ISB NEWS REPORT
OCTOBER 2014
China Rejects US Corn, While an Australian Court
Accepts DNA Patent Claims
Phill Jones
During November 2013, China started to refuse imports of
US corn on the basis that tests showed that some cargoes
of corn contained Syngenta’s genetically engineered
(GE) Agrisure Viptera® corn. After securing regulatory
approval for sale in the United States, Syngenta began to
sell Viptera® to US farmers in the fall of 2010. Although
Syngenta applied for regulatory approval from China
in 2010, that country has yet to approve the GE corn.
According to exporters, the Chinese government allows
its port officials to reject a cargo of corn if one kernel is
found to have an unapproved gene.
Industry analysts speculate that China used the GE
corn to evade contracts to buy US grain. China has a
surplus of grains. The government may be storing 150
million tons of grains, including corn. Thomas Pugh, an
economist at Capital Economics in London, calls these
stockpiles “absolutely ginormous, way out of line with
anything that you could justify holding onto on any sort of
commercial basis.”
Jason Britt, president of brokerage firm Central States
Commodities Inc. (Kansas City, Mo.), explained to the
Wall Street Journal that protectionism may be motivating
the rejection of US corn. “It’s amazing that China can
overlook GMOs when stocks are tight,” Britt said, “but
when they’re trying to protect their domestic farmers or
they’re in surplus, they can come up with things to mess
with us – they’re trade barriers, let’s just call them what
they are.”
“It’s 100% economics,” Karl Setzer told the Wall
Street Journal. Setzer, a market analyst for MaxYield
Cooperative (West Bend, Iowa) said that, “If China was
facing a corn shortage or really needed the corn, it wouldn’t
be a problem, because they’ve probably been importing
that [Syngenta variety] for the last three years.”
Regardless of the incentive behind China’s rejection
of US corn, the effects are clear. By April 2014, China had
refused almost 1.5 million metric tons of US corn. During
the first seven months of 2014, US corn shipments to China
totaled 85% less than shipments for the same period in the
previous year. The National Grain and Feed Association, a
group that represents grain, feed, and related commercial
businesses, estimated that the US corn, distillers grains,
and soy sectors sustained up to $2.9 billion in economic
losses following China’s rejection based on Viptera® corn.
These losses have ignited a debate in the agricultural
industry about who must shoulder responsibility.
“Technology developers should commit to fully bear the
risks and liabilities associated with any commercialization
or launch of their products,” the North American
Export Grain Association urged in a March 2014 letter
to the US Department of Agriculture. “We object to
commercialization prior to major market approvals
unless the technology provider assumes appropriate
responsibility for economic losses associated with such
commercialization.”
In September, three lawsuits that target Syngenta
signaled the opening salvo in the controversy. US grain
exporter Cargill Inc. filed a lawsuit against Syngenta in
a Louisiana state court. Cargill reportedly claimed that
by selling Viptera® corn to US farmers before obtaining
approval from China, Syngenta cost Cargill more than $90
million. Viptera® corn, Cargill alleged, occurs throughout
the US corn supply, which closes the Chinese market to US
exports. On the same day, Trans Coastal Supply Company,
Inc., an exporter of corn and dried distillers grain with
solubles, filed a class action complaint against Syngenta
in an Illinois federal district court. Trans Coastal alleged
that the company could lose at least $41 million because
Syngenta sold Viptera® corn seed to US farmers without
first obtaining import approval from China. Within a week,
Syngenta was hit with a third lawsuit. Stracener Farming
Company filed a class action complaint in an Arkansas
federal district court. The plaintiffs are farmers who grow
corn and lease farmland to other corn farmers.
Earlier this year, the North American Export Grain
Association and the National Grain and Feed Association
asked Syngenta to stop selling GE seeds to farmers until
China approves the seeds. David Morgan, Syngenta’s
director for North America, reportedly told the groups that,
if the company removed its GE products from the market,
then the Chinese regulatory system, which currently fails
to function in a predictable or timely manner, would be
deciding which tools should be available to US corn
growers.
This year, Syngenta premiered its GE corn Agrisure
Duracade™, which is awaiting approval from China. At
the same time, Syngenta set up a system to segregate
Duracade™ corn from the general supply. Gavilon LLC,
a Nebraska grain company, has agreed to buy Duracade™
corn from farmers. This system enables US farmers to
grow the GE corn while avoiding unapproved foreign
markets.
ISB NEWS REPORT
OCTOBER 2014
Myriad Decisions about Myriad’s DNA Patent Claims
Once upon a time, Myriad Genetics had US patent
claims to molecules with nucleotide sequences of
the BRCA1 and BRCA2 genes, two genes linked to
susceptibility for breast cancer. During May 2009, on
behalf of the Association for Molecular Pathology and
other groups, the American Civil Liberties Union and
the Public Patent Foundation sued the US Patent and
Trademark Office, Myriad Genetics, and Directors of
the University of Utah Research Foundation, alleging
the invalidity of the DNA claims.
Based upon decades of US court decisions and
patent practice, the case should have been a real loser.
But district court judge Robert W. Sweet decided
that the DNA molecules are not patentable. Although
the judge acknowledged that an isolated DNA
molecule differs chemically from a DNA segment in
a chromosome that resides within a cell, he said that
it’s not enough. “In light of DNA’s unique qualities
as a physical embodiment of information,” the judge
said, “none of the structural and functional differences
between native BRCA1/2 and the isolated BRCA1/2
DNA claimed in the patents-in-suit render the claimed
DNA ‘markedly different.’”
The Court of Appeals for the Federal Circuit
reversed the decision about DNA claims. “[T]he
challenged claims are drawn to patentable subject
matter,” the court wrote, “because the claims cover
molecules that are markedly different – have a
distinctive chemical identity and nature – from
molecules that exist in nature.” The plaintiffs urged
that the claimed DNA molecules and native DNA
molecules are not distinct because they store similar
information. “This approach,” the court replied, “looks
not at whether isolated DNAs are markedly different
– have a distinctive characteristic – from naturally
occurring DNAs, as the Supreme Court has directed,
but at one similarity: the information content contained
in isolated and native DNAs’ nucleotide sequence.”
The plaintiffs appealed to the US Supreme Court.
The Supreme Court vacated the Federal Circuit’s
decision and sent the case back to the Federal Circuit
for reconsideration in view of the Court’s recent,
patentee-unfriendly decision, Mayo Collaborative
Services et al. v. Prometheus Laboratories, Inc.
(2012). The Federal Circuit judges concluded that they
got it right the first time and issued a decision in favor
of Myriad’s DNA claims. The plaintiffs once again
appealed to the Supreme Court. During June 2013, the
Supremes published their decision in Association for
Molecular Pathology v. USPTO. “[W]e hold,” Justice
Clarence Thomas wrote, “that a naturally occurring
DNA segment is a product of nature and not patent
eligible merely because it has been isolated . . . .”
The Court decided that “genes and the information
they encode are not patent eligible . . . simply because
they have been isolated from the surrounding genetic
material.”
Meanwhile, another Myriad patent case brewed in
the Australian court system. Justice John Nicholas of
the Federal Court of Australia had to decide if, under
Australian patent law, a valid patent may be granted
for a claim that covers naturally-occurring nucleic acid
that has been isolated from human cells. “There is no
doubt that naturally occurring DNA and RNA as they
exist inside the cells of the human body cannot be the
subject of a valid patent,” Justice Nicholas wrote in
his February 2013 decision. “However, the disputed
claims do not cover naturally occurring DNA and RNA
as they exist inside such cells.” The judge concluded
that the claimed nucleic acid molecules are patentable
under Australian law. The plaintiffs appealed the
decision.
In September 2014, the full court of the Federal
Court of Australia published their decision in D’Arcy
v. Myriad Genetics, Inc. The five judges unanimously
decided to dismiss the appeal.
After examining the US Federal Circuit Myriad
decisions, the judges found that court’s reasoning to
be persuasive and consistent with Australian patent
law. They found fault, however, with the US Supreme
Court’s reasoning and referred to the Court’s Diamond
v. Chakrabarty (1980) decision in which the Court
concluded that an artificially-created bacteria strain
was patentable because the bacteria had markedly
different characteristics from any found in nature.
The US Supreme Court rejected the claim
over isolated nucleic acids for much the same
reasons as those pressed by the appellant in
this case. It is difficult to reconcile that Court’s
endorsement of the reasoning in Chakrabarty,
with its rejection of isolated nucleic acid as
eligible for patentability. With respect, the
ISB NEWS REPORT
Supreme Court’s emphasis on the similarity
of “the location and order of the nucleotides”
existing within the nucleic acid in nature
before Myriad found them is misplaced. It is
the chemical changes in the isolated nucleic
acid which are of critical importance, as this is
what distinguishes the product as artificial and
economically useful.
OCTOBER 2014
“Myriad’s claim,” the judges wrote, “properly
considered is not, as the US Supreme Court considered,
concerned ‘primarily with the information contained
in the genetic sequence [rather than] with the specific
chemical composition of a particular molecule.’” The
judges emphasized that Myriad’s claims are directed
to compounds – nucleic acids – not to information.
The plaintiffs can appeal the decision to the High
Court of Australia.
Selected Sources
Bunge, Jacob, “Cargill Sues Syngenta Over Sale of GMO Seeds Unapproved in China,” Wall Street Journal Website (September 12, 2014).
Available at: http://online.wsj.com/home-page.
Bunge, Jacob, “China’s Shut-Out of American Corn Won’t End Anytime Soon,” Wall Street Journal Blogs Website (April 11, 2014).
Available at: http://blogs.wsj.com.
Bunge, Jacob, “U.S. Corn Exports to China Dry up over GMO Concerns,” Wall Street Journal, Eastern Edition, page B1 (April 11, 2014).
D’Arcy v Myriad Genetics Inc. [2014] FCAFC 115.
“NGFA Estimates Up to $2.9 Billion Loss to U.S. Corn, Soy in Aftermath of Trade Disruption with China Over Detection of Unapproved Syngenta Agrisure
Viptera™ MIR 162 Corn,” National Grain and Feed Association Website (April 16, 2014). Available at: http://www.ngfa.org.
Polansek, Tom, “Cargill Fires First Shot in Legal Battle over GMO Trade Responsibility,” Reuters Website (September 14, 2014).
Available at: http://www.reuters.com.
Polansek, Tom, “Syngenta Faces Second Lawsuit over GMO Corn Rejected by China,” Reuters Website (September 16, 2014).
Available at: http://www.reuters.com.
Steger, Isabella, “China Is Awash in Grain Crops; Surpluses Will Be Sold into a Global Market Already in Oversupply,” Wall Street Journal Website
(August 26, 2014). Available at: http://online.wsj.com/home-page.
Phill Jones
Biotech-Writer.com
[email protected]