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Monday, 10 June 2013 08:24

Growing IP: Farmers benefit from patented crops, but must beware of violating agreements

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Ask people to describe the taste of a Honeycrisp apple grown on West Michigan’s Fruit Ridge and you’re likely to get responses talking about the crisp fruit’s sweet-tart rush of juices.

But not many people realize what they’re tasting is, in fact, intellectual property.

Many apple varieties, including the prized Honeycrisp, can trace their origins back to the University of Minnesota, which has introduced 26 apple varieties via its more than 100-year-old breeding program. But it wasn’t until 1991 and the release of the Honeycrisp apple that the university began patenting its varieties.

That turned out to be a good move for the university, which has received about $10 million in royalties from the Honeycrisp IP.

“For most universities, big winners in the marketplace are in the minority, but those inventions that are successful can bring in significant revenue,” said Anne E. Hall, technology strategy manager of life sciences for the office for technology commercialization at the University of Minnesota.

Local growers including Skip Sietsema of Sietsema Orchards who wanted to offer the in-demand apple had to first go through the institution.

“We bought the Honeycrisp license,” Sietsema said. “It was probably worth it. We’ve sold a lot of apples.”

Apples — a $700 million crop in Michigan, according to the Michigan Apple Committee — are one of many foods that have patent protection, but the practice of protecting the IP is perhaps most common among genetically modified crops — as well as the various pesticides that are used on them.

Many proprietary breeding programs, like the one used by the University of Minnesota for its apples, are also increasingly moving to the private sector, particularly in the fields of commodity corn and soybeans, Hall said.

The power of these protections became even more apparent last month when the U.S. Supreme Court by unanimous decision handed biotech giant Monsanto a victory in an IP case against Indiana farmer Vernon Hugh Bowman.

After inventing and securing two patents on Roundup Ready soybeans, Monsanto sold them to growers with a licensing agreement, which the company alleged Bowman violated.

Like many farmers, Bowman signed a contract with Monsanto nearly a decade ago to use the company’s popular Roundup Ready genetically modified soybeans. Bowman was able to grow two crops per season, but got his second round of seeds from his local grain elevator, figuring the seeds were Roundup Ready anyway.  

“The thrust of the licensing agreement (was) that growers can only use the seed for one season’s crop,” David Skidmore, a Grand Rapids-based attorney with Warner, Norcross & Judd LLP, told MiBiz. “Then (the farmer) will come back and get another bunch of seed for the next season. In other words, it is prohibited for the growers to buy the Roundup Ready seed, grow a bunch of plants and then take some of those soybeans and save them to plant their next crop.”

Eventually, Monsanto caught on to Bowman’s actions and sued him for violating the licensing agreement. The farmer contended that once he purchased the seeds, he was free to do with them as he pleased. A number of courts disagreed, including the U.S. Supreme Court.

Skidmore said that most farmers in Michigan love the Monsanto product, and more than 90 percent of soybean farmers use Roundup Ready beans to grow their crops.

“This case stands for the principle that a player like Monsanto — that puts so much investment into developing this wonderful new product for farmers to use — (Monsanto’s) investment is going to be protected,” Skidmore said.
The ruling on the case came as good news to local soybean processor Zeeland Farm Services Inc.

“The ruling will mean to (ZFS) that Monsanto and others will continue to bring new genetics to the marketplace with the potential of advancing both the quality and yield of our crops,” ZFS President Cliff Meeuwsen said in an email to MiBiz. “We believe it will open up possible new markets for soybean products all over the world.”

While a far cry from the scale of Monsanto, which had annual revenues of more than $13.5 billion in 2012, many universities around the country have agricultural and horticultural IP that they also license to growers in a number of ways.

All those Honeycrisp apples — or Zestar or SweeTango varieties, among others — grown on The Ridge have meant a steady stream of revenue for the University of Minnesota program, in particular.

That is, if the supply chain has followed the IP agreements.

With the Honeycrisp, for example, the college made the variety available to any grower in the U.S. through an agreement that would allow the farmers to purchase trees at a nursery or generate new trees in their own orchards, Hall said.

With the 2009 introduction of the SweeTango apple, a cross between its Honeycrisp and Zestar breeds, the university took a different path and licensed it to just one Minnesota-based grower, who handled all production and marketing for the United States and Canada. As part of the deal, the licensee selected only growers in the best regions to receive the new variety in an attempt to preserve the breed’s quality.

That move riled many growers, Sietsema included, who want to grow the variety, but have not been selected.

One of the largest apple breeding programs globally, Minnesota patents its research on crop varieties for much the same reasons as any private-sector tech or science-based company seeks intellectual property protections: It makes significant investments of time and money to develop new breeds. Hall said that it can take up to 25 years to develop new apple varieties.

Individual crop varieties on average yield the university anywhere from $200 to $10,000 per year in royalties, which are shared between the college and the inventors, Hall said.

While Hall acknowledges some growers have likely violated the university’s IP protections for apple varieties, she doesn’t think those actions are malicious.

“It’s difficult for us to know someone’s intentions, but in our experience, it appears that the majority of violations are indeed accidental,” Hall said. “Different types of growers (hobby farmers versus commercial growers, etc.) have different levels of knowledge of intellectual property. … The university advertises when licenses are required, and works hard to make the licensing process simple and affordable to growers.”

Read 3295 times Last modified on Friday, 19 July 2013 12:11

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