Monsanto termination of sub-licence with Indian co illegal: HC

The Delhi High Court today held as "prima facie illegal" the decision of US-based agro major Monsanto Technology to terminate its sub-licence given to three Indian companies for making and selling BT cotton seeds.
The court's ruling came while dismissing Monsanto's pleas against Nuziveedu Seeds Ltd, Prabhat Agri Biotech Ltd and Pravardhan Seeds Private Ltd for allegedly infringing on its patent and trademark in BT cotton, a genetically modified variant which resists bollworms.
The court, however, rejected the stand of the three companies that Monsanto was incorrectly granted the patent for its BT cotton seeds.
In his 96-page judgement, Justice R K Gauba said Monsanto "was duty bound" to consider the seed companies' request for modification of the terms of the sub-licence with regard to the trait fee, and since the US company "did not adhere to its obligation", its demand for a fee higher than what was permitted by law was "not lawful".

"As a sequitur (a logical conclusion), the termination of the sub-licence agreements by communications dated November 14, 2015 appears prima facie to be illegal and arbitrary," the court said and added the parties continue to be "locked with each other" in the arrangement under the 2015 sub-licence agreements prior to their termination.
The court also said since the termination of contract has been held to be prima facie illegal and the three companies having benefitted from the patented technology after entering into the agreements, they cannot now turn around and say they cannot be bound by the sub-licence terms.

It also made it clear that any trait fee chargeable would have to abide by the Cotton Seeds Price (Control) Order 2015 and the Licencing and Formats for GM Technology Agreement Guidelines of 2016.

The court also dismissed Monsanto's plea seeking contempt
action against the Indian companies for alleged breach of an interim injunction by continuing to make seeds, saying that there was no order prohibiting the three from manufacturing seeds after November 30, 2015.
It said that the consent order of February 2016 only prohibited the three companies from sale of seeds which were made after November 30, 2015.
While dismissing the pleas of Monsanto, the court also issued a number of directions to be adhered to by the three Indian companies and the US agro major.
As per the court's directions, Monsanto has to inform the Indian companies about the modified terms with regard to the trait fee which would be chargeable as per the prevalent local laws.

The companies, thereafter, would be liable to pay the fee as per the prevalent local laws, and if the same is not accepted by Monsanto, it would be deposited in court from time to time.
It said if the Indian companies do not comply with the directions issued by the court, they would be "disentitled" from continued use of the patent or trademarks of Monsanto and "stand injuncted against continued use of patent and registered trademarks of the plaintiffs for the pendency of the suit".
If Monsanto does not withdraw the amounts within one month of deposit, the Registrar General has been asked to keep the money in fixed deposits for six months.