*AI-generated translation, for reference only.

[Keywords] Civil, Dispute over ownership and infringement of new plant variety right, Dispute over temporary protection period royalty for new plant variety, Manufacture, Sell, Offering for Sale, Legitimate source, Exhaustion of right

Case Facts

The plaintiff, Tianjin [REDACTED] Seed Company, alleged that: The plaintiff is the variety right holder of the new plant variety of melon named "Boyang 9." Shouguang [REDACTED] Seedling Company, without authorization, sold melon seedlings under the name "Boyang 9," infringing upon its legitimate rights and interests. Liu [REDACTED] Sheng, as the sole shareholder and actual controller of Shouguang [REDACTED] Seedling Company, should bear joint liability for the infringement of Shouguang [REDACTED] Seedling Company. It requested judgment ordering Shouguang [REDACTED] Seedling Company and Liu [REDACTED] Sheng to immediately cease the infringement, pay a temporary protection period royalty of RMB 500,000 (same currency hereinafter), infringement economic losses of RMB 1,000,000, and reasonable expenses of RMB 42,900.

The defendants, Shouguang [REDACTED] Seedling Company and Liu [REDACTED] Sheng, argued in their defense that: The seeds for cultivating the allegedly infringing "Boyang 9" seedlings were legally purchased from a manufacturer with corresponding authorization and were propagated from "Boyang 9" seeds. As the variety right holder, Tianjin [REDACTED] Seed Company's rights have been exhausted; thus, it does not constitute infringement.

The court ascertained through trial: Tianjin [REDACTED] Seed Company is the variety right holder of the new plant variety of melon "Boyang 9." Starting from August 9, 2020, Shouguang [REDACTED] Seedling Company continuously promoted information about grafting "Boyang 9," claiming to sell 300,000 to 400,000 "Boyang 9" seedlings per year. An authorized dealer of Tianjin [REDACTED] Seed Company confirmed that Shouguang [REDACTED] Seedling Company purchased 10,000 grains of "Boyang 9" melon seeds from Shouguang [REDACTED] Agricultural Development Company, stating that the grafted "Boyang 9" melon seedlings were RMB 1.1 per plant, the seeds were RMB 0.28 per grain, totaling RMB 2,800. Shouguang [REDACTED] Seedling Company purchased a total of RMB 15,000 worth of "Boyang 9" melon seeds from the dealer of Tianjin [REDACTED] Seed Company in three batches.

The Intermediate People's Court of Qingdao, Shandong Province rendered the civil judgment (2022) Lu 02 Zhi Min Chu No. 160 on December 27, 2022, ordering: 1. Shouguang [REDACTED] Seedling Company shall immediately cease the acts of propagating, selling, and offering for sale of "Boyang 9" which infringe the new plant variety right of Tianjin [REDACTED] Seed Company; 2. Shouguang [REDACTED] Seedling Company shall, within ten days from the effective date of the judgment, pay Tianjin [REDACTED] Seed Company a temporary protection period royalty for the "Boyang 9" variety of RMB 30,000 and compensate Tianjin [REDACTED] Seed Company for economic losses of RMB 120,000; 3. Shouguang [REDACTED] Seedling Company shall, within ten days from the effective date of the judgment, compensate Tianjin [REDACTED] Seed Company for reasonable expenses incurred in stopping the infringement of RMB 26,900; 4. Liu [REDACTED] Sheng shall bear joint and several liability for the debts of Shouguang [REDACTED] Seedling Company set forth in items 2 and 3 above; 5. The other claims of Tianjin [REDACTED] Seed Company were dismissed. After the judgment was pronounced, Shouguang [REDACTED] Seedling Company and Liu [REDACTED] Sheng appealed, arguing that in the process of cultivating the "Boyang 9" seeds into seedlings, they did not produce or propagate new propagating materials, and for the subsequent sale of the seedlings, the principle of exhaustion should apply. The Supreme People's Court rendered the civil judgment (2023) SPC IP Civil Final No. 478 on June 7, 2023, dismissing the appeal and upholding the original judgment.

Judge's Opinion

The effective judgment of the court holds that: Article 10 of the Provisions of the Supreme People's Court on Several Issues Concerning the Specific Application of Law in the Trial of Disputes over Infringement of New Plant Variety Rights (II) (Fa Shi [2021] No. 14) provides: "Where the propagating material of a protected variety has been sold by the variety right holder or a unit or individual licensed by the variety right holder, if the right holder claims that another person's production, propagation, or sale of such propagating material constitutes infringement, the people's court shall generally not support it, except in the following circumstances: (1) the production, propagation, or sale of propagating materials obtained after the production or propagation of such propagating materials; (2) the export of such propagating materials to a country or region that does not protect the plant genus or species to which the variety belongs for the purpose of production or propagation." According to the above provisions, after the propagating material of a protected variety is sold by the variety right holder or a unit or individual licensed by the variety right holder, if another person purchases it and sells it after one round of propagation, without involving the further production or propagation of progeny propagating materials, the principle of exhaustion of rights applies because the variety right holder has obtained a reasonable return on the sold propagating material. In this case, there is evidence that Shouguang [REDACTED] Seedling Company purchased a total of 60,000 grains of "Boyang 9" melon seeds from a third party, which were legally authorized for sale by the right holder. Therefore, it had the right to cultivate the purchased melon seeds into seedlings and sell them. Both parties did not dispute the fact that one melon seed can only cultivate one melon seedling. Shouguang [REDACTED] Seedling Company cultivated the legally purchased 60,000 "Boyang 9" melon seeds into seedlings and sold 60,000 "Boyang 9" melon seedlings, which does not constitute infringement by production, propagation, or sale without the right holder's permission.

A purchaser who legally obtains seeds from the variety right holder or a person licensed by the variety right holder and sells the seedlings after cultivating them does not constitute infringement. However, if there is no evidence that the seeds used to cultivate the seedlings originate from the variety right holder, the production, propagation, and sale of seedlings from illegally sourced seeds constitute infringement. Although it was determined that Shouguang [REDACTED] Seedling Company and Liu [REDACTED] Sheng purchased a total of 60,000 grains of "Boyang 9" melon seeds from the legal dealer of Tianjin [REDACTED] Seed Company, their public promotion claimed to sell 300,000 to 400,000 "Boyang 9" seedlings per year, which clearly exceeds the amount of seeds legally purchased. Therefore, the first-instance judgment concluded that there existed acts of production, sale, and offering for sale infringing the new plant variety right of "Boyang 9" melon, and the conclusion was proper.

Judgment Digest

According to the principle of exhaustion of rights, cultivating seeds sold under the authorization of the new plant variety right holder into seedlings and selling them, where the seller does not use the seedlings for further production or propagation, constitutes legitimate commercial conduct and does not constitute infringement. However, if there is no evidence that the seeds used to cultivate the seedlings originate from the variety right holder, the production, propagation, and sale of seedlings from illegally sourced seeds constitute infringement.

Related Index

Article 28 of the Seed Law of the People's Republic of China

Article 10 of the Provisions of the Supreme People's Court on Several Issues Concerning the Specific Application of Law in the Trial of Disputes over Infringement of New Plant Variety Rights (II) (Fa Shi [2021] No. 14)

First Instance: Civil Judgment (2022) Lu 02 Zhi Min Chu No. 160 of the Intermediate People's Court of Qingdao, Shandong Province (December 27, 2022)

Second Instance: Civil Judgment (2023) SPC IP Civil Final No. 478 of the Supreme People's Court (June 7, 2023)