Zespri plans litigation in China after ruthless kiwifruit growers helped themselves to its prime SunGold plant material and used it to propagate up to 2500ha of illegal plantings.
Zespri's China team has long been investigating the extent of the illegal plantings in several Chinese provinces. In 2016, it was estimated that the area covered in China was about 160ha.
But latest investigations put that estimate closer to 2500ha. While the figures are not directly analogous (different seasonal effects are just one differentiator) the area of illegal planting in China could be roughly one-third of that planted in SunGold within New Zealand. While it is no immediate threat to Zespri's kiwifruit trade it has the potential to impact severely if the marketer does not act to protect its plant variety rights.
Zespri's board discussed the issue today and has decided to press ahead with civil action against some identified larger players and a few individuals.
Zespri chair Bruce Cameron later updated growers on what he called the "unauthorised G3 being grown in China."
"As the industry knows, G3 plant material was taken to China without authorisation," wrote Cameron.
"Our investigations indicate that G3 is now present in varying ages of maturity in several areas, including some larger growing operations.
"We are monitoring production sources and supply channels to further develop our understanding of the scale of the issue, as well as to obtain evidence for legal proceedings against unauthorised producers."
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As well as legal action in China, Zespri plans increased anti-counterfeiting activity to reinforce the Zespri SunGold brand, working with national and local officials to take action over the misappropriation of Zespri's IP and working with its commercial partners.
Cameron says Zespri's response was developed after careful consideration and seeking advice across a broad spectrum of stakeholders from within China and New Zealand – this is likely to have included New Zealand Government and Chinese Government agencies.
"While we understand this news will be unwelcome, we are encouraged by strong support within China for IP infringement in the past and ongoing public commitments from the Chinese Government to strengthen IP laws and enforcement in China.
"In that regard, China, like New Zealand, is in the process of updating its PVR laws to bring them into line with the most recent international standards in this area, which will strengthen protection for plant variety rights in China."
Zespri is hanging its hat to some extent on commitments to toughen up on IP protection that was made by Chinese President Xi Jinping at the recent International Import Expo in Shanghai that was hosted by the China Centre for International Economic Exchanges (CCIEE).
Zespri will have to keep the pressure on at New Zealand Government level to get control of the theft.
Yesterday, the company confirmed the forecast range for SunGold has been moved up from $7-$9 per tray in the March 2019 forecast, to an average of $8-$10 per tray. This reflects continued strong forecast returns for SunGold. Zespri has retained a $2 range to accommodate downside risks such as potential significant year-on-year volume movement of more than 10 million trays, a very poor taste year or the potential for market side risks.
The kiwifruit marketer earlier launched a civil case in the Auckland High Court for $30 million damages against a publicly unnamed person who allegedly sent plants of its SunGold kiwifruit variety to China.
Zespri owns plant rights to the new SunGold for at least another 18 years. It would be possible for Zespri to licence production in China.
But it needs to get some control back over its IP first.