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Learning 2: A licensing platform needs to include a mandatory “give ’n take” provisions. Parties who want to take licenses have to make similar technologies available to other platform members. Such “pull-in” needs to be support by a sufficiently attractive core.

Learning 3: Selection inventions can always occur. A constraining effect on the FTO of a clearing house can never be completely mitigated. However, the likelihood of such effect can be reduced by attracting the majority of the related industry sector to the platform. Platform members are discouraged to file blocking patents as the blocking effect is lost by the mandatory “pull-in” effect. A singular non-member player could theoretically block individual assets of the platform but would face opposition by the strong platform community.

Nevertheless, the BiOS initiative was fruitful as it inspired the ILP (see Section 4.2.2).

4.2.2. International Licensing Platform—Vegetables (ILP)

The International Licensing Platform—Vegetables (ILP) is a widely accepted “patent clearinghouse” in plant breeding [6]. It was founded in 2014 with support from the Dutch government and currently represents more than 60% of the global vegetable seed market [155]. Every party can join the ILP irrespective of whether it owns patents or not. Based on the principle “free access but not access for free” the ILP enables access to patented traits under fair and independently determined financial conditions [156,157,158]. While a use for research and breeding is free, a licensee has to pay a royalty for the commercialization, if and where the sale of the seeds is still covered by the patent. In addition, the ILP provides access to “variety patents” which in the US protect specific plant varieties [159]. The ILP has been described in detail elsewhere [160]. Therefore, only a summary is provided herein:

Defined scope: The ILP provides access to two classes of patents relevant for vegetable breeders “traits patents” [161] and “variety patents”. It enables the use of legally available vegetable material covered by a patent for further breeding. The ILP does not enable use of proprietary technologies nor does it mandates material transfer [162]. The ILP is limited to traits which are not regulated as GMOs [163]. When it comes to NBTs and the current “patch-work” of regulatory classification, the ILP enables licenses to NBT-derived traits in and for countries where those traits are not considered GMOs. Such limitation is necessary as GMO liability requires a qualification from licensees which would undermine the ILP principle that access is available for everybody.

“All-in” and “pull-in”: The ILP became the “one-stop-shop” for vegetable trait patents by creating an “all in” obligation: If a party wants to take a license through the ILP it has to become a member and will be obligated to make all its own vegetable-related patents available to other ILP members. This “conditional openness” enable a strong pull-in effect: The ILP enables access to more than 260 trait patent families and numerous variety patents [164]. This represents more than 60% of the relevant patent families in this field.

Contractual Breeders Exemption: ILP members grant each other a mutual, royalty-free non-assert under US variety patents to use a legally available variety for the breeding and commercialization of new varieties. Two conditions apply: The new variety has to be sufficiently distinct from the protected variety, and a notification needs to be send to the patentee.

Trait Licenses under FRAND Terms: ILP licensees have to pay a royalty for the commercialization of a variety if and where it is still covered by the patent. The ILP members agree to enter into bilateral negotiations for a license. Only if these fail after three months, the ILP’s baseball arbitration mechanism kicks in as a “safety net [165,166,167]. The baseball arbitration is based on a standard license agreement (“SLA”) where only the percentage royalty on net sales is subject to arbitration. No other element is negotiable [168]. The parties have to submit a binding, written proposal for a fair royalty with supporting evidence and reasoning. If the dispute is not resolves, the Expert Committee will render a binding decision. However, they can only pick the one submission they believe is “more fair”. No detailed reasoning needs to be provided. Based on the “game theory” [169] this creates a strong incentive for the parties to be reasonable, which eliminates inflated claims [170]. The established royalty is final and binding [171]. Changes are only possible if the value of the trait changes substantially [172]. The resulting valuation is likely as close to the true value of the technology as possible, or as noted by Lemley and Shapiro: “The Nash equilibrium of the game should be for each party to generate a proposed salary equal to the true value of the player” and “so long as the arbitration procedure itself is unbiased, bargaining in the shadow of binding arbitration will tend to lead to reasonable rates [173].” The same should apply in a licensing situation with respect to the submission of a royalty proposal which should equal the true value of the patented trait. Judge Arnold referenced baseball arbitration as one easy solution to establish FRAND terms as “the procedure forces both parties to pitch their offers close to what is objectively FRAND” [174,175,176,177].

The ILP’s incentive to reach an agreement bilaterally is strong: After six years of ILP the baseball arbitration was not used even once. However, according to this authors understanding, several license agreement and portfolio swaps have been established.

Most Favoured Nation clause: The ILP provides for a Most Favoured Nation (“MFN”) clause which requires to grant licenses under the best financial terms granted to any other Member under the SLA. Once an MFN percentage is set any licensee may request to an SLA with the same percentage.

The Expert Committee: The independence of the Expert Committee is key for the success of the ILP [178]. The seven experts collectively bring expertise in IP, economics, the vegetable seed market, plant science, and accounting. They are proposed of the ILP Board and need to be confirmed by a majority of at least 2/3 of the ILP Members [179].

Other elements: Every interested party can join the ILP even if it does not own patents. ILP members can continue to in- or out-license patents to third parties outside the ILP. They can freely choose which ILP patents they want to in-license. No “bundling” occurs. In addition, there are several elements safeguard the pro-competitive effect of the ILP, e.g., members can always challenge the validity of a patent.

By enabling access to traits at low transaction costs, the ILP provides “free access but not for free.” The use of fair and non-discriminatory licensing conditions in addition to transparent and pragmatic procedures were key for its broad acceptance in a stakeholder group with diverse interests.

While the ILP helped to establish a basis for cooperation and trust within the global vegetable breeding community, it is not perfect. Critical voices point out that the ILP is only a clearinghouse at first sight as it is “set up as a multiparty agreement between the participating companies, and strongly characterized by a membership principle, possibly creating a club atmosphere [180].” In addition, the ILP provides no solution for regulated technologies or how to establish FRAND conditions for stacked characteristics (discussed below under Section 5.1). Further, so far the ILP remains limited to vegetables. While there is an European-led initiative to establish an ILP for row crops, it might be challenging to bring such idea to life. Especially US-based multinational seed companies seem to favor an exclusive plant IP system and may be opposed to the idea of an ILP. As they often have the majority of germplasm ownership in key crops like maize, soy, cotton, canola and other crops an ILP without their participation will likely lack the critical mass.

4.3. E-Licensing and Licensing Pledges

In 2013 Syngenta launched its e-licensing platform Traitability™ [181] with the objective “to become the iTunes of plant patents with as much transparency as possible” [182]. A key feature is a cost-free access for breeding and development of new varieties. Royalties are only due for commercialization of newly-developed variety which contains the patented trait. All terms and conditions including the royalty rates are transparent. The Syngenta initiative is seen as “an impressive effort to establish a fully fletched standardized licensing clearinghouse in the sense that it organizes access to patented subject matter on in advance defined standard terms” [121]. Subsequently, other players like Monsanto [183], Enza [184], and Corteva [185]—adapted e-licensing or open-licensing platforms but didn’t disclose the term and conditions for their licenses which makes it questionable whether such system can qualify as “open”. Van Overwalle observes “Unfortunately, details on the royalty terms are lacking, so it cannot be verified whether Enza is indeed a standardized licensing clearinghouse, offering access at predefined financial terms“. [121].

4.4. Open Source Models

Open Source [186] and creative commons [187] models have been first established in for software related innovations. Based on the concern that germplasm ownership becomes increasingly concentrated and controlled by few companies [131], the Open Source Seed Initiative (OSSI) was established in 2014 by US plant breeders, farmers, and other stakeholders with a “pledge to preserve unencumbered exchange of germplasm for breeding and research purposes” with rights to save and replant harvested seed from OSSI varieties [188,189,190,191,192,193]. The pledge [194]—though legally hardly enforceable—is intended to create a moral obligation. The OSSI initiative in Germany goes a step further in using a bag-tag contract with the seed bag which by opening the bag obliges the user to comply with the conditions of the contract [195].

Louwaars sees the OSSI critical [196]. He not only questions the sustainability of the OSSI business model and whether it could sustain investments in plant breeding he also sees the OSSI in conflict with national sovereign rights on genetic resources and the openness enabled by the breeder’s exemption. Eventually the OSSI may create an anti-common effect.

Indeed, the term “open source” is misleading: Open source models in software—especially the obligation to grant-back derivatives and improvements—are functional not because are “IP-free” but they are based on enforceable copyright. Copyright in contrast to patents or PBRs does not require formal registration but is established with the act of creation. Such model works for software and other copyrightable subject matter but cannot be directly transferred to technology or plants. Thus, OSSI creates less an open-source environment but rather an unprotected commons. It does not create shareware, but freeware. Such approaches are usually seen as problematic—even in the open source literature—as they encourage to (mis)appropriate “derivatives” [189].

The OSSI’s negative position to IP ignores that it is not IP per se which is the problem, but how IP is used. It can be used to exclude or to invite. The situation can be compared with a lock to the door of your house: Even if there is a lock you can decide to have an inviting, open-house attitude. Without a lock you have no opportunity to keep even a burglar outside. Thus, the key question is not whether to have IP or not, but how to create incentives for and/or shape the IPR system towards openness.

4.5. Discussion of Current Solutions

4.5.1. A Word on Anti-Trust

The antitrust aspects of patent pools and clearinghouses like the ILP have been discussed by Kock and ten Have [160]. Assessing collective licensing structures under antitrust laws is challenging, especially in a global context. The mere fact that a group of the companies in a given industry establishes a licensing framework is inherently sensitive from an antitrust perspective. Also, the IP-antitrust interface is a topic for antitrust enforcers [197]. In the EU, patent pools and clearinghouses fall outside the scope of the Technology Transfer Block Exemption Regulation (“TTBER”) [198] and companies are required to conduct an in-depth “self-assessment” whether their arrangement is reconcilable with the EU antitrust rules. For patent pools the associated guidelines (“TT-Guidelines”) [125] contain a “soft law safe harbor” [199]. Pools that satisfy certain conditions [142] generally fall outside the scope of the cartel prohibition. However, clearing houses like the ILP do not qualify as pools as they do not offer license packages ([125], at para.244), but facilitate individual license agreements. In addition, while patents for a pool have to be selected in view of their essentiality [200], this is not the case for the 250 traits in the ILP. They are important for certain market segments but—likely—not “essential” in a strict legal sense [201].

Thus, as found by the Commission in the 3G3P case “the legal doctrine on patent pools was not directly applicable” [202]. While in principle possible, the EU Commission has so far refused to grant guidance for specific collective licensing arrangements. Thus, the only limited relief can be found in a Commission statement that even for licensing structures not qualifying as pools: “most of the rules governing patent pools under competition law could be used as guidance” [202]. The reluctance of the EU Commission to support pro-competitive solutions is certainly not helpful and indeed—as noted by Lerner and Tirole—“at least in part, the reluctance to form pools may be due to the ambiguities surrounding the manner in which proposed pools will be evaluated” [203]. Although there has not been any official direct “blessing” of the ILP as a pro-competitive instrument there are a number of supportive statements from relevant stakeholders including the EU Commission [204] and the OECD, which describes the ILP as “a promising development” because “this innovative approach allows access to traits at modest transaction costs, yet maintains incentives for innovation through the licensing fee. The ILP therefore provides “free access but not for free [6].”

While the key antitrust concerns expressed in the TT-Guidelines—i.e., price fixing and technology foreclosure—are not obvious in the absence of package licensing, they may become more relevant with the increasing importance of stacking. Here, also the issue of essentiality will become relevant and the question may be raised if the concept of essentiality should have the same central role as in patent pools associated with standards. Alternatively, the broader definition of essentiality in the context of gene related patents as proposed by Henry and Stieglitz could be considered [205].

4.5.2. Current Solutions: Fit for Future?

Thus, patent thickets which have been the primary incentive for establishing patent pools will become a reality for plant related innovation. The question arises “how do we move ahead”? What actions will be required from stakeholders, breeders and legislators, to ensure that breeding is not coming to a grinding hold, once, in 10 years >50% of all varieties comprise at least one genome-edited characteristic and in 20 years essentially all commercial varieties will comprise 5 or more of such characteristics.

While today the solution of the PINTO Database to create patent transparency and the ILP to enable access to patent traits are pragmatic approaches at least for vegetables, it is questionable whether these solutions can be evolved to meet the challenges of the future i.e., specifically (i) the increasing patent complexity of stacked traits and effects of method patents and (ii) the extension of patent activities to many crops and countries. All approaches have their shortcomings (see Table 4).

Table 4. Strengths and weaknesses of solutions for access and transparency for plant patents.

Table

A classical patent pool is not foreseeable and likely also unnecessary for the plant sector with the exception of specific technology area like CRISPR-Cas9. Breeders need an option to “pick-and-chose” the necessary licenses based on the traits in their new variety. These licenses may be to several trait patents and several method patents which extent to the trait (see under Section 3). It is unlikely that all these patent owners would join a pool or licensing platform, already because many of the method patent owners are academic institutes i.e., “non-practicing entities” which only provide licenses but do not need any.