India’s top court has agreed to review a shock decision which saw a key Monsanto patent struck down. The Supreme Court’s decision could have a major impact on innovators in the agricultural sector as it weighs whether or not certain plant biotechnologies are eligible for patent protection.

The explosive Delhi High Court ruling was the latest episode in a long battle between Monsanto and local licensee Nuziveedu. To the surprise of many, a division bench of the court invalidated a patent owned by Monsanto covering so-called Bt technology, which is uses to create a genetically-modified pest-resistant cotton variety. Overturning a single judge’s previous decision decision, it ruled that Monsanto must instead rely on the Plant Variety Protection & Farmer’s Rights Act, 2002 to protect Bt Cotton.

In a hearing today the Supreme Court refused to stay the lower court’s decision, meaning Monsanto’s patent will be unenforceable pending the appeal. The apex court will hear the case on July 18th.

The case has generated a strong reaction over the past three weeks. Over at Spicy IP, Prashant Reddy described it as a “deadly blow to the agro-biotech industry”. The former CEO of Indian seed company Advanta warned: “A number of patents of agriculture biotech inventions in various crops from wheat to rice that have been granted by various patent authorities across the globe stand the risk of being invalidated because of the judgment.”

Meanwhile, representatives of India’s agricultural industry have downplayed the decision’s importance – they point out that innovations in the sector will still be eligible for plant variety protection.

As we wait, I have asked Vikram Grover, principal at Groverlaw, to summarise and review the Delhi High Court ruling that is under appeal. His analysis follows.

Patent or Plant Variety: A cottonous proposition

A Division Bench of the Delhi High Court, in a recent decision held Monsanto Technology LLC’s patent untenable and claims thereunder as unpatentable. Agriculture being a significant contributor to India’s economy, the findings have wide ramifications. Also, right holders may question the frailty of the patent regime owing to the divergent views of the enforcement machinery viz. the Courts.

The suit patent granted by the Indian Patent Office in favour of Monsanto Technology LLC (first plaintiff/respondent) comprised 27 claims and covered method for producing a transgenic plant with increased resistance to insect on account of a 'nucleic acid sequence' derived from the DNA of Bt (Bacillus Thuringiensis) bacteria and the process to insert it in plant cells. The second and third plaintiffs are a subsidiary and a joint venture of the first plaintiff (all collectively ‘Monsanto’). The third plaintiff sub-licensed Monsanto technology comprising the suit patent to the first defendant - a private sector seeds company engaged in the business of developing hybrids and new varieties of cotton - and the second and third defendants, being subsidiaries of the first defendant (all collectively ‘Nuziveedu’).

The controversy arose out of the said sub-license agreements (‘Agreements’) executed on March 10, 2015 by third plaintiff with Nuziveedu. Monsanto provided Nuziveedu with Bt. Cotton transgenic variety seeds (‘Donor Seeds’) and permitted Nuziveedu to develop genetically modified hybrid cotton planting seeds in line with the terms and conditions of the Agreements including payment of trait fee. Monsanto’s registered trade marks viz. BOLLGUARD and BOLLGUARD-II were also licensed to Nuziveedu.

Subsequently, dispute arose between the parties with respect to payment of fee. Nuziveedu refused to pay trait fee in terms of the Agreements claiming that the same stood statutorily modified whilst Monsanto turned down requests to modify trait fee. Aggrieved, Monsanto communicated its decision to terminate the Agreements on November 14, 2015. Monsanto instituted a civil suit before the Delhi High Court on account of infringement of its patent and trade marks as Nuziveedu continued to market and sell hybrid cotton seeds. Nuziveedu contended inter alia that the suit for enforcement of Monsanto’s patent is liable to be rejected as the subject patent solely concerns an unpatentable matter. It also counter-claimed that the patent granted to Monsanto is liable to be cancelled besides praying for declaration that the Agreements are valid and binding and performance of the consequent obligations.

The High Court did not go into the question of revocation of patent and held that Nuziveedu cannot be injuncted. Notwithstanding, Nuziveedu's arguments regarding patentability including coverage under the Protection of Plant Varieties and Farmers’ Rights Act, 2001 (‘the PV Act’) were not accepted. It was further held that pre-mature termination of the Agreements was illegal and arbitrary and the parties would remain bound by their respective obligations. The trait fee was directed to be paid by Nuziveedu in accordance with prevalent local laws.

Both Monsanto and Nuziveedu preferred appeals to the Division Bench of the High Court. Monsanto was concerned over continuing supply of Donor Seeds under the Agreements with revised trait fee whilst Nuziveedu urged revocation of Monsanto's patent.

The Division Bench relied on the European Patent Convention to discern the import of ‘essentially biological processes’ and held that transgenic plants with the integrated ‘Bt. Trait’ produced by hybridization qualifies as an ‘essentially biological process’ which is excluded from patentability and Monsanto cannot assert patent rights over the gene. The Court also concluded Bt. trait induced varieties are parts of ‘seed’ and the trait, by itself has no intrinsic worth and requires further breeding to produce seeds for use. As regards protection under the PV Act, the Court held that a transgenic variety can be a ‘new variety’ and, therefore, registrable under the PV Act provided it satisfies the conditions of novelty, distinctiveness, uniformity and stability with appertaining advantage of benefit sharing to be claimed from the creator of the new variety. The Court held that the patent and the PV systems were not complimentary but exclusive and granted three months to Monsanto to apply for registration under the PV Act.

The Court then delved into the legality of termination of the Agreements and observed that if the obligation of a seed developer is not to charge more than what the law prescribes, it cannot legally collect it, till the law is overborne. Further, the Court recognized public interest inasmuch as denial of order of supply would violate the provisions of the Essential Commodities Act, 1955 (law which ensures delivery of certain products) and would deprive innumerable farmers, the right to access to seeds that were hitherto available to them. In the circumstances, the Court opined that pending trial of the suit, the directions of the Single Judge did not call for interference on this count.

The decision of the Division Bench may be perceived by seed companies as an impediment to recognition of innovation and introduces uncertainty in the patent protection regime. It may be speculated that innovations especially in the cotton sector will not reach Indian shores and multi-national companies will tighten purse strings. Having said that, in a country where a large section of the economy is dependent on agriculture, it is not surprising to balance interests of farmers against those of innovators. Monsanto has approached the Apex Court and it would be interesting to review further developments.