Commentary on the first case to consider infringement of plant variety rights in New Zealand.

Plant Variety Rights

Plant variety rights cases are rare and the first case to consider infringement was decided in the High Court of New Zealand in September 2004, followed by an appeal to the Court of Appeal by the first and second defendants in 2005.

In New Zealand plant variety rights ("PVRs") are governed by the Plant Variety Rights Act 1987 ("the Act"). PVRs give the owner of the PVR the exclusive right to "produce for sale, and to sell, reproductive material" of the variety protected (see section 17 of the Act). Infringement of the exclusive rights is actionable in the High Court. An appeal lies to the Court of Appeal.

The Facts Of The Case

In Cropmark Seeds Ltd v Winchester Intl (NZ) Ltd & Ors*, Cropmark, a New Zealand company, sued another New Zealand company and its two directors personally for infringement of its PVR in a barley called "Optic" used in brewing beer.

Cropmark alleged the defendants "arranged" for the sale of Optic barley seed.

Optic barley was developed in the United Kingdom. Cropmark was the exclusive licensee in New Zealand. There were sub-licensees in New Zealand who paid a royalty to Cropmark.

The facts of the case revealed a complex web whereby the defendants arranged for sales of uncertified Optic seeds from a third party. They did not sell seed themselves. The parties involved in the sale of the uncertified seed documented the sales and supply of seed as "feed" and not for "sowing" to avoid the need to pay levies and royalties to Cropmark. The seed was sold in plain bags, without tags. Purchasers of the seed were asked not to tell anyone about the purchase and that they would be billed for "straight barley" so as to leave a non-descript paper trail.

The second defendant was found to have gone to some lengths to hide the true nature of the sales. The judge, John Hansen J, also found discrepancies in the evidence. In relation to the second defendant, he found him "disingenuous, prone to dissemble, sometimes contradictory, and frequently answering a completely different question to what was put".

The High Court Decision

The judge came to the view that the second defendant knew that legally only Cropmark had the right to sell Optic barley, and had decided that if he did not sell directly, but merely arranged sales, he would avoid infringing Cropmark’s rights.

The defendants claimed that because there were no "sales" and as such no infringement based on the words of section 17 "produce for sale, and to sell, reproductive material".

John Hansen J’s decision includes an interesting discussion of the extent of the rights granted by the Act. The Act was said to give proprietary rights. Infringement is a violation of those rights, and in the judge’s view could not be limited to sale. The judge appeared to work backwards, stretching the words "produce for sale, and to sell, reproductive material" to include arranging sales. He said that otherwise sales of seed could be organised, in breach of proprietary rights, but escape liability.

How Can It Be An Infringement If The Rights Do Not Extend That Far?

It was the judge’s view that Parliament did not intend to exclude arranging sales from infringement. While this may be true, the words of the Act do not extend that far.

The Judge found that the first and second defendants infringed Cropmark’s proprietary rights. The third defendant, as director of the first defendant, was found not to have infringed because he lacked the necessary knowledge of the activities.

The question then turned to damages. There was no evidence that the defendants profited from their activities. If this was the case then one wonders why the defendants bothered to arrange sales. In any case, the judge saw no point in seeking an account of profits or damages.

Cropmark asked for exemplary damages. Exemplary damages are available where the defendant’s behaviour is reprehensible and are intended to punish a defendant.

The judge had no difficulty in finding there was a blatant and deliberate disregard of Cropmark’s rights. An award of $5,000 against each of the first and second defendants was awarded.

The Court Of Appeal Decision

The defendants challenged the High Court judgment as to liability, the award of exemplary damages and an order for payment of costs#.

The question was said to be whether the defendants’ conduct has diminished Cropmark’s enjoyment of its exclusive right.

Each of the sales was of reproductive material namely Optic seed. Since Cropmark possessed the exclusive right to engage in such conduct, undoubtedly the defendants infringed the exclusive right by depriving it of potential royalties.

The defendants may now apply to the Supreme Court for leave to appeal to that Court.

Did The Courts Get It Right?

Possibly not, because arranging sales is not one of the exclusive rights granted to the proprietor under section 17. But the defendants’ actions did deprive Cropmark of royalties and were deliberately designed to do so.

A judge can only operate within the confines of the law under consideration (although judges have at times been accused of stretching the law into the area of judicial lawmaking). Interest and lobby groups can then pressure Parliament for a change. The New Zealand Government is currently considering a change to the Act. The Plant Variety Rights Amendment Bill ("the Bill") has been released to the public for discussion but does not specifically cover "arranging sales". It does set out an expanded group of rights including the right to prevent other people, without the PVR owner’s authorisation, "from producing or reproducing, conditioning for propagation, offering for sale, selling or marketing, or importing or exporting the reproductive material of a protected variety" likely to be subject to some exceptions. The Bill also includes the right to prevent other people stocking that material for any of those purposes and authorising other people to do any of those things.

If passed by Parliament in its current form the Bill may be more likely to capture the defendants’ activities in the present case. While the words of the Bill do not expressly include "arranging sales" such an activity may be caught by the words "offering for sale" and/or "marketing" or as "authorising" other people to sell or offer for sale or market a protected variety. It seems that Parliament’s intention in drafting the Bill is to broaden the exclusive rights granted to PVR owners. However, the Bill is not yet law and has no effect on the case of Cropmark Seeds v Winchester.

*Cropmark Seeds Ltd v Winchester Intl (NZ) Ltd & Ors (HC, 28/9/04, John Hansen J, Timaru CIV 2003 – 476 – 8).

# Winchester Intl (NZ) & Anr v Cropmark Seeds Ltd (CA, 5/12/2005, Anderson P, Glazebrook J, Baragwanath J, Wellington, CA226/04)

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