Former Bay of Plenty contractor Haoyu Gao was ordered to pay $12 million dollars for illegally exporting kiwifruit budwood to China.
Zespri Group Ltd holds rights under the Plant Variety Rights Act for the G3 and G9 varieties of golden kiwifruit it developed. These varieties are commercially valuable; they proved resistant to PSA, the virus which damages legacy varieties.
The court was told Mr Gao extended his Bay of Plenty kiwifruit contracting business in 2013 with the purchase of a local kiwifruit orchard. Outbreaks of PSA put him under severe financial pressure. Mr Gao subsequently delivered G3 and G9 budwood to an associate in China, receiving cash against future ‘royalties.’ Private investigators hired by Zespri subsequently identified these varieties planted in four orchards near the cities of Chibi, Xianning and Wuhan; orchards controlled by Shu Changqing. He would not admit that Mr Gao supplied the budwood, but stated he did have a ‘licence agreement’ from Mr Gao supposedly giving him full intellectual property rights to G3 and G9 for the whole of China.
The Court of Appeal confirmed a High Court ruling that Mr Gao breached Zespri’s registered plant variety rights by exporting stock from New Zealand without Zespri approval.
Damages of $24 million were assessed on a notional royalty for the unauthorised kiwifruit subsequently harvested in China. Damages were reduced by fifty per cent to $12 million, recognising that Zespri could take legal action in China against Mr Shu for illegally cultivating G3 and G9 varieties.
Zespri has registered in China under its equivalent of the Plant Varieties Act, Zespri’s exclusive right to commercially exploit G3 and G9 kiwifruit varieties in that country. Zespri is required to take action in local courts to enforce these rights against growers in China.
It came out in evidence at the High Court that after Mr Gao sold a supposedly all-China exclusive licence to Mr Shu, he then attempted a sell the same licensing deal to another buyer in China. Mr Gao was angry when this second buyer backed out, having Mr Gao then accuse him of a lack of honesty. There was also evidence of Mr Gao suggesting to another associate in China that he get Kiwifruit stock by stealing budwood from a local orchard. Mr Gao provided detailed instructions as to where the orchard was situated.
Gao v. Zespri Group Ltd – Court of Appeal (7.09.21)
21.150