TITLE: Seed makers' suits sow
hostility AUTHOR: David Mercer PUBLICATION: Arkansas
Democrat-Gazette DATE: 18 May 2003 URL:
http://www.nwanews.com/adg/story_Business.php?storyid=30426
Arkansas Democrat-Gazette | 18 May 2003
SEED MAKERS' SUITS SOW HOSTILITY
by David Mercer
Just over a year ago, a man looking to buy some wheat seed stopped by the grain elevator that Shelton Guest manages in Marianna.
Guest wasn't there at the time, but another employee of East Arkansas Grain Co. later told Guest that the man said he wanted the wheat to plant deer plots, small patches of the crop intended to draw deer for hunting.
The other employee, Guest's son, sold the man 63 bushels of wheat seed, enough to plant about 30 acres.
The buyer, Guest now is certain, was a private investigator working for Syngenta Seeds Inc. A few months later East Arkansas Grain found itself the target of a lawsuit filed by Syngenta accusing the grain business of illegally selling the company's wheat seed without a license.
In all, Syngenta filed six suits in federal court in Little Rock one day last September accusing grain-handling businesses of similar misuse of its legally protected hybrid seeds.
Those actions aren't unique. There's been a crackdown in Arkansas and beyond by agribusiness giants such as Monsanto and Syngenta on what they say is a thriving trade in pirated crop seeds they have engineered or bred for better performance. "It's pretty widespread," Syngenta wheat product manager Phil Farmer said. "We estimate about 30 percent of the crop is planted in illegally saved seed."
As allowed in the agreements farmers sign when they buy genetically modified seed from Monsanto, the St. Louis firm routinely scours fields for evidence that growers are saving seeds from one year to the next. That once was a common farm practice but now is a violation of the agreements.
Companies like Syngenta also have paid undercover private investigators who try to buy seed on the sly.
Dozens of suits have been filed around the country -- Monsanto alone has filed 73 over the past five years. Most are settled out of court, with the companies claiming millions of dollars in compensation. Among the cases that have gone to court, the companies have lost few, if any. One Tennessee farmer was sentenced to prison earlier this month for destroying evidence -- burning saved seed.
The battles are being fought at a time when the industry is struggling. In its annual report for 2002, Syngenta noted seed sales have been flat for three years, while Monsanto's sales in its seed and genomics business declined in 2001 and 2002.
A lot of farmers and supply businesses, even some of those targeted by the companies, say they support the companies ' efforts to catch illegal seed traders and protect themselves. But others say the crackdown is heavy-handed, creating deep resentment and hostility among farmers and farm supply businesses toward the companies.
Syngenta earlier this month claimed in court papers that someone recently had threatened to burn down the home of one of the investigators. "Yeah, it's damaged relationships," said Jonesboro attorney Hunter Hanshaw, who represents Delta Cotton Cooperative in Marmaduke. The northeast Arkansas co-op is among the defendants sued by Syngenta, and it denies the allegations against it.
ENGINEERED SUPERIORITY
Crop seeds bred or genetically engineered for higher yields or resistance to insects, disease or chemicals account for a major portion of the business done by Monsanto, Syngenta, Pioneer Hi-Bred International and AgriPro Wheat, the companies behind the crackdown.
Of Monsanto's $4.7 billion in sales last year, 34 percent was generated by its seed and genomics operations. Syngenta, the world's largest agricultural chemical and seed supplier, sold $937 million in seeds during 2002, while overall sales totaled $6.2 billion.
Many of the hybrid seeds are bred for traits that make them regionally popular. Syngenta's Coker winter wheat -- the subject of all of the company's suits in Arkansas -- accounted for about three-quarters of the state's wheat crop a few years back, Syngenta's Phil Farmer said.
The hybrid seeds are protected by the federal Plant Variety Protection Act, which allows farmers to save some seeds for replanting but not for sale. Companies that license seed dealers to sell them receive royalties in return. "It's not unheard of for a small family seed business to pay a quarter of a million dollars in royalties [a year]," said Duff Nolan, a Stuttgart lawyer who, with partner Mark Henry of Fayetteville, is handling almost all of the seed companies' cases in Arkansas.
Monsanto's genetically engineered seeds have stronger legal protection than hybrids, because they're patented. Farmers who use the seeds agree they won't save any for replanting, forcing them to buy new seeds each year. The Monsanto seeds sell at a premium, which the company calls a technology fee.
Some of Monsanto's seeds have become dominant in the market. The U.S. Department of Agriculture expects that about four-fifths of all the soybeans planted in the country this year will be engineered to resist herbicides, and virtually all of them will be Monsanto seeds.
Monsanto's lawsuits accuse farmers of saving seeds. Suits brought by the other companies accuse grain elevators, local seed businesses and farmers of holding onto a portion of the crop that farmers bring to them to later sell as "brown-bagged" seed -- mislabeled as something other than the legally protected varieties and sold at lower prices -- and robbing the companies of sales and royalties on their products. In all, Pioneer, Syngenta and AgriPro have filed nine suits in Arkansas since last fall. Two have been settled while the rest remain active. The remaining defendants all deny any wrongdoing.
NO CASES LOST
Monsanto's suits in Arkansas and other states stretch over the past five years. Most of its suits have been in other states. Two of its Arkansas suits remain undecided, the company said. "This is something that Monsanto has always been committed to," company spokesman Shannon Troughton said. "Customers have asked us to make sure that they remain competitive." Most of the suits it has filed have been settled out of court, but the company has never lost a case that's been to trial, Troughton said. "The smart ones settle," Memphis attorney Clifford Cole said.
He speaks from experience.
In the late 1990s Cole represented a Lexa farmer named Ray Dawson who was being sued by Monsanto. The company accused Dawson of saving seed.
Dawson was a confident defendant, Cole said. Dawson wore a cap on occasion emblazoned with the slogan "Dawson Farms, Monsanto Folds." Monsanto attorneys took the hat and other "colorful" moves by his client personally, Cole said. "When I walked into court that first day for a pretrial conference," Cole said last week, "there were something like six Monsanto attorneys there that were armed and loaded for bear. I got a lot of blood on the carpet that day," he said. "I got beat up pretty bad." Cole said he couldn't win. He instead worked to get Dawson alone in a room with a Monsanto representative, who eventually agreed to a $2.5 million settlement -- the company's largest to date -- and eventually a deal for Dawson to pay only about $200,000.
GLOBAL COMPETITION
Soybean farmers in particular almost have to use Monsanto technology to compete in the global market because of the seeds' quality and their ability to survive herbicides such as Roundup, said Mitchell Scruggs of Tupelo, Miss., a cotton and soybean farmer who's battling a lawsuit filed by Monsanto.
Soybean farmers in other countries use Monsanto's Roundup-ready seeds, too, and they often save part of their crop to plant, or they buy pirated seeds, Scruggs and other farmers said. "How are you going to compete?" Scruggs asked, referring to the foreigners. While Monsanto's patents and restrictions irk some farmers and farm-supply businesses, few seem to complain about the legal protection provided by the Plant Variety Protection Act to hybrid seeds or the looser restrictions on their use.
What bothers some of those targeted by lawsuits is that they believe they could have worked their differences out without going to court. Those defendants believe the companies are trying to make examples of them.
Most of the defendants say they're small businesses. Some acknowledge they've made small inadvertent sales of hybrid seeds but insist they're being unfairly targeted by the giants of agribusiness.
"We're a small, country elevator that's been sued by a large Swiss company, and we're going to defend ourselves," said David Blair, the attorney for Griffin Seed & Grain in Newark, one of the defendants sued by Syngenta. He denies the allegations.
The seed sold by East Arkansas Grain, a company whose owners include state Plant Board member Mark Waldrip, came out of a common bin where the elevator kept wheat brought in by farmers throughout the area around Marianna, Shelton Guest said. It included any number of varieties of wheat, he said, and hadn't been cleaned -- meaning it also contained wheat husks and grass seed that would have made it a poor choice for commercial crop planting.
"No farmer would have got that wheat to plant it," Guest said.
East Arkansas Grain settled its case with Syngenta earlier this year for $15,000.
PREDICTIONS AND GRUDGES
Syngenta, Pioneer and AgriPro are all represented by Nolan and Henry. The companies have made extensive efforts to educate seed dealers, grain elevators and others so they don't illegally sell seeds.
Henry disputes some defendants' characterization of themselves as small businesses who may have accidentally sold a few wheat seeds.
Of the seeds that undercover investigators have bought, he said, "I would say the large overwhelming majority of it has been cleaned. In some cases," he added, "defendants say, 'Hey, tell all your friends to come on back. I've got plenty more.'"
He predicts more suits will be filed. His partner, Nolan, said many of the existing cases involve far larger amounts of seed than that sold by East Arkansas Grain. "Most definitely," Nolan said.
Hanshaw, the attorney who represents Delta Cotton Cooperative, said the lawsuits, whatever their outcome, could have long-term effects on the plaintiffs' business in parts of Arkansas. "I don't know if they fully appreciate that fact," Hanshaw said.
Guest said that even with East Arkansas Grain's suit out of the way, he'll probably keep a particular distaste for Syngenta. He also farms a little, he said, but, "I don't want any of their chemicals or products on my fields."