On Monday May 13, 2013, the Supreme Court issued a unanimous decision in Bowman v. Monsanto Inc., a closely-watched case with implications for patents on various types of technologies with “self-replicating” features, such as man-made cell lines, DNA molecules, certain nanotechnologies, and transgenic animals.
The Supreme Court’s actual decision is quite narrow and simply confirms that a buyer who purchases patented seed only gets the right to plant one generation worth of crop. At the same time, the decision offers guidance as to how courts are likely to resolve other scenarios involving self-replicating products.
Under the doctrine of patent “exhaustion,” a patent owner that sells a product normally loses the right to limit what purchasers do with that product. Having received payment for the invention, the patentee cannot come back later for a second bite of the apple.
This principle came into play when farmer Vernon Bowman sought a way to plant two “Roundup Ready” soybean crops a year without paying twice for the technology. “Roundup Ready” refers to soybeans with a “chimeric” gene that protects them from common herbicides. The result is crops that are much easier to tend than those without the recombinant genetic material. Monsanto has a series of patent claims that center around this gene, which does not exist in nature.
Bowman initially bought Roundup Ready seed from a company licensed by Monsanto and then used it to grow an initial soybean crop. Bowman later wanted to try a second planting in the same season, but his original purchase was governed by a Material Transfer Agreement (MTA) that prevented him from harvesting and replanting second generation soybeans. He also felt that a second planting was too risky to justify another payment to Monsanto’s licensee. Bowman instead bought commodity seed from a local grain elevator, knowing that most or all of its soybeans come from farmers who themselves plant Roundup Ready seeds. These soybeans can serve as Roundup Ready seeds themselves even though they are meant for consumption.
Bowman continued this practice for several years. Each spring, he planted seed that he bought from the company authorized by Monsanto to sell it. Later, Bowman planted a second crop using seed that he bought from the grain elevator and/or saved himself from his second crops in prior years.
Monsanto found out about Bowman’s second crops and sued him for patent infringement. In response, Bowman relied on the principle of patent exhaustion and argued that Monsanto could not target him because Monsanto’s licensee had already made an authorized sale to Bowman. However, the district court rejected Bowman’s argument and awarded Monsanto around $85,000 in damages. The Federal Circuit affirmed this decision and held that patent exhaustion did not apply to Bowman’s accused second-crop plantings, notwithstanding that the result was in practice to deny farmers in the United States the option of “commodity” soybean planting given how pervasive the Round Up Ready product has become.
Supreme Court Decision
In a unanimous decision, the Supreme Court made short work of Bowman’s exhaustion argument and affirmed the lower court judgment of infringement.
Specifically, the Court ruled that exhaustion doctrine did not give Bowman the right to make any additional Roundup Ready soybeans without Monsanto’s permission. Yet this is exactly what Bowman did as a result of taking the seeds he bought from the grain elevator and planting them in his field.
Put another way, the exhaustion doctrine is limited to the “particular item” that is sold—the actual soybeans from the grain elevator, for example. The Supreme Court reasoned that any other rule would impermissibly dilute the patent monopoly rights that patent law offers to encourage innovation. Instead of 20 years of protection, patent owners such as Monsanto would potentially be limited to a single sale, after which farmers such as Bowman could grow all the extra seed that they wanted.
While Bowman contended that soybeans were special because they naturally sprout (i.e., self-replicate) themselves, the Court brushed aside this “blame-the-bean” defense and noted that Bowman had himself elected to plant the seeds.
However, the Court also cautioned that its holding was “limited” and addressed only the particular situation in Bowman’s case rather than all possible scenarios involving self-replicating products. Noting that such technology is getting “ever more prevalent, complex and diverse,” the justices observed that future cases might involve self-replication that is (1) outside the control of the person buying the replicating technology and/or (2) an incidental step in using the self-replicating item for some other purpose.
In light of Bowman, owners of patents directed to self-replicating technologies will likely succeed when enforcing the patents against defendants that obtain such technology through authorized channels but then deliberately take steps to harness the self-replicating power and make more.
It remains unclear how courts will resolve other, more nuanced sorts of exhaustion disputes involving self-replicating technologies. For example, a company that has patent protection on a hybrid cell line for creating monoclonal antibodies may run into trouble with customers that purchase cells, then sit back and benefit as the hybridomas reproduce.
On the other hand, the Supreme Court’s emphasis on safeguarding patent owners’ full 20 year term may auger well for patent owners who make a “conditional” sale (a “one-time-use” restriction, for example) and then seek to enforce their patents against purchasers who violate the conditions. This is currently an unsettled question in light of the Supreme Court’s earlier Quanta decision. (See our alert on this case here.)
Indeed, the continuing uncertainty concerning the patent law doctrines of exhaustion and implied license makes it more important than ever for companies involved with self-replicating technologies to develop well-crafted MTAs tailored to business needs and the specific potential scenarios at hand. Bowman had to turn to commodity seed from grain elevators because the MTA prevented him from replanting second generation seeds.
Conversely, the Bowman decision does not offer much (if any) insight into how the Supreme Court may decide the Myriad case concerning whether human genes are patentable. The Roundup Ready gene is artificial and does not exist in nature.