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Does Monsanto's patent extend to second-generation seeds bought from grain elevator?

This article first appeared in the St. Louis Beacon, Feb. 18, 2013 - On Tuesday, Vernon Hugh Bowman will be a long way from the small Indiana farm where he was born 75 years ago and still farms 300 acres. He will be in the U.S. Supreme Court challenging the reach of Monsanto Co.'s patent to protect its Roundup Ready seeds.

To Monsanto and the research universities and corporations that support it, Bowman's challenge to patent rights could chill a broad range of technological innovation. To Bowman, it's a matter of justice. "They are more concerned about what might happen in the future than current justice," he said in a telephone interview.

"Hugh," as his neighbors call him, remembers the day seven years ago when two Monsanto men showed up at his tool shed to question how he had produced so much crop without buying more Roundup Ready seeds. He told them he had used seeds he bought from a local grain elevator that mixed Monsanto seeds with regular seeds. Monsanto claimed its patent rights still extended to those seeds. Bowman strongly disagreed.

"If they are suing people like that who don't have a bit of reason to sue, I'm not going to give into them. ... It wasn't coming after me that made me mad, it as coming after me for no reason. ... I just said they can run over me, but I'm not getting out of the road."

But Monsanto argues that if Bowman wins, the decision "could render future innovation in a variety of easily replicable technologies — including cell lines, DNA molecules, and nanotechnologies — economically unfeasible, as biotech firms, universities, and other institutions engaged in research and development would be unable to rely on the patent system to protect against unauthorized copying of their inventions."

The Obama Justice Department and a host of universities, including the University of Missouri and the University of Illinois agree on this alarming prediction. Also joining Monsanto are technological innovators like Apple and Microsoft.

Patent exhaustion

The legal question involves what is called patent exhaustion. This is the concept that the sale of a patented product exhausts – ends – the patent rights of the seller.

The question in the Monsanto case is whether Monsanto can exercise its patent rights to control the Roundup Ready seeds that have been mixed at the local grain elevator with seeds that have not been genetically modified.

More information

Center for Food Safety

The Scotusblog case file

Monsanto documents

Wall Street Journal article

Bowman plants two crops of soybeans each growing season. He is a loyal customer of Roundup Ready soybean seeds for the first of the two crops. The first crop is most likely to be successful so Bowman wants the best possible seeds. With Monsanto seeds, he can just use Roundup on the crop, whereas he would have to use several chemicals on an ordinary crop of soybeans.

Bowman signs the agreements with Monsanto promising not to save the seeds from the crop for future planting.

But Bowman came up with a different approach for his second, more marginal crop each season. He bought commodity seeds from the local grain elevator. Monsanto's agreement with farmers does not restrict them from selling to the grain elevators. In fact, the company encourages the sale. So Roundup Ready crops are mixed in the grain elevator with seeds from soybean crops without the genetic modifications.

Bowman suspected that the seeds he could obtain from the grain elevator would have the same properties as the Roundup Ready seeds. He was right. For the next seven years, he planted seeds from the grain elevators and seeds he saved from his own second crop of the year.

A few years later, the two Monsanto men showed up at his farm inquiring into how he could produce so much soybeans on the amount of seed he was buying. Bowman told them what he was doing and "asked them what in the world was wrong with it because I had been telling farmers over the years what I had been doing."

Monsanto sued claiming Bowman's practice violated its patent rights. Bowman argued that the patent rights had been exhausted after Monsanto sold the seeds for the first time. A lower court judge sympathized with Bowman but said he had to enforce the law and ordered him to pay more than $84,000. A federal appeals court agreed.

Bowman's argument is based on a 1942 U.S. Supreme Court ruling that a company that licensed a product could not control the resale price of the product without violating anti-trust laws. In other words, the patent was exhausted with the first sale. This is called the first-sale doctrine.

In a 2008 case the court ruled similarly that L G Electronics Inc. couldn't enforce its memory-technology against both Intel Corp. and computer manufacturers that use Intel chips.

Conditional sale

In the Bowman case, the federal circuit got around the Supreme Court’s decisions by ruling that patent exhaustion applies only to “unconditional sales.” The Monsanto sale comes with conditions so the company can continue to apply the conditions on downstream sales, the court said.

The court said there was a second reason the first-sale doctrine didn't apply. The new soybeans that Bowman grew had never been sold, so there hadn't been a first sale to exhaust the patent rights. It wrote that "the fact that a patented technology can replicate itself does not give the purchaser the right to use replicated copies of the technology.”

The distinction the court made was between the right to use a patented object and the right to make a new product from a patented object.

“The right to use does not include the right to construct an essentially new article on the template of the original,” the court wrote. The seeds from Bowman’s second crop of the season were a new article that he was prohibited from using.

Bowman's legal brief said this was absurd because the court was basically saying that "farmers can do anything they desire with purchased commodity seeds, except use those seeds for their most natural and foreseeable (if not primary) purpose, planting."

Innovators back Monsanto

One of the most influential friend of the court briefs on Monsanto's behalf was filed by universities and research institutions affiliated with universities. They argue that a decision against Monsanto would have a drastic impact on new discoveries made in university labs.

A decision against Monsanto "would impair technology transfer operations and ultimately deny the public the benefits of existing and yet-unknown artificial, progenitive technologies. The first buyers of artificial, progenitive technology could make an unlimited number of identical copies of the invention without having to compensate the patentee for those subsequent copies." Progenitive means capable of reproducing.

Among the kinds of inventions that could be stifled by a change in the law, the universities say, are "stem cells, mutant genes, DNA vectors and molecules, viral vectors, bacterial strains, RNA enzymes, cell lines, and organic computers."

In the past decade, under the current law, university researchers submitted more than 185,000 invention disclosures, resulting in more than 163,000 patent applications and more than 37,000 patents issued. The universities say this creative boom could deflate if Bowman wins.

Critics of Monsanto say, however, that smaller numbers of companies control the world's seeds and have impinged upon farmers' tradition of saving seeds from one crop to plant for the next.

The Center for Food Safety reports that Monsanto now controls one-quarter of the world's seeds and that Monsanto together with DuPont and Syngenta control more than half the world's seeds.

The center argues that genetically modified seeds also resulted in higher seed prices, less seed diversity and the development of superweeds that can't be killed by popular herbicides.

As for Bowman, he thinks the Monsanto seeds are just great, allowing him to produce more with fewer chemicals.  But there's no budging him from the belief that Monsanto can't control the seeds from a Roundup Ready crop once those seeds have been mixed with common seeds in a grain warehouse.

The Supreme Court is generally considered to be pro-business. But the court could have given Monsanto a victory by refusing to hear Bowman's appeal. So some eyebrows were raised when the court agreed to hear the challenge.

Bowman will have the last laugh even if he loses. He went broke a few years ago; he is getting pro bono assistance from a bar association involved in intellectual property law cases. If the justices rule against him, about all Monsanto could get to satisfy its judgment is a little rural post office he owns near his house.  And that's worth only about $4,000.

William H. Freivogel is director of the School of Journalism at Southern Illinois University Carbondale and a professor at the Paul Simon Public Policy Institute. Previously, he worked for the St. Louis Post-Dispatch for 34 years, serving as assistant Washington Bureau Chief and deputy editorial editor. He covered the U.S. Supreme Court while in Washington. He is a graduate of Kirkwood High School, Stanford University and Washington University Law School. He is a member of the Missouri Bar.