- In September 2023, Nestlé launched its “new and bespoke” coffee variety called N°20. Starbucks released six climate-resistant varieties in the same month
- This has raised questions about whether these companies could enforce intellectual property rights over a coffee variety
- By creating a potential monopsony, this could have significant consequences for the farmers who grow “owned” coffee varieties
FOR MANY years, coffee varieties have been artificially developed to increase production yields, improve quality, combat plant diseases, and adapt to different environmental conditions.
In September, Nestlé launched a “new and bespoke” coffee variety called N°20. Developed over 20 years of research and development, the hybrid arabica plant is Q-certified by the Coffee Quality Institute (CQI) and is currently being grown exclusively in Colombia for use in Nespresso capsules.
Developing new, hybrid coffee varieties is nothing new. Famous research centres like the Honduran Coffee Institute (IHCAFE) and Scott Agricultural Laboratories (SAL) have developed many widely adopted varieties such as IH-90 and the SL-series varieties that make up over 80% of Kenya’s coffee exports.
Artificially creating new varieties has been largely motivated by environmental and economic challenges in coffee production. Diseases, such as la roya, or coffee leaf rust, have decimated crops on a wide scale, and climate change continues to make coffee farming increasingly difficult. In response, researchers have developed varieties for long-term resistance.
At the same time, several coffee varieties have been bred to increase yields, producing a greater quantity of fruit per plant.
In general, research centres develop new coffee varieties for widespread distribution, either across the world, or among farmers in a particular region. However, the same can’t necessarily be said for the varieties single-handedly funded by large coffee companies.
Can coffee varieties be “owned”?
Intellectual property and patent registration are standard practices in the development of new technology, and this extends to plants and seeds. As of August 2022, there were over 1,000 plant patents in Europe – with 100 related to biological breeding processes.
These patents are often registered for research purposes. However, the development of a coffee variety by a private entity could fall under the same legal protection, potentially leading to legal and economic complications for anyone growing or selling them.
Indeed, it could be argued that the notion of intellectual property is inherently anti-competitive, and granting IP status to coffee varieties could cause a number of issues across the supply chain.
“Farmers growing a type of coffee whose genetics are owned by a buyer creates a potential perfect monopsony, or single-buyer, condition,” says Karl Wienhold, author, doctoral researcher, and consultant based at the University of Lisbon.
“This grants that buyer complete control over the terms of trade because, if the IP were enforced, farmers could not legally sell to anyone else. It’s only potential because the owner of the IP doesn’t have to enforce it, but can.”
This means that producers may be obligated to sell the harvest of these varieties exclusively to the companies that developed them. Farmers have relatively limited control in the value chain as it is. Private ownership of coffee varieties could create a situation that diminishes their position even further – potentially making them legally and economically dependent on already powerful entities.
“By owning the rights to a farmer’s crop, companies can limit the farmer’s alternatives in terms of buyers, if they choose to do so, increasing their power upstream,” Karl says. “If farmers can’t sell to anyone else, legally, they must take any deal they are offered.”
“By positioning this variety in the minds of consumers and making sure they are the only ones legally allowed to sell it to them, companies can also increase their power downstream toward monopoly.”
Narrowing the bottleneck
Although the legal ownership of coffee varieties may seem like a far-away concern, it has caused issues for smallholder farmers before. Global agrochemical and agricultural company, Monsanto, won over 140 patent infringement suits against small soybean farmers by claiming ownership over its genetically engineered seeds. The agricultural giant took more than $23 million in damages.
With large coffee companies expanding their control in an equivalent segment, it’s no surprise that there are concerns about what this could mean for the industry and its smallholder farmers.
On the face of it, however, both companies are displaying good intentions. Starbucks has announced that their new varieties are freely available for use by farmers across the world. Additionally, Nestlé is currently restricting the production of N°20 to their own facilities, which mitigates any potential legal complications.
This doesn’t mean that problems won’t arise in the future. Indeed, coffee production will encounter significant challenges in the face of climate change and an anticipated supply shortage. In response to this, demand for genetically engineered climate-resistant varieties is likely to increase, and if they are “owned” by private entities, legal disputes as seen with Monsanto may become a problem for the coffee sector.
“Protecting and enforcing IP over something others want is a way to gain power by narrowing the bottleneck you occupy,” says Karl. “Bargaining power is derived from relative substitutability on both sides of an exchange.”
The greater good?
Considering the countless coffee research facilities established across the globe, if powerful companies were developing coffee varieties with the intention of retaining “ownership” over them, this arguably adds little value to the industry.
Having said that, there is no evidence so far that these companies are attempting to, or are even able to patent their own coffee variety.
Even if they could, some may argue that if companies invest millions of dollars in researching and developing coffee varieties, they should have the right to determine how they use them. This could be for private gain, but – through its open-source agronomy system – Starbucks may be showing a way forward where this situation could benefit the greater good.
“What farmers could do with coffee of a cultivar whose genetics are protected would be at the discretion of the patent holder,” says Karl. “Whatever rules they decide to enforce, they have the right to prohibit anyone from using their intellectual property.
“To what degree they choose to exercise this right and what happens as a result is relevant to farmer wellbeing.”
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