Patent exhaustion does not apply where an infringer uses a patented self-replicating technology to create a second generation of infringing goods, even if the doctrine of patent exhaustion may have applied to the first generation alone.

Defendant Bowman, a soybean farmer, purchased seed containing plaintiff Monsanto’s patented Roundup Ready® genetic material from a local grain elevator as a commodity seed.  The defendant then planted that seed and retained the seed produced from the resulting crop.  Monsanto alleged that this activity was infringing.

The defendant argued that because the sale from the grower to the grain elevator was authorized and the grain elevator then sold to Defendant, the doctrine of patent exhaustion applied since those sales were authorized by Monsanto.  Monsanto argued that no sales which resulted in the creation of a second generation of seeds was authorized, and as such, the doctrine of patent exhaustion did not apply to the defendant’s activities.  The district court granted summary judgment of infringement.

On appeal, the Federal Circuit heard these arguments and held that even if Monsanto’s rights in the first-generation commodity seed were exhausted, the defendant’s creation of a second generation of seed “created a newly infringing article.”  Slip op. at 12.  Citing an earlier case pertaining to seed-saving activity, the Court held that “[t]he fact that a patented technology can replicate itself does not give a purchaser the right to use replicated copies of the technology. Applying the first sale doctrine to subsequent generations of self-replicating technology would eviscerate the rights of the patent holder.”  Id. (quoting Monsanto Co. v. Scruggs, 459 F.3d 1328, 1336 (Fed. Cir. 2006)).

A copy of the opinion can be found here.