Time India Lay’s eyes on Pepsi potato case

A multinational giant using all its might to crush four small farmers for an alleged patent infringement: this is how PepsiCo’s decision to sue a group of Gujarat farmers for Rs 1 crore each played out in the media early this month. The US-based snack and beverage maker was accused of coercion for taking the farmers to court for growing FC5 potato variety, which it exclusively developed for its Lay’s chips.

It was the money — Rs 1 crore — that caught attention: how can a poor farmer pay such a huge amount? And instinctively, you side with the farmer. But is that instinct correct? Who is right: the farmers or the drinks major they are up against?

PepsiCo is one of India’s biggest food and beverage manufacturers. It developed the disputed FC5 variety in response to supply-chain shortages that affected Lays’ production. The potato has low moisture and sugar content, which is ideal for chips. The company collaborates with 24,000 farmers in India, selling them potato seeds, providing agricultural assistance and buys the produce at a pre-determined price. PepsiCo registered FC5 under India’s Protection of Plant Varieties and Farmers’ Rights (PPVFR) Act in 2016.

In April this year, PepsiCo approached the Gujarat High Court, asking it to prevent the four farmers from growing and selling the FC5 variety illegally. A similar case was registered last year against five farmers in which PepsiCo demanded Rs 1 crore each in compensation for patent infringement.

The $64-billion company surely does not need the paltry Rs 9 crore and other farmers growing the FC5 potato do not affect the multi-national’s supply chain. The company offered to drop the demand for compensation, provided the farmers sold the produce to it at a pre-determined price or stop growing the FC5 potato. Finally, in consultation with the government, PepsiCo on May 2 dropped the suit citing ongoing discussions with the government for a long-term and amicable solution to seed protection.

The case may have ended but it put the spotlight firmly on the PPVFR Act. As India looks to increase agricultural yield and embrace new farm technologies, the Lay’s case is unlikely to be the last. PepsiCo claims that the PPVFR Act gives it the exclusive rights to grow the FC5 variety for Lays. But does it? Well, not explicitly.

Article 39 (iv) of the PPVFR Act says: “A farmer shall be deemed to be entitled to save, use, sow, resow, exchange, share or sell his farm produce, including seed of a variety protected under this Act in the same manner as he was entitled before the coming into force of this Act: Provided that the farmer shall not be entitled to sell branded seed of a variety protected under this Act.”

Simply put, farmers can exchange seeds among themselves or sell the produce, including new seeds, to a buyer. Thus, the Gujarat farmers could grow the FC5 from seeds they got from other farmers and sell the potato in the market but without claiming that these were FC5 or PepsiCo potatoes.

There have been no reports that the farmers violated the PPFVR Act. If this is the case, PepsiCo’s claim of patent infringement is unsubstantial. Of course, if PepsiCo has evidence of the farmers selling the FC5 potato in a branded packaging, it has every right to approach the courts. But if some reports are to be believed, the farmers were selling the produce to potato chip manufacturers. If this is the case, PepsiCo may be using patent infringement to actually restrict the supply of the FC5 potato to rival manufacturers.

Is it fair if rival companies get access to potatoes researched and developed by PepsiCo through the PPVFR Act? While it may not seem fair, there are two things to be considered. One, the farmers’ action is fair in the view of the PPFVR Act. Second, the farmers could not have claimed the potatoes to be FC5 and even if they did verbally, without any material branding, a rival company purchasing the potatoes would have to do so on trust without any legal recourse if they were duped.

Should the laws be amended to give better protection to seed companies? Many firms have found a solution by creating crops that do not produce seed, forcing farmers to buy seeds every year. This works if the income from the yield is higher than the cost to the farmer. Otherwise, the farmer can buy from companies whose seeds may not be high-yielding but will provide seeds the next season. There is complete transparency in this process and the final choice remains with the farmer. Further, most companies do not buy back the products of their seed and remain unaffected by where the farmer sells the produce.

PepsiCo’s case is peculiar because they are the breeder as well as the end-buyer. Amending laws so that companies control the supply chain would be detrimental to the ecosystem. Buying the produce back at prices higher than market rates or providing extra benefits to farmers who sell the produce to the breeder is one solution that can be looked at.

In the long-run, the case may not be of patent infringement, but a signal to other farmers and rival manufacturers to keep off Lay’s potatoes. If the case is of patent infringement, we should stand by PepsiCo. But if it is PepsiCo trying to using intellectual property to protect its potato from reaching its competitors, we need to side with the farmers. In either case, letting the courts decide in a transparent manner instead of opaque government-company discussions would go a long way in setting precedents for farmers and seed companies.

Shambhavi Naik is a research fellow with Takshashila’s Technology and Policy programme

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Updated Date: May 27, 2019 16:23:44 IST