Profiting from derived knowledge

In obtaining a patent that accepts claims relating to three 'novel rice lines', the biotech firm RiceTec gains a partial victory on the basis of a questionable use of the patenting mechanism.

THE decision of the United States Patents and Trademarks Office (USPTO) to grant the biotech firm RiceTec a patent that accepts five claims relating to three 'novel rice lines' has once again triggered a controversy in India. Parliament witnessed a heated debate, in which the Opposition accused the government of having through its negligence created a situation where India's exports of basmati rice traditionally grown in India and Pakistan would be adversely affected. The government naturally refuted the allegations, and declared the development to be a victory on a number of grounds.

First, the decision of the USPTO was arrived at in response to India's request to re-examine three of the originally accepted 20 claims made by RiceTec. Second, the number of claims upheld by the USPTO amounts to just five. And third, these claims are seen as relevant not to "basmati rice and lines" as originally defined, but to "novel rice lines" BAS867, RT1117 and RT1121, which are seen as varieties that deliver grain "similar to or superior to good quality basmati rice". What is of interest is that even "expert" opinion from non-governmental organisations and the media, are clearly divided on the dilatory question as to whether India has won or lost the legal battle.

The debate now centres on whether the specific form in which RiceTec has been given a patent on rice lines is in keeping with patenting "norms" and whether India's interests as an exporter of basmati rice have been affected adversely. The larger issue of whether "rice lines" deriving from varieties traditionally developed by cultivators located in specific geographical areas should be patentable at all is being ignored.

The defence for any patent rests on the need to provide intellectual property rights to those who develop new technologies, who have undertaken risky investments to achieve their goal and in the process provided society with new or better products or processes. Further, such technologies are seen as providing substantial 'external' benefits to society, far more than captured by prices or by the private benefit accruing to the innovator in terms of profit. Unless such investments are protected and profits on them assured, it is argued, technological change would be much slower or absent, implying considerable social loss.

Even this argument is fraught with problems. It is by no means clear why investments in agriculture by the government and the private sector, which are also quite risky and also provide society substantial 'external benefits', should be subjected to the "winds of international competition" through liberalisation, even while investments in innovation are protected.

Moreover, in the case of plant varieties derived from traditionally developed plants, the net accretion in terms of new knowledge is limited, relative to the existing varieties. But since the traditional varieties developed over time as a result of cultivator practices have substantial common property characteristics, they are not patentable by any single agent. On the other hand, "commercial plant breeders" like RiceTec who build on traditional knowledge, without having to pay for it, and manage to "differentiate" their product to render it "novel" enough to be considered for a patent, obtain the protection unavailable to the source product.

A product like basmati rice, it is acknowledged, has quite distinctive features in terms of long-grain characteristics, aroma and cooking properties such as elongation and relative non-stickiness. The range of basmati varieties available in the market do suggest that much has gone into generating the characteristics associated with the best basmati. Despite the claim that the original species came from Mesopotamia, the contribution made by farmers in India and Pakistan, where basmati is predominantly grown, in mastering and improving features that make basmati distinctive is both substantial and obvious. This should, in theory, entitle these farmers to one of two benefits. Either a share of the royalty on any derived variety of the kind that is being put out by RiceTec, assuming it is commercially successful, or protection of the description 'basmati' on grounds of geographical indication, as happens with Champagne, copies of which have to be termed "sparkling wine" if produced outside specified areas.

Neither of these entitlements is available to the South Asian farming community. In fact, in May 2000, the U.S. Federal Trade Commission rejected a petition by three NGOs demanding protection in U.S. markets for the "basmati" title on geographical grounds, for rice grown in certain specified regions of the world. Yet RiceTec, that develops on the substantial traditional knowledge embodied in existing varieties, is provided protection of any profits to be made on derived varieties on grounds of "novelty".

Needless to say, "novelty" here is a matter of fickle judgment, resulting in the peculiar situation where both RiceTec and the USPTO have kept altering their positions. In its initial order dating back to 1997 the USPTO provided RiceTec a patent that identified the varieties concerned as part of the basmati line and accepted 20 claims made by RiceTec regarding these varieties. When three of these claims were challenged by India, RiceTec itself decided to withdraw four of its claims, to protect its case that it had indeed developed novel varieties of basmati. Subsequently, the USPTO goes on to reject all but five of the remaining claims and chooses to describe RiceTec's rice lines not as "basmati rice lines" but as "novel rice lines" that are "similar or superior to" basmati. This, of course allows grain from RiceTec varieties to be called basmati rice, and that too of a superior quality.

Anyone with a rudimentary understanding of economics, markets and business practices should realise that RiceTec's intention never was to obtain protection of a kind that would make its new lines the only basmati. Making basmati a protected brand name for itself was an impossibility. Even when the original patent was in operation, exports of basmati rice from India were not kept out on grounds of patent violation. Rather, RiceTec's intention was to ensure that derived, basmati look-alike varieties that can be cultivated in climates dissimilar to that of the basmati-growing regions of India and Pakistan, are provided an official basmati label. Patenting was more a marketing device rather than a protectionist one. In this effort, RiceTec has lost a little, inasmuch as its lines are no more officially named basmati rice lines, but it has gained a lot inasmuch as the USPTO sees in the novel rice lines varieties that are similar to or superior to "good quality" basmati which it believes "can be cooked to the firmness of traditional basmati rice preparations". RiceTec has virtually got itself a geographical indicator as a trademark, through the unusual exertions of the USPTO. Whatever the brand name used, these varieties can now be marketed as superior basmati.

This important gain for RiceTec comes from two kinds of investments: "agricultural investments" in developing modified varieties that can be grown in climatic zones different from that of the source product; and investments in product differentiation that are needed for an official declaration about its rice lines that carries the term basmati. The first of these are investments of a kind that farmers all over the world have made over time, without any promise of promotional or protectionist support. The second consists of investments in minor modifications to justify novelty. Consider for example the way in which the three lines are seen as being novel. There are references to the method of breeding, to the semi-dwarf stature of the plants (that help it withstand stronger winds), and to their substantial photoperiod insensitivity, that allows cultivation in a region with shorter days. Modifying properties in this manner is now common practice among breeders seeking to develop hybrids of different kinds.

There is no guarantee that by getting itself a trademark-like patent notification, RiceTec is likely to market its varieties and make them successful competitors to basmati exported from South Asia. But the battle has begun, and a first partial victory has been won on the basis of a questionable use of the patenting mechanism. Unfortunately, the official Indian position on the re-examination exercise has concentrated on the government's success in spending much time, money and effort on blocking the patenting of basmati itself and of diluting the nature of the patent granted to RiceTec's rice lines. The fact that it has won this particular, limited legal battle on the patent front should not detract from the fact that agribusiness firms and farmers with much deeper pockets than Asian ones and support from much stronger governments have got more than a foot into the basmati market.