Order the Parties Separately Holding the Male plant and the Female plant of a New Plant Variety to Cross License to Each Other to Ensure Continuous Production of the New Plant Variety
——Tianjin Tianlong Seed Technology Co., Ltd. v. Jiangsu Xunong Seed Technology Co., Ltd.
[Syllabus]
As the parties who separately hold the male plant and the female plant of a new plant variety have failed to reach an agreement on cross liscensing to each other, continuous production of the new plant variety has become impossible, which will impair the interests of both parties and does not meet the purpose of cooperative breeding. In order to safeguard public interests, guarantee the national grain security, and promote the commercialization and implementation of widely-planted new plant varieties, on the basis of the judgement that the same value exists with both the male plant and the female plant in the production of a new plant variety, the people's court may directly order that both parties should grant authorization and license to each other and mutually exempt the corresponding royalties.
[Case No.] Jiangsu High People’s Court (2011) SZMZZ No. 0194 and (2012) SZMZZ No. 0055
[Cause of Action] New plant variety right dispute
[Collegial Panel Members] Song Jian Gu Tao Yuan Tao
[Keywords] Civil, infringement upon rights to new plant varieties, cross authorization and licensing
[Relevant Legal Provisions] Article 5 of the Contract Law of the People’s Republic of China and Articles 2, 6 and 39 of the Regulation of the People’s Republic of China on the Protection of New Varieties of Plants
[Basic Facts]
Tianjin Tianlong Seed Technology Co., Ltd. (hereinafter referred to as “Tianlong Company”) and Jiangsu Xunong Seed Technology Co., Ltd. (hereinafter referred to as “Xunong Company”) respectively filed lawsuits with the court regarding infringement upon rights to a new plant variety , each with the other party as defendant.
The 9A/418 rice variety, a three-line japonica hybrid rice variety, jointly cultivated by the Northern Japonica Hybrid Rice Engineering Technology Center (same institute as the Liaoning Rice Research Institute, despite of the different names) and the Xuzhou Institute of Agricultural Sciences, passed the National Crop Variety Validation on November 10, 2000. The 9A/418 rice variety is generated from female plant 9201A and male plant C418. On December 30, 2003, the Liaoning Rice Research Institute applied to the Ministry of Agriculture for rights to new plant variety with respect to the C418 rice variety, obtained the approval on May 1, 2007, and were granted the exclusive license to Tianlong Company for exercising new plant variety rights with regard to C418. On September 25, 2003, the Xuzhou Institute of Agricultural Sciences applied to the Ministry of Agriculture for protection of new plant variety rights with regard to the Xu 9201A rice variety it bred, and obtained the approval on January 1, 2007. On January 3, 2008, the Xuzhou Institute of Agricultural Sciences licensed the exclusive right to Xunong Company to exercise the new plant variety rights with respect to Xu 9201A. After the court investigation, it was found that Xunong Company and Tianlong Company used the same combination to produce 9A/418, namely, C418 as the male plant and Xu 9201A as the female plant.
On November 14, 2010, upon request by Tianlong Company, the court of first instance commissioned Hefei Test Center of Ministry of Agriculture to conduct parenthood DNA identification on whether there was parenthood between the alleged infringing variety under notarized preservation of Tianlong Company and the authorized variety C418. The following findings were obtained from the test. Having applied the 48 rice SSR markers in the national standard GB/T20396-2006, a marker analysis was made on the DNA of 9A/418 and C418. The results showed that in all markers tested, 9A/418 fully inherits the DNA band pattern of C418 and it may be concluded that there exists parenthood between 9A/418 and C418.
On August 5, 2010, upon request by Xunong Company, the court of first instance authorized the Hefei Test Center of Ministry of Agriculture to identify whether there was parenthood between the alleged infringing variety under notarized preservation by Xunong Company, and C418 and Xu 9201A. The following findings were obtained. Having applied 48 rice SSR markers in the national standard GB/T20396-2006, a marker analysis was made on DNA of the alleged infringing variety and C418 and Xu 9201A. The results showed that in all markers tested, the alleged infringing variety fully inherited the DNA band pattern of C418 and Xu 9201A, it may be concluded that there is parenthood between the alleged infringing variety and C418 and Xu 9201A.
In the written request of the application for the C418 variety rights submitted by Tianlong Company, the contents of the specification document included: C418, a japonica-type restorer line with a form close to indica and specific affinity, was cultivated by using the “indica-japonica bridge” restorer production technique first invented by North China Japonica Hybrid Rice Center and by using intermediate materials between indica and japonica varieties to construct favorable genetic groups from indica and japonica varieties. C418 has higher specific affinity, which is a property possessed by restorer lines cultivated by the “indica-japonica bridge” method, as manifested in the first offspring generation’s better coordination of the ecological and genetic differences between the genomes of indica and japonica varieties, thus providing a better solution to the weaknesses generally manifested by indica and japonica hybrids, such as low seed setting rate, poor grain plumpness, temperature sensitivity, and premature aging. C418 combines the excellent traits of indica and japonica varieties, and the hybrid combinations that it produces generally show a higher seed setting rate and some cold tolerance.
In their letter to Tianjin Seed Management Station, Xunong Company and Xuzhou Agricultural Science Institute claimed that Xu 9201A, a middle-season japonica sterile line that they independently bred, passed the national validation for crop varieties in 1996. Prior to the validation, it had been named “9201A”, abbreviated as “9A”; and after the validation, it was renamed as “Xu 9201A”. Adopting Xu 9201A as the female parent, they had successively bred various three-line japonica hybrid rice combinations, including 9 A/138, 9A/418, and 9A/24. In the application for national validation of the crop variety filed in 2000, the variety origins were indicated still as 9201A×C418”, the same as when the two genetic groups were combined in 1995. In the application to the Ministry of Agriculture for the protection of the new variety rights to Xu 9201A filed in July 2003, it was indicated in the variety specification as a part of the written application the variety rights, that Xu 9201A has been combined with other genetic groups to breed various hybrid combinations, including 9A/138, 9A/418, 9A/24, 9A/686, and 9A/88. Xu 9201A and 9201A are the same middle-season japonica sterile line. Tianlong Company’s infringement upon the rights to use 9201A was an infringement upon the rights to use Xu 9201A.
Holding
With respect to the case of Tianlong Company v.s. Xunong Company, on August 31, 2011, the Intermediate People’s Court of Nanjing Municipality, rendered the (2009) NMSCZ No. 63 Civil Judgment: I. the court orders Xunong Company to immediately cease selling the seeds of the japonica hybrid rice 9A/418 and orders that without permission from the right-holder, Xunongcompany is not allowed use the seeds of the new plant variety C418 repeatedly in the production of the seeds of the japonica hybrid rice 9A/418; II. the court orders Xunong Company to pay, within 15 days since the judgment has come into effect, RMB 500,000 to Tianlong Company as compensation for its economic loss; III. the court rejects Tianlong Company’s other litigation requests. The legal fees RMB 15,294of the first-instance trial is to be borne by Xunong Company.
With respect to the case of Xunong Company v.s. Tianlong Company, on September 8, 2011, the Intermediate People’s Court of Nanjing Municipality rendered the (2010) NZMCZ No. 069 Civil Judgment: I. The court orders Tianlong Company, immediately on the day the judgment comes into effect, to cease infringing Xunong Company’s exclusive right to the new plant variety Xu 9201A involved in the case; II. the court orders Tianlong Company to pay, within 10 days of the judgment’s coming into effect, RMB 2,000,000 toXunong Company as compensation for its economic loss; III. the court rejects Xunong Company’s other litigation requests.
Unconvinced by the first-instance judgments, Xunong Company and Tianlong Company both appealed for the above-mentioned cases respectively. On December 29, 2013, the High People’s Court of Jiangsu Province combined the two cases and rendered the (2011) SZMZZ No. 0194 and (2012) SZMZZ No. 0055 Civil Judgments: I. the court revokes the (2009) NMSCZ No. 63 and (2010) NZMCZ No. 069 Civil Judgments rendered by the Intermediate People’s Court of Nanjing Municipality, Jiangsu Province; II. the court orders Tianjin Tianlong Seeds Science and Technology Co., Ltd. to pay, within 15 days since the judgment has come into effect, RMB 500,000 to Jiangsu Xunong Seeds Science and Technology Co., Ltd. as compensation; III. the court rejects the other litigation requests of Tianjin Tianlong Seeds Science and Technology Co., Ltd. and Jiangsu Xunong Seeds Science and Technology Co., Ltd.
[Reasoning]
In the effective judgments, the court believes: the right to a new plant variety, as a type of important intellectual property right, should be respected and protected. Article 6 of the Regulation on the Protection of New Plant Varieties clearly provides: an entity or individual enjoys an exclusive right to a variety which they have bred and for which rights have been granted to the entity or individual. No entity or individual, without permission from the holder of the variety rights, shall produce or sell for commercial purposes the propagation material of the variety for which rights have been granted, or to repeatedly use the propagation material of the variety for which rights have been granted, in the production of the propagation material of another variety for commercial purposes. However, it is necessary to point out that this provision does not apply to the situation in this case. First, the cooperative cultivation of 9A/418, combining rice groups free of charge, traces its origin back to the large-scale cooperation in hybrid rice research that took place in the 1990s in China. The variety 9A/418 has excellent traits and has been widely planted in Jiangsu, Anhui, Henan, and other places. It has been generally welcomed by many farmers and has become the leading variety of middle-season japonica hybrid rice. The infringement of rights complained by both parties in itself shows that the variety 9A/418 has a high economic value and better market prospects compared with other varieties. The alleged mutual infringement has an important bearing upon enormous economic interests on the part of the collaborating parties, Liaoning Rice Institute and Xuzhou Agricultural Science Institute, as well as both parties to this case. During the second instance of this case, the court carried out significant mediation work in the hope that the parties to the case could engage in cross licensing to allow the continued production of the excellent variety 9A/418. The parties agreed to cross license the variety rights involved in the case, but the mediation was not successful, for the only reason that the first-instance court had ordered Tianlong Company to pay Xunong Company compensation in the amount of RMB 2,000,000 and had ordered Xunong Company to pay Tianlong Company compensation in the amount of RMB 500,000, and the parties could not reach a settlement on the RMB 1,500,000 net balance of compensation. As Tianlong Company and Xunong Company could not reach a settlement, production of the variety 9 You 418 could not continue. This could not be considered to affect only the interests of the two parties in this case. In fact, this outcome impaired the implementation of national food security strategy and was detrimental to public interests. In addition, this was not consistent with the fundamental purposes of the breeding cooperation initially carried out by Liaoning Rice Research Institute and Xuzhou Agricultural Science Institute, nor did it comply with the fundamental requirements for promoting commercialization and application of new plant varieties. At the surface of the issue, the actions of the parties to this case were undertaken to protect their own intellectual property rights, but the actual results were that the use of intellectual property rights and the commercialization and application of scientific and technological progress. Considering that public interests were involved in the two cases, such as national food production security, and the promotion of the excellent variety 9A/418 was affected, the parties should both be subject to some constraints when they exercise their exclusive licensing rights to the new plant variety involved in the case. In the production of the rice variety 9A/418, each party should permit the other party to use the propagation material of its own parent variety. This result was clearly beneficial to the common interests of Liaoning Rice Research Institute and Xuzhou Agricultural Science Institute—the two cooperating parties, and the parties to this case. This result would take care of many farmers’ interests. Therefore, it was inappropriate for the first-instance court to order the parties of the two cases to respectively cease infringing each other’s rights and to pay each other compensation for economic losses. The court’s mistakes should be corrected. Second, 9A/418 is a three-line hybrid combination that combines the excellent traits of the two parents and has notable heterosis. The role of the female parent sterile line is important, and the selective breeding of male parent C418 also successfully solved significant problems related to three-line japonica hybrid rice. In the 9A/418 combined groups, the male parent has the same status and function as the female parent. The court gave the decision that Xuzhou Agricultural Science Institute and Liaoning Rice Research Institute, the two parties cooperating for the development of the rice variety 9A/418, as well as Xunong Company and Tianlong Company, the parties to this case, all had the rights to use the propagation material of the parent variety for which rights have been granted, and that they should mutually exempt each other from the relevant licensing fees. However, the rights and exemption only applied to the production and sale of the rice variety 9A/418 and could not be used for other commercial purposes. Xunong Company expended significant business efforts and carried out research on planting technology in promoting the variety 9A/418, whereas Tianlong Company only entered into production of the variety 9A/418 after it had been widely recognized by the market; therefore, the latter’s market costs for promoting the variety were significantly reduced. For the sake of fairness and reasonableness, the court also ordered Tianlong Company to pay Xunong Company RMB 500,000 as economic compensation. Finally, given that each party produced 9A/418 on its own, as a matter of fact, there existed some market competition and conflict of interest between them, and the court warned that the parties shall abide by the relevant provisions of the Anti-Unfair Competition Law of China, operate their businesses honestly, compete in an orderly manner, and ensure the quality of their products. In particular, they shall clearly display their respective business logos in order to prevent new controversies and disputes from arising, and both parties shall jointly preserve the good reputation of the variety 9A/418.
