May 21, 2013
LES Insights
By John C. Paul; D. Brian Kacedon; Hala S. Mourad
Authored by D. Brian Kacedon, Hala S. Mourad, and John C. Paul
Last week, the Supreme Court issued its highly anticipated decision in Bowman v. Monsanto Co.1 (for our previous discussion of the Federal Circuit's decision in this same case, please see here). This case presents a unique application of the doctrine of patent exhaustion, which generally limits a patentee's right to control what others can do with a patented article after an initial authorized sale. Under the patent-exhaustion doctrine, such a sale "exhausts" the patentee's monopoly in the patented article and 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 Supreme Court, in a unanimous opinion by Justice Kagan, addressed the application of the patent-exhaustion doctrine to genetically modified seeds, a type of self-replicating technology. The Court determined that the patent-exhaustion doctrine does not permit a farmer to reproduce patented seeds through planting and harvesting without the patent holder's permission. Such actions, the Court explained, fell outside the boundaries of the exhaustion doctrine as an impermissible reproduction of patented technology.
Monsanto developed and patented a genetic modification for soybeans, trademarked and marketed as Roundup Ready, which enables soybean plants to survive exposure to glyphosphate-based herbicides, including Monsanto's own Roundup.
Monsanto sells and permits other companies to sell its Roundup Ready seeds to growers who agree to a special licensing agreement. The agreement allows growers to plant the purchased seeds in one—and only one—season. A grower may then consume the resulting crop or sell it as a commodity, usually to a grain elevator or agricultural processor. The agreement prohibits, however, saving any of the harvested soybeans for replanting or supplying them to anyone else for that purpose. The agreement, recognizing the ease with which a single Roundup Ready seed can grow a plant containing dozens of genetically identical beans, forces the grower to buy Roundup Ready seed from Monsanto each season, rather than buying Roundup Ready seeds only once and then producing identical seeds from the originals.
Vernon Bowman is an Indiana farmer who purchased commodity soybeans intended for human or animal consumption from a grain elevator but then planted them in his fields. Because those commodity soybeans came from other local farmers' prior harvests, and because many other local farmers use Roundup Ready seed, it was unsurprising, perhaps, that Mr. Bowman's resulting new crop of soybeans displayed the Roundup Ready trait. Mr. Bowman then saved seeds from that crop to use in his late-season planting for the following year, resulting in another new crop of Roundup Ready soybeans.
After discovering this practice, Monsanto sued Mr. Bowman for patent infringement. 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 from local farmers to the grain elevator. The district court rejected that argument and awarded damages to Monsanto. And the Federal Circuit affirmed, explaining that patent exhaustion did not protect Bowman because he had "created a newly infringing article." Mr. Bowman appealed, and the Supreme Court agreed to hear the case to consider the important question of patent law that it raised.
The patent-exhaustion doctrine restricts a patentee's rights only in the particular article sold, the Court explained. It does not affect the patentee's ability to prevent a buyer from making new copies of the patented item. This is because the patent holder has received compensation only for the actual article that was sold, the Court noted, and not for subsequent recreations of it. Otherwise, the Court observed, the patent would effectively protect the invention for just a single sale because a purchaser could make and sell copies of the patented article.
Applying this principle, the Court determined that Mr. Bowman could not rely on the patent-exhaustion doctrine to avoid infringement liability. Patent exhaustion would permit him to resell the patented soybeans he purchased from the grain elevator and consume the beans himself or feed them to his animals, the Court acknowledged, but it does not allow him to make additional patented soybeans without Monsanto's permission, either express or implied.
The Court rejected Mr. Bowman's primary argument that the patent-exhaustion doctrine should apply because seeds are meant to be planted. According to Mr. Bowman, he merely used Roundup Ready seeds as farmers normally use seeds, and allowing Monsanto to interfere with that use would create an impermissible exception to the exhaustion doctrine for patented seeds and other self-replicating technologies. But the Court disagreed, reasoning instead that Bowman sought an unprecedented exception to the rule that the exhaustion doctrine does not extend to the right to make a new product. The Court noted that, while reproducing a patented article no doubt constitutes use, the Court has repeatedly insisted that the exhaustion doctrine applies only to the particular item sold, and not to reproductions of it.
Mr. Bowman also argued that because soybeans naturally self-replicate unless stored in a controlled manner, the planted soybean itself, and not Bowman, made replicas of Monsanto's patented invention. The Court rejected this argument, finding the "blame-the-bean" defense difficult to credit. Mr. Bowman was not a passive observer of his soybeans' multiplication, the Court noted, and the seeds he purchased did not spontaneously create successive soybean crops. Rather, Mr. Bowman came up with a novel way to harvest crops from Roundup Ready seeds without paying the usual premium. It was Mr. Bowman, the Court concluded, and not the soybean, who controlled the reproduction of Monsanto's patented invention.
Of particular note, the Court explicitly limited its holding to address only the specific facts of Monsanto, rather than every situation involving a self-replicating product. The Court believed that it need not address whether or how the doctrine of patent exhaustion would apply in different circumstances involving a self-replicating technology, such as where the article's self-replication might occur outside the purchaser's control or as an incidental step in using the item for another purpose.
Although Monsanto provides some clarification on the applicability of the patent-exhaustion doctrine to self-replicating technologies, its guidance is limited. The Court was careful to limit the holding to the specific facts of the case before it, rather than every situation involving a self-replicating product. The Court recognized that such inventions are growing increasingly prevalent and complex, and suggested that situations involving an article's self-replication outside the purchaser's control or as an incidental step in using the article for another purpose might result in a different outcome. Monsanto therefore leaves open many issues regarding other self-replicating technologies, most prominently in the biotechnology and software fields.
1 The Supreme Court's Monsanto decision can be found at http://www.finnegan.com/files/upload/LES_Insights_Column/2013/Bowman_v_Monsanto.pdf.
Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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