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GEN News Highlights : Feb 22, 2013

Planting the Seeds of Legal Victory

The U.S. Supreme Court, which needed 5–4 majorities to settle Obamacare’s constitutionality and George W. Bush’s election, showed much more unity earlier this week in appearing to favor Monsanto’s right to enforce its patents for genetically-modified soybean seed, over the interests of a 75-year-old Indiana farmer who used multiple generations of the seed.

If the questioning of each side’s lawyers is any indication—and usually, it is—the high court’s nine justices showed support for Monsanto’s arguments, as did a lawyer for the federal government acting as amicus curiae, while cutting down the farmer’s key arguments as advanced by his lawyer.

That is welcome news for biopharma, which relies on patents to develop new drugs and diagnostics.

“It’s the same issue with anybody who’s selling a cell line or a virus or special bacteria. They might sell it for somebody to use for whatever its intended purpose is, but they don’t want the buyer to be able to make new ones,” Sarah A. Kagan, Ph.D., an attorney in the Washington, DC, office of the IP law firm Banner & Witcoff, told GEN.

At issue in Vernon Hugh Bowman v. Monsanto Co. et al. (No. 11-796) is whether Monsanto’s intellectual property rights to the seed extends to multiple generations beyond an authorized sale. While the company argued as much, Bowman contended that Monsanto exhausted its rights once the first generation seed was sold by its original farmers as a commodity.

Chief Justice John G. Roberts, Jr. interrupted Bowman’s lawyer about a minute into his oral argument, according to the court transcript.

“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?” Roberts asked.

“I agree no one would do that, and I don't think that is the situation here,” countered Bowman’s lawyer Mark P. Walters, a partner in the Seattle office of Frommer Lawrence & Haug. Walters argued that Monsanto and other companies could assert patent rights through their contracts with customers: “They don't have to sell it outright. They can sell it through an agency model.”

“The patent system is based, I think, on the recognition that contractual protection is inadequate to encourage invention,” Roberts continued.

“Well, part of the patent policy as well is to protect the purchaser,” Walters answered.

Dr. Kagan said the court doesn’t have to decide the case by addressing the issue of contracts or conditional licenses—a point made during oral arguments by Monsanto’s lawyer Seth P. Waxman, a partner who chairs the Appellate and Supreme Court Litigation Practice Group at law firm WilmerHale; and Melissa Arbus Sherry, assistant to the Solicitor General.

Bowman paid Monsanto for the first generation of the company’s Roundup Ready soybean seed he grew on his Knox County, IN, farm, then bought a bulk mix of soybean seeds at a grain elevator and grew them. He reasoned that the mix included Roundup Ready, named for its resistance to Monsanto’s herbicide glyphosate or RoundUp®, which it did. Bowman also reasoned that he wouldn’t have to pay Monsanto, which requires its farmer customers to agree in writing to not save seeds from the crop they produce—effectively agreeing to purchase the company’s seed each year.

Monsanto held that Bowman’s practice violated the company prohibition against saving seeds, thus constituting a patent infringement.

“So he never has to buy any seed at all from Monsanto?” Justice Ruth Bader Ginsburg asked Bowman.

“In practical matters it doesn't work that way,” Bowman sought to reassure her. “The seed that's available at a grain elevator is not a very good source of seed, and farmers are not going to be able to eliminate the need to go to Monsanto or the other seed companies every year by going to the grain elevator.”

Two lower federal courts agreed with Monsanto, which prevailed in both the U.S. District Court for the Southern District of Indiana, 686 F.Supp.2d 834 (S.D. Ind. 2009)—which awarded an $84,000 judgment against Bowman—and the U.S. Court of Appeals for the Federal Circuit, 657 F.3d 1341 (Fed. Cir. 2011).

In agreeing to hear the case, the Supreme Court posed two questions: 1) Had the Federal Circuit erred by refusing to find “patent exhaustion” in patented seeds sold for planting? 2) Can exception to patent exhaustion be created for self-replicating technologies?

Bowman argued that the court’s 150-year-old patent exhaustion doctrine allowed him to plant his grain-elevator seed without Monsanto’s express permission. Under the doctrine, authorized sale of a patented product “exhausts” the patent rights covering the product; purchasers can use it free from any infringement claims by patentees.

“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,” Justice Sonia Sotomayor said, answering question 1: “You can use the seed, you can plant it, but what you can't do is use its progeny unless you are licensed to, because its progeny is a new item.”

Question 2, Justice Stephen Breyer appeared to declare, should also be decided in the negative: “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 [Bowman] did.”

Breyer echoed a key argument of Waxman, who served as U.S. Solicitor General during the second half of President Bill Clinton’s administration (1997–2001).

“Without the ability to limit reproduction of soybeans containing this patented trait, Monsanto could not have commercialized its invention, and never would have produced what is, by now, the most popular agricultural technology in America,” Waxman told the justices, adding that Roundup ready is grown by grown by more than 90% of the nation’s 275,000 soybean farms.