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Bowman vs. Monsanto and the patent exhaustion doctrine

By Jack Gibney

105865270The Unites States Supreme Court recently announced a decision involving the appropriate use of a patent, and specifically discussed the application of the “patent exhaustion doctrine.” This Supreme Court decision is highly relevant to business owners today because it shows the degree to which a business owner’s patent rights extend after they sell their protected product. Accordingly, it also shows where licensing agreements can be used to increase patent owners’ ability to protect their product after it has been sold.

Generally speaking, once a patent has been issued, the owner of that patent has a right to exclude persons from manufacturing the item (i.e., copying the item).  However, once the item is sold, the purchaser is permitted to use the item under the patent exhaustion doctrine.

In this case, the company, Monsanto, sold a particular type of seed (specifically, a soybean seed), to Mr. Bowman, a farmer. This seed was resistant to a chemical called glyphosate, which is present in the herbicide Roundup (ironically, this product is also manufactured by Monsanto). Farmers could use Roundup on weeds, but it would not kill the soybean plants. The product was called “Roundup Ready Soybean Seeds.”

Monsanto had a licensing agreement with growers stating that the growers would only use the seeds for one season and then would repurchase another group of seeds for the next season. In the licensing agreement, the grower could not replant the genetically altered seeds that were reproduced from their harvest and could only consume the harvested plant, or sell the seeds as a commodity.

Mr. Bowman bought some of the seed, but then argued that because he was the rightful purchaser, he could then reproduce the seed. He claimed Monsanto could not control what he did with the seed because of the patent exhaustion doctrine. In other words, once the seed was sold, the rights of the patent owner were exhausted.

In this case, the farmer argued that the seed would naturally reproduce as intended. Monsanto argued that they should be able to sell additional seeds every growing season, and wanted to exclude farmers from reproducing the superior seed because the farmer would otherwise be copying the item in violation of well-settled patent law.

The question that was presented is whether, after an authorized sale, the farmer could “copy” the seed for future use under the exhaustion doctrine without paying Monsanto additional royalties. The Supreme Court held that Monsanto could prohibit the reproduction of the seed and deemed that Mr. Bowman had infringed on the patent.

Monsanto had appropriate licensing agreements in place that clearly defined that the copying of the sold item could be prevented. As the Court correctly pointed out, if Mr. Bowman was permitted to reproduce the seed, the value of the patent would plummet and, more importantly, the incentive to innovate would be chilled. Although this case clearly demonstrates the value of a patent, appropriate measures were in place with regard to licensing agreements that defined the parameters of the use of the sold item.

Licensing agreements can help business owners increase the value of their patents by allowing them alternative measures of protecting their intellectual property. In addition, licensing agreements, when carefully drafted, may also extend a business’s ability to protect its intellectual property after the patent rights have been exhausted from an authorized sale. In other words, by using licensing agreements, business owners can restrict buyers from more than just copying their protected products, but possibly from reselling or even modifying their products after being sold.

 

GibneyL. Jack Gibney is a native to Jacksonville and attended local school.  He accepted an appointment to United States Merchant Marine Academy and graduated from that college in 1979 with a B.S. in Engineering.  After graduating from the Academy he worked as an engineer and then returned to law school.  He graduated from FSU law school in 1984. He has been a Florida Bar Member since 1984, a Georgia Bar since 1985 and a Patent Bar since 2001.  Jack has been a sole practitioner since 1988 and currently concentrates his practice in the areas of intellectual property (primarily patents and trademarks) and private adoptions.

 


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