Plant Variety Rights Bill

Members, we now come to Part 7. This is the debate on clauses 101 to 113, “Compulsory licences”. The question is that Part 7 stand part.

Part 7 of the bill sets out provisions relating to compulsory licences.

The compulsory licence provisions were one of the more contentious areas with industry stakeholders during the select committee process. They set out the circumstances under which the commissioner can require a plant variety right holder to licence the use of their protected variety. Most submitters argued that they either should not exist at all or, if they do, they should be limited to a very narrow public interest test—for example, the need to protect life and health.

I disagree and agree with the Economic Development, Science and Innovation Committee. Intellectual property rights exist for the benefit of New Zealand as a whole. To encourage innovation, innovators are provided a time-limited, statutorily exclusive right to give them the opportunity to make a return on their investment. In return, that innovation needs to be made available to the wider public so that New Zealand as a whole can benefit. The compulsory licence provisions are there, at least in part, to ensure availability if that is not happening.

So while the new provisions still retain the availability test carried over from the current Act, they also make a number of important improvements on those provisions in response to issues that stakeholders have raised throughout the review—and notably, three. The test for a compulsory licence is now framed as a public interest test, with availability as one of the factors that the commissioner must consider.

The availability test includes consideration of the availability of harvested material as well as propagating material, and section 21(3) of the current Act—the focus of much of stakeholder dissatisfaction—has not been carried over. This prevented propagating material whose harvested material was already under contract from being included in the assessment of availability—which is an issue for closed loop arrangements like that operated by Zespri, where licences to grow are issued and the produce is then sold back to the rights holders for marketing.

While this was hotly contested, I would note that in the last 30 years, only two of these have been argued. None the less, an important thing to debate.

I think this clause should be renamed “The nationalisation of commercially developed intellectual property” because that’s effectively what it is, isn’t it? Clause 103 is obviously what the Minister has referred to. I’m hoping the Minister has a chance to listen to this, because I’m about to pose some questions.

What this is all about is saying that people in the private sector who have spent a fortune, not only in money—

CHAIRPERSON (Greg O’Connor): Do feel free to wait for the Minister’s attention—I won’t take the time off your time.

💬 Hon Dr David Clark: Apologies, Mr Chair.

CHAIRPERSON (Greg O’Connor): The member may restart. He may start from the start.

Thank you, Mr Chair. That will lead to a better debate, and I appreciate giving the Minister the time needed to find out some of the answers. As I said, I think this clause could quite rightly be deemed, “the nationalisation of commercially developed intellectual property”. What this is about is commercial operators who have spent a lot of time and money—and in most cases it’s not just about the monetary amount. It’s the time spent developing and propagating species and testing them, and then you have, under clause 103, three criteria where that intellectual property could be picked up at the commissioner’s behest and actually used and made available to other people. So the first thing is there are three tests. The Minister didn’t actually refer to them in detail, but the first one is that three years have elapsed from the date on which the plant variety right was granted.

So that raises the first issue. You spend 20 years developing a plant species, and then you’re waiting for the process with the commissioner—and let’s now put on our practical hat—which we seem forget in Parliament, in little old Wellington—and what might you have to do? Well, you’re going to have to work out who’s going to grow your new plant variety, so that might mean multiple growers. You have to go and secure those arrangements. There may be consenting issues with local councils to be able to do that new crop under the new regime that’s been imposed by the Labour Government on farmers. It might be water access issues. It might be why there are delays in getting that access to be able to grow that new plant variety on a commercial basis.

Then you’ve got to put in place storage of your product. Then in you have to put in logistics, distribution arrangements. And heaven forbid—we haven’t even talked about the marketing arrangements, how it will be distributed, and who it is sold to, how branding and advertising is done. All that’s got to be done, and, of course, we never think about that here in Parliament, do we? But all that’s got to be done and put into place. If I understand it—and this is where I need to understand from the Minister—it’s within three years having elapsed from the issuing of the plant variety. There may be very good reasons why someone hasn’t been able to do that. Are there extenuating reasons and do you have to go cap in hand to the commissioner and say, “Sorry, commissioner, I haven’t been able to do this because, you know, I’ve got a few other issues and I haven’t been able to secure the right people to grow the damn thing in the first place.”?

So what are the conditions around the three-year rule? That’s the first thing. The other one—and I think this is one we will focus on as there is public interest. But let’s just deal with the three-year rule and extenuating circumstances, and what is the process that might take place.

The process around that is that somebody has to apply to the commissioner for this and the commissioner makes a judgment. So it’s not that three years lapse and then suddenly something becomes available. The commissioner would have to judge that there was something untoward going on here that was not in the public interest. I think we would to see competition in the market—to the member’s point.

The other thing to say about that is that the judgment of the commissioner is also appealable to the court beyond that, so there’s a process around it, and in that case where the commissioner made a judgment, the plant variety right owner would still get a royalty as well. So this is a regime that is very seldom called on. As I said, there are only two cases in the last 30 years, and one of those was about feijoa trees—I don’t know the detail; I’ve asked my officials to remind me of that—and, ultimately, it was granted. The other one was settled commercially outside of the process once the appeal was lodged.

So this is a very, very, very rare thing that we wouldn’t expect to see wide usage of, and, generally, when somebody develops intellectual property, they want to make the best use of it. If there are extenuating circumstances in why they hadn’t been able to get it to market, I’m sure the commissioner would take that into account. It would be my expectation.

Can I just indicate that when the Minister needs to take advice, just to be fair to the questioner so that he’s getting attention, I’m happy to give the questioner more time so the Minister can get that advice.

💬 Hon Dr DAVID CLARK: Great. But we’ve got the advice that we need at the moment. Thank you.

OK. But just then with this issue of the three-year rule, what you’ll have is international people—we shouldn’t assume they’re just going to be domestic competitors. You will have Monsanto, you will have those big behemoth companies—I’m not saying they operate inappropriately, but you will have large-scale companies, international-based companies, that will sit and mine the data. Because with a three-year rule, they will look at any commercial opportunity to exploit intellectual property (IP) or intellectual assets being developed, and most likely by New Zealand growers. They will sit, and on the day three years and one day later, I imagine that they will want to make an application under these rules. Because it says if you haven’t done it within three years, if you haven’t got it to the market in three years, that’s the first grounds for making an appeal to use that data, that IP, right?

So I suppose the question—three years seems an inordinately short period of time to commercialise something, particularly—it’s not like a product, where you can just go down to a manufacturer and say, “Oh, can you make this through your workshop?” You’ve actually got to go and grow this on a commercial scale and all that sort of stuff. So why in dickens did we use three years as a start point? I can imagine if you haven’t utilised the IP for 10 years, maybe I can get that, but why a three-year time frame specifically?

This time frame is very similar—it was essentially the same as other countries who have a similar regime under the International Union for the Protection of New Varieties of Plants (UPOV)—

💬 Andrew Bayly: For plant varieties?

It’s my understanding. It’s that advice I’ve received. It’s similar across UPOV countries. The other thing just to stress, and I did put this in my opening comments, is that these IP rights exist for the benefit of New Zealand as a whole. They’re there to encourage the innovation. They’re there to encourage innovators. They’re given a statutory time-limited right to exclusive exploration of this—the opportunity to make a return on investment. And so we carved that out in the law. We say other people can’t use this, and that is to incentivise that development, right? That’s what’s done globally.

The quid pro quo is that there’s also a benefit for wider New Zealanders. It’s not just a right for the sake of having a right. It’s a right so that people can make a commercial return on their investment so that the innovators can be rewarded. But it’s not a right without looking to the benefit of wider New Zealand. At a certain point, that innovation needs to be made available for the wider public benefit. So that’s why there is a time limit on it.

Thank you, Mr Chair. See, I find that answer staggering, because my—it should be called “The Nationalisation of Commercially Generated IP”. Because your response—and I’m looking at the Minister, not to the Chair. The Minister’s response is saying, “Look, we don’t mind if you go away and spend 20 years and incur millions of dollars developing new plant species. Go ahead. We love it.” Right? But as soon as you come and want to register in New Zealand and operate under the IP laws of New Zealand, hey, we then as the Government should say, “Right, that has benefit to New Zealand, and therefore if you haven’t commercialised it within three years, potentially we’re going to allow other people to use it.” Right? That is Government think. That’s nationalisation of commercially driven IP.

I’ve just come back from Singapore. They are encouraging intellectual property because they see it as a way to grow the economy, right? It’s a valuable part of their growth strategy. For a moment do they think if we allow aerospace to come and do a whole lot of development in Singapore that it would be a really good, strong proposition to aerospace, so if we said to aerospace—this is the Singapore Government—“Oh, if you haven’t commercialised something and spent billions on it, we’re now going to allow competitors: Boeing and all the other aircraft manufacturers—to use it.” How compelling, as a proposition, is that? That is not a compelling proposition, and the worst thing about it is the Minister thinks that the Government has a right to take people’s commercially developed IP and say, “We’re going to nationalise and use it.” I find that an extraordinary comment from the Minister, and what a perception. Personally I don’t agree with it, and I’d love him to stand up and justify why he thinks the Government should have a role in nationalising and allowing other people to use commercially driven IP in a relatively short period of time of three years.

Mr Speaker—sorry, Madam Chair. Madam Chair. Wrong on both counts. Look, I think that—it’s thrown me—what the member is arguing is, essentially, that New Zealand should have a regime that is profoundly different to the United Kingdom, to the United States, and to Australia, who all have similar compulsory licence provisions.

The point that I think I would make to the committee is that these things are very, very rare: we only know of one where it’s actually applied in the last 30 years. And when they apply, they still require the people who use that intellectual property to pay the person who developed it.

So I think the member risks, perhaps, overdramatising the effect of this provision if he’s saying that the United States, the United Kingdom, and Australia have got this wrong and are all becoming nations that are trying to do some mischief to their intellectual property developers.

I don’t believe that to be the case; I think those regimes around the world that mirror the International Convention for the Protection of New Varieties of Plants suggestion of how this should be done are functional. I also have a belief in our exporters and our intellectual property developers that they will be able to take advantage of this regime—as those in the US do, as those of the United Kingdom do, and as those in Australia do.

So can the Minister provide now an absolute clear definition of what is in the public—just in the public interest. What does “public interest” mean? What is an absolute, crystal-clear definition of “public interest”? And can he assure the House that that definition won’t change over time? Because if you’re putting a piece of legislation, you’ve got to take a 10- to 20-year view on it. How do we know that, over time, public interest won’t change?

Because if we go back 20 years ago, I’ll bet you the view of “public interest”—even back in the 1980s, 1990s—will be a different public interest as what we’ve got today. We had a bill last night talking about the right role of directors running companies. We’ve got Dr Duncan Webb putting through bills requiring company directors to have regard for a whole lot of other, wider factors that directors have to take into account when they manage their business and direct their businesses.

So how do you know that the view on public interest won’t change? And what is the absolute view around what is public interest in today’s terms?

Thank you, Mist—Madam—far out—Madam Chair. I think the first thing I’d say is that guidance can be provided around this; and the second thing I would say—you know, put aside the misrepresentations of Dr Duncan Webb’s bill because we’re not discussing that today—clause 103(2) sets out the test, right?

I would hope that the public interest today is different to what it was 100 years ago; I really would. That’s the beauty of setting out a test and asking that a judgment be made. Public interest does differ over time and we would expect our legal framework to be flexible, to accept that, and I rest my case.

So, all right, I’m looking at 103(2)(a)(iv). One of the tests you refer to is if the price “at which the material is available is reasonable;”. So hang on: now we’ve got some Government official—and it would have to be a Government official—looking at commercially developed intellectual property, plant variety, may have incurred billions of dollars or millions of dollars for 20 years of time and seeking to recover their costs. What have we got?

Now we’ve got a Government official being an investment bank and trying to work out what the recovery cost is on the thing? Or does that person in some Government department, heaven forbid, go, “Oh, I think we could get that at a cheaper rate.”, and is that a reason? Because that’s set out clearly; that’s the criteria you’ve set out in the bill to say, “Oh, I recommend to the Minister”—because, of course, a lot of it is going to be done through regulation so it comes back to Minister—“I think that plant variety, they shouldn’t be selling for $200 a kilo; it should be a $50 because, you know, we’ve seen developments around the world and that’s our view.” Right? That is an absurd proposition.

Once again, I bring the member back to the fact that similar regimes exist in the United States, the United Kingdom, Australia, and numerous other countries—these are fairly standard provisions and we would expect our commissioner to have regard to their commercial environment and be advised appropriately. I think the prospect of the sky falling in and the kind of scenario playing out that Mr Bayly is depicting is very unlikely, or equally as likely in the United States, the United Kingdom, Australia, and various other countries around the world that have adopted these standards. I think it’s very sensible to have a regime where there is a test, even if it only gets used once every 30 years for situations where the wider public benefit has not been taken into account in the availability of intellectual property, once the exclusive statutory licence has been available for a period of time already for the owner of that property to—as we’ve canvassed in the debate—take advantage of. And, even then, when there is an exclusive licence, if there is one granted every 30 years, say, the intellectual property owner still gets paid the royalties.

Thank you, Madam Chair. I’m not going to continue labouring this, but I do think there’s a fundamental difference because the issue around determining this and the commercial stuff in the test used here—we have an opportunity where New Zealand sits on the intellectual property (IP) spectrum. And I know the Minister’s spoken about only two claims in the last 30 years—the issue is that the world has changed. Thirty years ago, no one talked about intellectual property. If you look at every listed company on the stock exchange now, on average, half of their value and half of their market value comes from the intellectual property. The world has moved on: intellectual property is the currency of value going forward. That’s why it is absolutely essential we get the right intellectual property protection in place, right? Just because we’ve picked up stuff from around the world—I can tell you that most countries look at their IP laws much more regularly than we do and make sure they’re up to date. In doing so, we can choose where on the spectrum we want to have our IP laws sitting.

The Minister seems to give this impression that because America and Britain, or whatever, have these laws that are the best laws and we must mirror them, no more, no less—actually, there’s an opportunity where New Zealand wants to be in the spectrum and whether we want to be particularly protecting our horticulture industry, which is so vital to New Zealand. I think, and I say it again, the three years is an absurdly short period of time, and some of these tests are very, very subjective.

Just turning to the royalty payment, which is clause 104, where the Minister says, “Hey presto, you don’t need to worry about it because they’re going to get paid the royalty anyway.” The terms are set out: “The compulsory licence … must set out the amount of, or method of calculating, the royalty; and … the royalty must be paid;”. So we’ve had this big debate, we’ve lost to Monsanto, so this IP is all going to be made commercially available, I suppose the big question is: who determines the royalty payment? Is that a capability residing in the commissioner’s office? Because, here we go, this is not a negotiation, I presume; this is a determination, I presume; or is it a negotiation between Monsanto and our little plant breeder in Pukekohe; or is it the commissioner doing this, and, if so, what skills is the commissioner going to have to be able to draw on to be able to decide this, and is it a determination of the royalty fees?

💬 Helen White: Madam Chair?

Can we hear the answer?

I move, That the question be now put.

Thank you for that, but the Minister was about to take a call, and the member is fully engaged in this part, so we will proceed.

As laid out, the commissioner, after talking to parties, sets that royalty. The previous matters canvassed by the member have been, I think, debated and answered. The member makes this case again, but I note it for the record.

💬 Helen White: Madam Chair.

I was about to put the question.

💬 Helen White: Oh.

CHAIRPERSON (Hon Jacqui Dean): But I will take the member, since she sought the call.

I move, That the question be now put.

The question is that Minister’s amendments to Part 7 set out on Supplementary Order Paper 132 be agreed to—is anybody going to vote?

Amendments agreed to.

Mark Cameron’s amendment to Part 7 set out on Supplementary Order Paper 186 is out of order as being inconsistent with a previous decision of the committee.

The question is that Andrew Bayly’s amendments to Part 7 set out on Supplementary Order Paper 191 be agreed to.