Blame Patent Laws for the PepsiCo FC5 Potato Lawsuit

Ryan Lau | @RyanLau71R

On Friday, PepsiCo announced a lawsuit against four Indian farmers. Their “crime”? Growing a special type of potato without permission.

The beverage company and owner of Lay’s potato chips claims that it holds exclusive rights to grow a particular type of potato. Despite this, they assert that the farmers have grown the crop. As a result, they are seeking 10 million rupees (approx. $143,000) from each of the four farmers.

Reuters reported that the company has supplied the special FC5 potato to farmers who grow the crop and sell it back to PepsiCo at a fixed price. The crop, which also goes by the name FL 2027, does have an existing patent. The United States granted it to Frito Lay, a subsidiary of PepsiCo, in 2005. The patent will last for 18 years in the country, expecting to expire in 2023 unless the company is able to extend it. PepsiCo states in legal documents that they also have exclusive rights in India, claiming this monopoly since 2016.

Who Is to Blame?

It goes nearly without saying that Pepsi’s course of action is morally regrettable. The giant beverage company brought in over $66 billion in global profits last year, netting $12.51 billion in the 12 months ending on March 31, 2019. This is a 157.67% increase in net income from the previous fiscal year.

Obviously, the company is not in any desperate need, especially considering they made more than half of that from October to December of last year.

The lawsuit is also a laughable amount of money for the corporation. If PepsiCo succeeds in their suit against the Indian farmers, they will receive roughly $572,000 USD: a mere 0.004% of their yearly revenue. To the potato farmers, though, it may mean the world. The FC5 potato may have been keeping those farmers afloat.

Though their financial information is not publicly accessible, average data is. The average annual income for an Indian farming household is 1,104 dollars (77,112 rupees). Even if these FC5 farmers are earning 2,000 dollars a year each (about twice the average), it would take them more than 70 years to pay this off. India’s life expectancy, though, is slightly below 70 years, according to recent WHO data. In essence, the PepsiCo lawsuit is handing these potato farmers a life sentence. But instead of spending it in a cell, they must instead work to pay off the draconian sentence of a company with more money than it knows what to do with. PepsiCo, however, isn’t alone in its abhorrent actions.

The Danger of Patent Laws

PepsiCo certainly was in the wrong here, but what is the origin of their power? Without a doubt, it is not money or influence. Though this may help them in the courtroom or in the court of public opinion, one thing absolutely enabled them to take this action; without a patent on the FC5 potato, none of this would be possible.

Patent laws are nothing but arbitrary regulations that prevent innovation and free enterprise. Like intellectual property laws, they criminalize the free spread and improvement of ideas. Patent laws create victims, rather than bringing justice to them. In planting the FC5 potato, these farmers did not harm PepsiCo. They clearly had no desire to sell them the plant, so they were not going to be getting any money from them, anyway. Instead, they seek to use the vicious arms of the government to prevent Indian farmers from supplying a crop that their buyers desire.

The farmers have not stated where they got the FC5 potato from, but it doesn’t really matter; once the property is theirs, they should be able to do what they want with it. Growing potatoes is not a form of theft, as long as they did not physically steal any property from PepsiCo. So far, at least, there is no evidence of this occurring.

A Wrongdoing of Governments

Though all patent laws place restrictions on the market, food patents seem particularly wrong. What right does any individual or state have to say what types of food someone may grow on their farm? These farmers are not stealing an idea; they aren’t even using the potatoes to make Lay’s chips. They simply want to feed people and bring in a little cash, and have found a sustainable way to do so that does not hurt anyone.

Without this patent law, PepsiCo would be virtually powerless in the situation. If they did not have exclusive rights over the FC5 potato, then the Indian farmers would be able to sell it however they wanted. Likewise, other farmers and other companies could also grow the potato, spreading it across the globe.

Instead, governments are enabling PepsiCo to do wrong to the little guy. In the end, this is often what happens with patent laws: large corporations take advantage of the system to stifle competition, making sure that they have complete control of the industry. Meanwhile, the government guarantees them this control, forcing the little guy to pay up if they try to get ahead. It’s a lot like the government is handing a thoughtless child a magnifying glass, showing him an ant in the sun, and cautioning him passively not to hurt the ant.

The PepsiCo FC5 Potato Monopoly

This patent law, just like any other, creates a monopoly on a certain product. For over a hundred years, the American government has taken steps to eradicate natural monopolies in the market. Many countries around the world have followed suit.

But in allowing these patent laws and giving exclusive rights to the FC5 potato, both India and the United States have granted a major corporation the ability to monopolize a raw material. As a result, PepsiCo gets to completely control the price of these potatoes, rather than allowing market competition to drive prices down. And they have done exactly that.

The company has offered the Indian farmers a way out of the lawsuit; they must become a member of the PepsiCo partnership and sell the company all of their potatoes. The catch? The sales will all come at a fixed price. That’s right, one company is now controlling the price of an entire breed of the crop. Want to sell, grow, or buy it at a mutually agreed upon price with someone else? Care to plant some potatoes of a certain variety to feed your family or your neighbors? Be careful, because governments around the world are giving PepsiCo the power to oppress you for doing it.

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