Sun World Inc v Registrar, Plant Variety Rights

[1997] FCA 924

C A T C H W O R D S

INTELLECTUAL PROPERTY - Plant Variety Rights - no prior commercialisation rule (NPC) - prior disposition of plants - whether "sale" for purpose of NPC rule - assignment of rights coupled with disposition - disposition coupled with restrictive covenants as to resale - purpose of legislation and NPC rule - novelty - International Convention for the Protection of New Varieties of Plants (UPOV Convention) - meaning of "sale".

STATUTORY INTERPRETATION - amending legislation - interpretation of Act pre-amendment - repealing Act with new statutory regime - purposive construction - "sale". 

WORDS AND PHRASES "sale".

Plant Variety Rights Act 1987 s.3, s.14, s.15, s.26
Plant Breeder's Rights Act 1994 s.11, s.43, s.44, s.83(1)

Re Rau Gesellschafts' Application (1935) 52 RPC 362
National Research Development Corporation v. Commissioner of Patents (1959) 102 CLR 252
Diamond v. Chakrabarty [1980] 447 US 303
Ex parte Hibberd [1985] 227 USPQ 443
Bristol-Myers Co. v. Beecham Group [1974] AC 646
Re Wheatley's Patent Application (1984) 2 IPR 450
J. & P. Coats Ltd v. Commissioners of Inland Revenue [1897] 1 QB 778
Simpson v. Connolly [1953] 1 WLR 911
Robshaw Brothers Ltd v. Mayer [1957] 1 Ch 125
Re Westminster Property Group PLC [1984] 1 WLR 1117; [1985] 1 WLR 676
FCT v. Salenger (1988) 81 ALR 25
Elizabeth of Glamis-Rose (1966) FSR 265
Grain Elevators Board (Vic) v. Dunmunkle Corporation (1946) 73 CLR 70
Allina Pty Ltd v. Federal Commissioner of Taxation (1991) 99 ALR 295

SUN WORLD INC. v. REGISTRAR, PLANT VARIETY RIGHTS and MURRAY VALLEY GRAPE GROWERS COUNCIL
VG 870 OF 1995

FRENCH J
PERTH (Heard in Melbourne)
25 June 1997

IN THE FEDERAL COURT          )
OF AUSTRALIA  )
VICTORIAN  )
DISTRICT REGISTRY                  )
GENERAL DIVISION                  )  No. VG 870 OF 1995

ON APPEAL from a decision given on 13 October 1995 by the Administrative Appeals Tribunal constituted by Deputy President B.M. Forrest; Mr A. Argent, Member and Mr I.L.G. Campbell, MC Member in proceeding No. V93/918

B E T W E E N:  SUN WORLD INC

Applicant

and

REGISTRAR, PLANT VARIETY
  RIGHTS         

Respondent

and

MURRAY VALLEY GRAPE
  GROWERS COUNCIL

Party Joined

MINUTE OF ORDERS

CORAM:   FRENCH J.
PLACE:    PERTH (Heard in Melbourne)
DATE:     25 June 1997

THE COURT ORDERS THAT:

1. The application is dismissed.

1. The Applicant to pay the Respondent's costs of the application.

Note: Settlement and entry of orders is dealt with in Order 36
  of the Federal Court Rules.

IN THE FEDERAL COURT          )
OF AUSTRALIA  )
VICTORIAN  )
DISTRICT REGISTRY                  )
GENERAL DIVISION                  )  No. VG 870 of 1995

ON APPEAL from a decision given on 13 October 1995 by the Administrative Appeals Tribunal constituted by Deputy President B.M. Forrest; Mr A. Argent, Member and Mr I.L.G. Campbell, MC Member in proceeding No. V93/918

B E T W E E N:  SUN WORLD INC

Applicant

and

REGISTRAR, PLANT VARIETY RIGHTS

Respondent

and

MURRAY VALLEY GRAPE GROWERS COUNCIL

Party Joined

CORAM:   FRENCH J.
PLACE:    PERTH
DATE:     25 JUNE 1997       

REASONS FOR JUDGMENT
  Introduction

On 16 July 1991 Sun World Inc made an application for the grant of plant variety rights under the now repealed Plant Variety Rights Act 1987. The application related to a variety of grapevine, whose grapes are called "Sugraone". The application was refused by the Registrar of Plant Variety Rights on 12 August 1993. The Registrar decided that, pursuant to s.14 of the Plant Variety Rights Act 1987, the company could not be granted plant variety rights under the Act because the grapevines had been sold by the breeder in the United States in 1972, more than six years before the making of the application.

The Plant Variety Rights Act 1987 was repealed by the Plant Breeder's Rights Act 1994. However by virtue of s.83 of its successor statute, the repealed Act was continued in force for the purpose of applications pending at the time of its repeal. The applicant applied to the Administrative Appeals Tribunal for review of the Registrar's decision. The Murray Valley Grape Growers Council, which had objected to the application for registration, was joined as a party. On 13 October 1995, the Tribunal affirmed the Registrar's decision. An appeal against the Tribunal's decision was filed in this Court on 10 November 1995. The Registrar filed a Notice of Contention on 10 April 1996. The principal question in the appeal concerns the construction of the word "sale" in s.14 and, depending on its construction, the scope of prior commercialisation which will prevent the grant of plant variety rights.

Factual Background
  The story of Sugraone begins with Mr John Garabedian, who is a breeder of table grapes and stone fruit and who operated an experimental table grape and stone fruit nursery/ranch and maintained a stock of proprietary table grape and stone fruit breeding material near Fresno, California.  There is no dispute that he was the breeder of the grapevine variety, Sugraone.  On 29 April 1970, he applied for a plant patent in the United States.  This was ultimately granted on 11 April 1972.  It was plant patent 3106.  It was sought under the designation, Berenda White, which refers to the same variety as Sugraone.

On 20 March 1972, Superior Farming Company (SFC), an operating division of Superior Oil Company, made an agreement with Garabedian to purchase his nursery/ranch including real estate and all breeding material of his proprietary varieties.  It also took an assignment of Garabedian's right, title and interest in the Sugraone grapevine variety, among others, including the right to apply for and obtain legal protection for it in the United States and overseas.

Documents before the Tribunal relating to this transaction were two land transfers dated 29 March 1972 from Garabedian and co-owners of various parcels of land.  These transfers, each designated as a "Grant Deed" were expressed to be "for a valuable consideration" which was otherwise unspecified.  There was also a written assignment "FOR VALUE RECEIVED" by Garabedian to SFC of his rights to all plant patents and plant patent specifications owned or controlled by him including:

"...the right to make application for and obtain patents and legal protection on such plants in the United States and foreign countries, specifically including the right to file foreign applications for patent under the provisions of any convention or treaty and claim priority based on an application for patent in the United States; ....."

The value received for the assignment was not specified in that document.

Superior Oil Company and SFC were owned by a family called Keck.  In 1984 the Mobil Oil Corporation purchased a controlling interest in Superior Oil Company and thereby acquired its division, SFC.  In June 1985, it disposed of all of SFC's table grape and stone fruit operations, including patents and related trade marks to Western Fruit Acquisition Inc. for $101.5 million.  All right title and interest in Sugraone was assigned to Western Fruit Acquisition.  This transaction was evidenced before the Tribunal by a lengthy Agreement of Purchase and Sale of Assets and Assumption of Liabilities dated 30 June 1985 and written assignments of US plant patent rights and rights to foreign plant patents, protection certificates and applications therefor.  The latter, dated 28 July 1986, related to pending applications in seven countries including Italy and Chile but not Australia.  Applications in relation to Sugraone were included in each of the lists of applications by country scheduled to the assignment.  In January 1986, WFA changed its name to Superior Farming Company (SFC/WFA).

In December 1989, SFC/WFA was acquired by Sun World Inc, a Californian corporation.  It markets fresh fruits and vegetables in the United States and internationally.  The acquisition included all intellectual property rights owned by SFC/WFA.  The rights thus acquired included the rights to apply for protection of acquired plant varieties throughout the world.  Before the Tribunal was an Agreement of Merger by which SFC/WFA would be merged into Sun World.  The merger was supported by written assignment of US plant patents from SFC/WFA to Sun World Inc.  Sugraone was not included in that list because the US patent had expired.  There was also an assignment of foreign rights and applications dated 12 December 1989.  These included rights and pending applications in relation to Sugraone. 

Between the major acquisition transactions outlined above, there was a number of lesser transactions assigning rights in relation to the grapevine to other persons.

In December 1984, Howard Keck Jr acquired from SFC a quantity of the Sugraone grapevine on condition that Keck not asexually propagate from the grapevines or sell, transfer or give them or their propagation wood away for the life of US Plant Patent 3106.  SFC retained the right to market fruit grown from the vines for five years.  The agreement was entitled "CONTRACT FOR SALE OF VINES".  Articles I and II of the agreement were in the following terms:

"ARTICLE I - QUANTITY

Buyer agrees to purchase from Seller and Seller agrees to sell to Buyer 12,925 grapevines of Superior Seedless variety.

ARTICLE II - PRICE

A)Buyer shall pay $1.50 per Superior Seedless variety grapevine plus sales tax (where applicable) of $.09 per grapevine.  The total purchase price (including sales tax) for all grapevines purchased under this agreement is $20,550.75."

Article VIII(A) of the agreement was the covenant by Keck not to asexually propagate nor sale, transfer or give away the grapevines or their propagation wood during the life of the US patent.  Article VIII(B) was as follows:

"B)For the purposes of this provision the parties agree that Buyer's right to grow and sell fruit from said grapevines is pursuant to a license granted by Superior.  No license, grant or right, express or implied is granted, to Buyer to sub-license, sell, transfer or give away said grapevines or propagation material therefrom, and such right is specifically withheld for this agreement."

After SFC had applied for patent protection in Chile, agreements were also made with some Chilean growers under which Sugraone vines would be made available to them for vineyard development.  Having applied for a patent for Sugraone in July 1982, SFC made a License Agreement, dated 3 February 1984 with Ruben Cruz Ponce, a well established, high quality vineyard grower.  Cruz was licensed to asexually propagate Sugraone grapes.  Vines could only be supplied by Cruz to third parties with the express approval of SFC.  Cruz was authorised to sell the vines in Chile subject to payment of a royalty.   The right to sub-licence propagation of Licensed Plant Material was expressly withheld.   SFC was said by the Tribunal to have sold reproductive material (cuttings) of the Sugraone grapevine to Cruz at a prize of $1.50 per cutting.

Another Chilean grower to whom SFC supplied cuttings was Cabo de Hornos.  He acquired 24,000 cuttings for a price said to be $US200.  He undertook not to propagate or reproduce or to market the plant in any way without the prior authorisation of SFC.  There was an exclusive right in favour of SFC for five years in relation to the marketing of the fruit.   The document evidencing the agreement was entitled "SALE OF PLANT AND FRUIT MARKETING AGREEMENT".  It recited SFC's ownership of the rights, titles and interests in the cultivar of Sugraone and the fact that SFC had not licensed Cabo to grow and propagate the variety experimentally or commercially.  It recited Cabo's wish to plant, develop and grow the variety with the consent and assistance of SFC and provided in various articles as follows:

"FIRST "SUPERIOR" hereby sells, assigns and conveys to Mr Turismo v Hoteles Cabo de Hornos S.A. the quantity of 24,000 cuttings plants of the Superior Seedless variety for planting in his property in Hacienda, Pulido, Copiapo for the maximum planting of 40 hectares.  These plants shall be delivered in the form of grape cuttings, in a container, at Santiago's Arturo Merino Benitez Airport.

SECOND The total price for these plants shall be US$200 - legal tender of the United States of America, which price shall be paid on delivery of the plants and upon presentation of invoice.

.
  .
  .

FIFTH "THE BUYER" Mr Turismo v Hoteles Cabo de Hornos S.A. agrees not to propagate or reproduce nor to market the plants in any way hereunder, without previous authorization of "SUPERIOR"."

An agreement with a third Chilean firm named Codelpa was concluded on 25 June 1985 in terms similar to those of the Cabo agreement.

SFC also made an agreement on 10 February 1983 with an Italian company, Zanzivivai-Ferrara S.r.1 (Zanzi) which, according to the agreement owned and operated a commercial nursery located in Italy and distributed propagating material for various fruit varieties throughout Europe and the Mediterranean area.  Zanzi was granted a territorially limited exclusive licence to propagate and distribute on a controlled basis propagating material for several SFC proprietary varieties including Sugraone.  The supply of vines by Zanzi to growers was to be under a restricted licence to grow the vine only.  Growers licensed by Zanzi were required to undertake that they would never reproduce or distribute propagating material of the vine.  The agreement with Zanzi was subsequently terminated. 
  In considering the money price for the acquisition of the variety under some of these agreements it is also necessary to have regard to the evidence of Brian R. Thompson, an Intellectual Property Consultant engaged by Sun World Inc, whose affidavit was before the Tribunal.  In speaking of the sale value of the vines he said no sales data ever existed because no commercial arms length transactions had occurred.  However, the variety had been valued and the valuation accepted at US$50.24 per vine for the purpose of proceedings in the US Federal District Court.

Statutory Framework
  The Plant Variety Rights Act 1987 came into effect on 1 May 1987. It was repealed by the Plant Breeder's Rights Act 1994 which came into effect on 10 November 1994. By a transitional provision, s.83(1) of that Act, the former Act is taken to continue in force for the purpose of dealing with outstanding applications for plant variety rights.

The Plant Variety Rights Act 1987 was based upon the International Convention for the Protection of New Varieties of Plants 1961 as revised in 1972 and 1978 ("the UPOV Convention" after its French language title).  The Convention, to which Australia is a party, was scheduled to the Act.  The Act was described in its long title as:

"An Act to provide for the granting of proprietary rights to persons originating certain new plant varieties, and for related purposes."

It established a Registry of Plant Variety Rights (PVRs) and the Office of Registrar (ss.9 and 6).  PVRs created by the Act are defined in s.12.  They included the exclusive rights to sell elements of the relevant variety and reproductive material of such plants and to produce or to license other persons to produce reproductive material of plants of that variety for sale.  For plants of a prescribed genus or species they included the exclusive right to produce asexually plants of that variety or reproductive material of plants of that variety for the commercial production of their fruit, flowers or any other product (s.12(1)).

Section 14 of the Act provided that PVRs are not to be granted in respect of varieties previously sold. The section was in the following terms:

"14.Where an application is made for plant variety rights in respect of a plant variety, those rights shall not be granted if there has been a sale of a plant, or reproductive material of a plant, of that variety by, or with the consent of, the breeder or a breeder, or a successor of the breeder or of a breeder, of the variety, and: 

(a)the sale took place in Australia before the making of the application; or

(b)the sale took place in another country earlier than 6 years before the making of the application."

Section 15 provided for applications for PVRs and established that the right of a breeder to make an application was assignable personal property subject to the qualification that an assignment of such a right would not have effect unless in writing, signed by or on behalf of the assignor. The relevant parts of s.15 were in the following terms:

"15(1)Subject to this Act, a breeder of a new plant variety may make an application to the Secretary for plant variety rights in respect of the variety.

(2)A breeder of a new plant variety has the right under subsection (1) to make an application for plant variety rights in respect of that variety whether or not the breeder is an Australian citizen, whether or not the breeder is resident in Australia and whether the breeder originated the variety in Australia or in another country.

(3)The right under subsection (1) of a breeder of a new plant variety to make an application for plant variety rights is personal property and is capable of assignment or of transmission by will or by operation of law (whether before or after the application has been made).

(4)An assignment of a right to make an application for plant variety rights does not have effect unless it is in writing signed by or on behalf of the assignor.

.
  .
  ."

Subsections (5) and (6) related to joint applications and joint origination of new plants.  Section 16 provides for the form of the application and required, inter alia, that it contain:

"(b)where the applicant is the breeder of the variety, a statement that the applicant is the breeder of the variety;

(c)where the applicant is not the breeder of the variety, the name and address of the breeder from whom the applicant derived the right to make an application and particulars of all relevant assignments and transmissions of the right to make the relevant application;"

Upon lodgment of an application, if the Secretary of the relevant Department were satisfied that it complied with the requirements of s.16, that the name of the variety complied with the requirements of s.17 and that no other person had priority, then the Secretary was required to accept the application.  There was provision under s.20 for objections to the grant of PVRs.

PVRs were granted pursuant to s.26 after a period of six months public notice of the application. PVRs, like the right to make an application, were personal property and capable of assignment or transmission by will or by operation of law (s.30).

A number of relevant definitions were set out in s.3 of the Act which included the following:

""breeder", in relation to a new plant variety, means:

(a)subject to paragraph (c), in the case of a variety originated by one person only - that person;"

Other limbs of the definition related to joint origination and origination by members or employees of bodies. 

""new plant variety" means a plant variety that:

(a)was originated by a person;

(b)is homogeneous having regard to the particular features of its sexual reproduction or vegetative propagation;

(c)       is stable; and

(d)is distinguishable by one or more important morphological, physiological or other characteristics from all other plant varieties whose existence was a matter of common knowledge at the time when the application in respect of the variety was made;"

""reproductive material", in relation to a plant, means:

(a)a seed of that plant;

(b)a cutting from that plant; or

(c)any other part, or product, of that plant, from which another plant can be produced;"

""sell" in relation to a plant or reproductive material of a plant, includes let on hire and exchange by way of barter;

"successor", in relation to a breeder of a new plant variety, means a person to whom the right of the breeder to make an application for plant variety rights in respect of that plant variety has been assigned or transmitted."

The Plant Breeder's Rights Act 1994, which supplanted the Plant Variety Rights Act creates a Plant Breeders Right or PBR in a plant variety which comprises, inter alia, the exclusive rights to produce or reproduce propagating material of the variety and to sell or offer such material for sale (s.11).  A PBR can only be granted in respect of a registrable plant variety (s.44(1)(b)(ii)).  It is a condition of registrability that the variety has not been exploited or has only recently been exploited (s.43(1)(e)).  A variety has only recently been exploited if, at the date of lodging the application for a PBR in the variety, propagating or harvesting material of it has not been sold to another person by or with the consent of the breeder, in Australia more than one year before that date, or in the territory of another contracting party, in the case of trees or vines, more than six years before that date (s.43(6)).  That disqualification does not apply to a sale by the breeder if the sale is a part of or related to another transaction under which the right of the breeder to make application for PBR is sold to the purchaser (s.43(7)).  The definition of the word "sell" under the Plant Breeder's Rights Act is the same as under the Plant Variety Rights Act.  The Plant Breeder's Rights Act is based upon the 1991 revision of the UPOV Convention which is scheduled to it.

The Tribunal's Decision
  The decision refusing registration was based upon the disqualifying effect of the alleged sale by Garabedian to SFC in March 1972.  The Tribunal, however, had regard to other transactions which took place prior to July 1985, that is more than six years before the application for PVRs was made.

The Tribunal held that the word "sale" in its statutory setting in s.14 of the Act, was not limited to the transfer of property for a money price. The agreement between Garabedian and SFC of 20 March 1972 was expressed to include a sale by the breeder of its patent rights world wide in the Sugraone plant variety. Accordingly, it was held to be a sale for the purpose of s.14(b).

Reference was made to a statement by Henry Chavez, Executive Vice-President of Operations, SFC, made in 1985 in support of an application for registration of plant breeders rights.  In that statement he referred to Garabedian as having sold, inter alia, all of the vines of the Sugraone variety and the world wide patent rights in the Sugraone variety to Superior Farming Company.  The Tribunal rejected the submission made on behalf of the applicant that the sale of the vines, being part of a larger transaction with Garabedian, including real estate and world wide patent rights, was not a sale for the purposes of the Act.

The Tribunal then held, shortly, that the agreements between SFC and Howard Keck Jr, and the Chilean and Italian transactions each constituted a sale for the purposes of the section.  It expressed no concluded view on whether the transactions between SFC and Mobil Corporation and between SFC and Western Acquisition Inc constituted sales.

It also held that a successor of the breeder, for the purposes of ss.3 and 14 of the Act, extended to successive assignees of the rights and the right to make application for PVRs. Sun World, it was said, was a successor of the breeder, Garabedian.

Grounds of Appeal
  The grounds of appeal as set out in the Notice of Appeal are as follows:

"(i)The term "sale" as referred to under Section 14 of the Act meant a transfer of property for real monetary consideration only. The addition of the words "let on hire and exchange by way of barter" to the definition of the term "sale" in the Act does not justify the conclusion that the consideration in a "sale", if not other goods, can take other than a monetary form.

(ii)The sale of a whole business which has as part of its assets a plant variety capable of being the subject of a grant of plant variety rights under the Act, and which includes the transfer of plants of the particular variety, does not constitute a "sale" as proscribed under Section 14 of the Act.

(iii)The granting of licences to grow plants of the "SUGRAONE" variety under strictly controlled conditions does not constitute a "sale" under Section 14 of the Act.

(iv)Section 14 of the Act does not apply to the sale of plants or reproductive material of plants of the particular variety by "the breeder" (as defined under the Act) to a "successor" (as defined under the Act). Similarly, a "sale" between one "successor" and another is not proscribed. Section 14 itself contemplates a transaction between the breeder and a successor which is by definition a "sale", for otherwise a "sale" by a successor could not eventuate.

(v)Section 14 of the Act does not deal with the transfer or other dealing with plant variety rights per se. Section 14 only proscribes certain "sales" of plants or reproductive material of plants."

Notice of Contention
  The Registrar filed a Notice of Contention which asserted that a breeder may assign or transmit the right to apply for PVRs only where the breeder first has that right.  Sun World cannot be a successor of Garabedian because Garabedian never had the right to apply for PVRs in Australia.  He assigned all his rights in respect of the Sugraone grapevines before the Australian Act came into force.

It was further contended, in the Notice, that the "successor" of a breeder entitled to apply for PVRs is limited to the immediate assignees of the breeder.  The applicant, it was said, is not a successor of the breeder because, in the event that SFC was a successor the right to apply for PVRs in Australia was not able to be further assigned to any other party.  However this contention was not pressed at the hearing. 

Protection of Plant Variety Rights - General
  Patentability under the laws of England and Australia has always depended upon the claimed invention being "a manner of manufacture" within the meaning of s.16 of the State of Monopolies 1623.  At one time agricultural or horticultural processes were excluded from that category -  Re Rau Gesellschafts' Application (1935) 52 RPC 362 and subsequent English Patent Office practice. That exclusion was not accepted by the High Court in National Research Development Corporation v. Commissioner of Patents (1959) 102 CLR 252. Plant varieties are patentable under Australian law if they meet the requirements of novelty, inventive step, utility and no prior use which are imposed by the Patents Act 1990 (Cwth).  Their patentability was acknowledged by the Patents Office in 1980 when it published an official notice on requirements for applications for patents of living organisms - (1980) AOJP 1162 and see Australian Patent Office, Background Paper on Australian Patents for Plants 1989.  Plant varieties may also be patented in Canada and in New Zealand Brown, Protecting plant varieties: Developments in New Zealand (1988) 18 V.U.W.L.R. 83.  In the United States, manmade living matter has been held by the Supreme Court to be patentable as is "anything under the sun that is made by man" - Diamond v. Chakrabarty [1980] 447 US 303.

In Europe the Strasbourg Convention 1963 signed by the member States of the Council of Europe provided that the Contracting States would not be bound to provide for the grant of patents in respect of plant or animal varieties or essentially biological processes for their production (Article 2).  The UPOV Convention had been signed in 1961 and recognised monopoly rights for new plant varieties.  Article 2(c) of that convention allowed Contracting States to afford patent or "special title" protection for new plant varieties but not both.  And although the Patents Act 1949 (UK), case law apart, did not expressly exclude plant varieties its successor, the Patents Act 1977 (UK) does albeit on a narrow basis.  The old law is in substance retained - see s.1(3)(b); Terrell on the Law of Patents 14th Edition (1994) Sweet & Maxwell 2.21; Cornish, Intellectual Property 3rd Edition, (1996) Sweet & Maxwell at 5-82; Phillips and Firth, Introduction to Intellectual Property Law 2nd Edition (1990) Butterworths 25-2 and 25-3.  The exclusion from patentability applies to any "variety of...plant" or any "essentially biological process for the production of....plants not being a microbiological process or the product of such a process".  Since 1964 the United Kingdom, however, has had the Plant Varieties and Seeds Act 1964, amended in 1983, which established a regime for the grant of breeders' rights. In the USA plant varieties are protectable under the US Plant Patent Act 1930 and the US Plant Variety Protection Act 1970.  They are not thereby excluded from the grant of a utility patent under the US Patent Code (35 USC) - see Byrne, Patents for Plants, Seed and Tissue Cultures (1986) 17 IIC 324 and Ex parte Hibberd [1985] 227 USPQ 443.  In addition to patent protection under its Patents Act 1953, New Zealand provides special protection under the Plant Varieties Act 1973.   The exclusion of plant varieties from European patents was continued by Article 53(b) of the European Patent Convention 1973 - see generally Straus, Patent Protection for New Varieties of Plants Produced by Genetic Engineering - Should "Double Protection" be Prohibited? (1984) 15 IIC 426 and Christie, Patents for Plant Innovation [1989] 11 EIPR 394.

By a 1978 revision of the UPOV Convention, countries providing dual protection systems were enabled to become parties to the Convention (Article 37).  As a result, both the United States and Australia became parties.  Australia enacted the Plant Variety Rights Act 1987, the relevant provisions of which have already been set out.

Prior Commercialisation and Novelty
As can be seen from s.14 of the Act, the prior sale of a plant variety overseas more than six years before application is made will prevent the grant of PVRs. Before turning to the language of the section and its statutory setting it is desirable to consider the rule as expressed in the corresponding article of the UPOV Convention and the policy underpinning it.

While it is a condition of patentability of an invention that it be novel, there was no explicit reference to novelty as a condition of the grant of PVRs in the UPOV Convention as it stood in 1978.  The "conditions required for protection" were set out in Article 6 which bore that heading.  The variety had to be distinct (6(1)(a)), uniform (6(1)(c)) and stable (6(1)(d)), three conditions known as the DUS requirement - Byrne, The Agritechnical Criteria in Plant Breeders Rights Law (1983) Industrial Property 293-303. These requirements are reflected in the definition of "new plant variety" in s.3 of the Plant Variety Rights Act 1987 which refers to homogeneity, stability and distinctness. Novelty was not expressly mandated in the Convention as at 1978 nor was it in the Act.

The distinctness condition required the variety to be "clearly distinguishable from any other variety whose existence is a matter of common knowledge at the time when protection is applied for". Common knowledge could be established, inter alia, by "marketing already in process" (Article 6(1)(a)). There was a question which, prior to 1978, was unresolved about whether the "common knowledge" referred to included common knowledge of the plant variety for which protection was sought thus imposing a novelty test similar to that applicable to patents. The last sentence of Article 6(1)(b) which dealt with prior commercialisation was added in 1978 and excluded that possibility except to the extent that the variety had become a matter of common knowledge through offering for sale or marketing. Article 6(1)(b) after the 1978 revision and as it appears in the UPOV Convention scheduled to the Plant Variety Rights Act 1987 provided:

"At the date on which the application for protection in a member State of the Union is filed, the variety:

(i)must not - or, where the law of that State so provides, must not for longer than one year - have been offered for sale or marketed, with the agreement of the breeder, in the territory of that State, and

(ii)must not have been offered for sale or marketed, with the agreement of the breeder, in the territory of any other State for longer than six years in the case of vines, forest trees, fruit trees and ornamental trees, including, in each case, their rootstocks, or for longer than four years in the case of all other plants.

Trials of the variety not involving offering for sale or marketing shall not affect the right to protection.  The fact that the variety has become a matter of common knowledge in ways other than through offering for sale or marketing shall also not affect the right of the breeder to protection."

This paragraph of Article 6 gives rise to a limited "commercial novelty" requirement.  It may only be destroyed where reproductive material is marketed by or with the consent of the applicant.  Thus one breeder may market a variety leading to loss of commercial novelty, whereas an applicant who has originated the same breed could obtain plant breeder's rights for that plant variety - Byrne: The Scope of Intellectual Property Protection for Plant and Other Life Forms (1989) Intellectual Property Publishing Limited pp.6-7; Christie, The Novelty Requirement in Plant Breeders' Rights Law (1988) 19 IIC 646.

As the latter paper suggested, the no prior commercialisation (NPC) rule imported a limited novelty requirement into plant breeders' rights law albeit it was very different to that which applies under patent law.  Nevertheless there are analogous elements in that prior commercialisation of an invention by offering it for sale or selling it will rob it of novelty and preclude the grant of a patent - see e.g. Bristol-Myers Co. v. Beecham Group [1974] AC 646 and  Re Wheatley's Patent Application (1984) 2 IPR 450. In the former case commercial dealings with the product had taken place. Dealing with the product by way of trade constituted "public use" - per Lord Diplock at p.680. In the latter case that characterisation extended to the making of an agreement to sell samples. Lawson LJ said of the inventor who made the agreement:

"He had dealt in the product of the invention before he had obtained any patent rights.   This was doing one of the things which the Statute of Monopolies 1623 was intended to prevent, namely getting a monopoly after having dealt commercially with the invention."

It may be noted that the Bristol-Myers case involved a patent applied for under the Patents Act 1949.  Under the Patents Act 1977 (UK) prior use would not extend to a use that did not provide an enabling disclosure of the invention claimed - Terrell para.5.30.  And the transaction in Re Wheatley's application might well have constituted a "secret use" under s.9 of the Patents Act 1990 (Cwth) - Blakeney and McKeogh, Intellectual Property Commentary and Materials 2nd Edition (1992) Law Book Co. Ltd p.362, n.1.

Putting aside particular statutory settings, the commercial novelty rule in the UPOV Convention can claim some of its ancestry in that aspect of the novelty requirement of patent law which relates to prior use by sale. 

As its preamble indicates, the UPOV Convention was made in recognition of the importance attaching to the protection of new varieties of plant for the development of agriculture in the territories of the Contracting States and for safeguarding the interests of breeders.  A consideration for the protection provided is, inter alia, public accessibility to the new variety through its eventual release from protection.  The period of protection is limited (Article 8).

The breeder's rights contemplated by the Convention involve exclusive control of the production for commercial marketing, the offering for sale and the marketing of reproductive or vegetative propagating material of the variety (Article 5).  It may be said that the object of the NPC rule in Article 6 is to protect the prior interests of merchants and growers who may have purchased and multiplied a variety in good faith not knowing that an application for rights would be instituted - Murphy, Plant Breeders Rights (1979) EIPR 236 at 239.  That said, the NPC rule is qualified by the one year and six year periods of grace in Article 6.

Not every commercial dealing with a plant variety prior to application for protection will give rise to a breach of the NPC rule under the Convention. The commercialisation caught by the rule is only that which is done "with the agreement of the breeder". Moreover, commercial dealings, however extensive, within the period of one year, if within the State in which application is made, or six years if outside that State, do not constitute a breach of the rule. Nevertheless, such dealings within the period of grace may cause the variety to be treated as one "whose existence is a matter of common knowledge at the time when protection is applied for" and thereby disqualify it from protection for failure to meet the distinctness criterion in Article 6(1)(a). This possibility was contemplated by the last sentence of Article 6(1)(b).

Article 5 after the 1991 revision sets out conditions of protection adding novelty to the DUS requirement.  Article 6 is entitled "Novelty" and Article 6(1) reads:

"(1) [Criteria]  The variety shall be deemed to be new if, at the date of filing of the application for a breeders right, propagating or harvested material of the variety has not been sold or otherwise disposed of to others, by or with the consent of the breeder, for purposes of exploitation of the variety

(i)in the territory of the Contracting Party in which the application has been filed earlier than one year before that date and

(ii)in a territory other than that of the Contracting Party in which the application has been filed earlier than four years or, in the case of trees or of vines, earlier than six years before the said date."

In 1993, the EEC Commission proposed a regulation on Community Plant Variety Rights, Article 10 of which set out criteria of novelty.  It disqualified from novelty varieties sold or disposed of for commercial purposes outside the territory of the Community more than six years before the application.  This was to be subject to an exemption for the disposition of plants in which the applicant or its predecessor in title preserved the exclusive right of disposal of those and other individuals of the variety in particular for purposes solely of reproduction or propagation.

"Sale" under Section 14 of the Plant Variety Rights Act
  The ordinary English meaning of the word "sale" relevant for present purposes is defined by the Shorter Oxford English Dictionary thus:

"1. The action or an act of selling; the exchange of a commodity for money or other valuable consideration.

Also: (ready, slow etc) disposal of goods for money;

opportunity for selling."

There is considerable authority for the proposition that the ordinary meaning of the word "sale" in a variety of statutory and common law settings is an exchange of commodities for money - J. & P. Coats Ltd v. Commissioners of Inland Revenue [1897] 1 QB 778 at 783; Simpson v. Connolly [1953] 1 WLR 911; Robshaw Brothers Ltd v. Mayer [1957] 1 Ch 125;  Re Westminster Property Group PLC [1984] 1 WLR 1117, [1985] 1 WLR 676. That meaning may be extended by statute expressly or by necessary implication - J. & P. Coats Ltd v. Commissioners of Inland Revenue (supra) at 783 and see generally the authorities reviewed in FCT v. Salenger (1988) 81 ALR 25 at 29-32 in relation to the treatment of compulsory acquisitions as "sales" for revenue purposes. Benjamin, Sale of Goods, 4th Edition, Sweet & Maxwell (1992), says at 1-034:

"To constitute a sale it is necessary that the consideration for the transfer of the property in the goods should be in money.  This may be either paid or promised (i.e. the sale may be for cash or on credit); but if the consideration is something other than money the contract is not, strictly speaking, one of sale in English law."

The definition of "sell" in the Plant Variety Rights Act is inclusive and expressly extended to "let on hire and exchange by way of barter". There is nothing in s.14 to exclude the application of that definition to the word "sale" in that section.

It was submitted for the applicant that, save for the extensions to cover hire and barter, the word "sale" was limited to its primary meaning of an exchange of goods for money.  Where the exchange is an element of a larger transaction it is not a sale for the purposes of the section.  Thus, the sale by Garabedian of the whole of his business, including land on which Sugraone vines were growing and his rights to the Sugraone variety, was said not to involve a sale of the vines for the purposes of the section.  Property in them passed as part of a larger transaction.  They were not the subject of commercial exploitation and the consideration paid for them was not money.  Nor, it was submitted, was the supply of vines to Howard Keck Jr a sale.  The rights given were restricted and the consideration complex.  There was no commercial exploitation of them and the supply was not unconditional.  Similar arguments were advanced in relation to the Chilean and Italian transactions.

It is necessary to ask what legislative purpose or policy is to be served by s.14. Broadly speaking the purpose of the Plant Variety Rights Act 1987, as set out in the Second Reading Speech for the Bill was "to enable plant breeders to apply for and to receive proprietary rights for new varieties of plants which they develop" - Parl. Deb. H of R 8/10/86 p.1648. Within that general framework and consistently with the evident purpose of Article 6(1)(b), to which it conforms, the purpose of s.14 is to ensure a minimum level of commercial novelty in plant varieties for which protection is sought. Thus it excludes varieties first sold more than six years previously outside Australia.

A question for resolution in the present case, is whether s.14 was intended to deny protection where an assignment of the right to make an application for PVRs in Australia was accompanied by a sale of the variety or its reproductive material - see the comment in Jarvis - Plant Patent, Plant Variety Right - or Both? (1993) 4 AIPJ 211 at 221-222. Counsel for the respondent submitted that that was the effect of the section. But there are contextual indicators to the contrary. The Act explicitly provides for the assignment of the right to make an application for PVRs (s.15(3) and s.15(4)). It contemplates that the application may be made by a successor of the breeder (s.16(c)). Prior to any grant being made the applicant for rights may be required to provide to the Secretary plants or their reproductive material to enable a test growing to be undertaken (s.24(1)(e)).

The exclusion of a plant variety from protection on the basis of a prior disposition which is an element of an assignment of the right to apply sits uneasily with the other statutory provisions mentioned and serves no evident legislative purpose. Section 14 itself contemplates that the disqualifying sale may have been made by a successor of the breeder, but a successor of the breeder is one to whom the right of the breeder to make an application for plant variety rights has been assigned or transmitted. The section contemplates the possibility that a successor will have plant or reproductive material of a plant capable of sale.

There is no direct judicial authority on this point.  In Elizabeth of Glamis-Rose (1966) FSR 265, applicants for rights under the Plant Varieties and Seeds Act 1964 (UK) had previously agreed to supply a third party with the budding eyes of a new rose called "Elizabeth of Glamis. The applicants were to take a share in the proceeds of the third party's sales of bush roses derived from the buds. The Plant Variety Office held this transaction to be in the nature of a joint venture rather than a prior sale. The passing of the property in the budding eyes was "no more than an incidental feature of the transaction".

The provisions of s.14 may be contrasted with those of its equivalent in s.43 of the Plant Breeder's Rights Act 1994. There is an explicit exemption, from the NPC rule, of a sale of propagating or harvested material if it is part of the sale of the right of the breeder to make application for a plant breeders right. There is no express provision of the UPOV Convention or its 1991 revision which would explain this alteration. It does, however, reflect the terms of a similar exemption in r.2(3) of the Rules set out in Schedule II of the Plant Varieties and Seeds Act 1964 (UK).

The role of amending legislation in the construction of the earlier provisions of the legislation it amends is debatable.  It can be said that although the Plant Breeder's Rights Act 1994 repealed the Plant Variety Rights Act 1987 and substituted a new statutory regime, there is an analogy to the case of amending legislation at least in respect of the operation of the NPC rule. Amending legislation which expressly introduces an exemption from some condition or liability imposed by the legislation to be amended may support a construction of that earlier statute that does not incorporate the exemption -  Grain Elevators Board (Vic) v. Dunmunkle Corporation (1946) 73 CLR 70. But as has been pointed out in a number of cases, care must be taken to determine whether the amending legislation merely makes clear what was implicit in the previous law or resolves doubts about its construction - Allina Pty Ltd v. Federal Commissioner of Taxation (1991) 99 ALR 295 at 303 and see generally Pearce and Geddes, Statutory Interpretation in Australia 4th Edition at 3.18.

There is only limited assistance to be derived from s.43(7) of the Plant Breeder's Rights Act 1994. It may be taken as a legislative indication that the exclusion from the NPC rule of sales coupled with rights assignments is consistent with the requirements of the UPOV Convention given that prior to and after its 1991 revision it made no express provision on this point.

In my opinion the disposition of plant or reproductive material which is an element of an assignment of a right to apply for plant variety rights in respect of the relevant plant variety is not a sale of that plant or reproductive material for the purposes of s.14. The transaction in such a case may properly be characterised as an assignment of the rights and the disposition of the reproductive material as an incident of that transaction. Indeed it would be difficult to imagine an assignment of the right to apply for the grant of a PVR that did not at least restrict the use to which vines remaining in the possession of the assignor could be put. Absent such a restriction there would be a real risk of disposal of the vine out of the hands of the breeder or assignor in a way that would violate the NPC rule and vitiate the assigned right to make application. It is commonsense to anticipate the probability that assignments of breeder's rights will be accompanied by the disposition to the assignee of vines in the hands of the breeder.

The position is not affected if it be assumed that the sale of the land would have been severable from the transfer of the vines on the basis that they were fructus industriales and therefore not part of the land while growing - Benjamin, Sale of Goods 4th Edition, 1-093.

It may be that in some cases the disposition of material linked to an assignment of rights, is so structured that it is intended for commercial exploitation in a way that infringes the NPC rule. There is no basis for such a characterisation of the Garabedian transaction. For present purposes, it is sufficient to say that the transaction whereby he assigned his rights in the Sugraone grapevine variety, including the right to apply for and obtain legal protection for it and sold the land and vines growing on it and the business which he operated on the land, was not a sale for the purposes of s.14. In my opinion the Tribunal was in error in construing the word "sale" in that section as extending to that transaction.

The next question is whether s.14 applies to a disposition of reproductive material accompanied by a restrictive covenant on its use. Here it is contended that a disposition is not a sale for the purposes of s.14 if it does not involve an assignment of the absolute or general property in the vines.

Before the Sale of Goods Act 1893 (UK), the common law regarded transfer of the absolute or general property in a thing transferred as an essential element of the contract of sale - Benjamin, Sale of Personal Property (2nd Edition, 1873) pp.1-2, cited in Benjamin, Sale of Goods 4th Edition, (supra) at 1-030.  Sales under covenants restricting the use and disposal of the goods sold could be seen as a limitation on the rights acquired by the buyer - Benjamin (supra) at 3-036.  It is plain however that the definition of "sale" under the Plant Variety Rights Act 1987 is not limited to the absolute or general transfer of the property in question for it expressly extends to letting on hire. Given that extension, there is no apparent rationale for excluding from the scope of "sale" for the purposes of s.14 transfers for money subject to a restrictive covenant as to resale.

It was submitted that the disposition to Keck in December 1984 was not a sale.  However the document evidencing the transaction was entitled "CONTRACT FOR THE SALE OF VINES".  The substantive provisions in Articles I and II were in the language of sale and purchase.  And the restrictive covenant was limited to the life of the US Patent.

In my opinion the covenant, which was limited in time, did not deprive the transaction of its character as a sale.  There was a purchase price specified for each vine, although this was said by a witness to be a significant undervalue not reflecting the true price of vines in the open market.  But the fact that a low price or, indeed something approaching a nominal price, is attached to a commodity in a transaction will not deprive it of the legal character of a sale for present purposes.

Similarly, in my opinion, the imposition of restrictive covenants on the on sale of grape vines sold to the Chilean growers and to the Italian grower do not deprive those transactions of the character of sales. Subject therefore, to its conclusion in relation to the Garabedian sale, the Tribunal did not err in characterising as sales for the purposes of s.14 the subsequent transactions involving Mr Keck Jr and the Chilean and Italian growers.

Whether Garabedian's Successors in Title are Successors
  For the Purposes of the Plant Varieties Act
  The Registrar did not press the proposition in the Notice of Contention that the successor of a breeder entitled to apply for PVRs is limited to the immediate assignees of the breeder. 

The other point taken on the Notice of Contention was pursued, namely that Sun World was not a successor of Garabedian within the meaning of the Act.  Garabedian had never had the right to apply under the Plant Variety Rights Act because it did not exist prior to the assignment of all his interests to SFC. 

There are two questions to be asked.  The first is: Did Garabedian's assignment to SFC extend to an assignment in futuro of a right to make application for a PVR which did not then exist?  Assuming an affirmative answer to that question, the second question is: Did the Plant Variety Rights Act 1987 provide a right to the assignee to apply for a PVR in respect of the variety the subject of an assignment made before it came into operation?

As to the first question, it is clear enough that Garabedian intended to assign all existing and future rights to the variety.  The rights assigned included "the right to make application for and obtain legal protection on such plants in the United States and foreign countries...."  The language of the assignment is unqualified and, in my opinion, intended to encompass all classes of rights relevant to the legal protection of the variety.  If it be the case that the breeder could have applied for PVR after 1987 then, the agreement contemplated in my opinion, that his assignee would be able to do likewise.

The second question is a matter of construction of the Act. Section 15 of the Act confers a right to apply upon "the breeder who is, according to the definition of that term, the person who originated the variety". There is nothing in the Act and no legislative policy which would exclude from eligibility for the grant of PVR a breeder whose plant variety was originated before the coming into operation of the Act. The "successor" is a person "to whom the right of the breeder to make an application for PVR has been assigned or transmitted". In my opinion this extends to the case in which a breeder has assigned his rights in futuro. It might be said that the assignment or series of assignments only crystallised or took effect upon the coming into operation of the Plant Variety Rights Act.  They were nevertheless effective to give the breeder's successor a right to make the application.  The restrictive construction for which the respondent contends serves no legislative policy, no useful purpose and may give rise to absurd or unjust results.  The contrary construction is not precluded by the words of the section.  I therefore reject the first proposition contained in the Notice of Contention.

Conclusion
For the above reasons I am of the opinion that there were sales of the grapevine variety "Sugraone" which fell within the scope of s.14 of the Plant Variety Rights Act 1987. Those sales meant that the qualifying requirement of no prior commercialisation of the variety was not able to be satisfied. The application should therefore be dismissed.

I certify that this and the preceding
  twenty five (25) pages are a true copy
  of the Reasons for Judgment of His Honour
  Justice French.
  Associate:
  Date:

Counsel for the Applicant: Dr. J. McL Emmerson QC
Solicitors for the Applicant: Davies Ryan De Boos

Counsel for the Respondent: Mr R.R.S. Tracey
Solicitors for the Respondent: Australian Government Solicitor

No Appearance for the Party Joined.

Date of Hearing: 8 May 1997
Date of Judgment: 25 June 1997