RPT-Monsanto defends GMO soy royalties in Brazil court
U.S. biotechnology company Monsanto Co is defending its right in Brazil to apply royalties to its patented Roundup Ready soybeans, a case that could cost it $7 billion in reimbursement payouts if it loses.

Late on Tuesday, Brazil's second highest court ruled that a class-action case brought by soybean producer groups in the southern grain state of Rio Grande do Sul against the company would have national application once a decision was reached.

"The values involved could total 15 billion reais ($7.5 billion)," the Superior Tribunal of Justice said on its Web site.

The case, raised late last year, challenges Monsanto's practice of extracting royalties from producers who replant their harvested crop as seed, which originally came from sowing Monsanto's patented Roundup Ready soybean seeds.

The case hinges on two laws in Brazil: One recognizes international patents; the other permits producers, especially small ones, to use their crop as seed without paying the original seed provider.

Brazil, the world's No. 2 soybean producer, is one of Monsanto's fastest growing and most important markets after the United States.

In 2005, with the passage of the Biotechnology Law, Brazil legalized genetically modified crops. This made Monsanto, which already occupied all of the black market in GMO seed at the time, the leader in legal GMO soy.

"This is not the final decision on the class action against the royalty collection system," Monsanto's local communications manager, Geraldo Magella, said in an email, adding that the collection system continues unchanged while the case is pending.

Under Monsanto's royalty system in Brazil, a producer can pay the royalty at the time of purchase of the Roundup Ready seed from the distributor, for which he receives a receipt that he must present at the time of delivery of the crop to prove he paid for the technology.

Lacking that receipt, the royalty is extracted from the sale price by the buyer when the signature genes of Roundup Ready are found in testing. The buyers tend to be trading houses, processors or cooperatives, who then pass on the royalty to Monsanto.

If the STJ rules in favor of the producers, it would be a big setback for Monsanto but not the final word. The company could still appeal to the STF, or Supreme Court.

"Farmers accept paying for intellectual property when they buy seeds legally. After that, when they have paid for them, they don't accept paying to replant the fruit of these products," said Neri Perin, judicial advisor for the Rio Grande do Sul state branch of the Aprosoja soy producers' association.

Chicago soybean futures have risen about 17 percent since the start of the year, propelled by severe drought in southern Brazil, in particular in Rio Grande do Sul. Brazil's 2012/13 soy crop output dropped 13 percent from the record 75 million harvested from the previous crop.
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