By Kevin E. Noonan --
Earlier this month, the Supreme Court granted certiorari in Monsanto v. Bowman, against the advice of the U.S. Solicitor General (whose views the Court had solicited). While it isn't unheard of for the Court to disregard the Solicitor General's views (including famously in Laboratory Corp. v. Metabolite Labs., Inc. ("LabCorp") where the Court ultimately determined that certiorari was improvidently granted over the objections of Justices Breyer, Souter, and Stevens), the certiorari grant raises the question of whether the Court is preferentially disregarding the views of the Obama administration. More importantly, perhaps, the circumstances surrounding the petition raise the question of what issue does the Court think it is addressing.
To recap, the case arose as the result of a farmer replanting Monsanto's patented Roundup Ready® seed. The patents-in-suit are (as they have been in other cases) U.S. Patent Nos. 5,352,605 and RE39,247 (a reissue of 5,633,435). Claims 1 and 4 of the '605 patent are representative:
1. A chimeric gene which is expressed in plant cells comprising a promoter from a cauliflower mosaic virus, said promoter selected from the group consisting of a CaMV (35S) promoter isolated from CaMV protein-encoding DNA sequences and a CaMV (19S) promoter isolated from CaMV protein-encoding DNA sequences, and a structural sequence which is heterologous with respect to the promoter.
4. A plant cell which comprises a chimeric gene that contains a promoter from cauliflower mosaic virus . . . .
Claims 103, 116, 122, 128, 129, and 130 of the '247 patent are representative:
103. A recombinant, double-stranded DNA molecule comprising in sequence: (a) a promoter which functions in plant cells to cause the production of an RNA sequence; (b) a structural DNA sequence that causes the production of an RNA sequence which encodes an EPSPS enzyme having the sequence of SEQ ID NO:70; and (c) a 3' non-translated region that functions in plant cells to cause the addition of a stretch of polyadenyl nucleotides to the 3' end of the RNA sequence; where the promoter is heterologous with respect to the structural DNA sequence and adapted to cause sufficient expression of the encoded EPSPS enzyme to enhance the glyphosate tolerance of a plant cell transformed with the DNA molecule.
116. A glyphosate-tolerant plant cell comprising a DNA sequence encoding and EPSPS enzyme having the sequence of SEQ ID NO: 70.
122. A seed of the plant of claim 116, wherein the seed comprises the DNA sequence encoding an EPSPS enzyme having the sequence of SEQ ID NO: 70.
128. A glyphosate[-]tolerant plant cell comprising the recombinant DNA molecule of claim 103.
129. A plant comprising the glyphosate[-]tolerant plant cell of claim 128.
130. A method for selectively
controlling weeds in a field containing a crop having planted crop seeds
or plants comprising the steps of:
(a) planting the crop seeds or plants which are glyphosate-tolerant as a result of a recombinant double-stranded DNA molecule being inserted into the crop seed or plant . . .
(b) applying to the crop and weeds in the field a sufficient amount of glyphosate herbicide to control the weeds without significantly affecting the crop.
Pioneer Hi-Bred (Pioneer), one of Monsanto's licensed seed producers, sold seed to Bowman; these sales were subject to a Technology Agreement similar to the Agreements Monsanto typically requires for farmers who purchase its seed. Under the Technology Agreement, the licensed grower agreed: (1) "to use the seed containing Monsanto gene technologies for planting a commercial crop only in a single season"; (2) "to not supply any of this seed to any other person or entity for planting"; (3) "to not save any crop produced from this seed for replanting, or supply saved seed to anyone for replanting"; and (4) "to not use this seed or provide it to anyone for crop breeding, research, generation of herbicide registration data, or seed production." It was undisputed that Bowman complied with these provisions as to its "first planting" each year. Monsanto's complaint arose from farmer Bowman's "second planting," which was made using so-called "commodity seed" obtained from local grain elevators. Farmers under the Technology Agreement could freely sell seed to grain elevators for commodity use (for example, as cattle feed), which did not include replanting. However, since Farmer Bowman's "second planting" was riskier (in terms of potential yield) he decided to use commodity seed because it was significantly cheaper than Roundup Ready® seed. After planting this seed, Farmer Bowman tested this second crop for Roundup® resistance, and finding that substantial amounts of the seed were resistant, used Roundup® on these plantings and replanted this seed. The District Court granted summary judgment of patent infringement and entered judgment against Farmer Bowman and the Federal Circuit affirmed.
The Question Presented is relatively straightforward:
Patent exhaustion delimits rights of patent holders by eliminating the right to control or prohibit use of the invention after an authorized sale. In this case, the Federal Circuit refused to find exhaustion where a farmer used seeds purchased in an authorized sale for their natural and foreseeable purpose -- namely, for planting.
The question presented is:
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?
It is certainly the case that the Federal Circuit finds itself once again on the wrong side of the Supreme Court's views on patent law with regard to the specialized appellate court's conditional sales doctrine in the line of cases beginning with Mallinckrodt, Inc. v. Medipart, Inc. It is also certainly the case that the Federal Circuit has used this doctrine in other cases brought by Monsanto against other farmers, including Monsanto Co. v. Scruggs and Monsanto Co. v. McFarling. But it is certainly the case that the Federal Circuit did not rely on the doctrine in affirming the District Court's judgment in this case; while not abrogating this line of cases (which a three-judge panel cannot do to binding precedent of earlier panels or the decisions of the C.C.P.A., South Corp. v. U.S.), the Court was careful to point out the alternative grounds of affirming the District Court.
This distinction was emphasized by the Solicitor General's brief, which pointed out for the Court that the Federal Circuit held that patent exhaustion did not apply. Citing the McFarling opinion, the panel stated that "[t]he 'first sale' doctrine of patent exhaustion . . . [wa]s not implicated [in this case], as the new seeds grown from the original batch had never been sold. The price paid by the purchaser 'reflects only the value of the 'use' rights conferred by the patentee.'" Id. at 1299 (citing B. Braun Med., Inc. v. Abbott Labs., 124 F.3d 1419, 1426 (Fed. Cir. 1997)). The Court futher stated that the important consideration is that "the grower has created a newly infringing article" when commodity seed was planted by Bowman and the "next generation" of seeds comprising Monsanto's Roundup Ready® technology were produced. "The fact that a patented technology can replicate itself does not give a purchaser the right to use replicated copies of the technology," according to the opinion, and "[a]pplying the first sale doctrine to subsequent generations of self-replicating technology would eviscerate the rights of the patent holder," citing Monsanto Co. v. Scruggs, 459 F.3d 1328, 1336 (Fed. Cir. 2006), cert. denied, 549 U.S. 1342 (2007). According to the opinion, the right to use patented technology upon purchase "do[es] not include the right to construct an essentially new article on the template of the original, for the right to make the article remains with the patentee," citing Jazz Photo Corp. v. Int'l Trade Comm'n, 264 F.3d 1094, 1102 (Fed. Cir. 2001), cert. denied, 536 U.S. 950 (2002). The opinion applied the "substantial embodiment" test with regard to separate generations of seed, stating that present seed does not "substantially embody" "all later generation seeds," because with regard to the commodity seeds "nothing in the record indicates that the 'only reasonable and intended use' of commodity seeds is for replanting them to create new seeds, citing Quanta, 553 U.S. at 631 and noting that other uses for commodity seed existed (such as use as feed). "While farmers, like Bowman, may have the right to use commodity seeds as feed, or for any other conceivable use, they cannot 'replicate' Monsanto's patented technology by planting it in the ground to create newly infringing genetic material, seeds, and plants.
It is evident that the principal basis for Farmer Bowman's certiorari petition is not consistent with the plain language of the Federal Circuit’s opinion. Farmer Bowman correctly argued that the district court based its decision on its appreciation that there had been no unconditioned sale of the seed "because the farmers could not convey to the grain dealers what they did not possess themselves." Farmer Bowman in response to the Solicitor General argued that the Federal Circuit necessarily agreed with the District Court's grounds for finding against Bowman based on the conditional sale doctrine, not from language from the Federal Circuit opinion, but merely from the fact that the Federal Circuit refused to find that Monsanto's patent rights were exhausted, i.e., failed to find in Bowman's favor based on Bowman's arguments. (This argument was also based on the Federal Circuit's refusal to remand for a recalculation of damages, based on the way the district court calculated damages.)
These circumstances suggest that the Supreme Court is sympathetic to Farmer Bowman's argument that, because the Supreme Court abrogated (or at least seriously questioned) the conditional sale doctrine by virtue of its Quanta Computer, Inc. v. LG Electronics, Inc. decision, this case becomes "an appropriate vehicle through which the Court may resolve uncertainty created by the Federal Circuit's continued reliance on the Mallinckrodt line of cases."
A more pernicious possibility is that the Supreme Court will focus its analytical powers on the second portion of the Question Presented, that the Federal Circuit has "creat[ed] an exception to the doctrine of patent exhaustion for self-replicating technologies." While not supported by the Federal Circuits opinion, that may not be dispositive: many, for example, have discerned that both the District Court and the Federal Circuit applied the "four factor test" for granting an injunction in eBay Inc. v. MercExchange, L.L.C., but that did not stop the Court from writing an opinion setting forth the necessity for the lower courts to apply the test in patent cases, based on clever briefing that suggested to the Court that the Federal Circuit was permitting district courts to grant injunctions "automatically" to prevailing patentees. Here, depending on how Farmer Bowman crafts his brief something similar may happen: the Court may be motivated to provide instruction to solve a problem that does not exist.
While any such prescriptive rule would create difficulties for companies such as Monsanto to protect its seed technology (or any company having self-replicating technology), more importantly it could create a need for business practices that would be less efficient, more burdensome and that could impede progress more significantly than anything Farmer Bowman accuses Monsanto of doing. For example, Monsanto could just increase (significantly) the cost of its Roundup® herbicide to provide sufficient return in investment lost by "free" distribution of its recombinant seed. Or perhaps Monsanto (or any recombinant seed producer) could restrict sales of Roundup® to those farmers who could provide proof of the provenance of the seed they were planting. The recombinant seed could incorporate genes that would prevent propagation, something that farmers have traditionally resisted. More intrusive methods could always be envisioned, 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. The important practical point is that any such system would be less beneficial to U.S. soybean production and (ultimately) its farmers. These inefficiencies would be imposed on all American farmers due to the misbehavior of the few like Famer Bowman who decided to infringe rather than respect Monsanto's patent rights. It is possible that the Court will see some grand philosophical grounds for making such a pronouncement in this case, but that would be contrary to the Constitutional mandate that Congress be empowered to enact laws to "Promote the Progress . . . of the Useful Arts" and continue its recent pattern of making distinctions contrary to the best interests of the patent system and the country.