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Supreme Court to Decide Whether Patent Exhaustion Doctrine Applies to GMOs, Self-Replicating Products

One of the cases the U.S. Supreme Court will decide next year is the David and Goliath like suit between an Indiana soy bean farmer, Vernon Bowman, and Monsanto Co., the producer of seeds that are genetically engineered to be resistant to glyphosate based herbicides, including Monsanto’s Roundup.   Farmers that plant Roundup Ready® crops can treat their entire fields with Roundup to control weeds without harming their crops.  The key issue to be decided is whether Bowman infringed Monsanto’s patents concerning the Roundup Ready® trait.  The Supreme Court’s decision will impact farmers across the nation.

Monsanto sells Roundup Ready® seeds directly to farmers, and also licenses its technology to seed producers who insert the glyphosate resistance trait into their own seed varieties and in turn sell those seeds to farmers.  Regardless of whether a farmer purchases Roundup Ready® seeds from Monsanto or a licensed producer, the sale is subject to a technology agreement.  Under the technology agreement, the licensed farmer agrees:

  1. to use the seed containing Monsanto gene technologies for planting commercial crops only in a single season;
  2. not to supply any of this seed to any other person or entity for planting;
  3. not to save any crop produced from this seed for replanting, or supply saved seed to anyone for replanting; and
  4. not to use this seed or provide it to anyone for crop breeding, research, generation of herbicide registration data, or seed production.

Monsanto limits the licensed farmer’s use of Roundup Ready® seeds to a single season because each successive seed generation has the patented genetic trait.  Monsanto claims that such restrictions are necessary to protect its investment.   Interestingly, Monsanto allows licensed farmers to sell second-generation seeds to local grain elevators as a commodity, with no limit on the grain elevators’ sales of that second generation seed, or for use as animal feed.  When sold to grain elevators, Roundup Ready® seeds are mixed with other seeds; there is no segregation.

Bowman purchased Roundup Ready® soybean seed from a licensed seed producer who had him sign the technology agreement.  Bowman abided by the technology agreement.  Between 1999 and 2007, he planted Roundup Ready® seeds as his first-crop in each growing season, and he did not save any seed from that crop.

Bowman also bought commodity soybean seed from a grain elevator in 1999 for a second-crop that he planted late in the season.  The majority of the commodity seed was Roundup Ready® seed, and Bowman used a glyphosate based herbicide to treat this crop.  Unlike his first-crop, Bowman saved seed from this second-crop for replanting new second-crops in the future.

Monsanto sued Bowman for patent infringement after it discovered that his second-crop soybean seeds contained its patented Roundup Ready® technology.   According to Monsanto, Bowman’s use of the commodity seeds was not within the scope of the technology agreement, and thus, Bowman’s use was unauthorized.  Bowman argued that the soybean seeds were not protected by Monsanto’s patent because the grain elevator was allowed to sell commodity seeds without restriction, and therefore, the patent is exhausted as to those soybeans and their progeny.

The District Court for the Southern District of Indiana granted Monsanto’s motion for summary judgment.  It held that Bowman infringed Monsanto’s patents, and entered judgment for Monsanto in the amount of $84,456.20.  Monsanto Co. v. Bowman, 686 F. Supp. 2d 864, 837-38 (S.D.  Ind. 2009).  Bowman subsequently appealed, and the Federal Circuit affirmed the district court’s decision on the grounds that the “first sale” patent right exhaustion doctrine did not bar the infringement suit.  Monsanto Co. v. Bowman, 657 F.3d 1341, 1347-48 (Fed. Cir. 2011).    According to the court, “[e]ven if Monsanto’s patent rights in the commodity seeds are exhausted, such a conclusion would be of no consequence because once a grower, like Bowman, plants the commodity seeds containing Monsanto’s Roundup Ready® technology and the next generation of seed develops, the grower has created a newly infringing article.”  Id. at 1348.  The court further reasoned that “[t]he fact that a patented technology can replicate itself does not give a purchaser the right to use replicated copies of the technology.  Applying the first sale doctrine to subsequent generations of self-replicating technology would eviscerate the rights of the patent holder.”  Id.  (internal quotations omitted) (quoting Monsanto Co. v. Scruggs, 459 F.3d 1328, 1336 (Fed. Cir. 2006)).

The Supreme Court will hear oral arguments in the case on February 19, 2013.  Its decision will have far reaching effects for both farmers and patent holders of other self-replicating technologies.   If the Supreme Court affirms the Federal Circuit’s holding that the exhaustion doctrine does not apply, Monsanto will have patent protection for all seeds that are Roundup Ready®.  As a result, farmers will no longer be able to buy commodity seeds for planting because all commodity seeds have been contaminated with Roundup Ready® seeds.   Farmers will have to purchase seeds for planting from Monsanto or one of its licensed producers, which are more expensive than commodity seeds.

According to the amici curiae brief from the non-profit Center for Food Safety and Save Our Seeds organizations in support of Bowman, prices for crops that are predominantly genetically engineered have skyrocketed.  For example, in the two decades prior to the introduction of Roundup Ready® soybeans (1975-1995), prices rose from $8.32 to $13.32 for the average cost of plating soybean seed on one acre.  After the introduction of Roundup Ready® (1995-2011), per acre prices increased from $13.32 to $55.55.  The amici curiae claim that as a result of these increasing prices, there will be less money to invest in the sustainability of American agriculture, there will be less innovation, and farmers will have fewer conventional seed options.

If Monsanto gets a favorable decision, it will no doubt continue to go after farmers who grow Roundup Ready® plants without its permission, regardless of whether the farmers intentionally planted the seeds, or pollen drift caused the seeds to land on their fields.   “Once . . . a farmer’s seed crop is contaminated with the Roundup Ready gene, there is no way for the farmer to remove the gene from the crop or control its further spread.”  Geerston Seed Farms v. Johanns, 2007 WL 518624, at *5 (N.D. Cal. Feb. 13, 2007).

When contamination is caused by pollen drift, the farmer can try to go after the responsible party, which may be a nearby farmer or the manufacturer like Monsanto, in a nuisance or trespass suit for instance.   Such suits may be difficult to win, however, for many reasons.  For example, because the prevalence of genetically engineered crops is increasing, it may be difficult to pinpoint which nearby farm is responsible.  Additionally, in a trespass suit, the trespass will likely be characterized as unintentional, meaning that the affected farmer will need to show that injury occurred and the defendant acted unreasonably, e.g., did not take precautions to prevent pollen drift.

Whether evaluating a concept, performing regulatory due diligence, maintaining or prosecuting regulatory filings, or contesting adverse litigation, Emord & Associates provides exceptional counsel for all your litigation and regulatory needs.

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