Supreme Court Rules in Patent Exhaustion Case: Farmer’s Use of Second Generation Seed Constitutes Infringement

by McNees Wallace & Nurick LLC
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On May 13, 2013, the U.S. Supreme Court unanimously ruled that patent exhaustion does not bar an infringement claim in a case involving a farmer who reproduced patented seeds by planting and harvesting second generation seeds without the patent holder’s permission.

Monsanto, maker of “Roundup®” herbicide, patented soybean seed genetically altered to resist its herbicide. The seeds are self-replicating in that the next generation of seeds produced by plants grown from Monsanto’s seeds retain their herbicide resistance. The farmer in this case purchased his soybean seed from a grain elevator instead of from Monsanto, with the expectation that most of the grain elevator soybean seed would be second generation seeds grown from Monsanto’s original seeds.

Monsanto then brought a patent infringement action against the farmer. The farmer argued Monsanto’s original sale of its seed to farmers exhausted any patent rights in second generation seeds produced by plants grown from the original seed.

Under the doctrine of patent exhaustion, an authorized sale of a patented article cuts off the patent owner’s right to future control of that article. In this case, however, the Court agreed with Monsanto, ruling that the limitation of patent exhaustion applies only to the particular article sold, not new soybean seeds that resulted because the technology was self-replicating.

The Court noted the patent exhaustion doctrine still limits certain actions and the farmer had the right to resell the seed he purchased or to use it for human or animal consumption. However, the Court reasoned that the patent exhaustion doctrine does not permit farmers to grow a new crop of patented soybeans from those seeds without Monsanto’s permission. Otherwise, granting the farmer the right to make and sell endless copies would effectively protect only the first seed ever sold.

The farmer argued his use of the purchased seed should be covered by the patent exhaustion doctrine because he used the seed from the grain elevator in the normal way farmers do, by planting a new crop. The Court rejected that argument and noted that the farmer sought an exception to the well-settled rule that the exhaustion doctrine does not extend to the right to make a new product.

The farmer also argued that the reproduction occurred naturally, and so it was not the farmer himself who made replicas of Monsanto’s patented invention from the seed he planted. The Court rejected that argument as well, noting the farmer was actively engaged in the growing process and concluded that it was the farmer, not the bean, who controlled the reproduction of Monsanto’s patented invention.

The Court stressed that its ruling was applied to the particular facts of this case and would not necessarily apply to all situations involving a self-replicating product. However, as such inventions become more prevalent, complex, and diverse, the reasoning behind this decision may well be applied in future situations.

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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