The Monsanto vs. Argentina dispute on GMO soybean
By Carlos M. Correa [1]
Requests for the detainment of Argentine soymeal shipments at the ports of Denmark, the Netherlands, Spain and the UK, a multi-million dollar claim over royalties, and suits filed against European importers are some of the visible facts in an unusual dispute between the US multinational Monsanto, on the one hand, and farmers and the Argentine government, on the other. Curiously enough, the legal battle takes place in Europe rather than where the exported soybean was grown and processed. This article explains what are the reasons for as well as the possible consequences of this transnational litigation.
The seed of discord
Soy-related products (particularly for feed) are Argentina’s main export product to the European market, surpassing meat. Argentine soybeans and their derivates contain genes that were inserted artificially into the seeds in order to confer the plants resistance to glyphosate, a herbicide. These are, hence, by-products of a genetically-modified (GM) soybean.
Nowadays, GM soybeans account for over 90 per cent of the total soybean harvest in Argentina. Their rapid and broad dissemination is one of the factors explaining the soybean expansion in Argentina’s agricultural production: the share of soybean in total crops doubled (standing at nearly 50 per cent) between the 1996/1997 and 2004/2005 harvests. In that period, the number of soybean planted hectares rose from 10,000 to over 14 million. Argentina is selling, only to Europe, nearly 2 billion dollars in soybean-derived products per year.
This rapid expansion was the outcome of the insertion of a glyphosate-resistant transgene into the genome of a range of soybean varieties resulting from the excellent level of plant breeding existing in Argentina. This combination allowed for improvements in terms of production output as well as reductions in production costs. Another legal and commercial factor was also decisive: the glyphosate-resistant transgene (known in commerce as ‘Round Up Ready’ or ‘RR’), identified by Monsanto, has been and currently is within the public domain in Argentina, that is, it has been available for free use by seed companies to develop their own soybean varieties incorporating that gene, without requiring the permission or the payment of a compensation in favour of Monsanto. This issue deserves an additional explanation.
Patents and territory
The RR gene was not patented by Monsanto in Argentina, although it was patented in other countries, such as the US and European countries. Maybe as a result of a miscalculation about the commercial impact that RR soybean might have in Argentina, or for other reasons (either practical or strategic) Monsanto let due dates expire for obtaining a patent in Argentina.
The patent system has three major characteristics:
- it is of voluntary use, that is, inventors may choose to apply or not for a patent;
- it is territorial in nature, which implies that a patent is only legally enforceable in the country where it has been applied for and obtained (therefore, a US patent is not valid in Argentina and vice versa);
- it is a system of rewards and punishments: if a patent is applied for before the invention loses its novelty (i.e. it becomes publicly disclosed) and other conditions of patentability are fulfilled, the patent holder may be granted a monopoly for its exploitation over a period of twenty years (from the filing date). But if it fails to be applied for within an effective term, the holder can no longer claim any right: once disclosed (except when this has taken place by fraud against the inventor) the invention falls into the public domain in all those countries where patent protection has been neither sought nor obtained.
The patent system has operated in this way since its inception in European countries five centuries ago, and indeed, the case in which an innovative company (least of all an individual inventor) applies for a patent in all countries around the world, is very rare or non-existent. On average, the number of countries where no patents are applied for (thus allowing the invention to be used by any person) is higher than the number of those where expenses- not despicable at all - are made for acquiring and enforcing patent rights. The only likely exception is the pharmaceutical industry which normally obtains patents worldwide in order to secure a monopoly on the sale of its new drugs.
In an era of globalisation it might be surprising to notice that the patent system is less global than what many people think or wish [2]. The lack of patent protection in a certain country cannot be compensated for – as now Monsanto intends – by the abusive exercise of patent rights conferred in another territory. The European or US patents the company may have can only be applied to acts that would constitute patent infringement under those jurisdictions. Unlike copyright, which is protected without the need to register or comply with any formalities, the protection of patents requires (to the advantage of patent attorneys) the processing and grant of patents in each country they are to be enforced.
The lack of a global patent system is evidenced by another major fact: countries, even those that are members of the World Trade Organisation and are therefore subject to TRIPS Agreements have a considerable margin to determine what is an invention and what is not. Thus, many countries consider that a gene cannot be patented because it is already a product of nature and cannot be ‘invented’, even when isolated and claimed as such. It is in this point [4] that the legislation of developed countries differs from that of many developing countries (such as Argentina and Brazil) where the ownership of genetic resources through patents generates resistance and less permissive regulations, although perfectly compatible with WTO rules.
Benefits without patent protection
Returning to the Monsanto case, as mentioned above, the company deliberately left the RR gene in the public domain in Argentina, since it failed to file an application for patent protection in due time. Obviously, the free availability of this gene would prompt – as it was bound to happen – the dissemination of the RR gene, with an important advantage for the company: it also sells the herbicide (glyphosate) to which the soybean plant becomes resistant to. In this way, Monsanto managed to profit from sales of GMO seeds and from growing volumes of glyphosate sales.
Moreover, even when Monsanto had no legal grounds to claim payment for the use of the RR gene, Argentine seed companies entered into private license agreements, thus involving payment of royalties for such use. A sign of the apparent harmony that prevailed is the fact that the National Seeds Institute registered nearly 200 plant varieties including the RR gene, of which only thirty were developed by Monsanto. But there is even a more revealing fact: the Argentine law allows any third party to oppose the registration of plant varieties. Monsanto has never made use of this right: that is, it agreed with full knowledge to the use of the RR gene in the numerous soybean varieties that were registered, being those varieties finally responsible for the success of the RR gene in Argentina.
However, the dissemination of RR soybean in Argentina not only served Monsanto’s interests when it came to sell seeds and glyphosate in the domestic market but was the starting point for the dissemination of its products all over the Southern Cone. Argentina was the port of entry that Monsanto chose for the region, probably attracted by its openness to foreign investments and, above all, by its permeability to accept transgenic varieties, which are rejected in other parts of the world. In fact, the formal approval for the cultivation of GMO soybean was delayed several years in Brazil owing to legal actions. Nevertheless, it was widely cultivated (particularly, though not only, in the South of the country) with seeds imported from Argentina. As a result of this, the government’s approval [5] just implied the legitimation of what was already a fact.
Ten years is nothing
The transgenic soybean was developed in 1991. The use in trade of a commercial variety containing the RR gene started in 1996. Argentina together with the United States and Canada was among the first countries to authorise its introduction, in spite of the global outcry against the cultivation of transgenic varieties by several non-governmental organisations and the concerns about their impact on the environment.
For almost ten years, the Argentine situation seemed to satisfy the economic aspirations of Monsanto:
- RR soybean dominated almost the total production of one of the world’s leading soybean producers and was disseminated in neighbouring countries;
- Monsanto participated in the market with the sale of both seeds and glyphosate;
- Argentine seed companies paid Monsanto royalties (even in the absence of patents)
Nevertheless, after having accepted and taken advantage of such a situation during that period, Monsanto decided that farmers should also pay contributions to the company. It demanded payment of up to 15 dollars per ton, an exorbitant amount that, in the event of being paid, would cause thousands of producers to go bankrupt.
The Argentine government – already skilled in major disputes (such as those resulting from the renegotiation of the external debt and IMF conditionalities) – rejected, in all its right, Monsanto’s aspiration. By way of reprisal, the company threatened with filing requests – and finally did so – to hold up Argentine soymeal shipments at European ports, on the grounds that it contained the RR gene (something nobody argues about) and that such imports were infringing its European patents on that gene as well as its expression in genetically modified cells and plants.
The multinational company has not concealed its intentions: to file actions against European importers of Argentine soymeal in order to make them pay an ‘extra’ amount for the technology incorporated by the RR gene, either voluntarily (through license agreements) or by legal decision. Given the imminent threat of facing legal action for each shipment of this product, European exporters might resort to other suppliers, or else accept to pay royalties the cost of which would end up being transferred to Argentine producers and exporters. This abusive exercise of patent rights could cause huge harm to Argentina. Monsanto speculates that – in view of this scenario – the Argentine government will give in and decide to create a special compensation system as a reward for the use of the unpatented gene.
While Monsanto was organising this operation to put pressure on the Argentine government, the latter was paradoxically filing a complaint before the World Trade Organisation (WTO) regarding the restrictions to trade in transgenic products imposed by a European ‘moratorium’ on the approval of new GMOs. The recent resolution of the WTO panel, which rules in favour of claimants, will benefit – among others – Monsanto, which will be able to expand its business transactions in the European continent once the moratorium is lifted.
No patent infringement
Monsanto’s arguments behind the offensive launched against the Argentine government and farmers are vague: ‘Monsanto acknowledges Argentina’s contribution with regards to the expansion of biotechnology...but we cannot refrain from demanding payment because that is how it works all over the world’ [6]. From such a global and dogmatic perspective, it does not matter what the legal provisions and circumstances of each country are.
Just as in other countries and pursuant to the UPOV [7] Convention that rules on the subject, farmers in Argentina may retain and use – as part of their own exploitation – seeds obtained from the cultivation of protected varieties. On the other hand, as also happens in other countries (including the United States), ‘white bag’ seeds that are grown without the authorisation of breeders end up cutting down sales of the legitimate seed. This is a problem of enforcement that affects all seed producers, not just Monsanto, which cannot be solved by filing suit in a foreign jurisdiction, but rather by investing in improved mechanisms for the supervision and control of the production and trading of seeds.
However, the option taken by Monsanto was to invoke the patents it holds until 2011 in European countries. These patents protect DNA sequences encoding certain enzymes (class II EPSPS) with kinetic and immunological activities as well as the recombinant DNA molecules comprising them; methods to produce genetically modified plants by using the respective DNA sequence, cells and plants thus obtained; and finally, methods to selectively control weeds in a field cultivated with crops containing the respective DNA sequence.
Can someone who imports soymeal or even soybeans not intended for cultivation purposes be committing a patent infringement? In the case of soymeal, even if DNA sequences – fit to perform immunization against glyphosate – remained intact after processing, it could certainly not be used for further cultivation. Therefore, it is impossible to infringe those patents by importing soymeal, since the patented gene is not performing its claimed function. The same can be applied to other by-products, such as soybean oil. In the case of soybeans, so long as they are not used as seeds, imports are not infringing said patents since there is no use in European territory of the gene resistance properties.
The case brought by Monsanto could be compared to the following: let us suppose that tomatoes are grown while being treated with a pesticide in country A, being said pesticide not patented there. Tomatoes are exported to country B where there is in fact a patent on that pesticide. Naturally, if those tomatoes were analysed, molecules belonging to that pesticide would be found. Could the patent holder block their import for that reason? It would be obviously an absurdity. A positive answer would grant unlimited power to patent holders in terms of imposing trade restrictions, not just on their own products but on everything that derives from or comprises such products in some way, no matter how residual.
Certainly, the European Law as it is expressed in the Directive on the Legal Protection of Biotechnological Inventions (Directive 98/44/EC of 6 July, 1998) leaves Monsanto’s audacious legal case before European courts with little chance of success. Its article 9 stipulates that the protection conferred by a patent on a product containing or consisting of genetic information shall extend to all material in which ‘the genetic information is contained and performs its function’. Although the European Court of Justice has still not construed this regulation, it is quite clear that: a patent cannot be invoked against acts involving products in which a protected gene is not performing ‘its’ function – in our case, to give resistance to glyphosate herbicide. This can only take place at sowing time with cells that are viable for such purpose, which is clearly not the case with Argentine exported products.
Strategic litigation
Monsanto’s action against European soy-meal importers represents a handbook case of the so-called ‘strategic litigation’. The party filing these cases has little chances of success or no real interest in obtaining a final judgment; the legal action is used to put pressure and create risks and uncertainty, thus achieving a rapid subordination of targeted parties to commercial conditions with no legal basis. Large companies like Monsanto allocate substantial budgets to strategic litigation. Their chances for success lie not on the law but on the power disparities with counterparts, farmers or importers.
In the case analysed here, the dispute goes beyond the private interests of the parties involved. It affects the Argentine economy which is just getting out of the biggest crisis ever in the history of the country. European importers being sued by Monsanto are strictly circumstantial victims. The company aims at twisting the arm of the Argentine government and imposing a ‘tailor made’ solution, bypassing the Argentine and international law. In fact, much more than the interpretation of patent law is at stake in this case. It is an important test for the way in which disputes between multinational companies and the States where they operate will be settled.
Notes
[1] Centro de Estudios Interdisciplinarios de Derecho Industrial y Económico (CEIDIE), Facultad de Derecho y Ciencias Sociales, Universidad de Buenos Aires. This paper was originally published under the title ‘La disputa sobre soja transgénica. Monsanto vs. Argentina’ in Le Monde Diplomatique/El Dipló, April 2006. Reproduced with permission. Translated from Spanish by Patricia Draper.
[2] The World Intellectual Property Organisation (WIPO) launched in 2001 a ‘Patent Agenda’ aiming at harmonising patent law at global level, but it has faced resistance by developing countries and strong disagreement among developed countries themselves, who are proposing such harmonisation.
[3] Agreement on Trade-Related Aspects of Intellectual Property. Argentina implemented the obligations within this Patent Agreement in 1995, through the enactment of law No. 24.481.
[4] Likewise, in Europe and many other countries, no patents are granted for plant varieties as such, unlike what happens, for instance, in the United States and Japan.
[5] See Provisional Measure 223/04 (enacted into Law 11.092/2005).
[6] Statement by the Development Manager of Monsanto Argentina, Newspaper La Nación, March 6 2006, Section 2, p. 3.
[7]] UPOV is the Union for the Protection of New Varieties of Plants.