Patent Exhaustion and the Curious Case of Bowman v. Monsanto

by Azita Mirzaian

For months, patent law scholars and biotech companies alike have awaited the U.S. Supreme Court’s decision in Bowman v. Monsanto, a case that arose from a dispute between an Indiana farmer and agribusiness giant Monsanto.  The Bowman decision was expected to addresses a very key question pertaining to patent law: whether or not “patent exhaustion” limits the rights of patent holders by eliminating the right to control or prohibit use of an invention after an authorized sale.  More specifically, the decision was expected to address “patent exhaustion” as it applies to self-replicating technologies such as seeds.

On May 13, 2013 the U.S. Supreme Court finally issued its much-anticipated decision, but ultimately tailored it so narrowly that the Court essentially just re-affirmed the doctrine of patent exhaustion as it currently stands.

The Doctrine of Patent Exhaustion

Patent exhaustion, a long-standing concept in patent law, can serve as a valid defense to patent infringement claims.  Patent exhaustion is the concept that if a patent-holder authorizes a first sale of a patented product or an article that embodies an invention, that authorized sale exhausts the patent-holder’s rights in the article sold.

In 1942, in United States v. Univis Lens Co., the U.S. Supreme Court held that patent exhaustion applies to authorized sales, notwithstanding any post-sale restrictions that the patent-holder wishes to place on end-purchasers.  In the 1992 case Mallinckrodt, Inc. v. Medipart, Inc., the Federal Circuit created a “conditional sale” exception to patent exhaustion, finding that exhaustion applies only to an authorized an unconditional sale – in other words, if a sale or license is expressly conditional, then patent exhaustion does not apply.  The Mallinckrodt case has been viewed by some as a questionable decision that is inconsistent with the U.S. Supreme Court’s precedent regarding patent exhaustion.

Monsanto’s Case against Bowman

In this case, Monsanto developed and patented (via several patents) a certain biotechnology whereby a gene was transferred into seeds in order to make the seeds resistant to an herbicide that Monsanto manufactures called Roundup.  These “Roundup-Ready” seeds can be planted and will produce crops that, when sprayed with the Roundup herbicide, will remain undamaged.  Monsanto authorizes sales of these Roundup-Ready seeds to farmers who agree to Monsanto’s Technology Agreement, which prohibits farmers from, among other things, using the seeds in more than one season, supplying the seeds to others for planting, and saving crops produced from the seeds for replanting.  Monsanto’s restrictions on the uses of the seeds are a direct result of the self-replicating nature of its patented biotechnology; Roundup resistance is not only displayed in the genetically-altered first-generation seeds, but in subsequent generations of seeds produced from the first-generation seeds.

In 2002, Indiana farmer Vernon Bowman purchased some of Monsanto’s Roundup-Ready soybean seeds for his first-crop harvest and signed a Technology Agreement that restricted his use of the seeds.  In accordance with the Technology Agreement that he signed, he did not save seeds from his first-crop harvest.  Around that same time, Bowman also purchased some considerably cheaper “commodity” seeds from a local grain elevator to use for his second-crop soybeans – these commodity seeds were a mixture of seeds from various sources, including Monsanto.  From year to year, Bowman saved seeds harvested from this second-crop harvest and replanted them, noticing that they were Roundup resistant.

Eventually, Monsanto accused Bowman of saving seeds in violation of the Technology Agreement that he had signed.  Bowman argued that he had only saved and replanted the commodity seeds from the grain elevator (an established and common practice among farmers), not the seeds from the first-crop harvest of Roundup-Ready seeds that were covered by the Technology Agreement.  Nonetheless, in 2007, Monsanto sued Bowman, alleging infringement of two of the patents that cover its Roundup-Ready seed technology.

In 2009, the District Court for the Southern District of Indiana granted Monsanto’s motion for summary judgment on patent infringement, stating that, “despite [Mr.] Bowman’s compelling policy arguments addressing the monopolizing effect of the introduction of patented genetic modifications to seed producing plants on an entire crop species, he has not overcome the patent law precedent which breaks in favor of Monsanto[.]”  The District Court awarded damages in the amount of $84,456 to Monsanto.

In 2011, the Court of Appeals for the Federal Circuit affirmed the District Court’s decision. The Court rejected the argument that patent exhaustion permitted Bowman to save and replant commodity seeds, holding that by using the commodity seeds for a natural and foreseeable purpose (planting), he “created a newly infringing article.”  Furthermore, the Court stated that the “fact that a patented technology can replicate itself does not give the purchaser the right to use replicated copies of the technology.”  The Court’s conclusion that farmers have “the right to use commodity seeds… for any other conceivable use, [but] they cannot ‘replicate’ Monsanto’s patented technology by planting it in the ground to create newly infringing” articles, is somewhat curious, given that the most obvious, primary thing to do with a seed is plant it.  The Court of Appeals’ decision was partially based on the “conditional sale” exception to patent exhaustion.

The Supreme Court’s Decision

The applicability of patent exhaustion to self-replicating patented technologies raised a novel question for the U.S. Supreme Court.  The Court’s grant of certiorari caught the attention of patent law scholars and biotech companies alike, who all wondered if the Court could potentially eliminate patent exhaustion as a viable defense to patent infringement claims pertaining to self-replicating technologies.

On May 13, 2013, the Supreme Court issued its decision in the case, which, while unanimous, was narrowly tailored enough that it didn’t have the sweeping effect on patent law that many were expecting.  The Court affirmed the decisions of the District Court and the Court of Appeals, ruling that Bowman infringed on Monsanto’s patents.  It rejected Bowman’s patent exhaustion argument, clarifying that in this case, because Bowman made copies of the patented technology (the seeds), the doctrine of patent exhaustion didn’t protect his actions; the doctrine of patent exhaustion only applies to the article that was lawfully purchased or obtained.

The Court raised the concern that “if the purchaser of [a sold] article could make and sell endless copies, the patent would effectively protect the invention for just a single sale,” thereby drastically reducing the value of patents and dis-incentivizing the research and development of new technologies.

The Court was not swayed by what it referred to as Bowman’s “blame the bean” defense – the argument that because beans self-replicate, a farmer does not control the reproduction of the patented article.   Ultimately, in addressing the self-replicating nature of seeds and the potential implications for other self-replicating technologies, the Court seemed to intentionally avoid making any sweeping decisions, stating, “We recognize that such inventions are becoming ever more prevalent, complex, and diverse.  In another case, the article’s self-replication might occur outside the purchaser’s control.  Or it might be a necessary but incidental step in using the item for another purpose…  We need not address here whether or how the doctrine of patent exhaustion would apply in such circumstances.”

Azita Mirzaian is an attorney at Pierce Law Group LLP, where she practices law with a focus on entertainment law, intellectual property law, and contractual disputes.  Her areas of interest include copyright matters, trademark matters, and right of publicity matters.  She also has a strong interest in food-related law.

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