Facts and Background

The tug of war between Monsanto and its erstwhile licensees over licensing fee and Patent infringement continues unabated. The current post discusses order dated March 28th, 2017 passed by the single judge of the Delhi High Court in an interim injunction application arising out of a Patent infringement action filed by Monsanto against Nuziveedu Seeds Ltd (NSL), Prabhat Agri Biotech Limited (PABL) and Pravardhan Seeds Private Ltd (PSPL). The genesis of dispute was termination of licence agreement by Monsanto, as NSL, PABL and PSPL refused to pay the trait fee in accordance with the agreement entered into between the parties. On the other hand NSL, PABL and PSPL demanded reduction of the trait fee by virtue of price control order issued by Ministry of Agriculture fixing trait fees and retail prices of seeds. Despite termination NSL, PABL and PSPL continued to sell the genetically modified seeds corresponding to the Monsanto's patented technology and using the marks BOLLGARD and BOLLGARD II. As a counter to Monsanto Patent infringement action, NSL, PABL and PSPL filed revocation action against suit patent.

Further details and background of this conflict can be accessed from our earlier post http://rnaip.com/wp-content/uploads/2016/06/monsanto-case-a-debate-over-private-rights-and-public-interest.pdf

Interim Ruling

The court while deciding the application for grant of interim injunction did not go into the issue of validity of the Monsanto Patent, on the ground that the matter requires evidence to be led through trial. The court in judging the Patent infringement proceeded to determine if the termination of licence agreement by Monsanto was not lawful, if so contract continues to exist. In that case the claim for patent and trademark infringement was not maintainable.

In summary, court decided in favour of NSL, PABL and PSPL holding Monsanto's termination of the contract to be prima facie illegal. In effect it allowed NSL, PABL and PSPL to continue using the technology provided that the trait fee is paid in accordance with what was fixed by the government under the "Licensing and Formats for GM Technology Agreement Guidelines, 2016". Further ordered the Monsanto is entitled to all the rights under the 2015 Sub-License Agreements except as to the rate of trait value.

The Court in coming to the above finding took into account the following:

  1. Monsanto refused to acknowledge the effect of the State government legislations or notifications on the cotton seed prices and only asserted the right to receive the trait fee as settled "through mutual consent" under the contract.
  2. Monsanto was duty bound to consider the request of NSL, PABL and PSPL as made by the communications beginning July 2015, for modification of the terms as to the rate of trait fee payable under the 2015 sub-license agreements for which the mechanism had earlier been agreed upon (in the form of Article 11.03). As Monsanto did not adhere to their obligation under the contract, the demand of payment under the contract terms being not lawful, it apparently being higher than the trait fee permitted by the law in force, NSL, PABL and PSPL could not have been found to be in default or to have breached their obligations.

Appeal to the two judges bench (Division Bench)

Monsanto appealed against the order dated March 28th, 2017 of the single judge to the Division Bench of the Delhi High Court, the court granted an immediate stay on restoration of a sub-licence agreement between Monsanto and NSL, PABL and PSPL pending hearing of Appeal. Last word is yet to be written on this dispute so watch this space for further developments.