May 14, 2013
Earlier this year, the Supreme Court issued a landmark ruling on the “first sale” doctrine.
“First sale” is a principle of copyright law that allows the end user to sell or otherwise dispose of a legally purchased copyrighted work without permission from the copyright owner.
The case, Kirtsaeng v. John Wiley & Sons, involved a consumer (Supap Kirtsaeng) having his family purchase textbooks for a reduced rate in Thailand, having them shipped to the U.S., where he would sell the same books for a significant profit.
The books’ publisher (John Wiley & Sons) accused Kirtsaeng of copyright infringement and sued.
The Supreme Court came down on the side of the consumer and against the intellectual property holder, in that it recognized that the “first sale” doctrine protected Kirtsaeng’s activities.
Yesterday, the Supreme Court ruled on yet another intellectual property case involving the “first sale” doctrine – or, at least, the analogous principle for patent law: the “patent exhaustion” doctrine.
That case is Bowman v. Monsanto Co.
“Patent exhaustion” gives the purchaser of a patented article, or any subsequent owner, the right to use or resell that article without the patent holder’s permission.
Rather than textbooks, the facts of Bowman involve the use of patented seeds. Farmer Vernon Bowman purchased “Roundup Ready soybean seeds” from an affiliate of Monsanto, which invented and patented these seeds (“Roundup Ready” seeds are genetically modified to allow them to survive exposure to the herbicide “glyphosate”).
The purchase of these seeds is subject to a licensing agreement that permits farmers to plant the purchased seed in “one, and only one, growing season.” Farmers may consume or sell the resulting crops, but they may not save the seeds for replanting.
Bowman used these purchased seeds for use in his first growing season for several years. However, to reduce costs for his riskier late-season planting (these seeds are premium priced), Bowman purchased soybeans intended for consumption from a grain elevator, planted them, and treated the plants with the glyphosate herbicide, which killed all plants without the Roundup Ready trait.
He then harvested the resulting soybeans, all of which were “Roundup Ready” beans. He saved some of these seeds to use in his late-season planting the next season.
Monsanto found out about this and sued for patent infringement.
Just like in Kirtsaeng, Bowman raised a “first sale” defense (patent exhaustion). Unlike in Kirtsaeng, however, the Supreme Court didn’t side with the consumer.
Although Bowman didn’t violate the terms of the licensing agreement in the strictest sense in that he didn’t harvest and save beans from crops grown from beans directly purchased from Monsanto or one of its affiliates, the unanimous Court found patent infringement nonetheless.
The Court noted that Bowman knew that most farmers who sold their beans to grain elevators used Monsanto’s Roundup Ready seed. Thus, he could “anticipate that many of the purchased soybeans would contain Monsanto’s patented technology.” He was proven correct when he applied a glyphosate-based herbicide to his fields, since a significant proportion of the new plants survived the treatment.
The Court found that the exhaustion defense didn’t apply here.
Although, under the exhaustion principle, “the sale confers on the purchaser, or any subsequent owner, ‘the right to use [or] sell’ the thing as he sees fit,” the Court held that “the 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.”
In short, the Court found that since Bowman was effectively making copies of the protected intellectual property, a “first sale” defense didn’t apply.
But, as Bowman argued, seeds are obviously different than, say, a car engine. If you plant a car engine into the ground, it doesn’t produce new ones. Seeds are self-replicating.
However, the Court rejected Bowman’s argument, holding that Bowman was not a “passive observer” and that “the seeds he purchased (miraculous though they might be in other respects) did not spontaneously create eight successive soybean crops.”
True, the bean grew by itself, but “it was Bowman, and not the bean, who controlled the reproduction (unto the eighth generation) of Monsanto’s patented invention.”
The Court was careful, though, to limit the scope of its holding to “addressing the situation before [them], rather than every one involving a self-replicating product.” This seems to indicate some level of caution on the Court’s part in addressing patents involving living things.
Regardless, the holding of the Court in Bowman is still significant in its impact: as long as a patent holder sells its seeds with a license agreement analogous to Monsanto’s (that restricts the seeds’ use to one growing season), the planting of any beans resulting from the first crop is patent infringement.
In other words, companies like Monsanto have absolute power over a genetic trait.