Monsanto Likely to Score Supreme Court Win

On Feb. 19, 2013, the Supreme Court heard yet another Monsanto case. (And yet again, Justice Clarence Thomas, former lawyer for Monsanto, did not recuse himself.) This time around, it was Monsanto vs. Vernon Hugh Bowman, an Indiana soybean and wheat farmer.

The issue in question is a familiar one for those who follow the issue of genetically engineered seeds. Each buyer of Monsanto’s patented seeds must sign a “Technology Agreement” and pay a technology fee. In the case of soybeans, soybeans themselves are seeds. A farmer who plants Monsanto’s patented soybean seeds will grow a crop of soybeans, which are themselves also seeds. The Technology Agreement prohibits the farmer from saving and replanting those seeds. It also forbids the buyer from doing research on Monsanto’s patented seeds.

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In some cases, Monsanto licenses its genetically engineered seeds to other seed companies, like Pioneer (owned by DuPont). When a farmer buys Pioneer seeds with Monsanto patented genes in them, he pays one price for the seeds themselves – and that money goes to Pioneer – and a second fee, the Technology Fee, to Monsanto. The technology fee pays for Monsanto’s patented genes.

Because of the Technology Agreement and the patent on Monsanto’s genes, a farmer who saves and replants these seeds can be sued. Previously, Monsanto has filed 136 patent infringement lawsuits against 400 farmers and 53 small farm businesses. Monsanto has won 70 of these lawsuits, winning damages totaling more than $23 million.

There is almost no way to obtain Monsanto’s patented genes without paying for them via a Technology Fee and signing a Technology Agreement. But Bowman found one.

Instead of going to a seed dealer to buy seeds, Bowman went to his local grain elevator and bought some soybeans. These soybeans were a mishmash of every variety every farmer in his area grew and sold to the elevator. Some were Roundup Ready, meaning that they were genetically engineered to withstand Monsanto’s herbicide Roundup. Some were not. Different varieties within the mix mature at different rates and produce different yields. By any account, they were not terribly useful as seeds. But they were cheap.

The elevator was not selling its soybeans as seeds. To do so would be a violation of the law. After all, the soybeans in the elevator would make lousy seeds, given their lack of standardization and contamination with bits of dirt, rocks and debris. However, it imposes no restriction on its buyers. You buy from the elevator and nobody makes you sign a Technology Agreement. Most buyers plan to feed the soybeans they buy to livestock or use them for human consumption – not plant them.

Why would Bowman choose such a lousy – albeit cheap – source of soybean seeds? In his case, he has two different models of soybean growing on his farm. In some cases, he simply plows his field in the spring and plants soybeans like you might expect. When he does so, he buys high quality seeds and he pays full price for them. In 1999, he first bought Monsanto’s Roundup Ready soybeans for this use – and he paid the Technology Fee and signed a Technology Agreement.

In the second case, he grows wheat. After harvesting the wheat, he plants soybeans in the same field. Farmers sometimes call these “wheat beans.” Because he plants the wheat beans rather late in the season, the crop is relatively high risk. Instead of paying top dollar for seeds that might never produce a decent crop, Bowman planted the cheap soybeans he bought from the elevator.

Then, hoping that most of the soybeans he planted were Roundup Ready, he sprayed them with Roundup herbicide. The non-Roundup Ready plants died; the Roundup Ready plants lived. Bowman raised those plants to maturity, harvested the crop – and saved some of it to replant as seeds in the future.

In 2006, Monsanto investigated Bowman and Bowman cooperated. In early 2007, Bowman told Monsanto what he had done. He says he thought it was legal. Monsanto sued him later that year.

The case first went to a district court, and then to a federal circuit court. Bowman lost both times. The court awarded Monsanto $84,456.20. Now, this case is before the U.S. Supreme Court.

Bowman’s argument – explained by his lawyer Mark P. Walters – rests on a concept called patent “exhaustion.” Patent exhaustion means that after an initial authorized sale of a patented item, the patent owner has no more patent rights to that item. Company X makes its patented widget, sells it to you, and you do what you want with it. If you decide to sell it for $2 at a garage sale, Company X has no right to your $2. It’s already made its profit on the initial sale and its rights to the patented item were then exhausted.

Of course, as Chief Justice Roberts put it, “Why in the world would anybody spend any money to try to improve the seed if as soon as they sold the first one anybody could grow more and have as many of those seeds as they want?”

Walters argued that allowing Monsanto to continue holding rights over its seed after the initial sale of the seeds is tantamount to “taking away the ability of people to exchange these goods freely in commerce.”

But Justice Breyer did not seem to buy that, saying, “You know, there are certain things that the law prohibits. What it prohibits here is making a copy of the patented invention. And that is what he did.”

Justice Sotomayor added, “I’m sorry. The Exhaustion Doctrine permits you to use the good that you buy. It never permits you to make another item from that item you bought.” Based on this exchange and others, veteran watchers of the court feel confident that Monsanto will win this one.

At issue here are “self-replicating” technologies like seeds or software. When U.S. patent law was first written, perhaps the authors never imagined that some day someone might create something that could reproduce itself like a seed.

Another issue arose during the oral arguments surrounding the complexity of various generations of soybean seeds. Monsanto produces patented seeds, sells them, and receives payment for them. That much is clear. But when those seeds are planted and they produce a second generation of seeds, are Monsanto’s patent rights exhausted? Or, because they are a new generation of brand-new seeds, do they create with them a new set of patent rights for Monsanto?

Also in question is the “use” of Monsanto’s invention – its patented genes. Monsanto’s patent is on the DNA it inserted into the soybeans via genetic engineering, not on the beans themselves. Walters argued that the one and only use for this invention is planting the seeds and growing them. Justice Breyer countered by asking “Don’t people or animals eat them?” but Walters replied that “That is certainly a use, but it’s not the invention… Exhaustion is about conferring on the purchaser a right to use the invention.”

In other words, yes, one can eat soybeans or feed them to animals, but that is not a use of Monsanto’s patented invention – the Roundup Ready genes. The way one uses the patented Roundup Ready trait is by planting the seeds, growing soybean plants, spraying them with Roundup herbicide, and killing only the weeds but not the plants.

Justice Scalia did not seem to appreciate this argument, as he shot back with, “He can plant and harvest and eat or sell. He just can’t plant, harvest, and then replant.”

Another question before the court has to do with voluntary vs. involuntary patent infringement. In this case, Bowman bought soybeans at the elevator, planted them, and applied Roundup herbicide to kill any non-Roundup Ready plants. He was clearly hoping to sidestep Monsanto’s patent rights to its seeds. But what if a kid bought a few seeds to plant for a science project, and without his knowledge, they happened to be genetically engineered and patented? What if genetically engineered corn pollen blows onto an adjacent field and pollinates corn that a farmer saves for seed?

Justice Sotomayor asked this question, but never received a clear answer from Monsanto’s lawyer. Monsanto’s lawyer answered for soybeans – and soybeans only. Unlike corn or alfalfa, soybeans are self-pollinating. What’s more, they are heavy and won’t blow in the wind. But other plants’ pollen and seeds can and are carried by the wind. Answering the question using assumptions that apply only to soybeans would be a mistake.

The only two justices who seemed to express concern for the precedent that siding in Monsanto’s favor might set were Kagan and Kennedy. In Kagan’s case, she worried aloud about the ubiquity of Monsanto’s genetically engineered soybean seeds, which now account for some 90 percent of soybeans planted in the United States. She said, “And, you know, these Roundup seeds are everywhere, it seems to me… So it seems as though – like pretty much everybody is an infringer at this point, aren’t they?”

Justice Kennedy added that he worried about a case in which only a small percent of seeds at a grain elevator were patented. “You can’t see those,” he said, referring to a farmer’s inability to distinguish between which seeds at the elevator are patented and which are not. “That seems to me a very extreme result…. You can’t sell them if they know they are going to be used for seeds, and you can’t use them for seeds even though there is only 1 percent of the seeds?”

The case, while it might be an easy win for Monsanto, will no doubt set some interesting and important precedents once it is decided. When do Monsanto’s rights over its patented genes cease (if ever) following the sale of its seeds? What is the difference, legally, between accidentally violating Monsanto’s patent rights and doing so on purpose? And how will a redefinition of patent exhaustion from this case change patent law for everything – not just seeds?