Landmark SPC Ruling Sets Important Precedents And Applies Punitive Damages In Plant Variety Rights Infringement Case

Introduction

As significant development for intellectual property rights enforcement in China, this year the Supreme People's Court (SPC) delivered a landmark judgment in a plant variety rights (PVR) infringement dispute between Hengji Limagrain Seed Co., Ltd. (Hengji Limagrain) and Henan Jinyuan Seed Co., Ltd. (Jinyuan Seed). The final judgment, (2024) Zui Gao Fa Zhi Min Zhong No. 337, overturned the first-instance decision, finding Jinyuan Seed liable for infringing the PVR for the corn inbred line NP01154 and awarded unprecedented high damages of 53 million RMB.

This case is highly significant, setting important precedents regarding fact-finding methodologies in PVR infringement, the supervised destruction of infringing varieties, the defendant's commitment to cease infringement, and crucially, the application of punitive damages for willful infringement. It sends a clear message about China's commitment to strengthening PVR protection, particularly within the vital agricultural sector.

Case Background: The Disputed Parent Line

The PVR at the heart of this dispute, CNA20150107.1 for the corn inbred line "NP01154", was granted to Limagrain Europe in 2018. Hengji Limagrain, an affiliate of Limagrain Europe and its exclusive licensee in China, initiated legal action alleging that Jinyuan Seed had, since 2019, unlawfully used "NP01154" as a parent line to produce and sell several hybrid corn varieties, including "Zhengpinyu 491", "Jinyuanyu 304", "Zhengyuanyu 887", "Jinyuanyu 171", "Zhengpinyu 597", "Jinyuanyu 181", and "Zhengyuanyu 777".

The core of the dispute revolved around the identity of the parent line used by Jinyuan Seed, designated variously as "JCD15YZ320" or "YZ320" in the registration documents for the accused hybrid varieties. Hengji Limagrain contended that "YZ320" was, in fact, identical or essentially derived from the protected "NP01154". Jinyuan Seed countered, arguing that "YZ320" was a distinct variety, notably claiming it was a waxy corn type while "NP01154" was a common corn type, and presenting DNA evidence purportedly showing differences.

Navigating Complex Fact-Finding in PVR Infringement

The journey through the courts highlights the complexities of evidence and fact-finding in PVR cases, particularly reliance on molecular marker testing.

• Initial DNA Evidence: Hengji Limagrain initially presented DNA test reports (SSR marker analysis) comparing notarized samples taken from Jinyuan Seed's production fields with the 'NP01154' standard sample. These tests, conducted by the Beijing Corn Seed Testing Center, consistently showed only one differing locus out of 40 core loci, leading to a conclusion of "approximate variety".
• The First Instance Court's Reliance on "Additional Testing": The court of first instance, however, gave decisive weight to a supplementary test report (No. 2994) commissioned by the local agricultural administrative authority during an enforcement action. This test, requested by Jinyuan Seed, analyzed five additional specific loci (D7, D10, phi022, phi027, phi061), purportedly linked to waxy corn traits, and found four differences compared to NP01154. Combining the single difference from the standard 40 loci test with these four additional differences, the first instance court concluded there were five total differences, deeming YZ320 distinct from NP01154 and dismissing Hengji Limagrain's claims.
• SPC's Scrutiny and Reversal: The SPC conducted a meticulous review of the evidence and overturned the lower court's finding. Crucially, the SPC invalidated the No. 2994 "additional testing" report. The SPC noted that this test was conducted outside the standard protocols, used primer sequence information provided (via the commissioning authority) by Jinyuan Seed's affiliate (Bangdafu Company), lacked a conclusive opinion, was marked "for reference only" by the testing center, and did not carry the official CASL (China Accredited Seed Laboratory) mark. Furthermore, SPC investigation revealed the testing center did not confirm a definite correlation between these specific markers and the waxy trait, only a probabilistic link. The SPC emphasized that deviations from established national or industry standards for DNA testing require rigorous justification, which was lacking.
• Affirming Identity Based on Standard Samples: Conversely, the SPC gave weight to new evidence introduced in the second instance: DNA tests comparing the official standard sample of YZ320 (submitted by Jinyuan Seed's affiliate for its own PVR application) with the NP01154 standard sample. These tests, conducted by Buruidin Testing Company using both the standard 40 SSR loci and the five additional loci previously tested in report No. 2994, found zero differences, concluding the varieties were "extremely similar or identical" or had zero differing loci. This strongly indicated that the material Jinyuan Seed sought to protect as YZ320 was indistinguishable from "NP01154".
• Rejecting Flawed Counter-Evidence: The SPC also dismissed Jinyuan Seed's attempt to differentiate the varieties based on starch composition (waxy vs. common corn). The court found the sampling process for this evidence deeply flawed: the samples claimed to be "NP01154" were obtained from farmers under questionable circumstances (potentially breaching confidentiality agreements, chain of custody issues during transport with temporary loss of notary supervision), and the sample claimed to be YZ320 came from an unverified, untraceable sample held by a local authority (Ganzhou Seed Industry Development Center). The court deemed these samples unreliable or illegally obtained and inadmissible for proving biological differences.
• Finding of Bad Faith Acquisition: Adding weight to the finding of infringement, the SPC considered evidence suggesting bad faith. It noted that a former senior breeder at Hengji Limagrain's affiliate (Shanxi Limagrain) who had access to NP01154 materials and was involved in its PVR application and related variety ("Lihe 228") breeding, co-founded Jinyuan Seed's R&D affiliate (Jinyuan Beijing) using his mother's name (Wang Qingzhi) while still employed by the Limagrain affiliate. Furthermore, the PVR applications for YZ320 and the hybrid Zhengpinyu 491, listing his mother (who lacked breeding expertise) as the breeder, were later withdrawn or rejected partly due to lack of uniformity and stability – characteristics inconsistent with a properly developed and stable inbred line. This circumstantial evidence strongly suggested illicit appropriation of NP01154.

Stringent Remedies: Destruction and Commitment

Reflecting the finding of willful infringement, the SPC ordered comprehensive remedies:

1. Cessation of Infringement: Jinyuan Seed must immediately stop using NP01154 (or its equivalent, YZ320) to produce the infringing hybrid seeds.
2. Supervised Destruction: All existing infringing hybrid seeds (including inventory and any produced during the litigation) must not be sold and must be handed over to Hengji Limagrain or destroyed (rendered inactive) under Hengji Limagrain's supervision.
3. Surrender of Parent Lines: Crucially, any remaining inventory of the infringing parent line (YZ320/NP01154) must be handed over to Hengji Limagrain for disposal. This measure directly addresses the source of the infringement.
4. Public Apology: Jinyuan Seed must publish a statement in designated agricultural media confirming the infringement and eliminating negative impacts.
5. 53 million RMB Damages Award with Punitive Damages Applied, approximately 7.35 million USD, which will be illustrated in the next section.

Punitive Damages: An Important Deterrent

One of the most impactful aspects of the judgment is the application of punitive damages. The SPC affirmed the principle that deliberate, large-scale PVR infringement warrants punitive measures.

• Basis for Calculation: Damages were calculated based on Jinyuan Seed's profits derived from the infringement. The court meticulously calculated the infringing production scale (acreage of approximately 581 hectares) primarily based on official seed production filings and contracts, largely rejecting Jinyuan Seed's attempts to argue for lower actual production figures where unsupported by credible evidence. It estimated yield per unit area and profit per unit of seed based on available data, including Jinyuan Seed's own financial disclosures (e.g., during its IPO attempt).
• Finding of Malice: The court found clear evidence of Jinyuan Seed's bad faith (malice), citing the likely illicit acquisition of the parent line, the long duration and large scale of the infringing production spanning multiple years and large acreages, and the significant profits obtained.
• Application of Multiplier: Based on the severity of the infringement and the clear finding of malice, the SPC applied a one-fold multiplier to the calculated profit (infringer's gain) for the punitive portion, resulting in a total damages award equivalent to twice the calculated profit, plus reasonable enforcement expenses supported by the plaintiff. While Hengji Limagrain had requested RMB 160 million, the court rendered its final award based on verified infringing area, profit margins, and the application of one-fold punitive damages.

Significance and Implications

The Hengji Limagrain v. Jinyuan Seed decision carries profound implications:

1. Robust PVR Enforcement: It signals a strengthened commitment by China's highest court to rigorously enforce PVRs, aligning with national goals to bolster the seed industry through innovation.
2. Clarity on DNA Evidence Standards: The judgment provides crucial guidance on the evaluation of DNA evidence, emphasizing adherence to established standards and protocols (like the 40 core SSR loci) and the importance of official standard samples, while cautioning against reliance on non-standard, potentially self-serving "additional tests" without solid scientific validation and procedural integrity.
3. Deterrence Through Punitive Damages: The willingness to apply punitive damages for willful infringement sends a powerful deterrent message to potential infringers. It demonstrates that infringement will not be treated merely as a cost of doing business.
4. Focus on Bad Faith: The court's consideration of circumstantial evidence pointing to bad faith acquisition of genetic material highlights the importance of trade secret protection and employee loyalty issues within the breeding industry.
5. Comprehensive Remedies: The enforcement of practical remedies like supervised destruction and surrender of parent lines provides rights holders with more effective tools to stop infringement completely.

Conclusion

The SPC's decision in Hengji Limagrain v. Jinyuan Seed is a watershed moment for PVR protection in China. It provides clarity on complex evidentiary issues, particularly DNA testing, and demonstrates a firm stance against willful infringement through the imposition of punitive damages and effective injunctive relief. International seed companies and PVR holders can take considerable reassurance from this judgment, which reflects a judiciary increasingly equipped and willing to protect sophisticated biological innovations in line with international standards. This case will undoubtedly be closely studied by IP practitioners and stakeholders in the global agricultural sector.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.