• Biotechnology Industry Reaps a Harvest of Patent Protection from Supreme Court Ruling
  • June 10, 2013 | Authors: Wei R. Campbell; Kathleen Madden Williams
  • Law Firm: Sunstein Kann Murphy & Timbers LLP - Boston Office
  • At the height of this spring season, the Supreme Court planted a seed of hope for the biotechnology and other industries that offer self-replicating technologies.  In Bowman v. Monsanto Co., the court unanimously ruled that farmer Vernon Bowman infringed upon Monsanto’s patents on soybean seeds when he replanted these genetically modified seeds to create more crops without paying Monsanto a fee.

    The question before the court was “whether a farmer who buys patented seeds may reproduce them through planting and harvesting without the patent holder’s permission.” Monsanto holds patents on genetically modified soybean seeds, Roundup Ready, which are resistant to glyphosate, the active ingredient in many herbicides.

    Monsanto sells Roundup Ready seeds directly to farmers and to distributors who then sell the seeds to farmers under a special licensing agreement that limits farmers’ use of these patented seeds to one planting. Under the Monsanto license, the farmer may use the crop produced from that planting, for example, for household consumption or as animal feed, but may not use the harvested seeds for second, third (etc.) planting cycles.  This means that farmers need to buy seeds from Monsanto or from a licensed Monsanto distributor each season.

    Farmer Bowman thought of an “unorthodox” way to get around the agreement.  He bought the Roundup Ready seeds for the first season planting, but for the second season of each year, he purchased seeds from a grain elevator with a reasonable expectation that many of them are genetically modified Roundup Ready seeds. He replanted these seeds.  This pattern continued for eight years, until Monsanto caught up with Mr. Bowman’s subterfuge and sued him for patent infringement.

    Mr. Bowman raised the “patent exhaustion” defense.  Once a patented item is sold, the patent exhaustion doctrine curtails a patent holder’s monopoly in that item. Bowman argued that after the soybean seeds were sold to grain elevators, Monsanto’s right in the patented seeds terminated, and he could do whatever he sees fit with the seeds purchased from the grain elevator.

    Alas, Mr. Bowman lost at every turn - from the district court all the way up to the Supreme Court.  The court agreed with lower courts that the exhaustion doctrine does not extend the right to make a new seed product to a farmer who has purchased Roundup Ready seeds. 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... But the exhaustion doctrine does not enable Bowman to make additional patented soybeans without Monsanto’s permission. And that is precisely what Bowman did.”

    Hence, the “exhaustion doctrine is limited to the ‘particular item’ sold to avoid just such a mismatch between invention and reward,” Justice Kagan continued.

    This should not be a surprising conclusion.  The patent system is premised on incentives for innovation.  Allowing Mr. Bowman to get away with his transgression would deprive Monsanto of the reward it was entitled to gain from its patented seeds.

    Had the patent exhaustion doctrine been applied the way Mr. Bowman hoped, farmers would need to buy Monsanto’s patented soybean seeds only for the first season, then save enough seeds to replant in later years, and Monsanto would receive no gain after selling its first seeds.

    This could result in shortening Monsanto’s legal 20-year patent monopoly to a single transaction and also undermine the motivation for investing billions of dollars in research and development, particularly in the biotechnology and pharmaceutical industries.

    The court was cautious in not handing down a sweeping opinion, limiting its holding only to self-replicating seeds, not other self-replicating technologies as in biotechnology and software.

    Nonetheless, the court’s rationale appears to make sense as applied to other biotechnology sectors which rely on self-replicating technologies, such as antibody-producing transgenic animals, cell lines, and stem cells, each of which may be provided to a buyer under a license having similarly limited uses.

    The court seemed to suggest that where self-replication is passive (“outside the purchaser’s control”) or “incidental” to a different use of the technology, the Monsanto rationale may not apply.

    As we have reported, the Supreme Court’s ruling in Myriad Genetics, the “human gene patents” case, is due by June. That decision is awaited with keen interest by the biotechnology industry.  With the seed of hope planted by the Monsanto decision, the spring of biotechnology patents is surely upon us.