Planting the Seed for Patent Exhaustion: Will Monsanto Win Again?

There's a David and Goliath battle heading to the Supreme Court. One that pits a lil' ol' farmer against a megaseed manufacturer. On Tuesday, February 19, the Court will consider whether patent exhaustion applies to self-replicating technologies, like seeds.

Admittedly, we know nothing about farming, but the IP-infringement judgment at stake in this case suggests that the Supreme Court's decision could add up to millions for Monsanto.

Genetically modified seeds are big business for Monsanto, which invented and developed technology for genetically modified Roundup Ready soybeans that exhibit resistance to glyphosate based herbicides, such as Monsanto's Roundup product. The Roundup Ready technology is patented. Obviously.

Monsanto's licensed producers sell Roundup Ready seeds to growers for planting. All sales to growers, whether from Monsanto or its licensed producers, are subject to a standard form limited use license, called the Monsanto Technology Agreement. Under the Technology Agreement, Monsanto restricts the grower's use of the licensed seeds to a single commercial crop season because the patented genetic trait carries forward into each successive seed generation.

Although the express terms of the Technology Agreement forbid growers to sell the progeny of the licensed -- or "second-generation" -- seeds for planting, Monsanto authorizes growers to sell second-generation seed to local grain elevators as a commodity, without requiring growers to place restrictions on grain elevators' subsequent sales of that seed.

The petitioner in the case, Vernon Bowman, is an Indiana soybean farmer. Bowman purchased and planted seeds from one of Monsanto's licensees in compliance with the Technology Agreement from 1999-2007. In 1999, Bowman also purchased commodity seed from a local grain elevator for a late-season second-crop. Bowman applied glyphosate-based herbicide to the fields in which he had planted the commodity seeds to control weeds, and to determine whether the plants would exhibit glyphosate resistance.

Bowman confirmed that many of the plants were, indeed, resistant.

In each subsequent year, from 2000 through 2007, Bowman treated his second-crop with glyphosate-based herbicide. Unlike his first-crop, Bowman saved the seed harvested from his second-crop for replanting additional second-crops in later years. He also supplemented his second-crop planting supply with periodic additional purchases of commodity seed from the grain elevator.

Bowman candidly explained his practices with respect to his second-crop soybeans in various communications with Monsanto's representatives. When Monsanto sued him for patent infringement, Bowman responded that Monsanto's patent rights were exhausted with respect to Roundup Ready genetically modified seeds that are present in grain elevators as undifferentiated commodity seed, reports Reuters.

The Federal Circuit Court of Appeals disagreed, and upheld an $84,456 judgment against Bowman.

Popular opinion may be with Bowman -- it's hard to root against the little guy -- but the U.S. is standing with Monsanto: The government's amicus brief argues that the authorized sale of one article embodying a patented invention does not exhaust the patentee's exclusive right to control the creation of other articles embodying the invention.

It will be interesting to see whether the Nine overrule the Federal Circuit's designated IP-experts on patent exhaustion.

Related Resources:

• Monsanto v. Bowman (FindLaw's CaseLaw)
• Monsanto's Harvest of Fear (Vanity Fair)
• Monsanto Wins Genetically Modified Seeds Appeal in Fed Circuit (FindLaw's Federal Circuit Blog)