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House of Lords

Friday, 18th July 1997.

The House met at eleven of the clock: The LORD CHANCELLOR on the Woolsack.

Prayers--Read by the Lord Bishop of Birmingham.

Plant Varieties Bill [H.L.]

Lord Carter: My Lords, I beg to move that the Bill be now read a second time.

The purpose of the Bill is to implement the 1991 revisions to the International Convention for the Protection of New Varieties of Plants--or the UPOV Convention as it is commonly known. I understand that in the other place UPOV was described as a French acronym. In fact, boringly, it stands for the Union for the Protection of Varieties. At the same time, it will align the standards of protection offered by the UK national system of plant breeders' rights with those already available under the parallel, but separate, European Community plant breeders' rights regime established in September 1994.

Plant breeders' rights are a form of intellectual property, similar to patents, which enable plant breeders to obtain protection for new varieties and an income, through royalties, on their commercial exploitation. They are underpinned at international level by the UPOV Convention. The UK played a major role in the development of the first UPOV Convention, signed in 1961, and was a founder member of the union which it established.

A vibrant and successful plant breeding industry committed to investment in developing new, improved varieties is vital to the success of the UK agriculture industry and the nursery trade. A robust system of plant variety protection is essential to provide the necessary incentives to investment in plant breeding in this country.

The plant breeders' rights regime established by the 1964 Plant Varieties and Seeds Act implemented the first UPOV convention. But technology has moved on apace since 1964 and this was the driving force behind the revisions in the 1991 convention.

As well as enabling the UK to ratify the 1991 convention, the Bill will bring our national system of protection into line with that provided by the Community regime. Plant breeders have a choice between national systems of protection and the Community system which offers a right valid in all 15 member states. The Bill will put an end to the confusion which can arise when two systems which are different, but each of which have the same users (plant breeders, nurserymen, farmers and seed processors), operate side by side.

Before I turn to the detail of the Bill, when it was debated in another place some concerns were voiced about the safety and environmental impact of plant varieties developed by genetic modification. It is of

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course essential that these matters are addressed. This is why stringent statutory controls already exist which govern the release of all genetically modified organisms into the environment. But I should like to emphasise that this Bill is concerned only with plant breeders' rights. It does not have any implications for the regulation of releases of genetically modified plant varieties.

The statutory controls on releases, which include releases of genetically modified plant varieties, are quite separate from the Bill. Their effect is that a consent must be issued by the Secretary of State for the Environment, if the release is in England, or the Secretaries of State for Scotland or Wales, as appropriate, each acting jointly with the Minister of Agriculture in matters of joint interest, before any genetically modified organism can be released into the environment. No consent can be issued without the agreement of the Health and Safety Executive.

The independent expert members of the statutory Advisory Committee on Releases into the Environment--or ACRE as it is known--consider applications to release and market genetically modified organisms. ACRE advises Ministers whether a consent should be granted and which conditions should be attached to any consent. The Plant Variety Rights Office cannot undertake the tests necessary to establish whether a variety meets the criteria for plant breeders' rights unless and until the necessary clearance has been obtained. Nothing in the Bill alters or affects this position in any way.

Perhaps I could also emphasise that plant breeding is fundamentally about genetic change, whether that change is brought about through traditional methods of crossing and selection, or through genetic modification. The Bill does not favour or encourage one method of plant breeding over the other.

There are also concerns in some quarters about the development of genetically modified crops by multinational companies. There is an international dimension to plant breeding. This is recognised in the World Trade Organisation (WTO). The WTO agreement on trade-related aspects of intellectual property requires member countries to protect plant breeders' rights by patents, or a separate effective system. The Bill provides an effective system of plant breeders' rights, but it does not favour one type of company over another. Instead, it seeks to provide the basis for plant breeders from large and small companies to obtain a fair return on their investments.

Specific concerns have also been raised about the development of genetically modified herbicide tolerant crops and their management on the farm. MAFF published a discussion document on this subject on 10th July. This in my view is the more appropriate vehicle for dealing with this topic, not the Bill we have before us which is concerned only with intellectual property protection.

To turn to what is in the Bill, although it is a long one, many of its provisions do no more than re-enact and, where appropriate, clarify equivalent provisions from the 1964 Act. Given its length, I shall concentrate

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on describing the more fundamental changes it makes to the 1964 Act, rather than detaining the House with a clause-by-clause explanation of the detail.

The fundamental changes are in Clauses 6 to 10 which are about the scope of plant breeders' rights. The basic right in the 1964 Act is the exclusive right to sell propagating material of a protected variety, or produce propagating material for sale. The key change in Clause 6 is the much wider scope of things which a breeder can prevent others from doing with propagating material of a protected variety, without his authority. This includes, for example, any production or reproduction of propagating material, conditioning--which means preparing for planting--import, export and so on. Taken together, provisions in Clause 6(1) give the breeder control over all the things necessary to exploit a variety.

UPOV found it impossible to define "propagating material" in the 1991 Convention. The nature of plant material, and the technology, are such that a variety may be propagated from a much wider range of material than seeds or cuttings. Plant material which is commonly disposed of as the final product may be used as propagating material. For example, tissue culture techniques mean that a plant of a vegetatively propagated variety may be obtained from a cut flower. A whole plant or bush which is sold to the public may alternatively be used as propagating material to produce more plants. The Bill, like the 1991 convention, does not include a definition of propagating material - any material which is actually used as propagating material is propagating material for the purposes of Clause 6(1).

The breeder can authorise others to undertake any of the acts in Clause 6(1), and may make his authority subject to conditions. This is the basis for plant breeders' rights licences, which are the means whereby the breeder gives permission to others to exploit the variety, subject to payment of a royalty, while at the same time retaining overall control of it.

The control which the breeder has over his variety is - as with other forms of intellectual property - wide ranging, but it is not unlimited. Acts done for private, non-commercial purposes or to breed another variety, for example, do not come within the breeder's control. Above all, the breeder must act reasonably in taking commercial decisions on whether to issue licences and on what terms. If he does not do so, the controller has powers to issue a compulsory licence and to set the terms, provided that it is in the public interest.

In normal circumstances, as Clause 10 makes clear, the breeder's right is exhausted once propagating material is disposed of with his consent to produce a commercial crop. However, if material sold with the breeder's authority for a purpose which results in exhaustion of rights is used for another purpose, then the breeder's right may not be exhausted. For example, if a finished pot plant is used as source material for vegetative propagation of further plants, then the breeder's right is not exhausted.

The ability of the breeder to take action against infringement of his rights has been strengthened by extending his rights to harvested material which has

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been obtained from the unauthorised use of propagating material in those circumstances where the breeder has not had a reasonable opportunity to exercise rights against the propagating material before the point at which it is harvested.

(My Lords, when reading a brief such as this, I have the feeling that the original Sanskrit was probably easier to understand!)

The Bill also includes an optional provision from the 1991 Convention which allows Ministers to extend rights, by regulations, to specific products made directly from harvested material of particular types of varieties which have been obtained through unauthorised use of propagating and harvested material where the breeder has not had reasonable opportunity to exercise his rights at an earlier stage. I should add that Ministers will use the discretion to extend rights to directly made products only where they are satisfied that plant breeders are suffering significantly from pirating of a particular group of varieties with special properties of value, for example, for industrial use.

I should like to emphasise that the extension of rights to enable a breeder to act against harvested material and, where provided for in regulations, directly made products does not give plant breeders a choice between acting against propagating or consumption material. The breeder must always act against infringement of his rights at the earliest possible stage. The most obvious instance where a breeder might not have reasonable opportunity to exercise rights at an earlier stage is unauthorised use of propagating material outside the UK, in a country which does not offer protection to it, followed by an import of the harvested material or, possibly, a product made directly from the harvested material.

Clause 7 extends the breeder's right in a protected variety to encompass a second variety dependent on it. The 1964 Act already recognises that there is a form of dependency in production of hybrids which can only be obtained through repeated use of parent lines. The concept of essential derivation, however, is a new one, introduced to address developments in plant breeding technology.

It can take many years and a heavy financial investment to develop a commercially successful new variety using traditional breeding techniques. Newer techniques in plant breeding, or natural mutations, may result in very small changes to a protected variety in a relatively short time. The change may be only one characteristic of no commercial significance, but it may be freely commercialised in competition with the initial variety, without any acknowledgement of the contribution made by the latter.

Clause 7 provides that where the resultant change is sufficient to make the second variety distinct, but in all other respects the second variety expresses the same characteristics as the initial protected variety, then it may be essentially derived from the initial variety. Clause 7 extends the umbrella of protection in the initial variety to cover the essentially derived variety. In consequence, the breeder of the initial variety has the right to prevent anyone doing any of the acts in Clause

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6 in respect of the essentially derived variety. In other words--and your Lordships will be waiting for this!--he can prevent its commercial exploitation.

This enables the breeder of a protected variety to obtain a fair return on his investment. In practical terms, those working on a breeding programme which may result in an essentially derived variety can be expected to reach agreement on its commercialisation with the owner of the initial variety, otherwise there would be little point in their work. I can tell your Lordships that I did not expect a laugh a line while reading this speech!

I have already touched on the exceptions to the breeder's right in Clause 8 which enable the use of protected varieties for private, or other non-commercial purposes, or for experiments, or in a breeding programme. These are compulsory exceptions in the 1991 convention.

The 1991 convention also allows contracting states to restrict the breeder's right in respect of farm-saved seed, subject to safeguarding the legitimate interests of the breeder. I know that several noble Lords are interested in that aspect. Income from royalties is essential to encourage continued investment in UK plant breeding. Use of farm-saved seed without payment denies breeders income from their investment and restricts their ability to invest further in development.

In broad terms, Clause 9 exempts the use of farm-saved seed of species or groups prescribed in regulations from the breeder's right. But farmers who save seed of a protected variety or an essentially derived variety are liable to pay the breeder for that use. A similar provision permitting farmers to use farm-saved seed without the breeder's prior permission is in the Community regime and UK plant breeders have been collecting payment for the use of farm--saved seed of Community protected varieties since last autumn.

Ministers intend to exempt from the breeder's right all those species and groups which may be farm saved under the Community regime. Farmers will therefore be able to farm save seed of these species for use on their own holdings without the breeder's authority. But unless they come into one of the exempt categories, this will be balanced by a requirement to pay the breeder "equitable remuneration" which is "sensibly lower" than the royalty charged on certified seed of the same variety in the same area.

The requirement to pay will apply to varieties protected under the 1964 Act, as well as new varieties which come into protection after the Bill comes into force. But small farmers as defined in the Community regime are permanently exempt from the requirement to pay. There is a further exemption for farmers who have saved seed of a particular variety before the Bill comes into force, who may continue to save that variety, free of charge, until such time as Ministers discontinue this provision by order.

A similar "prior use" exemption is in the Community regime. This expires on 30th June 2001, though the Council regulation makes it clear that this date is subject to review in the light of a report which the Commission

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is required to make before then, and may be extended on a variety, group or species basis, depending on the findings in the report.

It is our intention to discontinue the prior use exemption at the same time as the corresponding provision in the Community regime is discontinued. This will not be before 30th June 2001, which means that the majority of farmers who have saved seed of older UK protected varieties before this Bill comes into force may continue to do so free of charge until 30th June 2001.

When the Bill was debated in another place, there was some concern at the absence of any reference in the Bill to the 30th June 2001 date. The reason for this, as my honourable friend the Minister of State made clear, is to ensure that the prior use exemption will not expire on 30th June 2001 if the corresponding date in the Community regime is extended.

Nevertheless, we recognise the concerns that have been raised on this point. The Government will therefore bring forward an amendment at Committee stage to put the 30th June 2001 date on the face of the Bill. I hope this will reassure farmers who save seed that they may continue to use varieties they currently save, free of charge, until that date. I understand, too, that the British Society of Plant Breeders has publicly stated that it does not propose to collect any payment on older UK protected varieties before 30th June 2001. I welcome this assurance.

I know that some sectors of the industry, particularly those representing the mobile seed cleaners, are concerned at the prospect of Ministers discontinuing the prior use exemption at any time in the future. It remains our intention to discontinue the exemption at the same time as the corresponding provision is removed in the Community regime. I hope the assurances I have given, combined with the amendment we shall bring forward in Committee which ensure the exemption will continue until at least 30th June 2001, will also give them some reassurance.

As regards level of payment, this is for breeders and farmers to negotiate, taking account of the requirement that the charge must be "sensibly lower" than the royalty on certified seed. The Bill gives guidance on what is meant by "sensibly lower" by reference to the Community regime. But it does not put any figure on it, and indeed the Government do not intend to intervene in what we believe are essentially commercial matters between breeders and farmers. I am impressed at the constructive way in which representatives of breeders, farmers and seed processors approached the farm-saved seed issue when it was first broached for Community protected varieties. I hope a similar constructive approach will prevail with this extension of the farm-saved seed provisions to UK protected varieties.

As your Lordships will realise, this is an extremely technical measure but it is of considerable importance to the agriculture and horticulture industries. I am aware that the National Farmers Union, the National Association of Agricultural Contractors and the British Association for the Representation of Breeders and others have views about particular aspects of the Bill.

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Because of the very technical nature of the Bill, I am more than happy to meet colleagues from all parts of the House with officials to discuss any relevant matters before we reach Committee stage after the Recess.

That brings me to the end of the most significant elements of this somewhat technically complex Bill. To summarise, it sets the framework for a national system of plant variety protection which should provide the basis for a healthy UK breeding and farming industry in the years to come. I commend it to the House.

Moved, That the Bill be now read a second time.--(Lord Carter.)

11.25 a.m.

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