By Kevin E. Noonan --
The Supreme Court heard oral argument today in Bowman v. Monsanto Co., with Mark P. Walters representing Farmer Bowman, Seth Waxman representing Monsanto, and Melissa Arbus Sherry representing the Department of Justice. While Supreme Court tea-leaf reading is a fool's game, consideration of the questions from the Justices can at least provide a diverting pastime while we await the Court's decision.
The Chief Justice asked the first question from the bench and got right to the point: "Why in the world would anybody spend any money to try to improve the seed if as soon as they sold the first one anybody could grow more and have as many of those seeds as they want?" Mr. Walters answered that while he agreed no one would do that, he didn't think that was the situation before the Court because Monsanto could protect its investment through contract. The Chief Justice persisted, asking how that was different from any patented article, and when Mr. Walters agreed, the Chief concluded by stating: "So the patent system is based, I think, on the recognition that contractual protection is inadequate to encourage invention." Mr. Walters countered that patent policy also exists to "protect the purchaser," and "any" farmer who grows soybeans infringes Monsanto's patents. Justice Scalia took issue with this characterization, saying "I thought that their claim is he only violates the patent if he tries to grow additional seeds from his first crop. Right? Isn't that the only claim here?" But Mr. Walters (mis)characterized Monsanto's position to be that Monsanto can control how the seed was used even after it is sold.
This argument did not hold water for Justice Scalia:
No, not that seed. It's different seed. That seed is done. It's been planted in the ground and has grown other seed. It's the other seed we are talking about. It's not the very seed that was sold. Right?
Mr. Walters was not deterred; he responded that "if exhaustion is eliminated, rather, for the progeny seed, then you are taking away the ability of people to exchange these goods freely in commerce. You have essentially a servitude on these things that are exchanged, and every grain elevator who makes a sale is infringing." Justice Kennedy then agreed that this may be Monsanto's argument, and says that he had "great difficulties characterizing it that way." "But Monsanto can still prevail if you say that there's a patent infringement if he plants it for seed and uses the seed to replant. That's not as far as Monsanto goes, but it seems to me it's one way to characterize their argument and to make it sensible," according to Justice Kennedy.
Justice Breyer distinguished Petitioner's argument regarding restrictions on sale of commodity seed by stating: "No, but you are allowing him to use those seeds for anything else he wants to do. It has nothing to do with those seeds. There are three generations of seeds. Maybe three generations of seeds is enough" (echoing Justice Oliver Wendel Holmes' infamous statement from Buck v. Bell). Returning to this generational analogy, Justice Breyer characterized the situation as:
[H]e [Farmer Bowman] can do what he wants with the first generation. Anything he wants. And moreover, when he buys them from Monsanto, he can make new seeds. He can make generation two, because they've licensed him to do it. Here, he buys generation two. Now, he can do what he wants with those seeds. But I'll tell you, there is a problem, because the coming about of the third generation is itself the infringement. So the second generation seeds have nothing to do with it. If he went into a room and had a box that he bought from a lab and he put rocks in it and he said, hocus-pocus and lo and behold out came the third generation of seeds, he would have infringed Monsanto's patent with that third generation, would he not?
Mr. Walters responded with a succinct "No." After attempting to clarify his hypothetical, Justice Breyer said that "You know, there are certain things that the law prohibits. What it prohibits here is making a copy of the patented invention. And that is what he did. So it's generation 3 that concerns us. And that's the end of it." When Mr. Walters attempted to make his argument on the lack of distinction between "making" and "using," Justice Ginsberg noted that "you said making or use and it isn't an either-or thing then. . . . You can use the seed to make new seeds. So use and make aren't -- it's not either you use it or you make it. You can use it to make a new item." Mr. Walters stated in response that making new seed was the "point" of the invention and thus constituted an exhausted use. Justice Breyer returned to the colloquy with the following:
I'm still not getting the answer. I'm going to try once more. Now, when you buy generation 2, well, there are a lot of things you can do with it. You can feed it to animals, you can feed it to your family, make tofu turkeys. I mean, you know, there are a lot of things you can do with it, all right. But I'll give you two that you can't do.
One, you can't pick up those seeds that you've just bought and throw them in a child's face. You can't do that because there's a law that says you can't do it.
Now, there's another law that says you cannot make copies of a patented invention. And that law you have violated when you use it to make generation 3, just as you have violated the law against assault were you to use it to commit an assault.
Now, I think that's what the Federal Circuit is trying to get at. And so it really has nothing to do with the Exhaustion Doctrine. It has to do with some other doctrine perhaps that -- that somehow you think should give you the right to use something that has as a basic purpose making a copy of itself. Maybe you should, but I don't see that. Where is that in the law?
Mr. Walters valiantly responded that this would be an exception to the patent Exhaustion Doctrine for self-replicating technologies.
Justice Sotomayor then said:
I'm sorry. The Exhaustion Doctrine permits you to use the good that you buy. It never permits you to make another item from that item you bought. So that's what I think Justice Breyer is saying, which is you can use the seed, you can plant it, but what you can't do is use its progeny unless you are licensed to, because its progeny is a new item.
Mr. Walters responded that this is a "brand-new case" before the Court, and to adopt the Federal Circuit's view would "modify this Court's case law substantially, and that's something that ought to be done in Congress." He then expanded on Petitioner's theme regarding the balancing of rights between the patentee and the public, saying:
The Exhaustion Doctrine, the policy that underlies this Court's cases is fundamentally a choice about the purchaser's rights in that personal property over the patentee's rights in the monopoly to use that monopoly and increase its sales. This Court has always chosen the purchaser's rights over the patentee's rights to increase sales. And we're just asking you to make the same choice here.
Justice Kagan turned Petitioner's argument on exceptions back on Mr. Walters, contending that the law was clear that a purchaser does not have the right to make a new copy of the exact same kinds as the purchased article, and that Farmer Bowman was asking the Court to make an exception for "self-replicating technologies." After some further discussion of whether the farmer was in control of his crop ("They plant, they spray and they pray."), Justice Breyer returned to the argument regarding the purported "self-replicating technology" exception:
You don't need any exception. There's no exception from anything. When you create a new generation, you have made a patented item, which you cannot do without the approval of the patent owner. Therefore, Monsanto gives that approval when you buy generation 1. Now, it seems to me all to work out without any need for exception.
Mr. Walters then accused Monsanto of wanting the farmer to take "all the risks of farming" but to retain ownership of "the property that is no doubt owned by that farmer." Justice Ginsberg did not accept that argument, saying that "the seeds are owned by the farmer. But when he uses them to grow more seeds, he's infringing on that patent. So I don't think that the ownership has anything to do with it."
Justice Kagan asked Mr. Walters to return to the Chief Justice's opening question regarding incentives to make recombinant seeds in the absence of the ability to prevent the type of infringement occasioned by Farmer Bowman's actions, noting that "it seems to me that that answer is [that the incentive is] purely insufficient in this kind of a case, because all that has to happen is that one seed escapes the web of these contracts, and that seed, because it can self-replicate in the way that it can, essentially makes all the contracts worthless." Mr. Walters responded by contrasting the uniformity of seeds as originally purchased with the commodity seeds obtained from the grain elevator, to the point that such plantings would not "compete with" Monsanto's seed. And he closed his argument by reiterating the allegation that Monsanto wanted farmers to take all the risks of farming while retaining ownership rights to their crops.
The government argued next, beginning with the Court's J.E.M. Ag Sciences decision, which Ms. Sherry asserted "largely resolves this case." According to the government, deciding in favor of Farmer Bowman would "read into" the utility patent statute the seed saving provisions of the PVPA. The Chief Justice took issue with the government's position that the patent Exhaustion Doctrine was not implicated because it had never been applied to such a case, stating that "the reason it's never is because this is an entirely different case. It's the reason it's here, because you have the intersection of the Exhaustion Doctrine and the -- the normal protection of reinvented articles. So I don't think it gets you very far to say that we've never applied the Exhaustion Doctrine that way either. We have never applied the reinvention doctrine to articles that reinvent themselves like plant seed." Ms. Sherry countered that the Court had always applied the Exhaustion Doctrine to "the specific article that's sold." Taking Petitioner's position to the extreme, the government asserted that the only seed protected by Monsanto's patents would be its first seed, because every seed sold after that would be a progeny of that first seed and there would be no incentive to patent recombinant seed as a consequence.
Justice Scalia responded by saying that:
That's a pretty horrible result, but let me give you another horrible result, and that is if -- if we agree with you, farmers will not be able to do a second planting by simply getting the undifferentiated seeds from a grain elevator, because at least a few of those seeds will always be patented seeds, and no farmer could ever plant anything from a grain elevator, which means -- I gather they use it for second plantings where the risks are so high that it doesn't pay to buy expensive seed. Now they can't do that any more because there's practically no grain elevator that doesn't have at least one patented seed in it.
That would not be such a horrible result, according to the government, because farmers do not traditionally used commodity grain from grain elevators for replanting, citing the American Soybean Association amicus brief and the likelihood that some of the commingled commodity grain would be covered by PVPA Certificates, providing another source of infringement outside the patent laws and another disincentive for farmers to use commodity grain for replanting. The Chief Justice asked the government for its views on when patent rights to the seed were exhausted, and Ms. Sherry responded "at the same time they are exhausted with respect to any other product, upon an authorized sale" and agreeing with Justice Breyer that "you can do what you want" with the seed purchased from such an authorized sale. What requires the patentee's permission, according to Ms. Sherry, is "mak[ing] a new generation of seed." Seeking clarification, the Chief Justice walked the government through planting and sale but not replanting, noting that "[t]hat sounds like the patent rights haven't been exhausted," to which Ms. Sherry responded that they had been exhausted as to the first seeds sold. While the Chief Justice distinguished this case based on its self-replicating nature, the government discussed "other technologies," such as software. The Chief Justice then stated that "we haven't had that case, either," and in response the government directed the Court's attention to Microsoft v. AT&T which, while "slightly different" had been analogized to reproduction through biological processes, bringing the argument full circle.
Ms. Sherry summed up:
And so all we are asking the Court to do today -- I recognize it's a new technology and to the extent new technologies require different rules, Congress is the body that should be making those different rules. And when Congress has acted in this area in the Plant Variety Protection Act and also in the software context in the Copyright Act, it has not adopted the wholesale exemption that Petitioner is talking for here.
Justice Kagan asked for one clarification: where the government diverged (if it did) with Monsanto's position. Specifically, the Justice asked whether the Federal Circuit's "conditioned sales" doctrine "is causing trouble as it presently exists in the Federal Circuit" and whether they should ignore the doctrine in this case or was it necessary for the Court to address it. Ms. Sherry responded that the government believed that the Court did "not need to do something about it in this case," and that "Quanta largely decided the issue."
Seth Waxman then presented Monsanto's argument, beginning by addressing some "science or technology" questions, including the life cycle of the soybean (to answer Justice Kennedy's earlier question). He also affirmed Justice Scalia's understanding that inadvertently growing Roundup Ready® commodity seed obtained from a grain elevator would be infringement, but noted that if the farmer did not treat his fields with Roundup® herbicide "neither the farmer nor Monsanto would ever know that there was an act of infringement." He then characterized Farmer Bowman's decisions in using commodity seed with regard to the economics of the situation, specifically Farmer Bowman's economic incentive to take advantage of Monsanto's technology to control for weeds while not paying the price for the patented seed. All from the Farmer's own testimony before the District Court.
Justice Kagan brought up the "worrisome" issue that Monsanto could "make infringers out of everybody," specifically with regard to seed blown onto a farmer's field. While conceding that the Justice's point about the ubiquity of Monsanto's recombinant soybeans was "a fair one," Mr. Waxman noted that the success of a product had never been able to affect the scope of patent rights. As a practical matter, Mr. Waxman noted that soybeans were not likely to blow onto a farmer's field ("I mean, it would take Hurricane Sandy to blow a soybean into some other farmer's field"). But as a practical matter, even for crops such as alfalfa where this could occur, "[t]he farmer wouldn't know, Monsanto wouldn't know, and in any event, the damages would be zero because you would ask what the reasonable royalty would be, and if the farmer doesn't want Roundup Ready technology and isn't using Roundup Ready technology to save costs and increase productivity, the -- the royalty value would be zero."
This answer piqued Justice Breyer's interest, who stated that it raised an interesting question with regard to self-replicating items (including, somewhat ominously, "genetic patents"). Was there any provision in patent law to deal with self-replicating technology that "end[s] up inadvertently all over the place?" he asked. While conceding that literal infringement is a "strict liability tort," Mr. Waxman contended that it required "volitional conduct" that would be absent under Justice Kagan's scenario. Mr. Waxman was also quick to agree with the government that there was no need for the Court to address the conditioned sales doctrine in this case. Justice Sotomayor further questioned whether Monsanto's views were entirely congruent with the government's, and Mr. Waxman clarified where Monsanto and the government differ:
Our single submission here is that where you have a technology that cannot be leased because it will consume itself in whatever use one makes of it, and therefore has to be -- an article embodying the invention has to be sold and where the invention cannot be commercialized if it -- if the inventor has to realize its full costs of development and a reasonable rate of return on the first sale, the fact that there is this necessary sale in order to commercialize the invention cannot ipso facto make all such conditions unenforceable. And that's all -- if you were to reach the conditional sale issue in this case, that is all we think this case stands for.
Mr. Waxman completed his argument by responding to Justice Kennedy's question regarding the problem of grain elevators containing a multiplicity of patented grain, by explaining that grain elevators cannot legally sell seed for replanting, that most of the seed will be covered by PVPA Certificates that prohibit reproductive uses, and that Farmer Bowman could use the commodity seed, or seed he withheld from his own planting, provided he was willing to forego the advantages of Monsanto's herbicide resistance technology and control weeds the old fashioned way.
While Mr. Walters in his rebuttal argument attempted to refute some of the points Monsanto raised in its argument -- such as whether grain elevators were permitted by law to sell commodity grain for replanting or whether commodity grain is covered by PVPA Certificates that preclude reproductive use -- questioning from Justices Breyer, Scalia, and the Chief Justice indicated that the Court was not sympathetic to the argument that Monsanto was attempting to prevent all uses of progeny seed by objecting to replanting without authorization.
A decision is expected by the end of the Court's current term in June.