IN THE HIGH COURT OF SOUTH AFRICA 
(WESTERN CAPE HIGH COURT, CAPE TOWN)

Case No A21/12

In the matter between:

OLYVENBOOM BOERDERY 

and

COLORS FRUIT SOUTH AFRICA 

Counsel for Appellants:	Adv P Ginsburg, SC et Adv P van Eeden

Instructed by:		Adams & Adams (C K Job)

Counsel for Respondent:		Adv A R Sholto-Douglas, SC et
Adv C R Cilliers

Instructed by:		Werksmans Incorporated (Mr M Bronn)

Reportable

IN THE HIGH COURT OF SOUTH AFRICA 
(WESTERN CAPE HIGH COURT, CAPE TOWN)

Case No A21/12

In the matter between:

OLYVENBOOM BOERDERY 

and

COLORS FRUIT SOUTH AFRICA 

JUDGMENT

GRIESEL J:

Introduction

[2] For convenience, I refer to the parties to his appeal as 'Voor-Groenberg' (first appellant), 'Olyvenboom' (second appellant) and 'Colors' (respondent) respectively. In the court a quo, a third and fourth respondent were also joined as parties: Sheehan Genetics LLC ('Sheehan Genetics'), a company incorporated in terms of the laws of the State of California USA, was the original third respondent, whereas a British company, Special New Fruit Licensing Limited ('SNFL'), was the fourth respondent. No relief was sought or granted against either of these respondents and neither of them features as parties to the present proceedings. Sheehan Genetics, however, continues to play a central role in the disputes between the parties to the present appeal, which comes before us partly with the leave of the court a quo and partly with the leave of the SCA.

The factual background

[4] In terms of the head licence, Sheehan Genetics undertook to provide consultation to AMC in relation to the areas in which Sheehan Genetics had special knowledge, skills and expertise. It would also conduct plant-breeding activities, which would be personally directed by Mr Tim Sheehan, the driving force behind Sheehan Genetics. In return, AMC would pay Sheehan Genetics a royalty of US$ 50 000 per annum irrespective of the amount of plant material delivered. AMC would plant, grow, market and sell the plant material and produce them at its own risk.

(a) an exclusive right (to the exclusion of both AMC and any third party) 'to obtain from AMC ... all the propagating samples of all new vegetative material bred and/or developed by Sheehan Genetics and received by AMC from time to time, so that Colors Fruit may (i) test, plant and cultivate them; (ii) obtain their products; and (iii) secure their statutory protection' in the form of registration of plant breeders' rights in the name of Sheehan Genetics within the defined territory ('Planting and Cultivation Rights'); and

(b) a non-exclusive right to use the intellectual property rights of which Sheehan Genetics was the proprietor, to market and distribute the products in the agreed distribution territory ('Marketing and Distribution Sub-Licence').

[6] The duration of the sub-licence was linked to that of the head licence inasmuch as the sub-licence would automatically be terminated at the end of the term of the head licence, subject thereto that if any exclusive rights in respect of the vegetative material remained vested in AMC despite the termination of the head licence, the Marketing and Distribution Sub-Licence would remain in force in respect of those surviving rights.
[7] In terms of a schedule to the sub-licence agreement, Colors was appointed as Sheehan Genetics' South African agents in connection with matters relating to plant breeders' rights, governed locally by the Plant Breeders' Rights Act, 15 of 1976 ('the Act'). Provisional protection in terms of s 14 of the Act was subsequently, during March 2009, granted in the form of a number of protective directions with the effect of provisionally protecting Sheehan Genetics' embryonic rights as would-be plant breeder.

[8] During the currency of the sub-licence, AMC provided 'vegetative materials' to Colors in the form of budwood of specific Sheehan varieties bred in California. Budwood constitutes very short vine lengths, each having about 10 buds on them. This plant material was delivered to a quarantine station in Stellenbosch operated by the National Department of Agriculture where it was used to establish five to ten plants per variety by a process of grafting the buds onto existing rootstock.

[9] Colors enlisted the services of Voor-Groenberg, a nursery doing business as such in Wellington, to propagate and multiply the plant material obtained by it. After completion of the propagation process of the original budwood, Colors would sell the resulting buds ('ogies') to Voor-Groenberg, who would graft the buds onto rootstock owned and produced by it [Voor-Groenberg]. The resulting vines would then be sold by Voor-Groenberg to growers (i.e. farmers), whereupon Voor-Groenberg would account to Colors in respect of its share of the proceeds, being a levy (royalty) of R1,00 per vine. All these activities took place on land belonging to Olyvenboom, which is a company associated with Voor-Groenberg. As consideration for the use of its land, it was agreed that Colors would pay Olyvenboom rental based upon the sum which Olyvenboom would have derived had it produced wine grapes on the area now occupied by the foundation block.

[10] During August 2009 Mr Tim Sheehan died. AMC accordingly served notice on Sheehan Genetics, on 3 December 2010, that the head licence agreement would be terminated with effect from 6 March 2011 on the grounds that the continuing personal involvement of Mr Sheehan had been crucial and that as a result of his death Sheehan Genetics was in 'material breach' of the agreement. On 20 January 2011, AMC wrote to Colors to inform it that the sub-licence agreement would automatically terminate with effect from 3 March 2011 as a result of the termination of the head licence.

[11] This communication gave rise over the next few months to a flurry of correspondence between the various parties and their respective attorneys. In a nutshell, Colors took up the attitude that the cancellation of both the head licence and the sub-licence was unlawful and unjustified; that Colors would 'not terminate any of its production or cultivation programs'; and further that it would not surrender any of its rights. It relied in this regard mainly on the provisions of s 23(6) of the Act and claimed that it 'may therefore deal with the Sheehan plant material it currently owns (i.e. all plants and plant material currently in South Africa) to the extent envisaged in s 23(6) to the exclusion of Sheehan Genetics, SNFLSA and any other third party, without a licence from the plant breeder'.

'Your client does not on any possible basis own the vines in the possession or under the control of VG. The original budwood and all propagated buds derived therefrom (through the process of propagation by SAPO and VG) are our client's property including the intellectual property rights. The sub-licence between AMC and your client did not transfer ownership of the Vegetative Material. The rootstocks to which the buds have been grafted are the property of VG and furthermore, your client invoiced VG for the buds harvested by it from the motherblock and VG paid for them. Your client has no claim to ownership of the resulting vinestocks whatsoever. To the extent that your client is alleging ownership of the buds or any other propagating material, that contention is false.'

[13] In the weeks following the letter just referred to, Colors unsuccessfully attempted to assert their rights with regard to the plant material and to obtain delivery thereof from Voor-Groenberg. This eventually gave rise to the application in issue.

Ownership of the plant material

[19] Recognition of this basic fact has important consequences in the present scenario. One of the main pillars in the argument of Colors in support of its claim to ownership is the fact that the sub-licence did not contain a reservation of ownership in favour of Sheehan Genetics or AMC. This fact, together with supply of the plant material to Colors, 'can lead only to the conclusion that the intention must have been for Colors to become owner', so it was argued. I cannot accept this argument, which is based on the fallacy that the failure of the parties to reserve ownership in favour of Sheehan Genetics is to be regarded as proof of an intention to transfer such ownership to Colors. It simply does not follow.

[20] Colors sought support for this argument in the fact that in a licensing agreement entered into between Voor-Groenberg and Sheehan Genetics, after termination of the sub-licence agreement with Colors, it was specifically provided that 'all Sheehan Cultivars and Planting Material shall at all times remain the property of the licensor'. Colors saw this as an indication that Sheehan Genetics was aware of the concept of reservation of ownership, as contended for by Colors. Accordingly, so it was argued, 'the fact that the relevant sub-licence agreement contained no reservation of ownership in favour of [Sheehan Genetics] was indicative that the latter had appreciated that, in order for [Colors] to enjoy rights to exploit the plant materials, there would be no other option but to effect the transfer of ownership in the plant materials from [Sheehan Genetics] to Colors.' However, this argument can be turned on its head: the fact that there is no reservation of ownership clause in the sublicence between Sheehan Genetics, AMC and Colors is equally consistent with a finding that the parties did not regard it as necessary to include such a clause in their agreement - just as parties to a lease agreement would ordinarily not deem it necessary to insert a clause reserving ownership to the lessor. Given the nature of the underlying agreement in issue, namely a sub-licence in respect of plant breeders' rights, the absence of a reservation of ownership clause in the agreement is therefore hardly surprising. Inclusion of such a clause in the subsequent agreement with Voor-Groenberg can most probably be ascribed to an abundance of caution (or a 'belts and braces' approach) on the part of Sheehan Genetics, flowing from its experience in this case.

'The question of implication arises when the instrument does not expressly provide for what is to happen when some event occurs. The most usual inference in such a case is that nothing is to happen. If the parties had intended something to happen, the instrument would have said so. Otherwise, the express provisions of the instrument are to continue to operate undisturbed. If the event has caused loss to one or other of the parties, the loss lies where it falls.'

The absence of a clause in the sub-licence dealing with the transfer of ownership or the reservation of ownership is therefore a strong factor in favour of Sheehan Genetics and Voor-Groenberg.

'In my experience at SAPO over approximately the last two decades, the industry norm appears to be that ownership of buds and budwood remains with the owner of the plant breeder's rights, irrespective of whether such vegetative materials are in possession of the licensor, licensee, or a sub-licensee.
Ownership of the vegetative materials, in my experience, does not pass to licensee or a sub-licensee when such materials leave the hands of the licensor. The nature of the relationship between the licensor and licensee (or sub-licensee) dictates that the licensor cannot and does not retain possession of the plant materials used for propagation. It would be untenable and illogical in the context of such relationship for ownership of the plant materials to pass to the licensee (or sub-licensee) on physical transfer of the goods/

Colors sought to counter this evidence by submitting that even if such a norm existed, it would have been and was excluded by the more specific contractual arrangement of the parties in this case, which is to the contrary effect. However, as I have attempted to demonstrate above, I am not persuaded that the contractual arrangement of the parties in this case is indeed to the contrary effect. Where their agreement is silent on the question of transfer of ownership, the status quo remains unaltered, which is exactly in line with the industry norm relied on by Voor-Groenberg.

[26] For all these reasons, I conclude that Colors has not discharged the onus of proving that ownership of the plant material in question had been transferred to it by AMC or Sheehan Genetics.

Section 23(6) of the PBRA

[27] It remains for me to deal briefly with the provisions of s 23(6) of the Act, on which Colors strongly relied. In an alternative argument, Colors claimed that it was entitled to possess and exploit plant materials in terms of and to the extent allowed by those provisions, which read as follows:

'(6) Notwithstanding the provisions of section 23A(a), a person who procured any propagating material of a variety in a legitimate manner shall not infringe the plant breeder's right in respect of the variety if he or she—
(a) resells that propagating material;
(b) subject to the provisions of subsection (2), sells any plant, reproductive material or product derived from that propagating material for purposes other than the further propagation or multiplication thereof;
(c) uses or multiplies that propagating material in the development of a different variety;
(d) uses that propagating material for purposes of bona fide research;
(e) uses that propagating material for private or non-commercial purposes; or
(f) is a farmer who on land occupied by him or her uses harvested material obtained on such land from that propagating material for purposes of propagation: Provided that harvested material obtained from the replanted propagating material shall not be used for purposes of propagation by any person other than that farmer.'

[28] Section 23A of the Act, as far as relevant, provides that 'a plant breeder's right shall be infringed by any person who -
(a) not being the holder of the plant breeder's right, performs, or causes to be performed, an act contemplated in section 23 (1) without a licence obtained under section 25 or 27;
(b) has obtained a licence under s 25 or 27 but fails to comply with any term thereof; . . .'

[30] As for the claim against Olyvenboom, it had no active involvement in any of the activities dealt with in the application and it posed no threat to Colors. On the papers, Colors has failed to establish any of the essential requirements for a final interdict. That part of the order, likewise, cannot be sustained. It follows that the application against both appellants should have been dismissed with costs.

Order

[31]    For the reasons set out above, it is ordered as follows:
(a) The appeal is upheld with costs, including the costs of two counsel.

'The application is DISMISSED with costs, including the costs of two counsel.'

B M GRIESEL 
Judge of the High Court

FORTUIN J: I agree.

C M J FORTUIN 
Judge of the High Court

SAMELA J: I agree.

M I SAMELA
Judge of the High Court