Sowing the seeds of wrath: Doctrine of Patent Exhaustion Could Not Save Farmer from Liability for Infringing Monsanto’s Patents on Genetically Modified Seeds
|Written by Cindy Chen
Westerman Hattori Daniels & Adrian, LLP
Posted: May 19, 2013 @ 8:30 am
For years, Vernon Bowman purchased Roundup Ready® soybean seeds from a Monsanto affiliate each year for his main crop of the season. The purchase required Bowman’s assent to a licensing agreement, which prohibited Bowman from saving any of the seeds for replanting. For his late-season second crop, however, Bowman would attempt to skirt Monsanto’s licensing agreement and instead purchase commodity soybean seeds from a grain elevator. The commodity soybean seeds are normally tagged for human or animal consumption only. Anticipating that a batch of commodity soybean seeds would surely contain some Roundup Ready® seeds, Bowman planted the seeds, applied Roundup herbicide to his fields, selectively recovered soybeans exhibiting the Roundup Ready® trait, and saved those seeds for further plantings. Bowman harvested eight late-season crops in this way.
Monsanto eventually caught wind of Bowman’s scheme, and sued Bowman for infringing Monsanto’s patents on the Roundup Ready® seeds. In his defense, Bowman invoked the doctrine of patent exhaustion, arguing that Monsanto had exhausted its rights in the soybean seeds because the seeds were the subject of a prior authorized sale.
The well-settled doctrine of patent exhaustion provides that the initial authorized sale of a patented article terminates all patent rights to that article, and confers on the buyer or any subsequent owner the unencumbered right to use or sell the article as seen fit. Bowman did not dispute this articulation of the doctrine. The Court acknowledged that Bowman’s lawful purchase of the patented seeds from the grain elevator entitled him to resell or consume the seeds, free of Monsanto’s interference. This, however, was the entire extent to which Bowman could use and enjoy the patented seeds and still remain protected by the exhaustion doctrine.
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A limitation on the exhaustion doctrine exists in that the doctrine restricts the patent owner’s rights only as to the particular article sold. That is, following the authorized sale of a patented article, the patent owner retains the ability to prevent a buyer from making new, unauthorized copies of that article. This means that while the exhaustion doctrine would protect Bowman’s resale or consumption of the seeds from the grain elevator as he saw fit, the doctrine does not give Bowman a free license to reproduce the seeds without Monsanto’s permission. Bowman’s deliberate selection and reproduction of seeds of the Roundup Ready® variety therefore infringed Monsanto’s patents on the seeds.
Bowman then ventured a slippery slope-like argument. Since seeds are meant to be planted, Bowman argued that allowing Monsanto to control his planting of the seeds would “creat[e] an impermissible exception to the exhaustion doctrine” where a patent owner has unbridled authority to interfere with commonplace usage of not only patented seeds, but also other self-replicating technologies. The Court dismissed Bowman’s slippery slope argument, recognizing that “it is really Bowman who is asking for an unprecedented exception.” In the first place, the question was not whether Bowman’s planting of the patented seeds was a protected use under the exhaustion doctrine. Rather, the question was whether Bowman’s reproduction of Monsanto’s seeds was entitled to the protection of the exhaustion doctrine. The Court answered that it clearly was not. Further, limiting the exhaustion doctrine to the particular patented seeds sold would unlikely hinder farmers from making appropriate use of the Roundup Ready® seeds that they buy. This is because of the existing commercial expectations between the farmers and Monsanto. No farmers would buy the Roundup Ready® seeds without the ability to plant the seeds. And so, Monsanto could not reasonably expect to sell any seeds without granting the farmers the license to plant them.
Still, Bowman creatively argued that since seeds naturally self-replicate, it was therefore the planted seeds, and not Bowman, that made replicas of Monsanto’s patented invention. The Court found the “blame-the-bean defense tough to credit.” Bowman was hardly a passive observer of the seeds’ reproduction. He bought the seeds. He planted the seeds. He applied herbicide to select for seeds with the Roundup Ready® trait. Finally, he recovered seeds with the desired trait and saved them for future plantings. The Court found that it was clearly the human Bowman, and not the seeds, who controlled the replication of Monsanto’s patented seeds.
There is nothing particularly remarkable about the Supreme Court’s decision in Bowman v. Monsanto. The decision is a simple restatement of long-standing patent law. Meanwhile, the Court’s application of the law is itself straight and narrow, and stays faithful to the most basic purposes of the patent system. The policy rationale driving the decision preserves the incentive for innovation by avoiding a mismatch between invention and reward, while maintaining the proper balance between inventors and consumers of inventions. As the Court noted, “[a]pplying our usual rule in this context therefore will allow farmers to benefit from Roundup Ready®, even as it rewards Monsanto for its innovation.”
That is not to say the Court’s calm return to the basics is not welcomed. It is certainly refreshing after the disruptive storm of last year’s Mayo Collaborative Services v. Prometheus Laboratories. Nevertheless, some had hoped that the Court would use Bowman as an opportunity to address the extent of a patent owner’s monopoly over other self-replicating technologies in the areas of biotechnology and information technology, such as human cell lines or computer programs. Certainly, the Court hinted at the possibility of situations where the patented article’s self-replication is truly outside the purchaser’s control, or where the self-replication is an essential step in using the patented article for another authorized purpose. The Court, however, cautiously declined to extend its holding in Bowman to those situations. The decision in Monsanto is intended to be fact-specific and carry slight ramification. Indeed, the Court’s unanimous decision ended with a significant caveat that the holding is limited, “addressing the situation before [the Court], rather than every one involving a self-replicating product.”
Contrast the Court’s decision in Bowmanto with the Court’s same-term decision in Kirtsaeng v. John Wiley & Sons, which concerns the “first sale” doctrine in copyright law. The “first sale” doctrine is copyright law’s answer to the doctrine of patent exhaustion. Basically, the “first sale” doctrine grants the lawful purchaser of a copyrighted material the right to sell or otherwise dispose of that particular copy of the material as the purchaser wishes. The relevant law reads, “the owner of a particular copy or phonorecord lawfully made under this title … is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord” (emphasis added). In Kirtsaeng, the Court declined to interpret “under this title” as imposing geographical limitations on the “first sale” doctrine. Freed from geographical limitations, a purchaser who lawfully buys copies of a copyrighted material that were manufactured abroad is now entitled to import the copies into the United States, and dispose of the copies as the purchaser sees fit. Unlike the decision in Bowman, Kirtsaeng is expected to have far-reaching consequences on the international market of copyright content. For instance, commentators have suggested that Kirtsaeng would have the effect of encouraging the influx of “gray market” copyrighted goods into the United States.
Finally, although the Court never directly discussed Bowman’s intent, the deliberateness of Bowman’s conduct seemed to have contributed to the Court’s readiness to affirm his liability. Bowman anticipated that the commodity seeds he purchased from the grain elevator would contain some Roundup Ready® seeds. He planted those seeds, intending to apply herbicide to the seeds for the purpose of culling seedlings that lacked the Roundup Ready® trait. Bowman then saved the desirable seeds for future plantings. Bowman’s unscrupulous intent to circumvent the restrictions of Monsanto’s license and to avoid paying the necessary premium for Monsanto’s patented seeds was evident. Had Bowman been more unwitting, would the outcome of the case be different? Could Bowman then have been on a firmer footing to assert his claim that he was merely planting the seeds and therefore engaging in a protected use, or that the soybeans and their natural self-replication were to blame? Possibly. Bowman would still be a literal infringer of Monsanto’s patents, and it is difficult to predict whether Bowman’s lack of intent would have qualified as some sort of mitigating circumstances. At the very least, though, Bowman might have cut a more sympathetic figure.
Another patent infringement lawsuit involving Monsanto was stayed pending the outcome of Bowman’s case, and specifically with respect to the question of patent exhaustion. More than a decade ago, Monsanto brought suit against the Scruggs brothers—Mitchell and Eddie Scruggs—for also infringing Monsanto’s patents on the Roundup Ready® seeds. The brothers bought a batch of the Roundup Ready® seeds without signing a license agreement, and replanted future generations of the same batch of seeds. The brothers had lost both at the federal district court level and on appeal. In September 2010, a jury returned a verdict of willful infringement against the brothers, and awarded Monsanto more than $8 million in damages. However, Monsanto is requesting treble damages because of the willful nature of the brothers’ infringement.
It is unlikely that the Bowman decision would provide the Scruggs brother with any reprieve. Any reliance of the Scruggs brothers on the exhaustion doctrine would be equally unavailing. For one thing, there was not an authorized first sale. The Scruggs brothers never assented to Monsanto’s licensing agreement, even though the use of Monsanto’s patented seeds by farmers is plainly conditioned on the farmers’ having obtained a license from Monsanto. Further, even assuming that the Scruggs brothers had an implied license to plant Monsanto’s seeds, the implied license still would not enable the Scruggs brothers to reproduce the seeds without Monsanto’s permission.
A conclusion to the contrary would lead to an absurd situation where an implied license would confer more benefits to a purchaser than an express license. Indeed, the exhaustion doctrine denies protection to a farmer who replicates Monsanto’s patented seeds in an infringing manner, regardless of how the farmer came into possession of those seeds. As the Court in Bowman explained in a footnote, “[today’s] conclusion applies however Bowman acquired Roundup Ready seed: The doctrine of patent exhaustion no more protected Bowman’s reproduction of the seed he purchased for his crop (from a Monsanto-affiliated seed company) than the beans he bought for his second (from a grain elevator). The difference between the two purchases was that the first—but not the second—came with a license from Monsanto . . .” (emphasis added).Vernon Bowman is a 75-year-old, recently bankrupt small farmer in Indiana. Monsanto is a multinational corporation that is revered in the industry for its innovations in the field of genetically modified seed technologies, but equally reviled in the American heartland for its staunch protection and ruthless enforcement of its patent rights against small farmers. In a unanimous decision, the Supreme Court sided with Monsanto in finding that Bowman had infringed Monsanto’s patents on genetically altered soybean seeds. This would translate into tens of thousands of dollars in liability for the small farmer. Those reacting purely emotionally to the story will be inclined to sympathize with the small farmer. And recalling Steinbeck’s Grapes of Wrath, they would lament, “The small farmer was weary and frightened because he had gone against a system he did not understand and it had beaten him.” However, the Court’s decision is merely a classical application of basic patent principles.
About the Authors
Cindy Chen is an Associate with Westerman Hattori Daniels & Adrian, LLP. Cindy only recently received her J.D. from the Boston University School of Law, graduating with a concentration in intellectual property law with honors. Cindy has a B.S. in Biochemistry and Molecular Biology from University of British Columbia in Canada.