Our stance is that patent protection for Monsanto is right under the law — and right for all innovators and the Americans who depend on them. Existing patent law protects easily replicable biotechnology, just as it protects innovations in computers, medicine, and other technologies. The courts have agreed, ruling for Monsanto at every level.
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Why the U.S. Supreme Court Should Affirm the Lower Court Rulings in Bowman v.Monsanto
The Federal Circuit concluded that Mr. Bowman infringed Monsanto’s patents by making new soybeans containing Monsanto’s patented technology without authorization. The court rejected Mr. Bowman’s argument that he could obtain an unlimited right to copy Monsanto’s technology without paying the same licensing fee paid by other growers. That analysis should apply to any patented product that may be readily reproduced.
Mr. Bowman will argue to the Supreme Court that Monsanto cannot enforce its patent rights in easily replicable biotechnology. He contends that Monsanto has no right to prevent him from making an unlimited number of copies of the soybeans that he purchased, even though these soybeans and their progeny all contain Monsanto’s patented trait.
Mr. Bowman’s argument is not only wrong under the law; it would gravely undermine the incentive to innovate.
The District Court put it this way: “Unless Monsanto receives the patent protection…because the [Roundup Ready®] trait carries forward to each successive crop, there would be nothing stopping all farmers from buying commodity soybeans for planting from this point forward, thereby allowing such farmers to receive the benefit of the Roundup Ready® genetic modification without compensating Monsanto for its research and development work.”
The Biotechnology Industry Organization (BIO) has called patents “the lifeblood…of biotechnology companies,” and has explained: “[T]he sale price of the first item sold – a single vial of genetically modified cells or a single packet of seeds – cannot capture the patentee’s fair reward for painstakingly developing the product. The patent laws’ current level of protection for such inventions has made enormous innovation possible in the last two decades, and the patent exhaustion doctrine should accommodate the unique demands of modern technological development.”
As Roy Zwahlen, a BIO attorney and blogger has written, “[A]ny outcome that upholds Bowman’s patent exhaustion defense will fundamentally change seed innovation. The Bowmans of the world will know that they can always ‘go around the back’ to avoid the law…These companies will be forced to cut back their research and development….”
A decision in Mr. Bowman’s favor could render future innovation in agriculture and other easily reproducible technologies economically unfeasible and affect other emerging technologies as well– across both the public and private sector.
A more detailed discussion of our view on two key legal issues in the case is set forth below.
The Patent Exhaustion Doctrine Does Not Apply To Articles Such As New Generations Of Soybeans That Have Never Been Sold
As the Federal Circuit correctly held in this case, the patent exhaustion doctrine is inapplicable to articles that have never been sold. Even an authorized, unconditional sale of an article does not convey to the purchaser the right to make new articles embodying the patented invention. In the case of easily reproducible technology such as Monsanto’s patented traits, the protection of the patent is independently applicable to each generation of articles that contains the patented trait.
Therefore, in this case, whether or not sales of a prior generation of soybean seeds containing Monsanto’s patented technology exhausted Monsanto’s rights in those particular seeds, Mr. Bowman infringed Monsanto’s patents by making new soybeans containing Monsanto’s patented technology without authorization. The same analysis should apply to any article embodying a patented invention that may be readily reproduced.
This conclusion follows directly from a long line of Supreme Court decisions holding that even an authorized, unconditional sale of a patented article grants the purchaser no right to “‘make a new article’” embodying the same invention. Aro Mfg. Co. v. Convertible Top Replacement Co.,365 U.S. 336, 343 (1961) (emphasis added).
As the Supreme Court explained over a century ago, “the purchaser of the implement or machine for the purpose of using it in the ordinary pursuits of life … does not acquire any right to construct another machine either for his own use or to be vended to another for any purpose.” Mitchell v. Hawley, 83 U.S. 544, 548 (1872) (emphasis added); see also Aro Mfg. Co., 365 U.S. at 346 (authorized sale provides no right to reconstruct patented invention such that new article embodying invention is created); American Cotton-Tie Co. v. Simmons, 106 U.S. 89, 93-94 (1882) (same); Wilson v. Simpson, 50 U.S. (9 How.) 109, 123-125 (1850) (same). Instead, the patent exhaustion doctrine is applied on an article-by-article basis. See, e.g., Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617, 625, 626-628, 631-632, 636-637 (2008).
Mr. Bowman argues that this principle does not apply to “self-replicating” technology, such as genetic traits in seeds, but Monsanto submits that this argument is wrong. He argues that exhaustion should apply to later-generation seeds because they are “embodied” in Roundup Ready® seeds sold by licensed seed dealers. Holding otherwise, he asserts, would exclude easily replicated technologies from the exhaustion doctrine. But this argument is contrary to established patent-exhaustion law: whether an article substantially embodies a patent claim determines only whether patent rights are exhausted in that article – not copies of that article.
Mr. Bowman’s proposed rule would effectively eviscerate patent protection for easily replicable inventions. Once a patent-holder made one sale of its technology, the purchaser (and purchasers from the purchaser) could make unlimited copies of the patented invention.
Such a regime would quickly eliminate investment in the development of cutting-edge technologies, to the detriment of the public interest. In the case of the invention at issue in this case, Monsanto would have had little incentive to develop the groundbreaking technology that provided growers and consumers such enormous benefits if it lost control of that technology the instant that the improved seeds were sold to a grower. The same would be true of other inventions that are embodied in articles that can be reproduced. Mr. Bowman’s argument threatens to bring these kinds of innovations to a halt.
The Quanta Decision Did Not Prohibit Patent Holders From Limiting The Patent Rights It Chooses To Sell
Mr. Bowman argues that his position is supported by the Supreme Court’s decision in Quanta, which addressed the patent exhaustion doctrine. In Monsanto’s view, Quanta does not address the issue in this case, because Quanta did not concern easily replicated technology, and it does not question the principle that exhaustion is analyzed on an article-by-article basis.
In any event, Quanta does not prohibit patent holders from granting fewer than all rights to a patented article, and it certainly does not prohibit patent-holders (such as Monsanto) from licensing their inventions on the condition that the licensee agree not to make unlimited copies of that invention (as Mr. Bowman claims to have the right to do).
Quanta does not undermine a patent holder’s ability to restrict the use of its patented technology pursuant to a licensing program like Monsanto’s. To the contrary, in that case the Supreme Court discussed at length the unrestricted right to make and sell that the license from LGE conferred on Intel: LGE had imposed no conditions in the license at issue. See 553 U.S. at 636-637.
If the Supreme Court had intended to rule that all attempts by a patent-holder to limit rights in sold objects embodying a patent claim are ineffective, and that any authorized sale of a product embodying a patent claim exhausts all patent rights, there would have been no need for the Court to emphasize the “important aspects of the structure of the Intel-LGE transaction” that “broadly permit[ted] Intel to ‘make, use, [or] sell products of LGE’s patent claims,’” id. at 636 (first brackets added).
Moreover, the Supreme Court’s exhaustion decisions have consistently noted that patent exhaustion applies when the patent-holder/manufacturer receives full consideration for the use of the patented invention through the sale of a patented article. See, e.g., Adams v. Burke, 84 U.S. 453,456 (1873). This is not a case in which the patent-holder receives full compensation for all copies of its invention when it sells the first generation.
As the Federal Circuit has recognized, Monsanto could not possibly obtain full consideration for the right to use its patented technology into perpetuity, through multiple generations of seeds, when it sells the first generation; any license fee that would be sufficient for that purpose would be exorbitant, and would certainly make the invention impossible to commercialize. See Monsanto v. Ralph, 382 F.3d 1374, 1384 (Fed. Cir. 2004).
Undoubtedly the same is true of other easily replicable technologies. If the inventors of such technologies were required to charge in a single transaction the amount necessary to compensate them for the unlimited right to use and make copies of their patented inventions across multiple generations, they would never be able to develop or commercialize their inventions at all.
Preserving parties’ freedom to contract with respect to their intellectual property rights is especially critical in areas where a rule that prevented parties from agreeing to the sale of fewer than all patent rights in an object would eliminate a viable market for the technology.