By Dennis Crouch
Bowman v. Monsanto (SCOTUS 2013)
In its newly filed brief, the US Government has agreed with Bowman that violation of use restrictions on commodity GM soybeans cannot result in patent infringement. However, the Government ultimately sides with Monsanto in arguing that the progeny beans grown by Bowman represent an infringing "mak[ing]" of Monsanto's patented invention.
Briefing continues in the GM seed case between the Indiana farmer Vernon Bowman and the developer of GM glyphosate resistant "RoundUp Ready" soybeans Monsanto. Monsanto holds two patents that clearly and literally cover the seeds in question. U.S. Patent Nos. 5,352,605 and RE39,247E. For several years, Bowman had been looking for a legitimate way to grow RoundUp Ready soybeans without paying the large license fee charged by Monsanto. What he did was find a seeming loophole in the Monsanto license agreement that allowed farmers to sell soybeans to the commodity market without any ongoing restrictions on the use of those beans. Call these "authorized sales" because the unrestricted sale of GM seeds to commodity market was authorized by the patentee, Monsanto. Normally, those commodity beans are purchased by CAFO and public school lunch operators, but Bowman purchased them with the intent of growing more soybeans. The nice thing about soybeans is that they self-pollinate and thus apart from mutation, soybean progeny are genetically identical to their forebears. The US commodity marketplace does not normally distinguish between GM and non-GM soybeans. However, Bowman relied on his reasonable assumption that most of the beans would be RoundUp Ready because of Monsanto's deep market penetration. Bowman planted the beans and fond that the bulk were resistant to the glyphosate herbicide. Bowman saved some of his harvest for replanting and sold the rest back to the commodity market. This continued for several years until Monsanto sued Bowman alleging patent infringement – arguing that Bowman's operation was "making" new infringing seeds in violation of the Patent Act. 35 U.S.C. 271(a) ("whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States … during the term of the patent therefor, infringes the patent").
Thus far, courts are siding with Monsanto, but now the Supreme Court will weigh in on whether those Monsanto-authorized sales should be seen as exhausting the patent rights in the progeny. The judicially created doctrine of exhaustion is designed to better ensure free alienation of goods and a robust secondary market. Exhaustion fits within the centuries long common law history of rejecting covenants and conditions that unduly limit the alienability (resale) and use of property rights. Although much of the property case-law has focused on real estate, the rules against unreasonable limits on alienation and use are at their peak in the context personal property, such as the soybeans at issue in this case. For the most part, restrictions on use and resale of personal property will not be enforceable against a bona fide purchaser. Under the patent exhaustion doctrine, patent rights are said to be exhausted for goods that enter the stream of commerce with the patentee's authorization and without restriction. Thus, when Ricoh sells a patented copier to a customer, the patent rights are exhausted and Ricoh cannot later assert patent infringement when the customer sells the copier to a third party or when that third party uses the copier. Unauthorized sale and use can each constitute patent infringement, but Ricoh would have no case here because its patent would be deemed exhausted. Final point on exhaustion is that it normally applies on an item-by-item basis. The fact that a customer owns an authorized Ricoh copier whose patent is exhausted does not provide the customer with any authority to build another copier that infringes the patent. Making that new copier would constitute patent infringement.
The case at hand is unique because of the self-replicating nature of soybeans (and life in general). In its brief, the US Gov't frames the issue as:
Whether the authorized sale of one generation of a patented plant seed exhausts a patentee's right to control subsequent generations of that seed.
In his framing of the question, Bowman identifies the Federal Circuit's decision as creating a loophole for self-replicating technologies.
Whether the Federal Circuit erred by (1) refusing to find patent exhaustion in patented seeds even after an authorized sale and by (2) creating an exception to the doctrine of patent exhaustion for self-replicating technologies?
Monsanto took its turn by presenting questions in apparently ad absurdum form:
1. Whether the first-sale doctrine grants the purchaser of a patented article the right to make, use, and sell an unlimited number of new copies of the patented invention that have never been sold.
2. Whether patent treats as per se unenforceable all restrictions imposed by license on the use of a patented article following an authorized sale.
There is some amount of cross-talk in these questions presented. Each party accuses the other of seeking an exceptional rule for self-replicated technology. Monsanto here also attempts to bring-in an additional factual question regarding whether the commodity seeds were actually sold without use restrictions.
As suggested above, the key briefs have now been filed (except Bowman's reply brief) and oral arguments are set for February 19, 2013.
I previously discussed Bowman's brief here: http://www.patentlyo.com/patent/2012/12/patent-exhaustion-gmo.html
U.S. Government Brief: The most important brief filed in the case is most likely that of the US Government filed as a joint effort by both Department of Justice and the US Patent Office. That brief fully supports the Federal Circuit's holding that patent exhaustion does not apply to the progeny because the progeny are new articles of manufacture. The brief cites case-after-case where Supreme Court has indicated that exhaustion only applies to the article sold and does not permit the purchaser to make new copies. Unfortunately, the Government brief does not seriously engage the peculiarity of this case – that the patented article is life form that self-replicates by its nature- other than by noting that Bowman "creat[ed]" the progeny "through planting and cultivation." In his brief, Bowman disputes that growing crops constitutes "making" because seeds that fall to earth will naturally sprout and grow without human intervention. The Government also tries to make a distinction based upon elements of the PVPA, but I don't believe those hold water.
On one element, the US Government agreed with Bowman – that the Federal Circuit rule that a patentee's conditional sale of patented goods binds subsequent downstream purchasers. The Government writes that the proper rule, under Supreme Court precedent, is that downstream purchasers will not be liable patent infringement based upon failure to comply with use restrictions placed on the original authorized sale.
Restrictions on downstream use or resale may be enforceable as a matter of state contract law, but a purchaser's failure to comply with such restrictions does not constitute patent infringement.
Although agreeing in principle with Bowman, the Government then reiterated that Bowman is liable for the progeny that are not exhausted.