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29 May 2019

PepsiCo Vs. Potato Farmers: A Legal Take

The withdrawal of the recent Intellectual Property infringement cases filed by the multinational food corporation, PepsiCo India Holdings Pvt. Ltd. against four farmers in Gujarat has led to a lost opportunity for the courts to demystify the cloud surrounding the implementation of the Protection of Plant Varieties and Farmers’ Rights (PPV&FR) Act, 2001[1] and adoption of the Model Contract Farming Act, 2018[2] by the states to regulate contract farming practices in the country. 

Earlier, PepsiCo had filed an IP infringement case claiming that the farmers were illegally growing its registered varieties of potatoes (FL 1867 and FL 2027) marketed under the trademark FC-5. The registered varieties claimed to have lower moisture content which ensures crispiness of the company’s marque ‘lays’ chips. To ensure a regular supply of this key ingredient, the company had entered into contract farming arrangement with around 12000 farmers across Gujarat and few other states, an arrangement which PepsiCo claimed to be highly beneficial to the farmers as it provided a higher yield with better quality and an assured price for the crop produced [3].

While pursuing the litigation, the company maintained that it was safeguarding the interests of these contract farmers against the non-contractual farmers. However, the withdrawal of the case after an offer to the farmers to join the potato farming program or undertake to never buy or sow the FC-5 variety of seeds in future leaves one wondering why such an option was not explored before intimidating the farmers through litigation which also led to a loss of face for the company in India. The incident also reiterates the importance of adoption of the Model Contract Farming Act, 2018 that includes provisions for an accessible and simple dispute settlement mechanism at the lowest level possible for quick disposal of disputes. It would also reduce the incidence of dishonor of contractual obligations by farmers or companies involved in contract farming when the market price shows stark fluctuation.

Further, a closer look at the incident shows that the withdrawal was not only a result of mounting social and political pressure but also a feeble case in favor of the company, thanks to the pro-farmer attribute [4] of the PPV&FR Act, 2001 which was enacted to ensure India’s compliance with the TRIPS. It is pertinent to note that India had rejected the framework of plant breeders’ rights given by the International Union for Protection of New Plant Varieties (UPOV Convention) which denied the farmers the freedom to re-use farm saved seeds and to exchange them with their neighbors.

In the present litigation, the farmers relied on Section 39 of the PPV&FR Act, 2001 which allows a farmer “to save, use, sow, resow, exchange, share or sell his farm produce including seed of a variety protected under this Act, provided that the farmer shall not be entitled to sell branded seed of a variety protected under this Act”. Further, the explanation to the section provides the meaning of a “Branded seed” as “any seed put in a package or any other container and labelled in a manner indicating that such seed is of a variety protected under this Act.” Moreover, Section 42 protects “innocent infringement” who were not aware of existence of registration of the seed variety. This provision seems to be an exception to the general principle that ignorance of law is not an excuse, which demonstrates that the act has been enacted keeping in mind the lack of awareness among the farmers operating in our country. Therefore, the farmers held ransom by the company could easily utilize these provisions to evade the suit. In addition, the farmers claimed precedence of their right against the allegations of infringement made by the Company under Section 64 by referring to the non-obstante clause in the beginning of Section 39 which says,” Notwithstanding anything contained in this act…”. However, that would only be clarified the next time the court gets an opportunity of interpreting the said provision.

The occurrence also highlights the need for empowerment of farmers through grassroot organizations and other mechanisms to counter intimidation by large entities and the need for awareness of the various rights and obligation of the farmers, so they do not end up getting entangled in a lawsuit. It has also obligated the government to come up with a legal solution to resolve similar issues that are bound to arise in future. The Government will also have to be careful to protect the rights of the Goliaths in this case so as not to deter foreign investment which is necessary for boosting our economy and thereby balancing the interest of both parties. 

(Co-Author: Aysha David, 4th Year Student, School of Law Christ University, Bangalore)

[1] https://indiacode.nic.in/bitstream/123456789/1909/1/200153.pdf

[2] http://agricoop.nic.in/sites/default/files/Model%20Contract%20Farming%20Act%202018.pdf

[3] Chips at stake in the PepsiCo-farmers fight – The Hindu – 5th May, 2019.

[4] http://plantauthority.gov.in/pdf/F_Brochure_English.pdf

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