IP law and administration


Plants For Europe actively campaigned for a Remain vote in last week’s referendum on the UK’s membership of the EU. We cannot deny that we are disappointed by the outcome of the vote. However, we must accept the circumstances as they are and work to maintain and extend the success of our business by serving our customers and the plants that we represent in the best way possible.

At the moment, the UK remains a member of the European Union. European Union law continues to be in force in the UK, including all laws related to Plant Variety Rights. Holders of Plant Variety Rights can expect that royalties should continue to be paid, subject to the current economic volatility. EU Plant Variety Rights continue to be legally enforceable throughout the 28 member states of the EU, including all parts of the UK.

In the medium and long term, we should expect some changes to Plant Variety Rights, particularly in the UK. However, we do not yet know what those changes might be. Plants For Europe is already in contact with the Horticultural Trades Association and other important organisations in order to promote the interests of plant breeders and to devise the best lobbying position and strategy to try and secure the best possible outcome for plant breeders. Our customers can be sure that we will do what we can to protect their interests – in fact, we may, in time, ask our customers to assist in any lobbying that is required.

Plants For Europe had drawn up plans in advance for both possible outcomes of the referendum vote. We are already taking measures to ensure that we are still able to administer both EU Plant Variety Rights and UK Plant Breeders Rights for our customers, even if the UK does fully withdraw from the EU and is no longer part of the EU Plant Variety Rights jurisdiction. These measures do not need to be implemented immediately, as we are yet to see exactly what the British government’s policies will be. The timetable for withdrawal is unclear and, until withdrawal is completed, the UK remains within the EU Plant Variety Rights system. At the very least, we expect withdrawal will take two years and is unlikely to be completed before the end of 2018 – it may, in fact, take much longer.

In the meantime, if you have any concerns or questions, please do not hesitate to contact us.

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INTRODUCTION

The United Kingdom will hold a referendum on continued membership of the European Union on June 23rd. All registered voters in the UK will get a vote and the outcome will be decided by simple majority. (Are you registered to vote? The deadline for registration is June 7th).

There are many arguments being put forward for leaving or remaining and it is for individual voters to make their own decision. However, we feel it is important to outline what we foresee as the likely implications of Brexit for plant breeders, both British and from other countries, and for growers, retailers, landscapers and gardeners. We should emphasize that it is difficult to be certain about what might happen after a possible Brexit. The Brexit campaign has not been able to say for definite what the policies of a post-Brexit government might be. Further, it is not clear what the negotiating position of the EU would be in such circumstances. However, whilst the issues laid out below are slightly conjectural, we believe that the situations that we propose are plausible and likely.

CURRENT SITUATION

In the first instance, it is important to realise that very few applications for Plant Variety Rights (PVR) now use the national PVR legislation of Member States. To prove this point, there has not been an application for a UK Plant Variety Right for an ornamental plant (except a few roses) since before 2012, and even then there were only a few each year compared to many thousands of applications for EU Plant Variety Rights.

Instead, breeders use the European Union Plant Variety Right administered by the Community Plant Variety Office (CPVO), which is an agency of the European Union. This provides a single Plant Variety Right that covers all 28 member nations of the EU. The main advantages of this are:

  • one set of forms/administration instead of separate forms/administration for each Member State
  • one set of fees
  • one DUS technical examination
  • uniformly legally enforceable across all 28 member nations – including any new nations that join in future (e.g. existing rights were automatically extended to cover Croatia when that nation joined the EU in 2013, without any additional cost to rights holders)

It is important to note that, whilst applications for EU Plant Variety Rights from plant breeders outside the EU are welcomed, they must be placed through an agent domiciled within the territory of the European Union. However, the geographical scope in terms of enforceability of the EU PVR is limited to the territory of the Member States. Ever since EU PVRs were introduced in the 1990s, their scope has never been extended to any nation that was not a member of the EU. It is, therefore, reasonable to assume that if the United Kingdom were to leave the European Union, EU PVRs would no longer be enforceable in the United Kingdom.

This leaves two problems.

EXISTING EU PVRs

The first problem is: what happens to all of the EU PVRs that have already been granted if the UK leaves the EU? Nearly 42,000 applications had been granted by the end of 2015, although not all of those continue to be valid – nearly 24,000 were in force at the end of 2015.

There are two possibilities. The UK and the EU could negotiate so that EU law regarding this intellectual property right would continue to apply in the UK. This would have drawbacks – not least, that the UK would be subject to a law over which it had no control and no power if the law was changed – there would be no seat at the EU negotiating table if the UK left. Given that the Brexit campaign is opposed to anything which gives the EU power over legislation in the UK, this outcome seems unlikely. Further, the EU PVR law has never been applied to any country outside the EU since it first came into force more than twenty years ago, so it seems unlikely that the EU would agree to such a solution.

Alternatively, the UK could give a special exception to the requirement of UK PVR for novelty for a transitional period (say, one year) so that holders of existing EU PVRs could apply for UK rights, perhaps limited in duration to match the remaining duration of the EU PVR. Naturally, there would be the normal fees involved for an application. The current UK fees levied by the UK Plant Variety Rights Office (PVRO) are £741 admin fee for the application itself, plus a fee for taking over a DUS examination report from another agency (in this case, the CPVO) which is the Sterling equivalent of the other agency’s fee. The CPVO charges EUR 20 for a certified copy of a report of no more than ten pages (which would be enough for most reports), which equates to £15.75 at today’s exchange rate. This means that every protected variety that the breeder wished to continue to protect in the UK would cost nearly £760 to protect – fees over and above those that were anticipated and in addition to the normal CPVO fees required for continuing protection in the rest of the EU. For varieties with only a few years left to run of their protection, this simply would not be worth doing – the breeder would lose the opportunity to derive an income from that variety in the UK for the remainder of the protection period. The PVRO works on a “user pays” basis and would not likely to be subsidized by general taxation, so any reduction to these fees seems unlikely.

This idea would work effectively (if expensively) for varieties where the application process for EU PVR is complete. For varieties where the application process has begun, but DUS examination has either not commenced or not completed and no DUS examination report is available, then it is reasonable to assume that the PVRO will require a DUS examination, as is required by the existing legislation. This attracts a much higher fee and is discussed further in the next section.

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NEW APPLICATIONS

The second problem arising from Brexit is: what are the implications for new varieties for which applications for PVR have yet to be made? The UK is a major market for ornamental plants, so it seems likely that breeders would still wish to have effective protection on both sides of the English Channel (and both sides of the north/south border in Ireland).

Again, the UK and EU could negotiate a situation whereby EU PVRs would continue to be valid in the UK. But, as outlined above, this seems extremely unlikely.

So, working on the reasonable assumption that two parallel systems for PVR would exist, one for the UK and one for the remainder of the EU, breeders would be faced with substantially increased costs. A comparison would be as follows, using applicable fees that are in force today:

EU PVR for a Petunia variety:

  • application fee: EUR 450
  • DUS examination fee: EUR 1570
  • TOTAL: EUR 2020 which is equal to £1590 at today’s exchange rate

UK PVR for the same Petunia variety:

  • admin fee: £741
  • DUS examination fee: £1480
  • TOTAL: £2221

Of course, the EU system also has an annual fee which must be paid after the PVR is granted. This is currently EUR 250 per annum, which equals £197.

So, PVR protection for the UK only would cost the same as protection for the whole of the EU, including the EU annual fee for the first three years. The UK PVR offers protection in a market of 64 million people. The EU PVR offers protection in a market of 510 million people (including the UK). You can draw your own conclusions about the cost-effectiveness of these systems.

In order to protect a new variety in both the UK and the remainder of the EU after Brexit, breeders will find that PVR costs would become roughly twice what they are now. (That does not include the extra administration that would be required. Furthermore, UK breeders would need to employ a procedural representative based within the EU to file their applications on their behalf – we currently charge £550 for that service, per application).

IMPLICATIONS FOR BREEDERS, GROWERS, RETAILERS, GARDENERS

You can easily see that Brexit will place a major cost burden on plant breeders. There will be three consequences of that and these consequences will have an impact on plant breeders regardless of nationality as well as on parts of horticulture which seem well removed from direct plant breeding activity.

Firstly, some breeders, especially those working on a small scale, will simply decide that it is no longer worth the effort and may scale back or stop their plant breeding activities. This could cost jobs.

Secondly, all breeders will consider whether it is financially viable to introduce so many new varieties. This will reduce choice and stifle innovation in new plants.

Thirdly, all breeders will look to pass the increased cost on in the form of increased royalties. This will increase costs for all growers and, ultimately, for retailers and gardeners. Plants will be more expensive.

OUR RECOMMENDATION

There are many good reasons to vote Remain on June 23rd – the wider economy, social cohesion, freedom of movement of goods and people. There are also good horticultural reasons – a robust and effective plant health system, access to suppliers and markets on the Continent.

But for plant breeders and innovators, we think that the argument is simple. Brexit can only make business more difficult and more expensive.

Therefore, we are recommending to our customers that they VOTE REMAIN ON JUNE 23rd and we ask that all of our customers and friends encourage their contacts to do the same.

The European Parliament today debated the conflict, potential or existing, between Patents and Plant Variety Rights. The discussion was driven by a proposed motion in the Parliament, which you can read here.

The excellent IPKat website has some analysis here, although it is worth noting that it would not be limited to fruit, but apply to all plants, including ornamentals.

Some incorrect information is being bandied about by campaigners and the media. The patents that are now being granted apply to variety traits (characteristics), not to varieties themselves. This is a critical distinction between PVR (which apply to varieties) and patents.

For example: Breeder A develops the world’s first blue daffodil.

As it currently stands, Breeder A has two options:

  1. Take out Plant Variety Rights. The PVR applies to the particular blue daffodil variety that Breeder A has developed. A competitor breeder can now exploit the breeder’s exemption within PVR law and develop further blue daffodil varieties by breeding from the original variety (provided that they are sufficiently distinct as to not be considered Essentially Derived Varieties [EDV]) or by reproducing the breeding process that Breeder A followed (which circumvents the EDV rules). Within a very short period of time, Breeder A’s new variety is subject to competition, even though Breeder A invested many years and considerable resources in developing the original new blue daffodil. Conversely, Breeder A does not have a monopoly, so other breeders can improve on the original blue daffodil by developing new varieties and can aid the consumer by creating competition in the market.
  2. Take a Patent in the blue petal colour trait in daffodil, even though it is the product of a natural biological process. This would give Breeder A a monopoly position and prevent anyone else from developing a daffodil with a blue petal colour, even if they did so independently. This would provide Breeder A with a good opportunity to commercially exploit their new variety and recoup their significant investment (an incentive to innovate) but would prevent anyone else from developing a competitor or improved variety (stifles the market; stifles innovation). There is currently no obligation on a patent holder to licence their patent to any other party. Also: patents are very expensive for the independent breeder, so they can’t get this level of protection for their own new developments.

So there are arguments for and against the use of patents. As it is, the deep-pocketed breeding companies (mainly in agricultural crops) are applying for large numbers of patents. They are beyond the budget of many smaller firms and independents. Additionally, these patents may prevent other breeders from developing new varieties if they possess a trait that is owned by a third party.

We expect to see this debate run and run. We also expect growing pressure for amendments to legislation, although that will be a long and tortuous process. For now, watch out for more and more patents.

My thanks to Thomas Leidereiter for pointing this out to me. However, the commentary below and any errors or inaccuracies it contains are mine alone. Remember that PFE is not qualified to give legal advice and the following should merely be regarded as personal opinion.

The European Commission has proposed amendments to the Regulation that controls Community Trademarks (CTMs). CTMs are often used for branding plant varieties, series of plant varieties or even entire breeding programmes. For example, we look after plants covered by the CTM “Walberton’s” which is applied to plants originating from breeding activites at Walberton Nurseries. We attach brand values of quality and the assurance of many years of experience and trialling of new varieties. Other examples that you would be familiar with are the mark “Surfinia” (Suntory), applied to the well-known Petunia breeding, and “Wave” which is used for Petunia and Viola (Ball Horticulture).

CTMs are regulated by EC Regulation 207/2009 which you can read here. The European Commission has proposed amendments which are contained in document COM(2013) 0161 final, whch you can read here. Paragraph 10 of the latter document proposes the addition of a new paragraph (l) to Article 7 of the former, which is the section that covers absolute grounds for refusal for CTMs at the application stage. The new text reads as follows:

“trade marks which contain or consist of an earlier variety denomination registered in accordance with Council Regulation (EC) No 2100/94 of 27 July 1994 on Community plant variety rights with respect to the same type of product”

This is a new provision. Consider it carefully. If one applies for a CPVR using the name “Whatever”, one could then not obtain a CTM in the word “Whatever” for class 31 goods (plants), even though you would be the owner of both the CPVR and the CTM. “Pink Whatever” or “Whatever Beauty” would also be disallowed.

Moreover, if you wanted to apply for a CTM for class 31 and that contained a word that had previously been used by anyone as the variety denomination for a CPVR, then your application would be refused without any further consideration, even if the variety had been commercialized under a different (marketing) name.

The upshot of this proposal is that vast swathes of potential trademark names have been rendered unusable (there have been more than 40,000 applications for CPVR, I believe). Furthermore, applicants for CPVR will have to use a codename for the denomination if they have any intention of applying for CTM for their variety (which is probably good practice anyway). Potentially, existing CTMs which contain or are the same as CPVR variety denominations that pre-date the CTM application could be challenged and declared invalid.

Also, note that the amendment only refers to Community Plant Variety Rights and not to national PVRs in the Member States. So, potentially (and we’re being wilfully obscure here and our learned friends may well pull this to pieces!) a breeder could apply for a national PVR in a Member State in January 2015 and then apply for CTM in March 2015. In the meantime, no commercial exploitation of the variety is undertaken. Then, in January 2016 (before the first anniversary of the national PVR application), the applicant submits an application for CPVR using the rule of priority to claim the earlier filing date. Because the owner of the CPVR is the same as the owner of the CTM, the CTM does not preclude the use of that name for the CPVR denomination and yet, because the CPVR is filed after the CTM, the CTM remains valid. (Mind you, this would be very convoluted and potentially costly, just for the sake of not using a codename for the CPVR denomination).

All of which is jolly exciting and nicely illustrates why breeders pay a company like Plants For Europe Limited to worry about this sort of stuff so that they don’t have to!

We are always pleased when the cost of something is reduced. In 2013, the application fee for a Community Plant Variety Right was reduced from EUR 900 to EUR 650. On 1st January this year, the annual fee for CPVR was reduced from EUR 300 to EUR 250.

However, prices going down is a rare event. Prices going up seems more common.

The CPVO has been conducting a review of the fees it pays to the various national “competent authorities” that conduct DUS examinations of plant material subject to a PVR application. These include GEVES in France, the Bundesortenamt in Germany, the Naktuinbouw in the Netherlands and NIAB here in the UK. The fees are reviewed every three years or so and are calculated and negotiated based on the average costs incurred by the examination centres over the preceding three years. This process was completed in 2013 (relating to costs in the period 2010 to 2012) and has resulted in an average increase of 10% in fees paid by the CPVO to the examination centres.

The CPVO is now working on the second part of this fees review, which covers the fees levied by the CPVO to applicants for DUS examintion. The last review of fees was carried out six years ago, in 2008, with the new fees effective from 1 January 2009. The CPVO intends to propose a new fee structure to the European Commission, along with a simplification of the fee groups scheme (whereby different genera with similar examination requirements are grouped together with the same fee). This proposal should be completed later this year, with the new fees likely to become effective on 1 January 2015.

It seems almost certain that the DUS examination fees payable by applicants will increase. An increase of at least 10% seems probable, perhaps a little more (although the CPVO runs at a surplus and has undertaken to reduce that surplus).

Applicants should note that the DUS examination fee due for payment will be the fee applicable at the time that the DUS examination commences, not the fee applicable at the time of application. Therefore, it is almost certain that all applications made from now on (and many recently submitted) will be subject to DUS fees in the new structure, at the new higher rate.

The UK Department for Environment, Food and Rural Affairs (DEFRA) is currently conducting a consultation on increasing the fees for UK Plant Breeder’s Rights. You can find the consultation by clicking here.

Under the proposed new tariff, the application fee will increase by about one third and the DUS examination fee will increase by more than 130%. That’s a rather large price increase. DEFRA is currently losing money on (i.e. subsidising from general taxation) every PBR application that is submitted by breeders and intends that the new fee structure will result in a reduction in that loss/subsidy to nil. This is known in the jargon as “full cost recovery”.

The new fees will be so expensive that, in the case of a perennial garden ornamental, for example, the cost of the UK PBR (covering just one nation) would be equal to the cost of application, DUS examination and the first three years of annual fees for EU PVR (covering the UK and 27 other member states of the EU). We should not be surprised by this – the process of dealing with an application for Plant Variety Rights involves a similar process whether that is for UK PBR or EU PVR, with similar costs. If anything, the EU perhaps has some advantages of economy of scale, as it handles many more applications per annum than the British authorities do.

Therefore, the obvious business decision would be to not bother with UK rights, but simply apply for EU rights instead. And that is what most people do already, certainly in the world of ornamental plants – in the last twelve months, only one application for UK rights in an ornamental has been submitted (for a rose).

So, does this increase matter? Well, hopefully not. All the while the UK remains part of the European Union, breeders wishing to exploit their variety in the UK are afforded an effective, legally-enforceable protection by means of the EU PVR system. However, should the Europhobes get their way and force the UK’s exit from the EU, then breeders would find their protection costs will double – the fee for EU PVR will remain, but they would also have to pay a similar sum for UK rights (as it is reasonable to foresee that EU rights would no longer cover the UK if the UK were to leave the EU).

Let’s hope that never happens, eh? And use your vote wisely!

 

Aside: UK legislation refers to Plant Breeder’s Rights (PBR). European regulation refers to Plant Variety Rights (PVR) and that is the term we generally use here at Plants for Europe. PBR and PVR are essentially the same thing – an intellectual property right to protect innovations created by plant breeders. We prefer the term PVR because the right may not necessarily be owned by the breeder. Just like patent or any other intellectual property right, PVRs may be bought and sold and their ownership transferred. We look after several plants where the owner of the rights is not the original creator, for various reasons. The right relates to a plant variety, so we feel PVR is a more accurate term.

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