Syngenta’s technology agreement review
For companies engaged in biotechnology, Syngenta’s technology agreement is a key contract. It is a commercial arrangement that permits parties to access new and enhanced agricultural traits, without using the same intellectual property identifiers. Syngenta’s tech agreement is also being used beyond agriculture – such as by Deere – to cross-license complementary technologies. Syngenta pays upfront fees and provides royalties for the transaction. The tech agreement with Syngenta has the following dimensionality:
(i) Likely saves Syngenta time and resources in developing an agricultural trait or technology (such as biotechnology, agrochemicals, software, etc.) on its own; (ii) Syngenta pays other parties a license fee (or a share of royalties) in addition to providing the license, which represents a business expense; (iii) Syngenta will receive an overall continuing return on its technology investments and increase its revenue (or reduce its expenses) via the cross-licensing arrangements with third-parties.
The tech agreement is a type of licensing agreement that allows Syngenta to engage in tech transfers with other licensed parties . The types of parties that may enter into a tech agreement with Syngenta include: (i) suppliers of agricultural products (biologicals and synthetic materials), (ii) manufacturers of agricultural machinery, including tractors and farm implements, (iii) software programmers for computer-based applications, (iv) marketing organizations, and (v) distributors. All such organizations require access to new technologies to remain competitive (and subsequently successful) in their respective fields of commerce (the ag-tech industry).
The tech agreement has two significant (and related) benefits. This contractual arrangement (first) permits Syngenta to reduce its need to expend additional resources (including time, talent, and funding) in developing new technologies, when those technologies already exist. The tech agreement has the enhanced benefit (second) of allowing Syngenta to recoup inflows (and outflows) in its R&D budget by targeting (for projected returns) only specific types of qualified applicants, within distinct niche segments of agriculture. The tech agreements with Syngenta have been identified as positively impacting Syngenta’s stock price, thereby creating measurable value for shareholders. In turn, Syngenta’s agreements comprise a specific share of the market in biotechnology and its related industries. The tech agreement makes good business sense.
Main terms of Syngenta technology agreements
Syngenta tech agreements have three principal components: intellectual property rights, license rights and restrictions and confidentiality. As with any contract, the specific details of the deal between Syngenta and the counter-party are unique to that particular transaction. However, these three components are contained in all tech agreements.
Intellectual Property Rights. The patent rights component generally identifies in detail the patents that are becoming available for licensing. A typical identification of patent rights includes not only the patent applications and patents themselves but also various divisions, substitutions and continuations, as well as utility model applications and utility model registrations. In addition, the intellectual property rights component usually identifies other items that are subject to the license, such as plant variety rights, data and trade secrets. This list of property is often referred to as the "patent rights," "technology" or "intellectual property rights," and the rights of the parties to use the patent rights will be summarized in the next subsection.
License Rights and Restrictions. The license rights and restrictions component will specify the type of license the counter-party will receive from Syngenta. The obligations of the counter-parties to pay certain amounts of money (usually referred to as "royalty"), will also be specified in the license rights and restrictions component.
Confidentiality. The confidential information component of a Syngenta tech agreement requires that the parties take reasonable steps to maintain the confidentiality of the data, drawings, specifications, documents and other information that Syngenta provides to the counter-party that is not already publicly known.
Tech impact on agriculture
The tech agreements with Syngenta have broader implications for the agricultural industry as a whole. Through these agreements, Syngenta encourages innovation and competition among their technology providers. The tech agreements may also directly affect regulatory approvals on certain traits depending on how quickly the agreements are reached. The tech agreements can thus have a significant impact upon market availability for a number of crops and traits. Having traits that are available on the market can have an impact, for example, on the overall productivity of certain crops. Agreements with multiple technology providers generally mean more product options for growers, including the possibility of multiple options for the same trait.
Companies that obtain agreements with Syngenta are typically able to move products through the pipeline more quickly, which means these companies can respond to a growing market demand for specific traits and develop products that are tailored to meet those demands. Further, the technology agreements allow participants to keep their R&D costs lower because they have the ability to share R&D information with Syngenta, while at the same time continuing to make royalties from their own genetics outside of the Syngenta platform.
Legal aspects in Syngenta agreements
One legal consideration, which has been much discussed, is the enforceability of these tech agreements. The busy-bee lawyers for Syngenta have written the tech agreements to be controlling law on such matters as collectability of damages in arbitration, governing law, warranties and damages for breach. Just to mention a few contract law principles, what is the governing law, is arbitration of disputes out of the question, are limitations on damages enforceable, and in courts or only in arbitration.
From what has been said publicly and reported, it appears most of the litigation in the coming year(s) will be based on the ability to force growers into arbitration and/or attempting to overcome the limits on damages for breach of a tech agreement. The issue of restriction on remedies will not only have to address what is considered limitation of damages and its enforceability, but also a conversation about whether the arbitration forum is of the growers choosing, which was pointed out to me by someone who groups of growers. (I believe they were referring to the California Arbitration provisions, but that is only my interpretation of what they were saying , which may have been wrong). Property specific rights and remedies are so specific to a particular state, it never hurts to take a look at the arbitration clause to be sure the forum is one you want before running off to court.
Another concern that has not even been mentioned, but is a very real concern, is whether or not the documents require growers to give up their water rights or somehow agree to transfer water rights to Syngenta. This occurred to this writer when a farmer made the public comment that he owes no reparations because he rented his ground and has no water rights to transfer.
There will likely be other questions that arise as litigators dig into the tech agreements. It’s not too late to add additional language to the tech agreement concerning enforcement and certain limitations. There is nothing wrong with wanting control over the timing and expense of an ag product trade secret lawsuit. However, a careful review of the impact on the trade secret owner is warranted when proposing contract language that could limit remedies for misappropriation of a trade secret. The frightening reality is that technology owners are forced to place themselves in jeopardy by signing these agreements in order to get their products into the market.
Syngenta technology agreements case studies
There are numerous successful examples of technology agreements between Syngenta and other organizations with co-development agreements. One such example is Syngenta’s agreement with the Nature Conservancy (TNC) which focuses on water conservation. TNC works with farmers around the U.S. to improve irrigation efficiency. In doing so, TNC engages landowners in the voluntary water quality trading market by enabling them to upload data for practices that reduce nitrogen to the Mississippi River’s Gulf of Mexico. In 2017, TNC announced a Water Quality Trading Platform that uses technology developed by Syngenta’s Digital Innovations team. The platform facilitates water quality credit transactions by accounting for changes in farm practices and verifying the benefits over time. With the volsave.tech platform, TNC has purchased credits from 68 sites to date, removing the equivalent of roughly 60 tons of nitrogen from body of water flowing in South Dakota to the Gulf of Mexico. A second Syngenta partnership also led to significant benefits. In 2016, Syngenta partnered with the United Nations World Food Program (WFP) to develop the FFA – Farmer Field Account Program app with Syngenta Digital Innovations. The app enables cash-based food assistance to participating farmers and refugees. In addition to being able to purchase items such as fertilizer, tomato seeds, and tools, farmers are able to share, trade, and receive goods through this new digital platform. The farmer profile use the "FFA" app to apply for assistance; it is a user-friendly application that allows farmers the ability to apply for assistance in local currencies. The benefits have been real and tangible: the newly incorporated payment technology has increased efficiency, transparency, and accountability in distributing crop assistance. It has helped the WFP increase efficiency when distributing crop assistance. WFP staff were able to focus more on hands-on "there when needed" distribution and verify that all farmers received the right amount of value after harvest.
Syngenta technology agreement trends
As we look to the future, it is evident that Syngenta’s technology agreements, like many other agricultural technology agreements, will continue to evolve and adapt to the changing landscape of the industry. In particular, digital agriculture and precision farming are likely to be key drivers of change.
Digital agriculture, which encompasses the use of data analytics and technology to enhance agricultural productivity and sustainability, has become a major focus for many agribusinesses. As a result, Syngenta’s tech agreements may increasingly include terms relating to the collection and use of data generated by agricultural inputs. This could include provisions governing ownership of data, data sharing and transfer, and data privacy.
Similarly, precision farming, which uses technology to optimize crop production on a site-specific basis, may also influence the development of Syngenta’s technology agreements. For example, Syngenta may seek to include provisions that govern the use of precision farming equipment and technology, or that protect the proprietary information that is generated as a result of such use .
Additionally, as the industry continues to consolidate and agribusinesses become larger and more powerful, Syngenta may seek to include more restrictive terms in their tech agreements in order to protect their interests. For example, Syngenta could require buyers to purchase a minimum quantity of Syngenta products in order to maintain their right to access Syngenta technology. Alternatively, Syngenta could seek to include provisions that require buyers to notify Syngenta of any changes in ownership or management, or to obtain Syngenta’s consent before making any significant changes to the business.
In any case, as the industry continues to evolve, Syngenta’s technology agreements will likely continue to adapt in order to keep pace. For growers and other agribusinesses, understanding these changes and their potential implications is important in order to ensure that they can continue to operate effectively in the marketplace.