CASE STUDY :- FL 2027 - Kavita Kuruganti Vs Pepsico India Holdings Private Limited

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Right from the British rule for sourcing cash crops such as indigo, opium, tobacco, and cotton, until recently when the Central Government promulgated an Ordinance passed by the Parliament in September 2020, contract farming is a highly debated topic throughout the modern history of India.

In a nutshell, contract farming is an agreement between a buyer and farmers, to carry out agricultural production that refers to production and supply of agricultural produce under a forward contract. Typically, the farmer agrees to provide agreed quantities of a specific agricultural product. These should meet the quality standards of the purchaser and be supplied at the time determined by the purchaser. In turn, the buyer commits to purchase the product and, in some cases, to support production through, for example, the supply of farm inputs, land preparation and the provision of technical advice.

Fig. Advantages of contract farming especially for small farmers

CASE DETAILS

The Plaintiff for this case: Kavita Kuruganti

The Defendant for this case: Pepsico India Holdings Private Limited

Judgement given by : The Protection of Plant Varieties and Farmers’ Rights (PPVFR) Authority

Coram: K. V. Prabhu, chairman of the PPVFR Authority

Date of Pronunciation: 3rd December, 2021

 

OVERVIEW OF THE CASE

While there has been a lot of controversy and uproar against the Government’s policy measures and decisions, a new chapter has been opened up in the same debate as the Protection of Plant Varieties & Farmers’ Rights (PPV&FR) Authority revoked the PVP certificate granted to PepsiCo India Holding (PIH) on a potato variety FC5 in India (originally registered in the US as FL-2027 variety), on multiple grounds, including that the grant of the certificate of registration had been based on incorrect information furnished by the applicant.

With 80 percent moisture content, as compared to the usual 85 percent, the FC5 variety is considered more suitable for processing and therefore, for making snacks such as potato chips. The variety was first cultivated by Dr Robert W. Hoopes, who holds the most potato patents and potato variety protections in the whole world.

The FL2027 variety was registered in the US in 2005 and was put to commercial use in India in 2009. The FL-2027 variety of potatoes (FL stands for Frito Lays, the name of Pepsico’s food arm, and owner of the famous ‘Lays’ brand of potato chips) was introduced by Pepsi in 2009 through a contract farming arrangement with some 12,000 farmers, to whom the company supplied the seeds and bought back the produce. This arrangement allows the company to buy all the produce from these farmers at pre-decided rates.

In India, the FL2027 variety was applied for registration in 2011 and obtained the registration in 2016. However, a nationwide stir erupted when in 2019, Pepsico sued nine farmers for infringement of its rights under the Act, and claimed ₹1 crore in damages from them, including some small farmers. This led to a widespread backlash, with farmers threatening a boycott.

In response to the backlash, Pepsico withdrew all the lawsuits against farmers in the same year and said that it wanted to settle the issue amicably. In the backdrop of this event, Kavitha Kuruganti, a farmers’ rights activist, petitioned the PPVFR Authority for revocation of intellectual protection granted to PepsiCo’s FC5 potato variety, saying that government’s rules do not allow a patent on seed varieties.

The PPVFR Authority agreed with Kuruganti’s contention that Pepsi cannot claim a patent over a seed variety and on 3rd December, 2021, passed an order in New Delhi, revoking the PVP (plant variety protection) certificate granted to PepsiCo (India) Holdings Pvt. Ltd for the FC5 potato.


SUBMISSIONS ON BEHALF OF THE PLAINTIFF

The plaintiff (Kavita Kuruganti), a farmers’ rights activist, petitioned the PPVFR Authority for revocation of PVP (plant variety protection) certificate granted to PepsiCo’s FC5 potato variety, saying that government’s rules do not allow a patent on seed varieties. The following were the grounds of opposition :-

  • Section 34(a) – the grant of the certificate of registration has been based on incorrect information furnished by the applicant.
  • Section 34(b) – the certificate has been granted to a person not eligible for protection.
  • Section 34(c) – the breeder did not provide the Registrar with such information, documents or material as required for registration.
  • Section 34(g) – the breeder has not complied with the provisions of this Act or rules or regulations.
  • Section 34(h) – the grant of the certificate of registration is not in the public interest

 

The plaintiff further contended that the defendant had filed the application mentioning the type of variety as new variety instead of extant variety. Moreover, the defendant had sued nine farmers for infringement of rights under the Act, and claimed ₹1 crore in damages from them, including some small farmers in a bid to tackle competition from local potato chip-makers. This led to a widespread backlash, with farmers threatening a boycott.


SUBMISSIONS ON BEHALF OF THE DEFENDANT

The defendant in reply to the arguments provided by the plaintiff contended that the company was a subsidiary of Pepsico Inc., world’s premier consumer products company. The defendant further stated that the assignment made by Dr. Hoopes was an inter-assignment between group companies and thus was valid. The defendant had informed the Authority that they had applied under the new variety category for applying for extant variety category. Further, the defendant stated that the actions initiated by it against public interest were baseless. Instead it had initiated the suits against the farmers for countering infringement of its registered variety with bona fide intentions and in complete accordance with the provisions of the Act.


THE AUTHORITY’S OPINION AND JUDGEMENT

The Authority opined that from the case facts and sequence of events followed, there remains no doubt that several farmers have been put to hardship including the looming possibility of having to pay huge penalty on purported infringement that didn’t take place as without being the registered breeder, the defendant filed infringement suit against the farmers. The Authority further stated that this was in violation of public interest.

The Authority chairman, K. V. Prabhu declared that “Accordingly the certificate of registration dated February 1, 2016 granted by Registrar in favour of the Registered Breeder (PepsiCo) in respect of the potato variety with denomination FL 2027 is hereby revoked with immediate effect”.


FURTHER READING

  1. https://plantauthority.gov.in/sites/default/files/final-judgment-fl-2027-dated-3rd-dac-2021.pdf
  2. https://www.thehindu.com/news/national/pepsico-loses-rights-to-special-lays-variety-potato-in-india/article37831634.ece
  3. https://www.bakeryandsnacks.com/Article/2021/12/07/PepsiCo-Lay-loses-sole-rights-to-special-Indian-potato-variety
  4. https://www.livemint.com/companies/news/pepsicos-ipr-on-fl-2027-potato-variety-revoked-11638545520051.html
  5. https://www.downtoearth.org.in/news/agriculture/historic-win-for-farmer-seed-rights-pepsico-s-ipr-on-potato-variety-revoked-80526