State Legislative Proposals in Response to Licensing Agreements

The state of the seed market

The current IP and contact regimes that restrict farmers' ability to save seed represent, from the farmer's perspective, a dramatic change from early governmental efforts to ensure access to a vast public domain of plant germplasm. Traditionally, states' involvement in regulating seed markets has been restricted to ensuring seed purity and truth in labelling. Recent economic and political developments in the seed industry, however, have influenced some legislators' otherwise laissez-faire approach to the seed market.

Legislators perceive a growing concentration and market power of multinational life science firms at the expense of smaller, local seed companies and plant-breeding operations. Between 1995 and 1998, 68 independent seed companies were acquired by, or entered into, joint ventures with just six multinational life science corporations (King, 2001, p. 6). Adding to the perception of market power is the dominant presence by many of these same multinational firms in the chemical input side of agriculture (King, 2001, p. 6).

In addition, adoption of fixed, take-it-or-leave-it seed licensing agreements accentuates the disparate bargaining power between the farmer or constituent and the multinational patent-holder. Judge Clevenger's vigorous dissent in Monsanto v McFarling (2002) characterized these agreements as unenforceable adhesion contracts. Although acknowledging that the patentee 'has every right to license its technology on only the most favorable terms possible', in his view, the technology use agreement violated the farmer's due process rights. Potentially lopsided contract terms may be amplified when the licensee has no other practical source to turn to for buying seed. The rapid adoption of glyphosate-resistant seeds, in Judge Clevenger's opinion, demonstrated that the farmer had little choice but to sign the technology use agreement in order to remain competitive in the soybean market.

Moreover, the elimination of farmers' traditional right to save seed upset the long-settled expectations of many farmers. Concurrent global competition from South American farmers who reuse Roundup Ready varieties of soybean seed with impunity, coupled with rising seed costs (USDA, n.d.a; USDA, n.d.b), created a perceived economic loss to the farmer. Seed-pricing structures also contribute to farmer discontent. In a typical transaction, the farmer purchases a bag of seed from the seed dealer and pays a separate 'technology use fee' for a limited licence to use the seed's technology for a single growing season. The farmer does not have the option to save the harvested seed and simply pay an additional technology use fee for the privilege of using the technology for a second growing season. Instead, the farmer must purchase a new bag of seed and pay the accompanying technology use fee. Anecdotal evidence suggests that even those farmers who traditionally saved seed would be willing to pay the technology use fee on an annual basis as long as they were not required to repurchase seed that they could otherwise produce themselves.

State action

In response to changes in the seed market precipitated by licensing agreements, two types of proposals have emerged from state legislatures that seek to restore farmers' ability to save harvested seed. The first variation, a 'contract-modification' statute, essentially would re-establish the seed-saving rules under the PVPA by mandating the terms of technology-licensing agreements. Specifically, the statute would require all bag tag licences or technology use agreements to contain a provision that allows a farmer to plant seed derived from the originally purchased seed on land under the farmer's control. Seed dealers would retain the right to prohibit 'brown bag' sales as well as research by competitors.2 The second variation, a 'seed-registration' statute, would establish a state seed registration and royalty office. Farmers desiring to save seed would register with the state agency and pay a royalty fee, a portion of which the state would remit to the patent-holder.3

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