European Court of Justice strengthens rights of plant variety right holders

By its ruling of 25 June 2015 (C- 242/14), the European Court of Justice (‘ECJ’) substantially reinforced the rights of the plant variety right holders. The court decided that a farmer who has seeded self-produced propagating material obtained from a protected plant variety (farm-saved seed) is – in order to benefit from the privilege for farm saved seeds – required to pay the equitable remuneration which is due thereon pro-actively and no later than 30 June following the date of seeding.

The background behind this decision is the fact that, according to Article 13(2) of Regulation (EC) No 2100/94, only the plant variety right holder is entitled to produce and reproduce variety constituents or harvested materials of a protected plant variety. Articles. 14 (3) of said regulation establishes a derogation for farm-saved seeds (so called farmers’ privilege). Farmers are allowed to use the products obtained on their own grounds for propagating purposes. In order to do so without the consent of the plant variety right holder, they have to fulfil the following prerequisites:

• to the extent that there are indications for the use of farm saved seed of the respective variety, they have to provide information about the extent of the use of farm saved seed of that variety; and
• they have to pay an equitable remuneration.¹

The claimant of this case (which dealt only with the payment obligation of the farmer, not with his obligation to inform the plant variety holder) was a company that manages the rights of several plant variety right holders. The defendants – an agricultural partnership and its partners – had sowed farm-saved seed of a protected variety without having paid the equitable remuneration due thereon prior to the end of the relevant financial year. The information about the use of farm-saved seed by the defendants was provided by a processor who had processed the relevant farm-saved seed for sowing by defendants. As a consequence, the claimant filed suit before the Regional Court of Mannheim against defendants, claiming a violation of plant variety rights and financial damages as a consequence thereof. The court raised the question whether a farmer

• can make use of the farmers’ privilege by paying the equitable remuneration due on the farm-saved seed used at any time, i.e. even after the end of the relevant financial year and after the use of farm-saved seed (despite the efforts of the farmer to hide that fact from the plant variety right holder) has been detected by the plant variety right holder, and even after suit has been filed accordingly; or
• having failed to pay the equitable remuneration for the use of farm saved seed in due time, could no longer claim the farmers’ privilege but rather is, under such circumstances, deemed to have committed a violation of the plant variety right.

Accordingly, the Regional Court of Mannheim submitted to the European Court of Justice the questions whether (i) the farmer has to pay the equitable remuneration prior to sowing the propagating material or – if not – (ii) there is any time limit for payment the farmer has to adhere to in order to be able to benefit from the farmers privilege.

The ECJ used its ruling as an opportunity to point out some fundamental aspects of the systematic of plant variety rights:

‘It should be noted, first, that Article 13(2) of Regulation No 2100/94 provides that the authorisation of the holder of the plant variety right is required, in respect of variety constituents or harvested material of the protected variety, inter alia, for production or reproduction (multiplication). In that context, Article 14(1) of that regulation establishes a derogation from that rule, insofar as use of the product of the harvest obtained by farmers, on their own holding, for propagating purposes in the field is not conditional upon authorisation by the holder of the right where they fulfil certain conditions expressly set out in Article 14(3) of that regulation.²

With respect to the questions of the Regional Court of Mannheim, the ECJ pointed out that there is no obligation on the farmer to pay the equitable remuneration prior to sowing the farm saved seed. However, the ECJ recognised that there is a need to find a time limit the farmer has to adhere to in order to be able to benefit from the farmers’ privilege. If the farmer would be able to delay the payment of the equitable remuneration indefinitely, there could, by definition, never be a violation of plant variety rights due to non-fulfilment of the prerequisites for the legal use of farm saved seed. The farmer could pay the equitable remuneration at any time (even if he were caught as having used farmsaved seed without having fulfilled the relevant prerequisites) and by doing so legalize the use of farm saved seed subsequently. The ECJ states:

‘In the second place, it should be recalled that the holders of plant variety rights alone are responsible for the control and supervision of the use of the protected varieties in the context of authorised planting and they depend, therefore, on the good faith and cooperation of the farmers concerned.³ Accordingly, the absence of a precisely defined period within which farmers are required to comply with the obligation to pay equitable remuneration by way of derogation is liable to encourage farmers to defer that payment indefinitely, in the hope of avoiding payment altogether. To allow farmers to avoid complying with their own obligations towards holders in such a way would be at odds with the objective set out in Article 2 of Regulation No 1768/95 of maintaining a reasonable balance between the legitimate interests of the farmers and the holders concerned.’

Therefore, the ECJ concluded, the farmers who want to make use of the farmers’ privilege are obligated to pay the equitable remuneration within the period that expires at the end of the agricultural financial year during which that sowing took place, i.e. no later than 30 June following the date of seeding.

This decision of the ECJ is an important signal in the European seeds market. By setting a time limit for the payment of the equitable remuneration under the farmers privilege the ECJ restores the balance between the interests of the farmers on the one hand and the plant variety right holders on the other hand, which had become necessary after the ECJ had seriously weakened the position of the plant variety right holders in prior decisions (ECJ, decision dated 04/10/2003, C-305/00; ECJ, decision dated 11/15/2012, C-56/11) by limiting the right of the plant variety right holders for information about the usage of farm saved seed of their varieties.