BASF Prevails in Seed-Saving Infringement Case
By Robert Dailey --
A federal district court held that a farmer who saved
rice seed in violation of BASF's standard Stewardship Agreement infringed the
patents covering the seed and its use. The buyer of the saved seed, however, had never actually signed the
Stewardship Agreement covering the relevant seed purchase. But in granting BASF's motion for summary
judgment, the court held that the farmer's knowledge of the terms of such
agreements was sufficient to subject his purchase to its limitations.
BASF accused a Louisiana rice farmer of saving seed from
his 2004 and 2005 plantings of Clearfield®, an herbicide-tolerant
rice-growing system. The Clearfield®
seed is protected under the Plant Variety Protection Act (PVPA) and by three U.S. Patents: 6,211,438;
6,211,439; and 6,222,100. BASF generally
sells the seed subject to a Stewardship Agreement that forbids the purchaser
from saving the seed for subsequent growing seasons. Yet the farmer had signed no Stewardship
Agreement covering his 2004 seed purchase. According to BASF, the farmer saved some seed from the 2004 crop and
re-planted it during the 2005 growing season. (Incidentally, a regional seed supplier had signed the farmer's name to
a 2004 Stewardship Agreement, but the court never resolved whether the supplier
had authority to sign the farmer's name to the agreement. At summary judgment, the court must assume
this disputed fact in the farmer's favor.)
The farmer argued that the "first sale
doctrine" provides an affirmative defense to any infringing conduct. The first sale doctrine provides that a
patent holder exhausts all rights in an article upon the sale of that
article. In B. Braun Medical v. Abbott
Labs, the Federal Circuit notes that this general rule does not prevent a
patentee from making conditional sales or granting use-restricted
licenses. The farmer argued that the
rule of B. Braun has no relevance since he signed no agreement relating to
BASF's use restrictions. BASF argued
that the farmer's notice of the terms of its Stewardship Agreement provided
sufficient evidence for the court to infer that the farmer agreed to the use
restrictions. The court wasted little
ink in agreeing with BASF's argument on this point.
This begs the question as to what quantum of evidence is
necessary for the court to imply conditions that carve out exceptions to the
first sale doctrine. The court cites B.
Braun, yet that case resolves a different question. B. Braun addresses whether conditional sales
or use restrictions, when expressly agreed upon by the parties, are
enforceable. The case says nothing about
what a court is to do when the parties never expressly agreed to the restrictions,
i.e., when the restrictions are only implied from the circumstances surrounding
the sale.
Federal Circuit precedent provides that state law
controls the express and implied terms of patent licenses. Power Lift v. Weatherford Nipple-Up, 871 F.2d
1082, 1085 (Fed. Cir. 1989). In similar
seed-saving cases, district courts have conducted extensive analyses under
state contract law of the conditions implied from the sale of the seed. See, e.g., Pioneer Hi-Bred v. Ottawa Plant
Food, 283 F. Supp. 2d 1018 (N.D. Iowa 2003) (finding an implied use restriction
based on marking of seed bags with terms of restriction). But the court conducted no such analysis in
this case. Moreover, the facts give no
indication that BASF had even marked its bags with a standard notice of its use
restrictions. The court inferred the
farmer's agreement to the restrictions simply based on his attendance at a
growers meeting and his role as owner of a farm supply store that had been
authorized to sell the seed.
Bag marking is sufficiently analogous to shrinkwrap licensing to permit courts to hold farmers to the terms printed on the exterior of the seed bags. Yet it remains unclear whether a court should read licensing restrictions into a contract based only on whether a farmer would have known about the limitations. In other words, can widespread publicity serve as a suitable substitute for product marking in the absence of an express agreement?
BASF Agrochem. Prods. v. Unkel, No. 2:05CV1478 (W.D. La. Dec. 7. 2006)
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