IP Management in the Development of a Medium-sized Argentinean Seed Company
RELMÓ is a typical family company belonging to the Ferrarotti family. The origins of RELMÓ are to be found in the Ferrarotti Countryside Organization (OFPEC) which was established in the 1960s as the first company to devote itself to the genetic improvement of soybean. OFPEC was responsible for the program that led to the registration of the first Argentinean variety in 1980. The company now has 37 employees, of which 17 are directly involved in research and development.
Despite its traditional approach in certain areas (e.g. the company’s main experimental field remains the Ferrarotti family farm, located in Maciel, Sante Fe Province, in the Argentinean corn belt) the company has, in recent years, dramatically changed its way of doing business and has managed to prosper following some of the important changes that took place in the Argentinean seed industry over the last decade. One of the main reasons for RELMÓ’s success has been its ability to manage its intellectual property successfully and to enter alliances and establish partnerships with foreign and domestic companies and research institutes based on intellectual property licenses.
Overview of the Business
RELMÓ is exclusively devoted to the business of producing and selling seeds for the major crops, namely, soybean, wheat and maize. Its central offices are in Rosario (Santa Fe), a major grain marketing and soybean grinding center, in addition to being a major seed export port. In fact, the most important soybean producing-exporting center in the world is to be found in an area within a radius of 200 km around Rosario.
Intellectual property as a basis for RELMÓ’s business
RELMÓ’s development in the past few years is based fundamentally on license and service agreements that are supported by intellectual property. For many years, seed companies’ activities were governed by the concept of vertical integration, encompassing all the parts of the seed cycle (from genetic improvement to seed production and marketing). Plant varieties were thus developed, produced and sold by a single company in isolation. The exchange of experiences was rare and the predominant culture one of isolation.
Over the past decade, the structure of the seed industry has changed significantly. Development is now horizontal with interaction between companies licensing products, carrying out joint development, providing services and so on. This is possible to a large extent through the practical application of intellectual property rights developed in the past few decades. The advantages are well known and allow technology to be disseminated more rapidly, with a synergy effect that benefits all the sectors involved. The dissemination of transgenic events not only did not hinder this process, but also made it more rapid and the flow of germplasm increased notably.
In the past few years, RELMÓ has transferred by license to other companies, in Argentina as well as abroad, a total of eight varieties and, in turn, has marketed eight varieties developed by others with its own trademark, four of which are part of its current commercial line. This exchange of varieties between companies is possible in the framework of the legislation guaranteeing ownership of the varieties. What is licensed is commercial use, while the licensing company retains ownership. An example of the success of RELMÓ’s new approach is represented by the licensing of wheat varieties. Having reached an agreement with the Uruguayan research institute INIA for the licensing of varieties of wheat enabled RELMÓ to jump from 4,000 bags of wheat sold in 2002, to ten times more in 2003 and 40 times more bags expected for 2004.
While RELMÓ does not have a department devoted exclusively to intellectual property (IP), decisions on IP matters are taken at the highest level by the board of directors.
Partnerships in Argentina
Partnerships with biotechnology companies
RELMÓ is a pioneering company in the genetic improvement of soybean in Argentina, and for years this has been its main activity. The commercial launch of the Round-up Ready (RR) gene constituted a major challenge, above all, due to its rapid adoption by farmers. In this context, it was necessary to prepare for the replacement of all the varieties RELMÓ had on the market with RR varieties as quickly as possible. This in itself already constituted an extraordinary effort. In the first stage, licenses were obtained for varieties from other companies, which had already incorporated the gene in their improvement programs. If it had not done so, RELMÓ would have had to wait to incorporate the RR gene in its germplasm, which takes time, and then market RR varieties, thus losing its market position.
The fact that foreign companies have transferred their varieties to RELMÓ for commercial exploitation purposes demonstrates the credibility of the system of ownership of phytogenetic creations, which the State guarantees through the Law on Seeds and the Plant Variety Property Register.
In order to commercialize RR varieties in Argentina, it was necessary to reach an agreement with Monsanto Argentina so that RELMÓ would be authorized to use the RR gene. The same was done on the basis of reasonableness which allowed RELMÓ to compete in the market, although it had to adapt its production and marketing systems to new models. This agreement also allowed RELMÓ to place its soybean varieties in other countries.
As far as maize is concerned, due to the high degree of adoption of transgenic forms of maize in Argentina, RELMÓ signed a testing agreement with Monsanto in order to work with the Bt gene (MON 810 event). The company takes the Bt gene and the germplasm, which was licensed from other companies, in order to form the hybrids which it then commercializes. The MON 810 gene is protected by the Law on Patents and the germplasm (inbred lines) by the Law on Seeds.
Partnerships with other seed companies
RELMÓ has licensed soybean varieties to various companies for a number of years. It has licensed in varieties of wheat and licenses out maize hybrids to companies operating in the domestic market. Graph 1 shows the flow of licenses with private companies and public sector institutions.
Graph 1 Flow of licenses and services
Partnershipswith public sector institutions
In 2002, RELMÓ concluded an Agreement on Technology Transfer with the National Institute of Agriculture Technology (INTA) of Argentina, with a view to the genetic improvement of subtropical germplasm of maize. This is an interesting example of cooperation between the public and private sector which thus enhances their respective capacities. The Agreement operates as follows: INTA provides the germplasm - which it owns - , the installations and the technical staff, and RELMÓ covers the operating expenditures. The hybrids obtained are marketed exclusively by RELMÓ which pays INTA a percentage royalty for what is marketed. RELMÓ thus has access to very good germplasm and a high level of technology, and INTA collects the royalties produced by the sale of hybrid seeds.
The inbred lines used in the production of hybrids are the property of INTA and commercial exploitation is exclusive to RELMÓ which may license such exploitation to third parties, while respecting the royalties received by INTA; the flow chart (Graph 1) therefore shows that RELMÓ takes maize hybrids from the Agreement with INTA, which it licenses in turn to other companies, in addition to producing them with its own trademark.
Partnerships throughout the world
Partnerships with the National Livestock Research Institute (INIA) of Uruguay
The National Agricultural Research Institute (INIA) of Uruguay has one of the oldest wheat breeding programs in South America and is located in an area with a high incidence of fungus and virus-related diseases, which allows it good selection pressure. RELMÓ obtained licenses of varieties from that program and last year INIA granted RELMÓ exclusive representation for its wheat in Argentina. In turn, RELMÓ did the same with soybean, granting INIA exclusive rights over the licenses for its varieties for Uruguay. The varieties of wheat are owned by INIA and RELMÓ exploits them commercially in Argentina.
This license agreement allows RELMÓ to enter the wheat seed market with adapted varieties at a cost probably equivalent to that of developing its own crops, with the advantage of time (the development of a new variety takes six to eight years). Testing and registration costs within the seed certification system are covered by RELMÓ. The advantage for INIA of Uruguay is the expansion of the potential market and a reduction in cost for each variety obtained. For RELMÓ, this is a very good commercial opportunity, since the incorporation of seeds of winter crops means that the sales structure has a longer period of occupation and also benefits considerably the cash flow; it is important to reiterate that for years the main business focus for RELMÓ has been soybean sown in summer.
The scheme of licenses for soybean varieties to INIA, with a view to their marketing in Uruguay, follows the same principles as those commented on for wheat.
Partnership with Delley Semences et Plantes (Seeds and Plants) S.A. (DSP) of Switzerland
RELMÓ established a commercial relationship with DSP in Switzerland, which includes licenses for varieties of wheat for the whole of South America and technical collaboration, including the training of RELMÓ staff, in Switzerland. As commented on in relation to the Agreement with INIA, the varieties here are also owned by DSP and RELMÓ is responsible for commercial exploitation. About four years ago, varieties from France were introduced into the Argentinean market by a large company and were widely accepted by producers. These French varieties require different technology for cultivation than for the Argentinean varieties, and they constitute a differential share of the wheat seed market; this license agreement has allowed RELMÓ to participate in the market with varieties of a similar profile to the French varieties.
Partnership with the Mato Grosso Foundation (FMT) of Brazil
Brazil and Argentina constitute a major market for the production of soybean in the world and the genetic improvement of the crop is very developed. The Foundation is an important technical support for the crop in Brazil, where approximately 16 million hectares are cultivated. RELMÓ has established a program of work which includes the joint launch of varieties of soybean, which is carried out in both countries. Contrary to the previous agreements, this joint project does not involve any licenses but an ambitious joint development of varieties and research on disease resistance, as well as cultivation technology.
Partnerships with South African companies
In the past, RELMÓ had granted licenses for conventional varieties in South Africa, and, more recently, it has done so for RR varieties, thereby contributing to the development of the crop in that country. As in previous agreements, RELMÓ is the owner of the varieties and a South African company exploits them commercially.
RELMÓ has registered its four main trademarks, namely RELMÓ, TECNOSOJA, TECNOTRIGO and TECNOMAIZ and has also registered the name with which it identifies its lines of products such as CANAI (which means friend in the indigenous language of the mapuches). Trademark registrations are primarily for the domestic market, as varieties that are licensed to foreign companies, e.g. American companies, are generally sold under the licensee’s trademark.
Graph 1 shows the importance for RELMÓ of developing partnerships with other companies. This partnership approach is only really possible with a legal framework ensuring respect for intellectual property, in this case the ownership of phytogenetic creations (varieties or lines), and provided that a scheme of seed certification exists allowing those tools to be used.
The extremely important role which institutions such as The International Union for the Protection of New Varieties of Plants (UPOV) have played and play is highlighted by their actions which have contributed to countries acceding to acts and adopting the principles allowing the development of companies, as was shown in the case of RELMÓ. The Company attaches great importance to these activities as shown through active participation in the Association of Argentinean Seed Producers (ASA), which is also a member of the Board of the International Seed Federation (ISF).
RELMÓ also participates in the Argentinean Association of Protection for Plant Breeds (ARPOV) which deals with the defense of rights and currently plays an important role in the collection of royalties for wheat and soybean. This has recently been implemented and constitutes a significant advantage for a company the size of RELMÓ, since it provides the possibility for collecting royalties in that ARPOV has the structure necessary for such monitoring and collection work.
It is interesting to discuss the advantages and opportunities on the one hand, and the disadvantages and shortcomings on the other, of a medium-sized company in the current context characterized by mergers that give rise to companies ever greater in size in the biotechnology era.
The main advantage, of no little importance, is that RELMÓ executives are its owners, which enables decisions to be taken quickly and direct treatment of the company’s domestic and foreign partnerships. Another advantage, which has nothing to do with the size, is that the company policy is to move forward quickly and very actively in business management.
In relation to events of importance such as that of the RR gene in soybean, the main disadvantage appears to be that of non-access to licenses for its use, which in Argentina would leave RELMÓ outside the market, a situation which has not occurred so far, not only with this event but also with others more widely disseminated.
Probably the major problem for RELMÓ lies in the difficulty in developing its own transgenic events, with shared ownership or exclusive commercial exploitation. While the partnership with public institutions or biotechnology companies would allow those developments to be faced jointly, the main problem would be the high costs of the deregulation procedures required for its commercial release. The companies devoted to biotechnology research and development have whole departments dealing solely with this subject.
Case study provided by Oscar Agustín Domingo, Director of Relmó. The original document was presented by Oscar A. Domingo in the WIPO-UPOV Symposium on Intellectual Property in Plant Biotechnology held on October 24, 2004, in Geneva. For further information on Relmó, see: http://www.relmo.com.ar.