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Farmers' Use of Second Generation Seeds May Infringe Seed Patents

The Supreme Court has held that farmers who plant and harvest second generation seeds of a patented variety without the patent owner's permission may be liable for patent infringement.

Monsanto Co. holds patents on a variety of genetically-altered soybean seeds that are resistant to its "RoundUp" herbicide. Purchasers of Monsanto's patented "RoundUp Ready" seeds must sign an agreement that grants a limited license to the purchaser, whereby farmers can use the seeds for one season and cannot be replant any seeds from the resulting plants. Vernon Bowman is an Indiana farmer who purchased soybean seeds from a grain elevator that included a mix of seeds, including the patented RoundUp Ready seeds, without signing such an agreement. He planted and then sprayed these seeds with RoundUp and many plants survived, which he then replanted. Monsanto sued Bowman for patent infringement, alleging that by planting the second-generation seeds Bowman had infringed the Monsanto patents.

Bowman's primary argument was that the sale from the grain elevator exhausted Monsanto's rights under the "exhaustion doctrine" (or "first sale doctrine"), which operates as an affirmative defense in patent infringement cases. The exhaustion doctrine limits the extent to which patent holders can control a patented article after a first authorized sale, because the sale compensates the patent holder for the use of that particular article. Under this doctrine, once an authorized sale has been made and the patent holder has been compensated, the patent holder's patent rights in that particular article are exhausted and the purchaser is free to use, resell, etc., without further restraint or liability under the patent laws.

A federal judge in Indiana disagreed and ordered Bowman to pay Monsanto more than $84,000. That decision was affirmed at the Federal Circuit and the Supreme Court also unanimously agreed with the decision. Justice Kagen said that the exhaustion doctrine did not apply to the way Bowman used the seeds. They could have been eaten or fed to animals, or resold, etc., but they cannot be used to create subsequent generations of seeds. The new seeds are a new article and not the same "particular article" in which patent rights had been exhausted. Allowing the exhaustion doctrine to shield Bowman against liability would destroy the the value of the Monsanto patents, because Monsanto would be compensated only once. In summary, patented seeds cannot be used to create new seeds without first obtaining permission and likely paying the patent owner a fee.

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