Argument preview: Stakes are high in dispute over rights to genetically modified seeds
on Feb 18, 2013 at 11:03 pm
Bowman v. Monsanto Co., scheduled for oral argument Tuesday, presents a high-stakes question about biotech products: how tightly can Monsanto control what users do with the Roundup-resistant soybean seeds that Monsanto has patented?
Although the practical ramifications are substantial, the doctrinal question is quite elegant. Like Kirtsaeng v. John Wiley & Sons, argued during the November sitting, the case involves the “exhaustion” of intellectual property. Generally speaking, it is usually the case that when an owner of intellectual property sells a specific tangible copy of the product, the user is free to do what it wishes with the product, free of further constraints imposed by the IP owner. In the common parlance, the first sale of the particular copy by the IP owner is said to “exhaust” patent (or copyright) protection with respect to that object.
This case presents a nice hypothetical question about that doctrine: what happens when the object that is sold has the inherent ability to produce further (perhaps boundless) copies of itself. Bowman (a soybean farmer) takes the view that once Monsanto sells a particular seed, patent protection ends for the seed. Because the natural purpose of the seed – the purpose for which Monsanto has designed it – is to produce more seeds, the farmer who plants the seeds he purchases from Monsanto is free to go about his business with the purchased seeds.
In this case, Bowman purchased and planted one set of soybean seeds from Monsanto. The seeds (its “Roundup Ready” brand) were highly desirable because they included a genome modified by Monsanto to make them resistant to the herbicide Roundup; that allowed Bowman to use Roundup indiscriminately to kill weeds without any risk of harming the soybean crop. Bowman also purchased another set of so-called “commodity” seeds from a grain elevator. Although the commodity seeds are the commingled results of other farmers’ soybean harvests, the commercial dominance of Monsanto’s Roundup technology means that the overwhelming majority of those seeds in fact are progeny of Monsanto Roundup Ready seeds, which thus carry the Roundup-resistant genetic trait.
Monsanto’s reaction is that Bowman’s use of the commodity seeds plainly violates its patent. From its vantage point, Bowman might have been free to use the seeds he bought from Monsanto (on the theory that Monsanto’s patent rights for those seeds were exhausted by its sale of them), but Monsanto has never sold the seeds that Bowman bought and planted; Monsanto does not, for example, sell seeds to grain elevators. Because Monsanto has never sold those particular seeds, Bowman’s use of them to create new seeds infringes its patent as clearly as if Bowman had made a new light bulb copying Edison’s light-bulb patent.
From that central dispute, the case spins out along a number of potentially important dimensions. A ruling that the sale of a single self-replicating object exhausts patent rights not only for that object but also for its progeny is even more problematic for information technology than it is for seeds; the marginal cost of copying software, for example, is essentially nil. Accordingly, the Court’s ruling on the exhaustion question is of foundational importance for firms in the IT industry.
For another thing, Monsanto’s technology agreement (signed by all farmers who purchase Roundup Ready seeds) includes provisions that prohibit Bowman’s activities. Among other things, those agreements prohibit any planting of progeny seed; the only permitted use of soybean seeds grown from Roundup Ready seeds is sale for food and the like. If the Court rules against Monsanto on the basic exhaustion question, it then must confront the controversial question (crucial to, among others, the software industry) of the enforceability of license agreements that govern the rights of users of IP-infused products. On that question, the United States (which firmly supports Monsanto on the central exhaustion question) argues that the conceded sale makes any subsequent licensing restrictions invalid as to those seeds and their progeny; not surprisingly, amici like the Business Software Alliance contest that idea.
A group of economists also provide a powerful amicus brief in support of Monsanto. They emphasize the “spillover” effects of innovation in this area: the substantial benefits to society as a whole (from increased agricultural productivity), which far exceed the profits biotech firms can earn on their patents; that argument speaks directly to the concern the Justices have expressed in recent years about the balance between encouraging new innovation and fostering dissemination of technology. The economists go on to describe the recent spate of IP literature emphasizing the differing value of patents from sector to sector. As it happens, all of that literature agrees that biotechnology sectors are among the ones where patents are the most valuable, largely because of the immense development costs (hundreds of millions of dollars in this case, for example), the up-front uncertainty of success, and the very low cost of the individual units of the resulting products.
In the end, it seems most unlikely the Court will rule against Monsanto. At the highest level, the correct answer almost has to be that Monsanto has some way to protect its investment in the technology. Although petitioner tries mightily to suggest that Monsanto could protect the value of its investment through contracts or other non-patent mechanisms, Monsanto capably demolishes that contention in its brief. It emphasizes, for example, the large volumes of its seed distributed by the United States in foreign aid programs in less developed countries: is it to be believed that Monsanto will obligate the United States to obligate all of the aid recipients to agree to contracts binding them (and purchasers of their harvest) to comply with Monsanto’s restrictions on seed use?
In sum, it is surely not easy to predict the doctrinal path that the Court will follow. But by far the most likely outcome is one in which the Federal Circuit’s ruling in favor of Monsanto is affirmed.