This American agricultural major’s fight with an Indian company regarding use of its Bt Cotton technology has reached the Delhi High Court   

~By Chandan Goswami

The Delhi High Court on April 10 stayed the restoration of a sub-licence agreement between Monsanto Technology LLC and Nuziveedu Seeds Ltd regarding the use of the former’s patented Bt Cotton technology.

A division bench headed by Justice S Ravindra Bhat was hearing Monsanto’s appeal against a single-judge order which had ruled that Monsanto’s termination of agreement with Nuziveedu Seeds was illegal and arbitrary. Both the parties were told to file their written submissions. Earlier, under the March 29 order, the court reinstated the agreement, but said the royalty or trait fee payable for the use of Monsanto’s patented Bt Cotton technology would be as per government stipulations.

Monsanto Inc., through its Indian arm Mahyco-Monsanto Biotech Ltd, sued Nuziveedu Seeds and its subsidiaries Prabhati Agri Biotech Ltd and Pravardhan Seeds Pvt. Ltd last year for allegedly continuing to sell seeds using its patented technology despite termination of its sub-licence agreement in November 2015.

It was not an easy case. Both parties had a commercial agreement which allowed Nuziveedu to sell Bt Cotton seeds under the trademark of Bollgard I and Bollgard II and under which Nuziveedu would pay royalty to Monsanto. There was an initial agreement for 10 years between the two, from 2004 and 2014. There was a dispute with regard to the “trait value” fee and it went before the Monopolies and Restrictive Trade Practices Commission (MRTPC). It was settled and there was a reduction in the “trait value” fee.

In the wake of the MRTPC order, Monsanto, through its subsidiary, Mahyco, had issued notices for terminating the contract in 2009. But the matter was settled in 2011. After the expiry of the 10-year contract period, it was ext-ended by a year to 2015. A fresh agreement was signed in 2015 for another 10 years. But in November 2015, Monsanto terminated the new agreement, accusing Nuziveedu Seeds and others of breach of contract because it did not pay the “fees” for the “trait value” of the Bt Cotton seed, and of infringement of copyright by using the trademark for Bt Cotton, Bollgard I and II through the acronym, BG, BG I and BG II.

Monsanto also challenged the central government’s Cotton Seeds Order of 2015 and the amended Essential Commodities Act, which placed a restriction on the upper limit of the price of seeds. Meanwhile, Nuziveedu Seeds challenged the original patent granted to Monsanto under the Indian Patents Act, 1970. The two sides also went in for arbitration over the termination of the contract.

The issue that Justice RK Gauba of the Delhi High Court adjudicated in March was whether the termination of the contract of 2015 by Monsanto was legal, and whether Nuziveedu Seeds and others were bound to pay the “trait fee” as part of their contractual obligation. Justice Gauba ruled that Monsanto terminating the contract of 2015 was arbitrary and it was legally untenable on two grounds. First, Nuziveedu was right in not paying the “trait fee” as stipulated in the agreement between the two because the price was subject to local laws.

The central government’s order placing a ceiling on the price of seeds was valid, and Nuziveedu Seeds had duly informed Monsanto about the change in the law, and it did not pay the originally agreed-upon price. Nuziveedu Seeds had even demanded a return of the excess money it had paid Monsanto in the light of the government’s order on the price of seeds.

Justice RK Gauba ruled that the contract signed in 2015 holds good, and that Nuziveedu Seeds should continue to honour its contractual obligations. In case Monsanto refused to accept the payments, the Court has asked Nuziveedu Seeds to deposit the money in a court-maintained account, and that it should submit monthly and quarterly accounts of the Bt Cotton seeds it was selling. Monsanto was allowed to withdraw money from the account as well.

Monsanto challenged the centre’s Cotton Seeds Order of 2015 and the amended Essential Commodities Act, which placed an upper limit on the price.

It is the legal context and connotations of the case that are of great significance. Monsanto has been a zealous proponent of GM crops, and it has been guarding the intellectual property rights of biotechnological innovations like the Bt strain it had introduced into crops such as cotton to protect it from the bollworm disease. This had brought the company into confrontation with environmental groups.

But in the present case, Monsanto is fighting with a commercial partner, Nuziveedu Seeds, and not its traditional rivals, environmentalists and defenders of farmers’ non-commercial rights.

It started with the Andhra Pradesh Cot-ton Seeds (Regulation of Supply, Distribution, Sale and Fixation of Sale Price) Act, 2007 followed by similar legislation in Gujarat and Maharashtra in 2008 and 2009. All the three are major cotton-growing states and are known to be users of the Bt Cotton variant. Hence, both Monsanto and Nuziveedu Seeds are interested parties. This process culminated in the central government’s Cotton Seeds Price (Control) Order, 2015, which was published in the Gazette on December 7, 2015. This order invoked the Essential Commodities Act “for uniform regulation across India of the sale price of cotton seeds with the existing and future Genetical Modification (GM) technologies”.

The judge said that the order took note of the fact “earlier attempts by the State Governments to regulate the Bt Cotton seed prices including trait value component in exercise of powers under the Seeds Act 1966 and the demands raised by the farmers for regulation of prices of such commodity, it having been highly priced”.

Monsanto has challenged the government’s Cotton Seeds Price (Control) Order, 2015, in the Delhi High Court. The present judgment is an interim order, and the main issues are yet to be resolved between the two disputants, as well as the one between Monsanto and the government.