Monsanto Wins Unanimous Decision In Patent Infringement Case At U.S. Supreme Court

An Indiana farmer has learned the hard way that patent law prevents him from “copying” Monsanto’s patented seed.  The U.S. Supreme Court ruled unanimously the farmer was not protected by the patent exhaustion doctrine when he purchased commodity seed from a local grain elevator that he knew had the Monsanto Roundup Ready patented technology.  He planted the seed, harvested the crop, and saved some seed for planting of next year’s crop.  His conduct allowed him to bypass the need to buy the seed directly from Monsanto pursuant to a technology agreement (which bars saving the seed for replanting).  Monsanto sued a farmer for patent infringement for planting the progeny of protected seed. The federal trial court granted summary judgment in favor of Monsanto, and the farmer sought review by the U.S. Supreme Court.  The Court granted review on October 5, 2012.  

Monsanto developed technology for Roundup Ready soybeans and obtained patents protecting the company’s technology in 1996. Since 1996, Monsanto has marketed and sold Roundup Ready soybean seeds under its own licensing, and all growers are subject to a standard limited-use license known as the Monsanto Technology Agreement (MTA). Under the MTA, the grower agrees to use the seed containing the gene for the planting of a commercial crop for only a single season, to not supply any of the seed to any other person for planting, and to not save any crop produced form the seed for replanting. The MTA, however, does not prohibit the grower from selling the seed to a cooperative or elevator. In such situations, the grower does not have to secure a promise from the grain elevator not to sell the seeds for planting. However, problems arise when the grain elevator sells the grain for replanting. 

Here, the defendant purchased seed containing the Roundup Ready trait and executed an MTA.  The MTA provided him with a limited license to plant the seeds for a single crop.  Beginning in 1999, the defendant also purchased commodity soybean seed from a local grain elevator for a late-season planting or “second-crop” planting. He purchased the commodity seed to avoid paying the higher price for the Roundup Ready seed. The farmer saved the seed from the second-crop planting for additional second-crop replanting in subsequent years. Monsanto investigated the defendant’s activities and sued the farmer for patent infringement based on the saving of seed.  The farmer claimed “patent exhaustion” as a defense.  The federal trial court in Indiana ordered the defendant to pay $84,456 to Monsanto for infringement. 

The defendant appealed to the Court of Appeals for the Federal Circuit, arguing that Monsanto’s patent rights are exhausted with respect to the Roundup Ready soybean seeds present in grain elevators as “undifferentiated commodity.” According to the defendant, the sales of second generation seeds by growers to grain elevators and then from grain elevators to purchasers are authorized by the tech agreement and are “exhausting” sales. The defendant urged the court to adopt a “robust” exhaustion doctrine that encompasses the progeny of seeds and other self-replicating biotechnologies. 

The appellate court refused to adopt the defendant’s view and held the licensed growers’ sales of second-generation seeds to grain elevators as commodity seeds did not exhaust Monsanto’s patent rights and a grower’s sale of harvested soybeans to a grain elevator is not an authorized sale when it results in those soybeans being planted. Here, patent exhaustion did not bar Monsanto’s infringement action. By planting the commodity seeds containing the Roundup Ready technology, the defendant created a “newly infringing article” in violation of the tech agreement. Farmers, like the defendant, cannot replicate the patented technology by planting it in the ground to create newly infringing genetic material.  

On further review by the Supreme Court, the Court unanimously affirmed.  The Court noted that under the patent exhaustion doctrine, the initial authorized sale of an article that is patented terminates all patent rights to that particular article and gives the buyer and any subsequent owner the right to do whatever they want with the article.  But, the Court noted, the doctrine only applies to the item sold.  A buyer can’t make “copies” of the patented item.  Thus, when the farmer planted and harvested the seeds he bought from the grain elevator that contained Monsanto’s technology, he made additional “copies” of Monsanto’s patented product.  That conduct is not protected by the patent exhaustion doctrine.  To hold as the farmer desired, the Court reasoned, would eliminate the patenting benefit achieved by Monsanto for its products developed as a result of extensive investment into research and development of crop technology for the benefit of farmers and the public.  Establishing a “per se” rule that exhausts all patent claims upon the first sale would not foster the development and sale of patented products and would erode the incentive that patent law provides to develop new technology and products.  The Court found it important that Monsanto’s patent at issue was a utility patent and not a patent derived from the Plant Patent Act or the Plant Variety Protection Act (which would not receive as lock-tight patent protection).  Further, any exemption for the copying of seed technology would need to come from the Congress rather than the Court (as the Congress has done with respect to the copying of computer software).  Bowman v. Monsanto Co., No. 11-796, 2013 U.S. LEXIS 3519 (U.S. Sup. Ct. May 13, 2013), aff’g., sub nom., Monsanto Co. v. Bowman, 657 F.3d 1341 (Fed. Cir. 2011).