Monsanto challenges Centre, says cap on royalty ‘bad in law’


Challenging the Centre’s proposals to cap royalty for genetically modified (GM) seeds and deprive it of the freedom to choose local licensees and negotiate commercial terms with them, US biotech major Monsanto said the move was “both bad in law and policy” and amounted to usurping its patent, which falls within the larger definition of property in the Constitution and is inalienable from it unless by authority of law.

The seed-tech company, which quoted an independent study to suggest that it requires to spend about R900 crore to develop a new GM product and bring it to the market, argued in its detailed response to the agriculture ministry’s draft guidelines on GM technology agreements issued in May that if implemented, these would “set at (sic) naught” all the benefits delivered to Indian farmers over the last one and half decade via its GM cotton.

Currently, 90% of India’s cotton area of 11.8 million hectares (in the 2015-16 season) is under Bt (GM) cover. Domestic cotton output has risen manifold since farmers started using Bt seeds — from 13.6 million bales in 2002-03 to 30.1 million bales in 2015-16.

Mahyco Monsanto Biotech or MMB (Monsanto’s 50:50 joint venture with Maharashtra-based Mahyco) had, on July 6, withdrawn its application for environmental clearances for commercial cultivation of its Bollgard II Roundup Ready Flex technology.

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It called the decision “an outcome of the uncertainty” surrounding its India business due to the regulatory overreach. The company, however, added that the decision would have no impact its current cotton portfolio in the country, making it clear that only the new technology will be held from Indian farmers.

In its latest submission to the ministry, MMB said what the ministry intended to bring in by seeking to nullify all existing licence agreements and introduce the new rules was a “free-for-all regime”.

The ministry’s draft guidelines, MMB said, were an attempt to create a parallel framework of compulsory licensing (CL), which is at odds with the well-defined mechanism under Section 84 of the Patents Act, besides being devoid of checks and balances.

According to the company, the draft guidelines expanded the scope of CL in a draconian manner as it doesn’t mention the circumstances under which such licences could be issued under the Act’s Sections 84 (at the behest of an interested party) and 92 (under special governmental powers to be exercised during national emergency, etc) Unless the conditions specified in the Act were met, the draft that sought to invoke CLs via executive order won’t stand legal scrutiny. Besides, the draft guidelines reflected incorrect understanding of the extant IPR regime for “biotechnology, plants and varieties in the seed industry” and were ulta vires the Essential Commodities Act, MMB argued.

Calling into question the ministry’s move to assume the power to decide the GM technology licensing conditions, MMB said, “No licensor will want to enter into arrangement that carries a high risk of having to constantly enter into disputes and arbitration proceedings for any recovery of contractually agreed to Trait Value…it is important that the potential licensing partner is a company known to be compliant with the regulatory laws, which has necessary infrastructure, wherewithal and training to undertake hybrid development using GM traits.”

Alluding to the gradual decline in Bt cotton yield, MMB said: “All seed companies capitalise on the brand name associated with the technology and, therefore, adverse consequences resulting from poor implementation by licensees is ultimately directed back at the technology and (us). It added that although the environment ministry’s Genetic Engineering Approval Committee has attempted to “curb this issue” by mandating NOC from the technology holder, this wouldn’t guarantee “sustained quality” from seed companies throughout the lifespan of the product. MMB, incidentally, is engaged in a legal battle with a clutch of seed companies for the latter’s alleged non-payment of trait value.

The agriculture ministry had, in December last year, imposed price controls on Bt cotton seeds. Subsequently, in May this year, in the face of protests from Monsanto and its local partners, it had to summarily put in abeyance for a period of 90 days a gazette notification that sought to impose a cap on the royalty charged by seed-tech firms on new traits at 10% of the maximum selling price (MSP) of the seeds (to be fixed by the government) for the first five years, to taper further by an an annual 10%. By that order, the government had also sought to arrogate to itself the right to decide when a GM trait loses its potency and proposed that once the efficacy goes, the royalty can’t be charged. The government claimed that the move, supported by local seed companies not in partnership with Monsanto, would ensure availability of cotton seeds to farmers at “reasonable and affordable” prices.