June 12, 2013

Federal Circuit: Organic Farmers Cannot Litigate Potential Patent Infringement from Trace Contamination by Patented Seeds

The Federal Circuit has issued its opinion in Organic Seed Growers and Trade Association (OGSATA) v. Monsanto, a declaratory judgment (DJ) action in which OGSATA and other plaintiffs (growers, seed selling businesses, and agricultural organizations) sought to litigate the question of whether inadvertent contamination of their crops by patented Monsanto (GE) seeds could give rise to a potential patent infringement claim by Monsanto. The threshold issue for the plaintiffs has been to establish standing for the suit, relying on their assertions that the prospect of infringement litigation from Monsanto has caused them to limit or halt their farming activities. In 2012, the lower federal court ruled that the plaintiffs could not meet the threshold showing for sustaining a DJ action, and dismissed the case. In the appeal to the Federal Circuit, the oral argument focused on determining whether a “substantial controversy between parties having adverse legal interests of sufficient immediacy and reality" – as required by the Supreme Court in Medimmune v. Genentech (2007) – exists. If so, a DJ action allows the plaintiffs to ask a court to adjudicate whether inadvertent contamination rises to the level of patent infringement, and whether the Monsanto patents are invalid under numerous patent law doctrines. Because patent infringement is generally regarded as a strict liability tort (intention irrelevant), passive contamination of an agricultural field by a patented product could be characterized as a patent infringing use. The plaintiffs argued that their concern over future litigation was warranted by Monsanto’s legal actions to date (between 1997 and 2010, 144 suits and 700 settlements related to unauthorized use of patented seed) and by Monsanto’s refusal to grant the plaintiffs a covenant not to sue. However, Monsanto did make representations of disinterest in pursuing patent infringement claims for instances of trace contamination, such as those contemplated by the plaintiffs. In response to a direct question from the court in oral argument, counsel for Monsanto agreed that representations in the court regarding the lack of the company’s intention to sue for trace contamination might give rise to judicial estoppel for plaintiffs to rely on later. From the opinion:
Taken together, Monsanto’s representations unequivocally disclaim any intent to sue appellant growers, seed sellers, or organizations for inadvertently using or selling “trace amounts” of genetically modified seeds…..We conclude that Monsanto has disclaimed any intent to sue inadvertent users or sellers of seeds that are inadvertently contaminated with up to one percent of seeds carrying Monsanto’s patented traits. 
According to the Federal Circuit, those representations effectively extinguished the claim of legal threat by the plaintiffs: 
In sum, Monsanto’s binding representations remove any risk of suit against the appellants as users or sellers of trace amounts (less than one percent) of modified seed. The appellants have alleged no concrete plans or activities to use or sell greater than trace amounts of modified seed, and accordingly fail to show any risk of suit on that basis. The appellants therefore lack an essential element of standing. 
The Federal Circuit was quite clear in characterizing the nature of Monsanto's representations that plaintiffs had no basis for apprehension:
While Monsanto’s representations are not a covenant not to sue, they have a similar effect. If we rely on Monsanto’s representations to defeat the appellants’ declaratory judgment claims (as we do), those representations are binding as a matter of judicial estoppel. 
In response to the ruling, OGSATA has stated that “we’re encouraged by the court’s determination that Monsanto does not have the right to sue farmers for trace contamination.” For the plaintiffs, the failure to establish a declaratory judgment action also means that their allegations of the patent invalidity of a number of Monsanto patents will not be heard (e.g., contentions that the patents lacked utility under 35 U.S.C. 101). Plaintiffs may appeal to the Supreme Court (which recently considered the patent exhaustion doctrine in the context of patented genetically engineered seeds in Bowman v. Monsanto; see here).

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