In North Carolina, a 20-fold increase in fines for seed piracy

mquillin@newsobserver.comMay 17, 2014 

— North Carolina’s peanut belt got the kind of rain in 2013 that three decades ago could have wiped out the peanut crop.

The deluge of precipitation was ideal for nurturing devastating diseases for the harvests, but farmers had a defense: Most of them had planted protected peanut varieties that N.C. State University’s Tom Isleib and his staff developed to fight off the rain-fueled fungi, blights and viruses that can be the difference between a farmer making money and taking a loss.

A change in state law aims to make sure inventors such as Isleib and his fellow crop scientists get a return on their investment, too. This growing season, any purveyor of a protected variety caught selling unlabeled seed to avoid paying royalties to the plant breeder can be fined up to $10,000. That’s up from the $500 fine violators have risked since the 1940s.

The 20-fold increase reflects the rise of agricultural research as intellectual property, and it highlights the growing importance of royalties as a way to pay for innovations that guarantee a stable food supply.

Isleib – pronounced ISS-lub – believes patenting seeds tends to reduce the genetic diversity of crops by discouraging researchers from trading plant material. But he says it’s no longer feasible to place new varieties – known as cultivars in peanut research – into the public domain.

Without patents, there are no royalties, he said. “And without royalties, this kind of research would dry up.”

With only about 1.2 million acres across the country planted each year, peanuts are a relatively small crop. So private companies don’t have much incentive, Isleib says, to invest the years and the millions of dollars it takes to create new seed varieties, then test, purify and multiply them, and get them into the hands of farmers.

That leaves most of the work to publicly funded labs such as those of the U.S. Department of Agriculture and university programs like the one Isleib runs out of his office and half a greenhouse off Method Road in West Raleigh.

Isleib’s program performs traditional plant breeding. Plant breeders have intentionally crossed different plant lines to emphasize desirable traits since at least the 1800s.

The newer, more controversial process known as genetic engineering or genetic modification involves the mechanical placement of genetic material inside a living cell, such as with the use of a particle gun. Both processes transfer plant DNA, but genetic modification can include the insertion of DNA from entirely different species, such as introducing a gene for a fluorescent jellyfish protein into zebrafish to make a fish that glows in the dark.

While the state pays his salary, Isleib needs $350,000 to $400,000 a year to pay for his staff, materials, equipment and rental of sandy state-owned test fields like the one in Bertie County where he was planting last week. Grants and royalties paid to NCSU, which holds the rights to the seeds he develops, are his major sources of funding.

Researchers do similar work for every crop in North Carolina that’s grown from seed, including wheat, corn and soybeans.

“There’s somebody like me for just about everything you eat, except for a few wild mushrooms you might gather up out of the woods, and fish you take out of the ocean,” Isleib said. “The general public doesn’t see the value of that. They rely on it, but they’re not aware of it.”

Peanut research star

In modern agriculture, where plants can be bred to resist ever-changing pest-and-disease combinations peculiar to small geographic areas, seed choice is one of the most important decisions affecting a farmer’s yield. A $7 billion-a-year seed industry has grown up in the U.S., much of it dedicated to developing and selling those customized varieties.

In the world of peanut researchers, Isleib is a rock star, even if he’s a stocky, graying one whose voice sounds like a friendly cartoon character’s, the result of a severe stroke a few years ago.

Since 1990, Isleib has taken 17 new peanut seeds to market, including Bailey and Sugg, the ones that saved North Carolina growers last year. This year, Bailey is expected to account for 80 percent of the 85,000 acres of peanuts that will be planted across the state.

So far, N.C. State has received $4.5 million in royalties from Isleib’s work. The university’s Office of Technology Transfer disburses the money, as it does for hundreds of other commercially successful discoveries NCSU has fostered.

But Isleib and his staff do the lengthy, multistep work of developing the seeds, which starts with crossing plants to combine the traits they want to see in the final product. Desirable traits can change over time with consumer preferences, weather patterns and the spread of new pests and diseases.

Farmers may need peanuts that are more drought-tolerant, or have a bigger, lighter-colored pod. In general, they’re moving toward peanuts with higher oleic-acid content, because it extends shelf life. They may want types with a sweeter flavor.

“Farmers today don’t drive the same tractor their grandfather drove,” Isleib said. “They don’t plant the same corn, either.”

Once Isleib has the traits he wants in a variety, he raises many generations of it, taking careful measurements of how plants respond to field conditions, pests and pathogens, how they look and how the peanuts taste. He gives the seed a name, usually honoring someone who has worked in peanut research, and when it’s ready, he delivers several hundred pounds of the seed to NC Foundation Seed Producers Foundation, which grows additional generations and checks to make sure it performs as promised.

Finally, it’s packaged, labeled, sold to distributors and offered to farmers, who pay about 85 cents per pound, including a 3-cent-per-pound royalty. Farmers plant from 100 to 130 pounds of peanut seed per acre. North Carolina has about 1,500 peanut growers producing 85,000 acres of peanuts. That’s at least $255,000 a year in peanut seed royalties in this state if farmers buy new seed every year.

Some don’t; they save money by saving seed from one year’s crop to plant the following year, which is allowed under the seed law, although it can result in an uneven crop.

Penalties for brown bagging

But it is illegal for them to sell their saved seed to another farmer or anyone else, a practice called brown bagging, because that bypasses the royalty payments owed to the owner of the seed and gives the buyer no assurance of quality.

Across the state, the N.C. Department of Agriculture and Consumer Services has nine inspectors in its Plant Industry Division whose duties include making sure seed conforms to the N.C. Seed Law, whether it’s sold on a shelf in the garden center at Walmart or moved by the truckload through a farm supply store. If inspectors find a violation, they can stop the sale of the seed and, if the situation warrants, invoke a fine.

Phil Farmer, past president of the N.C. Seedmen’s Association and a retired seed company employee, says distributors brown-bag seed with some frequency, though state officials can’t remember a recent prosecution.

By selling brown-bagged seed, and telling buyers it’s the brand-name product without paying the royalty, distributors gain an unfair price advantage over competitors. Sometimes, the competitors hear about the practice and report it.

If they were only fined $500 for a violation but could make thousands by selling uncertified seed, “They’d just keep on doing it,” Farmer said. “Even if they got caught and had to pay the fine, it was still worth doing.”

In 2012, when the Bailey peanut seed was in high demand and certified supplies of the still-new seed were not yet robust, Daryl Bowman, executive director of Foundation Seed, got a complaint that a distributor was brown-bagging Bailey. He went to the distributor, where he found several thousand pounds of uncertified seed for sale, but determined that the company official who had arranged it didn’t know it was illegal to sell saved seed from a protected cultivar crop.

“It was a matter of ignorance,” Bowman said. The company stopped the practice, paid the royalties it owed NCSU and, at Bowman’s urging, hired a consultant to train employees on the state and federal laws.

Bowman, the Seedman’s Association and state agriculture officials pressed for the change in the law the General Assembly passed last year. Besides the increased fine, it allows the state to revoke a distributor’s license to sell.

Without a meaningful penalty, Farmer said, there would be the temptation to cheat patent-holders out of their share.

“Then you end up killing the goose that laid the golden egg.”

Quillin: 919-829-8989

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