The Bowman vs. Monsanto Co case, which was decided last month, has generated more public interest than most in recent years.

The case deals with the controversial right to control farmers harvesting and re-planting patented seeds.

The US Supreme Court however showed no discord and ruled unanimously in favour of Monsanto. The court concluded that the exhaustion of patent rights, at least, "does not permit a farmer to reproduce patented seed through planting and harvesting without the patent holders permission".

This decision provides relief for some in biotech industry. The case also raises interesting questions regarding use of "exhaustion of patent rights" as a defence against infringement for other "self-replicating" technologies.

Background

Monsanto's "Roundup Ready" soybeans contain a genetic modification which makes them glyphosate-resistant. Glyphosate is the active ingredient in many commercial herbicides including Monsanto's own "Roundup". This modification allows farmer to control weeds by application of glyphosate without harming their crop. This technology is very popular with farmers and reported to be the world's most widely adopted biotech trait.

Monsanto sell "Roundup Ready" soybeans with a licence limited to planting and harvesting a single soybean crop for sale or consumption.

Indiana farmer, Vernon Bowman appreciated the benefits of the Monsanto technology. He bought and grew "Roundup Ready" soybeans and used them over a number of years for his first season crop complying with the terms of Monsanto's licence. However, Bowman used an alternative approach for growing his "more risky" late season crop.

The potentially infringing act

Bowman, bought soybeans intended for human or animal consumption, from a grain elevator correctly assuming that many of these soybeans would contain the "Roundup Ready" trait. He then planted the soybeans, selected for plants with the trait by spraying with glyphosate, and harvested the resulting soybeans. Bowman saved some of these soybeans for future plantings, sometimes supplemented by further grain elevator soybeans, and harvested eight crops in this way.

Monsanto discovered this practice and sued Bowman for infringing its patents covering the Roundup Ready technology.

Bowman's main defence

The main thrust of Bowman's defence was that Monsanto's patent rights were "exhausted" when farmers sold seed to the grain elevator with Monsanto's authorisation.

Bowman argued that under the doctrine of patent exhaustion, the initial authorised sale of a patented item terminate patent rights in that item so the buyer can use or sell the item "as he sees fit".

Bowman further argued that seeds are meant to be planted, and that the exhaustion doctrine typically prevents the patentee from controlling such normal use of a product following authorised sale.

The Court's decision

The court unanimously rejected the exhaustion of rights defence, upholding the principal that the doctrine is limited to the actual item sold, and does not affect the patent owner's ability to prevent the buyer from making and selling additional copies of the patented item.

Thus if you buy a patented machine, you can sell that machine, but your initial purchase does not give you the right to make copies of the machine to sell to others, without the patent holder's permission.

The court considered that the process used by Bowman of producing new soybeans from the grain elevator soybeans was effectively the same as making copies of the item originally sold by Monsanto, and hence decided that the doctrine of patent exhaustion provides no defence to such activity.

Innovation versus reward                                       

In the written decision, the Court touched on the often neglected concept of the appropriate balance between innovation and reward.

The court noted that if the doctrine of exhaustion were a valid defence against the unauthorised making of copies of a patented article, patents for plants and seeds would provide "scant benefit". In the present case, after inventing and patenting the Roundup Ready technology, Monsanto would receive reward only from its initial sale of Roundup Ready soybeans. After that, there would be nothing to stop other companies reproducing the seed and selling it to farmers, thus depriving Monsanto of compensation for its investment in developing the technology. Similarly a farmer would only need to buy the soybeans once to reproduce seed for further sowings, like Bowman, and avoid the need for further purchases. Thus the value in the patented technology would fall drastically after the initial sale.

Under the law affirmed in the present decision, the farmer would pay for the soybeans to plant each crop and gain from sale of the harvested soybeans.  Monsanto would gain from each sale of soybeans for thelimitedterm of the patent covering the technology. Interestingly, Monsanto's own website reports that the last applicable Monsanto-owned patent, for the first generation Roundup Ready soybeans, is expected to expire in 2014.

The court appeared to consider that the presently affirmed law strikes the right balance in providing an appropriate reward for the investment made in making and bringing the innovation to market.

Blame-the bean defence

Bowman also argued that it was the soybean plant, and not himself that made copies of Monsanto's patented seeds. The court found this argument severely lacking, and noted that Bowman was not a "passive observer" and that the seeds he bought did not "spontaneously create eight successive bean crops".

Patents versus Plant Variety Protection

This decision highlights a difference between the rights afforded by patents versus those of Plant Variety Protection (PVP) certificates in the United States. Patents are harder to obtain than PVP certificates, in part because an inventive step is required for a patent.

However there is a trade off, because the protection provided by patents is stronger. Patents can be used to prevent a farmer from replanting his/her own saved seed, but PVP certificates cannot. Similarly, neither plant variety rights (PVR) in New Zealand nor Plant Breeder's Rights (PBR) in Australia generally provide protection against the farmer's use of his/her own farm-saved seed.

How might this decision be applied to other self-replicating subject matter?

The Court specifically limited its decision to addressing situation before it, rather than suggesting that it should apply every situation involving self-replicating products. Thus in theory the exhaustion of rights defence could still be applied to other self-replicating products.

It will be interesting to see if and how the exhaustion of rights defence will be applied to other biotechnological products such as cultures of microorganisms and cell lines, where a degree of self-replication may be an inevitable consequence of use.

However, in lower US courts at least, it seems likely that the logic of the present decision will be applied against an alleged infringer pleading an "exhaustion of right" defence in situations where self-replication is intentionallydrivenby the alleged infringer for commercial gain.

Conclusion

The present decision, while not answering every question, has, for now a least, alleviated the fears of some in the biotechnology industry. An opposite decision with respect to exhaustion of patent rights could have had fundamental consequences for incentivising innovation in agricultural biotechnology and other industries.