1999/6/EC: Commission Decision of 14 December 1998 relating to a proceeding under Article 85 of the EC Treaty (IV/35.280 - Sicasov) (notified under document number C(1998) 3452) (Only the French text is authentic)
Date: 1998-12-14
Institutions: European Commission
Subjects: agricultural cooperative, agro-industry, marketing, patent law, plant propagation, trade licence

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II

(Acts whose publication is not obligatory)

COMMISSION

COMMISSION DECISION

of 14 December 1998

relating to a proceeding under Article 85 of the EC Treaty

(IV/35.280 — Sicasov)

(notified under document number C(1998) 3452)

(Only the French text is authentic)

(1999/6/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Whereas:

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation No 17 of 6 February
1962, First Regulation implementing Articles 85 and 86
of the Treaty (1), as last amended by the Act of Accession
of Austria, Finland and Sweden, and in particular Articles
2, 4 and 8 thereof,

(a) Sicasov

I. THE FACTS

A. THE UNDERTAKINGS

Having regard to the request for negative clearance and
the notification submitted on 26 October 1994 by Sicasov
(Soci(cid:130)t(cid:130) coop(cid:130)rative d’int(cid:130)r(cid:136)t collectif agricole anonyme a
capital variable) Paris, France in respect of standard
licensing agreements for the production and sale of seeds,

Having regard to the summary of
that notification,
published (2) pursuant to Article 19(3) of Regulation No
17,

Having consulted the Advisory Committee on Restrictive
Practices and Dominant Positions,

(1) OJ 13, 21. 2. 1962, p. 204/62.
(2) OJ C 95, 19. 4. 1995, p. 8.

(1)

Sicasov groups together the breeders of plant vari-
eties protected in France. No member of Sicasov
may hold more than 10 % of the share capital or
10 % of the voting rights. Sicasov’s objects are as
follows:

— to take over, under an exclusive or non-
exclusive licence, the plant varieties entrusted
to it by its members, and all incorporeal rights
relating to agriculture and the agri-foodstuffs
industry,

— to make new or improved plant material avail-
able, under the best technical and economic
conditions, to farmers and the agri-foodstuffs
industry,

— to grant

licences or

allowing
breeders’ plant varieties to be produced, multi-
plied and marketed under its supervision,

sub-licences

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— to ensure that varieties are maintained (that is,
to attend to the protection of technical material
of
generation
preceding
intended for sale to the end user) and take the
necessary steps to avoid a shortage,

generations

the

— to arrange for joint research to be carried out

into the new genetic material,

— to encourage plant breeding and to promote
and attend to the dissemination of plant
material.

(2)

In particular, Sicasov’s role is to manage plant vari-
eties entrusted to it by breeders (or their assignees).
Accordingly, breeders
their assignees) may
(or
either:

(a) give Sicasov the right to grant non-exclusive

multiplication and sales licences; or

(b) give Sicasov an exclusive production and sales
concession allowing Sicasov to grant non-
exclusive multiplication and sales sub-licences.

(6)

The agreements between breeders and Sicasov are
outside the scope of this Decision.

Managing breeders’ plant varieties entails in partic-
ular concluding seed-production and sales contracts
with multipliers under which Sicasov receives fees
to the breeders after
which it
then transfers
deducting its administration costs.
these
It
contracts, which have been notified, which are the
subject of this Decision (see points 37 to 42).

is

Until 1993 the management of plant varieties in
France was entrusted to Sicasov and to the Caisse
de gestion des
v(cid:130)g(cid:130)tales, hereinafter
referred to as ‘CGLV'.

licences

On 1 January 1994 Sicasov took over CGLV in a
full merger and is now the only company in France
which manages breeders’ rights; former Sicasov and
CGLV members are now all members of Sicasov.

Sicasov manages, on behalf of numerous French
and foreign plant breeders, about 2 600 varieties
belonging to about 50 genera. Practically every
plant variety that can be produced under contract is
produced via Sicasov. The management group
concludes a total of about 9 500 licensing contracts
each year with about 6 000 French and 2 500
foreign firms.

(3)

(4)

(b) Plant breeders

(5)

Plant breeders are entities, whether private or
public, that conduct research aimed at creating new
plant varieties able to meet the criteria giving en-
titlement to plant variety rights.

in the first

instance, of
Plant breeders consist,
family firms, which have a long-standing tradition
of plant-breeding and vary considerably in size, and
of a number of agricultural cooperatives. Secondly,
there are large firms which, in recent years, have
activities
become
involved in plant-breeding
(particularly, undertakings which were
already
present in the chemicals sector). Finally, mention
should also be made of public bodies carrying out
agricultural research (such as the Institut national
des recherches agronomiques, hereinafter ‘INRA',
schools of agronomy and universities), both in
France and elsewhere.

Each plant breeder has a ‘portfolio' of several vari-
eties, one or more of which can be very competitive
indeed.

New varieties can be multiplied by the breeders
themselves but, since the latter are very often
unable to keep pace with demand, they entrust
multiplication to a multiplying firm (see point 7) in
order to obtain sufficient quantities of seeds which
will be sold to farmers for their annual sowings.
Being a plant breeder entails certain rights and
obligations, which will be examined at points 11 to
36.

(c) Multipliers

(7)

(8)

Seed production is carried out by multipliers,
known also as seed producers (hereinafter referred
to as ‘multipliers'). They must hold a permit to
carry on the business, and before they can produce
certified seed they must undergo inspection by
administrative bodies established for that purpose
(see point 32). For multiplication of a new variety
they must apply to Sicasov for a licence in respect
of that variety.

There are currently about 6 000 multipliers in
France.

Multipliers frequently have access to a network of
farmers who are given seeds for multiplication. The
seed produced is then purchased by the multiplier,
who undertakes certification and sale. The relation-
ship between multiplier and multiplying farmer is
governed by a standard contract drawn up by the
Service officiel de contr(cid:147)le (hereinafter ‘SOC') and
approved by the Ministry of Agriculture.

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(9)

These multiplying farmers must not be confused
with farmers who use seed for the purpose of
sowing rather than for obtaining additional seed,
and who are thus comparable with end-users.

B. THE PRODUCTS

(10)

The products relevant to this Decision are seeds
and seedlings belonging to the following species or
fodder plants, high-
groups of species: cereals,
protein products, maize, sorghum, vegetables, oil
and fibre plants, and potatoes. For the purposes of
this case, seed and seedlings will be jointly referred
to as ‘seed'.

C. THE PROTECTION AFFORDED BY PLANT-

BREEDING LAW

(a) Community provisions

(11) Most Member States have schemes which give legal
protection to plant varieties. These schemes have
not, however, been harmonised at Community
level and continue to be governed by national laws.

(b) French provisions

(14)

In France the guiding principles for legal protec-
tion of new plant varieties are those of the Inter-
national Convention for the Protection of New
Varieties of Plants (‘the UPOV Convention'), signed
in Paris on 2 December 1961.

Law No 70-489 of 11 June 1970 provides that any
new, uniform and stable plant variety may be the
subject of a ‘new variety certificate' (certificat d’ob-
tention v(cid:130)g(cid:130)tale), which confers on its holder the
exclusive right to produce, to bring into France, to
sell or offer for sale any material for the reproduc-
tion or vegetative propagation of
the variety in
question.

(15)

The Law states that the exclusive right is to last 20
years from the date of issue of the certificate, or 25
years if the species takes a long time to form its
reproductive material. Decree No 71-75 of 9
September 1971 lists the species for which the
right lasts, variously, for 20 or 25 years.

(16) On the subject of ownership and transfer of new
plant rights, the Law refers to the rules generally
applicable to patents. New plant rights (both prop-
erty and usufruct) can therefore be transferred as
freely as those of patent holders.

On 27 July 1994, in the light of that situation, the
Council adopted Regulation (EC) No 2100/94 on
Community plant-variety rights (3), as amended by
Regulation (EC) No 2506/95 (4). The system is
without prejudice to the right of Member States to
grant national property rights for plant varieties
(subject to a ban on cumulative protection). Since 1
April 1995 it has been possible to file applications
for Community plant-variety rights.

D. THE REGULATION OF SEED PRODUCTION

AND MARKETING

(17)

In France, seed production, inspection and certi-
fication are covered by detailed rules which corre-
spond to the requirements
laid down by the
Community.

(12)

In order to be eligible for Community plant-variety
rights, varieties must be distinct, uniform, stable
and new. Holders have exclusive rights in respect
(a) production or reproduction
of the following:
(multiplication); (b) conditioning for the purpose of
propagation; (c) offering for sale; (d) selling or other
marketing; (e) exporting from the Community; (f)
importing into the Community;
(g) stocking for
any of the purposes referred to in (a) to (f).

(18)

(13) Community plant-variety rights last 25 years (30

years in the case of vines and trees).

(3) OJ L 227, 1. 9. 1994, p. 1.
(4) OJ L 258, 28. 10. 1995, p. 3.

(a) Community provisions

supervision of

the
Several Community directives provide for
the production and
detailed
marketing of seed within the Community in order
to ensure their free movement. The directives are
aimed at making the cultivation of
the various
plant species more productive by requiring that,
when choosing varieties that may be marketed,
Member States apply rules that are uniform and as
strict as possible. Accordingly, the directives estab-
the
lish a unified certification scheme

for

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its purpose being to guarantee, by
Community,
means of official monitoring,
the identity and
purity of varieties. It covers both sales on domestic
markets and trade between the Member States. Seed
cannot be marketed unless it has been officially
examined and certified by
agency
a public
belonging to one of the Member States.

(19) Directives have thus far been adopted for

the
marketing of seed of the majority of plant species:
cereals, beet, fodder plants, potatoes, oil and fibre
plants, etc.

In addition, Council Directive 70/457/EEC (5), as
last amended by the Act of Accession of Austria,
Finland and Sweden, introduced a common cata-
logue of varieties of agricultural plant species.

(20)

The directives lay down, for each plant species, the
conditions which seeds must satisfy in order to be
marketed. In particular, they specify the minimum
conditions of varietal purity and uniformity and the
conditions under which they are to be grown.
Moreover, Community rules have been introduced
regarding packing, sampling, sealing and marking.

(i) Basic and certified seed

(21) On the basis of existing international terminology,
the Community directives on seed marketing draw
a distinction between ‘basic seed' and ‘certified
seed'.

(22)

‘Basic seed' is seed which:

— has been produced under the responsibility of
the breeder according to well-defined practices
for the maintenance of the variety,

(24)

— is intended for the production of certified seed,

— satisfies

the conditions

laid down by the
directive as regards cultivation, uniformity and
varietal purity,

machinery. In this connection, however, it should
be emphasised that from a legal point of view there
is nothing to prevent a breeder from using basic
seed for sowing or from selling it to farmers so that
they can use it for sowing (or from allowing licence
holders to do so). Such an occurrence will be
extremely rare, however, given that basic seed is
fairly valuable and that its use for sowing would
therefore prove uneconomic.

(23)

‘Certified seed' is seed which:

— is of direct descent from basic seed,

— is intended for purposes other than the produc-
tion of seed (that is to say, intended for direct or
indirect sale to farmers for sowing),

— satisfies

the conditions

laid down by the
Directive as regards cultivation, uniformity and
varietal purity,

— has been found by official examination to

satisfy the abovementioned conditions.

Certified seed cannot lawfully be used to produce
seed of a later generation. Seed produced from
certified seed cannot itself be certified and cannot,
therefore, be marketed. Consequently, certified
seed must be used only for sowing or for sale
(direct or via cooperatives or the trade) to farmers,
who in turn will use it for sowing. Certified seed is
thus often referred to as ‘commercial seed' or ‘seed
in free circulation' and is to some extent compar-
able to a finished industrial product covered by a
patent.

The situation is, however, more complex in the
case of certain species (such as oats, barley, rice,
wheat and spelt) where, under Community direct-
ives, both first-generation and second-generation
certified seed are allowed. Community directives
give the following definitions:

— has been found by official examination to

(a)

‘first-generation certified seed'

is seed which:

satisfy the abovementioned conditions.

Thus basic seed is not seed intended for sale
(whether direct or via cooperatives or the trade) to
farmers, but seed intended solely for producing
additional seed of a later generation. It can, as it
were, be compared to intermediate industrial

(5) OJ L 225, 12. 10. 1970, p. 1.

— has been produced direct from basic seed,

— is intended either for the production of
for
second-generation certified seed or
purposes other than seed production (that
is, for direct or indirect sale to farmers for
sowing),

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— satisfies the conditions laid down by the
directive as regards cultivation, uniformity
and varietal purity,

— has been found by official examination to
satisfy the abovementioned conditions;

(b)

‘second generation certified seed' is seed which:

— has been produced direct from first genera-

tion certified seed,

— is intended for purposes other than seed
production (that is, for direct or indirect sale
to farmers for sowing),

— satisfies the conditions laid down by the

Directive,

— has been found by official examination to
satisfy the abovementioned conditions.

are individual species for which some Member
States authorise only the first generation whereas
others authorise both first and second (and possibly
later) generations.

(27) Certified seed originating in a Member State
providing for only one generation could thus be
exported to Member States that allow two (or more)
generations and be multiplied in one of
those
Member States. Such seed is often referred to in the
trade as ‘technical seed'. However, this name does
not appear in Community instruments but is used
in practice to designate a specific group of seeds
which could be referred to as follows: certified seed
of a commercial nature only (that
for
producing other seed in the Member State of
(to
origin) which can be used as ‘basic seed'
produce new certified seed) in the country of des-
tination.

is, not

Certain directives allow even third-generation certi-
fied seed.

(ii) Common catalogue of varieties

(25)

Thus, first-generation certified seed can be used for
two purposes, either: (a) production of other certi-
fied seed; or (b) sowing. The first purpose is iden-
tical to that served by the basic seed referred to at
point 22 (thereby making first-generation certified
seed comparable to intermediate machinery). The
second purpose, however, is to provide commercial
seed for crop production (by virtue of which the
seed can be compared to a finished industrial
product). It is above all for the breeder (or his
licence holder) to decide for what purpose first-
generation certified seed is to be used. However, a
third party who has lawfully obtained such seed
to
(and who is authorised by national bodies
operate as a multiplier) could also produce second-
generation seed and have it certified by public
bodies.

(26)

ensure

Regarding the distinctions made in points 21 to 25
it should be pointed out that while the Community
directives
free movement within the
Community of basic and certified seed which satis-
fies their conditions, they do not oblige Member
States to make provision in their legislation for two
separate generations (first and second) of certified
seed. Thus, even in cases where a number of
generations are allowed, some Member States make
provision for only one generation. As a result, there

(28) Directive 70/457/EEC called for the drawing-up of
a common catalogue of varieties of agricultural
plant species on the basis of the Member States’
national catalogues. Each Member State draws up
one or more catalogues of the varieties officially
approved for certification and marketing on its
territory.

(29)

Seed of a variety which is accepted in the national
catalogue may no longer be subject
to any
marketing restriction in other Member States:

— with effect from 31 December of the second
year following that in which the said varieties
are entered in the national catalogue,

or

— when all the Member States have manifested to
the Standing Committee on Seeds and Propa-
gating Material their intention not to restrict
the marketing of seeds of the variety entered in
the said national catalogue.

The Commission publishes in the Official Journal
of the European Communities (under the title
‘Common catalogue of varieties of agricultural
plant species') a list of all varieties the seed of
which are not subject to any marketing restriction.

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(30)

those provisions, seed of varieties
By virtue of
entered in the common catalogue may move freely
between all Member States of the Community, even
where the variety concerned is not recognised in
the Member State of destination.

On the other hand, in order to produce certified
seed outside the Member State of first certification,
the variety in question must be entered in the
the Member State where
national catalogue of
production is
the
In other words,
Community directive allows seed to be marketed,
but not produced, throughout the Community.

to begin.

(b) French provisions

(31)

The general technical rules on seed production and
marketing in France are to a large extent drawn
from Community directives. In order to safeguard
product quality these rules require very rigorous
enforcement, thus imposing a substantial adminis-
trative burden on the public authorities. The
central role falls to SOC, which is an arm of the
French Ministry of Agriculture and which is
managed by the Groupement national interprofes-
sionnel des semences (GNIS).

(32) Certification is the outcome of a control procedure
enabling the Service officiel de contr(cid:147)le to be sure
that seed submitted to it meets minimum genetic
or varietal purity requirements.

Seeds can be certified only on the premises of
multipliers, who must have been approved for the
purpose beforehand. Certification is evidenced by
attaching certificates, official
labels or in some
cases seals issued by the SOC to the packaging of
certified seed.

Approval for testing is granted by decision of the
Minister for Agriculture, following a proposal from
the SOC, for one or more species and, for each
species, for one or several categories.

(33)

France’s general
following categories of seeds:

technical rules provide for the

(a) Stock material

The initial material (strains, clones or multipli-
thanks to which the variety’s
cation stock)
maintenance can be resumed or continued each
year.

(b) Pre-basic
seed)

seed (generations predating basic

Seed of a generation occurring between the
stock material and basic seed.

(c) Basic seed

Seed produced according to accepted practices
for the maintenance of the variety and normally
intended for production of certified seed.

(d) Certified seed

Seed of direct descent from the multiplication
of basic seed or, in some cases, at the breeder’s
request and with the approval of the SOC, from
pre-basic seed. Certified seed may be sub-
divided into first-generation certified seed (R1)
and second-generation certified seed (R2).

the purposes of

For
the seed
described at (a), (b) and (c) above will be collectively
referred to as ‘basic seed' and that described at (d)
will be referred to as ‘certified seed'.

this Decision,

(34)

The stock material, pre-basic seed and basic seed
are produced under
the
breeder, who is in charge of the production of his
varieties.

the responsibility of

Special technical rules specify the conditions under
which stock material, pre-basic seed, basic seed and
certified seed are to be produced.

In France most of
the specific technical rules
provide for only one generation of certified seed.

(35)

The situation is different in other Member States,
where two or more generations of certified seed
may be allowed (see point 26). French certified seed
can, in such cases, be exported there and undergo
multiplication (‘technical seed') — a procedure
which would not be allowed in France.

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(36) Accordingly, certified seed can, under French rules,
be ‘reclassified'. This consists in repacking first-
generation seeds by changing the certificate or
label, with the result
it will no longer be
that
possible to use the seeds to produce other seeds in
the Member State of destination.

E. THE NOTIFIED AGREEMENTS

(37)

The notified agreements are standard contracts
whereby Sicasov organises the production and sale
of seed protected by plant variety rights which
breeders have entrusted to its management.

There are two types of agreement.

(a) Where Sicasov acts as the breeder’s agent (see
point 2(a)), it concludes an agreement with the
multiplier known as a contrat de licence de
production et de vente de mat(cid:130)riel de reproduc-
tion ou de multiplication vegetative de vari(cid:130)t(cid:130)
v(cid:130)g(cid:130)tale.

(b) Where Sicasov acts as the breeder’s concessio-
naire (see point 2(b)), it concludes an agreement
with the multiplier known as a contrat de sous-
concession de production et de vente de mat(cid:130)riel
de reproduction ou de multiplication vegetative
de vari(cid:130)t(cid:130) v(cid:130)g(cid:130)tale.

(38) On the basis of the notified agreements, Sicasov
grants the licence holder a non-exclusive licence to
reproduce and sell a given plant variety (first para-
graph of Article 1). The licence is personal and the
rights arising therefrom cannot be transmitted,
either in whole or in part (second paragraph of
Article 1).

Except with the prior agreement of Sicasov, the
licence holder may not allow seed production to be
carried out by a third party (third paragraph of
Article 1).

The notified agreements concern groups of species,
which are thus subdivided:

— cereals,

— fodder plants and high-protein products,

— maize/sorghum, vegetables, oil and fibre plants,

— potatoes.

(39)

The notified agreements provide that the produc-
tion and marketing of seed are subject
to the
following requirements:

(a)

the production and reproduction licence for the
variety is granted solely for the production and
sale of seed within French territory or within
another specified territory (Article 2(A)) (6);

(b) the licence holder may neither export nor
import basic seed without express approval
from Sicasov (first paragraph of Article 2(C));

(c) a licence holder selling basic seed must obtain a
commitment from the purchaser that the seed
will not be exported either direct or indirectly
(second paragraph of Article 2(C));

(d) the licence holder may not export certified seed
direct (or through an undertaking belonging to
the same group or subject to the same export
prohibition) if the variety has been entered in
the common catalogue for less than four years
(Article 2(D));

(e) the licence holder may not export certified seed
of the first generation to Member States that
authorise two or more generations or export
certified seed of
the second generation to
Member States that authorise three or more
generations. The licence holder undertakes to
impose this obligation on all his purchasers
(first paragraph of Article 2(E)). However, the
breeder undertakes to give his agreement on
the reclassification of seed to the national certi-
fication authorities as a matter of course,
provided that the exporter informs him of his
intention and that the certification authorities
inform him (or his assignee) of the quantities of
seed reclassified and the country of destination
(second paragraph of Article 2(E)). Such system-
atic authorisation is to be granted only for vari-
eties entered in the common catalogue for
more than four years (third paragraph of Article
2(E));

(6) Where the variety is protected by a French breeding certifi-
cate, the right of production covers all French territory. By
contrast, where the variety is protected by a Community
breeding right, the right of production is granted in respect of
the whole of the Community. The licence holder is therefore
entitled to produce and sell seed freely in all
the Member
States. The clauses relating to the import and export restric-
tions provided for by Article 2 of the contract will apply only
where the variety in question is protected under Community
plant-breeding law (except where non-member countries are
concerned).

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(f)

the licence holder may not export certified seed
to Member States which do not grant
legal
protection for new plant varieties. The licence
holder undertakes to impose this obligation on
all his purchasers (first paragraph of Article
2(E));

(g) the licence holder may not export certified seed
to States which are not members of
the
Community or members of the Union interna-
tionale pour la protection des obtentions v(cid:130)g(cid:130)-
tales (UPOV). The licence holder undertakes to
impose this obligation on all his purchasers
(first paragraph of Article 2(E)).

The management group may subject the licence
holder to any check it feels is necessary in order to
ensure that the operations for which it is respon-
sible are being properly carried out; it may also
require the licence holder to submit to it each year
a statement of sales or certifications, broken down
by species.

In exchange for the rights granted to him, the
licence holder undertakes to pay the management
group a membership fee and an amount based on
the quantities sold or certified in the autumn or
in question is payable by
spring. The amount
licensed multipliers when they entrust
to their
multiplying farmers seeds under licence produced
or packed by them.

If the subject of the agreement is an annual species
the licence is granted only for the harvest resulting
from the planting that follows its signing. In the
case of a perennial species, the licence is granted
for the number of harvests resulting from the
planting that follows the signing of the agreement
and is specified therein.

(40)

(41)

(42)

II. LEGAL ASSESSMENT

A. ARTICLE 85(1)

(43) Article 85(1) of the Treaty prohibits as incompat-
ible with the common market all agreements
between undertakings, decisions by associations of
undertakings and concerted practices which may
affect trade between Member States and which have
as their object or effect the prevention, restriction
or distortion of competition within the common
market.

(45)

(46)

The licence holders are also undertakings since
they carry on an economic activity (the production
and marketing of seeds).

From the product standpoint, the notified agree-
ments relate to a very large number of different
reference markets. Each plant species constitutes a
different market and, within a given species, groups
of varieties can very often be identified that are to
be regarded as separate markets.

From the geographic standpoint, the abovemen-
tioned markets correspond to the territories of the
Member States. It should first be borne in mind
that
the production and marketing of seeds is
governed by national rules (as far as France is
concerned, see points 31 to 36), although such
national rules must comply with the applicable
Community directives. Secondly,
should be
stressed that seed distribution structures are organ-
ised chiefly along national lines. However, the fact
that the reference markets are national markets
does not detract from the existence of import and
export flows, some of which are on a large scale.

it

(47)

The notified agreements are ‘agreements between
undertakings' within the meaning of Article 85 of
the Treaty. It is therefore necessary to examine
whether the clauses provided for by the said agree-
ments restrict competition and affect trade between
Member States.

(a) General

(48) However, before assessing whether the clauses of
the notified agreements are compatible with Article
85(1) of the Treaty, it is advisable to examine the
scope of the plant-variety rights in order to define
which clauses of the notified agreements arise from
the existence of those rights.

(49)

In this connection, reference should be made both
to Regulation (EC) No 2100/94 and to the UPOV
Convention, which has been ratified by most
Member States.

Together, they give the breeder the right to subject
to his prior authorisation all acts relating to the
production, reproduction, conditioning, putting up
for sale, marketing, export, import and stocking of
seeds of the protected variety.

(44)

Sicasov is an ‘undertaking' within the meaning of
Article 85 of
the Treaty since it carries on an
economic activity consisting in the management
and supervision of plant breeders’ rights in France.

It therefore follows that any act relating to the
production of basic or certified seeds falls within
the breeder’s exclusive rights and is accordingly
covered by plant-variety rights.

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(50) Consequently, the breeder is entitled to control the
destination of all seeds in respect of which an act of
production is still legally possible in the light of
the public provisions applicable (see points 21 to
27 and 31 to 36). This means that Article 85(1) will
not apply to agreements aimed solely at protecting
the breeder’s right in regard to seeds which, on the
basis of the public rules applicable, can lawfully be
used to produce other seeds. Thus, for instance, an
from
agreement prohibiting the licence holder
selling or exporting seeds which do not belong to
the last generation that may lawfully be reproduced
and which have been made available to him solely
for the purpose of multiplication is not covered by
Article 85(1) of the Treaty (7).

The above points also apply to ‘technical' seeds (see
point 27). It must be accepted that, in the absence
of any Community harmonisation in this field, a
breeder may insert whatever contractual clauses are
needed to protect his rights. In order to do so, the
breeder may stipulate contractual clauses enabling
him to subject to his authorisation and control any
seed-production act irrespective of the generation
concerned (first generation, second generation, etc.).
Such clauses will, however, be approved only if
they are essential to protecting the breeder’s rights
and are compatible with the Community rules on
competition. Scrutiny of
reveal
whether those requirements are fully satisfied.

the case will

(51)

By contrast, the breeder’s right of control ceases to
apply only after he produces (or authorises the
production of) seeds which, by virtue of the public
provisions applicable, can no longer be lawfully
reproduced and after he puts them (or authorises
them to be put) into circulation. The seeds may no
longer be used to produce other seeds; they may
only be sold (direct or via an intermediary)
to
farmers for the production of consumption goods.
The seeds must in such cases be regarded as goods
that are comparable to finished industrial products.

(7) See Case 27/87 Erauw-Jacquery v. La Hesbignonne [1988]
ECR, p. 1919, at paragraphs 9 and 10 of the judgment. Ac-
‘the breeder must be entitled to restrict
cording to the Court,
propagation to the growers which he has selected as licensees.
To that extent,
the provision prohibiting the licensee from
selling and exporting basic seed falls outside the prohibition
contained in Article 85(1)'.

Any agreement aimed at restricting the production
or marketing of the seeds can be scrutinised in the
light of Article 85 of the Treaty.

While it is true that the abovementioned seeds are
the subject of numerous checks by the public
authorities (see points 31 to 36), the legal position
of a breeder does not differ from that of a holder of
a patent or trade mark on a product subject to
control by the public authorities (such as a pharma-
ceutical product). There are therefore no grounds
for regarding seeds protected by plant-variety rights
as having specific characteristics which require
them to be treated differently from products
protected by other industrial property rights. This
does not affect the need to take the specific nature
of seeds into consideration for the purposes of
applying the competition rules (8).

(b) Clauses not covered by Article 85(1)

(52)

The granting by Sicasov of a non-exclusive right to
in
multiply seeds covered by the agreements
France or on a territory which is the subject of the
plant variety rights (which means, in the case of the
Community plant-breeding right, the Community
as a whole) does not restrict
to grant
licences to all multipliers submitting an applica-
tion, providing that those multipliers fulfil French
legal requirements in terms of seed certification. In
this respect, Sicasov’s policy has been to grant
licences without difficulties to applicants in respect
of the selected varieties.

its right

Moreover, the breeder is still free to sell the seeds
covered by the contract in France or elsewhere. He
may do so direct or via a distributor. Such a clause
must
restricting
competition within the meaning of Article 85(1).

seen as not

therefore

be

(53)

The obligation on the licence holder not (except
with Sicasov’s approval) to entrust basic seeds to a
third party with a view to producing certified seeds
is one of the options arising from the existence of
plant variety rights. In this connection, it should be
emphasised that producing basic seeds entails
major costs and may carry with it appreciable risks.

(8) See Case 258/78 Nungesser v. Commission [1982] ECR, p.

2015.

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8. 1. 1999

(56)

(57)

the
Moreover, basic seeds are produced under
responsibility of the breeder. The latter must there-
fore be allowed to protect himself against any tech-
nical mishandling of those seeds. To that end, he
must be allowed to restrict the multiplication of
basic seed to the growers which Sicasov has
selected as licence holders (9). This means that the
breeder has the right to restrict the movement of
basic seed. Accordingly,
the obligation on the
licence holder not to entrust basic seed to third
parties is compatible with Article 85(1) of
the
Treaty.

The obligation on the licence holder not to export
basic seed must also be regarded as the expression
of the exercise of one of the rights open to the
breeder. The latter (or, as in this case, his assignee)
must be recognised as having the right to restrict
the destination of basic seed in order to avoid any
wrongful handling of the varieties. To that end, he
must have the right to prohibit the licence holders
he has chosen (or, as in this case,
the licence
holders his assignee has chosen) from selling and
exporting the basic seed (10). Clearly, therefore, a
breeder who bears the economic and legal risks
involved in the production of seeds must be able to
control
sale
abroad. It may accordingly be felt that the pro-
hibition on the export of basic seed is not covered
by the prohibition under Article 85(1) of
the
Treaty.

their destination,

including their

The obligation on the licence holder to pass on to
the buyer the obligation not to export basic seed
must also be regarded as an expression of the rights
accruing to the breeder. In that case too,
the
breeder must be able to control the destination of
the basic seed in order to avoid any technical
mishandling of
the varieties concerned. Such
wrongful handling could occur not only when a
licence holder exports direct but also when he sells
(with Sicasov’s approval) to a third party who then
exports the basic seed. The breeder must therefore
be in a position to control the final destination of
the basic seed. It may therefore be felt that the
obligation on the part of the licence holder to
obtain an undertaking from his buyer that the basic
seed will not be exported is not covered by the
prohibition under Article 85(1).

The obligation on the licence holder not to export
first- or second-generation certified seed if the said
seed does not belong to the lowest level of protec-
tion afforded by the country of destination (‘tech-
nical seed') and has not been reclassified before-
hand is aimed at ensuring that the breeder is able
to control reproduction acts over which he has
exclusive rights. In Member States where several
generations
first-generation seed
imported into France might be used as basic seed
in order to obtain other seed (the same would apply
to second-generation seed in the case of Member
States that allow three generations or more). Repro-
duction acts could be carried out
therefore by
multipliers who have not been selected by the
breeder and are outside his control (11).

allowed,

are

Similar considerations may be arrived at as regards
the prohibition on imports of basic seeds. Plant-
protection rights allow the holder to prohibit third
parties from importing protected seed. Those rights
may be regarded as having expired only when the
breeder has put the seeds into free circulation or
has given his consent to that end. In the case of
basic seed, the breeder arranges for its production
and distribution on the basis of a network of multi-
pliers who cannot freely dispose of the seed. It is
therefore permissible for the breeder to underpin
that system by means of a prohibition on each
licence holder from importing basic seed. That
clause should accordingly not be regarded as being
covered by Article 85(1) of the Treaty.

It should be emphasised that reclassification lowers
neither the intrinsic value nor the commercial
value of the seed. The sole effect of reclassification
is to make seed non-reproducible (from the legal
point of view). Account must be taken of the fact
that it would be almost impossible for the holder to
use contractual means alone to prevent reproduc-
tion acts from taking place without his agreement
in a Member State that allows several generations.
In those Member States, reproduction acts towards
subsequent generations are quite legal and the
national authorities are under no obligation what-
soever to ask the breeder for his authorisation or to
communicate to him seed certifications of genera-
tions occurring after the first.

(54)

(55)

(9) See footnote 7; at paragraph 10 of the judgment.
(10) See footnote 7; at paragraph 10 of the judgment.

(11) See footnote 7; at paragraph 10 of the judgment.

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Admittedly, the authorisation to reclassify is not
granted by the breeder until four years after entry
in the common catalogue; meanwhile,
licence
holders will therefore be unable to export direct to
of
certain Member
Community harmonisation, it must be concluded
that such a measure is justified and does not restrict
competition.

In the

absence

States.

(60)

(61)

(62)

(58)

(59)

Accordingly, an obligation on the licence holder to
reclassify first-generation seeds (or, where applic-
able, second-generation seeds) prior to exporting
them to Member States that allow two or more
other generations does not restrict competition
within the meaning of Article 85(1) of the Treaty.

The obligation on the licence holder to pass on the
prohibition on exports of the abovementioned seed
is aimed at preventing an adverse effect, through
one or more third-party buyers, on the breeders’
rights in the Member State of destination which
would have the consequences described in point
57. Such an obligation must therefore be regarded
as compatible with Article 85(1) of the Treaty.

The obligation on the licence holder not to export
certified seeds to Member States that do not afford
any legal protection to new plant varieties is aimed
at preventing third parties
from carrying out,
without the breeder’s authorisation, reproduction
acts in order to obtain later generations of those
seeds. In those Member States, anyone may repro-
duce seeds until the last generation allowed under
national legislation in accordance with Community
directives. The only possibility the breeder has of
exercising control over such acts is to restrict the
marketing of seeds. Breeders’ rights do not cease to
apply in the case of seeds that do not belong to
self-reproducing plant species.

Self-reproduction is a phenomenon producing a
situation different from that obtaining in the field
of patents. After being put onto the market (by the
holder or with his consent), a patented industrial
product can no longer be used to produce large
numbers of similar products (regardless of whether
or not there is any protection under patent law). On
the other hand, prohibiting exports of seeds to
Member States that do not recognise any legal
protection for the species concerned is tantamount
to prohibiting the licence holder from transmitting
to third parties in a Member State that does not
grant protection in respect of the patent any inter-
mediate machinery used to manufacture a product

in the Member State of
protected by a patent
origin. This prohibition should not be regarded as
restricting competition.

In the light of the above, an obligation on the
licence holder not to export seeds to Member States
that do not grant any legal protection to the variety
in question is not to be regarded as restricting
competition under Article 85.

The obligation on the licence holder to pass on to
any buyer the obligation referred to in paragraph
59 is also aimed at preventing reproduction acts
from taking place outside the breeder’s control.
That obligation is not, therefore, covered by the
prohibition set out in Article 85(1) of the Treaty.

that are not Member States of

to export certified seeds to
The obligation not
countries
the
Community or members of UPOV is in keeping
with the same objectives as are described above (see
points 57 to 60).

(c) The clause covered by Article 85(1)

(or

from registration of

The obligation on licence holders not to export
certified seeds from France direct
through
undertakings belonging to the same group, or
through other licence holders) for a period of four
years
the variety in the
common catalogue prevents licence holders not
only from conducting an active sales policy outside
France but also from meeting unsolicited demand
from customers in other Member States. It follows
that the licence holder may not supply customers
established in Member States other than France,
even if the sale of the seed takes place on French
territory. It should be emphasised, moreover, that
the said obligation also applies where the sale is
made through a broker (who acts on behalf and for
the account of the customer outside France).

The obligation in question therefore prevents any
direct exporting and leaves only the possibility of
effecting indirect exports (that is, via a third-party
undertaking established in France).

is clear therefore that

It
the said obligation is
designed to eliminate licence holders as direct
to undertakings established in
sellers of
Member States other than France. Thus, undertak-
ings outside France can only buy seeds through
intermediaries established on French territory. In

seeds

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Official Journal of the European Communities

8. 1. 1999

general, such purchases are more difficult and less
advantageous than those made direct from licence
holders. Consequently,
the clause in question
reduces the degree of competition in the other
Member States, since the breeder (or the under-
taking which the latter has authorised to produce
and/or sell) is faced only with sales to third parties
who bought the seed covered by the agreement in
France (from licence holders in the management
group or from the breeder himself) and subse-
quently exported them to the State in question.

(or his assignees)

(63) Accordingly, the obligation mentioned in point 62
is designed to restrict competition within the
meaning of Article 85(1) of the Treaty, at least in
the case of exports to States which do not give the
to prevent
breeder
imports from other Member States. To this extent,
the said obligation enables the breeder to achieve a
result which he would not be able to attain by
relying exclusively on possible rules relating to
plant-breeding rights, adopted by the Member
States into which the seeds are imported.

the right

(64)

The obligation mentioned in point 62 is likely to
eliminate a flow of trade in seeds from France to
the other Member States, which might otherwise
have expanded. It must therefore be regarded as
the
affecting trade between Member States of
Community.

Article 2 of Regulation No 26 apply to the notified
agreements.

(67)

It should be pointed out first of all that the notified
form an integral part of a
agreements do not
national market organisation for seeds. Such a
national organisation exists neither in France nor
in any other Member State, since the sector is
governed by the provisions of Council Regulation
(EEC) No 2358/71 of 26 October 1971 on the
common organisation of the market in seeds (14), as
last amended by Regulation (EC) No 192/98 (15).

(68)

It should be examined subsequently whether the
notified agreements are necessary for the attain-
ment of the objectives set out in Article 39 of the
Treaty.

It should be emphasised in this respect that, since
it is a derogation to the general rule of Article 85(1)
of the Treaty which is involved, the said exception
is to be interpreted restrictively (16).

In addition, the Community courts have consis-
tently held that the exception in question only
applies if an agreement promotes the attainment of
all the objectives of Article 39 of the Treaty (17).

Lastly, it must be concluded that agreements which
are not included among the means provided by the
Regulation on the common organisation for the
attainment of the objectives set out in Article 39 of
the Treaty are not necessary within the meaning of
Article 2(1) of Regulation No 26/62. The common
organisation of markets in seeds does not provide
for the conclusion of licensing agreements.

B. ARTICLE 2 OF REGULATION No 26

(69) Accordingly, an exception under Article 2 of Regu-
lation No 26 must be ruled out in this case and, by
the same token, Article 85(1) of
the Treaty is
applicable.

(65) Article 2 of Council Regulation No 26 applying
certain rules of competition to production of and
trade in agricultural products (12), as amended by
Regulation No 49 (13), provides that Article 85(1) of
the Treaty is not to apply to such of the agree-
ments, decisions and practices which concern the
production or sale of agricultural products as form
an integral part of a national market organisation or
are necessary for attainment of the objectives set
out in Article 39 of the Treaty.

(70)

C. ARTICLE 85(3)

The provisions of Article 85(1) can, by virtue of
Article 85(3), be declared inapplicable in the case of
any agreement or category of agreements between
undertakings which contributes to improving the
production or
to
distribution of
promoting technical or economic progress, while
allowing consumers a fair share of the resulting
benefit, and which does not:

goods

or

(66)

Seeds are listed in Annex II to the Treaty and are
therefore
products. Consideration
should therefore be given to whether the two
exceptions provided for by the first sentence of

agricultural

(12) OJ 30, 20. 4. 1962, p. 993/62.
(13) OJ 53, 1. 7. 1962, p. 1571/62.

(14) OJ L 246, 5. 11. 1971, p. 1.
(15) OJ L 20, 27. 1. 1998, p. 16.
(16) See Case C-399/93 Oude Luttikhuis [1995] ECR I, p. 4515, at
paragraph 23 et seq. of the judgment and Joined Cases T-70/
92 and T-71/92 Florimex [1997] ECR II, p. 693, at paragraph
152 of the judgment.

(17) See Case 71/74 Frubo [1975] ECR 563, paragraphs 22 to 27
of the judgment, Oude Luttikhuis, see footnote 16, at para-
graph 25 and Florimex, see footnote 16, at paragraph 153.

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(a)

impose on the undertakings concerned restric-
tions which are not indispensable to the attain-
ment of those objectives;

(b) afford such undertakings

eliminating
substantial part of the products in question.

competition in respect

the possibility of
a

of

(71)

The Commission may apply Article 85(3) either by
means of an individual decision or by means of a
regulation.

(72) Commission Regulation (EC) No 240/96 (18) may
technology
relating to plant breeders’

be applied to certain categories of
transfer agreements
rights (point (h) of Article 8(1)).

Regulation (EC) No 240/96 cannot, however, be
applied to the notified agreements since the prohi-
bition on exporting certified seeds does not corre-
the obligations mentioned in
spond to any of
in particular, the
Article 1(1) of the Regulation:
notified agreements do not grant
territories to
licensees (see points 1, 2, 4, 5 and 6 of Article 1(1))
or reserve certain territories for the licensor (see
point 3 of Article 1(1)).

(73) Although Regulation (EC) No 240/96 is not applic-
able as such, it can nevertheless provide criteria
that may be used, in the context of this individual
Decision, in assessing the prohibition on exporting
certified seeds.

Consequently, with a view to assessing whether the
prohibition on exporting certified seeds satisfies
the tests of Article 85(3) of the Treaty, account
must be taken of the following considerations.

(74)

The prohibition on exporting certified seeds contri-
butes to improving production and distribution,
and to promoting technical and economic progress.

First, it facilitates the dissemination of new varieties
in Member States other than France by encour-
aging undertakings in those Member States to
accept
the risks involved in producing and/or
marketing new varieties selected by the French
breeders. Those firms will be more inclined to
undertake the dissemination of new varieties if they
can be certain that they will not have to contend
with direct exports from France during the launch
period. It is therefore appropriate to conclude that,
during this period, French breeders should have

(18) OJ L 31, 9. 2. 1996, p. 2.

to protect

licence holders and
their
the right
distributors (in Member States other than France)
against direct competition from French licence
holders by imposing on the latter contractual
clauses prohibiting them from exporting certified
seeds. Licence holders and distributors in Member
States other than France, who will normally have a
better knowledge of the respective markets than
the French breeders, will be able to market seeds
belonging to new varieties in optimum conditions
and provide users with regular and adequate
supplies.

the export prohibition improves

Secondly,
the
organisation of the production and distribution of
seeds in France by encouraging French licence
holders to concentrate their efforts on French ter-
ritory with a view to providing user farmers with
regular and adequate supplies.

It should also be stressed that Regulation (EC) No
240/96 exempts obligations on licensees to refrain
from both active sales (Article 1(1), point 5) and
passive sales (Article 1(1), point 6) since it considers
such prohibitions generally contribute to
that
improving the production of goods
and to
promoting technical progress.

(75) User

farmers, be they in France or

in other
Member States, will be allowed a fair share of the
benefit resulting from the improved supply of seeds
referred to in point 74. The protection afforded by
the prohibition on exports encourages firms in
Member States other
than France to conclude
production or distribution agreements with French
breeders and thereby introduces farmers in those
Member States to new varieties that will improve
their harvests.

French farmers will also benefit from regular and
plentiful supplies, since French licence holders will
have to concentrate their efforts above all on the
French market.

In order
to preserve these beneficial effects,
however, parallel exports from French territory
must at all times be free. This requirement is met
in the case in point since there is no clause in the
notified agreements prohibiting licence holders
from selling to users and dealers established in
French territory, who could then export to other
Member States.

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The foregoing considerations are compatible with
that
Regulation (EC) No 240/96, which states
export prohibitions
as
referred to in Article 1, as a rule allow consumers a
resulting from the
share of
fair
improvement
in the supply of goods on the
market.

imposed on licensees,

the benefit

(76)

(77)

The prohibition on direct exports of seeds is essen-
tial for ensuring the dissemination of new varieties
in Member States other than France and, therefore,
for achieving the objective of promoting technical
and economic progress for the benefit of users situ-
ated in those Member States. In particular, it does
not seem that a protection period of four years,
calculated from the entry in the common cata-
logue,
is excessive compared with the aim of
promoting the knowledge and dissemination of a
new variety on a market. In this respect, it should
be noted that Regulation (EC) No 240/96 allows
prohibitions on passive exports for a period of five
years, calculated from the date on which the
product in question is first placed on the market.
As regards the date on which the export prohibi-
tion is to begin, it should be borne in mind that, on
the whole (that is to say, in cases other than that of
parallel entry in the national catalogue of
the
Member State of destination), a variety may not
move freely in the Community until it is entered in
the common catalogue. It is therefore advisable to
choose the time of such entry as the starting point
of the protection period.

The obligation on the licence holder not to export
seeds direct does not enable breeders to eliminate
competition. First of all, new varieties of seeds are
mostly in competition with existing varieties which
are well known to farmers and which therefore
constitute an alternative source of supply. Secondly,
parallel imports from France are still unrestricted,
with the result that any customers established in
other Member States will, albeit indirectly, have
access to French varieties, even during the launch
phase.

(78)

(79)

D. ARTICLES 6 AND 8 OF REGULATION No 17

The Commission is required, under Article 6 of
Regulation No 17, to indicate the date on which an
exemption decision begins to take effect.

By virtue of Article 8(1) of Regulation No 17
exemption is to be granted for a specific period. In
view of technical developments in the field of seeds
and the
situation on the market
concerned, it would be reasonable to provide for a
10-year exemption, to begin on 26 October 1994,
being the date of notification of the agreements,

economic

HAS ADOPTED THIS DECISION:

Article 1

Pursuant to Article 85(3) of the EC Treaty, Article 85(1) is
hereby declared inapplicable to the standard agreements
of Sicasov (Soci(cid:130)t(cid:130) coop(cid:130)rative d’int(cid:130)r(cid:136)t collectif agricole
anonyme (cid:133) capital variable) covering the production and
sale of seeds.

Article 2

The exemption shall apply from 26 October 1994 to 26
October 2004.

Article 3

This Decision is addressed to: Sicasov (Soci(cid:130)t(cid:130) coop(cid:130)rative
d’int(cid:130)r(cid:136)t collectif agricole anonyme (cid:133) capital variable)
7, rue Coq-H(cid:130)ron, F-75001 Paris.

Done at Brussels, 14 December 1998.

For the Commission

Karel VAN MIERT

Member of the Commission