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 Will Material Transfer Agreements Open Pandora's Box?
By
Robin Pistorius
 
Keywords:  Access to genetic resources; Consultative Group on International Agricultural Research (CGIAR); International Plant Genetic Resources Institute (IPGRI); Food and Agricultural Organization (FAO); Intellectual property rights. 
Correct citation: Pistorius, R. (1995), "Will Material Transfer Agreements Open Pandora's Box?" Biotechnology and Development Monitor, No. 24, p. 20­22.

Germplasm collections under trusteeship of the Consultative Group on International Agricultural Research (CGIAR) were built up on the basis of the principle of free access to and use of genetic resources. With the implementation of the Convention on Biological Diversity, national states can exercise sovereign rights over genetic resources. The International Plant Genetic Resources Institute (IPGRI) and FAO now attempt to design a mechanism to guarantee a continued access and distribution of germplasm transfers while taking the Convention's prescriptions into account.

Material Transfer Agreements (MTAs) are contracts on the conditions of transfer and use of genetic resources. They are not a completely new phenomenon. Especially within the biotechnology industry in the USA, and lately also in Europe and Japan, MTAs are increasingly being used to transfer (genetic material of) varieties and/or breeding lines with a potential commercial significance. MTAs can be considered to comply with growing market forces on the use of genetic resources. Additionally, since the current open­access regime does not result in enough economic incentives for developing countries to invest in new conservation facilities, the use of sovereign rights might be considered as a feasible means to generate addition income.
At the same time, however, MTAs are used to guarantee that genetic material does not become subject to the private property regime. The Botanical Gardens at Kew, London, for example, uses MTAs to prevent the contracting party from using the received material for commercial purposes. As will become clear in this article, the CGIAR centres intend to use MTAs to ensure continued free availability of "designated germplasm". Designated germplasm is germplasm acquired prior to the entry into force of the Convention on Biological Diversity (CBD), or material developed by a centre from this germplasm. However, the parameters for the exchange of genetic resources are changing dramatically, creating a new legal environment for the twelve CGIAR institutes maintaining germplasm collections. This is particularly true for the post­CBD period, in which the provisions of national sovereignty in relationship with a fair and equitable sharing of benefits have started to dominate international decision making.

Changing parameters
The past 10 years show a gradual erosion of the principle that genetic resources are "heritage of mankind". This principle was first encoded in the FAO International Undertaking on Plant Genetic Resources established in 1983. In 1989, the Undertaking was extended by two resolutions. The first resolution (4/89) recognized that Plant Breeders' Rights, as provided by the Union for the Protection of New Varieties of Plants (UPOV) Convention of 1978, were not inconsistent with the Undertaking. It simultaneously recognized Farmers' Rights, which were defined in the second resolution (5/89). In 1991, a third resolution (3/91) stated that the concept of the heritage of mankind is subject to the sovereign rights of nations over their genetic resources. It also agreed that Farmers' Rights will be implemented through an International Fund for Plant Genetic Resources.
Not only the FAO Resolutions, but also the CBD has added new conditions for the access to and compensation for plant genetic resources. The CBD, which was signed in 1992 and entered into force in December 1993, recognizes the sovereign rights of nations over their genetic resources, and proposes the "equitable sharing of benefits from its use."
The effect of the FAO Undertaking and the CBD on CGIAR policies has been very limited, because (a) the CGIAR genebanks until recently had no formal ties with the FAO Global System on Plant Genetic Resources for Food and Agriculture, FAO's institutional structure; and (b) the CBD did not cover ex situ material already in storage prior to its implementation. Hence, CGIAR could continue to apply the principle of free access without having to deal with the question of sovereign rights.

The FAO/CGIAR agreement
Resolution 3 to CBD of the Nairobi Final Act in 1992 identified access to existing ex situ collections and Farmers' Rights as outstanding issues to which solutions had to be sought within the FAO Global System. On 26 October 1994, twelve CGIAR centres maintaining ex situ germplasm collections placed designated germplasm accessions under the auspices of the FAO as part of the International Network of Ex Situ Collections. IPGRI played an important role in negotiating this agreement on behalf of the CGIAR.
According to Article 3b of the FAO/CGIAR Agreement, each of the 12 CGIAR centres has to apply to the following two provisions: (a) "not to claim ownership over the designated germplasm received, or to seek intellectual property rights over that germplasm or related information" (e.g. research results and information obtained from the persons or communities who had donated the germplasm to the CGIAR centre); and (b) "to ensure that any subsequent person or institution to whom he or she makes samples of the germplasm available, is bound by the same provision."
In addition, Article 10 of the FAO/CGIAR Agreement explicitly states that the centres have to accept responsibility for ensuring that any recipient of the designated germplasm and/or related information is bound to the same conditions as the 12 centres. A total of about 450,000 designated accessions have been listed in the Annexes to the individual Agreements which are part of the FAO/CGIAR agreement. After June 1995, institutes and persons requesting material from the CGIAR centres will receive a Notice Letter in which the new provisions are made clear. By signing the Notice Letter the new user agrees with Article 3b of the FAO/CGIAR agreement.
However, designated germplasm is genetic material that has been acquired or improved prior to the entry into force of the CBD. What about material acquired after the enforcement of the CBD? Whereas the current agreement merely consolidates the principle of genetic resources as "heritage of mankind", exchange and use of post­CBD material will surely fall under specific provisions of both the Undertaking and the CBD related to sovereign claims and a "fair and equitable sharing of the benefits". In this context it should be noted that the CBD recognizes the primacy of Intellectual Property Rights (IPR).
Rules for the exchange of post CBD material are currently being debated in the FAO Commission on Plant Genetic Resources in co­ordination with the Conference of Parties to the CBD, representing the countries that signed and implemented the CBD. The FAO/CGIAR Agreement however does not yet cover post­CBD material. The Agreement does state that the signing CGIAR centres are to "actively participate" in the debate with the aim of reaching an arrangement which will "facilitate exchange and utilization" and a "fair and equitable sharing of the benefits derived from the commercial or other utilization of the germplasm".

Outstanding issues
As the FAO Commission on Plant Genetic Resources is now in the process of bringing the Undertaking in line with the principles of the CBD, the outcome of the debate between the FAO Commission and the Conference of Parties to the CBD on access and exchange issues will have direct consequences for the CGIAR policies. CGIAR centres will have to anticipate national sovereignty claims from source countries that are supported by the CBD for the material acquired by the centres after the CBD entered into force. In the process of setting up national legislation, source countries could start to impose restrictions on the distribution and collection of their genetic resources.
It is in this context that the discussion on the application of MTAs to the distribution of post­CBD CGIAR material takes place. How can the CBD provisions of sovereign rights and a "fair and equitable sharing of the benefits" be linked with CGIAR's mandate to maintain the free availability of germplasm? The solutions will be dependent on the outcome of other discussions among the member states of the FAO Commission and CBD Conference of Parties.
An increasing number of CGIAR centres are distributing material from their breeding programmes to commercial users. With regard to commercial application of the material supplied, six centres are now drafting MTAs: CIAT, CIP, CIMMYT, ICRISAT, IITA and IRRI. Considerable differences in the interpretation of MTAs exist among these centres: some centres just want to be informed about commercial uses, others want to be asked for agreement.

IPGRI's proposal
In June 1995, Geoffrey Hawtin, IPGRI's general director, proposed a multilateral framework which could provide a mechanism for the sharing of benefits in cases in which the source country is known and the research leads to commercialization.
With regard to material distributed from CGIAR breeding programmes, Hawtin suggests categorizing material "not­for­profit­use" and for "commercial use". Not­for­profit­use would include farmer­to­farmer exchange, and varieties bred which are made available without profit. Commercial use includes all cases where IPR protection is employed.
Hawtin suggests applying a compensation mechanism to cover pre­CBD material and putting "any benefits derived from commercial use (...) into the envisaged international fund for the implementation of Farmers' Rights." Hawtin warns against complex negotiation procedures which lead to the equitable sharing of benefits. "In most cases such financial benefits are not unlikely to be large, which (...) underlines the importance of analyzing the transaction costs involved. (...) In any case the international community will have to weigh the transaction costs against the possible benefits."

Pandora's box
The question is what role CGIAR centres would take in case of a violation of MTA rules by private or public users. A detailed compensation arrangement as part of the CGIAR MTA policy can become very complex. The recent unofficial MTA proposal of Barton and Siebeck includes optional clauses in which the rights of a source country are protected by means of a "lineage norm" based on the level of parentage between the improved variety and its genetic source material. They mention a minimum lineage norm of  25 per cent.  Also, recipients that pursue IPR on genes or inventions deriving from CGIAR material would not be allowed to assert IPR against the source country for a number of years, unless the invention is made available within that country at an equitable price.
In spite of their logical and reasonable content of MTAs, it should be questioned to what extent they will really help developing countries to benefit from their national sovereignty over genetic resources. MTAs might bring more unexpected costs in terms of extra regulation than real benefits if not quickly streamlined. The following points illustrate some potential pitfalls in the implementation of the MTAs:
(1) Opposition by industry. Some users in industry might not want to accept material on terms that restrict their right to exploit IPR (especially patents) in the developing and/or source country. This applies especially to cases in which CGIAR centres use the 'for research only' clause in MTAs, thus preventing patenting of the transferred material or of certain kinds of derived products. In these cases, commercial users might want to circumvent CGIAR centres. There are many alternative suppliers outside the CGIAR network. Elite material, to date, is usually exchanged within breeders networks, outside the CGIAR system.
(2) Use of multiple resources. Barton and Siebeck state that a 'lineage norm' can easily be challenged by users. Parentage in advanced varieties depends on a host of different lines, each most often contributing much smaller portions than one­fourth to a new line. In the medical sector private companies, such as Merck, tend to use material from one source country (e.g. Costa Rica). But in the agricultural sector it is typical for a variety to include genetic material from many sources. Applying a similar approach to genetic material used in agricultural research would lead to highly complex sharing formulas.
An additional argument could be that MTAs imply open access to information on the pedigree of commercial varieties, which in the private plant breeding industry is usually kept secret. How can a lineage norm function properly while not violating this practice?
(3) Extent of rights. To what extent rights of source countries as described in MTAs also include derivatives of subject material is unclear. Advances in biotechnology can complicate negotiations on what is a derived product. For example, circumstances could exist in which techniques are used that can vary genetic expression in different hosts. The gene essentially remains the same but its function differs. Also, techniques might be used to identify similar genes or gene combinations in other species which then are patented by the user who is thus circumventing claims. Barton and Siebeck suggest that MTAs could contain "reach through" clauses in order to prevent these specific cases and secure royalties to the source country. However, the question to what extent a user will still be interested in a MTA restricting its rights to use a patent again becomes relevant. The issue would perhaps require a study on the options for integrating the UPOV rules on "essentially derived varieties" and MTAs.
(4) Position of developing countries. The citation above mentions "developing nations" as areas in which a patent owner may not seek protection of its rights. This calls for a proper definition of which countries are developing countries and which countries are not. Among the developing countries as defined in the CBD several countries have advanced biotechnology industries, such as Brazil and Malaysia. They will interpret the clause as an impediment to their efforts to expand their regional or world­market share. Apart from this, many developing countries do not (or do not yet) possess juridical mechanisms to enforce national claims on technology transfer or financial compensation.

Are MTAs as used by CGIAR institutes a useful mechanism to strike an equal balance between free accessability and fair compensation? If CGIAR centres prefer not to continue setting up joint ventures with commercial users, the demand for complex MTAs will become less urgent. This in turn would deprive source countries from the incentive to get involved in compensation issues through sovereign claims.
Robin Pistorius

University of Amsterdam, Department of Political Science, Oudezijds Achterburgwal 237, 1012 DL Amsterdam, the Netherlands. Phone (+31) 20 525 4587; Fax (+31) 20 525 2086; E­mail r.pistorius@sara.nl

Sources
J.H. Baron and W.E. Siebeck (1994), Material Transfer Agreements in Genetic Resources Exchange: The case of the International Agricultural Research Centres. Issues in Genetic Resources No.1, May 1994. Rome: IPGRI.

J.H. Barton and W.E. Siebeck (1995), Securing Genetic Resources Exchange Through Transfer Agreements. Not published.

FAO Commission on Plant Genetic Resources (1995), The International Network of Ex Situ Collections, and the CGIAR Centres. FAO document no. CPGR­6/95/12 ADD.1, June 1995, Rome: FAO

G. Hawtin (1995), Approaches to Facilitating Access to Plant Genetic Resources and Promoting the Equitable Sharing of Benefits Arising from their Commercial Exploitation, within the Context of the CGIAR. Not published.



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