Germany's Bayer dealt new legal blow as more Brazil farmers challenge soy patent

By Ana Mano

SAO PAULO (Reuters) - Germany's Bayer AG <BAYGn.DE>, which completed the takeover of U.S.-based Monsanto last year, has been dealt a legal blow in Brazil as more farmers joined a lawsuit challenging the protection of a key soy seed patent.

A Brasília appeals court authorized producers from another 10 states to join Mato Grosso state farmers as plaintiffs in a case challenging the validity of Monsanto's Intacta RR2 PRO patent, according to court filings.

That means Bayer, which had been ordered to deposit royalties received from the Mato Grosso growers in an escrow account, will have to do the same with royalties from the new plaintiffs, said Sidney Pereira de Souza Jr, an attorney representing the soy growers who cited court decisions granted in July 26 and on Feb. 25.

The Mato Grosso farmers sued Monsanto, now Bayer, in late 2017 aiming to cancel the Intacta patent, which they claim lacks any real technological innovations.

The legal dispute underscores the operating risks for firms like Bayer in Brazil, where companies face the prospect of more such lawsuits, Souza said.

Recently, Brazilian cotton growers challenged Bayer's patent protection for the Bollgard II RR Flex seed.

Souza said Brazil's farmers are "more organised" and are increasingly demanding to know whether the technology they are buying is new.

Royalties from Intacta sales in Mato Grosso were an estimated 800 million reais (£172.6 million) per harvest, Souza said. When royalties from farmers in the other 10 states are accounted for, the amount to be deposited in a judicial account could rise to as much as 2.7 billion reais, he said.

A Bayer spokeswoman said the company did not have a specific comment on the latest court ruling because it has not been formally notified of the decision.

She said it has been depositing royalties paid by the Mato Grosso farmers relative to the 2017/2018 crop cycle in an escrow account as ordered by the lower court overseeing the case in July 2018.

Mato Grosso growers claim Bayer has only deposited an estimated 4% of the royalties they paid. Souza said the latest court ruling reiterated a prior decision obliging the firm to deposit 100%.

Bayer declined to say how much it has deposited.

Intacta's patent protection extends through October 2022.

(Reporting by Ana Mano; Editing by Lisa Shumaker)