Monday, 13 May 2013

Bowman v. Monsanto Co.: The Federal Circuit Finally Wins A Case at the U.S. Supreme Court

In today’s 9-0 decision, the Supreme Court of the United States affirmed a ruling by the U.S. Court of Bowman v. Monsanto Co., No. 11-796 (U.S. May 13, 2013). Opinion HERE.
Appeals for the Federal Circuit that a farmer accused on infringing Monsanto’s patent on “Roundup Ready” soybeans was not protected by the doctrine of patent exhaustion.

Background Facts:

Monsanto owns patents covering soybean seeds containing a genetic alteration that makes the seeds immune to glycophosate-based herbicides, such as Monsanto’s Roundup® herbicide. As a result, farmers can apply glycophosate herbicides directly on fields before or after planting, killing weeds but not harming the soybean plants. Monsanto sells Roundup Ready seeds under a license agreement that prohibits farmers from retaining soybeans harvested from Roundup Ready seeds for planting. Thus, although farmers may sell the harvested seeds for consumption or processing, they cannot be used as seed.

Bowman, an Indiana soybean farmer, purchased Roundup Ready seeds for his spring crop. However, unwilling to pay the premium price of the seeds for his second, more speculative planting, he purchased seed from the local grain elevator, knowing that they were largely made up of soybeans harvested from Roundup Ready seeds, and planted them. He then saved and replanted the seeds for eight successive seasons. Monsanto discovered his practice, and sued for patent infringement. Bowman defended on the ground that since he purchased his seed from the grain exchange, which had purchased it from Monsanto’s licensees, he was a downstream purchaser protected by the doctrine of patent exhaustion.

Supreme Court Decision:

The district court rejected Bowman’s defense, as did the Federal Circuit. In an opinion by Associate Justice Kagan, the Supreme Court agreed.

Although patent exhaustion allows downstream purchaser to “use” and “sell” a patented product, it does not confer the right to “make” copies of the invention. If it did, any patent would only protect against the first sale, and the invention could thereafter downstream purchasers could widely copy and distribute it. The effect would be to cause the value of the affected patent to “plummet[.]” Slip op. at 8.

The Court concluded that by replanting the Roundup Ready seeds that he purchased, Bowman was unlawfully “making” new copies of the invention:

Under the patent exhaustion doctrine, Bowman could resell the patented soybeans he purchased from the grain elevator; so too he could consume the beans himself or feed them to his animals. Monsanto, although the patent holder, would have no business interfering in those uses of Roundup Ready beans. But the exhaustion doctrine does not enable Bowman to make additional patented soybeans without Monsanto’s permission (either express or implied). And that is precisely what Bowman did. He took the soybeans he purchased home; planted them in his fields at the time he thought best; applied glyphosate to kill weeds (as well as any soy plants lacking the Roundup Ready trait); and finally harvested more (many more) beans than he started with. That is how “to ‘make’ a new product,” to use Bowman’s words, when the original product is a seed.
Slip op. at 5-6.

The Court rejected Bowman’s main two arguments. First, Bowman argued that since seeds are all meant to be used by planting, the doctrine of patent exhaustion covered his cultivation. The Court noted, however, that the harvested seeds could be used for consumption or processing. In fact, the seeds Bowman purchased could not legally be used for replanting under a state statute. Bowman admitted that he was not aware of any other farmer who used grain purchased from a grain elevator for replanting. Thus, the patent exhaustion did not protect the use. Second, Bowman argued that the seeds he purchased, if left alone, would spontaneously germinate and reproduce. Thus, Bowman argued that the seeds themselves were responsible for any infringement. The Court rejected this “blame-the-bean” defense, noting that Bowman repeatedly orchestrated and controlled the replanting.

The Court noted that patent exhaustion could well apply in a situation where "self-replication might occur outside the purchaser’s control" or might be an essential step in "using the item for another purpose." Id. at 10. But neither scenario was before the Court. So, in the end, Bowman’s arguments against liability failed to bear fruit.

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