Issue(s): Was the district court correct in granting summary judgment of infringement in favor of Monsanto where farmers planted the progeny of genetically altered seeds covered by U.S. patents?
MONSANTO CO., Plaintiffs-Appellees, v. VERNON HUGH BOWMAN, Defendant-Appellant. (2010-1068) Appeal from the United States District Court for the Southern District of Indiana in case no. 07-CV-0283, Judge Richard L. Young. (Decided: September 21, 2011); Before BRYSON (Author), LINN, and DYK,
Facts: Monsanto invented and developed technology for genetically modified “Roundup Ready®” soybeans that exhibit resistance to N-phosphonomethylglycine-(commonly known as “glyphosate”) based herbicides, such as Monsanto’s Roundup® product. The ’605 and ’247E Patents cover different aspects of this Roundup Ready® technology.
On October 4, 1994, the United States Patent and Trademark Office (“PTO”) issued the ’605 Patent to Monsanto for “chimeric genes for transforming plant cells using viral promoters.” Representative claims 1 and 4 cover:
1. A chimeric gene which is expressed in plant cells comprising a promoter from a cauliflower mosaic virus, said promoter selected from the group consisting of a CaMV (35S) promoter isolated from CaMV protein-encoding DNA sequences and a CaMV (19S) promoter isolated from CaMV protein-encoding DNA sequences, and a structural sequence which is heterologous with respect to the promoter.
4. A plant cell which comprises a chimeric gene that contains a promoter from cauliflower mosaic virus . . . .
Since 1996, Monsanto has marketed and sold Roundup Ready® soybean seeds under its own brands, and licenses its technology to seed producers who insert the Roundup Ready® genetic trait into their own seed varieties. Monsanto’s licensed producers sell Roundup Ready® seeds to growers for planting. All sales to growers, whether from Monsanto or its licensed producers, are subject to a standard form limited use license, called the “Monsanto Technology Agreement” or “Monsanto Technology/Stewardship Agreement” (both referred to hereinafter as the “Technology Agreement”). Monsanto’s Technology Agreement covers a variety of its patented agricultural biotechnologies, including Roundup Ready® soybeans. Both the ’605 Patent and the ’435 Patent (reissued as the ’247E Patent) are listed as “applicable patents” licensed under the Technology Agreement.
Although the express terms of the Technology Agreement forbid growers to sell the progeny of the licensed Roundup Ready® seeds, or “second-generation seeds,” for planting, Monsanto authorizes growers to sell second-generation seed to local grain elevators as a commodity, without requiring growers to place restrictions on grain elevators’ subsequent sales of that seed. Commodity seeds are a mixture of undifferentiated seeds harvested from various sources, including from farms that grow Roundup Ready® soybeans and those that do not, although nearly ninety-four percent of Indiana’s acres of soybeans planted in 2007 were planted using herbicide resistant varieties. Before this court, Monsanto has twice eschewed any reading of the Technology Agreement to prohibit unrestricted seed sales to grain elevators as a commodity.
In 1999, Bowman also purchased commodity seed from a local grain elevator, Huey Soil Service, for a late-season planting, or “second-crop.” Because Bowman considered the second-crop to be a riskier planting, he purchased the commodity seed to avoid paying the significantly higher price for Pioneer’s Roundup Ready® seed. That same year, Bowman applied glyphosate-based herbicide to the fields in which he had planted the commodity seeds to control weeds and to determine whether the plants would exhibit glyphosate resistance. He confirmed that many of the plants were, indeed, resistant. In each subsequent year, from 2000 through 2007, Bowman treated his second-crop with glyphosate-based herbicide. Unlike his first-crop, Bowman saved the seed harvested from his second-crop for replanting additional second-crops in later years. He also supplemented his second-crop planting supply with periodic additional purchases of commodity seed from the grain elevator. Bowman did not attempt to hide his activities, and he candidly explained his practices with respect to his second-crop soybeans in various correspondence with Monsanto’s representatives.
Lower Court’s Decision: Bowman was sued for infringement, but Bowman argued that The Technology Agreement signed by Bowman extended only to seeds purchased from Monsanto or a licensed dealer; thus, Bowman’s use of the commodity seeds was not within the scope of the agreement. Monsanto did not allege infringement or breach of the Technology Agreement with respect to Bowman’s planting of first-generation seeds purchased from Pioneer.
On September 30, 2009, the district court granted summary judgment of infringement and entered judgment for Monsanto in the amount of $84,456.20. Am. Final J. and Order Granting Pls.
Findings on Appeal: Bowman argues that if the right to use patented seeds does not include the unlimited right to grow subsequent generations free of liability for patent infringement, then any exhaustion determination “is useless.”
Bowman also argues that Monsanto’s patent rights are exhausted with respect to all Roundup Ready® soybean seeds that are present in grain elevators as undifferentiated commodity. According to Bowman, the “[s]ales of second-generation seeds by growers to grain elevators, and then from grain elevators to purchasers (like Bowman) are authorized according to the terms of Monsanto’s [T]echnology [A]greement, and are thus exhausting sales . . . under the Supreme Court’s analysis in Quanta [Computer, Inc. v. LG Electronics, Inc., 553 U.S. 617 (2008)].”
Monsanto counters that licensed growers’ sales of second-generation seeds to grain elevators as commodity seeds did not exhaust Monsanto’s patent rights in those seeds “[b]ecause of the express condition [in the Technology Agreement] that the progeny of licensed seed never be sold for planting.” According to Monsanto, “a grower’s sale of harvested soybeans to a grain elevator is not an ‘authorized sale’ when it results in those soybeans subsequently being planted.” Monsanto argues that, even if there was exhaustion with respect to commodity seeds, Bowman is nevertheless liable for infringement by planting those seeds because patent protection “is independently applicable to each generation of soybeans (or other crops) that contains the patented trait.”
In Scruggs, Scruggs purchased Roundup Ready® soybean seeds from one of Monsanto’s authorized seed companies and never executed the Technology Agreement. 459 F.3d at 1333. Scruggs planted the purchased seeds, harvested them, and replanted the second-generation seeds containing the Roundup Ready® trait. \Scruggs asserted the doctrine of patent exhaustion as one of many defenses, and the court held that it was inapplicable: “There was no unrestricted sale because the use of the seeds by seed growers was conditioned upon obtaining a license from Monsanto.”
Thus, the doctrine of patent exhaustion did not bar the infringement claims in McFarling or Scruggs. Similarly, here, patent exhaustion does not bar an infringement action. Even if Monsanto’s patent rights in the commodity seeds are exhausted, such a conclusion would be of no consequence because once a grower, like Bowman, plants the commodity seeds containing Monsanto’s Roundup Ready® technology and the next generation of seed develops, the grower has created a newly infringing article.
While farmers, like Bowman, may have the right to use commodity seeds as feed, or for any other conceivable use, they cannot “replicate” Monsanto’s patented technology by planting it in the ground to create newly infringing genetic material, seeds, and plants.
Bowman argues that Monsanto cannot recover pre-Complaint damages because it did not provide actual notice and did not mark or require growers to mark second-generation seeds in compliance with 35 U.S.C. § 287(a).
Monsanto counters that Bowman waived this argument by failing to raise it at the district court. Monsanto argues that even if not waived, Monsanto complied with § 287(a) because Monsanto gave Bowman actual notice of infringement in a 1999 letter and again in the Technology Agreement, and alternatively put Bowman on constructive notice by marking and requiring all seed partners to mark first-generation seeds containing Monsanto’s patented technology.
This court holds that Bowman did not waive his lack of notice argument under § 287(a) because he argued before the district court that Monsanto failed to put any growers or grain elevators on notice of its patent rights with respect to commodity grain. While Bowman did not cite § 287(a) as the legal basis for this “lack of notice” contention, this court holds that, as a pro se litigant, he alleged facts and proffered argument sufficient to preserve the issue for appeal.
Monsanto sent Bowman a letter on June 11, 1999, specifically notifying Bowman of its patents covering Roundup Ready® soybeans and informing Bowman that the “[p]lanting of seed that is covered by a patent would be making the patented invention and using the patented invention.” The fact that this letter does not specifically mention commodity seeds is of no import because the specific accused products are not commodity seeds as a class, but rather Monsanto’s Roundup Ready® seeds. Bowman planted Roundup Ready® seeds with actual notice that Monsanto considered this activity to infringe its patents.
For the foregoing reasons, this court affirms the district court’s holding that patent exhaustion does not apply to Bowman’s accused second-crop plantings.
Allen’s Observations: Whether one agrees that farmers should not be able to plant second generation patented seeds or not, this case is fairly straightforward. The court found that patent exhaustion likely attached to the parent seed once sold as a commodity to grain elevators and mixed with other seed. The issue then is whether that patent exhaustion attached to subsequent generations. Clearly, the CAFC did not agree, finding that the new plant progeny were “new articles” and thus protected under the patent.