On May 13, 2013, the United States Supreme Court held that the doctrine of patent exhaustion does not permit a farmer to reproduce patented seeds through planting and harvesting without the permission of the patent holder. In a unanimous decision, the court sided with Monsanto Co., ruling that Indiana farmer Vernon Bowman had infringed on Monsanto’s patent for its genetically modified soybeans when he bought commodity soybeans covered by Monsanto’s patent from a local grain elevator and planted them as seed without paying Monsanto a fee. The grain elevator had obtained the commodity soybeans from local crops produced from patented seeds sold by Monsanto.
At the heart of the case is the doctrine of patent exhaustion. Under the exhaustion doctrine, once a patent holder authorizes the sale of a patented product, the patent owner’s right to control the further use or resale of that product is terminated, leaving the purchaser free to use the patented product without restriction. However, as the court affirmed in the decision, the exhaustion doctrine restricts the patent holder’s right only as to that particular product sold. It does not extend to the right to make “new copies” from that product.
Bowman’s main argument was that Monsanto’s patent protection was exhausted with the sale of the first crop of Roundup Ready® soybeans, so he could do whatever he wanted with the commodity soybeans he purchased legally from the grain elevator, including using them as seed for a second, late-season planting.
The court rejected this argument and held that the exhaustion doctrine did not apply to his use of the commodity soybeans. Under the exhaustion doctrine, Bowman could resell or consume the commodity soybeans. But the exhaustion doctrine does not allow him to use these soybeans as seeds to grow a new crop, because by doing this, Bowman made additional copies of the patented product. This conduct is barred by the patent laws.
Bowman also argued that he did not replicate Monsanto’s patented seeds. Rather, the soybeans themselves performed the replication. The court rejected this argument too, and reasoned that the seeds Bowman purchased did not spontaneously create successive soybean crops; it was Bowman himself who used the soybeans to produce the new crop.
The court’s holding was quite narrow, being explicitly limited to the facts of the case. Accordingly, the results of case can not necessarily be applied to other self-replicating technologies. In light of the ambiguities surrounding this decision, companies and investors must carefully consider whether the exhaustion doctrine applies to the use of a particular “self-replicated” patented product. Applying the law to your particular situation requires careful consideration and should involve a lawyer who knows your business and this area of the law.