Royalty collection in the UK Penny Maplestone, BSPB CSTA Funding Innovation Symposium 4/5 April 2013

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1 Royalty collection in the UK Penny Maplestone, BSPB CSTA Funding Innovation Symposium 4/5 April 2013

2 Arable crop areas Source: Defra

3 Size and structure of farms Consolidation Complex farming arrangements 2% arable area, likely to grow Source:Defra

4 UK seed market Plant breeding is almost 100% private sector activity (since 1970s) Total royalty available around 45M across all crops; around one third available for breeding Public private partnerships are needed to speed innovation valley of death issue Mature and inelastic but relatively stable seed market; generally conservative but farmers are rapid adopters Certified seed market is regulated and orderly but highly competitive FSS is a fact of EU legislation and of life

5 Seed use (1,000t) % FSS Wheat - 44 W barley - 37 S barley - 32 OSR - 38 Oats - 33 Beans - 56 Peas - 22

6 Royalty income ( million)

7 UK certified seed production (t) Source: NIAB

8 Production and flow of seed Pre-Basic & Basic Breeder Basic or C1 Contract grower to bulk up seed stocks Merchant (Sales licensee) Contract grower to produce C1 and C2 grades C2 C1 & C2 Merchant (PRS licensee) Farmer buying certified seed As grown Merchant (PRS licensee) FSS

9 Royalty collection Centrally through BSPB Certified cereals, some peas and beans, some grasses, linseed and potatoes FSS cereals, oilseed rape, linseed, peas and beans, potatoes By-passed vining peas Special collections for individual breeders and varieties (new and old) At company level Hybrid barley (in seed price) Certified oilseed rape (in seed price) Royalty area collection some oats, peas and beans Forage maize, sugar beet, vegetables, some grasses (in seed price) Most certified potatoes A 100% private sector activity

10 BSPB introduction Limited company, not for profit, funded by retention and membership fees >95% coverage Board and Chairman elected by the membership Small executive team (13) Licensing & royalty collection Technical & regulatory (trials) Communications & lobbying

11 BSPB Head Licence BSPB Sub-licences & collects royalties in respect of specified varieties in the UK (exclusive) for certified and/or FSS Investigates and enforces PVR including legal proceedings (subject to breeder instructions) Pays royalty collected minus gross retention to breeder within specified time period Makes a balancing payment at the year end (not for profit) - <2% net Supplies information to breeder about chargeable transactions Obligation of confidentiality Breeder Is the rights holder or agent for the rights holder for the specified varieties and a BSPB member Sets the royalty rates annually for each variety and notifies BSPB of same Pays a Head Licence fee annually to BSPB Indemnifies BSPB Access to all information held by BSPB relevant to the varieties

12 BSPB PRS sub-licence (150) BSPB Sub-licensee (merchant) Acts for the holder of rights; sublicence is non-exclusive May amend payment terms Supplies royalty rate information Audits and invoices or refunds based on findings Confidentiality obligation May produce C1 or C2 within a certification scheme (contract grower) May sell that C1 or C2 to a farmer or to another merchant Pays royalty to BSPB on all chargeable transactions (sales for grasses certification) per tonne at the specified rates by the specified dates (credit period) Keeps full and accurate records and makes them available for audit Allows BSPB to have information from officials Provides information on sales relating to FSS enforcement

13 FSS EU Regulations Exemption from PVR for named species Seed from own harvest resown on own holding Equitable remuneration paid by farmer Sensibly lower contract, agreement or 50% of certified rate Small farmers exempt Information to be given to the rights holder (problems of interpretation) ECJ rulings

14 FSS - combinable crops agreement BSPB-NFUs Agreement signed June 2007 Flat rate per crop, 46 to 60% of certified rate, calculated annually as % of weighted average certified rate but declaration by variety needed 80% of collection through mobile processors at tonnage rate 20% direct from farmers at a hectare rate 7% collection cost

15 FSS calculation of payment rates FSS rates for 2012/ _2013 Weighted FSS average FSS tonnage seed rate % hectare certified rate (t/ha) rate royalty Crop Wheat Winter barley Spring barley Oats Peas Beans Oilseed rape 4, , Linseed Triticale

16 Agreements with FSS processors Collection fee payable BSPB polices, not the processor Processor declares and pays seasonally Provides information on farmers who have not made FSS payment Farmer debts may be assigned to BSPB Processor open to audit Non-registered processors must give information by law

17 FSS collection practicality Contact with all relevant farmers Significant investment in database Names and addresses from certified seed merchants Around 20,000 entries Declaration forms issued May and November Declaration by post, phone, online, , fax Chasing procedure for non-returns Over years records allows discrepancies to be seen Verification agreed for certain older varieties but otherwise no audit right

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19 Compliance - % FSS evaded

20 Engagement

21 Education

22 We need more research and breeding and need to up production through new genetics. We need to make sure the breeding companies make a living we are all linked together in the same chain and royalties are absolutely necessary

23 Enforce when necessary Database, processor audits and conversations with farmers show discrepancies in returns 100% return of information - UK law has non-return as a criminal offence - procedure leads ultimately to private prosecution - but not in practice Farmer to farmer trade and use of bought in grain as seed liaison with the authorities some success Accessible and affordable legal remedies are sadly lacking

24 UK ingredients for success Fully traceable certified seed system with access to official information Single agency for both certified and FSS collections cross fertilisation Decision taken to invest in database Mobile FSS processors are organised into an association and take a pragmatic business view Relatively small numbers of players breeders (40), PRS merchants (150), FSS processors (150), arable farmers (20,000) Farmers are generally appreciative of breeding (rapid adopters) and the need for royalties Relationships are good (but can t be take for granted) Strategic communications plan in operation

25 UK challenges Royalty linked to seed volume sets a ceiling 50% default rate for FSS payments - EU legislation Enforcement of FSS declaration and payment - no right of audit - difficulty of private prosecution - prohibitively high cost of civil proceedings Evasion of FSS payments Commercialisation of FSS - pressure to increase opportunity to transfer Pressure to farm save hybrids Relationships can be fragile and need constant vigilance

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