For more than a century and a half, courts in the U.S. have applied what is called the doctrine of patent exhaustion. Under this doctrine, the initial authorized sale of a patented item terminates all of the patent owner’s rights in that item.
On February 19, the Supreme Court heard oral arguments in Bowman v. Monsanto Co., which deals with patent exhaustion. The Monsanto case poses the interesting question of whether patent exhaustion applies to the sale of self-replicating seeds.
On appeal before the Federal Circuit, Bowman argued “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 the farmer, 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 licensing agreements], 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 countered 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 licensing 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 argued 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.’”