On October 5, 2012, the U.S. Supreme Court granted review in Bowman v. Monsanto, a saved-seed case that includes questions of patent exhaustion and self-replicating technologies — and has the potential to impact multiple industries.
Bowman purchased Roundup Ready® soybean seed from a licensed source and signed a Technology Agreement agreeing, among other things, to use the seed for a single season commercial crop, not to save seed and not to replant the seed. Bowman did not breech the Agreement.
While he grew authorized seed in a first crop, Bowman also grew a second crop of soybeans from seeds purchased from a commodity grain elevator. He tested the crop to confirm that the commodity seed was largely Roundup Ready® seed and grew the second crop using glyphosate-based herbicide, which is compatible with Monsanto's herbicide resistant Roundup Ready® seed. In subsequent years, he saved the seed from the second crop and replanted the second crop with the saved seed.
Monsanto sued Bowman in Indiana District Court for patent infringement, alleging infringement of two U.S. patents related to Roundup® glyphosate-based herbicide and resistant Roundup Ready® soybeans. (US Patents 5,352,605 and RE39, 247E). The ‘605 patent issued in 1994 with claims directed to plants and chimeric genes containing a CaMV (35S or 19S) promoter and a structural gene heterologous to the promoter.
The ‘247E patent issued in 2006, with claims to DNA molecule comprising a promoter, structural sequence and a 3' non-translated poly-adenylation site, and includes claims where the structural sequence encodes an EPSPS resistance sequence. Additional claims recite plant cells, seeds and methods that employ the DNA molecule. The district court granted summary judgment of infringement with damages to Monsanto. Bowman appealed to the Federal Circuit.
On appeal, Bowman asserted the doctrine of patent exhaustion, arguing all rights to patented seeds placed in the grain elevator as undifferentiated commodity seed are exhausted when sold to downstream purchasers, under the Supreme Court's decision in Quanta Computer, Inc. v. LG Electronics, Inc., 128 S. Ct. 2109 (2008). According to Bowman, under Quanta, each seed sold is a substantial embodiment of all later generations, whereby the exhaustion doctrine encompasses the progeny of seeds and other self-replicating biotechnologies. Analogizing to the Supreme Court's disapproval of any categorical elimination of the exhaustion doctrine to method claims, Bowman asked the Court to similarly reject the effective elimination of the exhaustion doctrine for self-replicating products. Monsanto v. Bowman, Fed Cir 2012 (slip opinion at page 10).
Monsanto asserted the second generation commodity seed sales to the grain elevator did not exhaust Monsanto's patent rights because of the express condition in the Technology Agreement that the progeny of licensed seed never be sold for planting. A grower's sale of harvested soybeans to a grain elevator is not an authorized sale when it results in replanting. According to Monsanto, even if there was patent exhaustion in the commodity seeds, Bowman is still liable for patent infringement due to planting the seeds, as patent protection is "independently applicable to each generation of soybeans (or other crops) that contains the patented trait," citing Monsanto Co. v. Scruggs, 459 F.3d 1328 (Fed Cir 2006); Monsanto Co. v. McFarling, 302 F.3d 1291 (Fed Cir 2002). Monsanto also cited J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred Int'l, Inc., 534 U.S. 124, 143 (2001) for its holding that patent exhaustion in seeds, if applicable, must be limited to the seeds sold: "Most notably, there are no exemptions for research or saving seed under a utility patent."
The Federal Circuit affirmed the district court's holding that patent exhaustion does not apply to Bowman's accused second-crop plantings. Like earlier, Federal Circuit decisions in McFarling and Scruggs"… patent exhaustion does not bar an infringement action." Monsanto v. Bowman (slip opinion at page 12). The U.S. Supreme Court granted Bowman's petition for writ of certiorari on October 5, 2012, which presented the following question concerning patent exhaustion of self-replicating technologies:
- Whether the Federal Circuit erred by (1) refusing to find patent exhaustion in patented seeds even after an authorized sale and by (2) creating an exception to the doctrine of patent exhaustion for self-replicating technologies?
In its brief-in-opposition, Monsanto reformulated the question to one of creating a new generation of genetically modified soybeans to which independent patent rights are applied:
- Whether the Federal Circuit correctly ruled that Monsanto's patent rights in biotechnology related to genetically modified plants (here, patented technologies that make soybeans resistant to glyphosate-based herbicides) are independently applicable to each generation of soybeans embodying the invention, such that a grower who, without authorization from Monsanto, creates a new generation of genetically modified soybeans infringes Monsanto's patents.
The Solicitor General provided commentary in a lengthy amicus brief, urging the court to deny certiorari. The SG disagreed with the Federal Circuit decisions on patent exhaustion, finding the "conditional sale" doctrine to be inconsistent with Supreme Court precedent. He cautions that a decision in either party's favor could have long-term consequences. Following the Federal Circuit's decision would "eliminate commodity soybeans as a low-cost alternative for second-crop plantings" while following Bowman's view could broadly impact "patents for man-made cell lines, DNA molecules, nanotechnologies, organic computers and other technologies that involve self-replicating features." According to the SG, it would be better to wait for more development in the case law before potentially adopting "a restrictive definition of 'making' that could have unforeseen consequences for other present and future self-replicating technologies," citing the Court's own cautionary statements in Bilski v. Kappos, 130 S. Ct. 3218, 3227 (2010).