Zespri awarded $15m after suing grower

Kiwifruit marketer Zespri has been awarded almost $15 million in damages by the High Court at Auckland after the firm's SunGold variety was unlawfully taken to China and distributed to other growers.

The company said it started the civil action in 2018 against kiwifruit grower Haoyu Gao, his wife Xia Xue and their company Smiling Face Limited, after discovering that two of its protected varieties were being propagated by Gao and his associates in China.

In a ruling dated Feb. 20, Justice Sarah Katz found that Gao had fraudulently offered to sell Zespri's varieties as well as the right to licence them to parties in China - a right exclusively retained by Zespri. That facilitated the planting of Zespri's varieties in Chinese orchards and breached his contractual obligation to notify Zespri of any infringement he was aware of.

Her decision said Gao was a "very unimpressive witness," adding that "on his own evidence, Mr Gao revealed himself to be a person who lacks a moral compass and does not place a high value on honesty."

On the other hand, she said she had no credibility issues with Zespri's witnesses, although some of their evidence was hearsay.

While the judge had awarded damages of almost $15m each against Gao and Smiling Face, and a further $10m against Xue, she ruled that the maximum to be paid was $15m.

"This is an important decision for New Zealand's kiwifruit growers, as well as for other New Zealand horticultural businesses," Dave Courtney, Zespri's chief grower and alliances officer said.

"If they continue to invest in research and development to create value for New Zealand they will have protections against those who seek to undermine that," he said in a statement.

Kiwifruit is New Zealand's biggest horticultural export. In the year ended March 2019, Zespri sold 167.2 million trays of fruit globally, almost 149 million of which were grown here.

Zespri said greater China accounted for about $650m of the firm's $2.94 billion of sales last year. About 28 million trays were exported there from New Zealand with another 2.5 million supplied from the northern hemisphere.

Zespri said it had been investigating the unauthorised spread of Zespri's SunGold variety in China and had identified parties associated with Gao, as well as others, who had knowingly misled Chinese investors and growers to plant Zespri's varieties without authorisation. Late last year it said it would take legal action under China's already "strong" plant variety rights legislation.

Courtney said a critical aspect of the court's decision was its recognition of the multi-lateral standards of protection that are afforded to members of the International Union for the Protection of New Varieties of Plants. That framework was important to the court's ability to find for Zespri, despite some aspects of the infringing activity occurring across borders or in other countries.

"Investment in new plant varieties is becoming an increasingly important way of creating value around the world and we need to protect those intellectual property rights to encourage that investment and to feed the world in ways which deliver good, healthy foods which have a low impact on the environment."