Friday 27 September 2019

AJ Park files submissions in response to MBIE’s ‘Options Paper’ outlining its proposed changes to the Plant Varieties Act

A review of New Zealand’s Plant Variety Rights (PVR) Act 1987 is currently underway. Under the terms of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), we have three years to modernise our PVR regime to be consistent with the most recent international agreement on PVRs (UPOV 91).

The Ministry of Business, Innovation and Employment (MBIE) recently released an Options Paper setting out its preferred options for changing the PVR Act. While a number of the proposed changes are prescribed by the requirements of UPOV 91, there are several areas where New Zealand can choose how to implement the UPOV 91 requirements. AJ Park made a submission in response to MBIE’s Options Paper. A summary of our submission is provided below. A full copy of our submission can be found here.

Use of contracts vs legislative provisions

MBIE’s analysis seems to be underpinned by an expectation that the owner of a PVR can enter into a licence agreement or other contract that is exempt from certain competition law provisions. For example, that a PVR owner is free to include provisions restricting the use of harvested material. However, in an unrelated review, MBIE has proposed amending the Commerce Act to remove the IP exception provisions. We believe it is incorrect to assess the PVR options on the basis that contracts between parties will be a suitable alternative to legislative provisions.

Farm saved seed

We are surprised that MBIE’s preferred option does not expressly provide for a royalty payment for farm saved seed. Most of the submitters on MBIE’s earlier Issues Paper agreed that the benefits of a royalty scheme outweighed the potential costs.

We understand that both breeders and farmers want to have the flexibility to decide whether seed point or end point royalties are used. There is no reason why the PVR Act needs to prescribe how a royalty is collected. Instead, the Act (or Regulations) could provide a framework and users of the system could determine the best collection process.

We do not support adopting the Australian ’exemption' model for farm saved seed. Given the small size of the New Zealand industry and the likely time and costs involved in making an application for an exemption, it is unlikely that these provisions would be used. Other jurisdictions have moved towards providing for royalties for farm saved seed, eg, Europe and Canada. We believe there is value in having consistency with overseas markets, especially ones that are part of the CPTPP.

Essentially derived varieties

UPOV 91 extends protection to essentially derived varieties (EDVs). Most countries have adopted the UPOV 91 wording for their EDV provisions. However, MBIE’s preferred option is to provide a new, narrower, definition of what constitutes an EDV. MBIE prefers this option because it believes this definition is clearer and easier to interpret than the UPOV wording.

In our opinion, the preferred option is too narrow and does not adequately recognise the contribution of the original breeder. While breeding to produce a new variety is to be encouraged, an improved version of an existing variety can often be produced more quickly and for significantly less cost. If the market shifts to the new variety, eg, because it has better disease resistance, the market for the parent variety can disappear before the original breeder has had the ability to recover their investment.

While the UPOV 91 provisions may lack some precision at the edges, the key terms will be clear in many cases, eg, when a variety is produced using a single parent plant. Adopting the UPOV wording would also allow New Zealand-based parties to draw on international case law to interpret the UPOV 91 wording.

Compulsory licencing

Compulsory licence provisions have a purpose when the market is not being supplied with harvested material, or where a PVR owner essentially has a monopoly on one plant type. To provide for these circumstances, we believe that the PVR Act should introduce a public interest consideration. This would allow the Commissioner of Plant Variety Rights to consider all of the surrounding circumstances when considering an application. A public interest provision would be consistent with both UPOV 91 (which refers to compulsory licences being granted in the ’public interest') and our major trading partners. Also, in terms of compulsory licencing, UPOV 91 moved away from the ’widespread distribution' test in UPOV 78 to a public interest test. If we are required to align our PVR Act with UPOV 91 as much as possible, then this change should be reflected in the legislation.

We also support the removal of section 21(3) of the PVR Act, which allows the Commissioner of Plant Variety Rights to disregard certain sales when considering whether a variety has been made available to the public. We believe this section unfairly and unnecessarily targets certain commercial arrangements. The intent of compulsory licences, ie, preventing an abuse of a monopoly position, can be met without section 21(3). General competition law rules will also apply if a PVR owner is abusing their market position. If section 21(3) remains, it will effectively limit the term of a PVR to three years for breeders that operate a closed loop system. This is not long enough for breeders to recover their investment in new varieties.

For these reasons, we strongly disagree with MBIE’s preferred proposals for compulsory licences.

Next steps

The next step is for MBIE to provide advice to Ministers on changes to the PVR regime. Once the policy decisions have been made by Cabinet, new legislation will be drafted. MBIE expects the legislation will be introduced to Parliament in May 2020.

We will continue to be engaged in the review process and we hope the end result will be a modern PVR Act that is fit for purpose.