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FAQ - NDSU Plant Varieties and the Canadian Market

NDSU Research Foundation
North Dakota State University


NDSU Plant Varieties and the Canadian Market - Frequently Asked Questions

The NDSU Research Foundation (NDSU/RF) and Canadian companies and organizations have been entering into licensing agreements involving NDSU plant varieties. When possible, the NDSU/RF will continue forging such agreements.

These arrangements allow the NDSU/RF to maintain control over the production of Registered and Certified seed in Canada, minimize the proliferation of common seed, and prevent seed of an NDSU variety from entering the United States from Canada. These agreements also garner revenue that can help support NDSU plant breeding programs and fund the NDSU/RF endowment, which also supports other research at NDSU.

Since the NDSU/RF began arranging these licensing agreements, several concerns have arisen. What follows is a list of questions reflecting those concerns and the NDSU/RF position:

1. What happens if you don't license plant varieties in Canada?

Making plant varieties available to Canadian seedsmen and producers by granting exclusive marketing rights to a licensee is a recent undertaking for NDSU, but the controlled exchange of crop genetics, both germplasm and varieties, is a long-standing practice. And it is on this point that the interests of North Dakota's certified seedsmen and producers converge.

Without a free-flowing exchange of germplasm on a worldwide basis, public and private breeding programs would lack the essential tools for developing varieties that meet current and future agronomic challenges. Fusarium head blight (scab) is only one example of the need for this exchange.

During the rust years in the 1950s, North Dakota producers sought out Selkirk wheat, a rust-resistant Canadian variety. What if Canadian breeding programs are the first to release scab-resistant wheat or barley varieties? Today, North Dakota's canola producers are dependent upon Canadian varieties. The same holds for the state's pulse crop producers.

Furthermore, if licensing doesn't occur, NDSU plant varieties would still be able to move into Canada; however, without the control licensing agreements provide, there is a potential for seed proliferation, as Canadian seedsmen anticipate registration. If no registration is forthcoming, that seed is likely to find its way into U.S. channels, either as seed and/or as a commodity. Also, without licensing agreements in place, the NDSU/RF will miss opportunities for generating revenue from seed sales.

(NOTE: Unlike the United States, Canada has a registration process that all plant varieties, both foreign and domestic, must undergo prior to commercialization. Depending upon the crop and the testing it requires, the registration period may extend from one to four years. Even when covered by a licensing agreement, some NDSU varieties may never be registered for sale as Certified seed in Canada.)

2. How much money will licensing varieties in Canada generate for NDSU?

Because individual licensing agreements are based on a bidding process, the amount of revenue generated from each can vary considerably. In short, the revenue potential depends upon the crop and the variety's potential. For example, a high-quality oat or soybean variety currently would be of less interest to Canadians than a scab-resistant wheat or barley variety. Other factors, such as adaptability to the environment, also affect a variety's perceived value, and it is this perceived value that determines how much a prospective Canadian licensee is willing to bid for exclusive rights. That bid involves three components: an up-front fee paid by the licensee when the agreement is signed; a second licensing fee paid upon registration; and research fees (royalties), which accrue on a per-bushel basis once a variety is registered and which are derived from the sales of Registered and Certified seed. Again, because an NDSU variety may not meet the standards set forth in the registration process, a Canadian licensee has no guarantees until registration occurs. And even then, a variety's profit potential ultimately depends upon its popularity among Canadian producers. These unknowns affect how much money, by way of licensing fees, a potential licensee is willing to invest.

3. What happens to the licensing fees and the royalties the NDSU/RF receives?

The NDSU/RF makes available to NDSU agriculture research 80 percent of the net revenues, which include the breeders' 30-percent shares that they may or may not elect to receive. Of the 20 percent it retains, the NDSU/RF dedicates 30 percent to the NDSU/RF research endowment to support future research at NDSU.

4. Do the Canadians get access to NDSU varieties at the same time as their U.S. counterparts?

The Canadian licensee gets access within one year of when U.S. seedsmen do. But because of the Canadian registration process, Canadian producers will have to wait anywhere from one to four years before they have access to Certified seed.

5. Can the NDSU/RF hold varieties off the market in Canada and thereby create an advantage for North Dakota producers?

Under the Canadian Plants Breeders' Rights (PBR) law, it is illegal to hold a variety off the commercial market. What provides the lag in availability to Canadian producers is the registration process, over which the NDSU/RF has no control, or at best minimal control.

6. Can U.S. seedsmen sell seed of a licensed variety into Canada?

Yes. However, they can sell seed only to the Canadian licensee. Because of the control licensing agreements provide, the quantities of Registered seed needed will be small while the variety is undergoing the testing required by the Canadian registration process. In addition, the Protective Direction provision of Canada's PBR law makes it illegal to sell seed commercially until the variety is registered. If the variety does become registered, it is unlikely that U.S. seedsmen would want to sell Certified seed in Canada simply because Canadian seedsmen seem willing to sell for less.

7. Why doesn't the NDSU/RF set up an office in Canada or hire someone to be its licensee for plant varieties?

Four reasons: One, Canadian law requires that in order to receive PBR, the licensee must be either a resident company or organization. Two, the expenses involved with maintaining an office or hiring someone would be considerable. Three, the licensing agreements require licensees to cover all the costs (field tests, application fees etc.) associated with registering and protecting a variety in Canada. And four, there may be additional costs related to enforcing ownership rights against those who handle seed illegally in Canada; as stated in the NDSU/RF license agreements, the licensee incurs these costs as well. In other words, the NDSU/RF employs a bidding process and guidelines for rating those bids that are designed to optimize revenue, maximize control, and minimize expenses and risk. In addition, the Canadian entities that become licensees are part of an existing marketing network.

8. Why is the NDSU/RF involved in this type of activity?

Again, with no licensing agreement in place, NDSU loses control over the seed production of its plant varieties and it loses revenue. The uncontrolled flow of seed going north is likely to result in larger volumes of Canadian seed coming back into the United States as long as Canadian seedsmen continue their current pricing practices. And, the survival of North Dakota's seed industryabout 1,100 certified seedsmen and seed conditioning plantscould be jeopardized. If an unlicensed NDSU variety fails to meet the standards set forth in the Canadian registration process, seed proliferation could spur movement of commodities into U.S. markets as well.

As for the revenue issue, how would other North Dakota taxpayers view NDSU's stewardship if it fails to capture value from its technology? Regardless of how small the amount in some cases, that revenue represents a supplemental funding source, and NDSU's breeding programs and the state's producers are both beneficiaries.


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