Exhaustion of plant variety rights:KANZI nicoter apples

In a recent case that reached the Court of Justice of the European Union (CJ), the question had to be answered, whether the main condition for exhaustion, disposal by the holder or with his consent, was fulfilled.

Better3fruit licenses nictoter/KANZI to Nicolaï

The company Better3fruit acquired the Community PVR for the apple variety nicoter. Better3fruit was also the proprietor of the trade mark KANZI, exclusively used for the nicoter variety.

Under a license contract with Better3fruit, Nicolaï, a Belgian apple tree producer, acquired the exclusive right to grow and market apple trees of the nicoter/KANZI variety. One clause in this contract which is of utmost relevance for the ruling of the Court of Justice of the European Union (EU) is detailed below:

Licensee (Nicolaï) "... will not dispose of or sell any product covered by the licence unless the other party signs in advance the annexed grower's licence (where the other party is a grower) or the annexed marketing licence (where the other party is a trader )".

Nicolaï, Mr Hustin and Mr Goossens

On 24 December 2004, Nicolaï sold 7,000 apple trees of the nicoter/KANZI variety to a Belgian apple producer, Mr Hustin. In that transaction, Mr Hustin was not required to sign, (at least he did not do so), a license contract with regard to the growing of the apples or the sale of the harvest.

On 4 December 2007, it was established that a Mr Goossens was selling apples under the KANZI trade mark on the market of Hasselt in Belgium. It transpired that those apples had been supplied to him by Mr Hustin.

Greenstar-Kanzi Europe NV v Jean Hustin, Jo Goossens

On the basis of that finding, Greenstar Kanzi Europe (GKE) , the successor of Nicolaï as licensee of Better3fruit, brought a court action for infringement of the Community PVR against Mr Hustin and Mr Goossens. The proceedings reached the Belgian Court of Cassation.

The Court of Cassation decided to stay the proceedings and to refer two questions to the CJ for a so-called preliminary ruling, a binding interpretation of a provision of EU law.

The questions concerned what action may be taken against third parties (in this case Hustin and Goossens) who obtain material of a protected variety through a licensee, which do not respect the licence agreement.

The answers of the CJ

The CJ implied that the rights holder can bring an action for infringement against a third party which has obtained material through another person who has contravened the conditions or limitations set out in the licensing contract that the other person agreed with the holder to the extent that the conditions or limitations in question relate directly to the essential features of the Community PVR concerned.

Unfortunately, the CJ did not indicate what should be considered as essential features of the Community PVR. It ruled instead, that the Belgian judiciary should make that assessment. The Belgian judges took their time. The final outcome of the procedure, a decision of the Court of Gent, is expected 1 December 2014, more than three years after the ruling of the CJ.

What can we learn from this case?

First, that in order to avoid legal problems, the person who acquires material of a protected variety from a person other than the holder of the right, should seek the assurance that this material was acquired by the other person from the holder or with the holder's consent.

Secondly this case gives an example of the effectiveness of dual protection, ie, protection of a variety by a PVR as well as by a trade mark. Indeed, the infringement of the PVR for nicoter would probably not have been discovered, if apples of that variety had not been offered for sale under the KANZI trade mark. On the other hand, the protection offered by the PVR to this apple variety was an effective instrument to defend the KANZI trade mark.