A recent Supreme Court ruling, which reversed the order of a division bench of the Delhi High Court that had declared invalid Monsanto's patent over a method of genetic modification of cotton seeds, is being interpreted in several reports as one that upholds Monsanto's patent rights. This sweeping assumption is clearly missing the wood for the trees.

The truth lies in a far more nuanced approach taken by the Supreme Court, which has essentially left the matter open for adjudication through a detailed trial by the Delhi High Court, while observing that several technically complex issues need to be carefully considered before a conclusion can be achieved.

The case is a significant milestone for Indian laws governing intellectual property rights (IPRs), and will be closely watched for the many technical, legal and scientific questions that need to be addressed with clarity and care.

The Facts

Here are the brief facts: Monsanto is the registered holder of a patent titled "Methods for Transforming Plants to Express Bacillius Thuringiensis Deltaendotixins". Bacillius Thuringiensis, or "Bt" is a bacterium that is inserted into a specific part of cotton seeds through the process of genetic modification, in order to make cotton seeds resistant to attacks from bollworms, which are responsible for significant crop damage in India. While larger issues of the impact of genetic modification on farming practices and farmers in India have been raised, this case was on a purely technical issue of the scope and extent of proprietary rights that Monsanto has over the method for making cotton seeds bollworm resistant, and the rights of seed companies that had purchased Monsanto's seeds.

Monsanto had sold its Bt seeds under a license agreement to Nuziveedu Seeds, and several other Indian seeds companies, under which Nuziveedu and other licensees, were allowed to develop genetically modified hybrid cotton seeds and to commercially exploit the same using Monsanto's registered trademark "Bolgard". This agreement terminated in 2015 as a result of disagreements and disputes between Monsanto and the seed companies. Subsequently, Mosanto filed a suit against Nuziveedu claiming that they were infringing Monsanto's patent through their continued use of its patented technology and marketing the seeds using the Bolgard trademark.

In its defence, Nuziveedu argued that its seeds, which were developed using the Bt trait in Monsanto's donor seed, have acquired their own distinctiveness, and hence there can be no claim of infringement of Monsanto's patent. Nuziveedu argued that Monsanto's patent was for insertion of a "nucleic acid sequence" (NAS) into a plant cell in laboratory conditions. The agreement with Monsanto, Nuziveedu pointed out, was not for purchase of technology, but for purchase of donor seeds containing the Bt strain from Monsanto, which it used in its own breeding programmes. These programmes involve conventional breeding techniques and natural biological processes, through which it has developed a range of Bt. cotton plant varieties which have their own characteristics. Nuzivvedu has also submitted applications for registration as a "breeder" of such varieties under the Protection of Plant Varieties and Farmers' Rights Act, 2001 (PVPFRA).

Nuziveedu argued that once its varieties are registered under the PVPFRA, the law allows Monsanto to claim benefits as determined by the Authority established under the PVPFRA. Benefit sharing under the PVPFRA necessitates an examination of the extent and nature of the use of genetic material of the claimant in the development of the registered variety, as well as the commercial utility and demand in the market for such variety.

Nuziveedu also filed a counter-claim that Monsanto's patent is invalid to begin with under section 3(j) of India's Patent Act. Section 3(j) states that a patent cannot be maintained over "plants and animals in whole or any part thereof...including seeds, varieties and species and essentially biological processes for production or propagation of plants and animals".

Patents Act and PPVFRA

It would be useful to step back and understand the two laws in contention — the Patents Act and the PPVFRA, and their relevance in the context of India's international obligations under the WTO's Agreement on Trade related aspects of Intellectual Property Rights (TRIPS Agreement). The TRIPS Agreement represents the international minimum standard that IPR laws of countries need to adhere to. It recognizes the rights of countries to exclude from patentability plants, animals, and essentially biological processes for the production of plants or animals. In fact, this is the precise ambit of section 3(j) of India's Patents Act. However non-biological and microbiological processes for the production of plants or animals, as well as micro-organisms themselves, are eligible for patentability.

While recognising that countries can exclude plants and animals from patentability, the TRIPS Agreement mandates that such countries should provide for the protection of plant varieties by an "effective sui generis system". India's PPVFRA is an example of such a sui generis system. It recognises and balances the rights of breeders and farmers.

The Monsanto case will be the first time when the ambit and interplay of these laws and their provisions, will be tested: What is the exact scope of Monsanto's patent? Is it one over a micro-organism or a microbiological process or an essentially biological process, or is it for a part of a plant or a plant variety? Should Monsanto also apply for registration of the Bt trait under the PPVFRA? What are the rights and obligations of Nuziveedu? Has it developed varieties which are distinct from the donor seeds obtained from Monsanto, which is eligible for registration under the PPVFRA?

The Journey to the Supreme Court

Prior to the matter reaching the Supreme Court, there were two orders from the Delhi High Court: an interim injunction by a single judge, followed by the dismissal of the same by a division bench. In the first instance, on the institution of Monsanto's suit, the single judge of the Delhi High Court granted an interim injunction, and ordered that during the pendency of the suit, the parties would be bound by their respective obligations under the license agreement, and that the license fees would be payable in accordance with the prevailing regulatory requirements under the Cotton Seed Price Control Order (CSPCO).

On appeal from this interim injunction, a Division Bench of the Delhi High Court held that the patent exclusion under section 3(j) of the Patents Act invalidated Monsanto's patent. This resulted in Nuziveedu succeeding in its counter-claim against Monsanto's patent.

The Supreme Court reversed the order of the Division Bench, on the simple reasoning that the Division Bench ought to have confined its consideration to the question as to whether the grant of injunction was justified or not, and that it should not to have decided on the patentability issue when the question of appeal was limited to the injunction. The Supreme Court noted that "the suit involved complicated mixed questions of law and facts with regard to patentability and exclusion of patent, which could be examined in the suit on basis of evidence".

It therefore remanded the matter back for trial by the single judge of the Delhi High Court. Pending adjudication, as ruled by the single judge earlier, the seed companies can continue to use and sell the cotton seeds, subject to payment of the royalty fees to Monsanto.

The matter is now back to where it began: a suit before the Delhi High Court single judge. At stake is the interpretation of rights and obligations under two distinct laws, the tests used for determining the scope of patent rights under the Patents Act, and breeders rights under the PPVFRA. As the curtain rises, eager viewers cannot wait for the show to begin.

RV Anuradha is a Partner at Clarus Law Associates. She specialises in international trade and investment laws, and law and policy relating to IPRs.

Originally published by CNBC TV18, January 2019

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