Bt COTTON PRICE CONTROL: FIXATION OF LICENSE FEES BY THE KARNATAKA HIGH COURT

Monsanto’s much discussed Bt Cotton has spawned the biggest of all intellectual property disputes in India. In series of matters concerning the Bt cotton patent, which involves around at least 15 different proceedings at various courts, the honorable Karnataka High Court held that Bt Cotton seed is an essential commodity for which the license fee can be regulated by the central government.

Backdrop

The technology herein involves insertion of certain genes of Bacillus thuringiensis(Bt), a naturally occurring bacteria in genome of cotton seeds in order to ensure the resulting crop’s resistance to certain pets.

Monsanto licensed this patented technology to its joint-venture in India called the Mahyco Monsanto Biotech (India) Ltd. which has in turn entered into sub-licenses with approximately 40 Indian seed companies.

Constant complaints were raised against Monsanto for overcharging, which in turn raised the price of the cotton seeds being sold to farmers. The state governments enacted legislation to control the retail prices of seeds. This however affected the Indian companies the most as while the retail price of cotton seeds were reduced, Monsanto refused to reduce its licensing fee.

In 2015, the Ministry of Agriculture of Government of India notified the Cotton Seeds Price (Control) Order (CSPO), 2015.

Section 3 of the Essential Commodities Act, 1955 allows the central government to control the production, supply, distribution, etc., of essential commodities. Exercising its powers under this provision, the central government passed said order in December 2015 which gave the government the power to fix the maximum sale price of cotton seeds and also gave it the power to fix license fees payable to technology providers. In 2016, the government reduced the sale price of cotton seeds and also reduced the license fees paid by seed companies to companies like Monsanto.

Facts of the case and Issues Raised

The Association of Biotechnology Led Enterprises and Namdhari Seeds Pvt. Ltd. filed a writ petition against this order before the Karnataka High Court stating:

Bt Cotton seed (genetically modified) not to be treated as cotton seeds (an essential commodity).

The Central government has no power (under Section 3 of the Essential Commodities Act, 1955) to regulate the sub-components of an essential commodity.

The respondents (The Union of India and Ors.) challenged the maintainability of the petition.

The Order

The Single Judge granted an interim order holding that the fixation of license fees would not be given effect to by the government. After hearing the parties this order was vacated. The petitioners then appealed to a Division Bench.