Current Developments in AgTech Law: A Primer on Modern Agriculture Technologies

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CURRENT DEVELOPMENTS IN AGTECH LAW:

A PRIMER ON MODERN

AGRICULTURE TECHNOLOGIES

Authors: Erica Riel-Carden & Roger Royse

Working Paper

2016 World Technology Law Conference May 18 - 20, 2016, ITechLaw Association

Copyright © 2016 All Rights Reserved

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Table of Contents I. Introduction ............................................................................................................................ 3

II. Modern Agriculture: How has farming changed? ........................................................ 3 A. Family farms are thriving and expanding. .............................................................................. 4 B. The Expense of Farm Labor ....................................................................................................... 6 C. Consumers care about the public cost of food. ....................................................................... 9

III. Current trends in AgTech and emerging legal issues. ............................................. 12 A. Precision Agriculture .............................................................................................................. 13 B. Ownership, Access, Use, and Control of Agricultural Data ............................................... 17 C. Drones ............................................................................................................................................ 20 D. GEC is the new unregulated GMO ......................................................................................... 23

IV. Conclusion. ........................................................................................................................ 26

As a Working Paper, we welcome your feedback, which can be sent to the email addresses provided in the biography.

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I. Introduction

Farming is often characterized as low skilled. A farmer just plants, weeds, sprays,

waters, waits, and harvests. However, farmers spend every day living in unpredictability;

defending their crops against, untimely weather, unwanted pests, and unrelenting

pathogens. Operating a farm is a very risky financial business. Annual income can vary

substantially from year to year as product prices, input prices, and yield prices fluctuate.1

Imagine having to plan your entire year’s business off of one annual paycheck. Most

farmers must pay for agricultural inputs at the beginning of the year and are not paid until

their product makes it through the agricultural distribution chain. Therefore, the chances

of a farming surviving is relatively low, only 55.7 percent of all farms having positive

sales in 2007 also reported positive sales in 2012.2 Is there a better or more efficient way

to do farm?

Agricultural technologies (“AgTech” or “Agri-tech”) include hardware, software,

and biotechnological innovations that companies, universities, and other stakeholders are

deploying to help farmers be more efficient, increase production, access new markets,

capture useful data, and reduce agricultural inputs. This paper discusses (1) three ways

modern agriculture has changed, and (2) some current examples of AgTech and its

emerging legal issues as technology companies attempt to penetrate the agricultural

supply chains.

II. Modern Agriculture: How has farming changed?

1 Trends in U.S. Local and Regional Food Systems page 12

http://www.ers.usda.gov/media/1763057/ap068.pdf 2 Id. at 13.

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While every consumer knows their favorite food aisle in the grocery store or their

favorite farmer’s market vendor, very few can describe from where the food originated.

For many food shoppers, only two pictures come to mind: family farms versus factory

farms. First, this section dispels the notion that family farms are disappearing. Next, this

section reiterates one modern problem statement Agtech is trying to solve: the farm labor

deficit. Lastly, it briefly explores the modern “Food Movement” in which consumers seek

to reconnect to their food products.

A. Family farms are thriving and expanding.

When most people think about agriculture, their minds focus on historic family

farms. They think of a husband, wife, and their children; living and working full-time on

a farm that they own and manage.3 Their picturesque family farm has small acres with

one or two people tending the land with a red barn and a white picket fence, while their

animals bask in the sun in the green pastures. For many, this scenic illusion of American

agriculture has since become tainted with industrial “factory farms.”

Run by giant corporations whose only goal is maximize profit and minimize

costs, these factory farms abuse animals by cramming them into “filthy, windowless

sheds and confined to wire cages, gestation crates, barren dirt lots, and other cruel

confinement systems. These animals will never raise their families, root around in the

soil, build nests, or do anything that is natural and important to them before slaughter.”4

Indeed, many consumers tend to believe only agribusiness uses pesticide, herbicides and

genetically engineered seed. These simple descriptions of family and factory farms barely

3 John Ikerd “Sustaining the Family Farm” Presented at the Tiffin Conference Series, 2006, The Prosperous Farm of the Future, Lethbridge, Alberta, Canada, February 16, 2006. 4 Factory Farming: Cruelty to Animals” http://www.peta.org/issues/animals-used-for-food/factory-farming/

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gloss the surface of modern agriculture today, and the underlying suggestion that family

farms are disappearing is far from reality.

The United States Department of Agriculture Economic Research Service

(USDA-ERS) defines a family farm as one in which “the principal operator, and people

related to the principal operator by blood or marriage, owns more than half of the farm

business.5 Non-family farms are operated by cooperatives, hired managers on behalf of

non-operator owners, large corporations with diverse ownership, and by small groups of

unrelated people (often in partnerships or corporations).6 Because the USDA-ERS

defines a family farm by ownership and operation, and not by size or by labor

commitments, many modern family farms today are large and rely heavily on hired labor,

rented land, and contracted services to operate their businesses.7

Today, 96 percent of U.S. crop production is in family farms, and they generate

87 percent of the total value for crop production.8 Contrary to popular belief, family

farms continue to dominate agricultural production in the United States even as

production has shifted to larger farm business.9 Family farms account for over 96 percent

for vegetables and melons and almost 93 percent of fruits and nuts production in the

United States.10 So why do many people believe family farms are disappearing? Because

farms are getting bigger in size, even as farm labor is decreasing as discussed in the next

section.

5 Farm Size and the Organization of U.S. Crop Farming, ERR-152, page 47 6 Id. at 48. 7 Id. 8 Farm Size and the Organization of U.S. Crop Farming, ERR-152, page 47 9 Id. 10 Id.

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While the average (mean) farm is 234 acres, half of all farms (the median) have

less than 45 acres.11 However, the ERS estimates that the midpoint acreage of total U.S.

acres devoted to farmland is 1,100 acres where the midpoint acreage represents the

midway point of the total number of farm acres across the country.12

Therefore, the ERS believes the midpoint acreage indicates farms are getting

larger, otherwise the midpoint acreage would reflect a number closer to the mean and

median farm size. Based on midpoint farm acreage, U.S. cropland nearly doubled

between 1982 and 2007, from 589 acres to 1,105 with many farms five and ten times that

size.13

In conclusion, instead of belaboring the mythical loss of family farms due to

industrial agribusiness, consumers can rejoice in the expansion of family farms. Rather

than pitting agribusiness versus family-owned, a better way to frame the picture is large-

scale family farms. It should be conceded that globalization of the markets has affected

all sectors, and all farmers can benefit from bigger farms because they can realize larger

economies of scale.

B. The Expense of Farm Labor

Hired labor, including contract labor, is a necessary input in U.S. crop production.

Larger family farms require more than mom, dad, and children. Hired labor represents

one-third of all those working on the farm, including field crop workers, nursery workers,

livestock workers, farmworker supervisors, and hired farm managers.14 The demand for

hired farm labor is a complex model. Deciding what to produce and how to produce it

11 Farm Size and the Organization of U.S. Crop Farming, ERR-152, page 47 12 Id. 13 Id. at iii. 14 http://ers.usda.gov/topics/farm-economy/farm-labor/background.aspx#.U3rfOlhdV_U

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includes considering demand for different farm commodities and the associated cost of

farm labor.15 Different types of crops require a variety of labor capital.

From the farmer’s perspective, his interest in the business of farming is to keep

labor costs as low as possible. Larger crop farms usually perform better financially, not

through higher revenues, but by lower costs in production including labor and capital.16

Hired labor accounts for about 17 percent of variable production expenses, such as

wages, and as much as 40 percent of such expenses for fruits, vegetables, and nursery

products.17 While farmers recognize labor is the single largest input cost in the production

of many crops, producers try to keep production costs competitive by reducing labor use,

adopting labor aids to increase labor productivity, or mechanizing harvests to reduce

labor needs. 18 As discussed in Section III, keeping labor costs low is just one of the

problem statements AgTech is trying to solve.

The global demand for labor-intensive crops has increased due to consumer

demand and changes in food consumption.19 While fruit, vegetable, and nut production

are more labor intensive than common row crops such as corn, wheat, and soybeans,

labor hours per harvested acre decline sharply for all crops as the total harvest acres

increase.20 For example, corn, wheat, and soybean farmers harvesting more than 2,000

acres use less than half as much labor per acre as farms harvesting fewer than 500 acres.21

15 Philip Martin and J. Edward Taylor, Ripe with Change: Evolving Farm Labor Markets in the United States, Mexico, and Central America. UC Davis February 2013, publisher: Migration Policy Institute at 1. 16 Id. at 16. 17 Economic Research Service/USDA, The Potential Impact of Changes in Immigration Policy on U.S. Agriculture and the Market for Hired Farm Labor: A Simulation Analysis / ERR-135, at iii, 18 Economic Research Service/USDA, The U.S. Produce Industry and Labor: Facing the Future in a Global Economy / ERR-106, at 1 19 Id. 20 Id. at 18-19. 21 Id. at 18. Table 6

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Farmers who hire laborers to harvest between 500 and 999 acres instead of less

than 10 acres are almost 87% more effective for fruits and nuts and 92% more effective

with vegetables and melons.22 While on less than 10 acres, fruit and nuts harvesting takes

approximately 564.7 hours to harvest and vegetables and melons take 849.3 hours, labor

spent on harvested acres between 500-900 acres only amount to 74.2 hours and 46.4

hours respectively.23 From these results, one can deduce to maximize agricultural profits,

farmers can reduce input costs such as labor.

Along with the heavy cost of farm labor, farmers are also having a hard time

finding help. The number of farmworkers decreased from 3.4 million to 1 million in the

past century.24 This farm labor shortage has been linked to increases in food prices and a

negative effect on the number of crops that the U.S. can produce.25 Without labor, fields

must be abandoned instead of harvested or never planted at all. Additionally, the gap in

available farm work but lack of workers has partially lead to a massive increase in illegal

workers. In the past 15 years, approximately 50% of hired crop farmworkers were

unauthorized to work in the United States compared to roughly 15% in 1998 and 1991.26

In conclusion, managing farm labor cost and hiring enough workers is a major

complex issue for the current agricultural market. One agtech hardware solution to this

issue is agricultural robotics. One of the best examples is Blue River Technology, a

California startup using computer vision and machine learning. Blue River Technology

developed tractor-towed robots that are able to target each individual plant, instantly

22 Id. at 19, table 7 23 Id. 24 http://ers.usda.gov/topics/farm-economy/farm-labor/background.aspx#Numbers 25 Matt Koba, “The shortage of farm workers and your grocery bill” May 15, 2015, CNBC http://www.cnbc.com/id/101671861 26 http://ers.usda.gov/topics/farm-economy/farm-labor/background.aspx#Numbers

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determine its health, structure and needs, and precisely apply the right amount of

herbicide – all in real time, at tractor speed.27 By putting a robot in every field, this

startup helps farmers reduce their labor costs associated with weeding and input costs

with reductions in agricultural chemical inputs. Additionally, Blue River has been one of

the rare robotics startups to survive the early stages of financing, raising $17 million in a

Series B round in December 2015. In conclusion, cutting farm labor cost and increasing

the farm labor supply is a current issue for most farms in the current agriculture market.

C. Consumers care about the public cost of food.

The latest Food Movement shows consumers are concerned not only with the

monetary cost of food, but also with its long-term impacts on the environment,

agricultural workers, and future generations.28 Because food is one of the most basic

physiological needs, food production is inherently a societal benefit. Food production and

food access have enormously significant human health, social, economic, environmental,

political, and moral dimensions.29 Agricultural production has three distinct attributes

that are themselves “areas of public interest.”30 First, there is a fundamental interest in

the production of healthy foods through policies that assure the safety and availability of

those foods to all segments of society.31 Second, because agricultural production involves

the production of living things, this industry evokes ecological and moral issues that are

27 http://www.businesswire.com/news/home/20151216005360/en/Blue-River-Technology-Raises-17-Million-Series

28 Id. 29 Jay A. Mitchell, Getting into the Field, 7 J. Food L. & Pol'y 69, 84-85 (2011) 30 Id. 31 Id.

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completely different than the production of inanimate products.32 Third, agricultural

production is heavily dependent upon the natural world and its resources making

conservation a huge interest to reduce environmental degradation.33

All of these attributes have become under heightened scrutiny in the past decade.

In conjunction with making farms sustainable, the traditional farming structure is being

reexamined. Consumers are demanding full transparency even if they are unsure how to

process all of the new readily available information. It is no secret that consumers want

to do the right thing when it comes to buying and sourcing their food.

The current Food Movement, however, encompasses many different reform goals

under the umbrella of those three public interest purposes. of From farmland preservation

to food safety regulations, animal welfare rights and the ethics of bioengineering, one can

find numerous causes as his guiding principle. Additionally, there is no consensus on

sustainability or how much should be required. Michael Pollan defined the food

movement as the “recognition that today’s food and farming economy is

“unsustainable”—that it can’t go on in its current form much longer without courting a

breakdown of some kind, whether environmental, economic, or both.”34 Meanwhile,

Congress defined sustainable agriculture as “integrated system of plant and animal

production practices having a site-specific application that will, over the long term:

satisfy human food and fiber needs; enhance environmental quality and the natural

resource base upon which the agricultural economy depends; make the most efficient use

of nonrenewable resources and on-farm resources; and integrate, where appropriate,

32 Id. 33 Id.

34 The Food Movement, Rising June 10 2010 Michael Pollan http://www.nybooks.com/articles/archives/2010/jun/10/food-movement-rising/

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natural biological cycles and controls; sustain the economic viability of farm operations

and enhance the quality of life for farmers and society as a whole.”35 Consumers

understand that sustainable products must mean a wholly better product.36

In pursuing a sustainable way of eating, conscious eaters are searching for local

community-based food systems that connect consumers directly to farmers in an attempt

to make farming more sustainable. Studies of consumers’ willingness to pay (WTP) a

premium for local food showed consumers felt confident that their actions “make a

difference” for public and private outcomes.37 The “local and regional” food systems

have not yet been well defined. Some consider it based on distances while others prefer

looking at whether the ownership of the farm is local.38 In 2012, just 7.8 percent of U.S.

farms sold food through local food marketing channels, including direct-to-consumer

(DTC) marketing channels (e.g., farmers’ markets, roadside stands, u-pick) and

intermediated marketing channels (e.g., direct to restaurants, institutions or to regional

food aggregators, known as food hubs).

From an agricultural economics perspective, there is still some debate about

whether local is truly more cost-efficient in a globalized market. In conclusion, the

current Food Movement has shifted towards the serious reconsideration of the

environmental and economic ramifications of food purchases and eating choices.39 This

in turn has caused other players upstream in the agricultural supply chain to also review

35 http://www.nal.usda.gov/afsic/pubs/agnic/susag.shtml 36 Note: Sustainability is defined as the capacity to endure and in the environmental context has been taken to mean the reduction of negative human impact on an ecosystem.

37 Trends in U.S. Local and Regional Food Systems page 30 http://www.ers.usda.gov/media/1763057/ap068.pdf.

38 Trends in U.S. Local and Regional Food Systems page 1 http://www.ers.usda.gov/media/1763057/ap068.pdf.

39 Christopher Kaltsas, Harmony at the Farm: Rediscovering the "Community" in Community Supported Agriculture, 56 Wm. & Mary L. Rev. 961, 968 (2015).

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their own business pipelines.40 While the agriculture industry has been evolving for many

centuries, the current state of agriculture has created a complex set of problem statements

for tech startups to explore, review, and hopefully help solve.

III. Current trends in AgTech and emerging legal issues.

Agriculture technologies are innovative new methods that give farmers long-term

site-specific applications. Put another way, AgTech allows farmers to optimize crop

yields and be better input stewards for the environment. The 3 main crop inputs are seed,

fertilizer, and pesticides; and, production costs include machinery, oil and fuel, and labor

(as previously discussed in Section II). Therefore, the viable on-the-farm agricultural

technologies will decrease production costs and inputs and/or increase harvest potential,

commonly known as yield.

Farming has always been an innovative sector. First mankind domesticated crops

and animals, and then humans mechanized and mass-produced it with synthetic inputs

and seed genetics. While agriculture previously innovated without regard to the

environment, these previous improvements positively increased U.S. farm income. In the

last decade, net farm income continued to climb to its highest level at $123.7 billion in

2013.41 However in 2014, net farm income began to decline, falling to its lowest level in

9 years in 2015, almost a 40% (forty percent) reduction.42 The USDA expects another 3%

reduction by the end of 2016.43 The decline is due in part to falling commodity prices,

40 Note: Between growers and consumers, the supply chain also includes a host of processors, distributors, manufacturers, and retailers. 41 “Ag Sector Weakness Forecast To Continue Into 2016” http://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/2016-farm-sector-income-forecast.aspx 42 Id. 43 Id.

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which in turn arguably resulted from increases in yield production technology and the

current global surplus of corn, wheat, and soy.44

However, the current trend in agriculture is that farmers are operating at a loss

and suppliers are consolidating, merging, selling assets, laying off people, or closing field

sites to stay competitive. This means everyone in the agricultural supply chain is looking

for new ways to cut costs and continue improving production. Everyone has to do more

with less and advances in cloud computing, genetics labs, and the internet of things (IoT)

are bringing information technology and new crop protection products to the field. Some

of those advancements include precision agricultural products, big data analysis, drones,

and new gene editing techniques, all of which are discussed below.

A. Precision Agriculture

So how does a farmer know how to farm? When and where should seed be

planted? How much fertilizer should be applied? Besides the Farmers’ Almanac and

personal records, information is passed down through generations of farmers. One field is

more productive than another and everybody just knows that.45 Since World War II,

farming was done uniformly at the level of the entire field.46

However, fields usually have several soil types with different potential yields for

different crops. If a farmer wanted to better understand their whole field potential, they

had to rely on the USDA, land grant universities, and county extension offices. First, a

farmer would randomly collect soil samples to send to a lab. After paying $10 per 44 http://www.bloomberg.com/news/articles/2016-01-12/farm-boom-fizzles-as-u-s-crop-surplus-expands-financial-strain 45 Erin Boba. Betting Big on Precision Ag, MODERN FARMER (Mar. 3, 2014), http://modernfarmer.com/2014/03/betting-big-precision-ag/. 46 Margaret Oliver, Precision Agriculture and Geostatistics: How to manage agriculture more exactly, SIGNIFICANCE, Apr. 2013, at 18.

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sample, the field could be mapped on paper based on the soil lab analysis and historical

documentation such as land use maps and surveys. Once a farmer knows how her field

differs in soil, farmers still need to interpret that data to implement changes in their farm

strategies.

Even if farmers decided to survey their land, most did not waste the time, energy,

or money because of the complexities of soil science. Every field is unique with different

“high spots,” soil content, and drainage patterns and a field can change in less than a

foot.47

In reality, a lot of farmers do not or cannot analyze their thousands of acres

individually, so their whole field is managed as a uniform unit. A farmer just estimates a

uniform number of seeds to plant per acre because it is too complicated or time-

consuming to decide which areas of each acre are more or less fertile.48 Crop yield was

painstakingly measured by averaging the total moisture content harvested from a plot,

even though patches could yield more than others.49

With technological innovation, farming strategies are being revolutionized with

precision agriculture. Instead of treating fields uniformly, agricultural companies want to

help farmers increase crop yields by analyzing their personal grower data to manage

individual plots within the field.

Precision agriculture, also known as integrated farming systems, site-

specific crop production, prescription farming or planting, and soil-specific crop

managements, refers to a suite of technologies embedded in farming equipment that uses

47 Tim Barker, Monsanto expands precision agriculture offerings for farmers, ST. LOUIS POST-DISPATCH, (Apr. 6, 2014, 12:15 AM), available at http://www.stltoday.com/ business/local/monsanto-expands-precision-agriculture-offerings-for-farmers/article_ c39fd6c4-fcac-5f2a-9692-dde5dab6b0e6.html. 48 Barker, supra note 3. 49 Oliver, supra note 2, at 18.

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real-time personal grower data to continually assess field conditions and apply farmer

inputs, such as fertilizers and pesticides, to specific GPS field locations.50 In other words,

the entire process of planting, fertilizing, and watering is not only highly specific; it’s

also now automated.51 The goal is to “push every acre to its maximum potential” and

“help farmers squeeze as much production as possible from every inch of their soil.”52

Precision farming is a technology plaftorm with multiple technologies such as

yield monitors, global positioning systems (GPS), remote sensing (RS), geographic

information systems (GIS), and variable rate technology (VRT). Yield monitors can

instantly record and display crop yields from farm equipment. GPS has allowed farmers

to pinpoint the exact locations of other relevant data to produce better precise maps

known as grid soil sampling which divides a field into square shapes that are assigned a

latitude and longitude.53 RS tools can gather data through satellite imagery without being

in physical contact with the area or object through.54 RS technology can also determine

the health and vigor of growing crops and provide an overall better agricultural survey of

the field than by manually taking random soil samples.55 GIS technology can map all of

the data and draw analytical relationships between factors like soil types, fertilization

levels, and crop yields in a user-friendly way.56 Lastly, VRT describes any technology

50 See James R. Walter, A Brand New Harvest: Issues Regarding Precision Agriculture Data Ownership and Control, 2 DRAKE J. AGRIC. L. 431, 434 (1997), and see also, Tadlock Cowan, RS20515: Precision Agriculture: A primer, (updated Mar. 27. 2000) at 1. 51 Biba, supra note 1. 52 Barker, supra note 3. 53 Walter, supra note 6, at 437. 54 Satellite Imaging Corporation, http://www.satimagingcorp.com/svc/agriculture.html (last visite Apr. 5, 2014). 55 Id. 56 Walter, supra note 6, at 437-38.

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that enables producers to vary the rate of crop inputs.57 Farm equipment equipped with

VRT can automatically adjust chemical application rates while the equipment travels

across the field based on pre-determined levels.58

Precision agriculture adoption has been described as a three-step process: 1) using

yield monitors to collect yield information, 2) creating a soil (field) map by collecting

field characteristics (RS, GIS, GPS) , and (3) using VRT to put soil and yield information

together.59

The ability to have all the components of precision agriculture is a farmer’s

dream. Agricultural companies are racing to roll out prescriptive planting technology to

U.S. farmers who know from years of experience that tiny adjustments in planting depth

or the distance between crop rows can make a big difference in revenue at harvest time.60

Sellers of prescriptive planting technology want to accelerate, streamline, and combine

all those data with their highly detailed records on historic weather patterns,

topography and crop performance.61

However, not all components must be used together in order to be practical. Also,

growers are proving adoption will happen in stages. While over forty percent (40%) of

U.S. grain crop acres had yield monitors in 2005-2006, other precision agriculture

techniques were only adopted eight to twelve percent (8% - 12%) of the time in the same

year.62 Why would a farmer not want to adopt life-changing technology?

57 ALA. COOPERATIVE EXTENSION SERV., Variable Rate Technology, http://www.aces. edu/anr/precisionag/VRT.php (last visited on Apr. 7, 2014). 58 Walter, supra note 6, at 439. 59 David Schimmelpfennig and Robert Ebel, USDA ECONOMIC RESEARCH SERVICE, On the Doorstep of the Information Age: Recent Adoption of Precision Agriculture, EIB-80 (Aug. 2011) at 8-9. 60 Jacob Bunge, Big Data Comes to the Farm, Sowing Mistrust, WALL STREET JOURNAL (Feb. 25, 2014, 10:38 PM), http://online.wsj.com/news/articles/SB100014240527023044 50904579369283869192124. 61 Barker, supra note 3. 62 Supra 59 at iii.

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Arguably, the standard for a typical agtech transaction has not been as user or

grower friendly. Instead of treating farmers as a business to business transaction, tech

companies are using standard consumer end user license agreements. With a lack of clear

understanding of the many layers of the agricultural supply chain, tech companies are

using multiple technology licenses for farmers and other agriculture companies such as

SaaS licenses, Terms of Service agreements, and Browser or Click-wrap licenses.

However, farmers are sophisticated business professionals. Because “information

produced on the farm truly represents power”63 farmers believe their data is their trade

secrets and have started scrutinizing and negotiating Agtech licenses while they are in

their infancy.

B. Ownership, Access, Use, and Control of Agricultural Data

Precision farming uses technology to gain a clear and comprehensive picture of

one’s farming operation to secure the highest measure of farm efficiency and profitability

by reducing input usage, insulating against risk, and enhancing sustainable farming

practices.64 Treating data as a source of power, prescription agriculture is based on data

mining principles. Companies want to aggregate growers’ personal data into a database

so that they can use mathematical formulas to sift through large sets of data to discover

useful patterns, group relationships, and predict future behavior to benefit farm

management.65 Who owns, accesses, and controls data is a broad current concern that

should be addressed in the license grant and conditions.

63 Walter, supra note 6, at 439. 64 Jim Langcuster, Data management biggest challenge in precision farming, SOUTHEAST FARM PRESS, (Jan. 14, 2013), http://southeastfarmpress.com/equipment/data-management-biggest-challenge-precision-farming?page=2. 65 Liane Colonna, A Taxonomy and Classification of Data Mining, 16 SMU SCI. & TECH. L. REV. 309, 310 (2013).

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From an intellectual property perspective, licenses should define who owns what

data and how one can use such data. Licenses should clearly separate ownership for the

initial field information or raw data that a farmer provides and the prescription or

recommendations that the company sends. Additionally, parties must decide who owns

the generated data from the GIS, RS, and VRT technologies. Lastly because many farms

operated on a landlord-tenant basis where the farmers as tenants share the profit of each

harvest with the landlord, licenses should recognize whether both farmers and

landowners should own the raw and/or generated data.66

After ownership, it is important to discuss access and control. By paying for the

technology, farmers may assume they ultimately own and control their grower data in the

programs. However, the licenses may only grant farmers limited access to the data since

the company is actually generating new data for them or about them.67

Because companies can limit users’ access to the data farmers should negotiate

for data portability terms. Even if growers do not own the generated data, they should be

allowed to export all of their imported, generated, and recommended data from a

company’s software program. Because companies will be only recommending their own

products, farmers will be even more restricted in changing suppliers.68 Farmers usually

buy seed, farming equipment, fertilizers, and pesticides from several different companies.

If a farmer does not own his data or cannot take the prescription data with him, he will

never be able to switch companies.69 Even if the farmer literally owns the bits of data, she

66 Walter, supra note 6, at 444. 67 Walter, supra note 6, at 441. 68 Dan Charles, Should Farmers give John Deere and Monsanto their Data?, NPR THE SALT BLOG (Jan. 22, 2014, 4:45PM), http://www.npr.org/blogs/thesalt/2014/01/21/264577744/should-farmers-give-john-deere-and-monsanto-their-data. 69 Walter, supra note 6, at 442.

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still cannot switch companies if she cannot export the data into a useful format. For

example, if Facebook’s licenses restricted image exports to their own format instead of

.jpeg files, a user could not easily remove their photos.

Next, duration must be noted in the license grant. Gathered data becomes more

valuable as the number of total crop years increases because patterns can become more

significant.70 While a company understandably needs to be able to aggregate non-

personalized data in perpetuity, farmers may be concerned about how long companies

may store personal grower data from each individual season to season.

Then, access to the personal grower data is a huge issue that should be addressed

by a severely limited third party access license terms. Farmers have voiced initial access

concerns regarding neighborhood farmers, the commodity traders, and government

agencies. 71 Prescription planting could create unwanted land use competition. If a

neighbor can see a farmer’s crop yield, it could increase farmland rent and other land

costs.72 Crop production is also unique because many row crops are traded as

commodities. Farmers rely on commodity futures contracts, an agreement to buy or sell a

set amount of the crop at a predetermined price and date73, when planning their future

crops. With seed prices per acre up one-hundred-sixty-six percent (166%) from the

inflation-adjusted cost since 2005,74 farmers are concerned traders will use the data to

push futures lower earlier in the growing season which would further limit their profits.75

70 Id. 71 Charles, supra note 37. 72 Id. 73 INVESTOPEDIA, http://www.investopedia.com/terms/c/commodityfuturescontract.asp. 74 Charles, supra note 37. 75 Bunge, supra note 17.

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The stock market has already adopted technology with high-frequency trading however,

so parties to the prescription license may not be able to limit that exposure. 76

Lastly, the American Farm Bureau Foundation, a trade group for farmers, has

expressed concerns regarding confidentiality and data privacy. These concerns include

attempts from regulatory agencies or non-governmental organizations to gain access to

production data for their own interests.77 In conclusion, out of the intersection of farmers

and tech companies has emerged many novel, licensing issues for a unique industry. Tech

companies are having to re-write their “standard” agreements, which means both parties

have the opportunity to negotiate their concerns and policies through these agtech

licenses.

C. Drones

The rise of Unmanned Aerial Vehicles (UAVs), commonly known as drones, is

largely due to the advances in Micro-Electro-Mechanical Systems (MEMS) technology in

very small devices: accelerometers, gyros, magnetometers, pressure sensors, small GPS

modules, incredibly powerful processors, and a range of digital radios.78 Those same

technologies are used in smartphones and other consumer devices.

In March 2013, the Associated for Unmanned Vehicle Systems International

(AUVSI), identified precision agriculture as one of the most “promising commercial and

76 Timothy P. Morgan, Wall Street Wants Tech To Trade Smarter And Faster, ENTERPRISETECH (APR. 9, 2014 10:09AM), http://www.enterprisetech.com/2014/04/09/ wall-street-wants-tech-trade-smarter-faster/. 77 AMERICAN FARM BUREAU, Proprietary information generated from Precision Agriculture Technologies AFBF Policy Development (May 2013), available at ofbf.org/uploads/Proprietary_Information.pdf. 78 Chris Anderson, https://www.technologyreview.com/s/526491/agricultural-drones/ Unmanned Aerial Vehicles, Unmanned Aerial Systems

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civil markets” along with public safety.79 The American Farm Bureau Federation

estimates farmers’ return-on-investment alone could be $12 per acre for corn and $2 to $3

per acre for soybeans and wheat.80

Farmers can literally see an instant return on drone investment because drones can

provide farmers with previously unattainable detailed views. First, seeing a crop from the

air can exposes crop stress such as irrigation inconsistencies and pathogen infestations.81

Second, airborne cameras with multispectral imaging can capture data from different

spectrums, not available to the naked eye.82 For example, the near-infrared (NIR)

spectroscopy method is already widely applied in agriculture to determine crop quality.

Finally, a drone can survey a crop every week, every day, or even every hour. Those

method are the basis for the primary drone-based observational technique, Normalized

Difference Vegetation Index (called NDVI), a measure assessing crop productivity that is

calculated based on visible and infrared radiation. Viewed with an aerial camera, crop

rows that normally look like an undifferentiated mass can suddenly pop into relief in

bright yellows, oranges, reds, and greens; software then stitches together hundreds of

images to form a complete picture.83

When those images are combined, the combinations create a time-series

animation, which can show long-term changes in the crop, revealing long-term

79 See DARRYL JENKINS & BIJAN VASIGH, ASS'N FOR UNMANNED VEHICLE SYS. INT'L, THE ECONOMIC IMPACT OF UNMANNED AIRCRAFT SYSTEMS INTEGRATION IN THE UNITED STATES 2-20 (2013). 80 John Wihbey, “Agricultural drones may change the way we farm” https://www.bostonglobe.com/ideas/2015/08/22/agricultural-drones-change-way-farm/WTpOWMV9j4C7kchvbmPr4J/story.html 81 Id. 82 Id. 83 77.

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opportunities for better crop management.84 For example, the super-high resolution

spectral imaging will allow for more targeted fertilizing and better use of water and labor

in different areas of the field.85 The need for common fertilizers, such as nitrogen, as well

as herbicides, insecticides, and fungicides that pollute local waterways could be

substantially reduced. 86 As previously discussed, the substantial reduction stems from

the traditional method of farming a field at a uniform level.

However, the regulatory field for UAVs is still a huge hurdle for full introduction

of drones in U.S. agriculture. In enacting the FAA Modernization and Reform Act of

2012 (FMRA), Congress reauthorized funding and set policy priorities including, the

integration of civilian unmanned aircraft into the national airspace system.87 With drone

interference in emergency situations, drone crashes at public events, and unintended

drone surveillance of private individuals, legislating marketplace drones continues to be

slow moving. Without a statutory exemption, however, the current use of drones remains

illegal and subject to penalties for many agricultural commercial users. Commercial users

must apply for a Section 333 exemption, a provision that allows the FAA to authorize

specific, case-reviewed applications for commercial drone use, and to grant

“airworthiness certificates” to applicants who meet the statute’s criteria.88 Even if the

exemption is granted, there are still regulatory limits in place such as ensuring the drone

stays within the operator’s line of sight. The FAA’s first Section 333 exemption issued to

an agriculture company was announced in January 2015.89 Other legislative attempts in

84 78. 85 77. 86 Id. 87 Joshua D. Beard, Up in the Air the Legal Status of Drones, Mich. B.J., December 2015, at 20, 22 88 https://agfundernews.com/how-the-faas-proposed-commercial-uav-regulations-may-shape-the-future-of-drones-in-agriculture4662.html 89 Id.

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the past year include the February 2015 proposed Small UAS Rule which distinguishes

UAV’s from UAS’s and the May 2015 Commercial Moderniztion Act, a bill introduced

in the Senate that would set interim operating guidelines for commercial unmanned

aircraft systems. 90

In conclusion, due to the current U.S. regulatory landscape, drones can really only

supplement other imaging technologies, satellites and airplanes, to capture agronomic

data.91 As other developed countries, including Canada and Japan, already allow some

form of UAV or UAS for agriculture, U.S. farmers are preparing to reap the promised

savings drone companies are offering. The global market for agricultural drones,

currently estimated at $494 million is anticipated to reach $3.69 billion by 2022.92

D. GEC is the new unregulated GMO

Since its commercial introduction in the 1990s, genetic modification (GM), also

known as genetic engineering (GE), emerged as a critical tool for modern agriculture.

The three primary plant transformation methods were Agrobacterium-mediated

transformation, biolistic (gene gun) transformation, or other types of bacteria-mediated

transformation. All three methods required the insertion of non-host DNA, foreign DNA,

to transform the plant. Originally established in 1986, the United States’ Coordinated

90 Id. . 91Louisa Burwood-Taylor, “Drones Startups Raise $450m in 2015 but How Effective Are They for Agriculture Today?” https://agfundernews.com/drones-raise-450m-in-2015-but-jury-still-out-on-ag-application5245.html 92 http://www.marketwatch.com/story/agricultural-drones-market-worth-369-billion-by-2022-2016-04-06-2203128

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Framework for Regulation of Biotechnology sought to ensure that GM crops did not pose

a risk to humans, other plants and animals or to the environment.93

U.S. regulatory law was structured to regulate Agrobacterium-mediated

transformation because the initial bacteria were considered “pest-derived” and so

regulations were passed based on one form of technology. Currently, three federal

agencies are authorized to regulate GMOs, the Food and Drug Administration, the

Environmental Protection Agency and the USDA Animal and Plant Health Inspection

Service, Biotechnology Regulated Service (APHIS-BRS), but not all of them may be able

to enforce federal regulations depending on the type of organisms involved and the

purpose of the GM product.

As GM methods evolved, APHIS a pattern developed whereby companies

seeking to commercialize GM crops and technologies in the U.S learned a quicker path to

the market was seeking the deregulation of a GM product. By presenting scientific

evidence in a letter of inquiry to APHIS-BRS that a GM product did not contain any

regulated materials, the USDA could indirectly approve the commercialization by saying

they did not have the authority to regulate the product. Therefore, a large number of GM

products actually fall outside the purview of any regulation.94 The current Framework has

been heavily criticized for failing to oversee these new product types, while

overregulating GE crops and technologies with proven track records of over ten years of

safety that no longer give cause for concern. 95

In the past four years, however gene editing has emerged as a brand new

technology. Scientists can disable, replace or tweak genes by using the CRISPR

93 Camacho et al. Nature Biotechnology, Volume 32, No. 11, 1088. Nov. 2014. 94 Id. at 1090. 95 Id. at 1091.

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technique. CRISPR is a bacterial immune system that uses the enzyme Cas9 to snip DNA

at sites determined by the sequence of a ‘guide’ strand of RNA.96 It works by allowing

scientists to cut DNA at a specific location in the genome and insert desired genes in that

place.97 Compared with previous methods, it is much quicker and cheaper. In June 2012,

a University of California Berkeley team led by Jennifer Doudna and Emmanuelle

Charpentier published their research first showing the could be reprogrammed using an

RNA guide sequence to cut any selected target DNA.98 Then in January 2013, a research

team led by Feng Zhang at the Broad Institute, a biomedical and genomic research

collaboration between Harvard and MIT then published its work reporting mammalian

gene editing in mouse and human cells. 99

While other scientists around the world have also contributed to advancements in

CRISPR’s technology, Doudna and Zhang are heavily cited with the initial discovery as

both researchers’ universities are embroiled in a heavy patent dispute over who owns

CRISPR.100 Many other researchers have already demonstrated its potential including

removing peanut allergens from plants and removing degenerative traits (diseases) from

humans and the licensing royalties are already projected in the billions.

From a legal perspective, APHIS-BRS already decided it does not have the

authority to regulate at least two gene-edited crop (GEC). On April 13, 2016, USDA

APHIS confirmed a CRISPR-edited white button mushroom was neither transgenic, nor a

96 http://www.corpcounsel.com/id=1202755897108/A-Breakthrough-Technology-is-Caught-in-an-Epic-Patent-Battle?slreturn=20160327042654 97 https://www.washingtonpost.com/national/health-science/scientists-are-growing-anxious-about-genome-editing-tools/2015/05/18/0a4db63c-ef4e-11e4-8abc-d6aa3bad79dd_story.html 98 http://www.nature.com/news/bitter-fight-over-crispr-patent-heats-up-1.17961 99 Id. 100 http://www.nature.com/news/how-the-us-crispr-patent-probe-will-play-out-1.19519

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regulated article.101 Dr. Yinong Yang of Penn State University used CRISPR to keep

white button mushrooms from browning by inactivating a gene. Five days later on April

18, 2016 the USDA published a second letter response to Dupont Pioneer’s "Regulated

Article Letter of Inquiry" stating that it does not consider next-generation waxy corn

developed with CRISPR as a regulated article.102

In conclusion, there is literally no U.S. federal rules that regulate gene editing

techniques or GECs. Scientists and other policy leaders are hopeful that this time around,

regulations will be science-based and more flexible to evolve with the accumulating

scientific knowledge and new technologies research labs are discovering and innovating

every day.

IV. Conclusion.

In order to discuss the current trends in agtech, this paper first discussed the

current state of the U.S. agriculture market. The purpose of this paper was not to

introduce or explain all of the many facets of the industry. Rather, the intended focus was

to showcase the emerging legal issues resulting from some of the latest agricultural

technologies as it relates to precision agriculture and tech licensing, drones, and gene

edited crops. Additionally, it should be noted that the technologies presented in this

working paper do not encompass the breadth of innovative technologies in this space.

Entrepreneurs and researchers are working on many startups in the animal and livestock

101 https://www.aphis.usda.gov/biotechnology/downloads/reg_loi/15-321-01_air_response_signed.pdf 102 http://s3-wp.lyleprintingandp.netdna-cdn.com/wp-content/uploads/2016/04/21141022/15-352-01_air_response_signed.pdf

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sector, food safety and traceability, irrigation and water, and waste as well as consumer

driven solutions.

While early adopters of technology will survive, the agtech market is still

immature. Many people still hold images of old-fashioned farmers and ideals that are no

longer representative of the industry. There still needs to be better flow of communication

between technology start-ups and farmers as agtech licenses are standardized and

necessary federal regulations are proposed and enacted. In conclusion, agtech could

provide farmers with the resources they need to meet the continuing demand to produce

food in a sustainable way.

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Roger Royse Biography

Roger Royse is the founder and owner of the Royse Law Firm, PC, a 25 lawyer firm with

offices in San Francisco, Los Angeles and Silicon Valley. He works with companies

ranging from newly formed tech startups to publicly traded multinationals in a variety of

industries, including technology, entertainment and new media, sports, real estate and

agri-business. Roger regularly advises on complex tax structuring, high stakes business

negotiations and large international financial transactions. Roger is a Northern California

Super Lawyer, AV Peer-Rated by Martindale Hubbell, and has a “Superb” rating from

Avvo. Roger is also the organizer of the Silicon Valley AgTech Conference and runs the

AgTech Innovation Network, an early stage incubator and network for tech companies in

the agriculture and food markets. Roger has been quoted in the Wall Street Journal, the

San Francisco Chronicle, Reuters, The Recorder, 7X7 and Fast Company. Roger is a

participating instructor of corporate law for the Center for International Studies (Salzburg

Austria) and has been an adjunct Professor of Taxation (Property Transactions and

International Taxation) for Golden Gate University.

Education: • J.D., B.S. (Accounting), University of North Dakota • LL.M. (Taxation) New York University School of Law Admitted To Practice: • Nevada, California, New York, Minnesota, South Dakota and North Dakota • U.S. Tax Court • United States District Court, Northern District of California Affiliations: • American Bar Association • Santa Clara County Bar Association • State Bar of California • Palo Alto Area Bar Association • ND Society of Certified Public Accountants For more information on Roger Royse, please email to: [email protected]

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Erica Riel-Carden Biography

Erica Riel-Carden is an AgTech and FoodTech Attorney at the Royse Law Legal

Incubator, an award winning program that helps lawyers launch their own law practices.

She advises AgTech and FoodTech startups as they enter the U.S. market with IP

strategies, early stage financings, entity formation, corporate governance,

and compliance. As a previous grower, she uses her in-depth knowledge of the food

system to leverage new opportunities for both startups and investors. She regularly sits

on industry panels and gives presentations on the ag market as a mentor of the Royse

Law AgTech Innovation Network. Before law school, Ms. Riel-Carden grew

wholesale Ericaceous flowers in Northern Ohio and assisted with preservation of

ornamental plant germplasm for the USDA-ARS. During law school, Erica served as the

Editor-in-Chief for the High Technology Law Journal, Volume 31, and was awarded the

ABA-BNA Excellence in Intellectual Property Award.

Education: • B.S. in Agriculture, The Ohio State University • J.D., Santa Clara University School of Law, Admitted To Practice: • California Affiliations: • American Bar Association • State Bar of California • Palo Alto Area Bar Association For more information on Erica, please email: [email protected]

Current Developments in AgTech Law: A Primer on Modern Agriculture Technologies

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Transcript of Current Developments in AgTech Law: A Primer on Modern Agriculture Technologies