On Tuesday, 19 February 2013, the Supreme Court of the United States heard oral arguments in the case, Bowman v. Monsanto. This case involves the application of the patent exhaustion doctrine to self-replicating technology, in this case, seeds.
The basic facts of the case are as follows (more detailed background available here): Bowman purchased seeds from a grain elevator and planted these seeds. Some of these seeds were the patented “roundup ready” soybeans produced by Monsanto. Because Bowman purchased these riskier seeds from a grain elevator, there were no contractual obligations between Monsanto and Bowman (generally, Monsanto placed contractual limitations on the seeds when selling them to farmers). Bowman harvested the seeds and saved some for future planting. Monsanto alleges that Bowman infringed on its patents in the seeds because Bowman created “newly infringing” articles and that its rights to the future generations seeds were not exhausted and that patent exhaustion does not apply to self-replicating technology.
Oral arguments involved Mark P. Walters representing Bowman, Melissa Arbus Sherry representing the United States (supporting Monsanto’s position) and Seth P. Waxman for Monsanto. In short, it appeared that all parties and justices agreed that this is a very new and novel question. There appeared to be quite a bit of discussion of replication of a software disc to create new copies of the disc, though this example is not directly analogous as the creation of a copy of a disc is not truly “self-replicating” as a seed is. Justice Alito did not ask a single question, nor did (predictably) Justice Thomas.
Oral Argument of Bowman
Mr. Walters began oral arguments but was quickly interrupted by Chief Justice Roberts who asked:
CHIEF JUSTICE ROBERTS: Why in the world would anybody spend any money to try to improve the seed if as soon as they sold the first one anybody could grow more and have as many of those seeds as they want?
Walters tried to assert that contractual agreements may be better suited to protect the inventor in the case than the creation of an exception to patent exhaustion for self-replicating technology.
Justice Breyer discussed at length the three generations of seeds that may be involved. The first seed sold by Monsanto, then creating a second generation seed sold to the grain elevator, followed by the replanting of the second generation seed which produces a third generation. Breyer stated that the problem appeared to be with the third generation seed and suggested that it could not be replanted without violating Monsanto’s patents. Breyer summed up his argument as follows:
JUSTICE BREYER: You know, there are certain things that the law prohibits. What it prohibits here is making a copy of the patented invention. And that is what he did. So it’s generation 3 that concerns us. And that’s the end of it. Now, what is your response to that?
Justice Breyer continued:
JUSTICE BREYER: Now, when you buy generation 2, well, there are a lot of things you can do with it. You can feed it to animals, you can feed it to your family, make tofu turkeys. I mean, you know, there are a lot of things you can do with it, all right. But I’ll give you two that you can’t do. One, you can’t pick up those seeds that you’ve just bought and throw them in a child’s face. You can’t do that because there’s a law that says you can’t do it. Now, there’s another law that says you cannot make copies of a patented invention. And that law you have violated when you use it to make generation 3, just as you have violated the law against assault were you to use it to commit an assault. Now, I think that’s what the Federal Circuit is trying to get at. And so it really has nothing to do with the exhaustion doctrine. It has to do with some other doctrine perhaps that — that somehow you think should give you the right to use something that has as a basic purpose making a copy of itself. Maybe you should, but I don’t see that. Where is that in the law?
Walters noted that this was an exception to the patent exhaustion doctrine for self-replicating technologies. He noted that if Congress wanted to make such an exception, that would be the appropriate venue to create an exception, not the Court.
Justice Ginsburg noted a distinction between the “making” of a patented article or the “use” of an article. She also questioned whether a farmer ever has to purchase seeds from Monsanto or whether he can simply purchase from the grain elevators. Mr. Walters noted that as a practical matter, farmers do not tend to purchase seeds from grain elevators, at least for first plantings, because of the high risk associated with these seeds. In fact, for first plantings, Bowman continued to purchase the seeds from Monsanto.
Justice Sotomayor also noted this distinction stating that the exhaustion doctrine permits use, but not the creation of another item. In response, Mr. Walters conceded that this case is a novel one and again suggested that any exceptions to the patent exhaustion doctrine should be handled by Congress rather than the courts. Justice Ginsburg, however, suggested that it need not be left to Congress because this issue had not come up before and the Court had never found that an exception does or does not apply and would therefore not be going against precedent in deciding the case.
Walters argued that finding an exception to the exhaustion doctrine would go against the policy of the Court’s precedent involving exhaustion:
MR. WALTERS: The Exhaustion Doctrine, the policy that underlies this Court’s cases is fundamentally a choice about the purchaser’s rights in that personal property over the patentee’s rights in the monopoly to use that monopoly and increase its sales. This Court has always chosen the purchaser’s rights over the patentee’s rights to increase sales. And we’re just asking you to make the same choice here.
Additionally, Mr. Walters argued that the basic activities of farming did not constitute making an invention:
MR. WALTERS: If you read the statute, it says making the invention, not just making a copy like it would be in the Copyright Act. We have the invention, which is a particular genetic sequence that was made principally by Monsanto’s genetic engineers. And farmers, when they plant seeds, they don’t exercise any control or dominion over — over their crop. Otherwise, every year they’d have a bumper crop.
Justice Sotomayor stated that without the work of farmers, tending the soil and watering the crops, the soybeans will not grow. An exchange between Mr. Walters, Justice Breyer and Chief Justice Roberts then followed:
MR. WALTERS: They absolutely do work, but they don’t have control over the creative process. They plant, they spray and they pray.[…]
CHIEF JUSTICE ROBERTS: Well, you only need one — I mean, you throw the seeds on the ground, one or two of them are going to grow and you still have the same case, right?
MR. WALTERS: Absolutely. And — and that’s how broad this position is. It doesn’t matter how you come into possession with these seeds. You are committing patent infringement if you — any cell division is patent infringement.
JUSTICE BREYER: That’s true, but that’s what I thought you were going to respond. I thought you were going to respond to me that my question then makes it infringement when your client buys generation 1 from Monsanto, because they buy generation 1 from Monsanto, they plant it in the ground and, lo and, behold, up comes generation 2. And generation 2, on the basis of what I was asking you, is just as much a violation. But I think, though I’ll find out from them, that the response of that is, yes, you’re right, it is just as much a violation. That’s why we, Monsanto, give the buyer a license to do it. And so it all seems to work out. You don’t need any exception. There’s no exception from anything. When you create a new generation, you have made a patented item, which you cannot do without the approval of the patent owner. Therefore, Monsanto gives that approval when you buy generation 1. Now, it seems to me all to work out without any need for exception. And I’m putting to you my whole thought so that you can respond to it.
Mr. Walters responded by suggesting that Monsanto wants the farmer to assume all the risk of farming while still retaining property control over the seed arguing that such a result is “fundamentally inconsistent” with the application of the patent exhaustion doctrine.
Justice Kagan expressed her doubts that contracts create sufficient protection for Monsanto:
JUSTICE KAGAN: Mr. Walters, can you go back to the Chief Justice’s opening question, because the Chief Justice asked you what incentive Monsanto would have to produce this kind of product if you were right. And you said, well, they can protect themselves by contract.Actually, it seems to me that that answer is purely insufficient in this kind of a case, because all that has to happen is that one seed escapes the web of these contracts, and that seed, because it can self-replicate in the way that it can, essentially makes all the contracts worthless. So again, we are back to the Chief Justice’s problem, that Monsanto would have no incentive to create a product like this one.
Mr. Walters then engaged in a lengthy discussion about how grain/seeds purchased from grain elevators differ from those that are purchased directly from Monsanto, including differences in maturation rates, different disease resistance, and the reasons that commodity seeds are seen as riskier than first generation seeds purchased from Monsanto. He then reserved the remainder of his time for rebuttal.
Oral Argument of United States as Amicus Curiae
Ms. Arbus Sherry, on behalf of the United States as amicus curiae, went next. She began by noting that no seed saving exemption is provided by the Patent Act, nor is there any research exemption. She then stated that the exhaustion doctrine “really has nothing to do with this case,” to which Chief Justice Roberts noted:
MS. ARBUS SHERRY: Well, but I mean, this — the reason it’s never is because this is an entirely different case. It’s the reason it’s here, because you have the intersection of the Exhaustion Doctrine and the — the normal protection of reinvented articles. So I don’t think it gets you very far to say that we’ve never applied the Exhaustion Doctrine that way either. We have never applied the reinvention doctrine to articles that reinvent themselves like plant seed.
Ms. Arbus Sherry then argued that application of patent exhaustion would “eviscerate” patent laws, though Justice Scalia noted that a “horrible” result would occur no matter which side the court comes down on:
MS. ARBUS SHERRY: […] If the concept is the sale of a parent plant exhausts the patentholder’s rights not only with respect to that seed but with respect to all the progeny seed, we would have to go all the way back to the very first Roundup Ready plant that was created as part of the transformation event. Every single Roundup Ready seed in existence today is the progeny of that one parent plant and, as Your Honor pointed out, that would eviscerate patent protections. There would be no incentive to invest, not just in Roundup Ready soybeans or not even agricultural technology, but it’s quite a bit broader than that.In order to encourage investment, the Patent Act provides 20 years of exclusivity. This would be reducing the 20-year term to essentially one and only sale. It would be near impossible to recoup your investments with that first sale and so the more likely consequence is that research dollars would be put elsewhere.
JUSTICE SCALIA: That’s a pretty horrible result, but let me give you another horrible result, and that is if — if we agree with you, farmers will not be able to do a second planting by simply getting the undifferentiated seeds from a grain elevator, because at least a few of those seeds will always be patented seeds, and no farmer could ever plant anything from a grain elevator, which means — I gather they use it for second plantings where the risks are so high that it doesn’t pay to buy expensive seed. Now they can’t do that any more because there’s practically no grain elevator that doesn’t have at least one patented seed in it.
Ms. Arbus Sherry then noted that even putting aside patent law, the Patent Variety Protection Act may apply and Bowman could be infringing on the Plant Variety Protection Certificate (note that Monsanto did not raise this argument).
Chief Justice Roberts questioned when, precisely, exhaustion would apply and the following exchange took place:
MS. ARBUS SHERRY: Monsanto, upon the first sale of the bag of Roundup Ready seed, authorizes the planting for one commercial crop and it authorizes the farmer to sell that as a commercial crop or to use it for any purpose other than replanting. That is an authorized sale. So if you take that second generation seed — “second generation” is a bit of a misnomer, but if you take that seed and you follow it through, all of the patent rights with respect to that particular seed have been exhausted. But you cannot take that seed without separate authorization, plant it in the ground, and come up with the next generation of seed. That would be -CHIEF JUSTICE ROBERTS: That sounds like the patent rights haven’t been exhausted then.
MS. ARBUS SHERRY: They have been exhausted with respect to the particular article sold. When the Court’s talked about patent exhaustion, you are not exhausting the rights with respect to the patented
invention. You’re exhausting -CHIEF JUSTICE ROBERTS: You are saying it’s exhausted with respect to the one bean?
MS. ARBUS SHERRY: Yes, and that’s always the case just as if I sell — I mean, even if you think
in the copyright -CHIEF JUSTICE ROBERTS: That’s always the case because it’s a very — the other cases haven’t
involved this situation where you are talking about a self-regenerating product.MS. ARBUS SHERRY: But I think there is other technology out there. I mean, even if you think
of software, for example, there are plenty of other products where one reasonable use is to make more. I can purchase software; one reasonable use would be to make a dozen other copies to give to my friends or sell on eBay. It’s a reasonable use, but it’s an infringing one.CHIEF JUSTICE ROBERTS: Well, we haven’t had that case either
Oral Argument of Monsanto
Mr. Waxman followed and stated that for Bowman’s second plantings, the farmer did not need to purchase the seeds from a grain elevator. Instead, Bowman could have purchased a bag of non-patented seeds with the same results. Justice Ginsburg noted that Bowman could not have used the herbicide if he had used non-patented seeds, instead.
Mr. Waxman then followed up on Chief Justice Roberts’ very first question in the case and stated that Monsanto could not have commercialized the seeds without being able to limit the progeny seeds. He stated that Monsanto spent “hundreds of millions of dollars” and thirteen years developing the invention.
Justice Kagan pointed out that finding patent exhaustion does not apply could make infringers out of everyone and harm innocent farmers. (Note that there is a case headed by PUBPAT making its way through the court system on the very issue that every farmer may become an infringer, even unknowingly, because of the ubiquity of Monsanto’s patented seeds. Information on that case is available here). Justice Kagan notes:
JUSTICE KAGAN: Mr. Waxman, there is a worrisome thing on the other side, though, too. And that is the Bureau position has the — has the capacity to make infringers out of everybody. And that is highlighted actually in this case by how successful this product is and how large a percentage of the market it has had.So that — you know, seeds can be blown onto a farmer’s farm by wind, and all of a sudden you have Roundup seeds there and the farmer is infringing, or there’s a 10-year-old who wants to do a science project of creating a soybean plant, and he goes to the supermarket and gets an edamame, and it turns out that it’s Roundup seeds.
And, you know, these Roundup seeds are everywhere, it seems to me. There’s, what, 90 percent of all the seeds that are around? So it seems as though — like pretty much everybody is an infringer at this point, aren’t they?
Mr. Waxman replied that edamame is an immature form of a soybean and could not be planted. He also acknowledged:
MR. WALTERS: Your point about the ubiquity of Roundup Ready’s use is a fair one. I mean, this is probably the most rapidly adopted technological advance in history. The very first Roundup Ready soybean seed was only made in 1996. And it now is grown by more than 90 percent of the 275,000 soybean farms in the United States. But size — that is, success — has never been thought and can’t be thought to affect the contour of patent rights. You may very — with soybeans, the problem of blowing seed is not an issue for soybeans. Soybeans don’t — I mean, it would take Hurricane Sandy to blow a soybean into some other farmer’s field
[…]
The point that there may be many farmers with respect to other crops like alfalfa that may have some inadvertent Roundup Ready alfalfa in their fields may be true, although it’s — it is not well documented. There would be inadvertent infringement if the farmer was cultivating a patented crop, but there would be no enforcement of that.
A somewhat confusing but humorous exchange regarding a hypothetical about a vaccine followed, with Mr. Waxman again reverting back to the software disc example. The exchange also led into several other hypotheticals.
MR. WAXMAN: . . . if we take it out of the soybean area, let’s look at vaccines. Because the Roundup Ready gene essentially immunizes soybean plants from the herbicide in the same way that a life-saving vaccine will immunize individuals that receive it from some external — it wouldn’t be a herbicide — a life threat. Okay. Vaccines are live. They are live cultures; they can regenerate themselves. If a company develops the vaccine for, you know, H1 — I shouldn’t be using — an important life-saving vaccine -
(Laughter.)
MR. WAXMAN: — it’s unsupportable to say that you cannot sell a quantity of that vaccine without exhausting all of your rights in it. I mean, when Schering-Plough or Bristol-Myers develops a vaccine and sells some of it to CVS so I can go in and get injected, they haven’t lost all of their patent rights in that vaccine. CVS can’t turn around and become a competitor.JUSTICE SOTOMAYOR: Simplifying this case, you can’t take the person who’s been given the vaccine and take vials of their blood and keep selling it? Is that your -
MR. WAXMAN: Yes, and keep — well, keep replicating it in competition. Take another example -
CHIEF JUSTICE ROBERTS: Well, is that how it works?
(Laughter.)
CHIEF JUSTICE ROBERTS: No, I’m serious. I mean, your example, it seems to me, is not quite on point because it’s not a situation where the intended use of the vaccine necessarily results in regeneration of it. In your hypothetical, CVS was going to some lab and making more, right?MR. WAXMAN: Well, CVS was presumably buying it either from the manufacturer or another lab. But the point here is, to take the software example, if I go to, you know, Staples and buy the Windows operating system on a disk, I don’t have the authority to put it in a disk replicator and press a button and make a million copies of it.
JUSTICE BREYER: But you don’t need that because in each instance, as you say, you are making new ones. It’s the making of the new ones, not the use of the old ones, where you prevent that from being done.
MR. WAXMAN: Yeah. Well, let me — the example that comes to mind is, of course, poor Dr. Chakrabarty who, you know, invented a new man-made bacteria. Bacteria replicate themselves, unlike soybeans which require human intervention. I mean, the notion -
[. . .]
JUSTICE BREYER: Then you use the word “use” and you get to the same place.
MR. WAXMAN: I mean, my submission about -
JUSTICE BREYER: I don’t think you can think of an example. I mean, you say — I don’t think you can think of an example where if you win on the other ground, you can produce a bad result for the manufacturer or the inventor because you haven’t treated the conditional sale like a license. I’m not saying you can’t, I just can’t think of one.
MR. WAXMAN: Okay. Here’s one. I will use something that doesn’t make itself, because we think
that is covered by the new article. Let’s say that I invent a new, miraculous new machine. I get a patent for it. I want people to be able — I’m going to commercialize it or I’m going to license with people to commercialize it, but I want people to be able to study it and research it. And so, like Monsanto with its seeds, I sign — I provide a copy of the machine to MIT with a research-only license; that is, you can use this machine to figure out how it works and develop new applications and all that sort of stuff. If that sale is exhausting for all purposes, I can’t prevent MIT or a third party that MIT provides the machine for -JUSTICE BREYER: So lease it.
MR. WAXMAN: — to go into competition with it.
JUSTICE BREYER: So lease it.
MR. WAXMAN: Yes, but you can’t lease articles like software and, you know, soybeans that
consume themselves in any use other than an art experiment.JUSTICE KENNEDY: I do have this problem that goes back to Justice Scalia’s example. What about the commodity bin that has 2 percent of the patented seeds in them? Now, you get away from the article by saying, oh, well, almost all seeds are Roundup these days. But let’s have some different commodity where there are three or four different patented items but 1 percent or 2 percent of the seeds are in the bin. You can’t — you can’t sell those. That seems to me a very extreme result.
MR. WAXMAN: Well, I mean, when you say you can’t sell them. So, as Ms. Sherry was pointing out -
JUSTICE KENNEDY: You can’t sell them if they know they are going to be used for seeds, and you
can’t use them for seeds even though there is only 1 percent of the seeds?
Rebuttal of Bowman
Mr. Walters began rebuttal in part by noting his objection to the suggestion that the selling of seeds through grain elevators violated any laws. He notes that suggestions to the contrary refer to state labeling laws, but that these laws are in place to protect the seed purchaser and do not violate the Plant Variety Protection Act and no PVPA certification issue had been alleged.
Mr. Walters also stated that:
MR. WALTERS: So if you don’t apply the exhaustion doctrine and allow someone to use it, you’re choosing patent rights over personal property rights, and that’s never been done in 150 years of this Court’s exhaustion cases.
In an exchange with Justice Breyer, Mr. Walters noted that use of the seeds for uses other than planting, for example as use as feed for animals, was not making use of the invention. The invention involves the aspect of the seed that is resistant to the herbicide. Justice Breyer did not seem particularly persuaded and asserted that “there are loads of other uses” for the seeds.
The full hearing transcript is available here. The Court could decide the case and issue an opinion any time before the end of the 2012-2013 term at the end of June.