The Intellectual Property Court (IP Court) of the Supreme People's Court recently heard a case on the infringement of new plant variety rights, determining that the behavior of planting vegetative propagation materials, done not for private non-commercial use, is an infringement of rights, i.e. producing and cultivating seeds of granted plant varieties.

Yangshi Fruit Technology Co., Ltd. based in Yangzhou, East China's Jiangsu province, obtained "Yang's Golden Red No. 1", a new plant variety of kiwifruit on November 1, 2014. Yidun Kiwifruit Planting Co., Ltd. based in Southwest China's Sichuan province is the implementer of the variety right, and was authorized by Yangshi Fruit to file a lawsuit against the infringement in its own name to defend the variety rights.

Shizhangkong Kiwifruit Specialized Cooperative of Mabian Yi Autonomous County in Sichuan planted 7,000 kiwifruit trees of the granted variety in two bases in Zhenzhuqiao and Shizhangkong villages in Mabian. The kiwifruit trees were obtained by grafting from the "Yang's Golden Red No. 1" kiwifruit branch purchased from another party, which is not a party to the litigation case.

The two planting bases involved in the case were projects jointly implemented by Shizhangkong Kiwifruit Specialized Cooperative and the local villagers' committee, and the cooperative is responsible for construction, operation and management of the bases. Local poverty-stricken families also hold shares of the bases.

Yidun Kiwifruit filed an allegation on infringement of new plant variety rights at the Chengdu Intermediate People's Court in Sichuan, requesting Shizhangkong Kiwifruit Specialized Cooperative to pay royalties for the variety rights until they no longer plant the variety or until the expiration of the variety rights. The company didn't apply for cessation of the infringement.

The court of first instance concluded that Shijangkong Kiwifruit Specialized Cooperative infringed on the granted variety as it had produced and grown the propagation materials of the granted variety for commercial use without permission.

Considering the average yield of the kiwifruit trees after they entered the fruiting period and the purchase price recognized by the cooperative and Yidun Kiwifruit, as well as the special situation that the poverty-stricken families also hold shares of the bases, the court determined that Shizhangkong Kiwifruit Specialized Cooperative should pay for the variety royalty with the rate of CNY10 ($1.45) per plant per year until ceasing the planting. The payment duration should not exceed the protection period of the variety rights, and the cooperative should pay the reasonable cost of 30,000 yuan arising from the remedy for infringement.

The cooperative appealed against the judgment of the first instance and claimed that it did not produce or grow the granted variety of propagation materials. It added that as the cooperative was established to support poverty alleviation in Mabian and the local farmers had invested in the kiwifruit planting project, the royalty payment determined by the court of first instance was too high.

In the second instance, the SPC concluded that the scions used for grafting by Shizhangkong Kiwifruit Specialize Cooperative were branches of "Yangshi Golden Red No. 1" kiwifruit variety sold without permission of the variety rights holder. The grafting was for production and propagation and the new plant belongs to the "Yangshi Golden Red No. 1" kiwifruit plant variety.

The "Yangshi Golden Red No. 1" kiwifruit plant variety mainly relies on vegetative propagation while cuttings and grafting are the main ways of realizing the value of the variety. Except for special items of the law and regulations, the behaviors of planting vegetative propagation materials, done not for private non-commercial use and without permission of the rights holder, constitute infringement of rights of production and cultivation of seeds of the granted plant varieties.

The determination of whether a behavior constitutes "private non-commercial use" generally involves various factors such as the nature of the subject of the infringing act, the scale of the planting and whether it is profitable.

In this case, the cooperative is a mutual assistance economic organization jointly managed by agricultural producers under their own will. It is a market entity for profit, is not for private use of farmers, and consequently is not exempt from tort liability.

In terms of the scale of the planting and the purpose of the infringement, Shizhangkong Kiwifruit Specialized Cooperative planted 7,000 kiwifruit trees in two planting bases, which is a large scale of planting, and the purpose of its behavior was for profit.

Therefore, the grafting and planting behaviors have grown vegetative propagation materials, which harmed the market competition interests of the variety rights holder. The behavior should be described as producing propagation materials of granted varieties without permission of the rights holder and constituted infringement of the new variety rights.

According to the SPC, the kiwifruit tree is a kind of perennial plant and farmers can continuously obtain economic benefits through the harvest of kiwifruits.

The request of royalty payment raised by the variety rights holder in lieu of stopping the infringement is practical and operable, which not only avoids the waste of resources and makes the best use of materials, but also gives full play to the economic benefits of the planting bases involved in the case.

The two planting bases involved some poverty-stricken farmers. The poverty alleviation project not only includes their shares but also provides them with jobs. The determination of the royalty payment should consider the market value of the licensed variety and comparable royalty situations in the same period while protecting the benefits that Shijangkong Kiwifruit Specialized Cooperative could reasonably expect to obtain.

In conclusion, the SPC rejected the appeal and affirmed the original judgment.

The SPC also pointed out that in the process of consolidating and expanding the results of poverty alleviation and promoting rural vitalization, farmers' specialized cooperatives should participate in market operation activities in accordance with the law and respect the intellectual property rights (IPR) of others.

Protecting new plant variety rights in accordance with the law is complementary to guaranteeing legal operation and the operation rights and interests of new-type agricultural production business entities.

Only by respecting the IPR of seeds can the goal of self-reliance and self-improvement in science and technology of the seed industry in China be boosted and the country’s rural vitalization be continuously powered, the court said.