Plumpy’Nut, part 2: The ethics

The basic facts of the Plumpy’Nut case were shown in the previous part.  It sounds controversial, but what is intriguing about this case is that things could be significantly worse. Compared to the extremes that the law would allow it to do, Nutriset is behaving somewhat decently.

The complaints focus on the fact that Nutriset is in many cases refusing outright to sell licenses, and instead wants to remain the sole provider. This is argued to raise prices and cause risks in the manufacturing chain, especially since such a huge part of the manufacturing occurs in just one factory in France.

In a perverse way, that stubbornness may actually limit the damage that the patent can cause. Nutriset has actually been producing Plumpy’Nut since 1997, and continues to do so. According to the April 4, 2011 press release, it employs 110 people and owns a factory in France. Since Nutriset is getting its profit from making the product rather than selling licenses, it needs to actually produce Plumpy’Nut.

Kraemer 2012 does note that even without any pricing issues, there are risks associated with having the whole production coming from one company, and even one factory. If there is a sudden need for large amounts of Plumpy’Nut (for example a natural catastrophe, which is what Plumpy’Nut is in part targeted for), the single factory cannot hope to cope with the increased demand immediately. Thus, even if Nutriset were selling Plumpy’Nut at exactly cost, having a single source poses a real risk to humanitarian operations.

According to the NYT article, UNICEF purchases 90% of its supply from the Nutriset factory in France. I have no idea whatsoever of what kind of a deal has actually been made, but UNICEF is a formidable agency. It must operate within the laws, but it has battle-hardened workers who are well capable of protecting their work. It is very difficult to see that it would allow itself to be exploited. This, at least,  is a case of equals battling equals. In terms of a concept we have used before, it is “conventional IPR warfare”.

Unfortunately, the BBC April 8 2010 article in particular suggests that there is “non-conventional IPR warfare” going on quietly in the background, that is, cases that never really reach the surface. The companies involved in the 2009 litigation were fairly small; one wonders if they ever had a realistic chance.

Yet, on the upside, in an October 13, 2010 press release the company opened up a “Patent Usage Agreement” for product Plumpy’Nut. The agreement is downloadable at the Nutriset website and covered in Casipblog. It has potential to simplify the licensing agreements, since the requirements are not complex and only a “voluntary” 1% fee for R&D is asked.

Article 4.1. In compensation for the authorization granted under the terms of the present Agreement, the Beneficiary undertakes to:
– recognize N and the IRD’s contribution to in the Nutrition sector through the development of innovative and high-quality nutritional products.
– to pay a “Contribution to the IRD’s research works”. This contribution is to be 1% of the Net Turnover earned by the Beneficiary during the Contractual Year. It is understood that N does not expect any financial compensation under the terms of execution of the present Agreement.

The Contribution was called “voluntary” in Casipblog, and indeed it is not clear what sanctions would follow if it is not given. In Article 4.2., it is noted the the licensee must keep books, which the IRD may audit to see whether the Contribution has been paid correctly. Any disputes will be resolved in France under French laws (Articles 15 and 16).

Although nothing should ever be taken at face value, it does appear that Nutriset is making efforts to at least clean up its image. It had no legal obligation to compromise in this way.

If the Contribution is considered as a license fee (even though it is technically not called one), then a 1% license fee is not unreasonable. There are no hard-and-fast rules to determine license fees, but typically they are from 3% upwards. The Contribution to a French governmental entity is quite unusual, but perhaps that is the whole point: this is an unusual attempt to deal with an unusual situation.

It is easy to condemn Nutriset outright, but the reality is quite a bit more nuanced. Things could be far worse, as will be shown in the next part.

More on similar issues: Dangerous patents. All Plumpy’Nut articles: here.

Plumpy'nut_wrapperPlumpy’Nut is a real product with a real use; this is not a case about abstract “immaterial” rights. Image source: Wikipedia.

Acknowledgment: The research for this series has been done between 2012 and 2014. The series has benefited greatly from discussions with Kalle Pietilä, Viv Collins, Niko Porjo, and Timo Tokkonen.