Patent law - first-sale doctrine does not extinguish patentee's rights in self-replicating organisms - Bowman v. Monsanto Co.

• Author: Salvaggio, Kristen

Patent Law--First-Sale Doctrine Does Not Extinguish Patentee's Rights in Self-Replicating Organisms--Bowman v. Monsanto Co., 133 S. Ct. 1761 (2013)

Through the patent system, inventors are rewarded for their ingenuity with a limited monopoly to practice their inventions at the exclusion of all others for a finite period of time. (1) The grant of a monopoly is not taken lightly in the United States, resulting in a careful construction by the courts of limiting doctrines, including the patent-exhaustion (first-sale) doctrine and the related repair-reconstruction doctrine, to prevent overreaching on the part of the patent owner. (2) In Bowman v. Monsanto Co.,3 the Supreme Court addressed the issue of how the patent-exhaustion doctrine and post-sale restrictions apply to patented seeds, which by their very nature self-replicate when planted and create new seeds that are genetically similar to the original patented seed. (4) The Court determined that Monsanto's rights are not exhausted after the first sale of its patented seeds, solidifying the exception to the first-sale doctrine created by the United States Court of Appeals for the Federal Circuit. (5)

Monsanto is a chemical and agricultural biotechnology company and is the leading producer of genetically modified (GM) seeds in the United States, with ninety-three percent of American soybeans and eighty percent of American corn originating from Monsanto seeds. (6) Monsanto's Roundup Ready seeds are genetically engineered to withstand exposure to glyphosate, the active compound Monsanto developed for use as an herbicide and sold under the brand name Roundup. (7) To market its genetic technology, Monsanto sells Roundup Ready seeds directly and through licensed seed producers who insert the transgene into their own seed varieties. (8) Farmers wishing to purchase Roundup Ready seeds directly from Monsanto or from a Monsanto-licensed producer must sign the "Monsanto Technology Agreement," characterized as a limited use license. (9) Under the agreement, the farmer may "use the seed ... for planting a commercial crop only in a single season," and may not "save any crop produced from this seed for replanting, or supply saved seed to anyone for replanting." (10) Monsanto does permit farmers to sell second-generation seed to grain elevators without requiring restrictions on the elevators' subsequent sales of such seed. (11)

At the time of the Supreme Court litigation, Vernon Hugh Bowman was a seventy-five-year-old farmer who purchased Roundup Ready soybean seeds annually from a Monsanto-licensed distributor beginning in 1999. (12) From 1999 to 2007, Bowman planted Roundup Ready seeds for his first crop each growing season and abided by the terms of his license agreement, saving no seeds from his first crop. (13) Unwilling or unable to shoulder the expense of Roundup Ready seeds for a riskier late-season crop, Bowman purchased and planted commodity seeds from a grain elevator. (14) Bowman applied a glyphosate-based herbicide to his crop; as one would suspect based on Monsanto's dominance in the marketplace, much of Bowman's crop survived, exhibiting a tolerance for glyphosate. (15) Throughout the years that he used Roundup Ready seed, Bowman maintained a fairly open line of communication with Monsanto, requesting clarification regarding the terms of his license agreement and providing candid information about his use of commodity grain for late-season planting. (16) Because the grain he purchased from the elevator was without restrictions and not subject to his license agreement with Monsanto, Bowman believed that he was acting legally. (17)

In October 2007, Monsanto sued Bowman for patent infringement based on his planting of commodity grain. (18) Bowman represented himself at the district court proceedings and argued that if Monsanto prevailed, commodity grain would be eliminated as a low-cost source of seeds for planting. (19) The district court found Bowman's arguments compelling but was unable to find for him based on existing Federal Circuit precedent, stating, "the court may disagree with the decision to award unconditional patent protection to Monsanto for its genetically altered soybeans and their progeny, but this court does not make policy; rather, it interprets and enforces the law, which, in this case, does not support Bowman." (20) On appeal, the Federal Circuit affirmed the judgment in favor of Monsanto by relying on its own precedent in two recent, factually similar cases (also involving Monsanto), and established that patent exhaustion does not bar infringement because Bowman "created a newly infringing article." (21) The Supreme Court granted certiorari and strongly affirmed the Federal Circuit holding, stating, "[b]ecause Bowman thus reproduced Monsanto's patented invention, the exhaustion doctrine does not protect him." (22)

The patent-exhaustion doctrine originated in case law from 1852 and stands for the principle that once a patented product is sold, the patentee holds no rights in that particular product--it becomes the personal property of the buyer. (23) The policy behind the doctrine is that while the patentee may separately grant away each of his substantive rights guaranteed by the patent, he receives consideration when he sells a product whose sole value is in its use; and thereafter, he should not be able to interfere in the buyer's use of that product. (24) Historically, the patent-exhaustion doctrine is invoked upon any authorized sale; however, in recent years the Federal Circuit has imposed an additional requirement that the sale also be unconditional. (25) Conditional sales and other similar restrictions imposed by patent owners have received favorable treatment by the Federal Circuit but patent owners' continued control over sold products may still be curtailed through antitrust or patent misuse actions. (26) Federal Circuit precedent would lead one to believe that assertion of the patent-exhaustion doctrine is not an available defense in any case involving conditional sales, but the Supreme Court continues to cite precedent requiring only an authorized sale. (27) The Supreme Court stated the current test for proper invocation of an exhaustion defense in a relatively recent opinion, Quanta Computer, Inc. v. LG Elecs., Inc., (28) and may be summarized as consisting of two requirements: an authorized sale of an item, and a sufficient embodiment of the patented invention in that item. (29)

While the patent-exhaustion doctrine provides a potential defense against patent owners attempting to exert post-sale control, it applies only to the use and sale of the particular article sold--the buyer does not obtain the right to make a new article unless that right is bargained for independently. (30) The repair-reconstruction doctrine draws the line between permissible repair and impermissible reconstruction of the sold article; while "[m]ere replacement of individual unpatented parts ... is no more than the lawful right of the owner to repair his property," reconstruction "as to in fact make a new article" is impermissible. (31) Despite extensive case law, the line between repair and reconstruction remains blurry and may be frustratingly difficult to apply--at one point driving the Supreme Court to consider the perishability of toilet paper while attempting to characterize its replacement in a patented dispenser as either repair or reconstruction. (32) Nonetheless, both doctrines offer important counterbalances to the patentee's monopoly, ensuring that the public is protected from overreach; however, it is still unclear how these doctrines will apply to biological inventions, if they can be applicable at all, or if new limiting doctrines will grow to fill their space. (33) Providing utility patent protection to living organisms is a relatively recent development; one that had been prohibited before 1980, when the Court broadly classified living organisms as "products of nature." (34)

Before 1980, attempts at providing intellectual property protection to plants included the Plant Patent Act (PPA) of 1930 and the Plant Variety Protection Act (PVPA) of 1970, both the result of lobbying by the seed industry. (35) Ultimately, however, neither act provided a significant amount of protection for the seed industry; exceptions in both statutes made it nearly impossible to protect investments in new seed varieties, including an exception permitting farmers to save seed from year to year. (36) After 1980, the floodgates opened for biotechnology companies to seek greater protection on their inventions through utility patents; indeed, Monsanto filed its relevant patents in Bowman in the early 1990s, implying that most research and development on their GMOs occurred during the 1980s, after Chakrabarty. (37) Before long, the Supreme Court confronted the issue of whether plants would be eligible for utility patent protection given the enactment of the PPA and PVPA and held that protection may be granted under both Acts. (38) Armed with utility patents for its transgenic seeds, Monsanto has pursued aggressive enforcement techniques to ensure that farmers do not save seed from year to year, hiring investigators (often referred to as "seed police") to obtain samples from farmers who purchase Roundup Ready seeds one year but not the next and suing farmers for "seed piracy;" in total, it is estimated that Monsanto has received approximately $23.7 million from such suits against farmers. (39) The Federal Circuit has held favorably for Monsanto in recent appeals involving such infringement suits, in part on the basis that patent exhaustion cannot be invoked due to the...