House Considers Alternative Patent Royalty Scheme for Genetically Engineered Seed

By Kevin E. Noonan --

The tendency for members of the House of Representatives to exhibit ignorance of the patent system, so amply demonstrated in the "debate" over H.R. 6621 at the end of the last Congress (see "Congressional Misunderstandings (Apparently) Motivate H.R. 6621"), persists in the 113th Congress.  The most recent example is H.R. 193, the ''Seed Availability and Competition Act of 2013'' introduced on January 4th by Representative Marcy Kaptur, D-OH (9th District, which includes Toledo).  The seeming intent of the bill is to substitute government bureaucrats from the Departments of Agriculture and the Treasury for private patentees in enforcing patents on genetically engineered seed.  In addition to amounting to a compulsory license, Rep. Kaptur has evidently never considered that, sometimes, the scariest sentence in the English language is "I'm from the Federal government, and I'm here to help."  This is not surprising; Rep. Kaptur was recently elected to her 15th term, and her background is not in patent law or agriculture:  her professional training is in urban planning.

The bill requires "persons [farmers] who seek to retain seed harvested from the planting of patented seeds to register with the Secretary of Agriculture and pay fees set by the Secretary for retaining such seed, and for other purposes."  Specifically, any farmer who plants patented seed or seed "derived from" patented seed to retain the seed for replanting is subject to two requirements.  The farmer must submit a notice to the Secretary of Agriculture of the intent to retain patented seed for replanting, (§ 2(a)(1)) and to pay a fee established by the Secretary and dependent on the "type and quantity" of seed that can be retained and "any other information" the Secretary determines to be "appropriate" (§ 2(a)(2)).  The fee is paid to the Federal government (§ 2(b)) and deposited into a "Patented Seed Fund" established in the Treasury (§ 2(e)(1)(2)).  The fees will be refunded to any farmer who can establish that, after paying the fees, natural disaster or "related" circumstances prevented them from replanting the seed (§ 2(c)).

The monies collected from the farmers is then paid to the patent holders by the goverment (§ 2(d)).  The motivation for all these seeming legal and economic inefficiencies finally becomes evident in § 2(f), which provides that any farmer who complies with the provisions of the bill (if enacted) "shall not be bound" by any contractual, patent royalty, or licensing fees.

Not wishing to be considered un-American, Rep. Kaptur (at left) included in the bill a provision (§ 3) whereby the Treasury Department will collect a tariff amounting to the difference between the royalties or licensing fees imposed upon purchasers of patented seed in the U.S. and any lower royalties or licensing fees paid by purchasers of patented seeds in a foreign country and then imported into the U.S.  Those tariffs are paid into the Patented Seed Fund, presumably for payment to patent holders who have negotiated the lesser fees in the foreign country in the first place.

It is hard to know where to begin.  Clearly the political controversy engendered by the many patented seed cases brought by patentees against farmers over the past decade, and the recent kerfuffle produced by the Public Patent Foundation in its suit on behalf or "organic" farmers came to Rep. Kaptur's attention.  And in some ways this is a classic "split the baby" result, where the government (and its sensitivity to political considerations) can determine the "appropriate" royalty for replanted seed and distribute it to the patent holders.  The tariff provisions might also be seen as a boon to those patentees who were unable to obtain royalties or patent licensing fee abroad commensurate with the fees they collect from U.S. farmers.

But in reality, of course, the bill imposes a compulsory license on holders of genetically engineered seed patents, who have resisted the political pressure to permit farmers to replant seed instead of purchasing seed for each planting.  Although this has imposed legal and public relations costs on these patentees, the patent grant permits them to impose these restrictions (unless and until the Supreme Court decides otherwise in Bowman v. Monsanto).  But regardless of which side has the better policy argument in that debate, Rep. Kaptur's bill is not a remedy required by the politics or economics of the situation.  Indeed, it would just impose another government bureaucracy on U.S. agriculture that would not promote either agriculture or technological progress.

The bill has been referred to the House subcommittee on Rural Development, Research, Biotechnology, and Foreign Agriculture for further consideration.

Text of the bill:

A BILL

To require persons who seek to retain seed harvested from the planting of patented seeds to register with the Secretary of Agriculture and pay fees set by the Secretary for retaining such seed, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.


This Act may be cited as the ''Seed Availability and 5 Competition Act of 2013''.

SEC. 2. RETAINING PATENTED SEED.

    (a) REGISTRATION.—Any person who plants patented seed or seed derived from patented seed may retain seed from the harvest of the planted seed for replanting by that person if that person—
        (1) submits to the Secretary of Agriculture notice, in such form as the Secretary may require, of the type and quantity of seed to be retained and any other information the Secretary determines to be appropriate; and
        (2) pays the fee established by the Secretary pursuant to subsection (b) for the type and quantity of seed retained.
    (b) FEES.—The Secretary of Agriculture shall establish a fee to be paid by a person pursuant to subsection (a)(2) based on the type and quantity of seed retained.  The Secretary shall deposit amounts collected pursuant to subsection (a)(2) in the Patented Seed Fund established under subsection (e)(1).
    (c) REFUNDS.—The Secretary of Agriculture may refund or make an adjustment of the fee paid pursuant to subsection (a)(2) when the person is unable to plant or harvest the retained seed as a result of a natural disaster or related condition and under such other circumstances as the Secretary considers such refund or adjustment appropriate.
    (d) DISTRIBUTIONS.—The Secretary of Agriculture shall pay the collected fees to the appropriate patent holders, at a frequency that the Secretary determines is appropriate, from the Patented Seed Fund established under subsection (e)(1), taking into consideration the possibility of refunds pursuant to subsection (c).
    (e) PATENTED SEED FUND.—
        (1) ESTABLISHMENT.—There is established in the Treasury of the United States a fund to be known as the ''Patented Seed Fund'', consisting of such amounts as may be received by the Secretary and deposited into such Fund as provided in this section.
        (2) ADMINISTRATION.—The Fund shall be administered by the Secretary of Agriculture and all moneys in the Fund shall be distributed solely by the Secretary in accordance with this section and shall not be distributed or appropriated for any other purpose. Amounts in the Fund are available without further appropriation and until expended to make payments to patent holders.
    (f) INAPPLICABILITY OF CONTRACTS AND PATENT FEES.—A person who retains seed under subsection (a) from the harvest of patented seed or seed derived from patented seed shall not be bound by any contractual limitation on retaining such seed, or by any requirement to pay royalties or licensing or other fees, by reason of the patent, for retaining such seed.
    (g) DEFINITION.—In this section, the term ''patented seed'' means seed for which a person holds a valid patent.

SEC. 3. TARIFF ON CERTAIN IMPORTED PRODUCTS.

    (a) TARIFF.—In any case in which—
        (1) genetically modified seed on which royalties or licensing or other fees are charged by the owner of a patent on such seed to persons purchasing the seed in the United States is exported, and
        (2) no such fees, or a lesser amount of such fees, are charged to purchasers of the exported seed in a foreign country, then there shall be imposed on any product of the exported seed from that foreign country that enters the customs territory of the United States a duty determined by the Secretary of the Treasury, in addition to any duty that otherwise applies, in an amount that recovers the difference between the fees paid by purchasers of the seed in the United States and purchasers of the exported seed in that country.
    (b) DEPOSIT OF DUTIES.—There shall be deposited in the Patented Seed Fund established under section 2(e)(1) the amount of all duties collected under subsection (a) for distribution to the appropriate patent holders in accordance with section 2(d).
    (c) DEFINITIONS.—In this section—

        (1) the term ''genetically modified seed'' means any seed that contains a genetically modified material, was produced with a genetically modified material, or is descended from a seed that contained a genetically modified material or was produced with a genetically modified material; and
        (2) the term ''genetically modified material'' means material that has been altered at the molecular or cellular level by means that are not possible under natural conditions or processes (including recombinant DNA and RNA techniques, cell fusion, microencapsulation, macroencapsulation, gene deletion and doubling, introducing a foreign gene, and changing the positions of genes), other than a means consisting exclusively of breeding, conjugation, fermentation, hybridization, in vitro fertilization, tissue culture, or mutagenesis.

Comments

[Puck]

Kevin, your use of understatement in the first paragraph had me rolling on the floor. Touche!

Looks like PubPat and the other kooks are getting what they want, because if ever there was a prescription for ending the development of genetically engineered seed, this is it. But we can rest easy, knowing we can go back to more conventional means of controlling bugs and weeds. Like DDT.

[josh]

That patent system works the way Congress says it does. Don't forget that. You can disagree with the wisdom of a compulsory licensing system for saving patented seed, but there's nothing "ignorant" about it. And what exactly is the point in putting "organic" in scare quotes? Is it because you think those farmers weren't organic as defined by federal law? Any proof of that, or is it just defamatory? Or maybe you just think the whole concept of organic food is a joke? Or maybe you're just a shill? So many options.

[What, me worry?]

The more government, the better. NOT!

[Kevin E. Noonan]

Dear Josh:

That Congress can define how the patent system works is certainly true, but individual members are not "Congress" and are capable of ignorance. (Whether Congress as a whole is ignorant of how a patent system works effectively will be seen as the remainder of the America Invents Act is implemented.)

I did not intend to besmirch those who truly want to avoid genetically engineered foods. However, in view of the incapacity for traditional, "organic" means of farming to produce sufficient food for all, those who not only adhere to a personal standard of conduct but advocate for policies that would inhibit the application of tools like genetic engineering for enhancing yields etc. have a different set of moral issues to confront.

And with regard to "organic" foods, if you don't think terms like "organic" and "natural" are as frequently used for marketing to upscale consumers as they are to denote the absence of food additives or pesticide use, then Rep. Kaptur is not the only one who is ignorant. Or perhaps a shill.

Thanks for the comment.

[Skeptical]

Dr. Noonan,

What becomes of this bill if the Supreme Court decides that the first sale exhausts?

[Kevin E. Noonan]

Dear Skeptical:

The motivation for it would die.

Of course, your question raises the possibility that recombinant seed companies may support or have encouraged this bill as a hedge against just that eventuality. Because per Josh, Congress decides what the patent system is, and because this bill also covers contractual payments the Court's decision against Monsanto would not totally vitiate the factual underpinnings of the legislation.

Thanks for the comment.

[EG]

Kevin,

This bill by Kaptur shows the same level of ignorance and nonsense as the Becerra bill that tried to ban patents on "human nucleotides" (that's what the name of the bill said) but wrote the bill in such a way that it would prevent patenting of ANY NUCLEOTIDE, human or otherwise. As you say we can do without such "help" from the group referred to by Mark Twain (or at least Hal Holbrook who portrayed him) as the "insane asylum for the helpless."

[6]

"I'm from the Federal government, and I'm here to help."

Which Kev conveniently forgets is what the government is saying to everyone who gets hit by a patent lawlsuit. The entirety of your beloved patent system is government bureaucrats saying that they're there to help.

[Kevin E. Noonan]

No, 6, it isn't. Patent infringement lawsuits are private matters, and neither plaintiffs nor defendants have the bottomless pockets to fund litigation that the Federal government has. Nor does a patentee have the right to do anything, just the right to exclude. Don't want to pay royalties - don't make the infringing product.

It's the difference between not shopping at a store and not paying sales tax. You have the choice not to do the former, but not the choice not to pay the latter (unless your idea of a good time is prison for tax evasion).

Not surprising that a government bureaucrat would miss the distinction but there you have it.

Happy New Year, 6. Thanks for the comment.

[Skeptical]

Dr. Noonan,

Contemplating the following:

(g) DEFINITION.—In this section, the term ''patented seed'' means seed for which a person holds a valid patent.

I am still wondering about the impact of a verdict of first sale exhaustion. Since such a verdict would mean that the seed (the res) would NO LONGER be covered by a valid patent, this law seems ill-crafted and would likely only cover seed not exhausted by a first sale.

I 'get' the possible hedge effort, but by its very words, this law appears to not reach that objective.

On the other hand, if the Supreme Court decision goes the other way...

[6]

"Patent infringement lawsuits are private matters"

Facilitated entirely by someone like me saying that I'm here to help by issuing a patent.

Kev, kindly remove your finger from the posting button if you don't know what it is that I'm doing nearly every single day of my life. I can assure you that it is, very much in a very literal sense of the words me saying "I'm from the government and I'm here to help".

[6]

"Don't want to pay royalties - don't make the infringing product."

But if you do want to make the infringing product: "I AM MOST DEFINITELY HERE TO HELP!"

[6]

And happy new year kev. Seriously though bro, you could at least have the class to understand what it is that you are doing all day begging for the government to intervene and "help" by issuing you something it has itself entitled you to.

[Jane Wyman, Jr.]

Kevin: "sometimes, the scariest sentence in the English language is "I'm from the Federal government, and I'm here to help."

Just out of curiosity, can you name three other examples outside of the patent realm where you believe that an offer from the Federal government to help is "scary" (other than the circumstances described in your post, which you appear to be frightened by)? I'm wondering why you chose to quote this phrase, which strikes me as particularly odd in the context of patents.

[Jane Wyman, Jr.]

6: "understand what it is that you are doing all day begging for the government to intervene and "help" by issuing you something it has itself entitled you to"

This.