Impact of PepsiCo verdict

AGRICULTURE/ ECONOMY/ GOVERNANCE

• GS-3: Indian Economy and challenges
• GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation

Impact of PepsiCo verdict

Context: Two years ago PepsiCo India had sued nine Gujarati farmers for allegedly infringing patent rights by growing its registered potato variety.

• However, now the company’s registration of the variety has been revoked by the Protection of Plant Varieties and Farmers Rights’ Authority (PPV&FRA). 
• The PPV&FRA questioned the documentation produced by PepsiCo claiming it was the owner of the variety, and thus could be considered the Registered Breeder under the law. 
• The wider implications of the verdict for intellectual property rights in the agricultural sector are being examined by farmers’ groups as well as seed developers and industrial agriculture companies, both international and Indian.

What does the verdict mean for farmers’ rights?

• Although the PPV&FRA verdict largely depended on procedural errors and shortcomings of PepsiCo and the registrar with regard to documentation and transfer of rights between the plant breeder and the production company, it does touch briefly on the protection of farmers’ rights and public interest. 
• “Farmers have been put to hardship including the looming possibility of having to pay huge penalty on the alleged infringement they were supposed to have been committing which violated the public interest” said the judgment. 
• The verdict sent a strong signal to those who hold intellectual property rights for seeds that the unique rights that the PPV&FR Act provides Indian farmers are not to be transgressed.

What is the difference in rights provided under law to farmers and breeders?

• ‘Producing from a variety’, including a farmer saving seed and using unbranded seed from a harvest, is very different to ‘producing a variety’, which involves breeders following complex technical procedures that farmers largely do not have the skills for. 
• There is no risk of commercial competition for the IPR owner in the first case, when harvests are meant for consumption, processing and the grocery market, unlike in the latter case when harvests are meant for further planting and multiplication of the genome or to generate heterosis in hybrid varieties

Does the PPV&FR Act encourage innovation and protect intellectual property rights of seed developers?

• The biggest problem with the law is the lack of proper enforcement, according to the seeds industry. 
• There must be a mechanism to catch and punish those who illegally sell the variety, but enforcement is left to States and is uneven. The rampant spread of unauthorised and genetically modified HTBt cotton seeds as an example of this.
• The unique protections provided to farmers in India can act as an enforcement loophole given the grey area between farmers and aggregators. 
• A farmer is allowed to grow protected varieties, sell the produce, even sell the unbranded seeds under the law, and that intention is good. But there is ambiguity on what happens when many farmers sell registered seeds to an aggregator who collects it and then sells it in a branded fashion, or sells to a competitor.
• If the aggregator owns an acre of land somewhere, he may also call himself a farmer, and therefore there is a possibility of pilferage of the parent seed from farmers’ fields to other farmers.
• Other issues with PPV&FR implementation which obstruct innovation include the slow turnaround time for registration of varieties and the requirement that companies submit parent seeds when applying for registration. 
• As a result, not just foreign investment, even domestic investment in innovation is low because of lack of protection of IPR.
• The Indian seed market has annual revenues of ₹20,000 crore, but less than 3% or about ₹500-600 crore is ploughed back into research, in contrast with 10-12% which is the global standard.

How does contract farming law impact the issue?

• With the first national contract farming law passed by Parliament in 2020 being repealed in Nov 2021 under pressure from protesting farm unions, there is no uniformity among the few State laws that exist. 
• The seed industry, which depends on farmers for seed production, prefers to deal with local contractors rather than sign direct contracts with farmers.
• If a contract is violated, there is no way for private players to enforce it at the village level, so it is better to deal with a local player and form tripartite agreements. Also, it is inconceivable for any company to sue a farmer given that PepsiCo and Monsanto have faced political and public backlash for doing so.

Connecting the dots:

• India’s IPR policy.
• IPR waiver for COVID-19 Vaccines