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Legal Affairs : Aug 1, 2012 ( )
Patent Exhaustion & Self-Replicating Technologies
Supreme Court Considers Question in Seed Case with Broad Implications for Industry!--h2>
Patented seed technologies are in part responsible for the vast increase in U.S. farm productivity over the past several decades. Indeed, the vast majority of all corn, soybean, and cotton seed grown in the U.S. today were developed through the use of either plant breeding methods, genetic engineering, or both. The seed industry is now worth more than $25 billion worldwide. Major seed companies include Pioneer Hi-Bred (a subsidiary of DuPont), Monsanto, and Syngenta, among others.
The increasing value of proprietary seed technologies has spawned renewed interest in intellectual property (IP) rights relating to new plant varieties. Numerous IP rights are available to inventors of new plants. Asexually reproducing plant varieties such as roses, fruit trees, and grapevines are protectable by plant patents. Plants that reproduce by flowering and production of seeds may be protected by Plant Variety Protection (PVP) Certificates and by utility patents.
Seeds protected by PVP Certificates may be used by third parties in breeding as there is a research exemption for PVP Certificates. In contrast, third parties require a license to use seeds protected by utility patents as no research exemption exists for utility patents.
Plant Variety Certificates cover varieties that are indistinguishable from the protected variety and varieties essentially derived from the protected variety. Broader plant intellectual property rights are available via utility patents.
A utility patent can protect the variety itself and the trait embodied by the variety. Utility patent rights are also available for transgenic traits developed through recombinant DNA techniques, when they are successfully applied to plants. Issues pertaining to this latter class of rights have broader implications for the biotechnology industry, as demonstrated by Bowman.
The Questions Posed to the Supreme Court
The Supreme Court recently requested the views of the Solicitor General on whether to grant review in Bowman v. Monsanto, a case relating to transgenic corn. Such requests are considered to be an indicator that the Supreme Court is likely to hear the case, and will do so if the Solicitor General agrees that there is an important issue for the Court to decide. The debate has been framed with a narrow first question limited to seed technology: whether a sale of patented seeds exhausts the patent rights in those seeds.
A second question before the Supreme Court, however, cuts more broadly: whether patent rights are subject to normal rules for exhaustion when the technology is self-replicating. In other words, the question is whether patent rights end once a plant, organism, or other biotechnology invention is sold, even though the technology may be expressed in subsequent generations of the patented article. If the Court answers “yes,” it would have a huge impact on the ability to protect certain types of biotechnology inventions.
The Technology at Issue
The Bowman case involves a seed-purchasing customer’s use of a transgenic Roundup Ready® seed variety first invented and developed by Monsanto. Monsanto’s Roundup Ready technology includes seeds for growing corn, soybeans, and other crops that exhibit resistance to an herbicide known as glyphosate. Because glyphosate is rated “least dangerous” compared to other herbicides and pesticides, it had long been a goal in crop science research to develop crop varieties with glyphosate resistance.
Monsanto achieved this in soybeans by using the cauliflower mosaic virus (a virus capable of infecting plants) to create a vector for incorporating chimeric genes into soybean germplasm. The chimeric genes were derived in part from a strain of Agrobacterium that exhibited glyphosate resistance. Transgenic plants expressing the chimeric genes are also resistant to glyphosate.
Vernan H. Bowman is an Indiana soybean grower who signed a technology agreement allowing him to purchase Roundup Ready soybean seeds from Pioneer Hi-Bred, an authorized seed producer of Monsanto and a seed developer in its own right. While the technology agreement forbade saving seeds for use in replanting, it did allow the unrestricted sale of harvested soybeans (i.e., the seeds) as a commodity to grain elevators. In fact, 94% of soybeans sold into commodity markets in Indiana in 2007 used Monsanto’s Roundup Ready technology.
Starting in 1999, Bowman—in addition to the seeds he purchased from Pioneer Hi-Bred—also began purchasing commodity soybean seeds from a grain elevator for planting. He found that these seeds showed the same herbicide resistance as Roundup Ready soybean seeds. Bowman was candid with Monsanto about his purchase and use of commodity soybean seeds.
Monsanto investigated and found that the unlicensed seeds Bowman purchased from the grain elevator contained Monsanto’s patented technology. Monsanto then sued Bowman for patent infringement. A federal trial court granted summary judgment of infringement for Monsanto, awarding $84,456.20 in damages.
The Decision of the Appellate Court
On appeal, Bowman’s principal argument was that, under the Supreme Court’s prior decisions, the authorized sale of seeds into commodity markets exhausts any patent rights in any article that “substantially embodies” the same characteristics (e.g., plants and seeds grown from the commodity seeds).
Monsanto took the position that its technology agreement explicitly did not permit either the saving of harvested soybean seeds or the sale of those seeds for planting purposes. Additionally, Monsanto argued that Bowman was liable for infringement by planting commodity seeds because patent protection is independently applicable to each generation of soybeans (or any other crop) that “contains the patented trait.”
The appellate court sided with Monsanto. It found that “[e]ven if Monsanto’s patent rights in the commodity seeds are exhausted, such a conclusion would be of no consequence because once a grower, like Bowman, plants the commodity seeds containing Monsanto’s Roundup Ready technology and the next generation of seed develops, the grower has created a newly infringing article” to which the patent exhaustion doctrine does not apply.
Implications of Bowman’s Petition for Review
If the Supreme Court grants review, it could have implications for more than just the seed industry. Indeed, when the federal appellate court referred to “self-replicating” technologies in the decision Bowman would have the Supreme Court reverse, it did not limit its finding to seeds. Thus, the opinion does more than just strengthen protection for transgenic plants.
The biotechnology industry is replete with examples of self-replicating technologies, including novel DNA sequences, virus strains, microorganisms, and cell lines to name a few. If the Supreme Court reverses on the question of whether there is “an exception to the doctrine of patent exhaustion for self-replicating technologies,” then competitors and consumers may be able to avoid patent infringement by growing, or otherwise duplicating a patented article from as little as a single sample purchased in the stream of commerce.
Though the implications for the seed industry are fairly obvious—as was made clear in Bowman—any change in the law could affect other industries as well. Accordingly, companies with novel self-replicating technologies that are (or could be) subject to commercial sales will want to watch Bowman closely, in case the Supreme Court expands the scope of patent exhaustion with respect to these kinds of inventions.
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