On October 5, 2012, the Supreme Court granted cert. to hear Monsanto Co. v. Bowman. Monsanto is an agriculture company and one of its primary focuses is to develop genetically modified crops that are resistant to glyphosate herbicides such as Roundup® brand herbicide. Herbicide resistant crops allow farmers to spray herbicide over the entire planting field to kill weeds while leaving the crops unharmed. This results in substantial savings in labor costs for weed control. Monsanto owns the patent for the herbicide-resistant plants, the genetically modified seeds for such plants, the specific modified genes, and the method of producing the genetically modified plants.
In the case here, Bowman purchased Monsanto commodity seeds from a local grain elevator in 1999 for a late-season planting. Commodity seeds should only be used as feed or food. Therefore, Bowman was not required to sign the Technology Agreement that would have prohibited him from planting the subsequent generation of seeds. However, instead of using the seeds as feed or food, Bowman planted them. After discovering that the seeds retained the desirable genetic trait, resistance to herbicide, Bowman began to save seeds from each generation of crop for replanting. He also supplemented the seeds he saved with periodic additional purchases of commodity seed. These activities occurred continuously from 2000 to 2007.
The primary issue is whether Monsanto has the rights to regulate the subsequent use and sale of its patented seeds or if that right was exhausted by the first sale of the seeds. The first sale patent exhaustion doctrine states that the first vending of any article manufactured under a patent puts the article beyond the reach of the monopoly which that patent confers. However, courts have recognized exceptions to this general rule including unlawful sale, restricted sale, etc.
Bowman argued that Monsanto’s patent rights were exhausted when the commodity seeds were sold at the elevator as undifferentiated commodity. Monsanto, on the other hand, relied on Monsanto Co. v. Scruggs to argue that the sale from the elevator was not an authorized sale because the Technology Agreement, that whoever grew the seeds Bowman purchased presumably signed, expressly states that the progeny of the licensed seed should never be sold for planting. Therefore, first sale exhaustion doctrine should not apply. Furthermore, Monsanto relied on Monsanto Co. v. McFarling to argue that each generation of seed is a new product, so even if its patent rights were exhausted on the seeds that Bowman purchased, its patent rights on subsequent generations of seeds should be unaffected. The Court of Appeals for the Federal Circuit held in favor of Monsanto on both arguments.
This will be the first chance for the Supreme Court to review the application of the longstanding doctrine of patent exhaustion to the newly emerging issue of self-replicating technology. Self-replicating technology is fundamentally different from other types of intellectual property because its initial research and development is extremely expensive and time-consuming, but since the technology reproduces itself, subsequent reproduction is very inexpensive. This creates two potential problems. First, the buyer can purchase the product once and use subsequent generations to supply all of its own future needs. Second and more importantly, the buyer can also use subsequent generations to compete with the patentee in the marketplace. As a result, patentees must control downstream use to avoid making the first sale of their product prohibitively expensive.
At the federal appellate level, the court has consistently recognized these unique characteristics and has been very generous in terms of broadly construing the exceptions available to release patent holders from the first sale patent exhaustion doctrine in the field of self-replicating technology. Although the Supreme Court has not displayed the same generosity in cases involving non-self-replicating technology, it is still uncertain which approach it will take under the unique circumstances of self-replicating technology. Either way, the decision will undoubtedly have a tremendous impact on the operations of various companies and individuals.