Does Patent Exhaustion apply to the sale of self-replicating seeds?
On February 19, the Supreme Court heard the oral argument in Bowman v. Monsanto on the application of patent exhaustion to patented self-replicating seeds. Under the doctrine of patent exhaustion, “the initial authorized sale of a patented item terminates all of the patent owner’s rights in that item.” Monsanto holds a patent on a gene which makes plants resistant to glyphosate herbicides. Farmers use the herbicides on weeds and when using Monsanto’s seeds, has no effect on the plant.
Monsanto sells the herbicide resistant seeds to farmers and licenses the technology to seed producers. As a condition of sale, all purchasers of the first generation seed must agree to limit the use of their seeds and the technology to a single season and cannot replant the second generation seeds. This is because through the acts of nature, the herbicide resistant-trait is passed down to each successive generation of seeds. However, Monsanto does allow farmers to sell the second-generation seeds (restriction free) to local grain elevators as animal feed or commodity seeds (which are purchased for various uses including planting). Bowman purchased seeds from a local grain elevator and planted them as a second crop (the latter act in double cropping), later discovering that some of the commodity seeds he purchased, included herbicide-resistant seeds. While Monsanto purchased first generation seeds from a licensed retailer for his first crop, he continued to use the seed offspring of his second crop supplemented with additional commodity seeds during subsequent years.
Monsanto sued Bowman for patent infringement of two of its patents. Bowman argued that under the doctrine of patent exhaustion, Monsanto’s failure to restrict the authorized sale of second-generation seeds rendered its patents exhausted with respect to the use of that seed. The district court disagreed, and the federal circuit affirmed, finding that Monsanto’s patents rights in the seeds were not exhausted once sold to a commodity dealer; and that the patent covered the technology of the original seed and all products of the original seeds. In principle, the federal circuit basically held that patent exhaustion does not apply with respect to self-replicating technologies. Bowman’s main argument is that the patented seeds were bought to be planted, and the expected and natural use of the product of such seeds is to be planted. Any patent rights Monsanto had with regard to the sale of its seeds was exhausted with the sale of its second generation seeds without restriction to the grain elevators. Monsanto claims its patent is on the trait (herbicide-resistance) and therefore seeds containing the trait are covered by the patent.
In a 2008 case involving Intel chips licensed from LG, the court held that once the chips were sold to computer manufacturers, LG’s rights were exhausted. The case here is different as it involves not only a self-replicating invention, but an invention which self-replicates through mechanisms of nature. Based on the oral argument, it seems the justices have taken the side of Monsanto.
However is it really the role of patent law to restrict the use of subsequent seed generations that were a known, natural byproduct of an authorized sale? Or is this really an issue which would be better addressed by contract law. Monsanto argues that a decision in favor of Bowman would “eviscerate patent protection.” Couldn’t Monsanto structure its contracts differently or in a more effective matter in order to prevent farmers like Bowman from saving and using subsequent seed generations for planting?
Chief Justice John Roberts asked “Why in the world would anybody spend any money to try to improve the seed if as soon as they sold the first one anybody could grow more and have as many of those seeds as they want?”
Since when does a patent on an innovative invention guarantee a successful marketable product or a return on your investment? Why should the court create a special exception to a long-standing doctrine to simply accommodate Monsanto? Monsanto knew what it was doing when it entered the seed business. Seeds grow into plants, plants produce seeds. One could reasonable argue that Monsanto should have taken account for the qualities and characteristics of its own “invention” when marketing its product. Monsanto argues that Bowman’s use of progeny seed is equivalent to making illegal copies of an invention. Bowman isn’t taking the seed and making an exact copy of the seed. The seed makes a plant which makes more seeds; this is the nature of the seed, and the natural use and purpose of the seed. Couldn’t Monsanto modify its gene in a way which would not allow for subsequent generations of seed to maintain the herbicide-resistant trait (effectively making “sterile” seeds)?
Regardless of the justices’ decision here, the holding can potentially raise a broad range of implications and questions. What happens when Monsanto seeds blow onto another farm…does that farmer then become liable for infringement? If a grain elevator unknowingly sells Monsanto seeds, is the grain elevator infringing? Some argue that a decision for Monsanto may increase monopolies and make it harder for the consumer to bring anti-trust suits. Others argue a decision for Bowman has a negative impact on innovation and research in the seed market, cause an increase in price on the sale of seeds, and have an impact on the protection of patented software (which also has the ability to self-replicate). We hope to have the answer to some of these questions by June.