Patent Watch: Organic Seed Growers & Trade Ass'n v. Monsanto Co.

by BakerHostetler
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"[Where the court relies on a patent holder's] representations to defeat [jurisdiction over the declaratory judgment claims], those representations are binding as a matter of judicial estoppel [even in the absence of a covenant not to sue]."

On June 10, 2013, in Organic Seed Growers & Trade Ass'n v. Monsanto Co., the U.S. Court of Appeals for the Federal Circuit (Dyk,* Bryson, Moore) affirmed the district court's dismissal of the suit by a coalition of farmers, seed sellers and agricultural organizations seeking declaratory judgments of non-infringement and invalidity with respect to 23 Monsanto patents, which related to genetically modified seeds. The Federal Circuit stated:

The declaratory judgment plaintiff bears the burden of showing the existence of an "actual controversy," that is, "any controversy over which there is Article III jurisdiction." "[T]he question in each case is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.'" "In determining whether a justiciable controversy is present, the analysis must be calibrated to the particular facts of each case." Although there is no bright-line rule applicable to patent cases, we have held that "Article III jurisdiction may be met where the patentee takes a position that puts the declaratory judgment plaintiff in the position of either pursuing arguably illegal behavior or abandoning that which he claims a right to do." A reasonable apprehension of suit is not necessary. However, "jurisdiction generally will not arise merely on the basis that a party learns of the existence of a patent owned by another or even perceives such a patent to pose a risk of infringement." Thus, the question in this case is not whether the appellants' subjective fear of suit by Monsanto is genuine, but whether they have demonstrated a "'substantial risk' that the harm will occur, which may prompt [them] to reasonably incur costs to mitigate or avoid that harm."

The appellants concede that Monsanto has never specifically alleged that they infringe its patents, nor threatened suit against them. Nevertheless, the appellants contend that in light of Monsanto's evident history of aggressive assertion of its transgenic seed patents against other growers and sellers (144 suits and 700 settlements),they must assume that if they infringe those patents, they will also be sued -- even if they only infringe inadvertently. The appellants urge that this suffices for declaratory
judgment jurisdiction. . . .

For purposes of this appeal, we will assume (without deciding) that using or selling windblown seeds would infringe any patents covering those seeds, regardless of whether the alleged infringer intended to benefit from the patented technologies. While appellants do not allege that they have detected contamination in their crops, the district court held that it is likely inevitable that conventional crops will be contaminated by trace amounts of windblown pollen or seeds from genetically modified crops or other sources. Monsanto acknowledges that conventional crops could be exposed to "cross-pollination from nearby fields where biotech crops are grown," and that they "might inadvertently contain traces of Monsanto biotech genes (because, for example, some transgenic seed or pollen blew onto the grower's land)." [A] grower who harvests and uses or sells contaminated crops risks incurring infringement liability.

Despite this possibility of infringement, the question is whether Monsanto is correct that its representations moot any potential controversy. [A] covenant not to sue a declaratory judgment plaintiff can moot a controversy between the parties. . . . Monsanto's representations unequivocally disclaim any intent to sue appellant growers, seed sellers, or organizations for inadvertently using or selling "trace amounts" of genetically modified seeds. Monsanto makes clear that this covers "USDA [United States Department of Agriculture]-certified organic farm or handling operation[s]," which are prohibited from using genetically modified seed. . . . We conclude that Monsanto has disclaimed any intent to sue inadvertent users or sellers of seeds that are inadvertently contaminated with up to one percent of seeds carrying Monsanto's patented traits.

While Monsanto's representations are not a covenant not to sue, they have a similar effect. If we rely on Monsanto's representations to defeat the appellants' declaratory judgment claims (as we do), those representations are binding as a matter of judicial estoppel. It is well-established that a party who successfully argues one position is estopped from later adopting a contrary position in a case involving the same patent. The main factors warranting judicial estoppel are (1) a party's later position is "clearly inconsistent" with its prior position, (2) the party successfully persuaded a court to accept its prior position, and (3)the party "would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped." Should Monsanto sue the appellants for future actions falling within the scope of its representations in this litigation, all three factors would warrant the application of judicial estoppel. . . .

One problem with Monsanto's disclaimer, however, is that it has limited scope: it applies only to growers or sellers of "trace" amounts of seed. [W]e cannot conclude that Monsanto has disclaimed any intent to sue a conventional grower who never buys modified seed, but accumulates greater than trace amounts of modified seed by using or selling con┬Čtaminated seed from his fields. Nonetheless, [T]he appellants here have not made allegations that they fall outside Monsanto's representations. While at least some of the appellants allege that they will necessarily harvest and use or sell trace amounts of modified seeds, no appellants have alleged that they are engaging in activities that place them outside the scope of Monsanto's disclaimer. There is no allegation that the alleged contamination already exceeds the one percent threshold.

[T]he appellants argue that Monsanto's refusal to provide a blanket covenant not to sue has a "chilling effect," forcing the appellants "to forgo farming or seed distribution activities that they otherwise would very much like to pursue." Under some circumstances, forgoing activities or taking costly precautions may be reasonable responses to a substantial risk of future harm, and may therefore be cognizable injuries. However, "'[a]llegations of a subjective "chill" are not an adequate substitute for a claim of specific present objective harm or a threat of specific future harm.'" Declaratory judgment plaintiffs need not be "literally certain that the harm they identify will come about," but they must show that they are at "'substantial risk'" of that harm, and that costly precautions are a reasonable response. The appellants have not made that showing here, because the future harm they allege-that they will grow greater than trace amounts of modified seed, and therefore be sued for infringement by Monsanto-is too speculative to justify their present actions. Parties "cannot manufacture standing merely by inflicting harm on themselves based on their fears of hypothetical future harm." . . .

In sum, Monsanto's binding representations remove any risk of suit against the appellants as users or sellers of trace amounts (less than one percent) of modified seed. The appellants have alleged no concrete plans or activities to use or sell greater than trace amounts of modified seed, and accordingly fail to show any risk of suit on that basis. The appellants therefore lack an essential element of standing. The district court correctly concluded that it lacks Declaratory Judgment Act jurisdiction.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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