Friday, July 25, 2014
seedwrangle_main_jan2013

Are legal wrangles in the seed world impeding or encouraging new technologies to enter the marketplace?

In what has now become a global arena, the complexities of doing business in the seed world are taking on new dimensions. However, they boil down to a basic problem: how to share information while still attempting to maintain legal protection of intellectual properties. In simpler terms, successful businesses must be “good neighbors” without sacrificing financial opportunities in the process.

Recent collaborations making headlines include the following:
• Syngenta and Dow AgroSciences offer reduced refuge options
• Bayer and Pioneer launch new seed treatment
• Bayer and Monsanto enter soybean agreement
• BASF and Monsanto expand collaborations maximizing crop yield

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Decision-makers can let emotions stemming from an adversarial situation compromise their abilities to continue collaborating in other areas, when they would be wiser to remove emotion from the equation.

 

However, also drawing media attention are legal cases involving the seed industry. For example, two major cases still in process include DuPont’s appeal of the verdict that was reached in favor of Monsanto in Monsanto’s patent infringement case against DuPont and, in a ruling against Bayer Bioscience due to inequitable conduct, Dow AgroSciences was awarded costs of $5.3 million.

Indeed, the ramifications of companies taking legal action against one another while collaborating with each other continues to make headlines. But this most compelling environment triggers some obvious questions. How does this affect the decision-making process? And with new technologies constantly driving the marketplace, do these patent infringement legal challenges alter, or even seriously impede, the research and development ambitions of any firm doing business in the seed world?

An attorney working in the “Seed Capital of Minnesota” community of Olivia, Steve Hettig points out the importance of protecting intellectual property in this environment. “Because it is such a fiercely competitive business, seed companies are very concerned about protecting their intellectual properties and will spend time and money having confidentiality agreements signed and enforced,” he says.

“Logic would suggest that two companies in collaboration on something would temper the desire to bring a lawsuit against the other company for fear of harming the existing collaboration or making future collaborations less likely. However, if the matter is important enough I could see one company bringing a lawsuit against another with whom it is in collaboration.”

Rod Osthus, president of the R.C. Thomas Company and a seed industry veteran with several years of experience doing business development presentations to agribusiness companies, says, overall, litigation is not to be feared. “All seed companies need to be aware of trademarks and the reality of patent infringement, but they don’t need to fear it,” he says. “The most important thing companies can do is create strong relationships with technology providers, then follow their rules in how those technologies are to be used and marketed. If you don’t own the technology, you cannot make the rules.”

Osthus lists several potential consequences of litigation when companies already have collaboration agreements:
• Approval and release of new technology is often delayed to the marketplace. If this is “breakthrough” technology, this delay has negative cost implications for both producers and consumers.
• Confusion with production and marketing strategies and with the buying audience—the farmer.
• Misinformation about the technology, because companies may or may not know exactly how much information can be shared.
• Increased complication of the sales process due to the amount of legal documentation needed to enforce the use of the product (i.e. warranties and disclaimers).
• Suppliers may shy away from offering products and technologies from companies with a reputation for being litigators.

“All seed companies need to be aware of trademarks and the reality of patent infringement, but they don’t need to fear it. The most important thing companies can do is create strong relationships with technology providers, then follow their rules in how those technologies are to be used and marketed. If you don’t own the technology, you cannot make the rules.” —Rod Osthus

Chicago patent attorney Keith Parr of Locke Lord has over 30 years of experience advising companies in the seed industry, as well as over 15 years of market entry litigation in the pharmaceutical industry. He characterizes the seed industry as being relatively new to dealing with disputes involving utility patents while at the same time dealing with the intricacies of licensing agreements, joint ventures and other collaborative efforts on a more cooperative basis.

“In the pharmaceutical world, it is not uncommon to be involved in litigation on certain products while at the same time having joint ventures or product collaborations on other products,” says Parr. “Companies need to structure their internal decision-making processes to make certain they make rational decisions to take advantage of a collaboration that is favorable, while still being able to make different decisions on products where they have disputed issues.”

Parr says decision-makers can let emotions stemming from an “adversarial situation” compromise their abilities to continue collaborating in other areas, when they would be wiser to remove emotion from the equation. “I think it is important for companies to develop internal structures and reporting processes to ensure that they are making rational decisions in all disputed matters, while also making rational decisions on matters where they would be better off working cooperatively,” Parr notes.

Asked whether winning at any price should be the ambition when litigious issues surface, Parr cautions that no one ever “wins” completely. “In any event, in the seed industry, it’s important to have a competitive atmosphere to bring out the very best in people, which very directly leads to better products,” he says. “Farmers want to see companies competing. To them that means better products, and the ongoing introduction of new technology is what makes agriculture such an exciting industry for all participants, especially those involved in the seed industry.”

Parr, who owns and operates four farms in Illinois and one in Wisconsin, emphasizes that farmers want to see companies resolve disputed legal issues because seed and technology companies continually doing battle in the courts project an image of uncertainty that the American farmer would like to avoid, given all the other variables, including weather factors, that they have to deal with.

Compromising Innovation
Does continuing conflict between seed companies potentially slow down the advancement of new genetics, new traits and other technologies? Parr believes it can. “Companies may delay decisions about introducing new products if they are concerned about potential patent infringement. But it is also important to encourage and recognize innovation.”

“Companies may delay decisions about introducing new products if they are concerned about potential patent infringement. But it is also important to encourage and recognize innovation.” —Keith Parr

Some companies don’t always access and analyze enough information in attempting to develop and introduce a new product if management becomes too passive because of litigation fears, he says. “Although with the Internet, and other more traditional sources of information, a substantial amount of information may be publicly available, accessing that information and utilizing it in a decision-making process depends upon a management team being able and willing to do so,” says Parr.

“I agree that some companies might be slow about entering into a collaboration, particularly if the company they hope to deal with is already engaged in litigation,” he says. “They won’t want to be the recipient of a subpoena. They won’t want to appear to be aiding or assisting one or the other sides of the potential dispute. By the same token, the seed industry apparently is already entering into relationships which benefit both parties and the revenue stream of each participant. Contractual protection to limit the downside risk is the key to making collaborations work,” says Parr.

Osthus reasons that the greater the development cost of a particular technology, the more likely the company will be to protect it as long as it can. Releasing a particular technology to the industry might generate more income, but such a tactic often hastens the commoditization of the technology, which erodes long-term profitability.

Recognizing that “first to market” is the mantra of the seed world, he suggests that litigation sometimes does nothing more than slow down the ultimate introduction of new traits and new technologies by other companies.

“Where trusting and honesty agreements used to be supported by a handshake—that no longer exists. Litigation, to a large extent, now both controls and refines the entire process of how future technologies will be delivered and used.”

Dick Hagen

 
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