WASHINGTON, D.C. - (Mealey's) If allowed
to stand, a 2011 Federal Circuit U.S. Court of Appeals ruling will threaten
farmers by prioritizing "patent rights over personal property rights,"
something "that's never been done in 150 years,"an attorney for one such farmer
told the U.S. Supreme Court yesterday (Vernon Hugh Bowman v. Monsanto Co. et al.,
No. 11-796, U.S. Sup.; See 10/15/12, Page 4).
Arguing on behalf of
petitioner Vernon Hugh Bowman, Mark P. Walters said that under the theory
endorsed by the Federal Circuit, "any farmer who grows a soy bean seed is
infringing" a patented pesticide-resistant seed owned by respondent Monsanto
Co. and that under such a standard, "there is really no limit" by the doctrine
of patent exhaustion.
Justice Sonia Sotomayor
appeared skeptical, however, noting "the exhaustion doctrine permits you to use
the good that you buy. . . . It never permits you to make another
item from the item you bought."
At issue in the dispute is
patent No. 5,352,605, which covers chimeric genes used to transform plant cells
using viral promoters. The invention specifically relates to the use of
viral nucleic acid from the cauliflower mosaic virus, a virus capable of
infecting plant cells, as a vector for incorporating new genetic material into
Monsanto's "Roundup Ready"
soybeans exhibit resistance to N-phosphonomethylglycine-based herbicides and
are covered by the '605 patent as well as reissue patent No. RE39,247E. The
company licenses producers to sell patented Roundup Ready seeds to growers
pursuant to a technology agreement that requires growers to not save any crop
seed for replanting. Accordingly, a grower's use is restricted because the
patented Roundup Ready genetic trait carries forward into each successive seed
Bowman purchased Roundup
Ready seeds from Monsanto's licensed seed producer Pioneer Hi-Bred.
Bowman, pursuant to the technology agreement, did not save seed from his first
crop during any of the seven years he used the Roundup Ready seed.However, in
1999, Bowman purchased commodity seed from a local grain elevator for a
late-season second crop. Bowman applied glyphosate-based herbicide to the
commodity seed fields to control weeds and to determine whether the plants
would exhibit glyphosate resistance. After confirming that many of the plants
were indeed resistant, Bowman saved the seed harvested from his second crop for
replanting additional second crops in later years.
After performing a field investigation,
Monsanto and Monsanto Technology LLC (collectively, Monsanto) sued Bowman in
2007 in the U.S. District Court for the Southern District of Indiana, alleging
patent infringement on the basis that Bowman's second crop of soybean seeds
contained Roundup Ready technology. Monsanto moved for summary judgment; in
response, Bowman argued that Monsanto's patent rights to the seeds he purchased
from the grain elevator and their progeny were exhausted.
In 2009, the U.S. District
Court for the Southern District of Indiana granted [enhanced version available to lexis.com subscribers] Monsanto's motion, entering
judgment in the respondent's favor in the amount of $84,456.20. In September
2011, the Federal Circuit U.S. Court of Appeals upheld the ruling [enhanced version available to lexis.com subscribers], rejecting
Bowman's patent exhaustion defense. The appellate panel further found that by
planting commodity seeds and harvesting their progeny, Bowman "created a newly
Bowman filed a petition for
writ of certiorari with the U.S. Supreme Court, seeking review of the
Federal Circuit's patent exhaustion ruling, on grounds that "this issue affects
every farmer in the country and the method of planting that farmers such as Mr.
Bowman have used for generations." In October 2012, the Supreme Court granted
the petition. Bowman's brief on the merits presents the following question:
"Whether the Federal Circuit erred by (1) refusing to find patent exhaustion in
patented seeds even after an authorized sale and by (2) creating an exception
to the doctrine for self-replicating technologies."
Walters said today that when
a farmer grows progeny seed, "they insure the risk that they're not going to
have a crop in the first place."
"If they drive to the grain
dealer to sell their harvest - they get one paycheck a year, by the way - if
they get into a wreck, that's not Monsanto's problem; that's the farmer's
problem. So what they're essentially asking for is for the farmers to
bear all the risks of farming, yet they can sit back and control . . . how they
use those seeds all the way down the distribution chain," Walters added.
Such an approach is
"fundamentally inconsistent" with prior Supreme Court interpretations of the
exhaustion doctrine, according to Walters, who noted that "this is not a
license, this is an outright sale to the farmers of the first generation."
Justice Ruth Bader Ginsburg responded by making a distinction, however.
"The seeds are owned by the
farmer. But when he uses them to grow more seeds, he's infringing on that
patent. . . . I don't think that the ownership has anything to do with
it," she said.
Similarly, Justice Elena
Kagan was not persuaded by Walters' claim that Monsanto can protect its patents
contractually instead. "That answer is purely insufficient in this kind
of a case, because all that has to happen is that one seed escapes the web of
these contracts, and that seed, because it can self-replicate in the way that
it can, essentially makes all the contracts worthless," Justice Kagan opined.
"Monsanto would have no
incentive to create a product like this one," she added.
Arguing for amicus curiae the
U.S. government, assistant to the Solicitor General Melissa Arbus Sherry told
the court that J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred Int'l, Inc. (534 U.S.
124, 142  [enhanced version available to lexis.com subscribers]; See 12/17/01, Page 3) "largely resolves" the instant
dispute, for it counsels that there are no seed saving or research exemptions
within the Patent Act. To adopt Bowman's position would run afoul of J.E.M.,
Sherry said, as well as "doing much, much, much more under the guise of patent
"The exhaustion doctrine
really has nothing to do with this case, and that's because the exhaustion
doctrine has always been limited to the particular article that was sold, and
we are talking about a different article here. And it's never extended to the making
of a new article," Sherry added.
approach could stifle innovation, according to Sherry. Were the sale of a
parent plant to exhaust a patent holder's rights not only with respect to the
sale seed but with respect to all progeny seed, "we would have to go all the
way back to the very first Roundup Ready plant that was created as part of the
transformation event" Sherry said.
"Every single Roundup Ready
seed in existence today is the progeny of that one parent plant and . . . that would
eviscerate patent protections. There would be no incentive to invest, not just
in Roundup Ready soybeans or not even agricultural technology, but it's quite a
bit broader than that. In order to encourage investment, the Patent Act
provides 20 years of exclusivity. This would be reducing the 20-year term to
essentially one and only [one] sale. It would be near impossible to recoup your
investments with that first sale and so the more likely consequence is that
research dollars would be put elsewhere," Sherry cautioned.
Exhausted In Perpetuity
Attorney Seth P. Waxman,
representing Monsanto, echoed Sherry's claim. Citing the "hundreds of
millions of dollars" committed by Monsanto to develop the patented technology,
Waxman argued it would be unfair to endorse Bowman's theory, whereby Monsanto
exhausted its rights in perpetuity.
"Let's say that for
simplicity's sake, since generation 1 is the original soybean sold byMonsanto
to seed companies, let's just say that the bags of soybean seeds that farmers
go to purchase from seed dealers is called generation N and they are licensed
to produce generation N plus 1. But then, what about N plus 2? So what the
Federal Circuit held is N plus 2 has never been sold. It was created, it exists
without a sale, and because a sale is the sine qua non of patent
exhaustion, which is also referred to as first sale, there is no exhaustion,"
Bowman is represented by
Edgar H. Haug, Steven M. Amundson, Vicki M. Franks, Jonathan A. Herstoff and
Andrew M. Nason of Frommer Lawrence & Haug in New York and Walters, Dario
A. Machleidt and Eric A. Lindberg of the firm's Seattle office.Monsanto is
represented by Waxman of Wilmer Cutler Pickering Hale and Dorr in Washington
and Daniel C. Cox of Thompson Coburn in St. Louis. Sherry of the U.S.
Department of Justice in Washington
represents the government.
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