A short unanimous decision of the US Supreme Court of 13 May 2013 held that the doctrine of patent exhaustion still applies to patented items once sold so the buyer may use or resell the patented article but that buyer may not make copies of the item even if the item is capable of self-replicating. The self-replicating patented item in this case is genetically modified plant seed but this case may have significance to other self-replicating technologies in terms of protecting intellectual property rights in items such as software and other biotech products. The Court deliberately stopped short of stating that the decision applies to every item sold that is capable of self-replication but the case provides an indication of the Court's thinking.
Bowman v Monsanto Co. et al 11-796 (U.S. May 13, 2013) was the culmination of Bowman's fight to the bitter end to settle the issue as to just how far the doctrine of exhaustion of rights could be pushed. Mr Bowman is an Indiana farmer who had purchased Monsanto's patented Roundup Ready soybean seed for several years. Soybeans are capable of self-replicating in that the flowers may self-pollinate so the seeds (and subsequent plants grown from those seeds) are genetically identical to the parent plant. Monsanto's plants (and seeds) are genetically modified to be resistant to Monsanto's Roundup herbicide. Thus if a farmer plants Monsanto's patented Roundup Ready soybean seeds and uses Monsanto's Roundup herbicide on the resulting soybean plants, the herbicide will kill everything else other than the soybean plants. When Monsanto sells its seeds to a purchaser, the purchaser enters into a written agreement with Monsanto which allows the purchaser to use the seeds once to grow and sell the resulting crop of seeds for consumption or processing. The purchaser may also sell the second generation seed from those crops to local grain elevators for resale as a commodity only. The purchaser may not replant the second and any subsequent generation seeds. These grain elevators are restricted by law to selling the grain (or seed) for consumption (not for planting) and it is mostly purchased by public bodies and approved animal feed operators.
Monsanto's products have been so popular that Bowman came up with the idea that if he purchased commodity soybean seed from local grain elevators, there was a very high likelihood that the seeds would be Monsanto's patented Roundup Ready soybean seeds. Bowman decided he wanted to plant a second crop late in the season which was traditionally risky and therefore, did not want to pay for more Roundup Ready soybean seed. Instead, he purchased soybean seed from the local grain elevator and treated the resulting plants with Roundup to confirm it was Roundup Ready soybean seed. This continued for several years until Monsanto sued.
Monsanto sued Bowman for patent infringement. Bowman's defence rested on the argument of patent exhaustion or the doctrine of exhaustion of rights. This doctrine states that the first authorised sale of the patented product onto the market (in this case, the USA as the relevant patents are US patents) exhausts any intellectual property rights the patent owner may have in the product in terms of restricting the buyer from using or selling the product as the buyer wishes. The doctrine applies only to the particular patented product as sold. Therefore, for example, it does not extend to allowing the buyer to make copies of the product and sell them as this would still be infringement of the patent covering the product. Bowman argued that Monsanto could not control the seeds as they had been the subject of a legitimate sale from the grain elevator to Bowman. This argument was rejected by the District Court and the Federal Circuit. Bowman continued his battle to the Supreme Court which also rejected his defence and affirmed the Federal Circuit decision.
The Supreme Court held that Bowman could legitimately resell the soybeans he had bought or use them as feed but he could not make additional patented soybeans without Monsanto's consent. He reproduced Monsanto's patented invention without Monsanto's consent. Bowman argued that exhaustion should apply because seeds are meant to be planted and the doctrine prevents the patent holder from controlling the use of the patent product after legitimate sale. Bowman went on to argue that in allowing Monsanto to control the use of its seed in this manner would create an exception to the doctrine for seed and other self-replicating technologies. However, the Court gave this argument short shrift by stating that it was Bowman who was seeking an exception as the doctrine does not allow for the making of new products. If it did, the value of a patent would be minimal as it would only be valuable for the first sale of that patented product which would hardly provide incentive to invest in innovation.
Bowman also argued that the seeds were special as they were self-replicating and he did not reproduce them himself. Again the Court rejected this argument quickly by stating the fact that Bowman planted the seeds and nurtured the seedlings made him an active not passive observer of the soybeans reproduction.
So although now we have a clear US decision on self-replicating patented plants, we await to see how the UK and EU would decide on this issue if it were raised here. We also await to see how the doctrine of exhaustion may be applied to other self-replicating patented technologies in any jurisdiction.