Monsanto Announces New Policy Regarding Roundup Ready® Seeds

    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

Comments

[Dan Feigelson]

Thanks Kevin. I wonder how Monsanto would have fared on legal grounds suing someone after expiration of the patent for breach of the contract not to save seeds that was signed during the life of the patent (a contract that the farmer had to sign if he wanted Roundup-Ready seeds). It could be argued that to enforce the contract after the patent has expired is to in effect extend the term of the patent, ergo the contract is not enforceable. I haven't check for caselaw on this question; if you're aware of any, I'd be interested to hear about it.

BTW, I think you meant to write "heels", not "heals".

[breadcrumbs]

Could it be that Monsanto is not as altruistic as you paint them? That they are simply being pragmatic rather than accommodating to any perceived political or social winds?

The intersection of IP and contract law can be very interesting, especially if the contracts are tied too directly to the benefits accruing from patent protection.

Without actually seeing the contract language, I might hazard a guess that the contracts simply may not BE enforceable beyond the point at which patent protection ends, and that royalty collection could not be enforced at that point either (the foreign contracts are likely different).

The rest of the article may just amount to wishful thinking and spin.

[Kevin E. Noonan]

Dear Dan:

It might depend on whether the case was brought in state court or Federal court. I agree that on its face it seems that taking a tack other than the one Monsanto has chosen could be patent misuse, but there is another factor. That is, many (most?) of the farmers don't buy directly from Monsanto but from Monsanto's licensees. Monsanto could have cut off the source of Roundup Ready seeds and only provided the Roundup Ready 2 seeds after patent expiration - this would be like any other instance of planned obsolescence, and in the absence of a seed "generic" company there would really be no other place to get Roundup Ready seeds. So there could have been a de facto "extension of the patent term" without the need to litigate. Monsanto's decision avoid that eventuality.

Thanks for the comment.

[Kevin E. Noonan]

Dear bread:

See my last comment. I don't (and didn't) ascribe Monsanto's actions to altruism; I think accommodating the prevailing cultural and regulatory winds is good corporate strategy. As a countervailing example, ask Myriad how not doing so is working out for them.

And, rather than "spin" we prefer "opinion." We are not representing Monsanto.

Thanks for the comment.

[max hensley]

I enjoyed your insightful comments, particularly with regard to the political reputation of patents.

I recently retired from patent law, but had the privilege of practicing during its golden years. Patent law was in the judicial dumps in the 1970s. Progressives and then the New Deal had tarred it with the monopoly brush, leading to atrocious decisions by left-wing jurists such as William O Douglas and judicial chaos in the Federal judiciary. It was nice to ride the come-back, thanks to the Fed. Cir.

The current anti-patent trend is different. This one appears to be more about economics than politics, as the silicon and general business crowd lines up against the overreaching of recent years. If past is prologue, things will go too far, particularly with a Congress more resembling a watering hole on the Serengeti than a deliberative body, but we are still only in the early stages of this trend.

It's been a nice ride. Thanks patent law.

[6]

" and in the absence of a seed "generic" company there would really be no other place to get Roundup Ready seeds. "

There would be if I started one. 11% is nothing compared to the boost that round up ready v1.0 gave to farmers iirc. And it very well may be that one could offer the first gen much cheaper than the 2nd gen since Monsanto will be jacking up their prices. Especially if you kept your operation small.

[Kevin E. Noonan]

Dear 6:

The difference is that it isn't so easy to "start" a recombinant seed company. Which is one of the distinctions between the biotech/pharma industry and IT/computers, etc. In fact, for all the skepticism Monsanto has gotten, its decision (for whatever motivation) will make a big difference to those farmers who decide not to spend the extra for Roundup Ready 2 seed and to forego the 7-11% increased yield. (Of course, Monsanto is banking on most farmers wanting the extra yield.)

Happy holidays, 6.

[SKD]

I agree with kevin's view. Monsanto's strategy is totally different now than what they did when EP farmers protested GM crops in the late 90's. Myriad slept on its public relations until the ACLU law suit. It is good to be proactive in this anti-patent climate, especially when Monsanto does not have good image anyway.