Licences, royalties and plant varieties: who really controls the value of the product

Registration protects the variety; contracts determine its economic control, commercial dissemination and value enhancement within the supply chain.

Plant variety development programmes require significant investment and many years of research.

Obtaining legal protection for a new variety is an essential step, but it is not sufficient in itself.

The ability to control its dissemination, commercial enhancement and the economic flows generated by the supply chain depends largely on the structure of the contracts governing licences, royalties, trademarks and commercial relationships.

Protection of the plant variety does not coincide with control of the supply chain

Registration of a plant variety — whether under national systems or through Community protection managed by the Community Plant Variety Office (CPVO) — allows the breeder to exercise exclusive rights over propagating material.

These rights are generally identified internationally as plant breeder rights (PBR) and constitute the legal basis through which the holder may control the production and commercialisation of the variety.

However, protection of the variety is only the legal prerequisite of the transaction.

The actual economic control of the variety depends on the structure of the contracts through which cultivation rights, commercial distribution and the organisation of the supply chain are regulated.

Cultivation licences and control over the dissemination of the variety

In the fruit and vegetable sector, dissemination of new varieties increasingly takes place through plant variety licensing systems.

Through these agreements, the holder of the variety grants cultivation rights to selected producers, regulating production methods, commercialisation conditions and the management of royalties.

In many cases, these models take the form of so-called variety club agreements, organisational systems in which cultivation and distribution of the variety are managed through a network of authorised producers.

These models make it possible to control dissemination of the variety, quality of production and commercial positioning of the product in international markets.

Royalties and economic enhancement of the variety

One of the central elements in plant variety development agreements concerns definition of remuneration systems deriving from the economic exploitation of the variety.

In the agricultural sector, these systems are normally based on payment of royalties, which may be calculated on the basis of propagating material, cultivated area or volumes of product marketed.

The structure of royalty mechanisms represents one of the main tools through which the holder of plant variety rights maintains economic control over dissemination of the variety.

A properly structured contractual system makes it possible to ensure remuneration proportionate to the commercial development of the variety in the different markets.

Sublicences and management of the international dissemination of the variety

When the variety is intended to be cultivated in several countries, management of plant variety rights often requires the use of sublicensing systems.

Through these mechanisms, the main licensee may grant cultivation rights to local operators in the various markets.

The regulation of sublicences is one of the most sensitive aspects of international plant variety development programmes.

The structure of these clauses directly affects the ability of the holder of the variety to maintain control over dissemination of plant material and quality of the product throughout the production chain.

Commercial trademark and product enhancement in global markets

Alongside protection of the plant variety, many plant variety development programmes involve the use of commercial trademarks intended to identify the product on the market.

The trademark makes it possible to build a commercial enhancement strategy for the variety and to differentiate it from other productions.

Licensing the trademark to producers or distributors is therefore one of the tools through which commercial management of the variety is organised in international markets.

In these contexts, contractual regulation of trademark use rights must be carefully coordinated with cultivation licences and royalty systems.

Contracts as a tool for governing the supply chain

In the fruit and vegetable sector, plant variety development agreements are tools through which the entire production and commercial supply chain of the variety is organised.

Through these agreements, not only ownership rights over the variety are regulated, but also cultivation methods, commercial distribution, use of trademarks and allocation of royalties.

When the variety is intended to be cultivated and commercialised on an international scale, these contracts play an even more important role in the governance of the supply chain.

The proper structuring of these legal instruments is therefore one of the decisive elements in the economic enhancement of new plant varieties.

In the fruit and vegetable sector, the value of a variety does not depend exclusively on genetic innovation or on legal protection obtained.

The ability to control its dissemination, commercialisation and economic remuneration depends significantly on the structure of the contracts governing the supply chain.

For this reason, licences, royalties, trademarks and commercial management agreements are not ancillary aspects of a plant variety project, but essential tools for the economic enhancement of the investment and for maintaining control over the product in international markets.