Bayer Gets Rare Monsanto Reprieve With Cotton Seed Ruling

(Bloomberg) -- Bayer AG's Monsanto won a legal battle to own patents on genetically-modified cotton seeds in India, the world's biggest producer of the fiber, in a rare piece of good news for the German company.

India's Supreme Court ruled on Tuesday that Monsanto's patent for Bt cotton seeds is valid, overturning a judgment by the High Court of Delhi that said certain items such as seeds, plants and animals can't be patented. A two-judge bench, headed by Justice Rohinton F. Nariman, referred the matter to the lower court saying that all aspects related to Monsanto's patents on genetically-modified seeds can be considered by the Delhi court.

The ruling is a boost for Monsanto, which faced the risk of losing revenues without a claim over exclusive rights in India, as the company faces legal challenges in the U.S. over allegations that its Roundup weed killer can cause cancer as well as a backlash in Europe over genetically modified organisms. The verdict may also boost foreign investors' confidence about the validity of patents awarded to firms in India.

“Pirates cannot be innovators,” said Ashok Gulati, a professor at the Indian Council for Research on International Economic Relations in New Delhi. “If we are to respect intellectual property only then we can expect to access the best technologies in the world.”

The ruling may prompt some biotech companies to revive expansion plans that were placed on hold amid restrictions imposed by the government and local courts in recent years.

The high court's ruling “essentially means that the patent is in force,” said a spokesman for Bayer in India. Shares of the German company rose 2.2 percent to 65.39 euros in Frankfurt trading.

Shares of Kaveri Seed Co. erased gains to drop as much as 3.6 percent on Tuesday, while Monsanto India Ltd. jumped as much as 13.5 percent in high volumes after the verdict.

Seed Fees

The ruling is the result of years of legal battles between Monsanto and domestic seed companies, led by Nuziveedu Seeds Ltd. The Indian firm, one of the licensees of the U.S. company's seeds in India, had petitioned in the court to cancel Monsanto's patent. Monsanto had lodged counter cases for patent infringements by Indian companies.

The issue of the validity of Monsanto's patent has been left for the lower court to decide, Nuziveedu's lawyer Diya Kapur said.

Local seed firms, which get licenses from Monsanto to sell genetically-modified seeds, pay a “trait fee” fixed by the government. They had argued that the U.S. company was not entitled to get any more money from them. India cut the fee on Monsanto's cotton seeds last year to 39 rupees ($0.56) per 450-gram pack from 49 rupees. About 50 million packs of GM cotton seeds are produced each year in India, according to the National Seed Association of India.

--With assistance from Pratik Parija and Marthe Fourcade.

To contact the reporters on this story: Upmanyu Trivedi in New Delhi at utrivedi2@bloomberg.net;Vrishti Beniwal in New Delhi at vbeniwal1@bloomberg.net

To contact the editors responsible for this story: Unni Krishnan at ukrishnan2@bloomberg.net, ;Eric Pfanner at epfanner1@bloomberg.net, Atul Prakash, Abhay Singh