May 14, 2013

Bowman v. Monsanto: Supreme Court Interprets Patent Exhaustion for Genetically Engineered Seeds

Yesterday, the Supreme Court issued its opinion in Bowman v. Monsanto, a patent infringement case that tested how the doctrine of patent exhaustion applies to self-replicating patented inventions such as genetically engineered (GE) seeds. The patented invention is the Monsanto Roundup Ready soybean, which contain a gene that encodes EPSPS, a glyphosate-tolerant enzyme. The genetically modified plants express the enzyme and thus exhibit resistance to the herbicide glyphosate– specifically, to the application of the Monsanto glyphosate product, sold as Roundup. A license restriction accompanies the sale of the Roundup Ready seeds, and it prohibits the use of second-generation seeds in later plantings. Farmer Vernon Bowman was accused of patent infringement by buying GE commodity seed from a grain elevator (not directly from Monsanto) which he then used for replanting (replication); Monsanto characterized his activities as an unauthorized use of a patented invention because it involved the “making” of a patented article. The doctrine of patent exhaustion operates to limit the control that an inventor holds over the life of a lawfully sold patented article – the first sale of a patented invention is authorized, and that act exhausts the control that the patent holder retains over subsequent uses of the article (absent some valid conditional sale agreement that accompanies the sale). Did that doctrine extend to a claim that a later sale of originally-patented GE seed to Bowman and his use in planting became an act of patent infringement because the seed replicates and he “made” an infringing article? In 2011, the Federal Circuit ruled that Bowman’s planting of the GE seed he purchased became an act of patent infringement, rejecting an interpretation of the exhaustion doctrine that would recognize the special attributes of seeds, which embody the property of replication and “manufacture” of an originally-patented invention (see earlier post). Did the company’s patent rights extend to this later series of events, or did they exhaust upon the first sale of the patented seed? Although one can freely “use” a product after patent exhaustion, does that authorize a use that results in the creation of a new copy of the patented article, which is generally viewed as an act of patent infringement? In the unanimous opinion authored by Justice Kagan, the Supreme Court said no: 
Reproducing a patented article no doubt “uses” it after a fashion. But as already explained, we have always drawn the boundaries of the exhaustion doctrine to exclude that activity, so that the patentee retains an undiminished right to prohibit others from making the thing his patent protects. 
What does not exhaust is the ability of patent holder to enforce one of the rights of exclusion, that is, the ability to prevent unauthorized replication of a patented invention. No exception applied here to GE seeds in this scenario, despite Bowman's invocation of self-replication by the product itself. Justice Kagan did note, however, that the decision was limited to this set of facts:
Our holding today is limited—addressing the situation before us, rather than every one involving a self-replicating product. We recognize that such inventions are becoming ever more prevalent, complex, and diverse. In another case, the article’s self-replication might occur outside the purchaser’s control. Or it might be a necessary but incidental step in using the item for another purpose. 
This restraint from the Court at least references analogous scenarios in computer software, where use of a lawfully obtained program often requires the making of a copy on a host computer; Congress has address this with an amendment to copyright law (17 U.S.C. 117) that immunizes users from copyright infringement in such circumstances. There is some pushback in Congress with respect to patented seeds and the restrictions that accompany their sale; H.R.19, the Seed Availability and Competition Act of 2013 was introduced this year and it authorizes second generation plantings of patented seeds, effectively establishing a compulsory license, but setting a royalty mechanism for payments to the patent holder. This is unlikely to garner significant support in Congress, but it indicates that there are legislative approaches that can theoretically modulate patent rights for certain technologies, if the political will exists to do so.

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