In a unanimous decision, the Supreme Court affirmed both the lower court and Federal Circuit decisions rejecting Bowman’s patent exhaustion defense relating to his harvesting of second generation soybean seeds featuring Monsanto’s patented genetic trait.
Monsanto invented and patented a genetic alteration that allows soybean seeds to survive exposure to a certain herbicide. Monsanto sold its patented seeds to farmers, subject to a licensing agreement that only allows farmers to plant the seed for a single growing season. Thereafter, farmers have to purchase the patented seeds anew each year for planting. While farmers may sell the crop for consumption or processing, they are not allowed to save any of the harvested soybeans for replanting.
Bowman, a farmer, purchased seeds from an authorized Monsanto affiliate, subject to the aforementioned license for his primary soybean crop. However, in order to save money on a later season crop, Bowman purchased soybeans intended for consumption or processing from a grain elevator and replanted them, in the hopes that some contained the genetic trait of Monsanto’s patented seeds. After spraying the late season crop with the herbicide, some of the seeds survived, confirming Bowman’s suspicions. Bowman then harvested this second crop and replanted the resulting seeds with Monsanto’s patented genetic trait for eight subsequent late season plantings. Monsanto sued Bowman for patent infringement.
Bowman raised the defense of patent exhaustion, arguing that the prior authorized sale of the soybeans from a farmer to the grain elevator exhausted Monsanto’s patent rights to control what Bowman did with the soybeans and their seeds thereafter. The Federal Circuit, however, rejected this argument, holding that he had “created a newly infringing article” by replanting the progeny of Monsanto’s genetically altered seeds.
On appeal, the Supreme Court affirmed, holding that “the exhaustion doctrine does not enable Bowman to make additional patented soybeans without Monsanto’s permission.” The Court confirmed its prior holding in Quanta Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617, 625 (2008) that under the doctrine, “the initial authorized sale of a patented item terminates all patent rights to that item,” and reiterated that “the exhaustion doctrine is limited to the ‘particular item’ sold.”
The Court also rejected Bowman’s arguments that he was only doing what farmers have done with seeds for years and that the soybeans’ natural ability to self-replicate or “sprout,” like any other seed, is what “made” the additional soybean replicas – not Bowman. The Court held that Bowman’s actions in planting the seeds, spraying them with herbicide, and thereafter repeatedly harvesting them exerted control of the reproduction, constituting infringement.
Finally, the Court noted that its decision in this case is limited to the facts at hand, leaving open any further questions regarding the applicability of patent exhaustion to other self-replicating technologies.
FORGET EXHAUSTION, ARE SELF-REPLICATING TECHNOLOGIES SUBJECT TO SECTION 101 SCRUTINY?
With the recent uncertainty over Section 101 patent eligibility requirements, one might ponder the interplay between Section 101 and self-replicating technologies. This is especially true considering last Friday’s, evenly-split Federal Circuit decision affirming that certain system, method, and media claims directed to computer software for minimizing risk in financial trades were patent ineligible (see CLS Bank International v. Alice Corporation Pty. Ltd., 2011-1301 (Fed. Cir., May 10, 2013). But at the risk of causing even more tension over the issue, consider whether the progeny of Monsanto’s seeds should be susceptible to a Section 101 challenge.
Specifically, should the “natural law” exception to patent eligible subject matter apply to any progeny seed carrying Monsanto’s genetic trait? See e.g. Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012) (holding that claims directed to a method for measuring the dosage of medication in patients fell under “natural law” and were thus patent ineligible). In theory, Monsanto’s invention altering the genetics of the seed should be limited to just that – the alteration and subsequent first production of that very seed altered by humans. Thereafter, the seed’s ability to self-replicate is a natural occurrence – the seed now exists in nature, forever able to replicate with all its genetic traits without further human alteration/intervention (think Bowman’s sprout argument) – a replication process that normally no one would argue is patentable.
The Court’s decision in Monsanto, however, seems to put to rest any such possibility, dismissing Bowman’s attempt to raise the issue as an unsuccessful “blame the seed” argument. The Court further acknowledged the importance of incentivizing innovation in the field by protecting such technology. Nevertheless, others inventing self-replicating technologies should be cognizant of the Court’s statement limiting its decision to the specific facts presented in Monsanto (though only related to the issue of exhaustion) in light of the apparent expansion of Section 101 applicability.
In the meantime, perhaps Monsanto will consider inventing seeds that do not self-replicate in such a manner (seedless grapes, anyone?).
PATENT EXHAUSTION, GOING FORWARD
The Supreme Court’s recent decisions regarding intellectual property exhaustion, including Monsanto and an unrelated copyright case, shed light on the Court’s March 25, 2013 denial of a petition for certiorari requesting the Court address the extraterritorial reach of the patent exhaustion doctrine.
In Ninestar Tech. Co. Ltd. v. ITC, 667 F.3d 1373 (Fed. Cir. 2012), cert. denied 133 S.Ct. 1656 (2013), alleged infringer Ninestar purchased used/spent Epson ink cartridges in China, refilled them with ink, and then shipped them to the U.S. for resale. The ITC found Ninestar’s practice to be infringing upon Epson’s patents relating to the ink cartridges.
On appeal to the Federal Circuit, Ninestar asserted the defense of patent exhaustion, arguing that its purchase of the cartridges, even if overseas, exhausted Epson’s U.S. patent rights. The Federal Circuit, however, rejected the defense, applying Federal Circuit precedent that patent exhaustion does not apply to foreign sales of patented goods. Ninestar petitioned the high court seeking reversal and an expansion of the patent exhaustion doctrine extraterritorially.
While awaiting a decision on Ninestar’s petition, however, the Supreme Court issued a decision explicitly expanding the doctrine of first sale/exhaustion with respect to copyrights outside U.S. boundaries in Kirtsaeng v. John Wiley & Sons, Inc., 133 S.Ct. 1351 (2013). Kirtsaeng, a foreign student studying in the U.S., arranged for family members in Thailand to purchase English-language textbooks and ship them to him in the U.S. for resale. The foreign printed textbooks were much cheaper, and Kirtsaeng’s sale of the books at U.S. prices resulted in profit. The publisher of the books sued, asserting copyright infringement.
On appeal, Kirtsaeng successfully relied on the first sale doctrine, arguing that his family members’ authorized purchases of the textbooks exhausted any U.S. copyright restriction on their resale, use, and other enjoyment of the books. Agreeing with Kirtsaeng, the Supreme Court explicitly held that neither Congress nor the common law expressed any intent that the first sale doctrine should not apply to foreign sales of copyrighted works.
Based on Kirtsaeng, many believed the Supreme Court might grant Ninestar’s petition to address the similar issue of whether patent exhaustion applies to sales or purchases made outside the U.S., or that the Court might at least remand the case in light of Kirstaeng. But a mere six days after the release of its decision in Kirtsaeng, the Supreme Court denied Ninestar’s petition outright.
Comparing the facts in Ninestar to Monsanto and Kirtsaeng, however, perhaps the Court was hinting that patent exhaustion was not the correct issue presented. Specifically, Ninestar’s purchase of the spent Epson cartridges and subsequent refilling of those cartridges before resale likely removed the products from any protection under the patent exhaustion or first sale doctrines. The refurbished cartridges were thus no longer the “particular item” (see above discussion) sold by Epson and initially purchased by Ninestar. In effect, Ninestar’s practice created a new instance of infringement, just like Bowman’s harvesting and reproduction of seeds constituted new infringement, or unauthorized copying of Monsanto’s patented seeds. In contrast, Kirtsaeng’s U.S. sales were mere resale of the same “particular items” initially purchased – Kirtsaeng did not run to Kinko’s/Fed Ex, so to speak, and make numerous unauthorized copies of the textbooks to sell.
Accordingly, though the issue of whether patent exhaustion reaches beyond the boundaries of the U.S. still lingers, what appears to be clear is that exhaustion will not save one from infringement liability where the accused instrumentality is not the “particular item” initially purchased.