Hey PepsiCo, Enforcing IPR is Okay – Suing Farmers for 1 Cr Is Not

Anand Yagnik, who’s representing 4 sued farmers, says that his clients don’t benefit from Lays’ potato variety.

Image used for representational purposes.

(Photo: Altered by Arnica Kala / The Quint)

PepsiCo, the US-based food and beverages multinational, has sued nine farmers of Gujarat, some of them for Rs 1 crore each, for allegedly violating its intellectual property rights (IPR) in a registered potato variety. A court has given an injunction after finding that the samples were indeed PepsiCo’s variety, but the company might find it difficult to prove that the farmers obtained the seed illegally.

India has two laws for protecting agricultural IPRs. Genetically-modified (GM) traits like bollworm resistance and herbicide tolerance in cotton, for instance, being artificial nucleic acid sequences, are protected by the Indian Patent Act. India also has a unique law, enacted in 2001, which protects the rights of farmers and communities in plant varieties they have conserved over time.

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These varieties have useful traits (like salt or heat tolerance, or resistance to diseases) that breeders might want to incorporate in their commercial varieties. The Protection of Plant Varieties and Farmers’ Rights (PPVFR) Act allows them to register such varieties and entitles them to a share of the profits made from the commercial use of such varieties. It also allows breeders to register novel varieties provided they meet the criteria of distinctiveness, uniformity and stability (DUS).

What the PPVFR Act Includes

PepsiCo has a wafer-quality potato variety called FL-2027 registered in the United States. FL stands for Frito-Lay, PepsiCo’s snack foods subsidiary. This variety has high dry matter (23 percent) and low levels of reducing sugars which make it ideal for frying. It also has the desired texture and appearance. PepsiCo brought this variety to India, and in 2016, it got PPVFRA registration for it.

The PPVFR Act allows farmers wide latitude. They can save, use, sow, re-sow, exchange, share, and sell their farm produce, including a seed protected under the Act. But they cannot sell a protected variety in a branded form.

“We are not interested in FC 5 over which they claim registration,” says Anand Yagnik who is representing four of the sued farmers. His clients, he says, get no yield advantage from FC 5. They are traditional farmers who experiment with various varieties. “They have obtained the seed through customary and conventional methods from friends and relatives.” Yagnik says his clients are “not interested in FC 5 or anything that violates the law.”

What Farmers Have to Say On the Matter

One of the sued farmers, Bipinbhai Badolkampa of Lakshmanpura village in Sabarkantha’s Vadali taluka says he did not know that the variety he had planted was FC 5. He challenges PepsiCo to prove that the sample which tested positive was from his field. He says he got the seeds from his friends circle.

Haribhai Patel, another alleged violator, is from Medhkampa village of Vadali taluka. He disclaims any knowledge of FC 5. “They (PepsiCo) should know why they have sent me a court notice,” he says.

Parthibhai Chaudhary of Banaskantha district says, ATL, short for Atlantic, a US royalty-free variety, and FC 5 are “same to same”. Chaudhary grows potatoes scientifically, and obtains high yields. He began as a contract farmer for McCain, which supplies potato products to McDonald’s. He has planted Lady Rosetta – a Dutch variety –and ATL. He supplies to Balaji Wafers.

Parthibhai asserts that PepsiCo exploits farmers by charging higher rate for seeds and rejecting their produce on the pretext of quality. “If Balaji was not there, PepsiCo would have finished us off,” he says.

Fulchand Kachchhava, who buys about 40,000 tonnes of potatoes for Balaji Wafers and also sells potato seed, insists there is no difference between ATL and FC 5. PepsiCo has served a legal notice to him. He says his family grows potatoes on about 150 acres. The varieties planted are Lady Rosetta and ATL.

Bhavesh Saini, also of Banaskantha, says ATL isn’t suited for Gujarat. He says FC 5 is being sold in bags without labels and also in the guise of ATL. A chemical engineer who prefers farming to a salaried job, Saini owns 60 acres of land. He intends to plant 34 acres with Lady Rosetta in the next season, and have a contract with McCain or Hyfun Foods for the rest. He is not under contract to PepsiCo.

Vinay Bhardwaj, Head of Crop Improvement at the Central Potato Research Institute in Shimla said ATL and FC 5 are distinct. While doing DUS testing on FC 5, he said, the institute had used ATL as a check variety. Though they look similar, their genetic profiles are different, he added.

Why Some Parts of PPVFR Act May Diminish IPR Protection

Some provisions of the PPVFR Act diminish IPR protection. ‘Brown bagging’ allows a farmer to sell the produce or seed of a protected variety if they are not labelled as such. The market for produce or seed sold in this manner cannot be large, because the transactions have to be based on trust.

The Act’s definition of “farmer” is wide. Even farmers with large holdings are included. Even farmers with large holdings and groups of farmers are included. These provisions have fallen foul of the Convention of the International Union for the Protection of New Varieties of Plants, called the UPOV Convention. India is not a member of the union, and has observer status.

Contract farming is good for farmers as they can concentrate on increasing production without worrying about market prices. Potato prices have been low for most of the past five years. PepsiCo is the largest contract buyer of wafer-quality potatoes. It has 24,000 farmers on contract, and procures about 3 lakh tonnes annually.

Depending on size, PepsiCo charges Rs 20-25 per kg of seed. It expects its contract farmers to return 11-13 times that quantity. It pays Rs 10 a kg for potatoes. Those below 45 mm in diameter are rejected. Defects like greening, black spots and bruises cannot exceed 15 percent.

Haresh Karamchandani, the CEO of Hyfun Foods, says PepsiCo’s IPR must be protected as it takes a long time to breed and register a variety. Hyfun Foods supplies potato products to Burger King and KFC. It exports half its produce. It has a processing plant at Mehsana, and 1,200 farmers with 5,500 acres on contract, from whom it procured 62,000 tonnes last season.

Weak enforcement of IPR laws will deter breeders from introducing desired proprietary varieties, Karamchandani says. According to him, Meijer, a Dutch breeder whose Lady Rosetta variety is a hit with farmers, is not keen on bringing Lady Anna, a French fries variety, because it fears for its IPR.

A Political Hot Potato

The dispute between PepsiCo and the farmers has turned political. The Gujarat government has said it will intervene in the suit on behalf of farmers. The Congress Party’s Ahmed Patel has termed PepsiCo’s action “brazenly wrong”. More than 190 organisations, including Amnesty India, many anti-GM activists, Swaraj Abhiyan – founded by the breakaway leaders of the Aam Aadmi Party – and the Sangh Parivar’s Bharatiya Kisan Sangh, have urged PepsiCo to withdraw its suit.

PepsiCo has a right to enforce its IPR, but taking on smallholder farmers and seeking damages of Rs 1 crore each from some of them was bad optics. If it wanted to send a warning to the wider community, it could have sought token damages from the farmers, or prosecuted large farmers and traders. Now it is open to the charge of being called greedy and high-handed.

Farmers have a point, says Karamchandani. What are they to do with undersize potatoes that the contract buyers reject? They will retain some for sowing and sell the rest for consumption or as seed.

Karamchandani says the owners of the protected variety must have the first right to buy the harvest from such seed. But such a right cannot be invoked without a contract in the first place.

PepsiCo has offered to settle. It has told the alleged violators it will buy their FC 5 produce and they can become its contract growers the next season. Lawyer Yagnik could be posturing when he says his clients are not interested in a settlement. The Gujarat government must broker a peace deal. Taking on small farmers has dented PepsiCo’s image, but if it cannot enforce its IPR, farmers will lose out in the long run.

(Vivian Fernandes runs a website called Smart Indian Agriculture. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)