India: The Monsanto Row

Last Updated: 13 February 2006
Article by Manisha Singh

Transgenic crops have always been the topics of hot controversial debates. The genetic alteration by the insertion of the genetic material containing the code for desired phenotypic expressions from another species confers some beneficial characteristics in the created crops. The case of Bt (Bacillus thuringiensis) cotton is a perfect example of the complex challenge regarding IPR and commercial property rights in the case of seeds and plants. On October 31, 1995 Monsanto got final approval for the commercial sale of its genetically modified cottonseed Bolgard engineered to produce its own insecticide. The seed contains a gene that codes for Bt, a naturally occurring soil bacterium that produces proteins that are toxic to many larvae of the lepidoptera order. Monsanto holds patents for this technology.

Monsanto has three conditions for sale of its invention – Bolgard .

[1] Growers agree to pay a technology fee

[2] Growers are forbidden to save seeds for future use

[3] Growers agree to plant a refuge of non-Bt cotton aside from their Bt cotton in order to ward-off resistance to the Bt toxin among target pests.

It is this first condition under which Monsanto is charging a royalty for developing a technology. In India the royalty charged is Rs 1250 on each 450gm packet of Bt cottonseed thereby pushing its sales price to around Rs.1800 whereas in US the royalty charged is not more than Rs. 180. In the light of this, Andhra Pradesh Government has made a reference in the Monopolies and Restrictive Trade Practices Commission accusing Monsanto of collecting ‘exorbitant’ royalty from growers and in the process unjustifiably exploiting its invention. The multinational defending its stance says that the use of Bt seeds saves growers on the expense of four to five pesticide sprays resulting in less pesticide use and increased income.

The issue which surfaces from this case is, whether a company selling a much sought after technology could have an unfettered discretion in determining the quantum of royalty it could charge under the guise of "trait value" or "technology fees".

Intellectual Property Rights under Patent Laws enable the right holder to exclude others from making, using and selling his invention for a term of years. The object behind this is to create an environment for betterment of industrial techniques through conferring a monopoly for a period of time. IPR is in essence a contract between the right holder and the society in which the statutory protection granted to the innovator for his creation to reap economic benefits makes the right holder duty-bound to exploit the creation for public good. This calls for a well-balanced competition policy that compliments the IPR laws.

The MRTP Act regulates trade and imposes prohibition on monopolistic trade. The character of a monopolistic trade can reflect in pricing of goods, control of production, charge reduced to unreasonable limits etc. The statute tries to rein in these and other similar eventualities to give to the players a level playing field for fair distribution of wealth and negation of the concentration of economic power. The exclusion provision under the statute that keeps out from the purview of monopolistic trade such trade practices expressly authorised by any enactment in force is a slippery ground for the Government along with the defence of the existing level of royalty by saying that use of Bt seeds save farmers on the expense of four to five pesticide sprays.

Further action on the notice served on Monsanto will reveal that whether exclusivity of patents is used as a competitive edge or not. To foster fair competition in the market we should identify factors, which would harmonise the competition policy and patent law.

© Lex Orbis 2006

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