The Doctrine of Patent Exhaustion

     

     In a case, Bowman v. Monsanto, U.S. Supreme Court opinion 11-796, respondent Monsanto invented and patented Roundup Ready soybean seeds, which contain a genetic alteration that allows them to survive exposure to the herbicide glyphosate. It sells the seeds subject to a licensing agreement that permits farmers to plant the purchased seed in one, and only one, growing season. The license permits growers to consume or sell the resulting crops, but may not save any of the harvested soybeans for replanting.

     Under the patent exhaustion doctrine, “the initial authorized sale of a patented article terminates all patent rights to that item,” Quanta Computer, Inc. v. LG Electronics, Inc., 553 U. S. 617, 625, and confers on the purchaser, or any subsequent owner, “the right to use [or] sell” the thing as he sees fit, United States v. Univis Lens Co., 316 U. S. 241, 249–250. However, the doctrine restricts the patentee’s rights only as to the “particular article” sold, id., at 251; it leaves untouched the patentee’s ability to prevent a buyer from making new copies of the patented item

\     In May 2013, the Supreme Court held: Patent exhaustion does not permit a farmer to reproduce patented seeds through planting and harvesting without the patent holder’s permission.

In its opinion, the Court stated:

Monsanto sells, and allows other companies to sell, Roundup Ready soybean seeds to growers who assent to a special licensing agreement.

That agreement permits a grower to plant the purchased seeds in one (and only one) season. He can then consume the resulting crop or sell it as a commodity, usually to a grain elevator or agricultural processor. But under the agreement, the farmer may not save any of the harvested soybeans for replanting, nor may he supply them to anyone else for that purpose.

     In this case, the farmer used the seeds for eight consecutive crops. The Supreme Court agreed with Monsanto that he only had permission for the first crop. The farmer raised the defense of patent exhaustion by claiming that Monsanto could not control his use of the beans as they were subject to the prior authorized sale to place he purchased the seeds from. The District Court rejected the defense and awarded damages to Monsanto of $84,456. The Federal Court agreed with this decision and later the Supreme Court affirmed. The Patent Act grants a patentee the “right to exclude others from making, using, offering for sale, or selling the invention.” 35 U.S.C.§154(a)(1). The Supreme Court decided that the farmer was replicating Monsanto’s seed by making more and using them thereby infringing on the patent owned by Monsanto.

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