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« Court Report | Main | USPTO and EPO Announce Launch of Cooperative Patent Classification System »

October 22, 2012

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"or the company could just abandon this area and let soybean production levels fall to what they were before the herbicide-resistant seed became available. "

As if there will be no one to compete with them when the patent expires in what, a year?

Besides all your bellyaching, there's the possibility that Monsanto does nothing and life goes on without there being an exception made for self-replicating "tech". And that is by far the most likely.

Kevin, I think the active ingredient in Roundup was known long before the seeds were developed, and that the last of the patents on the ingredient or the formulation containing it expired a while ago. So in this case there's already competition for the herbicide and raising its cost isn't an option.

I think what you were trying to say is that prospectively, if it turns out that companies can't protect their investments in genetically modified seeds, they'll stop trying to make them, thus foreclosing the improved crop yields that would result from such development.

Dan: "if it turns out that companies can't protect their investments in genetically modified seeds, they'll stop trying to make them, thus foreclosing the improved crop yields that would result from such development."

And then what? We all starve?

I can't think of an industry more worthy of the shaft than the genetically-modified food industry. Here's hoping a death blow is administered by the Supremes.

Dear Keep: We could.

Patent policy shouldn't be determined by who gets shafted, but by how to best promote the progress in favor of the public. Don't you think?

Dan: obviously a problem in that case. I'm sure innovators will get creative on how to protect such combinations.

Kevin, respectfully, if Bowman is an infringer, the progress of the useful arts is not promoted. He buys seeds without restriction, puts them in the ground, and they grow into plants. What did he do to create the plants? Put a little water on them?

Boo hoo for Monsanto.

How could the Supremes NOT have granted cert?

Dear Gary:

I'm not sure your predicate is correct; I'm not sure this us a case of innocent infringement. And I'm not sure the sale was authorized, at least for Farmer Bowman's replanting.

Dear Dan:

Actually, perhaps It is as simple as getting a method claim that requires a license to practice the method, and then limit that license to use of the recombinant seed purchased from the patentee. I think Cetus used to protect PCR performed using Taq polymerase using an "authorized" thermocycler.

Innocent infringement?

No such thing. You infringe or you do not infringe.

Kevin, care to put any odds on your prediction that "we could all starve" if companies like Monsanto can't "protect their investments" in genetically modified seeds? Is like that a 1 in 10 chance of world starvation if Monsanto's seeds patents are diminished? 1 in 100? 1 in a million? Just trying to get an accurate sense of the likelihood, in your mind, of this horrible event.

And do you honestly believe that Monsanto and its investors are concerned at all about starvation? Seems far more likely that they would welcome increased starvation as that would increase the demand for their product(s).

Dear Keep:

Starve is relative. The point is whether there are incentives to increase yields or not. If Roundup and Monsanto's seed didn't do that, no one would care. So if we disincentive investment in the area, less food than there would be otherwise. Might not work out this way; but it might

Hungry is relative. Starve is extreme.

When I see arguments in the extreme, I become a bit, well, skeptical.

Starvation is extreme, particularly to the people starving. And if you don't think that's happening you aren't paying attention.
That having been said, starvation is mostly a failure of distribution and politics, not quantity of food. But it would be foolish to think we won't need greater quantities of food in future, or that providing a disincentive to developing greater crop yields is equally foolish.

I guess there are alternatives (as in "The Moon is a Harsh Mistress") but I prefer recombinant seed to penal colonies on the Moon.

To each her own.

Dr. Noonan,

Respectfully, the first two sentences in your last two answers, juxtaposed together, make my point:

Starve is relative.
Starvation is extreme,...

Whether or not people ARE starving is quite besides the point and has nothing to do with my paying attention to the legal arguments presented, or to real world conditions quite outside the specific legal issues under evaluation.

I do understand that you feel strongly about this subject and the potential benefits of genetic engineering to combat our burgeoning population is a very real issue. My posts are not meant to diminish either your feelings or the importance of progress in this area. Unlike MM, my view is not driven by the desire to see anyone shafted.

However, and notwithstanding the seriousness of that issue, what I believe is before the court is the rather straight-forward simpler issue of what constitutes patent exhaustion.

To me, the question needs to align the purpose of the first sale (and its use to grow, as opposed to any other commodity use - and I wish to stress "other" in commodity use, because commodity use most definitely includes "grow" which is not evident in your write-up), with the fact that THAT use necessarily entails "make."

I would also point out that there are in fact THREE sales in the fact pattern:
1) Monsanto to grower, with K terms intact,
2) grower to commodity owner - wherein, the K terms (as drawn up by Monsanto work, as they should, against Monsanto), and
3) commodity owner to grower - wherein NO K terms of the original sale remain.

The argument is not against recombinant seed in its own right, and Monsanto in its first sale (that it fully controls) has the ability to price that sale for what it thinks the value of its invention (with focus on what the patented ivntnion FULLY entails) should bring - AT THAT SINGLE INSTANCE.

Self-replicating inventions, especially when the "USE" of the invention for its patented purpose necessarily invokes the "MAKE" aspect must not get a free pass on patent exhaustion.

Perhaps a simple "reasonableness" thought experiment can illuminate this point: Let's say Invention Seed and normal seed are both available, but Invention Seed is fully priced to reflect what the patent owner thinks is of proper value. Let's take this arbitrarily at a 10:1 ratio.

Would any reasonable person knowingly buy the more expensive seed for ANY commodity use other than that very use that entails "MAKE"?

The simple logic dictates that "USE" (and the purchasing decision) must be for (and thus include) "MAKE".

Dear Skeptical:

The problem as I see it is raising semantics over policy. If we decide on philosophical grounds that "use" always encompasses "make" for seeds, then we have the conundrum that there will never be any profit in developing them. This is because, of course, making "use" and "make" co-extensive will exhaust (more like extinguish) the patent grant on the first sale. Accordingly, someone could buy a first batch of seed and never have to purchase any seed ever again.

This means that 10-fold is nowhere need the ratio needed for ROI on recombinant seed. No ROI, not investment, no seed - so coming to that conclusion is not good policy in my opinion. (And ironically could act to "enrich" the seed producer even more than current policy.) It would also penalize all the folks who play by the rules and accept the benefit of higher yields in recompensing the provider of those higher yields with the cost of their goods.

The contract facet is not an option because the seed grower, who may be bound by a contract, is not in privity (regarding the contract with the seed supplier) with the commodity grain dealer, and thus contract doesn't help. We have the same situation.

So as a policy matter I choose to permit the recombinant seed producer to make her ROI for the limited time of the patent right, to encourage development of the seed.

The patent exhaustion principle makes sense for most patented items. After all, if you purchase a first item you don't get to make another one, although you may delay the ultimate purchase of a replacement by caring for and repairing the item. One of my partners just bought the second pair of dress shoes he has ever owned (he has been in practice 32 years), because in addition to taking care of them he replaced the soles and heels when needed. This is part of the patent bargain - you can "repair" but you cannot "reconstruct."

For seed (and any self-replicating invention) this doesn't work if you believe that this class of invention is categorically exempt from the repair/reconstruction dichotomy. But while the argument that the purpose of a soybean seed is to make another soybean seed may be a biological truth it doesn't have to be a legal one. And there are several alternative "uses" for the seed other than making more soybeans - tofu, for example.

Finally, while I won't publish them there has been a fair amount of talk regarding Farmer Bowman's behavior that make me think this was not the case of a farmer who unknowingly plants recombinant seed and is sued. Even in his brief Farmer Bowman seems to argue that the "second" (seasonal) planting of this seed somehow justifies his behavior, regarding the difficulties in growing soybeans at the later time of year. I don't know the economics sufficiently to credit this argument or not, but suffice it to say that Farmer Bowman knew that he was acting outside the scope of the "authorized sale" in this instance and took the risk that he would be accused of infringement.

Thanks for the comment.

Dr. Noonan - this is where I think your argument is weakest: "But while the argument that the purpose of a soybean seed is to make another soybean seed may be a biological truth it doesn't have to be a legal one. And there are several alternative "uses" for the seed other than making more soybeans - tofu, for example."

To subjugate the actual truth for a legal truth needs more than just a support of a Monsanto business model. After all, what is to stop Monsanto from invented a seed that produces for only one generation?

Moreover, I do not find the "alternative uses" plank to be compelling in the least - as I mentioned with the reasonableness example, the alternative "uses" do not pass muster, because (PRECISELY because) the reason for actually spending more on the patented item is for that very "make" capability. One simply would not buy the patented item for the other uses - making tofu or feeding pigs or whatever - the sale is inherently tied to the "use = make" and must exhaust.

As for the second season aspect, Bowman bought from the commodity owners (my third sale above) and thus there was no scope of "authorized sale" for him to act outside of - that is why I made a point of the fact that there are actually three sales in the fact pattern of this case.

As for your policy arguments - I understand them. I do. The problem with such arguments is that by using them, you actually must answer the second question to the Supreme Court in the affirmative: you must have an exception to the exhaustion doctrine for replicating inventions of this type. Hardly a matter of raising semantics over policy, the aspect of the patent here that distinguishes is the aspect of replication. As I point out, the very basis of the sale is the "use = make," and I do not see your policy argument to make an exception compelling enough. I just don't think that aspect should overpower the very rationale for the first sale and this nature of this particular type of invention, wherein the "use = make" is the reason in the first place for the sale. It would be an exception that would swallow the rule.

If it comes done to NO exhaustion versus exhaustion that more closely matches other types of patented inventions, I think that the latter must win out in any type of policy battle.

Lastly, I do not think this type of policy setting is one for the courts. To me, this is the type of policy (inventions dealing with a whole class) that is more attuned for Congress to take up.

Dr. Noonan,

A few more thoughts on your reply:

KN: “If we decide on philosophical grounds that ‘use’ always encompasses ‘make’ for seeds, then we have the conundrum that there will never be any profit in developing them. This is because, of course, making ‘use’ and ‘make’ co-extensive will exhaust (more like extinguish) the patent grant on the first sale. Accordingly, someone could buy a first batch of seed and never have to purchase any seed ever again.”

The decision is NOT “on philosophical grounds,” and my position is NOT “always.” The decision is based on the grounds of what the patented invention is and what is the relation of that patented invention to the supposedly exhausting sale. This is just a normal application of exhaustion doctrine.

The parallel between exhaust and extinguish is the exact same parallel that ANY event of exhaustion RIGHTFULLY entails. I view the choice of wording of extinguish to be merely a sympathy ploy and dismiss it out of hand.

Accordingly, yes – for a replicating invention wherein the purpose of the sale necessarily involves the use of make, a first batch would be purchased and all succeeding generations would not have to be repurchased. To quote O’Malley from a recent albeit unrelated case, “That proposition is an unremarkable one.”


KN: “This means that 10-fold is nowhere need the ratio needed for ROI on recombinant seed. No ROI, not investment, no seed - so coming to that conclusion is not good policy in my opinion. (And ironically could act to "enrich" the seed producer even more than current policy.) It would also penalize all the folks who play by the rules and accept the benefit of higher yields in recompensing the provider of those higher yields with the cost of their goods.”

I choose the 10-fold has an arbitrary and easy to handle number. Feel free to use a more realistic number to achieve ROI. Then realize that patents are not a hunting license and that if an ROI cannot be achieved, especially in light of alternatives in cost, then THE MARKET (rightfully) dictates whether the invention succeeds or not. How much would it be worth to a farmer to be able to buy seed once and not again for the next ten to twenty years (unless a better invention comes along?)

Patents HAVE NEVER been about guaranteeing a profit from the patented invention. Even patents take their chances in the market.

Also, you assume your conclusion when you state that “all the folks who play by the rules” would be penalized. Before that conclusion can be accepted, the premise that “currently innocents are penalized” stands on equal ground. Here too, your argument is meant to appeal to emotions, and at the lack of sounding calloused, I refute such an emotional ploy (but keep in mind, that I do not mean to impugn your belief that this area is important).


KN: “The contract facet is not an option because the seed grower, who may be bound by a contract, is not in privity (regarding the contract with the seed supplier) with the commodity grain dealer, and thus contract doesn't help. We have the same situation.”

The fact that contract does not help you should be taken as a hint that the exception to exhaustion violates the market. When you override the necessity of use-make in the first sale, market forces that should be in play are prevented from being in play. You are pushing the patent right beyond its natural state.


KN: “So as a policy matter I choose to permit the recombinant seed producer to make her ROI for the limited time of the patent right, to encourage development of the seed.”

I understand and recognize your choice. I think that choice robs the market of choosing, forces a foreclosure of secondary markets in patented items (like no other acceptable class of patented invention), and does more harm than good than is necessary.

It is one thing to reward inventors with exclusivity over their invention (and where that exclusivity stops as in the doctrine of exhaustion that applies across the board) and it is quite another to extend that reward to an actual monopoly by swallowing the doctrine with an exception, forcing out the secondary market and encouraging a windfall style of development divorced from ordinary market power to decide product success.


KN: “The patent exhaustion principle makes sense for most patented items. After all, if you purchase a first item you don't get to make another one, although you may delay the ultimate purchase of a replacement by caring for and repairing the item. One of my partners just bought the second pair of dress shoes he has ever owned (he has been in practice 32 years), because in addition to taking care of them he replaced the soles and heels when needed. This is part of the patent bargain - you can ‘repair’ but you cannot ‘reconstruct.’”

I think the arguments between repair/reconstruction do not fit the present fact patterns. I think my “reasonableness” test shows why.


KN: “For seed (and any self-replicating invention) this doesn't work if you believe that this class of invention is categorically exempt from the repair/reconstruction dichotomy. But while the argument that the purpose of a soybean seed is to make another soybean seed may be a biological truth it doesn't have to be a legal one. And there are several alternative ‘uses’ for the seed other than making more soybeans - tofu, for example.”

I do not think that “exempt” is the proper word. Rather than exempt, the purpose of the sale (make=use) simply overpowers the repair/reconstruction idea and makes the idea inapplicable to this invention.

Another mental exercise would be to contemplate a different invention: a seed that when ground up makes a superior paste (a tofu that tastes like lobster, for example). Such an invention would not be tied to replicating, and the “use=make” necessity would not come into play. One simply cannot choose to ignore the necessity of use=make tied to the purpose of the sale.


KN: “Finally, while I won't publish them there has been a fair amount of talk regarding Farmer Bowman's behavior that make me think this was not the case of a farmer who unknowingly plants recombinant seed and is sued. Even in his brief Farmer Bowman seems to argue that the ‘second’ (seasonal) planting of this seed somehow justifies his behavior, regarding the difficulties in growing soybeans at the later time of year. I don't know the economics sufficiently to credit this argument or not, but suffice it to say that Farmer Bowman knew that he was acting outside the scope of the ‘authorized sale’ in this instance and took the risk that he would be accused of infringement.”

“Unknowingly” is a bit of a red herring. Direct Infringement does not depend on “knowingly” (granted, the concept comes into play for damages and non-direct infringement). Economics, then, do not come into the argument. A better argument would be based on the contract terms – as written by Monsanto – that does not bind the commodity buyer. As you mentioned, contract does not avail an answer to Monsanto. But this does not mean that Monsanto cannot receive justice. It just means that the type of justice Monsanto wants is not the type of justice law provides. Just because they have a patent does not mean that market forces should be removed – no other type of patent gets that type of treatment.

The desired replication invention exception to exhaustion would in fact de facto bind such a third party to contract terms and eviscerate the secondary market in seeds. As I pointed out, the use of commodity seeds for growing appears to be a dominant use in that secondary market (based on my limited review of searching the web for commodity seed use), and the exclusion of that use seems to be a conclusion reached in your initial argument, rather than a position earned after consideration of arguments from both sides.


KN: “Thanks for the comment.”

Thanks for the forum!

There are a few key points that are worth mentioning.
One is the assumption that GM represents progress and it is useful. Experience so far shows that GM crops haven't produces significantly higher yield anywhere. It has never been the puurpose in developing them. It has absolutely nothing to do with starvation, hunger, wolrd population and the like. The only "result" in this area has been 270.000 suicides among Indian farmers who opted for GM seed and found themselves in a hopeless situation when they could not afford seed for the naxt season. They don't need any food anymore.

The ability to patent life forms is basically absurd. Owning them is even more absurd, since nobody can control the movement of pollens, so the protected genes appear in plants on road sides, deveral miles away from any cultivated field. So Monsanto can sue Nature or God.

Investment costs are so high that under normal market conditions there would be no chance for any profit. If you just sold GM seed and people would be free to use them like any other seed, the price wouls be sky-high, nobody would buy it and that'S THE WAY IT IS IF YOU PRODUCE SOMETHING THAT IS TOO EXPENSIVE.

SO the law has been twisted to the extreme to mak e profit possible for these poor companies who would otherwise find that there is no demand for their product. The business model works only if Monsanto controls everybod who ever touches those seeds, even people who have never bought anything from them in the first place. How come the put pressure on seed cleners not clesn GM seed for anybody? What do those cleaners have to do with it? Should they know if it is GM? How? The whole system is untenable and can only be maintaned through hacking the law, having Monsanto employees in tha FDA, coercing avery participant in the market and buying up all other seed companies so that traditional seed becomes non-existent. And whan you can only buy RR, you decide to buy RR.

Here Monsanto objects to the use of seed acquired in a business transaction tha does not involve Monsanto. How? Why? The only reason is "This is destroying our business". The fact is, they are out of luck, it is impossible to cover all the wholes in this fundamentally crazy system, but they are really good at trying.

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