PBR HOME > Essentially Derived Variety

Clarification of Plant Breeding Issues under the
Plant Breeder's Rights Act 1994
December 2002

• Essentially Derived Variety (EDV)
  • Terms of Reference and the Panel's Approach
  • Background: Incremental Breeding and Essential Derivation
    • Freedom to Operate
    • The Basis for a Declaration of EDV
  • Current Limitations of EDV and the Scope for Change
    • Non-PBR 'Copycats'
    • 'More than Cosmetic' Differences
    • The EDV Adjudication Process
    • The Important 'Non Cosmetic' Differences
    • The Scientific (Genetic) Evidence Related to Parentage

        ESSENTIALLY DERIVED VARIETY (EDV)

Terms of Reference and the Panel's Approach

The terms of reference established by SCARM regarding EDV are:

• the Plant Breeder's Rights Office work with the plant breeding and biotechnology industries to clarify essential derivation, develop practical solutions to intellectual property management of essentially derived varieties[1] and, through this process, examine ways in which changes might be made to the Plant Breeder's Rights Act 1994 to better protect the interests of the first breeder.

The Panel's deliberations have not been assisted by:

• minimal argumentation presented as to why there is a need to change the PBRA to 'better protect the interests of the first breeder' in respect of clarification of essentially derived varieties and associated intellectual property management.

  Although some concerns seem to be focused on the 'threat' that genetic modification (including patented gene modification) of conventionally bred varieties may pose for 'traditional' breeding programs;

• minimal empirical experience with EDV challenges under the PBRA to date, and no body of EDV experience globally to draw upon;
• a lack of public understanding of the function of the EDV concept, which is to protect against 'copycat' activity while not restricting the breeding of new varieties.

Fundamentally, EDV, as currently defined under the PBRA, potentially only encompasses a minor subset of all incrementally bred varieties. The minimal experience with EDV, even after 8 years operation, testifies perhaps to how small this potential subset really is. To this extent, possible changes to the scope/definition of EDV may have much less impact than some seem to envisage. Even then, such changes may have more impact on 'traditional' breeders than on 'biotech' breeders.

The Panel emphasises the difficulty of examining a provision as yet untested in Australia and tested minimally overseas. The provision is also the subject of debate that sometimes goes to issues that are only indirectly related to the prime function of EDV. Given the 'frontier' nature of EDV the Panel acknowledges that future events may necessitate reconsideration of the views expressed in this report.

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Background: Incremental Breeding and Essential Derivation

Real progress in plant innovation - which must be the goal of intellectual property rights - relies on access to the latest improvements and new variation. As a general rule, the easier the access, the more incremental breeding is promoted.

Incremental breeding refers to the breeding of an unlimited series of new varieties with each subsequent variety being bred from, and relying heavily on, the characteristics of the previous varieties. The differences between the previous and subsequent variety can be large, small or very small, with the latter being the most common. They are, in fact, derived varieties that are different and new, but they are not copies (EDVs).

Any proposition to strengthen the first breeder's power by extending EDV to all incrementally bred varieties (and not just copies) would go to the fundamentals of the PBR system, with profound implications for the community of breeders, for consumers and for Australia's national interests. The view of the Panel is that examination of such a proposition goes beyond its terms of reference.

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Freedom to Operate

• In the context of PBR, incremental breeding[2] is associated with 'freedom to operate' (more formally known as the 'breeder's exemption', or the 'research exemption'), which prescribes free access to PBR varieties (see PBRA section 16) for the purpose of research or breeding a new variety and, in virtually all (non EDV) cases, the commercialisation of that new variety.

Along with other criteria, the PBR Office examines each new candidate variety for distinctness, uniformity and stability (the DUS test). The PBRA provides for a challenge to the candidate variety up to, and after, the grant of rights on the grounds, inter alia, that the criteria of DUS have not been met. While at least one clear difference is required to qualify for protection, economic/aesthetic/performance/ values are not, per se, relevant for PBR protection. PBR is primarily a registration scheme based on perceived 'physical difference(s)' (eg a morphological, phenological or physiological difference) that distinguishes the candidate variety from all others. The difference may result in characteristics that have no agronomic value relevant to the registration process. Accordingly, a PBR registration of a plant sold through a garden centre is not a guarantee of performance/value, it simply warns against infringement of the innovator's rights.

There is a deliberate limited tension between the protection of the new variety and the unfettered commercialisation of varieties developed from it. PBRA section 16 specifically allows free access to a PBR variety to breed other varieties (freedom to operate). With regard to commercialisation of such an incrementally bred variety that is registered under the PBR scheme, where the change on the first variety is large, the breeder of the second variety can exercise PBR in that variety without reference to the breeder of the first variety.

However, where a relatively minor change between two varieties occurs, the PBRA recognizes the rights of the first breeder through the possibility of a 'declaration of essential derivation'. Basically, the EDV concept is directed towards protection against 'copycat' activity, not against incremental breeding and the innovation that springs from that endeavour. Genetic modification, whether done by 'traditional' or 'biotech' methods, is not necessarily 'copying'.

The first breeder must apply for a declaration of EDV in terms of the criteria established under the PBRA, and, if successful, has equal rights with the second breeder in the essentially derived variety of the second breeder as is described below:

Despite the seemingly positive tone of section 11, the plant breeder's right is one of exclusion, as are rights granted by other forms of patent legislation. So that, currently, if EDV were declared, the first breeder could exclude the second breeder from doing the acts established under section 11 and vice versa, meaning that neither breeder would be able to do the acts. Both breeders would be able to exercise the full extent of their rights, but effectively the new essentially derived variety could not be commercialised.

EDV does not hinder access to the existing variety for research and development, per se. What it does is provide protection for the first breeder if their variety is copied by providing a mechanism that enables the first breeder to effectively veto commercialisation of the EDV, or extract a rent for the use of their intellectual property.

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The Basis for a Declaration of EDV

Currently an EDV challenge in Australia can be made at the time of the PBR application for the second variety but can only be declared after the grant of PBR is made.

The test of whether the second variety is essentially derived from the first variety rests on the three criteria specified in the PBRA (see PBRA section 4), viz:

• it is predominantly derived from the first variety; and
• it retains the essential characteristics that result from the genotype or combination of genotypes of the first variety; and
• it does not exhibit any 'important' (as distinct from cosmetic) features that differentiate it from the first variety.

Interpreting these criteria consistently may be problematic as:

1. There are no definitions for the terms 'predominantly derived from', 'retaining the essential features of' etc, [an issue for all UPOV countries]
2. There is no definition for the term 'important, more than cosmetic, features' [an issue unique to the Australian PBRA]
   • however, 'important' would probably be taken to denote significant changes that affect performance, value or place in the market. For example, purple anthers in wheat, which do not affect performance or value of the crop, might fall into the category of a cosmetic feature.

It is not within the Panel's Terms of Reference to define these terms. Such definitions should be determined by the membership of UPOV, or by a court.

Membership of UPOV obliges Australia to meet minimum requirements but does not set upper limits, provided there is consistency with the minimum standards. The current provisions of the PBRA regarding essential derivation go further than the relevant UPOV 1991 provisions by:

1. Defining 'essential characteristics' as 'heritable traits ... that contribute to the principal features, performance or value of the variety' (see PBRA section 3(1));
2. Requiring that important differences (more than cosmetic) must be demonstrated if the second variety is not to be regarded as an EDV; and
3. Stipulating that the PBR Office should make decisions in relation to a declaration that a variety is essentially derived.

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Current Limitations of EDV and the Scope for Change

Non-PBR 'Copycats'

As the intent of PBR is to promote innovation, 'widening' of EDV in a way that threatens the development of innovation or restricts the breeder's exemption would, in the view of the Panel, be a negative step. This does not necessarily mean that there are no measures that could further protect the first breeder and stimulate innovation.

The Panel found that an EDV challenge is limited currently to applications (although the declaration can only be made in respect of a granted variety) for a grant of PBR in a new variety, or to grants already made. This means that those who breed from PBR varieties but do not enter their new variety into the PBR scheme cannot be challenged under the EDV provision of the PBRA.

Theoretically, the removal of the limitation of a declaration of EDV to only PBR varieties would give the first breeder a wider range of potential situations in which to exercise their exclusive right within Australia. The Panel believes that the current limitation is inconsistent with the intent of the legislation, which is to provide protection for the innovator. (Such a change would not necessarily hinder genetic modifiers of PBR varieties because new, genetically modified varieties might fall outside the other EDV criteria.)

The Panel recommends that the PBRA be amended to extend the capacity for an application for a declaration of EDV to varieties that are not the subject of PBR application or grant.

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'More than Cosmetic' Differences

The Panel also considered removing the limitation that provides for an exemption from EDV declaration for those new varieties that can claim the 'more than cosmetic' defence. Removal of the exemption would increase the scope of the first breeder to exercise their negative right. It would also increase the level of uncertainty in plant innovation as subsequent breeders would be less sure that their new varieties would be outside the ambit of an EDV declaration.

The view of the Panel is that the aim of plant innovation is furthered if a breeder can meet the initial DUS criteria and then demonstrate that their incrementally bred variety has 'more than cosmetic' differences. The Panel therefore does not recommend change to this provision.

The EDV Adjudication Process

Currently the PBRA stipulates that the PBR Office must take decisions in relation to declarations of EDV. Hypothetically, (because there is no experience with EDV declarations to date), the two key areas of EDV examination would be:

1. The important (non-cosmetic) differences; and
2. The scientific (genetic) evidence related to parentage.

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The Important 'Non Cosmetic' Differences

As indicated above, PBR is primarily a registration scheme based on perceived 'physical difference or differences' (eg morphological, phenological or physiological difference) that distinguishes the candidate variety from all others. The difference may result in characteristics that have no agronomic or aesthetic value relevant to the registration process. Accordingly, PBR registration of a plant is not a guarantee of performance/value, it simply warns against infringement of the innovator's rights.

The expertise of the PBR Office does not extend to balancing the evidence of competing claims involving issues of economic impairment and/or aesthetic consideration. This has never been the role of the Office since the scheme is based on identifying 'physical' differences between plants, not assessing performance/value/merit of those differences.

Any EDV challenge would involve costs that, under current regulations, would be distributed across all applicants, irrespective of their involvement in the specific EDV action. Moreover, any appeals under the current system would likely list the PBR Office as first defendant, inevitably magnifying the costs of running the scheme.

The scheme does not currently have the funds to provide such judicial capacity. A contingency fund, established from an increase in fees for all PBR users could provide such capacity. However, the Panel believes it would be impractical and inappropriate for the PBR Office to attempt to acquire and maintain such a specialised judicial capacity when it already exists elsewhere.

The Panel also believes that the scope to initiate a declaration of EDV through the PBR Office would result in action being taken more lightly, involve judgments that are very different from those traditionally made by PBR Offices, lead, in all likelihood, to further appeals to higher authorities, and impose unwarranted additional costs on the running of the scheme.

The Panel sees no compelling reason for all PBR users to bear the cost of EDV actions by individuals seeking to protect their own interests. Allegations of intellectual property impairment are routinely dealt with in the courts. Moreover, under other PBR systems, e.g. in Europe, allegations of EDV impairment is the responsibility of the judicial system. Courts are already equipped to deal with such disputes and action through the courts is a course that requires a serious cost/benefit analysis by both parties. Given the expense of maintaining structural capability to make judgments that would remain appealable, and accepted international practice that EDV challenges are a matter for the courts to decide, the Panel believes that the PBRA should be amended to bring it into line with such international practice.

The Panel observes that such a change would be more consistent with other aspects of the PBRA (e.g. infringement of rights) for a court of competent jurisdiction to decide whether a declaration in respect of EDV should be made. Moreover, if EDV is extended to non-PBR varieties it will not be possible for the PBR Office to have jurisdiction over such disputes.

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The Scientific (Genetic) Evidence Related to Parentage

The PBR Office is not equipped for these examinations nor does it have specialist facilities to undertake DNA testing. In any event, DNA testing is normally commissioned by the applicant/breeder through a specialist independent organization.

The Panel strongly recommends that the PBRA be amended to remove the PBR Office from the adjudication process in respect of claims for EDV.

If the above recommendation is not adopted, the Panel strongly recommends that the current legislation should be reviewed with the aim of ensuring full cost recovery associated with claims for EDV.

[1] Essentially derived variety refers to the situation where the breeder of one variety (the 'first variety') claims that another breeder has developed another new variety (the 'second variety') that is distinct from, but closely resembles and is directly related to, the first variety in all important respects.

[2] The term 'incrementally bred' is applicable to all varieties that share the majority of their characteristics with direct ancestors, irrespective of the breeding methodology used.

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