Agricultural Biotechnology: Legal Liability Issues

Drew L. KershenEarl Sneed Centennial Professor of LawUniversity of OklahomaCopyright 2006 Drew L. Kershen, all rights reserved

Adventitious Presence

Unintended presence of something other than the desired crop

– Weed seeds, seeds from other crops, dirt, insects, foreign materials (e.g. plastic, wood)

In context of transgenic crops, presence of transgenic materials (seed, parts, pollen)

Historical and Ubiquitous– AOSCA certified hybrid corn

0.5% seed of other varieties or off-types 2.0% inert material Pure hybrid seed corn at 98%

Coexistence

Three themes– Farmer choice– Good Husbandry– Neighborly cooperation

Examples of same species crops– Canola (cooking oil) and rape (industrial oil)– Malting barley and feed barley– Food corn, feed corn, industrial corn (starch)

USDA grades and standards– # 1 corn – allows 2% broken corn and foreign material

Coexistence

Organic Farming Research Foundation, 4th National Organic Farmer’s Survey (2002)

– 92% (938 respondents) had no direct costs related to transgenic crops

– 4% had payments for testing seeds and inputs. Probably not an additional cost

– 19 respondents reported positive tests for transgenic materials – 2% -- assuredly trace amounts

– 4% claimed some type of market loss – To be explained later.

Coexistence Studies

Level of tolerance recognized establishes the costs and difficulty of compliance

– Research Institute for Biological Cultivation (FiBL) (Frick, Switz., 2004) (World Wildlife Foundation)

0.1% detectable level; separation distances of 1 km for corn, 600 m for rape, 100 m for wheat

– Confederate Research Institute for AgroEcology and Cultivation (Agroscope FAL) (Reckenholz, Switz. 2005) (Swiss Federal Office of Agriculture)

0.5% detectable level; separation distances of 50 m for corn, 50-400 m for rape (depends on species), no separation for wheat

Coexistence: Conclusion

Zero tolerance is not achievable without a ban on transgenic agriculture.

By following reasonable agronomic practices, such as those of AOSCA, conventional, organic, and transgenic agriculture can easily coexist.

Stricter standards than those established by law should be contractual obligations.

Legal Issues:Organic Certification

Adventitious presence does not affect organic certification for organic farms or organic products.

NOP Final Rules at pp. 33-35, www.ams.usda/gov/nop/NOP/standards

– “The presence of a detectable residue of a product of excluded methods alone does not necessarily constitute a violation of this regulation. As long as an organic operation has not used excluded methods and takes reasonable steps to avoid contact with … excluded methods … the unintentional presence of … excluded methods should not affect the status of an organic product or operation.”

Organic Standards in the EU

2.2.3. Labelling threshold values: “The organic farming regulation establishes that no GMOs shall be used in production. Thus, materials, including seeds, which are labelled as containing GMOs cannot be used. However, seed lots containing GM seeds below the seed thresholds (which would not need to be labelled for this GMO presence) could be used. The organic farming regulation does allow for the setting of a specific threshold for the unavoidable presence of GMOs, but no threshold has been set. In the absence of such a specific threshold, the general thresholds apply.” COMMISSION RECOMMENDATION of 23 July 2003 on guidelines for the development of national strategies and best practices to ensure the coexistence of genetically modified crops with conventional and organic farming (2003/556/EC)

Legal Issues:Contractual Obligations

Depending on the contract specifications, adventitious presence can affect premiums and market access for both conventional and organic producers.

IFOAM guidelines on transgenic crops– “Organic certification shall not imply it is a ‘GE-free’

certification. Rather it shall be presented as guaranteeing ‘production without GE/GMOs’. As there is no guarantee that organic products are 100% free … Organic producers and associations shall actively inform the consumers of this fact to insure fair marketing claims and to avoid future debates about consumer deception.”

Contract Issues

Contractual obligations– Farmers must pay attention to the contract terms

Production standards, product standards Contract production widespread – common issues

– Farmers should not promise what they cannot control 100% GM free versus planted seed certified non-

transgenic 100% GM free at elevator versus reasonable care to

avoid mixture on own farm

Contractual Issues

Inadvertent Presence– Tolerance standards in the contract

Farmer has obligation to meet tolerance standard– Not a loss of organic certification for the product or farm

Risks farmer takes– Rejection of the crop – loss of premium; sell as commodity crop– Acceptance and blending – 3% Korea; 5% Japan, 0.9% EU – fraud in the

acceptance? General Legal Rule –

– Person seeking the premium or niche market bears burden– Contractual obligation accepted, not legal liability

D. Kershen, Don’t sign a contract promising a biotech-free crop, FOOD TRACEABILITY REPORT p. 19-20 (Sept. 2003). See also, American Farm Bureau Federation, What you should know about Organic and “Non-GMO” Production Contracts.

Contractual Obligations

“Where non-GM crop growers voluntarily choose to impose additional or stricter requirements on their productions systems over and above the legal minimum, in order to gain market or price advantage, then non-GM crop growers are responsible for ensuring those requirements are met and for meeting their associated costs, if any.” Report of the Working Group, DAF-Ireland (Sept. 2005) at p. 119

Depending upon the voluntarily accepted contract specifications, adventitious presence can affect premiums and market access.

Zero tolerance as a contract standard is not achievable without a ban on transgenic agriculture.

Civil Legal Liability

As of December 2005– There have been no lawsuits between farmers about adventitious

presence;– There has been one successful lawsuit (the StarLink litigation)

relating to an unapproved-for-food transgenic crop commingled into the food supply;

– There have been no successful lawsuits relating to Loss of premium due to adventitious presence; Loss of organic certification; Loss of market access; “pure economic loss” related to ethical values, socio-economic values,

etc.; or Product liability lawsuits related to health claims. No adverse health

claims have ever been verified.

Vermont S.18, sec. 3 (Feb. 2005)

[sec. 650(2)] “Injury” includes: (A) loss of any price premium

… contract … or that would have been otherwise reasonably available … through ordinary commercial channels;

(B) any additional transportation, storage, handling, or related charges or costs …

(C) any judgment, charge or penalty … because of breach of contract, including loss of organic certification for failure to deliver … any contractually agreed tolerances …

(D) market price reductions incurred by farmers resulting from loss of crop exports, including foreign and domestic markets; and

(E) a farmer’s loss of livelihood or reputation caused by genetically engineered crops.

[sec. 651(a)]The manufacturer … is liable to any person injured by the release into Vermont of a genetically engineered crop …”

Comment Points

These laws are addressing liability for coexistence, not liability for human or animal health, agronomic concerns or environmental safety. These are economic concerns.

Common law and civil law provide remedy if a physical harm. No loss of organic certification for product or farm. Production

standards, not product standards. Self-adopted standards. Contractual specifications are the risk of the contracting parties.

Party seeking the price premium bears the costs of earning the premium. Voluntarily accepted duties.

Aesthetic, ethical damages and reputation claims. D. Kershen, Legal Liability Issues in Agricultural Biotechnology,

Research article, National AgLaw Center, Univ. Arkansas-Fayetteville (2002), www.nationalaglawcenter.org.

Comment Points

Pure economic loss doctrine. Loss of contracts; loss of markets. Incalculable and unpredictable damages.

Claims of biodiversity damages. Lack of reciprocity and equality between agricultural production

methods. Coexistence has three themes – farmer choice, good

stewardship, and neighborly cooperation. Purpose of these liability proposals is:

– not compensation for sensible damages;– to use risk of liability to drive transgenic agriculture from the

market;– to privilege organic farming.

Legal Issues: Intellectual Property

Protection of intellectual property (seed breeding)– All crops, not just transgenic crops

J.E.M. Ag Supply v. Pioneer Hi-Bred– Plant variety certificates, Plant Patent Act (asexually reproduced), Utility

Patents– Trade Secrets (hybrids) – parental lines

Saving seeds– For own farm only for plant varieties (PVPA)– Contractual prohibition for patented plants– For agronomic reasons not feasible for hybrids – Soybeans, wheat, canola (rarely)

Infringement Litigation– As of Jan 2005, 98 lawsuits Monsanto and farmers– Monsanto has won 73 of 73 resolved lawsuits– Numerous other settlements; in fact, most settle quickly

Legal Issues:Infringement of Patents

Adventitious presence should not create legal liability for infringement under patents. All infringement cases, both conventional and transgenic, except two, farmers

admitted that they saved patented seeds intentionally.– Schmeiser v. Monsanto Canada, Inc.

In 1997 Schmeiser sprayed canola with Round-up; purposefully harvested seed from surviving plants; purposefully segregated the harvested seed; purposefully used the harvested, segregated seed for the 1998 crop

Tests on sample from Humbolt Elevator divided into three portions and sent directly to Schmeiser, Monsanto, and an independent expert; Schmeiser subdivided his portion and sent half to the independent expert

– Results: S65%; M95-98%; IES 65%; IEH 95-98% The Canadian courts (trial, appellate, and Supreme Court) found factually

that he purposefully saved and planted patented seed that he knew or should have know contained a patented gene for herbicide tolerance.

Patent law will protect the truly innocent infringer.

References

D. Kershen & A. McHughen, Adventitious Presence: Inadvertent Commingling and Coexistence Among Farming Methods, CAST Commentary QTA2005-1 (July 2005).

M. Hagmann, T. Hooker, Reports differ on coexistence of GM crops, SonntagsZeitung (June 2, 2005), http://www.sonntagszeitung.ch/dyn/news (discussion of the two contrasting Swiss studies)

W. Weber & T. Bringezu, Test of coexistence under German field conditions – results from the “Erprobungsanblau” 2004 with Bt-maize, Proc. 2nd Int’l Conf. on Co-Existence between GM and non-GM based agricultural supply chains 327, 329 (Montpellier, Nov 2005)

Davide Ederle, Agricultural Biotechnologist, Italy provided the photos of pollen flow between yellow corn and colored corn.

References

Anon, Co-existence at 20 meters claims study, Cedab Agrobiotechnologie (Cremona, Italy, Jan. 27, 2006) (press release about the Ederle et al. study)

International Federation of Organic Agricultural Movements (IFOAM), Position on Genetic Engineering and Genetically Modified Organisms (adopted by IFOAM World Board, Canada, May 2002), www.ifoam.com

Report of the Working Group of the Department of Agriculture and Food, Coexistence of GM and non-GM Crops in Ireland, Ch. 8 Economic loss, liability and redress (Sept. 2005), www.agriculture.gov.ie.

References

Kershen, Monsanto vs. U.S. Farmers: Commentary on the Center for Food Safety Report, ISB News Report (April 2005)

Percy Schmeiser v Monsanto Canada, Inc.– 2001 FCT 256 (trial court);– 2002 FCA 309 (intermediate appellate court);– 2004 SCC 34 (Supreme Court of Canada).

Kershen, D., Of Straying Crops and Patent Rights, 43 Washburn L. J. 575 (2004).

Siebrasse, N., A Remedial Benefit-Based Approach to the Innocent User Problem in the Patenting of Higher Life Forms, 20 Canadian Intel. Prop. Rev. 79 (2003).

Siebrasse, N., The Innocent Bystander Problem in the Patenting of Higher Life Forms, 49 McGill L. J. 349 (2004).

Thank you.

I look forward to answering questions about coexistence, organic standards, contractual obligations, and liability.