WUSTL

Supreme Court decision closes loophole in Monsanto’s business model

The Supreme Court’s unanimous opinion in Bowman v. Monsanto holds that farmers who lawfully obtain Monsanto’s patented, genetically modified soybeans do not have a right to plant those soybeans and grow a new crop of soybeans without Monsanto’s permission. “The Court closed a potential loophole in Monsanto’s long-standing business model, prevents Monsanto’s customers from setting up ‘farm-factories’ for producing soybeans that could be sold in competition with Monsanto’s soybeans, and it enables Monsanto to continue to earn a reasonable profit on its patented technology,” says Kevin Collins, JD, patent law expert and professor of law at Washington University in St. Louis

Collins


Collins’ comments on the loophole in Monsanto’s business model and the legal controversy with the Bowman v. Monsanto decision follow:

Soybean loophole

Monsanto invented a genetically modified soybean that is resistant to a particular herbicide, glyphosate. This agricultural technology poses an unusual challenge for Monsanto insofar as Monsanto seeks to use patent protection to profit from its invention.

Unlike most technologies, soybeans are to some extent self-replicating: the process of planting genetically modified soybeans leads to the creation of more genetically modified soybeans which, if planted, can generate yet more genetically modified soybeans, etc. To profit from farmers’ use of the patented soybeans year after year, Monsanto must prevent farmers from saving the soybeans harvested from a first crop and replanting them as a second crop.

In large part, Monsanto achieves this goal by requiring farmers who purchase the patented soybeans from Monsanto to sign a technology licensing agreement that contractually forbids the farmers from saving and replanting the harvested soybeans in future growing seasons. However, this contractual solution leaves a loophole that Bowman sought to exploit. Farmers who have signed the technology agreement regularly sell their soybean crops to a grain elevator that, in turn, regularly sells the soybeans for human or animal consumption.

Bowman went to a grain elevator, purchased Monsanto’s genetically modified soybeans, and planted them in his fields. Bowman was not under any contractual obligation to Monsanto; he did not sign a technology licensing agreement when he purchased the soybeans. He therefore argued that he had the right to re-plant the soybeans he purchased and to grow a new crop. This is the potential loophole in Monsanto’s ability to prevent the saving and replanting of its patented soybeans that the Supreme Court closed in Bowman v. Monsanto.

Legal controversy

More technically, the legal controversy in Bowman arises from the convergence of the unusual technological capacity of patented soybeans to self-replicate when planted and the patent doctrine of exhaustion.

The exhaustion doctrine states that an unrestricted sale of a patented article exhausts the patentee’s rights with respect to that article.

When a consumer buys a patented good—say, a vacuum cleaner—in an over-the-counter transaction, the consumer may use the vacuum cleaner for its intended purpose of cleaning without infringing the patent. However, the exhaustion doctrine is limited in that the purchase of the vacuum cleaner does not give the patent owner the right to make a second vacuum cleaner.

This limit on the exhaustion doctrine is an intuitive one: it is necessary for a patent owner to continue to earn a profit on a patented technology throughout the full term of a patent.

Bowman’s argument hinges on the fact that the clean distinction between a normally exhausted right to use a patented good for its intended purpose and a normally not-exhausted right to make new patented goods collapses when the patented technology is a self-replicating soybean.

The normal and ordinary way in which a farmer uses a soybean (planting it) necessarily makes new soybeans (the harvested crop). Bowman argued that his right to use the purchased soybeans therefore entailed a right to make new soybeans.

The Supreme Court disagreed, holding that the exhaustion doctrine did not give Bowman the right to purchase the patented soybeans at the grain elevator, plant them, and grow a new crop. The Court’s reasoning relied primarily on the fact that there are many ways to use soybeans that do not require self-replication (e.g., using the soybeans for human or animal consumption).

MEDIA CONTACTS
Jessica Martin
Associate Director of University News, Director of News for Law and the Brown School
(314) 935-5251
jessica_martin@wustl.edu
EXPERTS @ WUSTL
Kevin Collins
Professor of Law
(314) 935-7857
kecollins@wulaw.wustl.edu