The man in the picture above is a self-proclaimed fan of Monsanto Company’s genetically engineered soybeans. In fact, every year until 2007 Vernon Hugh Bowman – a 75-year-old farmer from Indiana – purchased Monsanto’s Roundup-Ready soy seeds (RR) from a licensed retailer in order to plant his crop of soy. RR is a type of genetically modified seed that has in-plant resistance to glyphosate, the active ingredient in Monsanto’s Roundup herbicides. This means RR soy crops can be sprayed with Roundup weed-killers without any damage being done to the soy.
But despite his loyalty and admiration, in 2007 Bowman was sued by Monsanto for patent infringement, and the farmer has taken on a legal dispute that recently reached the U.S. Supreme Court. The case revolves around whether Monsanto’s patent over RR soybeans grants it control over the reproduction of second-generation seeds. But from a broader perspective it raises the question of what institutional framework is most desirable for regulating the scope of patent rights and points to the tension between protecting competitive markets and promoting innovation through patents. Moreover, it brings to the public sphere discussions concerning transformations of the farming sector resulting from the privatization of its basic input – seeds.
Every time he bought a batch of RR seeds from the licensed retailer, Bowman would agree to a contract – called a Technology Use Agreement – promising not to save or plant seeds from the resulting crop. But in 1997 the Indiana farmer decided he would start planting an additional second crop of soy later in the growing season, and reasoned that instead of paying for RR seeds it would be better to purchase cheaper commodity seeds from a local grain elevator. These elevators sell an undifferentiated, lower-quality variety of soy seeds normally used for animal feed or industrial purposes. Bowman’s choice for the commodity seeds was driven by the risks associated to second cropping, namely due to weather and soil conditions that would make it too risky to invest in RR technology. And since no Technology Use Agreement was signed concerning the commodity seeds, Bowman went on to use them as if no patent protection were applicable.
But this is where things got tricky. Considering that 94 percent of Indiana’s acres of soybeans are herbicide resistant, it was likely that many of the seeds purchased from the commodity elevator would be RR. So Bowman planted them and sprayed them with herbicide, and found out that most of the seeds indeed had in-plant resistance. He kept the seeds and started replanting them, until in 2007 Monsanto discovered these activities and filed suit for patent infringement. Their argument was that even though the company no longer had contractual control over what was sold by the commodity elevator, planting these seeds is equivalent to reproducing the patented product and therefore violates Monsanto’s rights. Bowman’s reply was that the patent had been “exhausted” after the authorized sale, since the patent exhaustion doctrine states that
“[t]he authorized sale of an article that substantially embodies a patent exhausts the patent holder’s rights and prevents the patent holder from invoking patent law to control post-sale use of the article.”
The case poses important problems. For generations, farmers have been going to elevators to purchase soybean and other grains as commodities. What they did with these seeds was their own business. And in a sector where a large fraction of the market is controlled by a small number of companies, these elevators have become one of the few ways farmers could purchase non-patented seed, be it for animal feed, second cropping or whatnot. Public soybean varieties are currently very hard to find, and even universities get patents on their technology. On the other hand, allowing farmers to freely replant patented seeds might seriously reduce the incentives to invest in research and development in the biotechnology industry.
The arguments presented in court have addressed mainly the economic impacts of the Bowman v. Monsanto decision. According to Monsanto, allowing farmers to plant second-generation GE seeds – no matter how they got them – would be catastrophic for investment and innovation in the agrochemical industry. The Supreme Court’s preliminary declarations on the case seem to be aligned with this point of view. During the first hearing, Chief Justice John G. Roberts Jr. asked
“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?”
The Federal Government has also sided with Monsanto in its Amicus Curiae, as did the Intellectual Property Law Association, software and hardware technology companies, and other sectors of industry.
On the other side of the dispute, organizations such as the Center for Food Safety, Save Our Seeds and the American Antitrust Institute argued that deciding in favor of Monsanto would lead to a further consolidation of what has become a largely concentrated market, leading to an actual reduction in investments and innovation as well as increased seed prices. According to the AAI,
“If allowed to stand, the Federal Circuit’s exception to the first sale doctrine likely will chill or altogether eliminate competition from commodity seed. Notwithstanding that a given bag of commodity seed actually may contain only a little RR seed or none at all, a purchaser intending to plant, save, and reuse commodity seed will no longer be able to do so unless the purchaser is willing to incur the risk of infringement liability or undertake costly mitigating measures. Whether a commodity seed purchaser’s added costs flow from infringement liability itself, the expense associated with seed sorting, or self-imposed seed-saving restrictions on commodity seed, the net effect is to increase the price of the product to the farmer or to devalue the product sold by the grain elevator.”
Monsanto has a history of aggressively defending its patents in Court. According to a report from the Center for Food Safety, as of November 2012 Monsanto had filed 142 lawsuits involving 410 farmers and 56 small farm businesses alleging seed patent infringement. The Bowman case therefore seemed to present “a microcosm of the problem of farmer prosecution that the current system created and fosters.”
But despite all the talk about “David vs. Goliath”, last week the Supreme Court unanimously ruled that the patent exhaustion doctrine does “not permit a farmer to reproduce patented seeds through planting and harvesting without the patent holder’s permission.” The Supreme Court thus confirmed the Federal Circuit’s decision arguing that there would be a “mismatch between invention and reward” should the replication of seeds be allowed. Concerning the repercussions of this ruling for other self-replicating technologies, like software or viruses, the court stated that the exhaustion doctrine might have to be interpreted differently depending on the circumstances at hand.
All in all, the Bowman case failed to initiate controversies about the broader economic and environmental consequences of seed patents. Especially Monsanto’s patenting practices, like the replacement of Roundup Ready 1 after patent expiration in 2016 through Roundup Ready 2, were not considered. These are questions that simply fall out of the scope of the Supreme Court and would have to be raised before the Patent Office that examines the novelty and non-obviousness of inventions .
The only larger policy issue that was raised seems to be the level of protection patents have to afford in order to incentivize investments in genetically modified seeds; an assessment that is far more difficult to make than is often assumed. Looking beyond the Bowman case, large agrochemical companies are usually not only active in the U.S. or Europe, but also in South America and other regions of the world. In light of their activities, U.S. soybean farmers used to complain that they paid for research and development whose results would be enjoyed for free by their South American competitors. As this is no longer the case and the licensing streams coming from different parts of the world have presumably increased, it might be time to ask how much income is generated due to the transnational expansion of patent protection. Given that cross-border licensing revenues could be measured, it might be possible to determine how many replicated generations of seeds really have to be protected to make further research for Monsanto, Syngenta or Pioneer worthwhile.
These issues were of course not at stake in this case, as Bowman did not even purchase the seeds in question from Monsanto thus making the issue to be decided pretty basic. On the other hand, there are few opportunities to discuss the fact that the opportunity contexts for agrochemical companies have changed since the 1990s, while the assessments of judges and policymakers have not. It might very well be that they are lacking the insights that could be provided by organizations like the Office of Technology Assessment (OTA). This organization has not been extended in light of more transnational challenges, but was abolished in 1995.