Magic Beans, Golden Eggs and the Giant Monsanto Patent Decision

Whether you are in software, soybeans or a business somewhere inbetween, a recent landmark decision by the U.S. Supreme Court will probably impact what you do. A classic tale of the American Midwest circa 2013, involving a farmer, a huge agro-tech and too many lawyers. While these magic beans did not grow into a giant beanstalk, like a certain fabled goose, the Court’s decision may reap several golden eggs for Monsanto and other inventors.

Here is the modern version of the story. A farmer named Vernon Bowman decided to plant a late season soybean crop using special seeds from a local grain elevator, with a patent violation the last thing on his mind. Little did he know his actions would incite the wrath of the giant that is Monsanto, the developer of the genetically modified, herbicide-resistant seeds. Once awakened to Bowman’s actions, the agro-tech giant was not pleased and pursued Bowman all the way to the Supreme Court.

The Court ruled unanimously that farmers like Bowman could not use Monsanto’s patented genetically altered soybeans to create new seeds without paying a fee. As the latest response to the question of the legal status of self-replicating technologies, the ruling could result in more fees for patent-holders down the road.

“Self-replication” is a common attribute in nature, of course, as well as in software code, vaccines and cell lines.

“Like thousands of other farmers, Vernon Bowman adopted the Roundup Ready program, but with a twist,”said Pete Goss, a partner at law firm Blackwell Burke P.A. “At the beginning of each season, he would buy Roundup Ready seed from a Monsanto dealer, paying the company’s “technology fee” and receiving in return a license to grow one crop of soybeans. Later in the season, he would plant a second crop, but he would not buy that seed from Monsanto.”

When Monsanto introduced the altered soybeans in the 1990s, its innovation improved the farming process by customizing such genetically altered crops to an herbicide regimen. Prior to Roundup’s release, successful weed control required several applications of different herbicides to target individual species, which often led to mixed results. Monsanto’s patented technology embedded resistance to its highly effective, broad-spectrum herbicide into the genes of the soybeans themselves.

Generally, grain elevators purchase and sell commodities for consumption by people or animals and federal law dictates they are not permitted to sell grain for use as seed. For many grains, this is a clear-cut policy, but the nature of soybeans makes things complicated.

“In the case of soybeans, however, the finished product is the same as the seed it is grown from – a soybean,” Goss added. “Thus, there was nothing – except, as it turns out, federal patent law – to prevent Bowman from planting the soybeans he bought from the grain elevator.”

After planting the modified soybeans, Bowman found that nearly all of the plants the seeds yielded were resistant to glyphosate, the common pesticide Roundup was designed to protect against. For the next eight years in a continuous cycle, he took the soybeans from each harvest and used them to plant the next crop, benefiting from Monsanto’s technology without paying for it.

Needless to say, Monsanto was not pleased.

When Monsanto learned what Bowman was up to, they sued him for patent infringement. Bowman’s defense centered on the doctrine of patent exhaustion – the idea that in most cases, a patent-holder has no right to restrict the use of a patented article after it has been sold.

“When you buy a car from General Motors, they can’t tell you when or where you can drive it, or collect a royalty when you sell it on Craigslist,” Goss said. “In 2008, the Supreme Court reaffirmed this doctrine in Quanta Computer v. LG Electronics, holding that the patent holder, LG, could not restrict Intel’s sales of licensed microprocessors to third-party computer manufacturers.”

Relying on the Quanta case, Bowman claimed that Monsanto could not restrict his use of the soybeans bought from the grain elevator because Monsanto’s patent rights were exhausted after it sold the seed. Otherwise, he argued, patent rights would never be exhausted for soybeans and other “self-replicating products.”

The Supreme Court unanimously disagreed with Bowman’s argument. While the Court acknowledged that Monsanto’s rights in the soybeans at the grain elevator had been exhausted and the company could not restrict Bowman’s ability to eat them, feed them to his animals or resell them, it ruled that when Bowman planted the soybeans and harvested them for use as seed, he was making copies of Monsanto’s patented invention. Thus, the new soybeans grown from “exhausted” soybeans were all infringing because the patent gave Monsanto the exclusive right to produce Roundup Ready soybean seeds.

To the patent community, the ruling came as no surprise. Had the Court ruled in Bowman’s favor, Monsanto’s patent would have been worthless. While saving harvested seed for planting the next crop is as old as agriculture itself, only in the past 40 years have modern intellectual property rights put limits on this traditional farming practice.

“For many outside the patent world, the Court’s decision seems much more controversial: Why should Monsanto get a royalty every time you plant a seed, particularly when you didn’t buy the seed from Monsanto?” Goss said. “At least for the Supreme Court, the answer is simple: because Monsanto owns the genetic information in every one of the seeds.”

The Court’s ruling might seem clear-cut, but it does leave an interesting question: What happens if patented seed is sold without a license to grow it? By the Court’s reasoning, the purchasing farmer could not use the seed to grow plants because the seeds produced by the plants would be infringing. In this case, Monsanto’s well-developed licensing program eliminates the concern for Roundup Ready soybeans – every bag of seed comes with a license to grow a single crop. However, it is at least conceivable that a patented, self-replicating article could be sold without a license.

“While the Court coolly dismisses the issue, declaring that ‘No sane farmer … would buy the product without some ability to grow soybeans from it,’ it also hedges its bets,” Goss thinks. “The Opinion concludes by limiting the Court’s holding to the facts of this case ‘rather than every [situation] involving a self-replicating product,’ because ‘[w]e recognize that such inventions are becoming ever more prevalent, complex, and diverse.’”

For now, it remains for future inventors – and those who buy their products – to consider the outer limits of the doctrine of exhaustion and the perpetual golden eggs that await the winner of this classic confrontation, time after time.

Photo credit: igor.stevanovic/

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