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Industry fighting illegal seed sales

Anyone involved in the illegal selling of seed had best watch out. As promised, Arkansas attorneys Duff Nolan and Mark Henry are working with investigators to out perpetrators and recoup royalty fees for their seed company clients. Apparently, there's plenty of work for the investigators.

The penalty for being caught can be steep. During the second week of October, U.S. District Judge Susan Webber Wright in Little Rock signed a judgment regarding illegal seed sales made by an operation in east-central Arkansas.

“We settled the case for $150,000,” says Nolan. “The situation involved a farmer that had some wheat for sale illegally. The sale was consummated through the company and that allowed us to bring them into the suit and go through their records. After we created an audit model and made a close review of their records, it was determined there were several other incidences of illegal conduct with regard to Coker wheat varieties.”

Why $150,000? Was there a punitive aspect to the judgment?

“The amount does have a punitive aspect to it. There is a trebling of damages for ‘willful conduct.’ Technically, it isn't actually ‘punitive’ but the trebling is certainly a deterrent. Accidental illegal acts don't get tripled. This judgment is the highest I've seen in wheat.”

In an effort to show compassion, says Nolan, the dealer was given two methods to satisfy the judgment. One is a complete cash settlement over two years. The second method is to pay $15,000 cash now and satisfy the remaining $135,000 by purchasing $550,000 worth of Syngenta products in the next two years.

Is this something Nolan has offered/will offer others?

“We don't want to put anyone out of business. Rather than just be heavy-handed we decided to give them an alternative method to satisfy the judgment.”

Nolan and Henry have recently filed three more suits alleging seed sale misconduct. One was against a Mississippi company. The second case is against a Texas company. The last case is against a company with multiple locations in Arkansas and Texas.

Along with those three, there are five pending cases. Since beginning the actions on behalf of their clients (Syngenta Seeds, Pioneer Seed and Agripro wheat), the attorneys have put four cases to bed

Nolan says the lawsuits don't include all the “positive buys of illegal seed” that will result in resolution down the road. In other words, “we're not suing every entity where there's infringement. We're just suing those whose acts seem the most egregious. There are others that have violated the PVP that we will address and give an opportunity to resolve prior to litigation.”

How would Nolan characterize the number of those?

“I don't have the numbers in front of me, but it's far more than we've filed suit against.”

Coker wheat can only be sold legally as a certified wheat, says the attorney. “That's a rule under Title 5 of the Plant Variety Protection Act (PVP). That tells us that any time an entity is selling a Coker product that isn't certified through a certified dealership, it raises our attention. Once we investigate and make a purchase, we test it to make sure it's Coker. If it is and isn't being sold as a certified variety, we know beyond a shadow of doubt that an illegal sale has been made.”

Some dealers in illegal seed have told investigators they're selling “certified screenings,” says Nolan. Others say they're selling “feed wheat” without any feed analysis on the bag.

“Yet, they tell those they're selling it to that it grows well and yields great. And sometimes, they'll even say, ‘This is a brown-bagged Coker and I'm saving you money and keeping me from paying royalties.’”

Are investigators still being sent out to nab offenders in the act?

“I hate to say,” says Nolan. “But it's kind of like speeding. If folks never see a trooper, they tend to drive a little too fast.”

Besides the Delta states, Nolan and Henry are now working Texas, Kentucky and Alabama. They're coordinating their efforts from Nolan's Stuttgart office and Henry's new office in Fayetteville.

The two are also working a case in Nolan's backyard. He says an accused Stuttgart company was selling Coker through a brown-bag VNS (Variety Not Stated) scheme in multiple states. A suit was filed about three months ago.

“They were shipping illegally to about six or seven states,” says Nolan. “They had one of the largest distribution networks of illegal seed that I've ever come across. Everything we tested came back Coker. The guy selling it to us, when we asked what the VNS bag was, said, ‘Well, I'm not supposed to tell you — but it's Coker.’ We also heard, ‘Well, I don't want to tell you because then I'd have to pay a royalty. But it grows just like Coker.’”

Nolan insists these cases have come only after much warning.

“We've made a large effort to educate the seed industry to help keep them away from some bad practices. However, I think there are still plenty of dealers out there willfully turning a profit illegally.”

Last year, Nolan spoke at a dozen meetings and conferences and plans to hit the circuit again. He says the audiences treated him well.

“I received a lot of questions at both the podium and in the hallways. Folks also called after meetings to get clarification on certain points. This all goes to deterrence. We want to deter this illegal conduct and education is a great way to accomplish that. But if that fails, we have other options.”

He says a typical question at the meetings was: “If I sell the wheat as feed and don't advise the customer about the grain's ability to grow, am I still doing something illegal?”

The answer, says Nolan: “If it's sold with the intent to feed cattle and it goes into a food bunker, then that's okay. What triggers a violation of intellectual property rights is planting it.”

Another oft-asked question: “What about illegal wheat that's planted but not harvested?”

Answer: “Harvesting isn't the triggering mechanism for a violation. The triggering mechanism is ‘reproductive purposes’ or planting.”

Then, there are always queries on this scenario: “I've got a farm customer with 3,000 bushels he wants help moving. If I send another farmer to him is that illegal?”

“The answer is yes,” says Nolan. “A farmer can save only the amount he needs to plant his own acreage. He can't sell that saved seed at all. But under the PVP, he can save enough to plant his own land. The people we represent support that exemption.”

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