FEDERAL COURT OF AUSTRALIA

INTELLECTUAL PROPERTY – Plant Variety Rights – no prior commercialisation rule expressed in terms of “sale” – “sell” defined as including let on hire and exchange by way of barter – whether “sale” to be understood in the technical common law sense – whether agreements transferring property in grapevines on conditions restricting further disposition were “sales”.

Plant Variety Rights Act 1987 (Cth) ss 3, 5, 12, 14, 15

International Convention for the Protection of New Varieties of Plants 1961

Income Tax Special Purposes Commissioners v Pemsel [1891] AC 531 referred to

J. & P. Coats Ltd v The Commissioners of Inland Revenue [1897] 1 QB 778 referred to

Lambert v Rowe [1914] 1 KB 38 referred to

Robshaw Brothers Ltd v Mayer [1957] 1 Ch 125 referred to

Ashfield Municipal Council v Joyce [1978] AC 122 referred to

Re Westminster Property Group Plc [1984] 1 WLR 1117 referred to

Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd [1985] 3 NSWLR 475 referred to

Commissioner of Taxation v Booth (1986) 17 FCR 555 referred to

Booth v Commissioner of Taxation (1987) 164 CLR 159 referred to

SUN WORLD INTERNATIONAL INC (FORMERLY SUN WORLD INC) vREGISTRAR, PLANT BREEDER’S RIGHTS (FORMERLYREGISTRAR, PLANT VARIETY RIGHTS)and MURRAY VALLEY GRAPE GROWERS COUNCIL

VG 379 of 1997

burchett, carr & mansfield jj

melbourne

2 October 1998

On appeal from a Judge of the Federal Court of Australia

minute of orders

THE COURT ORDERS THAT:

1.                  The appeal be dismissed.

2.         The appellant pay the respondent’s costs of the appeal.

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

REASONS FOR JUDGMENT

BURCHETT J:

I have had the advantage of reading in draft the judgment of Carr J, with which, subject to what follows, I am in general agreement.

The issue in this appeal is really a very narrow one.  It is whether, in the reference made in s 14 of the Plant Variety Rights Act 1987 to “a sale of a plant, or reproductive material of a plant”, the word “sale” should be understood according to the technical sense it bears in the Common Law.  Under the Common Law, the primary meaning of the word “sale” refers to a transfer of the property in goods from a seller to a buyer for a consideration in money called the price:  J. & P. Coats, Limited v The Commissioners of Inland Revenue  [1897] 1 QB 778 at 783, per Wills J; Robshaw Brothers Ltd v Mayer [1957] Ch 125; In re Westminster Property Group Plc [1984] 1 WLR 1117 at 1122, affirmed [1985] 1 WLR 676 at 683.  In relying on the technical meaning, the appellant has the advantage that, prima facie, where a statute uses a word which is a term of legal art, it uses that word in its technical sense:  Ashfield Municipal Council v Joyce [1978] AC 122 at 134, where Lord Wilberforce cited Lord Macnaghten’s statement of a general rule to this effect in Income Tax Special Purposes Commissioners v Pemsel [1891] AC 531 at 580.  See also Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd [1985] 3 NSWLR 475 at 494, per McHugh JA (with whom Priestley JA agreed); Commissioner of Taxation v Booth (1986) 17 FCR 555 at 577.

But here the Act implements an international convention, the International Convention for the Protection of New Varieties of Plants of December 2, 1961, as revised at Geneva on November 10, 1972, and on October 23, 1978, Article 6 of which excludes protection for a variety that has “been offered for sale or marketed” in circumstances fairly closely corresponding to those stated in s 14 of the Act.  (That they are intended actually to correspond is made clear by s 5(b) – a grant of plant variety rights is only to be made “to give effect to the obligations of Australia under the Convention”.)  The expression used in the Convention is plainly not intended to be understood in accordance with the Common Law.  It is neither tied to Common Law principles by its language, nor confined to Common Law countries in respect of the international reach of the Convention.  Although, when s 14 was drafted, the word “sale” was inserted in it, the terms of the section do not leave the matter of international reach in doubt – the “sale” might take place “in Australia” (subsec.(a)), or “in another country” (subsec. (b)).  When legislation refers to a sale in another country, it must contemplate a transaction which may take a legal form and be governed by legal principles that do not necessarily coincide with the requirements of the Common Law.

Accordingly, I do not accept the appellant’s argument which would confine the application of s 14 to a sale as understood in our law, subject only to express provisions to the contrary in the Act.  Once that confinement of the section is rejected, there is no reason to exclude the transactions with which this matter is concerned.  In giving s 14 a broad construction, I am also fortified by the fact that its time limits are in no way stringent.  Its provisions do not suggest that Parliament would not have intended it to operate according to its terms, those terms being understood to include a transfer of property for a consideration other than money.

It is unnecessary to consider the Notice of Contention, which raised the question whether an assignment of plant variety rights, made before the enactment of the Act, could form the basis of a registration.  However, I see no reason to differ from the view of the primary judge that it could.  Section 15 contemplates assignment of the right to apply “for plant variety rights”, and s 12 defines those rights.  If all the rights in s 12 have in fact been assigned for the whole world, or a part of it including Australia, the fact that enforcement here had to await the passing of the Act, and an application under it, does not mean that the right to apply did not vest in the assignee upon this right coming into existence.  Provided the assignment was wide enough to embrace the right, Equity could fasten upon it, at the moment it arose, which was when the Act came into force.  I collected the authorities justifying this conclusion, as a corollary of the principle that Equity deems that to have been done which ought to have been done, in my dissenting judgment in Commissioner of Taxation v Booth at 577-581.  When that case went on appeal, as Booth v Commissioner of Taxation (1987) 164 CLR 159, Mason CJ said (at 167):

“It is possible to assign immediately a present right to future income … .  But … in some cases it may be impossible to identify a present right … .  In such cases an attempted assignment deals with future property or an expectancy and operates to vest the future income in the assignee as and when that future income accrues due, but not before it accrues due.”

See also the remarks of Toohey and Gaudron JJ at 177-178.

The appeal should be dismissed with costs.

Associate:

Dated:              2 October 1998

On appeal from a Judge of the Federal Court of Australia

REASONS FOR JUDGMENT

CARR J:

Introduction

This is an appeal from an order made by a judge of this Court, on 25 June 1997, dismissing an application by way of an appeal from a decision made by the Administrative Appeals Tribunal on 13 October 1995.  The Tribunal had affirmed a decision by the respondent, the Registrar of Plant Variety Rights, made on 12 August 1993, to refuse the appellant’s application, made on 16 July 1991, for the grant of plant variety rights under the now repealed Plant Variety Rights Act 1987 (Cth) (“the Act”).  That application related to a variety of grapevine whose grapes are called “Sugraone”.  The Registrar decided that, by reason of s 14 of the Act, the appellant 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.  In summary, the Tribunal upheld that finding and held that five other agreements, (one made in the United States of America, three with Chilean grape growers and one with an Italian grape grower) were also to be characterised as disqualifying sales.  The short question in the appeal is whether his Honour was correct in holding that those five latter transactions, described in more detail below, each fell within the definition of a “sale”.  His Honour held that the 1972 transaction did not do so and that the Tribunal was in error to that limited extent.

Factual Background

The following factual background is taken directly from the reasons for judgment of the learned primary judge.  [His Honour first described the history of the breeding of Sugraone (also known as “Superior Seedless”), the grant of a plant patent in the United States of America and various assignments of rights in relation to the plant.  That factual history was relevant to issues which his Honour had to decide, but which are no longer relevant to the appeal.  It is sufficient to pick up his Honour’s narrative at a point when all relevant rights to the plant were vested in an American company called Superior Farming Company (“SFC”)].

                “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 sell, 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 price 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 following outline of the relevant statutory provisions is also taken almost completely from the reasons of the primary judge.

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 UPOV 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 were 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 3 of the Act (the definitions section) provided:

"3.(1)  In this Act, unless the contrary intention appears:

. . .

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

The Decision At First Instance

The learned primary judge, in summary, held that:

            .      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 [this holding is not in issue in the appeal];

            .      the disposition to Mr Keck in December 1984 amounted to a sale within the meaning of that section, notwithstanding the restrictive covenant concerning resale; and

            .      the same applied to the transactions whereby grapevines were sold to the Chilean growers and the Italian grower, notwithstanding the various restrictions imposed by the terms of the four respective agreements.

THE GROUNDS OF APPEAL, THE RESPECTIVE CONTENTIONS AND

CONCLUSIONS

Whether there had been a “sale” within the meaning of s 14 of the Act?

This was the only issue in the appeal.  The appellant contended that the primary judge should have held that the express extension of the meaning “sell”, in s 3 of the Act, to include “let on hire and exchange by way of barter” provided the only extension of the meaning of that word.  The appellant submitted that his Honour should have held that the word “sale”, in s 14 of the Act meant a transfer of property for real monetary consideration only and that the true consideration in each of the five transactions in the present case was not only monetary.  Further, so it was put, the primary judge should have held that the dispositions of reproductive material accompanied by restrictive covenants on its use did not constitute “sales”.  The appellant submitted that a disposition was not a “sale” for the purposes of s 14 of the Act if it did not involve an assignment of the absolute or general property in the reproductive material.  The appellant complained that the primary judge gave no or no sufficient weight to the circumstances surrounding the dispositions of the reproductive material.

In oral argument Dr J McL Emmerson QC, counsel for the appellant, took us to certain “pointers” in the statutory context which, so he submitted, led to the conclusion that the sale which Parliament had in mind in enacting s 14 was a sale that left the purchaser free to propagate the variety.  First, there was no general prohibition in s 14 on commercial working of the variety.  A breeder could breed a variety and exploit it commercially, but what he may not do is sell a plant or reproductive material for a plant.  Secondly, there was no analogy between the sales referred to in s 14 and the sort of events that occur in other intellectual property statutes which prevent a person from obtaining rights.  It was perfectly consistent, so it was put, with an application for a plant variety right that the variety might already be well-known commercially.  Thirdly, it was submitted that s 14 itself contemplates that the relevant consent might not only be that of the breeder but also of a successor of a breeder.  The Act contemplated that there could be an assignment of an application for a plant variety right, without in any way invalidating that right.  We were taken to s 15 and the definition of “successor” in s 3 of the Act in that regard.  As his Honour had held, in the course of such an assignment, the assignor can transfer to the assignee plants or reproductive material of plants. Dr Emmerson submitted that this was another pointer towards the true meaning of the word “sell” in s 14.  Under s 33(2) an applicant might be required to cause a specified quantity of reproductive material to be delivered to a specified genetic resources centre.  Dr Emmerson took us to each of the five agreements and, in particular, referred us to the restrictions placed upon the parties contracting with SFC.  He argued that the legal consequence of the control maintained by SFC was that there was not the sort of unrestricted sale which was contemplated by s 14. 

I accept that each of the five transactions can be seen to have involved an agreement wider in scope than the mere disposition (to use a neutral term for the time being) of the relevant reproductive material.  For example, the Keck transaction involved Mr Keck becoming a viticulturist.  He owned some land in Riverside County, California.  On 27 February 1984 SFC and Mr Keck entered into a “Farm Development and Management Agreement” under which SFC agreed to develop, manage, cultivate and care for the vineyard and (all on behalf of Mr Keck) to sell the grapes.  That agreement was amended to take effect from 1 December 1984.  By a further agreement, said to be “effective this 1st day of December 1984”, SFC agreed to sell and Mr Keck agreed to buy the 12,925 grapevines for a total purchase price (including sales tax) of US$20,550.75.  That agreement described the location of those grapevines as being on Mr Keck’s abovementioned property.  The agreement recited that part of the consideration for SFC was Mr Keck’s agreement to enter into a marketing arrangement whereby SFC would have the right to market the grapes from the vines for standard commissions for five “commercial years”.  I accept, also, that Article VIII of the further agreement (portion of which is set out above) placed very substantial restrictions on the use to which Mr Keck could put the grapevines.

The other four agreements can also be seen to have wider commercial purposes than simply the disposition of the reproductive material.  All of the agreements imposed restrictions or controls on the use to which the plant or reproductive material could be put. 

Dr Emmerson distinguished the particular extensions of the definition of “sell” in the Act (“let on hire and exchange by way of barter”) from cases in which there are restrictions on use of the type described in the five agreements.  He submitted that s 14 was intended to deal with the transfer of plants or propagating material in a way that put the transferee in an unrestricted position to propagate the material itself. 

We were taken to several cases in which the word “sell” had been used in a statutory or regulatory context.  They included J. & P. Coats Ltd v Commissioners of Inland Revenue [1897] 1 QB 778; Robshaw Brothers Ltd v Mayer [1957] 1 Ch 125 and in Re Westminster Property Group Plc [1984] 1 WLR 1117.  With all due respect to Dr Emmerson, I do not find those cases helpful in resolving the present issue.  In fairness to him, the cases were cited only as examples of the approach which a court should take.  There are other cases where “sale” has not been construed in its strict legal sense.  For example, Lambert v Rowe [1914] 1 KB 38 was a case where the word “sell” in a statute [the Markets and Fairs Clauses Act, 1847 (10 & 11 Vict. c.14)] was held to be understood in a popular and not in its strict legal sense.  The Divisional Court in that case was unanimous in so holding.  The Court included Scrutton J who (at 49) said:

“For these reasons I think the justices in endeavouring to apply the law of the land have applied the wrong law, and instead of reading the word “sale” in the sense which it bears in the Sale of Goods Act they should have read it in the popular sense that it bears in the mind of farmers.”

But in the end, in my view, it all comes back to whether Parliament intended the word “sell” in the Act to be construed as being confined to a transfer of the general absolute property in the plant or reproductive material for a consideration limited to money. 

I accept Dr Emmerson’s submission that one starts with the prima facie meaning of the word “sell” and then one looks to the statutory context to see whether one departs from that prima facie meaning.  Accepting that in Australian law the primary meaning of the word “sell” is the conveyance of some article for money, the question is whether Parliament intended to use the word “sell” in the Act in some sense other than that primary meaning i.e. in some secondary sense.  The point is not an easy one to resolve.  However, in my opinion when Parliament provided in s 3 of the Act that “sell” in relation to a plant or reproductive material of a plant, includes let on hire and exchange by way of barter, it intended the word “sell” to be interpreted in a very wide sense and not just in its primary sense.  In my view, so construed, “sell” encompasses the sales which were made as part of the five transactions described above.  Put another way, I do not think that the above definition of “sell” should be construed as ‘“sell’ means sell (stricto sensu) and includes ‘let on hire and exchange by way of barter’”.  In my opinion there are sufficient contextual indications that the words “sale” and “sell” were used in the Act, not in their strict technical sense, but in their ordinary English meaning.  In each of the five transactions there was a sale of the plant or reproductive material for a consideration which included money.  Neither the fact that the price was low or nominal, nor that the sale was part of a larger transaction nor that restrictive covenants were imposed, in my view removes the legal characteristic of a relevant sale from the transactions.  I do not think that his Honour erred in reaching that conclusion.  Unlike the situation in which Upjohn J found himself in Robshaw - the absence of any context which would entitle him to extend the prima facie meaning of “sale or purchase” in Order 14A of the English Rules of the Supreme Court (see p 132), there is in the present matter sufficiently clear evidence of Parliament’s intention to extend the prima facie meaning of the words “sale” and “sell”. 

In respect of the restrictions contained in the five agreements, I think that it is permissible to test the appellant’s argument by varying the factual situation of the present matter in one respect.  Suppose that instead of disposing of the reproductive material in each of the five transactions, SFC had leased it on otherwise exactly the same conditions.  Would that not fall within the definition as being a “letting on hire”?  When I put that proposition to Dr Emmerson he said, in effect, that the answer would be no because there had to be unrestricted access to the propagating material.  I find myself unable to accept that proposition.  When something is “let on hire” it is commonplace for there to be conditions imposed upon the letting.  The hirer may accept restrictions on how when and where the thing may be used.  I do not think that Parliament intended the imposition of restrictions to take a transaction out of the operation of s 14 of the Act, either in the case of a letting on hire or in the case of a sale.

Another contextual indication, in my view, arises out of the fact that the Act was enacted to give effect to Australia’s obligations as a signatory to the UPOV Convention.  Section 5 of the Act provides that nothing in the Act requires or permits the grant of plant variety acts in respect of a new plant variety unless the grant is appropriate to give effect to the obligations of Australia under that convention.  Article 6(1)(b) of the UPOV Convention (which, as mentioned above, forms the Schedule to the Act) imposes conditions which a breeder must satisfy in order to benefit from the protection provided for in that convention.  One such condition is that, at the date on which the application for protection in a member State is filed, the variety 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 certain specified plants (including vines) and four years in the case of all other plants.  It is true that the terms of the article are in one respect more stringent than s 14 (“offer for sale” compared to “sell”) and in another respect perhaps less stringent (the reference to “marketed”).  That might neutralise, to some extent, what might be described as the contextual relevance of the UPOV Convention.  But the fact that s 14(b) of the Act referred to transactions which took place in a country other than Australia suggests, I think, that those transactions did not have to be characterised strictly as “sales” in the primary sense of that term under Australian law.  In my opinion, that factor is yet another contextual indication that assists in the displacement of what might otherwise have been the primary meaning of the word “sell” in s 14 of the Act.

For the foregoing reasons I would dismiss the appeal with costs.

Associate:

Dated:              2 October 1998

on appeal from a judge of the federal court of australia

REASONS FOR JUDGMENT

MANSFIELD J:

I have had the advantage of reading in draft the judgment of Carr J.  I agree with those reasons and the orders he proposes.

I certify that this page is a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.

Associate:

Dated:              2 October 1998