The Taste of Triumph: Lays Sweeps Potato Variety IP Dispute

Lays Bags the Win

A division bench (DB) consisting of Justice Yashwant Varma and Justice Dharmesh Sharma has nullified on 09 January 2023, the single bench’s (SB) ruling from 05 July, 2023 (discussed by Niyati here) and the order of the Authority established under Protection of Plant Varieties and Farmers’ Rights Act (PPVFRA), 2001, along with its letter dated February 11, 2022, which denied PepsiCo’s application for the renewal of patent registration on a potato seed variety- FL 2027. 

Before dealing with the legal consideration, a brief summary of the background of this case is as follows: PepsiCo had filed and subsequently settled a suit against farmers for the use of FC-5, also called the FL-2027, variety of potatoes in 2019. Subsequently, in December 2021, the PPVFR Authority revoked PepsiCo’s varietal registration certificate for FL-2027 following a petition by activist Kavitha Kuruganti, alleging false information in the certificate of registration. PepsiCo, after SB’s dismissal of its appeal, challenged the decision at the Delhi High Court (DHC).

In the case at hand, the DB was addressing cross-appeals filed by both PepsiCo and Kavitha Kurungati, a farmers’ rights activist, against the SB’s decision. In much detailed and structured discussion on the grounds of section 34 of the PPVFRA, the inherent contradiction in the usage of ‘new’ and ‘extant’, determining the date of first sale under section 16(1)(c), and most notably, the public interest dilemma under section 39(1)(iv) of the PPVFRA, the DB concluded it’s analysis with the rejection of arguments presented by Kuruganti against the patent registration. The renewal application from PepsiCo is set to be reinstated in the Registrar’s file and will be processed in accordance with the law.

The Varied Flavors of the Order

Firstly, the Authority had denied relief to PepsiCo under Section 34 of the PPVFRA, which allows revocation of protection for a plant variety based on eight specified grounds when applied for by an interested party. The Authority had found that PepsiCo’s certificate of registration had been granted “based on incorrect information” provided by the company, specifically regarding the date of the first sale of the potato variety and its classification as “new” instead of “extant.”

When PepsiCo appealed against this, Kurungati argued for the maintenance of the patent revocation due to non-compliance with section 34(f) of the PPVFRA, i.e. “the breeder has not complied with the provisions of this Act or rules or regulations made thereunder.” Karungati’s rationale here was to restrain PepsiCo from suing farmers for alleged infringement and to uphold farmers’ rights.

Secondly, the SB had emphasized that PepsiCo failed to establish any grounds for challenging the contested order. Additionally, the SB had pointed out that the application for registration lacked essential documents as required by Section 16 (who can apply for the registration) in conjunction with Section 18(3) (time for making the application for registration) of the Act and Rule 27 of the PPVFR Rules 2003 (proof of the right of making application). With regards to this, however, PepsiCo sufficiently argued that FL 2027, known as FC-5, is a specialized chipping potato with distinct qualities ideal for chip manufacturing under Lay’s brand and largely unsuitable for regular household cooking. PepsiCo further claimed that Dr. Robert W. Hoopes, a former employee of Frito-Lay Agricultural Research, a PepsiCo division, developed the potato variety in the USA.

Thirdly, the aspect that lies at the heart of this case revolves around the Certificate of Registration and the SB’s observation that it did not align with the public interest and was granted to an ineligible individual under the statute. The earlier discussion on the SB’s order on this platform has astutely delved into the public interest concerns apparent in the decision. Despite its appearances as a farmer-friendly decision prima facie, the SB had actually dismissed the ‘public interest’ aspect completely, a key ground for the revocation of the Certificate of Registration by the Authority. The Authority contended that public interest encompassed the potential hardships faced by farmers and the looming threat of substantial costs for alleged plant variety infringement. However, the SB, while acknowledging the possibility of frivolous infringement cases by the company, asserted that they would not be deemed against public interest. The SB decision did not provide clear criteria for revoking registration under Section 34(h). The provision’s broad framing allowed the Authority’s interpretation, but the court, by setting aside the order, not only departed from this broad reading but also missed an opportunity to define an accurate interpretation for future cases.

The DB, while dismissing the plea, stated that Karungati failed to prove PepsiCo’s suits were vexatious or part of predatory tactics, emphasizing the need for evidence. The court noted the absence of material supporting the allegation and highlighted that the authority’s revocation order merely mentioned the filed suits, which were later withdrawn, without substantial details. The bench concluded that Karungati did not establish that PepsiCo’s legal actions were solely to pressure or intimidate farmers and lacked merit in their claim.

Justice Served? 

The SB decision had garnered praise from many. Notably, it was hailed solely for its potential to impede the corporatization of agriculture by precluding Pepsico from asserting an exclusive right over the FL 2027 potato variety. This is an important aspect of consideration, no doubt, especially after the furor and apprehension that prevailed in the 2019 PepsiCo lawsuit against Gujarat farmers. As India’s largest seed producer, the farming community contributed 39% of the country’s seed demand through the informal sector, and that lawsuit was set to disrupt the state of affairs had it reached its intended conclusion. The settlement between the parties came as a source of relief within the farming community, and similar emotions were witnessed in response to the SB order of the DHC more recently. However, in the SB decision, the reasoning in the case was clearly riddled with insufficient backing for its claims, both in the form of arguments and evidence. These lacunae were too significant to overlook. The DB has exercised judicial propriety in overturning the decision and granted the appeal despite popular support for the SB decision.

Yet, what remains unaddressed by the DB bench is whether there are any penalties or actions to be taken ultimately for the procedural irregularities. While the DB is on the mark in commenting that the irregularities are not sufficient to revoke it altogether, it has failed to address a major question: what are the repercussions if similar instances of irregularity occur in the future? 

Errors in issuing the registration certificate could have serious consequences. Had the Registrar followed the PPVFRA strictly, an unscrupulous registration would not have gotten through in the first place, likely preventing the extant protracted dispute. The same is likely to be the case for several more such registrations marred by institutional lapses, potentially leading to more disputes that could’ve been nipped in the bud. So the dilemma remains: Will such irregularities be followed by a penalty or similar preventive action, or will the court’s approach remain to merely put the registrations on hold till they are corrected?

The PPVFRA does provide provisions for penalties for several situations in chapter X. I checked the Act to see what would be applicable and came across two potentially relevant provisions: section 70 (Penalty for applying false denomination) seems like the correct one, but section 76 (procedure invalidity of registration is pleaded by the accused) also has aspects that may find relevance, especially with regards to adjournment of the proceedings by the court. Would be interesting to know which of these would’ve/should’ve been applied in this case, if any. 

To me, however, it seems like addressing the Registrar’s oversight and the applicant’s furnishing of false information, like in the current case, falls beyond the scope of PPVFRA. This legislative gap highlights a need for a robust mechanism to prevent such issues from arising in the future. Addressing it could involve the establishment of penalties or corrective measures to ensure the integrity of the patent registration process and prevent any inadvertent or deliberate misrepresentations. 

If any of our readers have any thoughts on this, please do share in the comments!

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• Source: https://spicyip.com/2024/01/the-taste-of-triumph-lays-sweeps-potato-variety-ip-dispute.html