February 1998, Number 2

Introduction  
Main Features of TRIPs  
IPR in Agriculture  
Plant Breeders’ Rights  
Patents in Agriculture  
Agricultural Biotechnology and Global Competition  
IPR and Technology Acquisition  
Impact of PBRs on Local Breeding Activities  
Development of Agricultural Biotechnology  
Diffusion of Agricultural Biotechnology  
Conclusions  
Recommendations 

Until recently, most developing countries (and some developed countries) had comparatively weak IPR regimes. This meant that in these countries the protection of intellectual properties was limited, both in terms of coverage and duration of the protection. For example, in the case of pharmaceuticals and agro-chemicals, only processes could be patented in these countries. As products could not be patented, local researchers and firms were free to produce products which were patented in other countries through alternative processes. Similarly,  IPRs for life forms (plants, animals and cells) were not recognized by a number of countries. The main objective of the TRIPs is to strengthen IPR laws. 

 In simple words, the main features of TRIPs are as follows: 

• A large increase in the items eligible for IPR protection. Manufacturing processes, microorganisms and plant varieties which are not eligible for IPR protection in many countries, will become eligible. While processes and microorganisms will be eligible for patent protection, plant varieties will be protected either through patents or a sui generis system;
• The duration of patent protection will be increased to 20 years; and
• A product will be eligible for IPR protection whether it is being made locally or being imported. Non- working of a patent (meaning not manufacturing the product in question locally) will not be a sufficient reason for the grant of compulsory license or for revoking a patent.

Plant Breeders’ Rights 
 
In recent past, the use of IPR in agriculture was restricted to Plant Breeders’ Rights (PBRs), which were especially devised for the protection of plant varieties. Most countries which grant these rights are members of an international convention called UPOV (International Union For the Protection of New Varieties of Plants). Although some developing countries have joined the UPOV Convention, most of its members are developed countries. 

Out of the 32 members in May 1997, only five were developing countries. These were Argentina, Chile, Colombia, Paraguay and Uruguay. Incidentally, all of them are traditional agricultural exporters, and members of a coalition, called the Cairns Group (except Paraguay). The convention, first signed in 1961, came into force in 1968. Since then it has been revised in 1972, 1978 and 1991. 

Compared to patents, the protection provided by the PBR is weak. For example, PBRs based on the 1971 UPOV provides two important exemptions to the breeders’ rights. These are breeders’ exemption and farmers’ privilege (see Box 1). 
 

Similarly, the scope of the farmers’ privilege has been restricted in the 1991 version. The privilege, which was automatic in the 1978 Convention, has been made optional in the 1991 Convention. According to the 1978 convention, the farmers’ privilege came into existence when a state adopted the 1978 convention. On the other hand, in the case of the 1991 convention the member states are required to make special provision in their national legislation to include farmers’ privilege. Furthermore, it is required that these privileges are “within reasonable limits and subject to the safeguarding of the legitimate interests of the  breeders”. 

Although, the  1991 Convention is not yet in force, a number of member countries have already introduced national laws in accordance with it. According to the latest published information, by March 1997 26 states were granting plant variety protection on the basis of the 1991 Convention. This trend is expected to continue and, according to the UPOV, the 1991 Act must now be regarded by all countries as the new international plant variety protection standard. 

Following the TRIPs agreement, many developing countries are also in the process of enacting plant breeders’ rights. The Indian government, for example, has prepared a Draft Legislation on Plant Varieties, which has been under consideration for some time. Following the 1991 versions of the UPOV convention, the Act has restricted the breeders’ privileges. However, it has provisions for farmers’ privileges and farmers’ rights. 

Patents in Agriculture 

Although, following the 1991 version of UPOV, many countries have strengthened their PBR legislation, the agricultural biotechnology industry still considers them to be too weak. The industry prefers to rely on industrial patents for the protection of its intellectual property. This trend, which began in the late 1980s has seen a sharp increase in the 1990s. For example, in the USA, more than 100 patents for agricultural technologies/products based on biotechnology have been granted since 1980. 

Biotechnology has emerged as a major source of new technologies for agriculture. There have been major developments in agricultural biotechnology in the 1990s, particularly in the development of improved varieties of crops. It has dramatically increased the ability of researchers to  introduce new traits to commercially important crops. 

As a result, many crops have been genetically altered. The number of genetically altered plants (often referred to as transgenic plants) is already large. For example,  in the US alone, more than 2700 field trials involving transgenic plants took place between 1987 and 1996 (based on USDA data provided by Dr. Sivaramaiah Santhanam, USDA). While 15 transgenic plants had received approval for sale in the USA by November 1996, another 13 transgenic plants were waiting to receive marketing permission in the US at that time (“What is Coming To Market? An Update on Commercialization”, Gene Exchange, Vol. 7, No. 1, December 1996,  Pgs. 4-5). 

Agricultural Biotechnology and Global Competition 

Biotechnology offers technical solutions which can contribute to increased  agricultural production with reduced reliance on chemical inputs. However, the ability of developing countries to benefit from the new technology will be limited by two emerging trends. 
 The first is that of a decline in the importance of the public sector agricultural research centres. In the past, the public sector institutions (both national and international) have played a central role in the improvement of agricultural biotechnology and increasing production in  developing countries. Even in crops where private sector seed firms are major players (such as hybrids), these institutions have acted as major sources of technology and breeding material. 

This situation has now changed. With the emergence of biotechnology, private sector firms have emerged as technological leaders in a number of important areas. On the other hand, international agricultural research centres, which provided the bulk of the technical inputs to developing countries in the past, are comparatively minor players in biotechnology. This has affected their ability to provide technological support to developing countries. 

Today, research in biotechnology and the development of biotechnology based products (such as transgenic plants and their seeds) is largely concentrated in private firms in developed countries. A handful of these firms, such as Calgene, Mycogen, Biosem, Agracetus, Escagenetics etc. account for much of the R&D (see Box 2). These firms also account for most transgenic plants and other biotechnology based agricultural products. For example, of the 28 transgenic plants approved for sale or in the pipeline in the US by November 1996, only one was developed by a public sector institution. The rest were developed by private sector firms. 

The domination of agricultural biotechnology by a handful of large firms has increased in recent years. A number of mergers and acquisitions between the leading players have resulted in a highly concentrated industry (see Box 3). 
 

Similar collaborations have taken place between Monsanto and Pioneer (for the development and marketing of insect-resistant maize), between Mogen International and Asgrow Co. (to develop nematode-resistant varieties of horticultural crops), and between Mycogen and Pioneer (for the development of insect-resistant plants and seeds). 

Secondly, the importance of IPR in agriculture has increased many-fold. As mentioned earlier, in the past the use of IPR in agriculture was comparatively limited. With greater awareness of the economic importance of biotechnology and genetic resources, and the expanded role of private firms in agricultural research, the use of IPR to protect new developments has become common practice. The techniques used in genetic engineering and new products (such as genes with desirable traits and genetically engineered plants) are now patented as a matter of routine. 

Since the early 1980s the US government has awarded more than a hundred patents for techniques used in genetic engineering, and genetically engineered plants. These patents cover most of  the techniques and commercially important genes used in genetic engineering. For example, almost all the techniques used in the development of genetically engineered plants with pest resistance have been patented. Furthermore, most of these patents are owned by leading private firms. 

Mycogen, for example, has a near complete control of the technology used for the development of genetically engineered plants with pest resistance. Similarly, another firm, Calgene, has an unchallengable position in the field of Canola transgenics. 

Furthermore, following the trend set by the industry, the public sector institutions in developed countries, such as universities, are also increasingly relying  on patents. 

The control of technology through IPR has been further strengthened by the fact that some of the biotechnology patents  have a very broad scope. Their coverage is not restricted to a specific crop or a technique. In many cases they cover any method for the development of a product (such as a genetically modified plant) in any crop. 

One of the most widely discussed (and criticised) broad patents was a patent granted to Agracetus, a leading biotechnology firm. The patent gave it rights to all genetically engineered cotton plants and seeds, regardless of the method used to engineer the plant. Similar patents with wide coverage have been awarded to a number of firms. 
 
Clearly,  patent  protection with such a broad scope provides the patent holders with extreme control of a technology. The impact of such patents on the ability of competitors to carry out research is particularly restrictive. Furthermore, broad patents have encouraged the leading companies to cross license patented technologies to each other (i.e. a closed-loop system), further consolidating the position of the large players. 
 
This has disadvantaged both small companies and developing countries. Their ability to undertake research and development is impaired as the broad patents close most routes to independent technology development. Moreover, they will find it difficult to get licenses as they do not have the patents necessary for swapping arrangements in cross licensing deals. 
 
In short, the use of IPR  is becoming increasingly common in agriculture. This is particularly true in the case of techniques and products based on biotechnology, a number of which have been protected through patents. As can be expected, the monopoly provided by the patents is being used by the patent holders (most of whom are leading biotechnology, agrochemical and seed companies), to exclude competitors from both business and research activities. In fact, patent holdings have emerged as one of the most critical business assets. 
 
It must also be emphasised that as proprietary technologies grow in importance, firms are becoming more determined to protect their monopoly positions. According to a senior executive of Pioneer Seed Co.: “Security for proprietary genetics is at the heart of any good seed company’s ability to offer cutting edge products to the world’s farmers and to maintain a research budget. We intend to aggressively protect our intellectual property rights and we have the tools to do it.”  (“Pioneer Strengthens Protection of Intellectual Property Rights”, Seed World, July 1995, Pg. 12). 

  These tools include molecular markers technology or DNA finger printing. It is used by Pioneer and other seed companies regularly to determine if their proprietary seed lines have been used by competitors in product development. 

IPR and Technology Acquisition 
  
Impact of PBRs on Local Breeding Activities 

There is widespread feeling that the formulation of national PBR laws based on the 1991 UPOV (an increasingly common practice) will impinge upon the breeding activities in and for developing countries. As mentioned earlier, the 1991 version of the UPOV convention seriously limits the breeders’ privileges. In theory, this can restrict the breeding work needed to increase agricultural production in developing countries. 

However, in practice, the impact of PBR on food crops in developing countries will be moderated by the fact that most of the breeding work relevant to developing countries is carried out at International Agricultural Research Centres (IARCs) and national agricultural research institutes and universities in developing countries. 

These institutions are still the major sources of new varieties and breeding material used in developing countries. Therefore,  the impact of the PBR on developing countries will depend on a) the ability of these institutions to continue as major centres of breeding activities and b) their IPR policy. 
 
Unfortunately, there has been a recent tendency, in many developing countries, to neglect public sector agricultural research in general and breeding activities in particular. This trend needs to be reversed. However, considering the current anti-public sector sentiment, this will require strong political will. 
 
The pressure on public sector institutions to generate financial resources is  pushing them to protect their technologies, breeding material and new varieties. This could lead to a situation where most new varieties in developing countries are controlled by these institutions through PBRs. As long as they continue to provide breeding material and varieties to breeders and farmers at a nominal fee, the impact (for example, on availability, prices and diffusion of new seeds) will not be significant. 
 
However, considering its importance, the policy adopted by the public sector research institutions must be decided at national level. Furthermore, the chief concern of the policy should be the availability of breeding material and seeds at a reasonable price, and not the short term earnings of an individual public sector research institute. 

Development of Agricultural Biotechnology 

Will a strong patent regime encourage the development of agricultural biotechnology in developing countries? A number of them are undertaking the development of biotechnology based agricultural technologies locally. These include the development of genetically engineered plants with pest resistance and other desirable characteristics. Our research suggests that the impact of IPR on local development of agricultural biotechnology is likely to be strongly negative. This is mainly because firms in developed countries maintain tight control, through patents, a large number of useful technologies. 

Once the IPR laws in developing countries are tightened, these firms will be able to extend their patent rights. This will restrict the freedom of researchers in developing countries to develop/use these technologies locally. The impact will be particularly strong in countries such as India, which have a strong agricultural technology base. 
 
The example of Bt cotton and rice research in India shows how the new IPR regime can damage these activities. Indian researchers are engaged in projects aimed at the development of genetically engineered cotton and rice with resistance to pests. Almost all the components of these technologies are directly or indirectly patented. Indian researchers are able to use these techniques as Indian law does not recognises these patents. 
 
The situation will change once Indian patent laws are amended to meet the requirements of TRIPs. As the  patent holders will be able to extend their rights to India, the ability of Indian researchers to carry out this (and similar) research will be handicapped. The research efforts of other developing countries will also suffer. 

Diffusion of Agricultural Biotechnology 

Will a strong IPR regime benefit developing countries by encouraging transfer of planting material and agricultural biotechnology from developed countries? 
 
As far as the impact of PBR on the availability of planting material and local breeding activities is concerned, the impact is likely to be mixed. Recent research in five Latin American countries (Argentina, Chile, Uruguay, Columbia and Mexico) shows that in the case of hybrids and high quality propagating material for ornamentals and fruit varieties, effective PBR is likely to increase the transfer of breeding lines and propagating material from developed countries. 
 
However, the freedom of local farmers to use  imported germ plasma is constrained by the supplier’s business interests, particularly in the case of export oriented crops. For example, in 1994 Argentinean strawberry producers were denied permission to export strawberry plants to Europe by the American breeders and European licensees, because the Argentinean exports competed with European production directly. 
 
What is the likely impact of strong patents on the diffusion of biotechnology? It is possible to argue that strong protection of their intellectual properties will encourage foreign firms to transfer technologies to developing countries. In general, there is no empirical evidence to suggest that the IPR regime has any direct bearing on the level of foreign investment and transfer of technology to a country (“The TRIPs Agreement and Developing Countries”, United Nations Conference on Trade and Development, Geneva, 1996, Pg. 17). 
 
However, certain provisions of the TRIPs have the potential of restricting transfer of technology to developing countries. The TRIPs Agreement equates the working of a patent with imports. In other words, a country cannot revoke a patent even if a patent holder refuses to produce it locally. 
 
Thus, TRIPs will have two important effects on the transfer of technology to developing countries. Firstly, the patent holders will be tempted to export products rather than manufacture them in developing countries. Secondly, TRIPs will increase the bargaining power of the technology owners and they will be able to demand (and get) a higher price for technology (ibid, Pg. 18). 

Conclusions 

As signatories to GATT, developing countries are committed to strengthening their IPR laws. One of the important changes to be introduced is the extension of the role of IPR to agricultural technologies and products. They are expected to adopt a sui generis system for the protection of new plant varieties and extend the patent system to cover microorganisms. 
 
The proposed changes in the IPR policies of developing countries have raised a number of important issues. One of the most important  is the likely impact of these changes on a developing country’s ability  to undertake agricultural research. 
 
As shown above, provisions of TRIPs can have serious impact on agricultural research by developing countries. Furthermore, the impact will be felt on both conventional breeding research and biotechnology based research. 

The impact on breeding activities will be serious if the PBRs based on the 1991 Convention of UPOV are adopted.  However, it must be pointed out that the presence of a strong public sector in conventional breeding is likely to lessen some of the negative impact of PBR. 

The situation is more grim in the case of agricultural biotechnology research. The research in this area is completely dominated by firms in developed countries, while public sector research institutions (both international and national) are very weak. The adoption of an IPR system which includes patents for biotechnology-based techniques and products will be extremely detrimental to local research. Further, given the increasing number of mergers, acquisitions and collaborations by leading biotechnology (and seed) firms, the issue has to be approached from the viewpoint of global  competition. 
 
The effect of the TRIPs Agreement on transfer of technology is also likely to be negative. The Agreement limits the ability of developing countries to force the working of a patent. In the circumstances, a foreign firm may prefer to import a product rather than produce it locally. This could impede the diffusion of technology to developing countries. 
 
To conclude, the TRIPs-related changes in IPR are likely to have a negative impact on agricultural research in developing countries. They will particularly restrict the freedom of biotechnology researchers to use commercially important techniques and genetic material. Furthermore, commercialisation of locally developed products will become extremely difficult. It is, therefore, vitally important that the new IPR laws exclude (or dilute) those provisions of a TRIPs Agreement which are excessively restrictive in nature. An important objective of these laws should be to minimise curbs on research (and its commercialisation) by persons other than the patent holders. Furthermore, developing countries should try to have the TRIPs agreement modified so as to limit its detrimental effect on local technological development. 
 

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