MANY YEARS OF discussion about how to ensure more innovation in cereal seeds is finally coming to fruition. Historically, cereal seed breeding has been dominated by public institutions, supported by taxes and producer contributions. Because of this, and because Agriculture and Agri-Food Canada (AAFC) has indicated it will not be increasing its level of investment in cereal breeding, many industry players have been calling for a way to make sure private breeding firms are enticed to do more cereal breeding — by securing their return on larger investments. Some time ago, a task force called the Value Creation Working Group was created to look at the issues, and two leading funding models eventually emerged. One is a producer- facilitated royalty collection system of varieties registered after Feb. 27, 2015 (known as an end-point royalty). Royalties generated would be distributed to breeders based on a variety’s market share, possibly using existing collection systems. However, if a royalty is collected on seed, no royalty would be collected on harvested material. The other contender — the preferred option of the Canadian Seed Trade Association’s Intellectual Property Committee — is a royalty collection system enabled by contracts, where breeders or their representatives use contracts when selling certified seed of varieties registered after Feb. 27, 2015. This system involves the collection of royalties on any farm-saved seed, known as a trailing royalty. The latter is clearly the winner, reports Lorne Hadley, task force member and executive director at the Canadian Plant Technology Agency. “The seed industry has had long discussions about this over the last eight years and both the CSTA and the Canadian Seed Growers' Association have endorsed the model of trailing royalties,” he says. "Certain companies want to proceed with this and market this value to producers.” Hadley notes that producers already decide what seed to buy based on expected value, and those varieties that have value and are priced appropriately will have the market share. “We are trying to put in place a system to start by using pedigreed seeds, and the best varieties among them get the most return.” For his part, Darcy Pawlik believes the trailing contract model is the right one as it’s based on well-understood principles of existing contract law. The head of the Syngenta Cereals Portfolio for North America and vice-chair of the CSTA’s IP Committee notes the trailing royalty option is ideal for all acres grown of the varieties in question to be tracked, and also provides flexibility for the breeder in terms of the parameters that can be set. Rod Merryweather, CEO of FP Genetics, points out that this model could involve existing collection mechanisms already established by licensees of grain varieties, such as single-use contracts. He adds that the existing system for confidentially tracking every grower who uses midge tolerant wheat could be easily adapted to collect trailing royalties. “This system would also enable us to also track the use of certified seed, and make sure that a grower is not paying twice for the use of the variety.” Another benefit of the trailing royalty model, says Merryweather, is that trailing royalties also enable differential royalties on different varieties and crops. He says differential trailing royalties would be competitive in that breeders would be fairly compensated for every use of the variety, with growers deciding to use new varieties where the royalty appears worth the investment. Accessing superior genetics and seed is one way to ensure that Canada remains competitive in global agriculture. We talk with industry experts about the mechanics of funding innovation in cereals research through the concept of value creation/capture. Capturing Value, Funding Innovation Lorne Hadley is executive director of the Canadian Plant Technology Agency. Funding Innovation 20 www.seed.ab.ca | Advancing Seed in Alberta