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Licensed apples

December 2011 - Intellectual Property. Legal Developments by Norrbom Vinding Law Firm, member of ius laboris.

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by Tom Bork Petersen

The EU Court has now established once and for all that the doctrine of exhaustion under EU law also applies to plant varieties.
When a trademark or patent owner licenses a company within the EU to sell its product, he effectively loses control over the product. For under the doctrine of exhaustion, the rights owner will have no say over what happens in the downstream market when he has permitted the product to be marketed. But what if the licensee does not comply with the licence agreement? That was the question before the EU Court in this case.
The case concerned the Nicoter apple tree variety. According to apple experts, the Nicoter apple is a modern variety, best known for its red-orange colour, crispness and mild taste. The apple has been very successful in supermarkets, where it is sold under the Kanzi trademark.
The Nicoter apple tree was protected under the Plant Variety Regulation, but the breeder had licensed a Dutch company to sell the Nicoter apple tree, subject to the proviso that buyers must sign a grower’s licence or a marketing licence. But the Dutch licensee failed to make one buyer sign such a licence.
The Dutch licensee lost its licence and the breeder licensed another Dutch company in its stead. Now the question was if the breeder or the new Dutch licensee could sue the buyer which had not signed the required licence.
The matter ended up before a Dutch court, which decided to seek guidance from the EU Court.
Not sufficient information
The EU Court started out by concluding that the Plant Variety Regulation entitles licensees to sue for infringement of plant variety rights on behalf of the breeder. As a general rule, therefore, the breeder and the new Dutch licensee could both sue the buyer who had not signed the required licence.
On the question of whether the buyer who had not signed the required licence had infringed the plant variety rights, the EU Court said that it depends on whether the infringement involved 'essential features' of the plant variety rights. This is because the doctrine of exhaustion also applies to plant variety rights.
As the EU Court had not been provided with sufficient information, it was left to the Dutch court to decide whether the buyer‚Äôs failure to sign the required licence was an ‚Äėessential feature‚Äô.
Norrbom Vinding notes:
  • that the judgment makes it clear that the doctrine of exhaustion also applies to plant variety rights and that it does not matter if the buyer knows that the licensee is not complying with the licence agreement with the licensor; but

  • that considerable uncertainty remains because the EU Court did not provide any details as to what ‚Äėessential features‚Äô of plant variety rights means. As a result, we still do not know whether, for instance, exceeding an agreed production cap would constitute an 'essential feature'.

The above does not constitute legal advice and should not be relied upon as such

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