Supreme Court clarifies the doctrine of ‘patent exhaustion’ in Monsanto seed case

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by Jim Orr

A patent owner holds a patent on, for example, a phone or bicycle. When a consumer buys the patented phone or bicycle, the patent owner’s rights are considered to be “exhausted,” and thus the patent owner cannot sue the consumer for using the product or even for reselling it to someone else. If the phone or bicycle patent holder did try to sue for such use or reselling, the consumer could successfully raise the defense of “patent exhaustion.”

Monsanto invented and patented Roundup Ready soybean seeds, which contain a genetic alteration that allows them to survive exposure Roundup, which is made with to the herbicide glyphosate. Monsanto sells the seeds subject to a licensing agreement that permits farmers to plant the purchased seed in one, and only one, growing season. According to the licensing agreement, growers may consume or sell the resulting crops, but may not save any of the harvested soybeans for replanting.

Bowman purchased Roundup Ready soybean seed for his first crop of each growing season from a company associated with Monsanto and followed the terms of the licensing agreement. But to reduce costs for his riskier late-season planting, Bowman purchased soybeans intended for consumption from a grain elevator; planted them; treated the plants with glyphosate, killing all plants without the Roundup Ready trait; harvested the resulting soybeans that contained that trait; and saved some of these harvested seeds to use in his late-season planting the next season.

Monsanto sued Bowman for patent infringement. Bowman raised the defense of patent exhaustion, claiming that the doctrine gives the purchaser of a patented article the right to use or resell that article. The District Court rejected Bowman’s defense and awarded damages to Monsanto, and the Federal Circuit Court of Appeals affirmed. The Supreme Court affirmed the courts below, holding that patent exhaustion does not permit a farmer to reproduce patented seeds through planting and harvesting without the patent holder’s permission. Bowman v. Monsanto Company, No. 11-796.

The Patent Act grants a patent owner the “right to exclude others from making, using, offering for sale, or selling the invention.” Accordingly, “whoever without authority makes, uses, offers to sell, or sells any patented invention … infringes the patent”. However, the Supreme Court has previously explained that, under the patent exhaustion doctrine, “the initial authorized sale of a patented article terminates all patent rights to that item,” Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617, and confers on the purchaser, or any subsequent owner, “the right to use [or] sell” the thing as he sees fit, United States v. Univis Lens Co., 316 U.S. 241. “[T]he purpose of the patent law is fulfilled with respect to any particular article when the patentee has received his reward … by the sale of the article”; once that “purpose is realized the patent law affords no basis for restraining the use and enjoyment of the thing sold.” Id.

Significantly, the patent exhaustion doctrine applies only as to the “particular article” sold. In other word, the doctrine does not restrict the patent owner’s ability to prevent a buyer from making new copies of the patented item. “[T]he purchaser of the [patented] machine … does not acquire any right to construct another machine either for his own use or to be vended to another.” Mitchell v. Hawley, 16 Wall. 544, 548, 21 L.Ed. 322 (1873); see also Wilbur–Ellis Co. v. Kuther, 377 U.S. 422, 424, 84 S.Ct. 1561, 12 L.Ed.2d 419 (1964) (a purchaser’s “reconstruction” of a patented machine “would impinge on the patentee’s right ‘to exclude others from making’ … the article”). Such “copying” is improper because the patent holder has “received his reward” only for the actual article sold, and not for subsequent recreations of it. Univis, 316 U.S., at 251. If the purchaser of that article could make and sell endless copies, the patent would effectively protect the invention for just a single sale.

The farmer Bowman argued that his conduct—harvesting seeds with the Roundup Ready trait and planting them the next season—should be protected by the patent exhaustion doctrine. Bowman argued that he is merely using seeds in the normal way farmers do, and thus allowing Monsanto to interfere with that use would create an impermissible exception to the exhaustion doctrine for patented seeds. The Supreme Court disagreed.

The Supreme Court held that “[b]y planting and harvesting Monsanto’s patented seeds, Bowman made additional copies of Monsanto’s patented invention, and his conduct thus falls outside the protections of patent exhaustion.” The Court stated that “[w]ere this otherwise, Monsanto’s patent would provide scant benefit. After Monsanto sold its first seed, other seed companies could produce the patented seed to compete with Monsanto, and farmers would need to buy seed only once.”

Under the patent exhaustion doctrine, Bowman could resell the patented soybeans he purchased from the grain elevator or he could consume the beans himself or feed them to his animals. Monsanto would have no business interfering in those uses of Roundup Ready beans. On the other hand, the exhaustion doctrine did not enable Bowman to make additional patented soybeans without Monsanto’s permission.

The court decided that Bowman planted Monsanto’s patented soybeans solely to make and market replicas of them, thus depriving the company of the reward patent law provides for the sale of each article. The court affirmed the judgment in favor of Monsanto.

Patent Law and Intellectual Property Cases at Heygood Orr & Pearson

At Heygood, Orr & Pearson, our attorneys have handled numerous patent matters including prosecuting claims for infringement, as well as for interfered-with patent rights. We have handled claims brought by a large local company for infringement of its rail car patent, claims by a local inventor for infringement of her patent for a childcare product and claims by an Israeli company against a Fortune 500 company for infringement of its wireless technology patent. Our firm has also represented a client suing a large American pharmaceutical company for interfering with its patent rights to liposome technology.

Our attorneys are capable of litigating patent infringement claims throughout the country. In addition, firm attorney John “Jay” Pate is licensed to prosecute patents before the U.S. Patent and Trademark Office.

Beyond our specific experience in the field of intellectual property, our ability to prosecute patent infringement action is aided by our extensive trial experience in general. While technical knowledge and familiarity with patent rules is a must for attorneys handling patent infringement claims, there is no substitute for courtroom experience.

At Heygood, Orr & Pearson, our seasoned litigators have the experience to take even the most complex patent case and explain it in terms a jury can understand. We have a track record of proven success representing businesses large and small. Several of our trial lawyers are board certified* and many of them have been selected as Super Lawyers in the State of Texas for several years in a row.** Our firm is AV rated, the highest legal and ethical ranking available from the leasing law firm ranking service, Martindale-Hubbell.

If you or your company is in need of representation in an intellectual property matter, contact us for a free consultation by calling toll-free at 1-877-446-9001, or by completing the free case evaluation form located on this page.

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Michael Heygood, James Craig Orr, Jr. and Eric Pearson are all Board Certified in Personal Injury Trial Law — Texas Board of Legal Specialization.

** Michael Heygood, James Craig Orr, Jr. and Eric Pearson were selected to the Super Lawyers List, a Thomson Reuters publication, for the years 2003 through 2013.