China’s Supreme People’s Court Releases Fifth Batch of Typical Cases of Seed Industry Intellectual Property Protection

[Basic Facts of the Case]

Gan XX Industrial Company is the exclusive licensee of the new rice plant variety “Gangyou 188”. It filed an infringement lawsuit, claiming that the “Gangyou 88” seeds produced and sold by Chongqing Non XX Industrial Company and sold by Lei XX infringed its variety rights, and requested that the two companies be ordered to stop the infringement, Chongqing Non XX Industrial Company compensate for losses and reasonable expenses totaling more than 15.14 million RMB, and Lei XX bear joint and several liability for reasonable expenses. Chongqing Non XX Industrial Company argued that it had obtained the production and operation rights of the approved variety “Gangyou 88” through legal transfer, and at the time of transfer, it had conducted authenticity appraisal of the “Gangyou 88” it used and had fulfilled its reasonable review obligations, so it should not bear compensation liability. After the administrative agency and the first instance court commissioned appraisals respectively, the alleged infringing seeds “Gangyou 88” produced and sold by Chongqing Non XX Industrial Company and sold by Lei XX were identical to the standard sample of the approved variety, and were similar to the authorized variety “Gangyou 188”. The court of first instance determined that Chongqing Non XX Industrial Company and Lei XX did not infringe the law based on the fact that the alleged infringing seed “Gangyou 88” was identical to its approved standard sample. Gan XX Industrial Company filed an appeal.

[Judgment Result]

The Supreme People’s Court held in the second instance that there are differences between variety approval and variety authorization in terms of application procedures and system purposes. Whether the alleged infringing seeds are identical to the standard samples of the approved varieties has no relevance to whether they are identical to the characteristics and properties of the authorized varieties for protection. Unless otherwise provided by laws and administrative regulations, the production, reproduction, and sale of authorized variety propagation materials without the permission of the variety right holder constitutes infringement of variety rights. If the alleged infringing seeds belong to the approved varieties, he can claim the corresponding contractual liability from the transferor based on the contractual relationship, but cannot use this to counter the infringement claim of the variety right holder. If there are multiple license transfers of the infringing approved varieties, unless there is evidence that the alleged infringer has not used the seeds, the infringement time can be calculated from the date on which he acquired the variety in principle. Based on this, the second instance changed the judgment ordering Chongqing Non XX Industrial Company and Lei XX to stop the infringement, Chongqing Non XX. Industrial Company must compensate for losses and reasonable expenses for rights protection totaling more than 5.96 million RMB, and Lei XX was responsible for reasonable expenses for rights protection of 6,288 RMB.

【Typical significance】

This case clearly stipulates that the transferee of the approved variety shall bear legal responsibility for any act that constitutes infringement of the variety rights in the production and operation of the approved variety, which not only provides strong protection for the variety rights holder, but also effectively regulates the seed industry market. This case serves as a warning to seed operators to standardize their operations throughout the entire process of variety authorization, variety approval, and variety production promotion, in order to promote awareness of variety rights protection. The second instance judgment has reference significance in clarifying the legal nature of the approved variety, clarifying the method of infringement judgment, and reasonably determining compensation.

[Basic Facts of the Case]

The “Sailete” apple variety was selected and bred by a research institute company in New Zealand and obtained the plant variety rights in China. Ying XX International Company is an interested party in the variety rights of “Sailete”. They have filed a lawsuit claiming that You XX Agricultural Company has been producing, breeding, and selling “Sailete” breeding materials without permission since 2018, and has sold a large amount of apple fruits harvested from them, which constitutes infringement. They request an order to stop the infringement, to inactivate the infringing materials, and to apply punitive damages of 5 million RMB. The You XX Agricultural Company believes that its planting of fruit trees does not constitute production or reproduction, and that planting fruit trees only for the purpose of obtaining apple fruits rather than specifically cultivating seedlings and does not constitute infringement. Even if it is determined to constitute infringement, it should not be ordered to inactivate the fruit trees, let alone determine the compensation amount based on the sales volume of apple fruits. After appraisal, it was found that the branches of the “Aifei” fruit tree purchased by Yin XX company from You XX agricultural company through notarization are identical to the “Sailete” variety. You XX agricultural company did not provide evidence that its fruit trees have a legal source.

[Judgment Result]

The Lanzhou Intermediate People’s Court of Gansu Province ruled at first instance that You XX Agricultural Company should inactivate all infringing propagation materials (plants, branches, etc.), and at the same time applied double punitive damages, and ordered You XX Agricultural Company to compensate for losses, temporary protection period usage fees and reasonable expenses totaling 3.3 million RMB. You XX Agricultural Company appealed.

The Supreme People’s Court held in the second instance that in the process of planting and obtaining “Sailete” apples by You XX Agricultural Company, a large number of saplings and branches must have been propagated. Based on the evidence in this case, it can be reasonably inferred that it has been engaged in the continuous production and propagation of authorized variety propagation materials. You XX agricultural company plants saplings of the “Sailete” variety for profit, sells a large number of apple fruits, and engages in propagation behavior. Its planting behavior should be recognized as production and reproduction behavior. It not only produces and reproduces apple seedlings, but also sells apple fruits. The act of selling harvested materials is a natural extension of the production and propagation of authorized varieties of breeding materials in the chain of time and obtaining illegal benefits, and should be considered as a whole. When determining the amount of compensation, the principle of comprehensive compensation should be followed, and the profits obtained from selling harvested materials should be used as a reference for infringement profits. Inactivating the breeding materials of infringing varieties is an effective measure and a natural means to stop infringement. When determining the specific responsibility for ceasing infringement, based on the characteristics of the accused infringing variety’s long-term growth and asexual reproduction, if the infringing propagation materials are not inactivated, the infringing plants may survive for a long time and have the risk of spreading. Compared to the method of removing seedlings and replanting them, the right holder’s claim to stop infringement by inactivating the scion and grafting non infringing varieties of scions can better balance the interests of all parties and should be supported. The appeal was dismissed and the original verdict was upheld.

【Typical significance】

The holder of the variety right in this case is a New Zealand company, and the judgment shows that the People’s Court insists on equal protection in accordance with the law. This case regards the act of selling harvested materials as a natural extension of the production and reproduction of propagation materials, and when the infringer mainly obtains illegal profits by selling harvested materials, the sales profit of the harvested materials is used as the basis for determining the amount of compensation, which provides an important reference for the calculation of compensation in subsequent similar cases and further strengthens the comprehensive protection of variety right holders. The method of stopping infringement supported by this case, which is to cut off the scion of infringing propagation material and graft other non-infringing variety scions, fully considers the characteristics of perennial asexually propagated crops, fully protects the interests of variety right holders, and reasonably takes into account the recovery of agricultural production and avoidance of resource waste, and makes useful explorations for refining the forms of stopping infringement of variety rights.

[Basic Facts of the Case]

Xinjiang Hua Technology Co., Ltd. is the owner of the variety right of the new variety of Rosaceae, “Tianshan Xiangyun”. In 2022, Xinjiang Hua Technology Co., Ltd. notarized the purchase of seedlings that infringed the variety right of “Tianshan Xiangyun” from a certain seedling farm in Xinjiang. On May 28, 2023, a certain seedling farm in Xinjiang signed a “Seedling Ordering Agreement” with a certain cultivation base in Changji, agreeing to sell 8,000 “Tianshan Xiangyun Seedlings.” Xinjiang Hua Technology Co., Ltd. filed an infringement lawsuit, claiming that the Xinjiang seedling farm had continued to infringe from 2014 to 2023, and requested that Xinjiang farm to stop the infringement and compensate for losses and reasonable expenses totaling 5 million RMB. Xinjiang Hua Technology Co., Ltd. sells “Tianshan Xiangyun” at a price of 320-360 RMB per plant, while the Xinjiang seedling farm sells it at a price of 120-160 RMB per plant. Xinjiang Hua Technology Co., Ltd. claims that the average of the difference between its sales price of “Tianshan Xiangyun” and the sales price of the Xinjiang seedling farm in is its sales profit. The Xinjiang seedling farm argued that it was a public welfare institution. Since 2014, it has been cutting branches of rose varieties such as “Tianshan Xiangyun” from municipal parks for breeding. In 2021, the 36 rose varieties cultivated will be uniformly named “Tianshan Rose.” “Tianshan Xiangyun” is only one of them. Its behavior is scientific research and development, and the seedlings it obtained were cut from municipal parks or introduced from other places. According to the principle of exhaustion of rights, it does not constitute infringement. The 2021 work summary submitted by it shows that 10,500 “Tianshan Xiangyun” cuttings were taken in 2021, and 4,000 survived. The “Origin Quarantine Certificate” of the Xinjiang seedling farm in 2022 and 2023 recorded that the number of “Tianshan Rose” including “Tianshan Xiangyun” was 20,000 and 50,000 respectively. The first instance court determined that the production, breeding and sales behavior of the Xinjiang seedling farm exceeded the scope of scientific research and had a profit-making purpose. The infringement was established and ordered it to stop the infringement and pay 200,000 RMB in compensation. Xinjiang Hua Technology Company appealed.

[Judgment Result]

The Supreme People’s Court held in the second instance that the application of the principle of exhaustion of variety rights is based on the premise that the authorized variety propagation materials are sold by the variety right holder or the entity or individual authorized by the variety right holder, and only applies to the subsequent production, propagation, and sales of the legally sold authorized variety propagation materials themselves, and does not apply to the re-propagation and sale of the sold propagation materials. The Xinjiang seedling farm failed to prove that its propagation behavior was to use the authorized variety to cultivate new varieties, and its large-scale propagation was inconsistent with the scale required for scientific research. At the same time, it engaged in sales for profit, which constituted infringement. The Xinjiang seedling farm admitted that it had cut and propagated “Tianshan Xiangyun” seedlings at the end of 2014 and is still producing and propagating it. Combined with the notarial certificates involved in the case, relevant agreements, work summaries and other evidence, it can be determined that it has continued to infringe since at least 2014 to 2023. Considering that the price of goods sold to the outside world is bound to be higher than the production cost and the Xinjiang seedling farm refused to provide relevant account books and other information, the average value of the difference between the price of “Tianshan Xiangyun” sold by Xinjiang Hua Technology Company and the sales price of Xinjiang seedling farm, that is, 200 RMB/plant, was used as the basis for determining the losses suffered by the right holder due to infringement. Based on the evidence in the case, the number of alleged infringing seedlings produced and bred by the Xinjiang seedling farm in 2021 was not less than 4,000, and in 2023 it was not less than 8,000. Based on this, selecting the average number of these two years, it can be determined that the number of alleged infringing seedlings produced and bred by the Xinjiang seedling farm from 2021 to 2023 was 6,000 plants/year. The amount of damages calculated based on these three years alone has exceeded the 3 million RMB requested by Xinjiang Hua Technology Company in appeal. Therefore, the second instance changed the judgment to fully support the amount of compensation requested by Xinjiang Hua Technology Company on appeal.

【Typical significance】

This case clearly states that the principle of exhaustion of rights does not apply to the act of re-breeding and selling the propagation materials that have been sold. The second-instance judgment supported the relevant claims of the variety right holder when the infringer refused to submit financial books and other evidence, calculated the infringement damages based on the difference between the variety right holder’s selling price and the infringer’s selling price, and significantly increased the amount of compensation, effectively protecting the rights and interests of breeding innovation entities, and has precedential significance for breaking through the difficulties of evidence and accurately determining the amount of compensation in similar infringement cases.

[Basic Facts of the Case]

Jiangsu Jin XX Industrial Company is the licensee of the exclusive implementation license for the new rice plant variety “Jinjing 818”. In May 2020, a certain agricultural material company in Xuzhou was ordered to stop infringement and bear punitive compensation liability for using white bags and irregular packaging to sell infringing seeds without the permission of the “Jinjing 818” variety right holder. The company failed to comply with the above judgment, and Jiangsu Jin XX Industrial Company applied for compulsory execution. During the execution process, the court added Zhao XX, the sole shareholder and legal representative of a certain agricultural material company in Xuzhou, as the liable person. Since January 2021, Zhao XX has successively released seed supply information, contact numbers of the heads of various sales areas of a certain agricultural material company in Xuzhou, and accountant Zhao YY in WeChat group chats, and organized offline ordering activities. Starting from November 29, 2021, a farmer communicated with the sales staff of the agricultural material company in Xuzhou about the purchase of the alleged infringing seeds, and paid the deposit and the remaining amount to Zhao YY’s account. Jiangsu Jin XX Industrial Company filed a lawsuit, requesting that Xuzhou XX Agricultural Materials Company, Zhao XX, and Zhao YY stop infringing and jointly compensate for losses and reasonable expenses for rights protection totaling 3 million RMB. During the first instance trial, it was determined that the alleged infringing seeds were very similar or identical to “Jinjing 818”.

[Judgment Result]

The Nanjing Intermediate People’s Court of Jiangsu Province held at first instance that after being ordered to stop infringement in the previous case, the Xuzhou Agricultural Materials Company once again organized seed transactions through WeChat groups and committed infringement. Zhao XX, the legal representative and sole shareholder of Xuzhou Agricultural Materials Company, used WeChat groups to publish seed supply information and organized offline ordering activities, playing a key and core organizational role in seed transactions, and jointly infringed with Xuzhou Agricultural Materials Company. Zhao YY, who participated in seed sampling, collected transaction funds with his personal account after Xuzhou Agricultural Materials Company was found liable, and he, Xuzhou Agricultural Materials Company, and Zhao XX  jointly infringed. The three defendants were ordered to stop the infringement, and Xuzhou Agricultural Materials Company and Zhao XX jointly compensated Jiangsu Jin XX Industrial Company for economic losses and reasonable expenses totaling 1.8 million RMB, and Zhao YY was jointly liable for 350,000 RMB of it. The three defendants  appealed. The Supreme People’s Court rejected the appeal in the second instance and upheld the original judgment.

【Typical significance】

This case is a typical example of severely cracking down on hidden infringements and the persons directly responsible. In response to hidden infringements such as organizing seed transactions on online platforms, the actual controller of the company who played an organizing and decision-making role in the occurrence of the infringement and other persons who received the company’s infringement proceeds with their personal accounts and directly participated in the infringement were found to have committed joint infringements with the company, and were ordered to bear joint and several liability based on the circumstances of their infringement and the extent of their role, effectively raising the cost of infringement.

[Basic Facts of the Case]

A plant company in Shanghai and a non-party company in Shanghai are the variety rights holders of the new fruit vine variety “Hongyunlai.” In January 2020, the plant company in Shanghai obtained “Xinhongxing” seedlings sold by the Guangzhou agricultural science company and has them notarized and stored at the Plant New Variety Testing (Shanghai) Branch Center, and sent the above two samples to a technology company in Ningbo for testing. On April 13, 2020, the technology company in Ningbo issued a “Technical Appraisal Opinion”, and the appraisal result was that the AFLP fingerprints of the two varieties were 95.08% similar, and the two varieties were highly similar. The plant company in Shanghai filed a lawsuit, requesting that the Guangzhou agricultural science company be ordered to stop infringement and compensate for losses. The first-instance judgment did not adopt the technical appraisal opinion on the grounds that the varieties involved had no national standards or industry standards for molecular marker detection, and rejected all the claims of the plant company in Shanghai. The plant company in Shanghai appealed. In the second instance, the Supreme People’s Court approved the appraisal application of the plant company in Shanghai, and with the consent of both parties, designated a testing agency to conduct the appraisal. The testing agency used the MNP labeling method to conduct testing and issued a test report stating that the genetic similarity between the tested sample and the control sample was 99.91%, and the identification results were extremely similar or the same variety.

[Judgment Result]

The Supreme People’s Court held in the second instance that the people’s courts should review whether the molecular marker detection method for plant variety identity identification is scientific and reliable. If the molecular marker detection method for a specific plant variety has not yet established a national standard or industry standard, the identification results made by qualified identification institutions and appraisers with reference to other relevant standards, if the identification method can scientifically and accurately distinguish different varieties and has sufficient scientific basis and repeatability, can be used as evidence to determine whether the alleged infringing object is identical to the authorized variety. The “MNP Marking Method for Plant Variety Identification” has been established as a national standard and can be applied to the identification of original varieties, substantially derived varieties and variety authenticity identification of rice, corn, soybeans, etc. The identity identification of pineapple varieties of the genus Pyrifera can be carried out in accordance with the “MNP Marking Method for Plant Variety Identification.” After identification, the alleged infringing seedlings “Xinhongxing” and the authorized variety “Hongyunlai” are very similar or identical varieties. The Guangzhou agricultural science company did not submit rebuttal evidence, so it can be determined that the alleged infringing seedlings are identical to the authorized variety “Hongyunlai”. The court then changed the judgment to require the Guangzhou agricultural science company to stop infringing  and compensate for the losses and reasonable expenses totaling 1.075 million RMB.

【Typical significance】

This case is a typical case of exploring the use of MNP labeling for identification of specific crops for which national or industry standards for molecular marker detection have not yet been established. The second-instance judgment conducted a strict review of the identification methods and institutions of specific crops, and based on the scientific nature and repeatability of the identification methods, determined that the identification opinions can be used as evidence to determine that the alleged infringing seedlings are identical to the authorized varieties, avoiding the lack of identification standards for specific crop variety rights affecting judicial protection and relief. This case provides a precedential example for the use and judicial review of the MNP labeling method in the identification of the identity of new plant varieties.

[Basic Facts of the Case]

A certain scientific academy in Beijing is the owner of the variety right of the new corn plant variety “Jingnuo 6”, and a certain breeding company in Beijing is its exclusive licensee. “Jingkenuo 2000” is a hybrid corn variety produced with “Jingnuo 6” and “Bai Nuo 6” as parents. The breeding company in Beijing filed a lawsuit, requesting that a certain industrial company in Guangxi, a certain subsidiary in Shenzhen, and a certain seed store stop using “Jingnuo 6” to produce the alleged infringing seed “Shenkenuo 8” and compensate for the losses. The first instance court conducted an authenticity appraisal of the alleged infringing seeds “Shenkenuo 8” and “Jingkenuo 2000” in accordance with the law, and conducted a parent-child relationship appraisal of the alleged infringing seeds “Shenkenuo 8” and “Jingnuo 6”. The appraisal result is that the alleged infringing seeds “Shenkenuo 8” and “Jingkenuo 2000” are similar varieties, and are suspected to have a parent-child relationship with “Jingnuo 6”.

[Judgment Result]

In the first instance, the Shenzhen Intermediate People’s Court of Guangdong Province determined that the alleged infringing seed “Shenkenuo No. 8” was produced by reusing the authorized variety “Jingnuo 6” as the parent, based on the results of the authenticity identification and parent-child relationship identification in the case, and ordered the industrial company in Guangxi, the subsidiary in Shenzhen, and the seed store to stop the infringement, and ordered the industrial company in Guangxi to compensate for losses of 300,000 RMB and reasonable expenses of 50,000 RMB, the subsidiary in Shenzhen to compensate for losses of 100,000 RMB , and the seed store to compensate for losses of 20,000 RMB. The industrial company in Guangxi and a subsidiary in Shenzhen appealled.

The Supreme People’s Court held in the second instance that, when judging whether a specific hybrid is produced and propagated by repeatedly using the authorized variety as a parent, given that there is currently a lack of national standards or industry standards for the identification of the parent-offspring relationship of plant varieties, the parent-offspring relationship identification opinion made by the identification agency in reference to the variety authenticity identification standard can be used as the basis for determining the facts. The identification report in this case can serve as preliminary evidence to determine that the alleged infringing seed “Shenkenuo No. 8” repeatedly used the authorized variety “Jingnuo 6” breeding materials in the production process. At the same time, combined with the identification opinion that the hybrid “Jingkenuo 2000” produced with “Jingnuo 6” as the mother parent and the alleged infringing hybrid “Shenkenuo No. 8” are similar varieties, it can be determined that the fact that “Shenkenuo No. 8” was produced using the “Jingnuo 6” breeding materials as the parent is highly likely. The Guangxi industrial company and a subsidiary in Shenzhen failed to provide evidence to prove that the alleged infringing seeds have a legitimate parental source, so their claim of non-infringement is not supported. The court therefore ruled to dismiss the appeal and uphold the original judgment.

【Typical significance】

With the deepening of intellectual property protection in the seed industry, the protection of crop parents has become one o