Bowman v. Monsanto: A Primer and a Solution

Bowman v. Monsanto, the patent exhaustion case involving saved seed, agricultural biotechnology, genetic engineering, and “self-replicating technologies,” will be argued tomorrow (Feb. 19) at the Supreme Court.  Madisonian.net is delighted to host the following guest post on the case from Professor Mark Patterson of Fordham University School of Law:

Bowman v. Monsanto: Making, Saving, and Using Genetically Modified Seeds
Mark R. Patterson

The Bowman v. Monsanto Co. case currently before the Supreme Court is a challenging one. The case poses difficult conceptual problems because the self-replicating inventions at issue—soybean seeds—present unanswered questions about patent law’s prohibition against unauthorized “making” of patented inventions. But the case is also challenging because each of the parties has staked out an extreme position that seems an implausible resolution of the case. There is, however, an intermediate position that has already been provided by the Supreme Court for the Plant Variety Protection Act (PVPA) in Asgrow Seed Co. v. Winterboer, 513 U.S. 179 (1995). Importing the Asgrow approach from the PVPA for use also with utility patents would provide a solution that is both doctrinally acceptable and practical.

The largely agreed-upon facts are these: Vernon Hugh Bowman bought “commodity” soybean seed from a grain elevator. “Commodity” seed is seed intended for use as food or feed, rather than for planting, but Bowman’s purchases were not subject to any contractual restrictions regarding the seed’s use. The commodity seed included some of Monsanto’s patented Roundup Ready seed, but that seed had been sold to the grain elevator by growers that had produced it from Roundup Ready seed obtained in authorized sales from Monsanto. Monsanto’s Technology Agreement, which those growers had been required to sign, permitted the growers to make sales of their crops—second-generation Roundup Ready seed—as commodity seed. Thus, there was no violation of any Monsanto restriction either in the sales of the seed to the grain elevator or in Bowman’s purchase of it from the elevator. Bowman planted the commodity seed that he had purchased from the grain elevator, including that portion of it that was second-generation Roundup Ready seed, and he also replanted the subsequent (third, fourth, etc.) generations that he produced from those original purchases.

(Below:  A summary of Monsanto’s arguments, a summary of Bowman’s arguments, and a recommended solution.)

Monsanto’s Arguments

Monsanto argues that Bowman’s planting and growing of Roundup Ready seeds was an impermissible “making” forbidden by patent law, because it produced new seeds. The argument does not rely, though, on Bowman’s purchase of the seeds from the grain elevator, rather than from Monsanto. Instead, Monsanto appears to contend that even growing Roundup Ready seed purchased in authorized sales from Monsanto would be infringing in the absence of an express license from Monsanto. See Monsanto Brief at 34 (“All farmers who purchase Roundup Ready® seeds in an authorized sale have separately entered into a ‘Technology Agreement’ license to limited rights. Specifically, that Agreement authorizes the use of Roundup Ready® technology solely for growing one commercial crop of seeds.”)

This argument arguably conflicts with the Supreme Court’s decision in Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008). In Quanta, the patentee LG licensed its patents to Intel but required Intel, when selling patented products to Intel’s customers, to include a notice stating that Intel’s license “does not extend, expressly or by implication, to any product that you make by combining an Intel product with any non-Intel product” (emphasis added). When the customers did in fact, despite this notice, make the patented combination, LG sued for infringement. The Supreme Court rejected the claim, stating that “[t]he longstanding doctrine of patent exhaustion provides that the initial authorized sale of a patented item terminates all patent rights to that item.”

Monsanto’s response is to focus on the Court’s reference to “that item” and argue that even if its patent rights are exhausted for the seeds it sells, they are revived when new seeds, i.e., new “items,” are grown. One problem with this argument is that this “making” of new seeds is the natural result of “using” the seeds in which Monsanto’s patent rights are exhausted. As the Supreme Court said in United States v. Univis Lens Co., 316 U.S. 241 (1942), “[a]n incident to the purchase of any article, whether patented or unpatented, is the right to use and sell it.” Monsanto claims that the “Court’s decisions make clear that [Bowman] cannot ‘use’ his existing soybeans to violate Monsanto’s rights by ‘making’ new articles without Monsanto’s authorization.” The only case Monsanto cites for this claim, though, is American Cotton-Tie Co. v Simmons, 106 U.S. 89 (1882), where the defendants reconstructed patented cotton-bale ties by combining their original buckles with new bands to replace the original bands, which were destroyed in use. Monsanto takes the Court’s statement that “[w]hatever right the defendants could acquire to the use of the old buckle, they acquired no right to combine it with a substantially new band, to make a cotton-bale tie” and pulls “use” out of that statement to claim that although buyers of seeds may use them, they cannot use them to make new seeds. This is disingenuous. The reconstruction of the cotton-bale ties was entirely distinct from their normal use, while growing seeds is at the same time, and normally and naturally, “using” and “making.”

Furthermore, it is not clear that the Court intended to put so much weight on its reference to “that item” in Quanta (or to it similar reference to “that particular article” Univis, also cited by Monsanto), particularly since the earlier cases did not present the self-replication problem. But there is language in Quanta that would support Monsanto’s argument. The Court in Quanta emphasized that the products sold by Intel “substantially embodied” the patent and said that “no further ‘making’ results from the addition of standard parts—here, the buses and memory—to a product that already substantially embodies the patent.” Although one could argue that a seed “embodies” a patented genetic invention, and that no further “making” results from adding other biological material to the genetic invention, that approach is far from compelled by Quanta. Bowman argues that a seed “embodies” all subsequent generations of seed grown from it, but it surely does not do so in the way that, in Quanta and Univis, key components “embodied” patented combinations.

So Quanta might suggest a possibility of exhaustion on the facts of Bowman, but it does not mandate it. What Quanta does do is make clear that some interpretation is necessary to make sense of patent law’s reference to “making,” and perhaps also its “using” and the Supreme Court’s “embodying.” Monsanto’s only efforts to confront the central problem of interpreting “making” rely on dictionary definitions and on cases that refer to “making a crop” in entirely different contexts. And it confronts the making-is-using issue only by misusing the word “use” out of context, as discussed above. Most importantly, the upshot of accepting its argument would be that farmers who purchased seeds from Monsanto would violate the patent laws if they had no separate license to plant them, even if planting was, in Univis’s phrase, “the only object of the sale.” It seems unlikely that the Court will accept such a result, particularly on the basis of wordplay. Its approach in Quanta was more substantive. Referring there to one of the patentee’s arguments, the Court said that “[e]liminating exhaustion for method patents would seriously undermine the exhaustion doctrine,” and it is not any more likely to allow such undermining in Bowman.

Bowman’s Arguments

Bowman’s approach, on the other hand, would undermine, if not effectively eliminate, Monsanto’s patent protection. Bowman’s argument is remarkably ambitious, contending that any authorized sale of patented seed exhausts all the patentee’s rights, which would apparently permit Bowman or any other buyer to set up an operation to mass-produce Roundup Ready seeds and sell them in competition with Monsanto. Like Monsanto, Bowman reaches its conclusion through a largely formal approach to defining “making.” He argues that Monsanto’s (and the government’s) dictionary definitions are too broad, and he draws on cases from different contexts that use the same word to support his view. Bowman is unconcerned with the elimination of Monsanto’s patent rights, contending that contract law will provide adequate rights and remedies to protect Monsanto. Even recognizing that patent law is not intended to guarantee patentees any particular return on their inventions, this seems overly optimistic. Although I support the role of contract in intellectual property licensing, see Mark R. Patterson, “Must Licenses Be Contracts? Consent and Notice in Intellectual Property,” 40 Fla. St. U. L. Rev. (forthcoming 2013), there is a reason for patent law’s property protections, particularly for inventions like Monsanto’s that pose particular problems in preventing and detecting violations. Just as the Supreme Court seems unlikely to accept Monsanto’s argument to eliminate exhaustion for self-replicating inventions, it seems unlikely to accept Bowman’s effective elimination of patent protection for such inventions.

The Asgrow Solution

Thus, the Court may seek to find some middle ground here. Is there a reasonable compromise between the extreme positions offered by the parties? One need only look to the facts in Bowman to find one. Surely Bowman would be content with the right to do exactly what he did: purchase seeds in an authorized sale and replant their progeny in succeeding years. Bowman did not sell the Roundup Ready seeds he grew to other for planting, but instead sold them his extra seeds back into the commodity market. Hence, it seems unlikely that Monsanto is really threatened by activities like those of Bowman. What presumably, and rightly, concerns Monsanto is the possibility that a holding that any sale of seeds exhausts its patent rights would open the door to what it refers to as “exponential” reproduction and sale of the patented seeds.

The Supreme Court’s interpretation of the PVPA in Asgrow Seed Co. v. Winterboer reflects exactly compromise. The Winterboers, the defendants in Asgrow, were the “exponential” versions of Bowman, in one year planting 265 bushels of the plaintiff’s protected soybean seed and harvesting 12,037 bushels. Oversimplifying slightly, the PVPA makes it infringement to “sexually multiply . . . the [protected] variety as a step in marketing (for growing purposes) the variety.” As long as a farmer does not violate this “multiply for marketing” prohibition, however, the PVPA allows the farmer “to save seed produced by him from seed obtained, or descended from seed obtained, by authority of the owner of the variety for seeding purposes” and to plant that seed or sell it in certain circumstances. The Winterboers argued that the latter option “gave them the right to sell an unlimited amount of seed produced from a protected variety.”

The Supreme Court thus was called upon to draw the line between multiplication of seeds for “marketing” and multiplication for “seed saving.” In a statement that could also apply to the problem of interpreting “making” and “using” under the laws for utility patents, the Court said that “[i]t may be well to acknowledge at the outset that it is quite impossible to make complete sense of the provision at issue here.” Without delving into the Court’s reasoning, the conclusion it reached was that the PVPA permitted a farmer to save and sell seed, but “only such seed as he has saved for the purpose of replanting his own acreage.”

This same standard or a similar one could be applied to patent law’s “making” standard. That is, a farmer that acquired seed through authorized channels and without restrictions would be permitted to replant his own acreage (which presumably means the acreage that was originally planted with the crop with the patented seed). That could, in some sense, be viewed not as “making” new seed, but as “using” the purchased seed. Because the seed grown on a particular acreage will be sufficient for planting a much larger acreage—in Asgrow, the defendants produced enough soybeans to plant 10,000 acres on 265 acres—this limitation would ensure that the farmer would be primarily engaged in growing the crop for human consumption or feed or other “commodity” uses. If he were not, then he would be “making” the new seed in a sense that could be viewed as going beyond merely “using” the purchased seed. Of course, this approach would draw a nonstatutory, and perhaps nonobvious, distinction in interpreting “making,” but the distinction seems no less reasonable than the one the Supreme Court has adopted to allow owners of patented products to “repair” them but not to “reconstruct” them. See Aro Mfg. Co. v. Convertible Top Replacement Co., 365 U.S. 179 (1995).

Why did Bowman, at least, not argue for this position, or one along these lines, rather than for his more extreme one? The most obvious explanation is the Supreme Court’s statement in J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred International, Inc., 534 U.S. 124 (2001), that “there are no exemptions for research or saving seed under a utility patent.” But the issue in J.E.M. Ag Supply was the much different question of whether utility patents were available for plants, given the alternative protections of the Plant Patent Act and the PVPA. The Court’s references to the difference between utility patents and PVPA certificates with respect to seed saving was part of the Court’s explanation of the differences between the statutes and was dictum, especially given that the Court discussed additional differences in the different bodies of law.

More importantly, an interpretation of “making” that allowed some seed saving would not necessarily make the two bodies of law the same, even in that respect. Although a farmer who grows PVPA-protected seed for the purpose of replanting may, as discussed above, not only plant but sell it, the right to sell such seed would not necessarily be part of any similar rule adopted for patent law. Moreover, although seed saving is a statutory right under the PVPA, it is a right attached to “seed obtained, or descended from seed obtained, by authority of the owner of the variety for seeding purposes.” For utility patents the seed-saving right would presumably be the result of the exhaustion of rights produced by authorized sales of the patented seeds. In patent law, unlike copyright, exhaustion is not statutory. Hence, the Court in allowing seed saving might choose to duplicate the apparently mandatory rule of the PVPA, but it also might adopt only a default rule that would allow the patentee to contractually restrict the right. In its Bowman amicus brief, the United States seems to reject this possibility, but Quanta left open the possibility for contractual elimination of exhaustion, and that possibility presents different issues than are presented by the unrestricted sales to Bowman.

To be sure, this approach would impose greater burdens on Monsanto. It might be required to devote greater effort to ensure agreement to contractual restrictions to control its distribution system, at least if it wanted to eliminate the availability of commodity seed like that purchased by Bowman. And it might be necessary for it to charge farmers a higher price for their initial purchases of seed, since it would be more difficult to charge them every year for the purchase of new seeds. But Monsanto has adopted such approaches in other countries that do not provide it with the protections it argues for in Bowman. It is also worth noting that Bowman used the commodity seed only for his second crop each year. For his first, more important crop, he purchased new Roundup Ready seed annually. If seed saving were possible, farmers like Bowman might not make those annual purchases, but using saved seed poses its own problems, as described in the amicus brief of the American Soybean Association (in support of Monsanto), and Monsanto would always retain control over the most productive, first-generation seeds. In other markets, sellers contend with competition from used versions of their products, and PVPA protection, even with its seed-saving exception, has been successful, as the Court in J.E.M. Ag Supply observed. There is no evidence that Monsanto needs more.