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Supreme Court Case on Monsanto Seeds Tests Limitations of Patent Law

February 19, 2013 at 12:00 AM EDT
A suit between biotech giant Monsanto and an Indiana farmer has reached the high court. Gwen Ifill dissects the case with Marcia Coyle of the National Law Journal. Ray Suarez discusses broader implications with Bert Foer of the American Antitrust Institute and Todd Dickinson of the American Intellectual Property Law Association.
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GWEN IFILL: Now we have two looks at a case argued before the Supreme Court today that could have wider implications in the world of patents and technology.

In 1996, Monsanto came up with a formula to develop herbicide-resistant soybeans, able to survive being sprayed with the company’s popular weed killer, Roundup. The resulting Roundup-ready seeds seen here in promotional videos were more costly, but they would dramatically increase crop production.

MAN: What we have observed this year is outstanding yield potential.

GWEN IFILL: But the seeds are patent-protected and Monsanto prohibits farmers from saving or reusing them. Instead, they must buy new seeds each year.

In 1999, Indiana farmer Vernon Hugh Bowman bought genetically modified soybeans intended for animal feed from a small grain elevator, but instead of using them as feed, he replanted them. Monsanto sued and the dispute has now made its way to the Supreme Court.

Bowman, speaking to reporters on the steps of the court today, said he still believes he did nothing wrong.

VERNON HUGH BOWMAN, Farmer: I didn’t look at it as a loophole because I had always been able to go to the elevator and buy the seed, you follow me? So I just looked at it that when they dumped it in there that they had abandoned their patent. If they want to protect their patent, then it looks to me like it would be required — they’d be required to have to separate it at the elevator and keep it separate.

GWEN IFILL: Bowman also argues that Monsanto, an agribusiness giant, is trying to bully small farmers. But the company says it spent 13 years developing Roundup-ready seeds and it must defend its patents. So far, Monsanto has won in lower courts and the Obama administration filed a Supreme Court brief supporting the company.

It argues that the case has implications for patent rights, extending far beyond soybeans, to include medical research, computer software, and a host of other self-replicating technologies.

The Monsanto case reached its final stop at the Supreme Court today, where justices listened to the pros and cons.

Marcia Coyle of the National Law Journal, as always, was in the courtroom. She joins us now.

Marcia, you can look at this and think David v. Goliath, individual farmer vs. big agribusiness, but it’s a lot more than that.

MARCIA COYLE, the National Law Journal: Well, it’s a lot more complicated than that, Gwen.

Under patent law, if a patent holder authorizes the sale of a patented article or invention, after that first sale, the patent holder’s rights in that invention or article or product are what we call exhausted. And the purchaser can do whatever he wants with it.

If I buy a Sony TV or a Sony computer, I can sell it to somebody else, I can put it out on my front yard. But what the law says — also says is that what I can’t do is I cannot make a copy of the patented invention. And during the arguments today, the justices were focused on just where these seeds that are self-replicating after they’re planted, where they fit under that law.

GWEN IFILL: So the judges were focusing on what piece of this in the questioning?

MARCIA COYLE: OK.

Mr. Bowman’s lawyer was arguing first that farming is using seeds, not making seed. So the farmers were not making copies of Monsanto’s seed here. He said that the rule of the first sale of a patented invention should apply to this process, because these seeds are designed to grow and replicate themselves.

There was nothing exceptional about it. Monsanto argues that — and he’s also arguing that Monsanto wants an exception to the rule of the first sale of the seeds. And that is something he said that Congress should decide, not the Supreme Court. But he immediately ran into skeptical questioning.

Chief Justice Roberts, for example, right away said to him, well, what incentive in the world would anybody have to spend years and millions of dollars improving a seed if, after the first sale, anybody could take the seed and make copies of it? And also other justices questioned what incentive there was for a company to do this if that — if the result that Mr. Bowman is arguing for were to prevail.

The United States was in the arguments as well and they were supporting Monsanto. And the attorney for the United States said, well, what would happen, if Monsanto loses, is that research dollars will go elsewhere.

GWEN IFILL: So in order for more to get this to the Supreme Court, obviously, Monsanto had to win — to have been the last one standing, the last one winning. So this was — were the justices sympathetic to what the lower court had to say in this and was it the same reasoning that brought this to this point?

MARCIA COYLE: Yes. The justices were sympathetic to Monsanto’s argument …

GWEN IFILL: Right.

MARCIA COYLE: … and seemed to feel that the lower federal court here did have the right approach.

On the other hand, some justices did see some concerns with Monsanto’s argument. Justice Scalia said, well, you know, it is a harsh result that research dollars will go elsewhere, but here’s another harsh result. Farmers won’t buy grain, seeds from grain elevators for second planting for fear that in those undifferentiated seeds there are some patented seeds, they will be sued for infringement, and as in the case of Mr. Bowman, damages are very hefty in situations like that.

Justice Kagan raised a concern, too. She said, well, seeds drift, they scatter. So it could be that some of Monsanto’s patented seeds could go onto the land of an unwitting farmer and suddenly that unwitting farmer is a patent infringer.

GWEN IFILL: So even though they were talking about seeds, this is really about larger issues, including this — what you described as the kind of replicate-ability of a patent.

MARCIA COYLE: That’s right.

It was clear in the arguments that — in the justices’ comments that they knew they were dealing with a new technology here, and this case is going to have ramifications for other replicated technologies like software that’s very easily replicated, and that’s why you saw groups filing amicus briefs in the case, groups like the software industry and biotechnology industry, as well as the agricultural industry.

On the other side, for Mr. Bowman, the farmer, were consumer and food safety groups that are concerned about almost the monopoly power that Monsanto has here and how its pervasive influence in the market for soybeans is increasing prices for farmers.

GWEN IFILL: This is not the only court the Supreme Court is going to take up this term that have to do with patents and the same kind of issues.

MARCIA COYLE: No, it’s not. You’re right.

In fact, in April, they’re going to hear a fascinating case that very simply asks whether human genes can be patented. And this grows out of a dispute over a company’s patenting of a gene process that shows the breast cancer and ovarian cancer gene mutation.

GWEN IFILL: About so much more than just farming and seeds.

MARCIA COYLE: Absolutely.

GWEN IFILL: Marcia Coyle, thanks, as always.

Ray Suarez picks up on some of the broader implications now of the case.

RAY SUAREZ: And we turn to two people who followed the case closely.

Bert Foer is the president of the American Antitrust Institute, which filed a brief in favor of Mr. Bowman. And Todd Dickinson is executive director of the American Intellectual Property Law Association. His group filed a brief on behalf of Monsanto.

And, gentlemen, I would like to hear from both of you to start from your various perspectives. What was at stake in today’s argument for business and for the consumer?

Todd Dickinson?

TODD DICKINSON, American Intellectual Property Law Association: Well, broadly speaking, this case could have significant ramification, this case and the Myriad case that was eluded to in the run-up.

In some ways, intellectual property rights are a bit of a whipping boy these days, and the need for strong intellectual property rights, strong patent rights is embedded in our Constitution. There’s a reason for that. That’s because they lead to economic growth and development. They reward and incent innovation, and they nurture that innovation by protecting it.

RAY SUAREZ: Bert Foer?

BERT FOER, American Antitrust Institute: Well, Todd is right that intellectual property is a very important part of our economy.

On the other hand, there’s a lot of questions that have been raised in recent years about whether it is working well and whether it is creating too many monopolies, whether we have a good grasp on the system and can balance the different values that are also in our system, or whether intellectual property should have something of an absolute nature to it, which is the direction that we have been moving in. It’s kind of a scary direction.

RAY SUAREZ: Well, why would being able to protect your invention be anti-competitive? Aren’t other agricultural companies free to develop a competitor to Monsanto’s soybean seed?

BERT FOER: Well, you should be able to protect an invention. The question is, how far? What is the scope? And that’s what the court is being asked to talk about.

What is the use in this case? What is making? What is the difference? And when we get to self-replicating technologies, whatever that ends up meaning — it could mean a lot of things in the future — but the question is where to draw the line. And there is a doctrine, which is what was being argued about today, called first sale, or exhaustion, which means at some point in time the rights of the owner, the patentee, come to an end, and we move on.

RAY SUAREZ: Well, I mentioned that you both are from organizations that filed amicus briefs.

Todd Dickinson, why there are so many amici in this case from fields that have nothing to do with agriculture?

TODD DICKINSON: Well, as you suggested before, because the implications for this go far beyond this particular case.

There are other self-replicating technologies out there which would apply directly to it. I think the broader implications to the biotechnology industry in particular are very significant in this and the Myriad case. Another federal judge recently, another case said we have the broadest and strongest protection for biotechnology and intellectual property in the world, and we have the strongest biotechnology industry in the world.

Europe, by contrast, has weaker protection and a weaker industry. I think that’s a very compelling argument.

RAY SUAREZ: Well, before, you talked about exhaustion. Can a company control what happens to a self-replicating product, any one, a gene, an organism, a plant, aspects of software or a musical recording, once the customer walks out the door having purchased this thing?

BERT FOER: Well, that’s the question. How far does that control go?

Because both competition policy, which is antitrust, and intellectual property are — both have as an objective fostering innovation in the economy. The question is how much of this incentive do you need in the form of monopoly and how much in the form of firms competing with each other to build that better mousetrap?

RAY SUAREZ: So, when does that right run out? Does it ever?

TODD DICKINSON: Let me give you an analogy in the copyright area, which is related, that others might understand.

You have a right to buy a phonograph record. You have the right to play it yourself as many times as you want. You have the right to sell it or give it away to your friend and neighbor. What you don’t have the right to do is make a million copies of it online and distribute them.

I think that’s similar to what you said here. Here, the farmer had the right to use that product for whatever he wanted. As Justice Breyer said today, could I make tofu turkey out of it? Of course you can. He can use it as feed. There are many, many other uses he can make of that.

RAY SUAREZ: He just can’t let it grow into a soybean.

TODD DICKINSON: He can’t make a copy. No, he can’t make the copy of it and then sell that copy for the purpose that was claimed in the patent.

RAY SUAREZ: Well?

BERT FOER: Well, that’s what’s at stake here.

RAY SUAREZ: Is a soybean seed like a photograph record, if anybody can still play a phonograph record? Maybe not the most modern example.

TODD DICKINSON: Dating ourselves, right.

BERT FOER: I don’t know. Legally, it seems to me that, if I were writing the laws, I would put some limitations on the types of conditions that can be placed on an initial sale.

And I would say, after the initial sale, you’re subject to any contracts, licensing contracts. And those can be reviewed by courts under such laws as the antitrust laws. And we can get some sort of a balance in the public interest, whereas if you say that it’s only subject to patent infringement, you’re putting all the cards with the patentee and very few with the consumers or with all the other parties in the economy who are going to be affected.

The result of an extreme interpretation — who knows what we might get out of this in this decision — but the results of something extreme could be the guarantee of a very major long-term monopoly in food production.

RAY SUAREZ: In the short time that we have left, this world has charged ahead. And I’m wondering if the law has kept up with it. Can the law keep up with biotech, big pharma, software in 2013?

TODD DICKINSON: Well, that’s an excellent question.

And, for example, last year, the Congress for the first time in 60 years revised the U.S. patent law. And part of the rationale for why they did that was because of the need to keep up with changes in technology. However, our patent law has almost always done that. There’s always the next big thing. There’s always the cutting-edge technology, whether it’s the telephone, or the automobile, or the personal computer.

The patent law in the United States has by and large kept up with that and continues to.

RAY SUAREZ: Bert Foer?

BERT FOER: And we are more and more than ever dependent on high technologies that are highly patented. And so we’re seeing these clashes between antitrust and intellectual property which have in common, as I said, an interest in innovation, but two different ways to get there.

And more and more, we’re seeing clashes. There are a couple of other cases in front of the court. There are a lot of issues right now involving things like standard essential patents, commitments to make nondiscriminatory licensing, something new on the scene called patent assertion entities. And we have got a lot of problems here that need to be worked out in order to answer your question of whether the law is keeping up.

RAY SUAREZ: Bert Foer, Todd Dickinson, thank you both.

BERT FOER: Thank you.

TODD DICKINSON: Thank you.