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Top Court Justices Signal Support for Monsanto on Patents

February 20, 2013

High Court Justices Signal Support for Monsanto on Patents

A soybean seed that has been run through a chipping machine for testing, is displayed for a photograph inside a Monsanto Co. lab in St. Louis. Photographer: Daniel Acker/Bloomberg

Monsanto Co. (MON:US) got support from U.S. Supreme Court justices in its clash with a farmer who used harvested soybeans for a new planting of the crop, in a case that may aid makers of vaccines, software and genetically modified products.

Hearing arguments yesterday in Washington, a majority of the nine justices suggested that Monsanto has broad rights to control the use of seeds that contain its patented technology. The genetically modified seeds are used to grow more than 90 percent of the nation’s soybeans.

“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?” Chief Justice John Roberts said.

He and other justices signaled that they view seeds harvested from patented crops as new products with fresh patent protections. A victory for Monsanto would potentially let patent holders restrict use of self-replicating products beyond the first generation, benefiting producers of live vaccines, genetically modified salmon, and bacteria strains used in medical research.

Monsanto, the world’s biggest seed company, forbids farmers from saving seeds for replanting instead of buying new ones each season. The company is battling Vernon Hugh Bowman, an Indiana farmer.

Biotechnology, Software

Biotechnology companies, software makers and research universities say a ruling for Bowman would weaken their patent protections. On the other side, makers of replacement auto parts and the American Antitrust Institute argue against restricting how patented products are used.

Monsanto, based in St. Louis, inserts genes into crops that let them withstand application of the herbicide Roundup. Farmers who buy so-called Roundup Ready seeds agree to restrictions on their use. Monsanto has sued 146 U.S. farmers for saving Roundup Ready soybeans since 1997, winning all 11 cases that went to trial, said Kelli Powers, a Monsanto spokeswoman.

Bowman, 76, said he complied with the rules for the spring planting of soybeans, which he bought from DuPont Co (DD:US).’s Pioneer unit, a Roundup Ready licensee. For the second crop of the season, which is susceptible to low yields because of its late timing, Bowman planted beans he bought from a grain elevator. Bowman estimated he saved $30,000 for his farm.

No Written Restrictions

Bowman says he did nothing wrong since there were no written restrictions on purchasing soybeans from the elevator. He contends Monsanto’s patent rights expired after farmers bought the original seeds.

The U.S. Court of Appeals for the Federal Circuit ruled against Bowman in September 2011. The seed from the planting was a “newly infringing article,” the court ruled in upholding an $84,456 award against him.

Several justices suggested they agreed with that reasoning. Justice Stephen Breyer said federal law lets a purchaser use patented soybeans for a variety of purposes, such as feeding animals or one’s family, or making “tofu turkeys.”

“What it prohibits is making a copy of the patented invention, and that is what he did,” Breyer told Bowman’s lawyer, Mark P. Walters of Frommer Lawrence & Haug LLP in Seattle.

Walters said a ruling for Monsanto would place the rights of patent holders above personal property rights. Bowman’s actions don’t threaten Monsanto’s business because most farmers will continue to buy new, uniform seed to get the best harvest, the lawyer said.

‘Plant and Harvest’

Justice Antonin Scalia told Walters that patent law doesn’t give farmers such as Bowman the right to make copies of seeds.

“That’s all he is prevented from doing,” Scalia said. “He can plant and harvest and eat or sell. He just can’t plant, harvest, and then replant.”

Monsanto has said a loss would force the seed industry to shift research away from crops such as soybeans, canola and wheat that produce exact replicas of themselves because they are self-pollinating.

Grain from hybrid crops such as corn isn’t typically replanted because the offspring are less productive.

Genetic traits require an average of $136 million to develop and commercialize, a process that takes 13 years, according to CropLife International, an industry group. Monsanto in 2012 reported $1.51 billion in research and development spending.

$19.9 Billion

U.S. farmers spent $19.9 billion on seeds in 2012, according to data compiled by Bloomberg Industries.

The Center for Food Safety, a Washington-based group that is critical of genetically engineered foods, suggested in a court brief that Monsanto could use sales contracts and Plant Protection Act certificates, rather than patents, to prevent copying while permitting farmers to save seed for themselves.

The Obama administration is largely backing Monsanto in the case. To rule that the first sale of a seed ends Monsanto’s intellectual property rights would “eviscerate patent protections,” Melissa Arbus Sherry, a Justice Department lawyer, told the justices.

“There would be no incentive to invest, not just in Roundup Ready soybeans or not even agricultural technology,” Sherry said.

BSA - The Software Alliance, with members including Apple Inc. (AAPL:US) and Microsoft Corp (MSFT:US)., said in court papers that eliminating patent protection for self-replicating seeds could aid software piracy. Research universities and biotechnology companies say a victory by Bowman would harm their ability to license their work in cancer research, crop protection and nutrition.

Diagnostic companies including Agilent Technologies Inc. and Life Technologies Corp. said they often sell items for research use only. That allows them to charge lower prices by preventing replication of their products. They asked the court to uphold Monsanto’s conditions.

The case, which the justices will decide by July, is Bowman v. Monsanto, 11-796.

To contact the reporters on this story: Jack Kaskey in Washington at jkaskey@bloomberg.net; Susan Decker in Washington at sdecker1@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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  • MON
    (Monsanto Co)
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