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Farmer Liability and GM Contamination - Schmeiser Judgment

A recent decision of the Canadian Supreme Court in Monsanto Canada vs Schmeiser points to the need to pay priority attention to the development of comprehensive liability frameworks in the field of biotechnology.

Recent times, the introduction of genetically modified organisms and in particular genetically modified (GM) seeds has been controversial the world over. In India, the only GM crop officially commercialised to-date, Monsanto’s Bt cotton, has been debated mostly from the point of view of its possible environmental impacts and from the point of view of its overall contribution to sustainable agriculture, in particular its capacity to raise yields while providing a cotton of similar quality to non-GM cotton.

For the time being, intellectual property rights issues have been partly avoided because patent related issues are not the main practical issues at this point. A recent decision of the Canadian Supreme Court in Monsanto Canada versus Schmeiser nevertheless calls for giving more attention to patent issues and to a broader understanding of the issues surrounding the introduction of GM crops. While the Canadian Supreme Court decision has no direct relevance for the rest of the world, it has the potential to influence developments in other countries and to bear on current and future negotiations on intellectual property rights and on biosafety, in particular with regard to liability issues.

Schmeiser Case

The background to this case is the development by Monsanto of a GM variety of canola which is resistant to the application of Roundup Ready, a herbicide that kills most plants. Before this case, the understanding was that the GM construction – but not the GM plant – was protected under the Canadian Patent Act. Schmeiser is a farmer from Saskatchewan who has been growing canola for many years. In the 1990s a number of his neighbours decided to use the Monsanto canola variety on their fields. Schmeiser seems to have decided not to introduce the GM variety. However, Schmeiser was found in possession of Roundup Ready Canola even though he had never purchased it.

The source of the introduction of GM seeds on Schmeiser’s land has not been established conclusively by the courts. As stated by the Supreme Court, “[t]he origin of the plants is unclear”. The judges found that they may have been derived from Roundup Ready seed that blew onto or near Schmeiser’s land while at the same time indicating that none of the proposed sources of contamination could explain the overall very high concentration of GM seeds in the samples taken from Schmeiser’s fields.

Following the discovery of GM seeds on Schmeiser’s fields, Monsanto brought an action for infringement of their patent on Roundup Ready Canola. More specifically, Monsanto asserted that Schmeiser had used, reproduced and created genes, cells, plants and seeds containing the genes and cells claimed in Monsanto’s patent without authorisation. The Supreme Court found that the patent had been violated but that Schmeiser did not owe anything to Monsanto.

The reasons given for this judgment and the broader analysis provided by the judges is extremely instructive.

  • Firstly, the judges decided that this case was exclusively a case concerning the infringement of a patent held by Monsanto.

  • Secondly, the judges set out to determine whether the Monsanto patent was valid.

    The main question was whether the patent on GM cells also extended to the plants. The issue of whether the patentability of a component of a broader unpatented structure imposes on the user of the latter to respect the patent has been considered at length in patent cases over time.

    In general, it is often accepted that if the patented component is significant to the activities carried out with the unpatented structure, the user has to respect the rights of the patent holder. The added problem in the case of a plant is that in countries like India and Canada plants themselves are not patentable. As a result, the question that arises is whether the patentability of a gene inserted in a seed makes the plant itself protectable. The judges asserted that since the patented invention was going to be used in plants regenerated from the patented cells, the plant itself could not be overlooked in determining whether the Monsanto patent had been infringed.

  • Thirdly, the judges considered whether Schmeiser should be deemed to have used the patented gene or cell and thereby infringed the patent. In the context of patent protection, the issue is first whether using the seeds for regeneration in subsequent years constitutes a ‘use’ of the patented gene. Patent law practice often accepts that infringement of a patent can occur even where the patented invention is part of a broader unpatented structure.

    An expansive interpretation of this principle leads to the conclusion that even if the inventor is deprived indirectly of some of the benefits of her/his invention, that constitutes an infringement of the full enjoyment of the monopoly conferred by the patent.

    The question that arises subsequently is whether the mere fact of possessing the patented gene implies use. In principle, it is recognised that possession without use or intention to use is not an infringement.

    The presumption would be that possession is not an infringement as long as possession happens in non-commercial circumstances.6 In the case of GM seeds found on private or common lands that are not commercially exploited, this would imply that there is no scope for infringement. In the case of a commercial farm, the presumption would be that use is intended unless it can be proved that the user was never planning to use the invention. In this specific case, this implies that even if Schmeiser had not taken advantage of the special utility offered by the invention, he would have had to demonstrate that he had never intended to spray his crop with Roundup Ready even if there had been an unexpected need to do so.

    In the Schmeiser case, the judges decided that even though Schmeiser never sprayed his crops with Roundup Ready, it could not be ruled out that he might not have done so had the need arisen. This was based on the finding that Schmeiser ‘knew or ought to have known’ that the seeds he planted in 1998 were Roundup Ready tolerant. This led the court to determine that Monsanto had been deprived at least in part of the enjoyment of the patent, on the basis that even if the invention was not used directly by Schmeiser, possession gave him a chance to sell it to other farmers unwilling to pay the licence fee. In other words, even though it is possible that Schmeiser may not have known that his crop was Roundup Ready tolerant, he is held to have used the invention.

    The judges addressed one last argument concerning the relationship between real property rights and intellectual property rights. Schmeiser argued that once the patented seeds had made their way to his fields, he should be held to own the seeds in the same way that landowners own the progeny of animals reproducing on their land.

    The trial judge addressed this issue directly and came to the conclusion that while the farmer may own the seeds spilled onto his land or seeds having germinated from pollen carried to his fields from elsewhere by insects, birds or the wind, this does not give him the right to use the patented gene or the seed containing the patented gene or cell.

    The Supreme Court judges merely noted that the issue in the Schmeiser case was one of patent protection and that ownership would be no defence to a breach of the Patent Act. Having determined that Schmeiser had infringed the Monsanto patent, the Supreme Court found that Schmeiser did not owe Monsanto anything because he had not benefited from the use of the patent. This conclusion was arrived at because Monsanto decided to elect for a type of remedy – accounting of profits – which is measured by looking at the profits made by the infringer rather than the amount lost by the inventor. Since Schmeiser had not used Roundup Ready on his crop, he had not taken advantage of the herbicide resistant nature of the GM canola and had therefore gained nothing.

    Beyond Schmeiser Judgment

    The Supreme Court judgment is a decision nearly exclusively grounded in patent law. In the narrow context in which the judges decided to consider this case, they reached the conclusion that patent rights prevail over real property rights and that Schmeiser should be deemed to have infringed the invention even if he had not actually used and taken advantage of it. Having established these principles, the court then determined that Schmeiser owed nothing to Monsanto because he had not gained economically from the use of the invention.

    The judgment raises questions from the point of view of patent law. Besides patent issues, the judgment raises other questions since it fails to address other important issues related to the introduction of GM seeds into the environment. Thus, it neither considers questions related to biosafety, nor questions related to the environmental liability of the company commercialising the GM seeds, nor those related to farmers’ rights or privileges.

    Patent Protection

    The findings of the Canadian Supreme Court on patent law are potentially wide-ranging. The principle established by the court is that Schmeiser is deemed to have infringed the patent whether or not he knew that the Monsanto patented gene was present in his seeds. This is an odd result because it cannot be assumed that individual farmers have the capacity to test their seeds for the presence of patented genes.

    In the case of Roundup Ready Canola, for instance, this would seem to imply that farmers growing non-GM canola in an area where GM canola is also grown would be under an obligation to either have their seeds tested in a laboratory or to spray Roundup Ready on their crop which would have the effect of killing the crop if it is found not to be GM canola. Whether or not Schmeiser knew that there were GM seeds on his land, broader issues arise.

    As noted above, in Canada like in India plants are in principle not patentable. Further, both countries also have a special regime for the protection of plant varieties which introduces an alternative intellectual property rights protection known as plant breeders’ rights. It is noteworthy that there used to be a strict distinction between inventions which were the product of human inventiveness and products of nature such as plants which were possibly selected by human beings but not controlled by them.

    In fact, this distinction helps to understand the rationale for the development of plant breeders’ rights which were developed partly as a compromise between proponents of intellectual property protection for plants and proponents of the patent system who felt that the introduction of plants in the patent system would have a negative impact on the whole patent system by bringing in protectable subject matter where the human contribution was small.

    In recent decades, in parallel with the development of genetic engineering, patents on life forms have progressively been accepted as confirmed by the TRIPS Agreement which imposes life patents in all WTO member states. However, even if life patents are now allowed, countries neither have to provide patentability for plants nor for plant varieties. There are good reasons for maintaining this distinction. Firstly, should the Monsanto patent automatically extend to the plant of which it is a part, this would blur the distinction between patents on GM cells or genes and patents on plants. Secondly, the fact that certain plants can self-replicate and spread in the environment strengthens the rationale for maintaining the prohibition on plant patents.

    Biosafety and Liability

    The judgment does not consider issues besides patent protection. While patent protection is one of the main legal incentives for the development of genetic engineering in the private sector, biosafety regulations are the main instrument through which the environmental and health impact of genetically modified organisms are examined.

    Most countries of the world, even most of those that have not ratified the Biosafety Protocol to the Biodiversity Convention like Canada, have biosafety regulations at the national level. One of the main reasons why biosafety should be considered in a case like this is that it brings up different but complementary aspects to the dispute. The patent dispute looked exclusively at the question of whether Schmeiser had infringed a patent. The biosafety dispute would have also looked at the issue of whether Monsanto should be deemed responsible for introducing into the environment a GM construct which has the potential to self-replicate.

    Seen from this broader perspective, the dispute between Schmeiser and Monsanto becomes a question of the respective liability of Schmeiser concerning the patent infringement versus Monsanto’s liability for the contamination of his property. This raises problems which were not addressed by the court.

  • Firstly, there is a need for clarity concerning the responsibility of the different entities and individuals involved in the introduction of genetically modified seeds into the environment. One of the good solutions is the one adopted by Switzerland in its Gene Technology Act which clearly indicates that the entity which has been given the authorisation to introduce a genetically modified organism into the environment is solely liable for damage that is a result of the modification of the genetic material. Should a different solution prevail, the legal framework should at the very least clearly demarcate the responsibility of the entity marketing the GM organism and the responsibility of other users.

    In the Schmeiser case where the farmer is deemed to have infringed the patent even if his fields were in fact contaminated, this would seem to absolve the entity marketing the seeds from any liability and shift the burden to the users. On the basis of the Schmeiser decision, the principle established would appear to be that the only legal relationship that farmers have with Monsanto is with regard to patent protection. In a situation where their fields are contaminated, they would only be able to sue their neighbours for the contamination. This would be an unwelcome situation against which countries which have not yet given themselves a clear liability framework should protect themselves.

  • Secondly, the issue of a balance of liabilities raises the question of the control that farmers have or can have over the land they own or use. Different farmers may take different decisions concerning the kind of agriculture they want to undertake and some decide to pursue organic agriculture. Since the definition of organic agriculture implies that there should be no genetically modified plants, contamination by genetically modified seeds would immediately disqualify the organic farmer from selling his/her crop as organic and would lead to a loss of earning since organic products fetch in general a higher price than non-organic ones. The question which is raised here is that of coexistence, an issue which has been extensively discussed in scientific and policy debates. Unless there is a clear decision to forgo organic agriculture, contamination of organic crops should be compensated by the entity causing the contamination. The entity which benefits from the commercialisation of the GM seed should be the one shouldering the costs related to the contamination of the environment.

  • Thirdly, this also raises the issue of farmers’ rights. The situation can be divided between the rights of farmers who purchase GM seeds and other farmers. In the case of farmers who purchase, for instance, Roundup Ready Canola from Monsanto, they have to sign as part of the transaction a technology use agreement which contractually restricts the rights they have over the seeds they purchase. These agreements have, for instance, been challenged in some cases in the US but the courts have found that even if they deprive farmers of some statutory rights this does not invalidate the contract which they voluntarily sign as part of the purchase agreement with the company. While the situation of farmers who are bound by a technology use agreement seems clear at least in North America, these contractual provisions should not, in principle, affect the rights of other farmers. Farmers who do not purchase these seeds should, in principle, have the rights they customarily enjoy as part of the ‘farmer privilege’ enjoyed under the plant breeders’ rights system.

    These farmers should theoretically have the right to save and use seeds that they have grown even if they have been pollinated by GM pollen. The Schmeiser case, however, seems to indicate that unless a farmer had no inkling of the potential presence of GM seeds, s/he would be liable. In practice, this means that the onus of proof is on the farmers. This also implies that if farmers grow non-GM crops in an area where GM crops are grown, there could be a presumption that they ‘ought to know’ of the possible presence of protected GM seeds on their fields. I

    Implications of Schmeiser Case

    The Schmeiser case is an important decision. On the one hand, it acts as a clear warning to other farmers in Canada that they have to watch their fields for the presence of GM seeds. It also indicates that patent protection seems to prevail today over the rights that landowners have and that issues concerning biosafety, coexistence and liability are of low importance. On the other hand, the finding that the patent holder can in principle assert its rights on all transgenic seeds used in a commercial context whatever their origin may make the link between environmental contamination and the patent holder is easier to establish. In comparative perspective, the Schmeiser case can be seen as either relatively insignificant or as a warning sign to be taken into account. On the one hand, the case may remain an isolated oddity in the world and its negative impact may stop at Canadian borders. This will be the case if all other countries adopt strict biosafety frameworks which, like in the Swiss case, make it clear that the entity marketing the genetically modified organism is solely liable for all consequences. On the other hand, there remain at present a number of countries, including India, where the legal framework is not necessarily specific enough to ensure that similar cases will never occur in the future. The above analysis indicates that the Schmeiser decision is unhelpful from a patent law point of view and lacking because it fails to take into account biosafety aspects, the question of coexistence and to consider the liability of the entity introducing the GM seeds into the environment.

    The Indian legal system clearly favours a situation where plants and plant varieties are not patentable. It also clearly recognises that the introduction of GM organisms into the environment can have negative impact for the environment and human health. However, at present, the legal system remains inadequate with regard to issues of liability. There is very little guidance that would help judges to work out an appropriate balance between the liability of the entity marketing the GM seeds and the rights of this entity against the users of its invention. The Schmeiser case makes it clear that the development of comprehensive liability frameworks in the field of biotechnology is a priority. This is, in fact, an issue which is not only national in scope. In the context of the Biosafety Protocol, member states – including India – have just started the elaboration of an international liability framework. Even the remote possibility of a Schmeiser-like case makes the active and positive participation of all countries in the development of an international liability a priority at this juncture.
    (P. Culllet, EPW, June 19, 2004).

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