Order the parties separately holding the male plant and the female plant of a new plant variety to reach a compromise on granting authorization and license to each other for continuous production of the new plant variety

——Tianjin Tianlong Seed Technology Co., Ltd. v. Jiangsu Xunong Seed Technology Co., Ltd. in respect of a dispute over infringement upon new plant variety rights[1]

[Syllabus]

Where the parties separately holding the male plant and the female plant of a new plant variety fail to reach a compromise on granting authorization and license to each other, causing failure in the continuous production of the new plant variety, it will impair the interests of both parties and does not conform to the purpose of cooperative breeding. In order to safeguard the public interests, guarantee the national grain security, and promote the transformation and implementation of widely-planted new plant varieties, on the basis of measuring the same value of the male plant and the female plant in the production of a new plant variety, the people's court may directly order that both parties should grant authorization and license to each other and mutually exempt the corresponding royalties.

[Case No.]

Jiangsu High People’s Court (2011) SZMZZ No. 0194 and (2012) SZMZZ No. 0055

[Brief of Case]

New plant variety right dispute

[Keywords]

Civil; infringement upon new plant variety rights; mutual authorization and license

[Relevant Legal Provisions]

Article 5 of the Contract Law of the People’s Republic of China and Articles 2, 6 and 39 of the Regulation of the People’s Republic of China on Protection of New Varieties of Plants

[Basic Facts]

Tianjin Tianlong Seed Technology Co., Ltd. (hereinafter referred to as “Tianlong Company”) and Jiangsu Xunong Seed Technology Co., Ltd. (hereinafter referred to as “Xunong Company”) filed a lawsuit regarding infringement upon new plant variety rights with the court respectively, each with the other party as defendant.

　　The9A/418 rice variety, a three-line japonica hybrid jointly cultivated by the North Japonica Hybrid Rice Engineering Technology Center (same institute as the Liaoning Rice Research Institute, despite of the different names) and the Xuzhou Institute of Agricultural Sciences, passed the national crops variety review on November 10, 2000. The9A/418 rice variety came from female plant9201Aand male plant C418. On December 30, 2003, the Liaoning Rice Research Institute applied to the Ministry of Agriculture for new plant variety rights with respect to the C418 rice variety, obtained authorization on May 1, 2007, and licensed the exclusive right to exercise new plant variety rights with respect to C418 to Tianlong Company. On September 25, 2003, the Xuzhou Institute of Agricultural Sciences applied to the Ministry of Agriculture for protection of new plant variety rights with respect to the Xu9201Arice variety it bred, and obtained authorization on January 1, 2007. On January 3, 2008, the Xuzhou Institute of Agricultural Sciences licensed the exclusive right to exercise the new plant variety rights with respect to Xu9201Ato Xunong Company. After a trial, it was found that Xunong Company and Tianlong Company used the same combination to produce9A/418, namely, C418 as the male plant and Xu9201Aas the female plant.

　　On November 14, 2010, upon application of Tianlong Company, the court of first instance authorized Hefei Test Center to conduct DNA identification on whether there was parenthood between the alleged infringing variety under the preservation of Tianlong Company and the authorized variety C418. By using the 48 rice SSR markers in the national standard GB/T20396-2006, a marker analysis was made on DNA of9A/418 and C418. The results showed that in all markers tested,9A/418 fully inherited the banding pattern of C418 and it may be identified that there was parenthood between9A/418 and C418.

　　On August 5, 2010, upon application of Xunong Company, the court of first instance authorized the Hefei Test Center to identify whether there was parenthood between the alleged infringing variety under the preservation by notarization of Xunong Company, and C418 and Xu9201A. By using the 48 rice SSR markers in the national standard GB/T20396-2006, a marker analysis was made on DNA of the alleged infringing variety and C418 and Xu9201A. The results showed that in all markers tested, the alleged infringing variety fully inherited the banding pattern of C418 and Xu9201A, it may be identified that there was parenthood between the alleged infringing variety and C418 and Xu9201A.

　　In the written request of the application for the C418 variety rights submitted by Tianlong Company, the contents of the specification included: C418, a japonica-type restorer line with a form close to indica and specific affinity, was cultivated by using the “indica-japonica bridge” restorer production technique brought about in the world by North China Japonica Hybrid Rice Center and by using intermediate materials between indica and japonica varieties to construct gene groups beneficial to both indica and japonica varieties. C418 has higher specific affinity, which is a type of property possessed by restorer lines cultivated by the “indica-japonica bridge” method, as manifested in the first filial generation’s better coordination of the ecological and genetic differences between the genomes of indica and japonica varieties, thus providing a better solution to the obstacles generally posed by indica and japonica hybrids, including low seed setting rate, poor grain plumpness, temperature sensitivity, and premature aging. C418 combines the excellent traits of indica and japonica varieties, and the hybrid combinations that it produces generally show a higher seed setting rate and some cold tolerance.

　　In their letter to Tianjin Seed Management Station, Xunong Company and Xuzhou Agricultural Science Institute claimed that Xu9201A, a middle-season japonica sterile line that they selectively bred of their own volition, passed [the national validation for crop varieties] in 1996. Prior to the validation, it was named “9201A”, abbreviated to “9A”; after the validation, it was named “Xu9201A”. They used Xu9201Aas the female parent to successively breed various three-line japonica hybrid rice combinations, including9 A/138,9A/418, and9A/24. In the application for national validation of the crop variety completed in 2000, the content about the parents was drawn from “variety origins9201A×C418”used when the two groups were combined in 1995. In the July 2003 application to the Ministry of Agriculture for the protection of the new variety rights to Xu9201A, it was indicated in the variety specification included in the written request of the variety rights application that Xu9201Ais combined with other groups to breed various hybrid combinations, including9A/138,9A/418,9A/24,9A/686, and9A/88. Xu9201Aand9201Aare the same middle-season japonica sterile line. Tianlong Company’s infringement of the rights to use9201Awas an infringement of the rights to use Xu9201A.

[Judgment Results]

With respect to Tianlong Company v. Xunong Company, on August 31, 2011, the Intermediate People’s Court of Nanjing Municipality, rendered the (2009) NMSCZ No. 63 Civil Judgment: I. the court orders Xunong Company to immediately cease selling the seeds of the japonica hybrid rice9A/418 and orders that the company cannot repeat the use of the seeds of the new plant variety C418 inthe production of the seeds of the japonica hybrid rice9A/418 without permission from the right-holder; II. the court orders Xunong Company to pay, within 15 days of the judgment’s coming into effect, Tianlong Company RMB 500,000 as compensation for economic losses; III. the court rejects Tianlong Company’s other litigation requests. The acceptance fee of the first-instance case, RMB 15,294, is to be borne by Xunong Company.

　　With respect to Xunong Company v. Tianlong Company, on September 8, 2011, the Intermediate People’s Court of Nanjing Municipality rendered the (2010) NZMCZ No. 069 Civil Judgment: I. The court orders Tianlong Company to cease, immediately on the day the judgment comes into effect, infringing Xunong Company’s exclusive right to exploit the rights to the new plant variety Xu9201Ainvolved in the case; II. the court orders Tianlong Company to pay, within 10 days of the judgment’s coming into effect, Xunong Company RMB 2,000,000 as compensation for economic losses; III. the court rejects Xunong Company’s other litigation requests.

Unconvinced by the first-instance judgments, Xunong Company and Tianlong Company both appealed, each in its respective above-mentioned case. On December 29, 2013, the Higher People’s Court of Jiangsu Province combined the two cases and rendered the (2011) SZMZZ No. 0194 and (2012) SZMZZ No. 0055 Civil Judgments: I. the court revokes the (2009) NMSCZ No. 63 and (2010) NZMCZ No. 069 Civil Judgments rendered by the Intermediate People’s Court of Nanjing Municipality, Jiangsu Province; II. the court orders Tianjin Tianlong Seeds Science and Technology Co., Ltd. to pay, within 15 days of the judgment’s coming into effect, Jiangsu Xunong Seeds Science and Technology Co., Ltd. RMB 500,000 as compensation; III. the court rejects the other litigation requests of Tianjin Tianlong Seeds Science and Technology Co., Ltd. and Jiangsu Xunong Seeds Science and Technology Co., Ltd.

[Juridical Reason]

In the effective judgments, the court opined: under normal circumstances, the right to a new plant variety, as a type of important intellectual property right, should be respected and protected. Article 6 of the Regulation on the Protection of New Plant Varieties clearly provides: an entity or individual enjoys an exclusive right to a variety which it or he] has bred and for which rights have been granted to the entity or individual. No entity or individual, without permission from the owner of the variety rights, shall produce or sell for commercial purposes the propagation material of the variety for which rights have been granted or repeat for commercial purposes the use of the propagation material of the variety for which rights have been granted in the production of the propagation material of another variety. However, it was necessary to point out that this provision did not apply to the situation in this case. First, the cooperative cultivation of9A/418, which combines rice groups for free, has its origins in the large-scale cooperation in hybrid rice research that took place in the 1990s in China. The variety9A/418 has excellent traits and has been widely planted in Jiangsu, Anhui, Henan, and other places. It has been generally welcomed by many farmers and has become the leading variety of middle-season japonica hybrid rice. The infringement of rights that was mutually alleged by both parties was also sufficient to show that the variety9A/418 has a higher economic value and better market prospects compared with other varieties. The alleged mutual infringement involves enormous economic interests on the part of the collaborating parties, Liaoning Rice Institute and Xuzhou Agricultural Science Institute, as well as both parties to this case. During the second instance of this case, the court carried out significant mediation work in the hope that the parties to the case could engage in mutual licensing to allow the continued production of the excellent variety9A/418. The parties agreed to mutually license the variety rights involved in the case, but the mediation was not successful, for the sole reason that the first-instance court had ordered Tianlong Company to pay Xunong Company compensation in the amount of RMB 2,000,000 and had ordered Xunong Company to pay Tianlong Company compensation in the amount of RMB 500,000, and the parties could not reach a compromise on the resulting RMB 1,500,000 difference in compensation. Because Tianlong Company and Xunong Company could not reach a compromise, production of the variety 9 You 418 could not continue. This could not be considered to involve only the interests of the two sides in this case. In fact, this outcome impaired the implementation of the strategies for national food security and was detrimental to public interests. In addition, this was not consistent with the fundamental purposes of the cooperative breeding initially carried out by Liaoning Rice Research Institute and Xuzhou Agricultural Science Institute, nor did it conform to the fundamental requirements for promoting transformations for applications of new plant varieties. On the face of it, the acts of the parties to the case were undertaken to protect their own intellectual property rights, but the actual results were that the use of intellectual property rights and the transformations for applications of scientific and technological results were impaired. Given that the two cases involved public interests, such as national food production security, and affected the promotion of the excellent variety9A/418, the parties should have been subject to some constraints when they exercised their exclusive rights to exploit the licensing rights of the new plant variety involved in the case: in the production of the rice variety9A/418, each party should have permitted the other party to use the propagation material of its own parent variety. This result would have been clearly beneficial to the common interests of Liaoning Rice Research Institute and Xuzhou Agricultural Science Institute—the two cooperating parties—and the parties to this case. This result would also have been beneficial to many farmers’ interests. Therefore, it was inappropriate for the first-instance court to order the parties of the two cases to mutually cease infringing each other’s rights and to pay each other compensation for economic losses. The court’s mistakes should be corrected. Second,9A/418 is a three-line hybrid combination that combines the excellent traits of the two parents and has notable heterosis. The role of the female parent sterile line is important, and the selective breeding of male parent C418 also successfully solved significant problems surrounding three-line japonica hybrid rice. In the9A/418 combined groups, the male parent has the same status and function as the female parent. The court decided that Xuzhou Agricultural Science Institute and Liaoning Rice Research Institute, the two parties cooperating for the development of the rice variety9A/418, as well as Xunong Company and Tianlong Company, the parties to this case, all had the rights to use the propagation material of the parent variety for which rights have been granted and that they should mutually exempt each other from the corresponding licensing fees. However, the rights and exemption only applied to the production and sale of the rice variety9A/418; they could not be used for other commercial purposes. Xunong Company expended significant commercial efforts and carried out research on planting technology in promoting the variety9A/418, whereas Tianlong Company only entered into production of the variety9A/418 after it had been widely recognized by the market; therefore, the latter’s market costs for promoting the variety significantly decreased. To manifest fairness and reasonableness, the court also ordered Tianlong Company to pay Xunong Company RMB 500,000 as economic compensation. Finally, given that each party produced9A/418 on its own, there was, in fact, some market competition and conflict of interests between them, and the court warned that the parties should abide by the relevant provisions of the Anti-Unfair Competition Law of China, operate their businesses honestly, compete in an orderly manner, and ensure the quality of their products. In particular, they should clearly display their respective business identifiers in order to prevent new controversies and disputes from arising and should jointly preserve the good reputation of the variety9A/418.