Farmers grow soybeans, like most field crops, from seeds in a field. When soybean plants are ready for harvesting, combines are used to collect the plants, separate the soybeans from their pod and stems, and place the soybeans in a holding tank. The soybeans are then either taken directly to a grain dealer to be sold for consumption or stored in facilities for eventual sale by the farmer. Because soybeans are self-pollinating, i.e. a plant that produces seed and essentially clones itself, the soybeans can also be used to produce new soybean plants. The ability to self-replicate stood at the center of the dispute between Vernon Bowman, a soybean farmer in Indiana, and Monsanto Company, the largest agricultural biotechnology company in the United States.
Specifically, at issue, was whether the sale of self-replicating soybeans implicated the patent exhaustion doctrine. Patent exhaustion limits a patent holder's control of an article covered by a patent after an authorized sale. As an example, when a consumer purchases a smart phone, the consumer is free to use that phone or re-sell it. Hence, when an unrestricted, authorized sale of a patented article occurs, the patent holder's right to control the use and sale of that specific article is finished or "exhausted." The buyer is free to use or resell that article without the threat of patent infringement.
Patent exhaustion does have its limits, however. A purchaser of a patented article has only the rights conferred to it by the patentee and no more. Invoking the proverbial bundle of sticks analogy, a patent owner does not pass out the "copying" stick when selling a patented article. Rather, that right remains with the patentee. In Bowman v. United States, the U.S. Supreme Court addressed whether Monsanto did give Mr. Bowman the "copying" right because it patented technology that was self-replicating, i.e. a genetically modified soy-bean.1 Predictably, the Supreme Court found that Mr. Bowman had not received this right.
To make the most of the soybean planting season, most farmers engage in the practice of "double-cropping."2 That is, they grow and harvest two or more soybean crops on the same land in the same season. For the first crop, farmers typically use a more expensive seed as planting during the prime growing season carries less risk. For the second crop, however, farmers use a cheaper seed as planting later in the season is more of a gamble as an early fall freeze could kill the plants before harvest.
In keeping with this practice, Mr. Bowman purchased premium soybean seeds from Pioneer Hi-Bred, a Monsanto subsidiary, for his first crop of the season.3 These soybean seeds contained Monsanto's patented Roundup Ready® technology,4 which involves the genetic modification of soybeans to make them resistant to certain herbicides, particularly Monsanto's own Roundup® herbicide product.5 The practical advantage is a farmer can treat their fields with herbicides to control weeds without damaging the crops.
When purchasing the genetically modified soybeans, Mr. Bowman was required to execute a "Technology Agreement."6 Of note, the agreement contained the following relevant provisions: the licensed grower agrees "to use the seed containing Monsanto gene technologies for planting a commercial crop only in a single season" and "to not save any crop produced from this seed for replanting, or supply saved seed to anyone for replanting."7 Thus, Monsanto expressly restricted the use of its patented soybean technology to a single crop.
In keeping with this agreement, Mr. Bowman did not save seed from any of his "first-crops" harvested from Pioneer Hi-Breed seeds. The same did not hold true for Mr. Bowman's second-crop seeds, however. In 1999, Mr. Bowman purchased cheaper "commodity" seeds from a local grain elevator for his "second-crop."8 Mr. Bowman had a suspicion that the "commodity" seeds, which contains a mixture of different types of seeds, included Roundup Ready® seeds. To test this theory, he applied the Roundup herbicide to his second-crop and confirmed that many of the plants were resistant to the pesticide.9 From 2000-2007, Mr. Bowman treated his second crop with Roundup, killing the cheaper seeds and cultivating the Monsanto patented seeds. He saved the seed harvested from his second-crop for replanting more second-crops for subsequent years.10 He also continued to purchase commodity seeds from the grain elevator to supplement his second crop.
Interestingly, Mr. Bowman did not keep his "second-crop" farming method a secret. Rather, he amenably explained his second-cropping techniques to Monsanto representatives.11 As one could reasonably predict, Monsanto sued Mr. Bowman in the Southern District of Indiana ("trial court") for patent infringement of U.S. Patent Nos. 5,352,605 and RE39, 247E, which cover the Roundup Ready® seed technology.12
Although sensitive to Mr. Bowman's position, the trial court held that he had nonetheless infringed Monsanto's patents. In defense of his "second-crop" practice, Mr. Bowman raised patent exhaustion as a defense. He contended that when a licensed farmer sells a crop of soybeans produced from Roundup Ready® seeds, it is an authorized unconditional sale of the patented technology, and, therefore, the patent is exhausted as to those soybeans.13 Two prior cases; however, were at odds with this position and made the decision a relatively easy one for the trial court to make.
In Monsanto v. MacFarling, 302 F.3d 1291 (Fed. Cir. 2002), Monsanto contended that another farmer, Mr. MacFarling, had violated the terms of the Technology agreement by saving 1500 bushels of Roundup Ready® soybeans from his harvest during one growing season and replanting those seeds in the next season. Mr. McFarling did not pay the license fee for those years even though each crop contained the patented seed. McFarling defended his actions by contending that the conditions of the Technology Agreement "violated the doctrine of patent exhaustion and first sale." The Federal Circuit held that the doctrine of exhaustion was not implicated because the new seeds grown from the original batch of crops were never sold. Put another way, the seeds that Mr. MacFarling used each season were not sold to him by Monsanto; rather, they were copied from season to season in violation of Monsanto's patent rights.
Similarly, in Monsanto Co. v. Scruggs, 459 F.3d 1328 (Fed. Cir. 2006), another farmer, Mr. Scruggs, also raised the patent exhaustion defense. There, Mr. Scruggs purchased Roundup Ready® seeds from one of Monsanto's authorized seed companies and never executed the Technology agreement. Scruggs planted the seeds, harvested them, and replanted the second-generation seeds containing the Round-up Ready trait. The Court again held the doctrine of patent exhaustion did not apply because the second generation seeds were never sold; thus, the patent exhaustion doctrine was again not implicated. Perhaps anticipating the Bowman case, or a similar one, the Federal Circuit further held that "[a]pplying the first sale doctrine to subsequent generations of self-replicating technology would eviscerate the rights of the patent holder."14
Thus, the trial court held that Mr. Bowman had infringed Monsanto's patent rights by planting commodity soybeans and cultivating generations of crops that contained Monsanto's patent technology. The trial court did not find that Mr. Bowman had acted in a willful manner because he did not attempt to hide what he was doing nor did he unreasonably believe his actions violated Monsanto's patents.15 Thus, the district court awarded Monsanto compensatory damages in the amount of $ 84,456.20 but did not award enhanced damages.16
On appeal, Mr. Bowman again raised the patent exhaustion defense. The Federal Circuit held that even if Monsanto's patent rights in the commodity seeds were exhausted, when Mr. Bowman planted the seeds and produced a new generation of seeds - the farmer has created a new infringing article. The Federal Circuit found that a farmer may have a right to use commodity seeds as feed, or any other use, but it cannot replicate "Monsanto's patented technology by planting in the ground to create newly infringing genetic material, seeds, and plants."17 Thus, the Court affirmed the trial court's judgment laying the groundwork for Mr. Bowman's appeal to the Supreme Court.
II. The First Sale Doctrine Does not Permit A Purchaser of Patent Product to Make Copies of the Patented Product
Writing for an unanimous Court, Justice Kagan affirmed the Federal Circuit's judgment. The specific question that the Supreme Court addressed, however, was narrow: "whether a farmer who buys patented seeds may reproduce them through planting and harvesting without the patent holder's permission."18 The Court began the opinion by first explaining the doctrine of patent exhaustion. Particularly, the Court noted that the doctrine "restricts a patentee's rights only as to the 'particular article sold'; it leaves untouched the patentee's ability to prevent a buyer from making new copies of the patented item."19 If that were not the case, the Court notes, a purchaser of a patented article could make and sell endless copies and the patent would only protect the first sold patented item. This principal, the Court opined, effectively decides the case.
Specifically, to permit Mr. Bowman to make additional patented soybeans without Monsanto's permission would result in Monsanto receiving a "reward" for only the first seeds it sells. After the first sale, other seed companies or farmers would reproduce its patented soybeans depriving Monsanto of those sales. To interpret the exhaustion doctrine in this manner would result in a mismatch between the costs of inventing and the reward for obtaining a patent.
Turning to prior precedent, the Court noted that its holding was consistent with its decision in J.E.M Ag Supply, Inc. v. Pioneer Hi-Bred Int'l. Inc. 534, U.S. 124 (2001). There, Pioneer Hi-Bred (the same company who sold Mr. Bowman his premium seeds) filed a patent infringement suit against J.E.M. Agricultural Supply (JEM) for selling its patented hybrid corn seeds. JEM counter sued and contended that Pioneer's patents were invalid because Congress had superseded the original utility patent law when it created the two, specialized intellectual property protections for plants—the utility patent and the Plant Variety Protection Act (PVPA). JEM contended that it could not be liable under patent law because genetically engineered plants cannot be protected with utility patents.
The Supreme Court rejected JEM's argument and held that utility patents are available to plants under the Patent Act even though the PVPA also provided certain rights to plant technology. The Court further noted that the two statutory mandates provided different but not conflicting protection. Specifically, a utility patent provided greater protection for exclusion than PVPA. Additionally, while the PVPA provides an exemption to allow farmers to save seed and use that seed for replanting, there is no similar saved seed provision for a utility patent. Thus, to apply the doctrine of patent exhaustion as Mr. Bowman contended, i.e. allow patented genetically modified seeds to be saved and replanted, would have been inconsistent with the Court's holding in JEM.
Bowman, however, did exhibit some creativity furthering two arguments to support a special carve out exception to the patent exhaustion doctrine for genetically modified seeds. First, Bowman contended that exhaustion should apply because seeds are meant to be planted and Monsanto's patents prevent a purchaser from using seeds in the way that they are supposed be used. Preventing farmers from planting the seeds, would "create an impermissible exception to the exhaustion doctrine" for patented seeds and other 'self-replicating technologies." The Court rejected the argument finding that it was actually Mr. Bowman asking for an unprecedented exception as the patent exhaustion doctrine allows a patentee to retain its rights to exclude others from copying its invention. The Court explained that contrary to Mr. Bowman's argument, the patent exhaustion doctrine extends only to the actual item sold and not to copies of that item. Moreover, the Court surmised that its holding would not prevent farmers from using commodity seeds in the way they are normally used. The Court observed that it was well-established that the commodity beans that Mr. Bowman purchased were for consumption, e.g. used for animal feed, not planting. Moreover, no other farmer planted commodity beans only Bowman. Thus, the Court was not prohibiting farmers from using community seeds in the way they were regularly used in the farming process.
Second, Mr. Bowman raised the now famous "blame the bean" argument. Essentially, Mr. Bowman contended that seeds naturally self-replicate or sprout unless stored in a controlled manner, so he did not make copies of the bean; rather, the beans made copies of themselves. The Court dismissed this argument noting that Mr. Bowman was not a passive observer in the bean growing process. Rather he "devised and executed" a novel way to harvest crops from Roundup Ready® seeds without having to pay a premium price. Mr. Bowman, not the bean, controlled the reproduction of Monsanto's patent invention. The Court consequently affirmed the judgment of the Federal Circuit.
While the Bowman v. Monsanto Company decision certainly impacts farming practices in the United States, whether this case has more far-reaching effects remains to be seen. It is likely that the practical impact of Bowman v. Monsanto Company will be limited, as the Court expressly cautioned that their holding was a narrow one. Indeed, the Court left for another day whether replication that could truly occur outside the purchaser's control or replication that was an incidental step for using the item for another purpose could implicate the patent exhaustion doctrine. Anyone involved in areas where self-replication occurs, e.g tissue cultures, microorganisms, or DNA used in research, however, should proceed carefully as Bowman evinces the Court's concern over justly rewarding an inventor for their patented innovations.
Originally printed in CIPA Journal.