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NATIONAL ASSOCIATION OF PLANT PATENT OWNERS
Statement on H.R. 5119, the Plant Breeders’ Equity Act of 2002
Judiciary Subcommittee on Courts, Internet Intellectual Property,
U.S. House of Representatives
Craig J. Regelbrugge, NAPPO Administrator
September 19, 2002
Chairman Coble, Ranking Member Berman, and Members of the Subcommittee, the National Association of Plant Patent Owners (NAPPO) is grateful for the opportunity to provide this testimony on H.R. 5119, the Plant Breeders’ Equity Act of 2002. NAPPO is a national trade organization representing the foremost breeders of new horticultural plant varieties ranging from apples to strawberries to roses, peaches, grapes, and shade trees. NAPPO’s testimony and position on H.R. 5119 are fully supported by the American Nursery & Landscape Association and the Society of American Florists, the horticultural industries’ primary national trade organizations. Numerous other international, national, regional and state organizations also support swift enactment of H.R. 5119. This testimony will explain the basis and need for the bill, the severe harm felt by the horticultural industry as a result of the “102(b) problem,” and why H.R. 5119 is the soundest and swiftest remedy available.
INDUSTRY OVERVIEW
The 1997 Census of Agriculture shows that nursery, greenhouse and floriculture crop sales totaled $10.9 billion in 1997, up from $7.6 billion in 1992. This represents a 43 percent increase in sales over the previous 1992 Census. Together these crops make up 11 percent of total U.S. farmgate receipts. Some 33,935 farms produced nursery plants as their principal crop; floriculture farms numbered 21,824.
Nursery and greenhouse crop production now ranks among the top five agricultural commodities in 24 states, and among the top 10 in 40 states. Small and family farms and businesses dominate the industry. Seasonality and regional product differences have limited the presence of large corporate entities in the business. Furthermore, the industry operates without crop program supports that characterize much of American agriculture.
New varieties are the industry’s lifeblood. Growers produce thousands of varieties of cultivated nursery, bedding, foliage and potted flowering plants in a wide array of different forms and sizes on 1,305,052 acres of open ground and 1,799 million square feet under the protective cover of permanent or temporary greenhouses. The quest for new and improved plant varieties is accelerating, and international partnerships to pursue breeding and new variety introduction schemes are common and increasing. The current 102(b) situation jeopardizes the growth and prosperity of this increasingly important component of American agriculture.
HISTORIC ROLE OF THE PLANT PATENT ACT
The Plant Patent Act of 1930 has achieved exactly what Congress and early supporters such as Luther Burbank and Thomas Edison intended: it has offered a strong incentive for research and breeding activities, which are the foundation for the progressive and growing U.S. horticultural industries. The U.S. was the first in the world to provide an intellectual property scheme for plant inventors. Since 1931, over 12,500 plant patents have been granted for new varieties ranging from ornamental and fruit-producing trees to roses to poinsettias to strawberries. An average of 500 plant patents per year have been issued in recent years, and increasing numbers of those granted patents have involved the results of foreign breeding programs. U.S. interests usually work in close partnership with foreign breeding programs, and U.S. growers benefit from quick access to new varieties bred both domestically and abroad. Indeed, U.S. competitiveness in sectors such as fruit and grapes depends upon unimpeded access to these new varieties.
SUMMARY OF THE 102(B) PROBLEM
General U.S. patent law effectively directs the PTO to deny patents for inventions where “the invention was patented or described in a printed publication in this or a foreign country . . . more than one year prior to the date of the application for patent in the United States . . .” 35 U.S.C. § 102(b) (2000). Until recently, plant patent applicants (and ostensibly the PTO) operated under an assumption that the pre-publication basis for denial of a patent would not generally operate against plant patents on the reasoning that pre-publication of a plant variety was not sufficiently enabling to permit one skilled in the art to practice the patent and breed the subject plant.
In January, 2001, the U.S. Patent and Trademark Office (PTO) changed its examination guidelines for plant patent applications. Without forewarning to the horticultural industry, the PTO reversed the long-held PTO view of what constitutes prior art under 35 U.S.C. §102(b) in the context of examining plant patents. As stated above, previously the PTO took the position that any publication describing a claimed variety could not be enabling and therefore could not constitute prior art that could invalidate a claim to the same variety in a plant patent application.
So without forewarning, the PTO abruptly reversed this long-held view of the law and announced that a publication describing a claimed variety could be enabling if the plant described therein is available to the public anywhere in the world. As a result of this change in policy, the PTO began to reject any plant patent application where, more than one year prior to the application filing date, the claimed plant was described in a publication and the claimed plant was available to the public anywhere in the world (outside the U.S.).
The change in the PTO’s plant patent examining policy essentially considers that prior publication will serve as a basis for denial of plant patents if the variety in question is available anywhere in the world. The legal basis for this position is the 1992 Thomson case (Ex parte Thomson, - 25 USPQ2d 1618 (BPAI 1992)). In Thomson, the Board found that:
“Examiner properly rejected claims for cotton cultivar having designation "Siokra" based upon finding that claimed subject matter was described in printed publication more than one year prior to filing date, despite applicant's assertion that publication was not enabling, in view of evidence demonstrating that material disclosed in printed publication, when considered in conjunction with knowledge of skilled cotton grower, would have enabled such skilled artisan to make claimed cultivar, and in view of evidence demonstrating that seeds of claimed cultivar were commercially available more than one year prior to filing date.”
In practical terms, the U.S. moved immediately from having the most permissive system for protecting horticultural varieties – one where foreign publication and availability were deemed irrelevant to U.S. patentability – to the most rigid and limiting, where foreign publication and availability for more than one year are now considered an absolute bar to obtaining a U.S. plant patent. NAPPO has repeatedly questioned the eight-year delay between the Thomson decision and its application to the plant patent examination process. Eventually, the PTO claimed that changes to Sec. 105 in the omnibus patent bill of 2001 gave the PTO the investigative tools to implement the Thomson decision.
THE PRESENT SITUATION IS SEVERELY HARMING
THE HORTICULTURAL INDUSTRIES
From the perspective of foreign and domestic plant breeders, the situation remains unresolved and resulting injury is accumulating. Numerous patent applications – likely numbering in the hundreds – have received office actions requesting information on prior publication and foreign availability. Final rejections are beginning to be issued. These rejections will either need to be appealed, or the applications abandoned. Many plant inventions in the breeding and development pipeline that would have been protected are no longer protectable. Finally, the PTO has indicated that the current situation calls into question the viability of numerous plant patents granted under previously prevailing assumptions in the plant industry, and practice at the PTO. PTO officials have suggested that perhaps as many as 75% of issued plant patents may be in jeopardy. Severe and long-term economic harm will be experienced by the horticultural industry if the matter is not resolved swiftly.
It is difficult to fully and accurately assess the current and potential economic loss associated with this problem, because the majority of affected entities are small, closely-held and family businesses. However, a few specific case studies are illustrative:
§An estimated 70 percent or more of fruit tree varieties protected by U.S. plant patents are jeopardized under the current situation. In a global market, the fruit industries’ competitiveness is inextricably tied to timely access to new apple, pear, peach, cherry, plum, and other fruit varieties. This access is in jeopardy, and breeding programs stand to suffer.
§One of the larger U.S. nursery growers estimates that sales and royalty loss potential for that company alone exceeds $5,000,000 annually.
§A U.S. company which facilitates protection and introduction of new ornamental varieties into the U.S. conservatively estimates royalty losses of $2.4 million over ten years for just six plant groups with which they are working.
§A large U.S. rose breeder derives between $10 and $11 million annually from sales of foreign-bred varieties and related royalty income. Most of that annual revenue, which funds future breeding, will be jeopardized if the current situation is not resolved.
§A rose breeder with 16 patented varieties projects royalty losses alone at $2.9 million over the commercial life of those varieties – thus decimating that breeder’s research program.
ANALYSIS OF REMEDIES TO CURRENT CRISIS
Over the past year, NAPPO has explored policy, legal, and legislative remedies to the current crisis facing plant breeders. Activities and conclusions under each are detailed below.
PTO Could Change Its Policy
NAPPO, domestic and international plant breeders, and patent attorneys have met with PTO officials numerous times to discuss the rationale for, and harm caused by, the sudden change in examination practice as it relates to 102(b). While apparently sympathetic to the disruption caused, the PTO believes its current position is legally correct.
Legal Challenge Options
NAPPO has researched several litigation strategies including challenges based on the Administrative Procedure Act (“APA”). NAPPO concluded that such strategies were highly speculative and risky.
One or more applicants may appeal a final rejection on the legal merits. NAPPO believes that the Board of Patent Appeals and Interferences would most likely uphold its earlier decision in the Thomson case, so an applicant would need to be prepared to take an appeal all the way to the Court of Appeals for the Federal Circuit. Such an appeal would be costly and slow. Moreover, while the PTO’s action has generated controversy in the legal community, NAPPO’s analysis indicates that an appeal strategy could be highly risky on the legal merits. If the PTO position prevailed, hundreds and hundreds of existing, presumably valid plant patents would be practically invalidated, and the industry would be left with an unworkable system for the future. The industry simply cannot afford to rely on an appeal strategy that would leave plant breeders exposed and with no relief in sight should the PTO’s position be upheld.
Legislative Options
During the course of the past year, NAPPO has evaluated various proposals for addressing the 102(b) issue via federal legislation: (1) lengthening the pre-publication grace period specifically for plant patents; (2) applying said grace period retroactively; (3) creating a provisional application specifically for plant patents; and (4) seeking a procedure for patent term extensions for plant patents. While all of these proposals have some merit, NAPPO has concluded that the current crisis in horticulture should be addressed through a narrow, targeted and timely fix rather than more general patent law reform. H.R. 5119 proposes only to establish a pre-publication grace period for plant patents, and to apply that grace period retroactively.
Creating a pre-publication grace period specifically for plant patents by amending 35 U.S.C. §162 constitutes the most direct and least complicated approach to resolving the problem. At first glance the most logical approach would be to adopt the 6-year and 4-year “grace period”
provisions for woody and non-woody plants respectively, that exist in the International Convention for the Protection of New Plant Varieties (UPOV Convention). However, the UPOV time frames utterly fail to address unique challenges associated with introducing many important varieties into the U.S. Following is the technical and policy rationale for a grace period of longer duration than found in the UPOV construct:
§U.S. quarantine laws with respect to fruit trees, vines, and many other commercially significant asexually propagated plant varieties require years of testing and observation prior to unrestricted distribution in the United States. Many important ornamental and fruit-producing genera must undergo mandatory testing for, and treatment of, a wide array of devastating viruses, viroids, mycoplasmas, and other injurious plant diseases at a USDA or USDA-approved quarantine facility. In most such cases, the U.S. breeder or grower does not even acquire possession of the plant material until that process ends.
Depending on the plant material involved, quarantine testing can take two to eight years. After that time, the breeder/grower must perform initial evaluation of the variety for suitability to North American growing conditions. The performance of a plant variety can vary greatly in different parts of the world based on differences in light, soil, elevation, and other factors. In the end, often only two out of 100 new varieties prove suitable for commercialization in the U.S. market. It is economically and practically impossible to protect 100 varieties when only a few will prove suitable for introduction. Hence, a grace period of longer than six years is needed to accommodate the uniquenesses of the horticultural industry. Without a longer grace period to permit quarantine clearance and at least minimal suitability testing, many plant innovators will be foreclosed from pursuing protection and commercialization in the U.S.
§As a policy matter, the UPOV Convention is “Eurocentric” in that the grace periods featured in the UPOV are workable for introduction of varieties among European countries, which typically share common pest problems and feature few quarantine restrictions. However, world-wide introduction schemes would benefit from a longer grace period. The U.S. is in a good position to lead. After all, the U.S. led the world in 1930 by being the first country to provide plant breeders with similar intellectual property rights as had been afforded other inventors.
NAPPO first considered establishment of a 15-year grace period for fruit trees, and a shorter (perhaps six to 10 year) grace period for other plants. Dieter Hoinkes, at the time deputy administrator of the PTO Office of Legislation and International Affairs and the U.S. delegate to the UPOV, indicated that the PTO would prefer a single grace period so as to avoid administrative complications over ambiguous botanical distinctions. Similarly, tying grace periods to quarantine requirements makes little sense because quarantine requirements are dynamic. Thus NAPPO’s proposed legislation amends Sec. 162 to create a 10-year grace period for all asexually-reproduced plants.
H.R. 5119 would also make the publication-related grace period retroactive in effect, to safeguard the validity of the majority of granted plant patents. Our in-depth legal research reveals that there are no legal constraints on making this legislation retroactive in effect. In view of the PTO’s abrupt change in policy and apparent error in how it examines plant patent applications, we believe it very fair that the proposed legislation be retroactive in effect. The alternative is to unfairly expose the horticultural industries to financial ruin.
Some have voiced a hypothetical concern that a 10-year grace period will allow breeders to unfairly extend their patent rights by “sitting on those rights” until the grace period elapses. This concern is unfounded. The one-year on-sale bar for commercial activities within the U.S. compels a breeder who does not face lengthy, mandatory quarantine to file for protection promptly for foreign-bred varieties. Otherwise, such varieties may enter the country by another means and be offered for sale, thereby initiating the clock for Sec. 102’s generic one-year on-sale bar against patentability. Hence, breeders would “sit on their rights” at their own peril.
CONCLUSION
NAPPO and member breeders and patent attorneys have carefully evaluated a range of policy, legal, and legislative remedies to the current 102(b) problem created by the change in PTO examination procedures. NAPPO has concluded that legal challenges against the process by which the PTO changed its examination procedures would be speculative and costly. A final legal determination on the merits of the PTO’s new view on the impact of pre-publication activities on the validity of plant patent claims will take many months if not years to resolve. It is grossly unfair to expose the horticultural industry to this uncertainty. The validity of issued patents, pending applications and new introductions in the breeding and development process must be preserved.
H.R. 5119 represents a direct yet modest and narrowly focused remedy to the current situation. NAPPO, the American Nursery & Landscape Association, the Society of American Florists, and numerous other international, national, regional, and state plant breeder and grower organizations dedicated to the survival and health of the U.S. horticultural industries respectfully urge your support for swift passage of H.R. 5119, the Plant Breeders’ Equity Act of 2002. Thank you.
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