On Monday, May 13, 2013, the United States Supreme Court, in a unanimous decision, ruled that a farmer who buys Monsanto’s patented seeds cannot then propagate new seeds for future use without infringing the underlying patent.
The opening paragraph in the Court’s decision, which was delivered by Justice Kagan, succinctly captures the essence of the ruling. Justice Kagan wrote:
Under the doctrine of patent exhaustion, the authorized sale of a patented article gives the purchaser, or any subsequent owner, a right to use or resell that article. Such a sale, however, does not allow the purchaser to make new copies of the patented invention. The question in this case is whether a farmer who buys patented seeds may reproduce them through planting and harvesting without the patent holder’s permission. We hold that he may not.
Monsanto invented a genetic modification that enables soybean plants to survive exposure to glyphosate, the active ingredient in many herbicides (including Monsanto’s own Roundup). Monsanto markets soybean seed containing this altered genetic material as “Roundup Ready” seed. Farmers planting that seed can use a glyphosate-based herbicide to kill weeds without damaging their crops. Two patents issued to Monsanto cover various aspects of its Roundup Ready technology, including a seed incorporating the genetic alteration.
Vernon Bowman is a farmer in Indiana. He purchased Roundup Ready seed each year, from a company affiliated with Monsanto, for his first crop of the season. However, because he thought late-season planting to be risky, he did not want to pay the premium price that Monsanto charges for Roundup Ready seed for his second planting. He therefore went to a grain elevator; purchased “commodity soybeans” and planted them in his fields.
Bowman subsequently applied a glyphosate-based herbicide to his fields and a significant proportion of the new plants survived the treatment, and produced a new crop of soybeans with the Roundup Ready trait. Bowman saved seed from that crop to use in his late-season planting the next year—and then the next, and the next, until he had harvested eight crops in that way.
After discovering this practice, Monsanto sued Bowman for infringing its patents on Roundup Ready seed. Bowman raised patent exhaustion as a defense, arguing that Monsanto could not control his use of the soybeans because they were the subject of a prior authorized sale.
The Supreme Court explained that Bowman could use the seeds he purchased at the grain elevator for virtually any purpose without infringing Monsanto’s patent, but he could not use those seeds to produce a new generation of seeds. The production of a new generation of seeds from the first generation is patent infringement, not a justifiable use that is allowable under the patent exhaustion doctrine.
Justice Kagan wrote:
Under the patent exhaustion doctrine, Bowman could resell the patented soybeans he purchased from the grain elevator; so too he could consume the beans himself or feed them to his animals. Monsanto, although the patent holder, would have no business interfering in those uses of Roundup Ready beans. But the exhaustion doctrine does not enable Bowman to make additional patented soybeans without Monsanto’s permission (either express or implied). And that is precisely what Bowman did.
Justice Kagan also explained that a contrary ruling would make Monsanto’s patents of “scant benefit.” If Monsanto, or any patentee, were not able to stop reproductions, the patent term would effectively not be for 20 years, but for a single transaction. Justice Kagan explained:
The undiluted patent monopoly, it might be said, would extend not for 20 years (as the Patent Act promises), but for only one transaction. And that would result in less incentive for innovation than Congress wanted. Hence our repeated insistence that exhaustion applies only to the particular item sold, and not to reproductions.
The Court did, however, caution on an expansive reading of the holding in the case. In some situations, it could be envisioned that the reproduction would occur not because of the action of a farmer, but rather happen outside any control by a farmer, or purchaser. Justice Kagan explained the limited nature of the ruling by saying:
Our holding today is limited—addressing the situation before us, rather than every one involving a self-replicating product. We recognize that such inventions are becoming ever more prevalent, complex, and diverse. In another case, the article’s self-replication might occur outside the purchaser’s control. Or it might be a necessary but incidental step in using the item for another purpose. We need not address here whether or how the doctrine of patent exhaustion would apply in such circumstances. In the case at hand, Bowman planted Monsanto’s patented soybeans solely to make and market replicas of them, thus depriving the company of the reward patent law provides for the sale of each article. Patent exhaustion provides no haven for that conduct.
While a relatively easy case, it is encouraging to see a pro-patentee opinion from the Supreme Court.
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