Sparkling jewels or patented seed, Blackbeard or Joe Farmer, it's still piracy, according to agricultural seed companies. And those that steal seed might as well be piloting a black-flagged galleon across amber waves of Delta grain, they say. Trapped aboard are seed dealers and companies who fear their businesses will soon walk the plank.
To avoid that end and take back control of the ship, several seed companies have hired Arkansas attorneys to stop illegal brown bagging and selling of several patented seed varieties. So far, six lawsuits have been filed in federal court against seed cleaners, dryers, a cooperative, and several farmers.
“It's Syngenta's position that the parties involved have obtained NorthrupKing Coker seed varieties and sold them illegally,” says Duff Nolan of Nolan Barrett, the Stuttgart, Ark., firm representing Syngenta. “Syngenta has spent years of research and significant finances to develop these varieties, and these parties are pirating their products. It has to stop. It is Syngenta's obligation to protect its property rights — intellectual property rights.
“Filing these lawsuits will also allow dealers fair competition in the marketplace. There's an unlevel playing field among authorized dealers of Syngenta product,” he says.
Take, for example, two seed dealers in one county, says Nolan. One is paying his royalties while the other isn't. The one not paying the royalties is able to sell the seed cheaper, and that means unfair competition.
While every farmer isn't brown bagging wheat seed illegally, there is little doubt a large percentage are trading and planting ill-gotten germplasm. Authorized seed dealers spoken to for this story claim at least 50 percent of wheat seed sales are lost to illegal practices. Nolan says in investigating the problem, it was “easy and simple” to find violators.
According to farming sources, a farmer goes to a seed dealer or another farmer's operation inquiring about a solid variety that has been brown bagged. Cloaking their activities under state VNS (Variety Not Stated) laws, a patented variety is then offered at a cut price. Legitimate dealers are left out of the loop, and seed companies can't recoup their investment.
Nolan and Barrett filed one lawsuit against an individual, a cooperative and a farmer. “In this instance, the individual brokered the brown bag sale, the co-op accepted money and wrote a receipt for the sale and then contacted the farmer who then brought the product to the (person working for Syngenta),” he said.
“It appeared to us that they were trying to limit their exposure by allowing someone else to complete another link in the sale. Some of these places have warehouses full of the product, and it can be seen when you drive up.”
“IT AIN'T RIGHT, but prices are high and there's not much sympathy for the seed companies,” says one farmer in east Arkansas. “And with (these suits) they'll make a point, and it'll stop being so out in the open. But what's going to happen is these illegal sales will just go underground. You'll have a handful of farmers who can trust each other and won't work with anyone else. Sad but true: if there's a way to get around paying the companies their tech fees and all that, someone will find it.”
Nolan realizes those risks and says Syngenta isn't singling out Arkansas. This is an activity that's occurring across the South, and Syngenta is determined to put a stop to it.
“I would add that Syngenta isn't the only captain of this ship. Pioneer is involved in a similar effort as is Agripro wheat (whom Nolan is also representing). Syngenta — and we as their attorneys — feel it is more of an industry effort to stop the flagrant theft of our client's products,” he says.
FOR AT LEAST A YEAR, the word has been out that seed companies were looking into illegal seed dealers. Syngenta, in efforts to curb illegal activity outside the court system, tried the education route for several years. Nolan has spoken at numerous meetings on this, and farmers should have gotten the message, he says. Further, Syngenta's management sends out a packet of information every year, “regarding what the dos and don'ts are with respect to plant variety protected and patented germplasm.”
Last year, the Arkansas State Plant Board also mailed out a document to farmers spelling out what's allowed with proprietary seed.
The seed industry isn't what it used to be. Years ago, varieties developed by universities were fair game for anyone who wanted to use them. They could use those varieties for resale or on the farm.
Now, privately held corporations have spent literally billions of dollars developing a better mousetrap, says the attorney. In doing so, they must recoup their investments. They do that through royalties.
As a sidebar, Nolan says, “Syngenta is in no way attempting to eliminate farmer-saved seed that is used for replanting on the farmer's land. This is a very important point. (Such a practice) is allowed under the PVP (Plant Variety Protection) Act, and we're not in any way trying to step on a farmer's land and prevent him from saving or using the free copy he developed the year before. What we are saying is that anyone who has possession of the germplasm except for the farmer who grew it last year and intends to plant his own acres or a breeder is (a potential lawsuit target).”
Confident with the six suits his firm has filed, there has been coffee shop talk that many other suits could have been brought. “We could have brought a whole lot more,” says attorney Mark Henry, Nolan's partner.
“We're not trying to pick on these guys. It appears that these defendants received educational information on more than one occasion and still were very willing participants in illegal seed trade. We think it's only fair we try and educate the market before bringing a lawsuit,” says Nolan.
Any settlement talks?
Nolan says some defendants have shown a readiness to discuss and resolve the suits. What Syngenta is seeking are the records from the companies involved to determine the depth and scope of the illegal sales.
“I don't in any way believe we were the only ones who bought (Syngenta seed in such an illegal manner). I think there were many others. Once we determine the scope of this, we will certainly settle the cases on a non-confidential basis for three times the amount of damages our client has suffered. The law allows for treble damages. Typically, royalties are $1 to $2 per 60-pound bag. We're not seeking any criminal sanctions or remedies. But we may be seeking injunctive relief as well as monetary damages. I can't say this hard enough: our whole point is to deter the conduct.”
Why were the suits filed in federal court? Short answer: the PVP Act (used in the suits as a means to protect intellectual property — “meaning the research and development cost associated with breeding and selecting only the best seeds,” says Henry) gives rise to a federal cause of action under the Lanham Act.
“Trademarks are intended to protect the quality of a product. If you're selling a product of inferior quality under a famous trademark — like you see the roadside truckloads of Nike shoes or Oakley sunglasses — that's a violation of the Lanham Act,” says Henry.
The reverse is also true, especially in the seed cases. The defendants are selling a potentially superior product using an inferior trademark, “but in this brown bag situation there's no quality control associated with the packaging or cleaning of the seeds. The concern is whether what they're actually selling is in fact filled with impurities normally removed using accepted and authorized processes that an authorized dealer would be required to do,” says Henry.
The defendants in these cases made a representation that a brown bag contains a Syngenta or Agripro seed. If the seed turns out to be “bad” in some manner, it becomes much more likely the farmer will eschew that seed in the future and the company will lose sales.
“The truth is, the buyer doesn't really know what he's getting. The seller could be blending seed, selling seed of inferior quality, selling old seed that's outside recommended shelf life, or whatever. The defendants are depriving Syngenta and Agripro of the ability to ensure high-quality products,” says Henry.
What kind of reaction is Nolan — who not only represents agriculture companies but also farmers — receiving around Stuttgart? “The reaction I get from farmers and others I know from the seed business is what we're doing is a necessity in today's seed market.”
Nolan claims part of what allows the current seed piracy to happen are archaic VNS laws.
“Those are antiques and need to be repealed or modified. The VNS laws open the door for someone to take a PVP product and put it in a brown bag and stamp it VNS. In other words, if the Arkansas State Plant Board walked in to a location for inspection and saw a brown bag with VNS on it, they couldn't do anything. But the VNS law says you can't call something VNS if it has another name. It's just a way for illegally kept seed to be disguised.”