By Kevin E. Noonan —

In what may be considered a softening (or at least
a change) in its approach to protecting its patented technology, Monsanto
announced that it would not enforce any contractual provisions regarding its Roundup Ready®
transgenic seed (that preclude growers from replanting genetically-engineered
seeds) once the patents on that technology expire in 2014.  Monsanto also announced that the
company would stop collecting royalties from licensees at the same time.  These actions, by a company renowned
for stringently enforcing its intellectual property rights, may reflect a sober
and prudent conformity with the current political and regulatory climate.

The announcement addresses, and alleviates, what
farmers have expected (if not feared) regarding Monsanto's recombinant seeds,
particularly soybeans.  The
situation facing Monsanto after 2014 is similar to one that has faced
pharmaceutical companies when a company's main product goes off-patent.  Generally the answer has been further
innovation, which has sometimes taken the form of providing an improved version
of the original drug.  Examples
include AstraZeneca's Nexium® that took the place of the related Prilosec® (S-omeprazole rather than racemic
omeprazole), and several other drugs that have used this strategy for their
drugs (albeit perhaps none so successfully).

Monsanto has pursued a similar strategy for its
Roundup Ready® transgenic seed products.  These seeds contain an exogenous bacterial gene, encoding an
enol pyruvate shikimate-3-phosphate synthase (EPSPS) gene from the microbe Agrobacterium tumefaciens
that confers resistance to glyphosate, an herbicide sold by Monsanto under the
name Roundup®.  Over 90% of all
soybean acres planted in the U.S. use this herbicide to increase yield and as a
consequence are planted with Roundup Ready® seed.  For its soybean embodiments, Monsanto has developed a
second-generation seed, termed Roundup Ready 2®, having a 7-11% higher yield per
planted acre.  The same gene has
been introduced into these seeds but the transgene has integrated into a
different chromosomal site.  Until
Monday's announcement, farmers feared that Monsanto would force them to switch
to Roundup Ready 2® seeds, at a higher cost, in part by preventing them from
using the original Roundup Ready® transgenic seeds.

The announcement was more significant than it might
be otherwise (since a patentee's right to royalties typically ends with the
expiration of its patents) because, in addition to its patent rights, Monsanto
has also staunchly enforced contractual provisions protecting its seeds.  Recombinant seed purchasers have been
required to sign a "Technology Agreement" ("the Agreement"),
agreeing to pay a one-time license fee of $6.50 per bag, and agreeing not to
plant themselves, or supply to others, "saved" seeds, i.e., seeds produced from the originally
purchased seeds.  This system ensures that farmers purchase and license
Roundup Ready® soybean seeds each planting seasons.

Over the past 10 years, Monsanto has filed suit 125
times against individual farmers it accused of infringing its patents, including
U.S. Patent Nos. 5,352,605
and No. 5,633,435
(RE39,247)
related to its recombinant seed technology.  Only eight of
these lawsuits have gone to trial, while in the remainder, the accused
infringer agreed to settlements that generally included an admission of
liability.  Monsanto has been
awarded $21.6 million in its victorious lawsuits, and The Center for Food
Safety estimates that Monsanto has received between $85 million and $160
million in settlements, which remain confidential.  Monsanto has said that
it has donated these monies to charity.

One remaining concern are licenses required by
certain countries to permit importation of recombinant grain and other
foodstuffs, licenses maintained at present by Monsanto.  The company has announced that it will
maintain these until 2017, but should they be permitted to expire thereafter,
these countries may not permit importation of Roundup Ready® soybeans.

Monsanto's actions come on the heals of a
Department of Justice investigation into "potential anti-competitive conduct," due in part
to allegations by DuPont in counterclaims asserted in lawsuits between the
companies, to the effect that Monsanto has committed antitrust violations.  The American Antitrust Institute has
also recommended federal investigation of Monsanto's "anti-competitive"
conduct.  With the change of
administration has come a more stringent attitude regarding investigation if
not prosecution of such alleged conduct, even by patentees (whose exclusive
rights are, by nature, anti-competitive); the current DOJ antitrust division no
longer subscribes to the more patent-friendly (or at least
patent-accommodating) stance taken by the Bush administration (see "U.S. FTC and DOJ Release Report on Relationship between Patent Law and Antitrust Law").

Or perhaps Monsanto is aware that, even if they are
lawfully exercising the patent franchise, an argument can be made that at
present patentees must tread lightly, since the tide (of public perception,
Congressional understanding, and jurisprudential consistency) has turned against
them.  Every 30 years or so (the
1940's, 1970's, and today) we seem to forget the nature, value, and utility of
patenting.  We are in such a
period now, which is ironic since the economy depends on patent protection
today more than ever before, to protect nascent technology while at the same
time promoting its disclosure.  As
things now stand, if Monsanto's actions prevent another distracting episode of
patent-bashing it may be worth it for the company and the rest of us.

For additional information regarding this topic, please see:

• "Monsanto Announces Latest Lawsuit Settlement over Roundup Ready Soybean Seed," September 8, 2008
• "Monsanto Co. v. David (Fed. Cir. 2008)," February 6, 2008
• "Court Report," February 3, 2008
• "Court Report," January 28, 2008
• "Court Report," January 13, 2008
• "Court Report," January 7, 2008
• "Supreme Court Fails to Grant Certiorari in Monsanto Co. v. McFarling," January 7, 2008
• "Court Report," December 16, 2007
• "Court Report," November 18, 2007
• "Court Report," October 21, 2007
• "Court Report," July 1, 2007
• "Monsanto Co. v. McFarling (Fed. Cir. 2007)," June 4, 2007
• "Court Report," May 20, 2007
• "Court Report," May 7, 2007
• "Court Report," April 15, 2007
• "Court Report," March 11, 2007
• "Court Report," March 4, 2007
• "Court Report," February 28, 2007