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Question 1 – Explain how the patent issue is articulated in both decisions
Monsanto has developed a class of enzymes which are not sensitive to glyphosate (a non-selective herbicide). It has inserted those genes into the DNA of a soy plant, Roundup Ready (“RR”) ; as a result the soybean plant with this gene is resistant to the herbicide “Roundup”. Consequently, the farmers can treat their fields with glysophate herbicide to control weed growth without damaging their crops.
Monsanto holds a European patent to protect its rights.
The case before the European Court of Justice (« ECJ ») was related to the culture of RR soybean in Argentina where no patent protects Monsanto. Two Argentinean Companies (Cefetra and Toepfer) exported soy meal containing the protected enzyme in the European Union. Monsanto applied for injunctions and for a prohibition of infringement of the European patent.
The Dutch Court (competent because the cargoes arrived in Amsterdam) referred to the ECJ for a preliminary ruling. In its decision of July 6, 2010 (C-428-08), the ECJ examined various possible sources of protection, among which the Directive 98/44/EC of 6 July 1998 on the legal protection of biotechnological inventions (“Directive 1998”).
Article 9 of this Directive provides that the protection is subject to the condition that the genetic information contained in the patented product actually performs its function in the material which contains this information. As a matter of fact in a soy meal the genetic information can only be found in a residual state, which is a dead material obtained after the soy plant has undergone several treatment processes. Article 9 of the Directive 1998 does not protect the fact that the DNA sequence containing the genetic information could be extracted from the soy meal and possibly again performs its function in a cell of a living organism into which it would be transferred.
The Directive does not grant any protection to a patented DNA sequence which is not able to perform the specific function for which it was patented. The soy meal has not to be, as such, resistant to glysophate herbicide.
It is not the intent to provide for an absolute protection to a patented DNA sequence, irrespective if it performs its function, because it would involve an unacceptable extension as long as that situation exists.
The United States Court of Appeals for the Federal Circuit (“US Court”) had to rule a case slightly different, but also related to Monsanto’s RR covered, this time, by US patents.
Since 1996, Monsanto has sold RR soybean seeds, but also licensed its technology to seed producers who insert the gene into their own seeds. Everyone buying or licensing the RR has to sign an Agreement which lists the concerned patents. It has to commit, among others, to use the seed only one season and not to save any crop produced from this seed for replanting. However, growers are authorized to sell second-generation seed to local grain elevators as a commodity (mixture of seeds from different sources, including RR).
During several years, Mr. Bowman, the defendant, bought RR to Pioneer, a licensed seed producer. He complied with the restrictions imposed by the Agreement, meaning mainly a single use. Mr. Bowman simultaneously purchased commodity seeds from a local grain elevator, as a second crop. He applied the glyphosate herbicide to the fields with the second crop and, as a result, was able to determine which ones were resistant to the glyphosate. From a practical point of view, by doing this, he isolated the RR seeds. He repeated the operation seven years and each time saved the harvested seed of his second crop for replanting next years.
Monsanton notified to Mr. Bowman that such practices constituted an infringement to the patented invention.
The US Court decision of September 21, 2011 (ref. 2010-1068) ruled in favor of Monsanto, stating that the fact that a patented technology can replicate itself does not give a purchaser the right to use replicated copies of the technology. The patent exhaustion theory (see next question) does not apply to subsequent self-replicating technology because it would eviscerate the rights of the patent holder.
The right to use, as granted by the Agreement, does not include the right to construct an essentially new article on the template of the original one. Mr. Bowman had legally the right to use commodity seeds, but he did not acquire the right to replicate the patented product to create newly infringing genetic seeds.
Question 2 – comparison Quanta and Bowman cases
The Quanta case can be summarized as follows : LG Electronics Inc. had several US patents to cover its system ensuring an efficient processing of data by the computer. It licensed these patents to Intel Corporation. The agreement between both companies allowed Intel to manufacture and sell microprocessors and chipsets using these patents. However, it was agreed that no license was granted by either party to any third party for the combination of licensed products with other sources. Nevertheless, they also stipulated that nothing in this agreement alter or limit the effect of patent exhaustion which applies when a party sells any of its licensed products.
Quanta Computer Inc. is a computer manufacturer which purchases the microprocessors and chipsets from Intel and used them in combination with non-Intel memory and buses in ways that practice the LGE Patents. The latter filed a complaint against Quanta, asserting that it constituted an infringement to its patents. It argued that, in the case-at-hand, it was related to a method patent (process) which means that it can never be exhausted through a sale.
In its decision of June 9, 2008 (No. 06-937), the US Supreme Court relied on the longstanding doctrine of patent exhaustion which provides that the initial authorized sale of a patented item terminates all patent rights to that item. The right to vend is exhausted by a single, unconditional sale ; the lawfully sold article becomes outside the monopoly of the patent and free of every restriction. It also applies when the item sufficiently embodies the patent. According to the Supreme Court, methods may also be embodied in a product, the sale of which exhausts patent rights.
The Intel Products, which embodied the essential features of LGE patents, constitute a material part of the patented invention and Quanta had no alternative but to follow Intel’s specifications in incorporating this product into its computers. The Intel Products are specifically designed to function only when memory or buses are attached. Since the Intel Products embodied LGE patents, it must still be examined whether the sale to Quanta exhausted LGE’s rights, because exhaustion is triggered only by a sale authorized by the patent holder. This was the case : nothing in the agreement concluded between LGE and Intel restricted Intel’s rights to sell its microprocessors and chipsets to purchases who intend to combine them with non-Intel parts. As a result, the doctrine of patent exhaustion prevents LGE from asserting its rights with respect to patents substantially embodied by Intel’s products.
In the US Court case, Mr. Bowman referred to the patent exhaustion theory and more specifically to the Quanta case. According to his argument, since the sales of commodity seed were authorized by the Agreement, each seed sold is a “substantial embodiment” of all later generations.
The Court did not follow its argument.
One of the main differences between both cases is the fact that in Quanta’s file, LGE “sold” the right to use its patents, even if some restrictions were applicable, while in Monsanto vs. Bowman, Monsanto only granted the right to “use”. As such the doctrine of exhaustion only concerns the authorized “sale” of a patented item.
Eventually, it must be noted that in McFarling, the US Court already held that the conditions of Monsanto’s Agreement did not implicate the doctrine of patent exhaustion. In Bowman’s case too, the patent exhaustion did not bar an infringement action. Even if we would consider that Monsanto’s patent rights in the commodity seeds are exhausted, it would have no impact because once Mr. Bowman plants the commodity seeds containing RR and the next generation of seed develops, the grower creates a newly infringing article.
Question 3
A. Would it have been possible for the ECJ to rely on the exhaustion rule in Monsanto vs. Cefetra ?
The exhaustion theory was not invoked by Cefetra before the ECJ, because this theory is not part of the European rules in force and cannot be considered as a general principle of right.
Moreover, the exhaustion theory only applies to authorized sale of a patented item while Monsanto did not sell its RR seeds to Cefetra in Argentine.
B. Would the analysis be different if the soy meal would come from seeds sold by Monsanto or a licensee to EU farmer ?
Could you please clarify the question ?
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Good responses, but they come a bit late. You oppose the Quanta and the Bowman cases by stating that sale took place in the first case, not in the second one (a right to use was only granted). But what is the basis for distinguishing the “sale” and the “licence to use”? This is precisely the question at hand.
On the last issue (3.B), you could have mentioned that exhaustion (as the EU equivalent of first sale) could eventually apply — with the similar issues as in the US concerning the interpretation of the consent to market the products in such a case.
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1. The main issue in Monsanto v Cefetra is to determine if the article 9 of the Directive 98/44/EC of the European Parliament and of the Council on the Legal Protection of Biotechnological Inventions can be invoked in the situation in which the patent product is contained in the litigious material (soy meal) without performing the function for which is has been patented at the time of the alleged infringement, but had performed this function beforehand or would maybe perform this function again in the future, after it has been isolated from that material and inserted into the cell of an organism
This article provides that “the protection conferred by a patent on a product containing or consisting of genetic information shall extend to all material (…) in which the product in incorporated and in which the genetic information is contained and performs its function”.
For the Advocate General Mengozzi, ‘the protection for a patent on a gene sequence is restricted to the situations in which genetic information is currently performing the functions described in the patent’.
The European Court of Justice agrees with his opinion. It results from its analysis that the present time that the legislator used for the article is restrictive. It implies that « the function is being performed at the present time and in the actual material in which the DNA sequence containing the genetic information is found ».
The Court nonetheless adds a precision about the case of genetic information : it says that
it must be considered that the function of the invention is performed when the genetic information protects the biological material in which it is incorporated against the effect, or the foreseeable possibility of the effect, of a product that can cause the death of the material.
In the particular case of soy meal, the ECJ considers however that the use of an herbicide is not foreseeable, and even not normally conceivable.
In this case, the article 9 of the Directive can hence not be applied and does not give any patent right.
In Monsanto v Bowman, the issue is about a farmer, M. Bowman, who used Monsanto’s seeds for his first-crop. Because of this use, he has signed the Monsanto Technology Agreement prohibiting growers from saving any crop produced from this seed for replanting or supplying saved seeds to anyone for replanting. However, it allows them to sell second-generation seed to local grain elevators as a commodity.
M. Bowman purchased some commodity seeds for a second-crop. These contained Monsanto’s product as well as other seeds. The grower applied glyphosate herbicide in the fields where the commodity seeds were planted and saw that the plants were resistant to the chemical product. He saved harvested seeds from this second-crop to replant second-crops in the following years.
As Monsanto claims that there is a breach of its patent rights, Bowman argues that these rights are exhausted with respect to seeds that are sold as undifferentiated commodity seed.
The Court of Appeal does not follow the latter arguments and concludes that patent exhaustion does not apply to Bowman’s accused second-crop plantings.
Hence, Monsanto won the case.
The patent protection is larger in the US case. Even if the there was a patent exhaustion after the sale of the original seeds, the fact that M. Bowman took advantage of the self-replication of the technology is an infringement to Monsanto’s patent rights.
2. According to the Quanta case, there is an exhaustion of patent rights when there is an authorized sale of a product which substantially embodies the essential features of the patented invention. The Supreme Court adds that the only reasonable and intended use of the product must be to practice the patent.
In Monsanto v Bowman, the grower refers to this statement, saying that each seed sold is a substantial embodiment of all later generations. According to him, there is an exhaustion of the patent.
Yet, the Court of Appeal disagrees with this argumentation, at least with respect of the commodity seeds, because the ‘‘only reasonable and intended use’’ of commodity seeds is replanting them to create new seeds. It could also be used as feed.
Furthermore, this use is even prohibited by the Monsanto Technology Agreement.
This reasoning is therefore not valid in the Monsanto v Bowman case.
3. If the CJEU had not ruled that patent protection does not cover the circumstances of Monsanto v. Cefetra and if the soy meal comes from seeds sold by Monsanto to EU farmers, it would be possible to rely on the exhaustion, according to me.
Indeed, the sale of the seeds by Monsanto, which is the rightholder, would trigger the exhaustion of the patent right.
If one of the licensees of the company sold the seeds, the exhaustion would also be triggered, provided that Monsanto has authorized the licensee to conduct such a sale.
Thanks for sharing your thoughts — just a bit late. But your summary and discussion is going in the right direction.
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1. Both cases deals with the issue of the scope of patent protection. How far can a patent holder invoke its protection?
The case delivered by the CJEU is dealing with the claim of Monsanto to benefit of its patent protection on soy meal imported in Europe by Cefetra (an Argentinian company).
Actually, the soy meal is a dead material in which Monsanto had inserted the glyphosate herbicide commercialized under the trademark (Roundup – RR). This RR soybean is produced in Argentina, where Monsanto has no patent protection. Therefore, when Cefetra started to import soy meal into the European Union (which is faced with the BSE-Cow disease), Monsanto claimed its patent was infringed. Monsanto argues that intact DNA molecules are residually present in soy meal imported into Europe and that its patent is therefore infringed under national patent laws in Europe (J. Allen “There is a future for biotech patent protection in Europe”, http://www.lexology.com/library/detail.aspx?g=677cf65c-adc6-4171-a2db-2ac3306de6ad)
However, the material imported – even if the DNA sequence forms a part of it – has no purpose to perform its function at the time of the alleged infringement. Nonetheless, the soy meal has performed its function in the soy plant and would possibly again be able to perform its function (after isolation and insertion into the cell of an organism). The preliminary reference referred to the CJEU concerned Article 9 of Directive 98/44/EC of the European Parliament and of the Council of 6 July 1998 on the legal protection of biotechnological inventions. This article provides as following :
“The protection conferred by a patent on a product containing or consisting of genetic information shall extend to all material, save as provided in Article 5(1), in which the product is incorporated and in which the genetic information is contained and performs its function”
In its reasoned opinion, the Advocate-General Mengozy corroborates the ECJ’s decision. Indeed, Article 9 uses the present tense, consequently it does not apply to product that has performed or could probably perform its function. Monsanto’s reasoning could hence not be followed. The Court refused to give an absolute patent protection.
Where in Monsanto v. Bowman (US case), the court concludes to a “newly infringing article”. The issue was “could the result of self-replicating technology (in the present case: the modified soy seeds) could be considered as a patent infringement, even it the original seed is subject to patent exhaustion after its first sale?’. The Court of Appeal held in favor of Monsanto: “yes, this is an infringement”. In this case, we see that the patent protection covers a large scope. Indeed, despite the exhaustion of RR soy seed sale, the replanting of the second generation does not enjoy the same exhaustion. Even if, here again – like in the ECJ case – it concerns derivative product.
2. Bowman wants to apply the Quanta ruling, which provides that “Monsanto’s patent rights are exhausted with respect to all Roundup Ready soybean seeds that are present in grain elevators as undifferentiated commodity” (Bowman v. Monsanto, II. Discussion, B. Patent Exhaustion). So, he argued that because the second-generation seeds sold by growers to grain elevators are authorized in the Monsanto’s Technology Agreement and that this Agreement – that has been signed by Bowman – allows growers to sell second-generation seed to local grain elevators as a commodity. Therefore, there is exhaustion for the replanted second generation. Indeed, the Supreme Court rejects the application of patent protection to method patents.
Yet, the Court of Appeals for the Federal Circuit did not retain the Quanta precedent but relied on other precedent (like McFarling or Scruggs). The Court held against Bowman on the ground that farmers “cannot “replicate” Monsanto’s patented technology by planting it in the ground to create newly infringing genetic material, seed and plants” (Bowman v. Monsanto). Unlike Quanta case, the Courts of Appeals did accept the patent protection for method patents. Here, the scope for patent protection is extremely large because it covers “each generation of soybean that contain patent trait” (as it was argued by Monsanto) and as consequence it makes exhaustion almost impossible.
3. The ECJ did not apply the principle of exhaustion. Actually, as it has been seen in class the rule of exhaustion in EU, only apply – after a first entry in the Union territory – with the consent of the patent protection holder (Silhouette case). Moreover the importer of the derivative product – Argentina – is a non-Member State.
Things would be different if the soy meal would come from seeds sold by Monsanto since Monsanto enjoys a patent protection in EU. If the soy meal would come from one of its licensees to EU farmers. If there is a license there is a consent and therefore the rule of exhaustion can be applied. Nonetheless, if Monsanto claims an infringement took place, it should prove that It has given the consent only outside the European Economic Area. In this case, the EU farmers could not invoke exhaustion and carries the burden of the prove (the consent has been given as regard to inide the EEA, as well).
Show lessSome fairly good thinking on those complex issues under 1, but it is not correct to state under 2 that the U.S. Supreme Court rejects the application of patent protection to method patents. On 3, the explanation is difficult to follow. Also, No burden of proof for Monsanto here as plaintiff in a patent infringement case.
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In Monsanto v. Cefetra, the CJEU ruled that the soy meal is a dead material into which the genetic information can only be found in a residual state. The CJEU says that there is no patent infringement in case where “the product (the DNA sequence) forms part of a material imported into the European Union (soy meal) and does not perform its function at the time of the alleged infringement, but has indeed performed its function (in the soy plant) or would possibly again be able to perform its function after it has been isolated from that material and inserted into the cell of an organism”. So the CJEU rejected the possibility of an absolute patent protection.
In Monsanto v. Bowman, The Court gave a very different solution to the question of how far patent protection can go. In this case, a farmer used Monsanto’s product for his second-crop and then saved the seed harvested from his second-crop for replanting additional second-crops in later years. The problem is that he had previously signed the Monsanto Technology Agreement which applies to seed varieties where the Roundup Ready genetic trait is inserted. This Technology Agreement requires the grower “ not to save any crop produced from this seed for replanting, or supply saved seeds to anyone for replanting”, but allows growers to sell second-generation seed to local grain elevators as a commodity. The result of the self-replicating technology (the modified soy seeds) is considered as a “newly infringing article”. So even if the original seed is subject to patent exhaustion after its first sale, replanting the second generation is not. Monsanto thus won this patent infringement case.
So we can see that the second case offers a broader protection than the first case. In the first case, the Court rules that patent protection does not apply to soy meal produced with Monsanto’s product (so patent does not apply to genetic information) and in the second case, the Court says that it does apply to the replanting of crop produced from Monsanto’ seed.
In the Quanta case, the Court came to a very different conclusion than in Monsanto v. Bowman. It says that the authorized sale of an article that substantially embodies a patent exhausts the patent holder’s rights and prevents the patent holder from invoking patent law to control postsale use of the article. If the Court had followed this reasoning in Monsanto v. Bowman, it would have come to the opposite conclusion that the one supplied in the case. It would have said that the rule of exhaustion can apply to the replanting of the second generation.
In Europe, there is a sui generis system concerning plants. But when the plant is obtained through genetic modification, the invention is non-patentable. So even if the Court had not said that soy meal could not be protected by patent, Monsanto’s invention is non-patentable in Europe.
Fine apart from the last paragraph (not correct, neither logic). You should have better distinguished between the 3 subquestions.
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I. The two cases deal with the limit of patent protection in the case of derivative product. However, US Court and EU Court did not give the same answers to that question.
In Cefetra v. Monsanto, the European court of Justice held that article 9 of the Directive on Patent must be interpreted in an effective way. Hence, it does not confer patent protection when the patented product does not perform the function for which it was patented, even if it did perform this function before. A patented product can not have an absolute protection and moreover, this directive precludes national legislation from offering absolute protection to the patented product as such. In addition, the European Court of Justice claims that “a mere DNA sequence without indication of a function does not contain any technical information and is therefore not a patentable invention”. So, Patent protection may be exhausted if the product protected stops to perform its function for which it was patented. The Court of Justice made here an application of the exhaustion of Patent. It articulated the Patent issue in the light of its function.
On the other hand, in U.S. Monsanto V. Bowman case, the U.S. Court finally held that, under the circumstances, the Patent exhaustion is not applicable here. Indeed, the Court disagrees with Bowman that a seed substantially embodies all later generation seeds because nothing in the record indicates that “the only reasonable and intended use of commodity seeds is for replanting them to create new seeds”. It held that while farmers, as Bowman, have the right to use commodity seeds as feed, they can not replicate Monsanto’s patented technology. Here, the Court articulated the Patent issue in the light of the right conferred to the owner.
II. Bowman argued that the sales of second-generation seeds is authorized, and is thus exhausting sales, according to the Supreme Court’s interpretation in Quanta. From the Quanta case, we may deduce a statement that each seed sold is a substantial embodiment of all later generations, thus adopting a robust exhaustion doctrine that encompasses the progeny of seeds and other self-replicating biotechnologies. However, the Court, here, does not follow his argument and finally held that, exhaustion is not applicable in this case.
III. In Cefetra v. Monsanto, the Court made an application of the exhaustion of a Patent. It is now possible to rely on this exhaustion if a patented product does not fulfil its functions anymore. In this case, the soy meal came from Argentina. However, even if the meal came from one of the member state of the European Union, the exhaustion rule would have been applicable. Indeed, the European Court of Justice held that the Community legislature intended to effect a harmonisation which aimed at avoiding barriers to trade. Moreover, the Community legislature’s approach reflects its intention to ensure the same protection for patents in all Member States. So, the harmonization effected by article 9 of the Directive on Patent must be regarded as exhaustive. Therefore, it precludes the national patent legislation from offering absolute protection to the patented product as such, regardless of whether it performs its function in the material containing it.
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Ok, but you should be more precise on reference (ex. “Directive on Patent”). It is not correct to say “So, Patent protection may be exhausted if the product protected stops to perform its function for which it was patented”: in this case, the issue is not exhaustion, but the limit of patent protection. In addition, the following sentence (see also similar ones in your response) is not understandable: “The Court of Justice made here an application of the exhaustion of Patent.” Not clear response under 3.
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How the patent issue is articulated in the two decisions?
In the Monsanto v. Bowman case, patent exhaustion doesn’t exclude an infringement action. Even if the patent rights of Monsanto in the commodity seeds are exhausted, there’s no consequence resulting because once Bowman planted the commodity seeds containing Monsanto’s technology and thus the next generation grows, Bowman still created a “newly infringing article”. The Court acknowledges that there are indeed many uses for commodity seeds, including the uses as feed. But the Court underlines that while any farmer may use commodity seeds as feed, he cannot replicate the patented technology of Monsanto by planting it to create newly infringing genetic material. The Court concludes that patent on the first seeds is subjected to exhaustion after its first sale but there is no exhaustion when it is replanted in a second generation. Monsanto therefor won this case against Bowman.
In the Monsanto v. Cefetra case, the main question referred to the ECJ was whether the article 9 of the EP and Council directive (1998) on the legal protection of biotechnological inventions is to be interpreted, as conferring patent protection in circumstances where the patent product contained in the soy meal does not perform the function for which it was patented, but did perform that function previously or would maybe again perform that same function (after it has been extracted from the soy meal and inserted into a cell of an organism).
The Court first notes that art. 9 specifically organize protection under the conditions that the patented product performs its function in the material in which it is contained. In the particular case of genetic information’s, the function is performed when it protects the material in which it is incorporated against the effect or the “foreseeable possibility” of the effect, of a product that can lead the material to its death. The Court considers that the use of a herbicide on soy meal is not foreseeable. Therefor the protection of art. 9, cannot be applied when the product has ceased to perform its function within the material and thus protection cannot be granted even if the DNA sequence could be extracted from the material and afterwards, perform its function in a cell of another organism in which it would have been inserted. The Court concludes that article 9 does not confer any patent right in this case.
Impact of Quanta? Is the reasoning valid for Monsanto v. Bowman?
Impact: The Quanta case establishes that exhaustion applies to method patents and as the license authorizes the sale of components that embody the patents, the sale exhausts the patents.
The Court holds in favor of Quanta by first establishing that patent exhaustion does apply to method patents, and method patents are exhausted by the sale of an item that embodied the method. Concerning the extent to which a product must embody a patent in order to trigger exhaustion, the Court agrees with Quanta’s argument referring to the Univis case, according to which exhaustion was triggered by the sale of the product because their only intended use was to practice the patent and because they embodied some essential features of the patented invention. A microprocessor or chipset cannot function until it is connected to buses and memory. Here, the only apparent object of Intel’s sales to Quanta was to permit Quanta to incorporate the Intel products into computers that would practice the patents. The Intel products are a material part of the invention under patent and all practice the patent. The incomplete article embodies the patent because the only step left to practice the patent is the addition of standard parts. The Intel products (microprocessor or chipset) cannot perform their function unless they are attached to standard components, like memory or buses; the Intel products were specifically designed as such, to function only when attached to buses or memory. Quanta was not required to make any creative decision when it added to standard parts.
Thus the Intel products embody the patents.
Exhaustion is triggered only by a sale authorized by the patent holder. In this case, the License Agreement authorized Intel to sell products practicing the LGE patents. Nothing limited Intel to sell products embodying the patents. And because Intel was authorized to sell its products to Quanta, exhaustion applied to the patents embodied in those products. LGE cannot assert its patent rights against Quanta.
Reasoning valid in Bowman?
Obviously the common issue in both cases is the question on whether patent exhaustion applies to embodied exhaustion. In the Monsanto v. Bowman case, the Court concluded that there was no exhaustion when the commodity seed is replanted in order to get a second generation of seeds, there’s only exhaustion when the first seeds is sold. Thus, the reasoning of Quanta cannot apply to Monsanto v. Bowman since the Court in Quanta admitted exhaustion on the patent embodied in the Intel products sold to Quanta.
If ECJ had not ruled that there was no patent protection in Monsanto v. Cefetra, would it be possible to rely on exhaustion rule? Would the analysis be different if the soy meal would come from seeds sold by Monsanto or one of its licensees to EU farmers?
The DNA could still be protected by patent, therefor; the merchandise could have been sold such as to exhaust the patent.
If Monsanto sold the seeds directly, there would no problem because he has patent on the goods he’s selling, thus, total patent exhaustion. If it was one of its licensees selling to EU, the licensee concerned would need the authorization of the patent holder to sell the good protected such as trigger exhaustion.
Excellent! (The final paragraphs, in particular the last,one, are however less convincing and difficult to read.)
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I)
Monsanto v. Cefetra:
Facts: Monsanto has created a GMO soy seed which resists to the herbicide Round Up, also created by Monsanto. Monsanto has several patents related to this.
Monsanto has sold Argentina a technological package which includes the herbicide and the seeds. It must be noticed that Monsanto has no patent on seeds, but has apparent on the herbicide. So there was a huge production of soy seeds in Argentina (Monsanto could not protect its rights).
In the EU, Monsanto had a patent on the soybeans. Cefetra imported in the EU cargoes of soy meal. In this soy meal, the genetical information of the soybeans could only be found in a residual state and the soy meal can be considered as a dead material. Monsanto claimed that this soy meal contained the DNA of the Monsanto soy beans and so its patent was breached according to it. Monsanto required the seizure of this merchandizes.
“The referring court asked several questions to the CJEU, including whether there is patent infringement in case where “the product (the DNA sequence) forms part of a material imported into the European Union (soy meal) and does not perform its function at the time of the alleged infringement, but has indeed performed its function (in the soy plant) or would possibly again be able to perform its function after it has been isolated from that material and inserted into the cell of an organism (–> we have to refer to the Directive 98/44, art. 9)”? The CJEU responded negatively, thus rejecting the possibility of an absolute patent protection. ”
Monsanto v. Bowman :
In Monsanto v. Bowman, the farmer (Bowman) used, fort the first crop, Monsanto’s GMO seeds. For the second crop of the season, it did not want to pay the price of Monsanto’s seed and so purchased some commodity seeds to a local grain elevator ; those commodity seeds contained as well Monsanto seeds as other seeds. Nevertheless, he used the Monsanto herbicide for this second crop and saw that seeds were resistant. He saved some of those seeds for later crops. We must notice that the Monsanto Technology Agreement prohibits the saving and replanting of Monsanto seeds. Because he was also planting the RR soy seed for its annual first-crop, Bowman is bound by this Agreement.
According to Monsanto, there is an infringement of this agreement because he replanted Monsanto seeds.
For Bowman, there is an exhaustion of Monsanto patent right because he relied on the Quanta case (US Supreme Court) (infra question nr II).
The court held in favor of Monsanto, thus rejecting the statement of Quanta.
II)
In the Quanta case, the US Supreme Court held that when a good embodies in itself the essential features of a patented invention, there is exhaustion of the holder right. So Mr Bowman in this case said that the seeds contained the future generations of soy beans, so the reuse of the seeds for a second generation is not covered by the patent of Monsanto.
Here Bowman bought commodities for his second crop, commodities which were made up of several types of seeds, including Monsanto seeds. The Monsanto technology Agreement requires the grower “to not save any crop produced from this seed for replanting, or supply saved seeds to anyone for replanting”, but allows growers to sell second-generation seed to local grain elevators as a commodity.
The court did not retain Bowman’s Quanta argument “because nothing in the record indicates that the “only reasonable and intended use” of commodity seeds is for replanting them to create new seeds” (see Bowman decision). Indeed, commodity grains can be used for several goals, including feeding e.g.. Here Bowman used them to replant seeds whereas it was clearly indicated in the Agreement that replanting is forbidden. So for the court, Bowman created newly infringing genetical material. The court thus declared the Quanta statement invalid in this case.
III)
If the court had decided that the Monsanto patent covers the soy meal, we think exhaustion would apply because Monsanto sold a technological package to Argentina. So the patent is exhausted since the 1st authorized sale of a patented good make all the rights set aside.
We don’t think the analysis would be different if the soymeal came from seeds sold by Monsanto or one of its licensees to EU farmers for the same reason.
Show lessQuite good. For question II, you identified and summarized well the core of the argumentation (less good for III: I do not understand how there could be exhaustion as EU law does not recognize international exhaustion)
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1. Articulation of the patent issue regarding derivative products
The U.S. Monsanto case, the question of exhaustion of patent protection is articulated around the following issues raised by Mr. Bowman. Does the fact that he bought the seeds as undifferentiated products mean that the patent protection is exhausted, allowing him to replant the seeds? Is the replanting of seeds comprised in the concept of exhaustion? In this case, Monsanto allowed growers to sell second generation seed to local grain elevators as a commodity. According to the existing case law, exhaustion is triggered only by a sale authorized by the patent owner. Bowman buys seeds from a local grain elevator (Huey Soil Service) and from a licensed seed producer (Pionneer’s RR) for a different season. Bowman combines the two seeds, saves them and replants them. However, Monsanto forbade the saving of crop for replanting and the Court adds that the patent protection applies to each generation of soybeans.
In the EU Monsanto case the question of exhaustion is articulated around the interpretation of article 9 of Directive 98/44 and the possibility of a more extensive patent protection in the member states’ national laws. The main issue is whether patent protection subsists when the product in which it is embodied does not make the function performed foreseeable. In this case, Monsanto tries to argue that the DNA sequence is to be protected even in dead seeds, sold as soy meals. The ECJ says that such a protection cannot be granted because that would amount to an extension of patent protection to the material itself. The patented DNA sequence must perform its function in the material in which it is incorporated.
2. Impact of Quanta vs LGE (2008) on the Monsanto case.
According to Quanta case, there is an exhaustion of patent protection through the authorized sale of a product that substantially embodies a patent right. The user that acquired the patented product legally may even perform standard processes on the product because they are in no way innovative. In the Monsanto case, Bowman was right to point out that future generations of seeds embody the same patent right that was exhausted by the sale of the first seed, precisely because Monsanto allows sales from its licensee to farmers. However, the situation is different from the Quanta case, in the sense that the seeds embody a self-replicating technology protected by a patent, and that the license agreement forbids the planting of the seeds. Indeed, in Quanta, the court dealt with the sale of components of a patented system that must be combined with additional components in order to practice the patented method. The only use of those components is to be combined with other components in order to practice the patented method, while in the Monsanto case the use of soybeans is not solely for replanting but is also destined for feeding purposes. Therefore the replanting of seeds does not embody a simple use but a replication of the technology.
3. Is the exhaustion rule relevant if the ECJ decided that the patent protection was applicable to the seeds?
Regarding the facts of the case, it would have been impossible for Cefetra to rely on the exhaustion rule because Monsanto has never authorized Cefetra to use its technology or sell the products encompassing the technology on the EU market. Moreover, Monsanto has voiced its express opposition to the practices of Cefetra and has never implicitly consented to the selling of the seeds on the EU market (see ECJ Davidoff C-414/99 for the conditions of implicit consent).
However if the soy meal came from seeds sold by Monsanto or one of its licensee directly to EU farmers, we may say that the exhaustion rule is applicable because the patent owner has given his consent to the sale of the soy beans. The farmers are using the products for direct consumption which means that they do not threaten the monopoly of the patent owner: they are not abusing their right (see ECJ 144/81). Moreover, the use of the soy beans which consists in transforming them into soy meal consists in a essential function of the soy bean: soy beans are meant to be eaten!
Good. Your response on 3 is better articulated and more correct than in most other posts.
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1. The two cases deal with the limit of patent protection in the case of derivative products (either the meal coming from the seeds or the reuse of the second-generation commodity seeds). Can you explain how the patent issue is articulated in the two decisions?
a/
In the EU case, Monsanto v. Cefetra (C-428/08), Monsanto claimed that the soy meal was protected by their pattent and thus had the right to block Cefetra from importing.
The CJUE answered that the pattent they owned was on the DNA in the soy seed but that the soy meal, being composed of dead soy, was not protected by this pattent because the DNA could not perform its function anymore: “Article 9 of Directive 98/44/EC of the European Parliament and of the Council of 6 July 1998 on the legal protection of biotechnological inventions is to be interpreted as not conferring patent right protection in circumstances such as those of the case in the main proceedings, in which the patented product is contained in the soy meal, where it does not perform the function for which it is patented, but did perform that function previously in the soy plant, of which the meal is a processed product, or would possibly again be able to perform that function after it had been extracted from the soy meal and inserted into the cell of a living organism.”
It is clear that the pattent protection is not absolute.
b/
In the U.S. case Monsanto v. Bowman (Fed. Cir., No. 2010-1068, 21 Sept. 2011), Monsanto claimed that a farmer named Bowman planted seeds that were protected by the pattent they owned.
Monsanto sold soy seeds to growers who had signed the Monsanto Technology Agreement. Bowman was one of them. In this agreement there were four conditions to be respected and that the growers agreed to: « (1) “to use the seed containing Monsanto gene technologies for planting a commercial crop only in a single season”; (2) “to not supply any of this seed to any other person or entity for planting”; (3) “to not save any crop produced from this seed for replanting, or supply saved seed to anyone for replanting”; and (4) “to not use this seed or provide it to anyone for crop breeding, re- search, generation of herbicide registration data, or seed production.” ».
Monsanto authorizes, growers to sell second- generation seed as a commodity (meaning that it could not be used for plantation but for example to feed cattle).
Bowman however bought some of the grain sold as commodities, planted it and grew some soy crops.
Monsanto stated that it was a clear breach of their rights.
Bowman argued back stating that under the Monsanto Technology Agreement he was allowed to buy the soy seeds as commodity, that there right was exhausted and did not apply on the crop he grew.
Monsanto responded that Bowman infringed there right because he signed the Monsanto Technology Agreement but did not respect it: he bought seeds as a commodity but used it to grow some crops.
The Court stated in this case that « the patent exhaustion does not apply to Bowman’s accused second-crop plantings » .
2. In the U.S. Monsanto case, the ruling of the Supreme Court in Quanta v. LG Electronics, 553 U.S. 617 (2008) (see here) is discussed. What is the impact of Quanta? Is the reasoning in Quanta not valid for the Monsanto v. Bowman case?
In Quanta, the court stated clearly that “the authorized sale of an article that substantially embodies a patent exhausts the patent holder’s rights and prevents the patent holder from invoking patent law to control post-sale use of the article”.
Quanta’s reasoning is not valid in the Monsanto v. Bowman case because the circumstances were very different. The Monsanto case is about self-replication goods which is not the same as first sale.
3. Had the CJEU not ruled that patent protection does not cover the circumstances of Monsanto v. Cefetra, would it be possible to rely on the exhaustion rule in this case? Would the analysis be different if the soy meal would come from seeds sold by Monsanto or one of its licensees to EU farmers?
Had the CJEU ruled that Monsanto’s patent protected the soy meal (thus forgetting the functionalist theory), the court could have decided that Monsanto’s right was exhausted because they put their soy seeds on the market thus renounce the right they have on the post-sale of those seeds ( as the Quanta case explained).
The analysis would differ if Monsanto (or one of their licensees) sold directly the meal. They patent would not be exhausted because it would be a direct and first sale and not post-sale.
Show lessOK on 1(a), but you could have been more articulated in your explanation (rather then just quoting a paragraph of the court’s reasoning). On 3, I do not see how there could be some exhaustion.
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Question I : How the patent issue is articulated in the two decisions ?
These two cases concern patents held by Monsanto concerning the invention of a DNA sequences whose function is to make seeds resistant to total herbicide (Roundup Ready).
Bowman v. Monsanto
Facts : In the US, Monsanto licensed his patent to seed producers, for them to insert the genetic traits in their own seed. The growers that purchase these seeds have to respect the “Monsanto Technology Agreement” which state that the grower can only use the patented seed in a limited way. This limitation include the prohibition to supply these seeds except second generation seed as a commodity (feed,…). In this case, Bowman, an American grower, buys some seeds from licensee seed producer and did respect the conditions of use. But he also purchased commodity seed from a local grain elevator and replants them. Most of the commodities were in fact resistant to the herbicide. Bowman realized then that most of the seeds were coming from Monsanto and the latter argued there was a patent infringement, because those commodity seeds where subject to the same conditions and shouldn’t have been replanted. Bowman counters that the rule of exhaustion must here be applied.
Issue : Does the sale of seeds in the form of commodity (as authorized by the agreement) exhaust the patent protection ?
Holding : The court said that even if the patent right is exhausted by the sale of commodity, by replanting the seeds (commodities) Bowman had created a newly infringing article (new generation of plant) which falls under the protection of the patent. So there is a patent infringement in this case.
Monsanto c. Cefetra
Facts : Argentina bought soy seeds from Monsanto to reboost its economy. With this soy, they produced soy meal that they sold to Europe. Monsanto, that has a European patent concerning the invention of the DNA sequence contained in the soy seed, asks the customs authorities to detain the product because there were suspect of infringing their patent.
Issue : does the patent cover all material containing the DNA sequence ?
Holding : according to Art 9 of the Directive 98/44/EC, the patent only extended to the goods where the DNA performs its function. In this case, the soy meal is a ‘dead material’ in which the DNA function (be resistant to herbicide) is not performed. Thereby, there is no patent infringement.
Question II : What is the impact of Quanta? Is the reasoning in Quanta not valid for the Monsanto v. Bowman case?
Quanta reasoning is that when the sale of an article that substantially embodied another good that would normally fall under the protection of the patent, is authorized, then the patent is exhausted and the future good is not protected.
In the Bowman case, the farmer argues that the commodity embodied all future generations seeds and so these generation seeds were not covered by the patent. However, the Court didn’t follow this reasoning, saying that the commodity seeds are not intended to be replanted and thereby do not contain later generation.
Question III : Had the CJEU not ruled that patent protection does not cover the circumstances of Monsanto v. Cefetra, would it be possible to rely on the exhaustion rule in this case? Would the analysis be different if the soy meal would come from seeds sold by Monsanto or one of its licensees to EU farmers?
Let’s start from the hypothesis that the patent covers the soy meal (even if it’s “dead”). Would the patent be exhausted by the fact that Monsanto sold its seeds to Argentina, where they had no patent protection, and then Argentina sold the seeds transformed in meal in Europe, where there was a patent protection ? We think that Argentina has the right to sell the product without any condition, since the product was not protected in Argentina. By selling his product to Argentina without any clause prohibiting the sale in Europe, Monsanto implicitly consented to the export of the good and the patent was exhausted.
Show lessFine to use the 3-step presentation of decisions for question I. (Why do you write: “Argentina bought soy seeds from Monsanto to reboost its economy.”?).
You could have been better on question II as the response remains sketchy. Response III is not correct.
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1) In Monsanto v. Cefetra, the patent issue is about the scope of the right. The undertaking did not invent the soy plant itself, but it did invent the technology to modify the DNA. The question is to know whether if, through that invention, it could control the whole plant and its productions. The Court stated that, knowing that soy meal is a “dead” substance, the genetic information cannot exercise its function, which is to resist to total herbicides.
In Monsanto v. Bowman, the patent issue is also about the scope of the right, but more precisely about the exhaustion of patent. This question wasn’t dealt in the US case. Here, it is about the exhaustion after the first sale of the soy seeds.
2) In the Quanta case, the US Supreme Court decided that the exhaustion doctrine applied to method patents when they are sold. The impact was that the scope of the right was limited after the first sale of the protected good.
We think that the exhaustion doctrine does not apply here because the case is not about the same type of product. Indeed, the Bowman case is about progeny seeds. We found that: “This Court has never suggested that the patent-exhaustion doctrine applies to the products of a patented item that is capable of reproducing itself in the hands of the purchaser – e.g., newly-grown seeds that are identical to, and grown from, a patented genetically-modified seed that was purchased from the patentee or an authorized licensee”(1).
The author Chris Holman also said that “courts will carve out an exception to the patent exhaustion doctrine for the progeny of self-replicating biotechnology products such as generically-modified seeds. This distinction between a product embodied by a patent vs. a copy of the product would also be consistent with the distinction the Supreme Court recently drew between a component of a patent invention under 271(f) and a copy of that component made outside the US (Microsoft v. AT&T)” (2).
3) For us, there is a problem as Monsanto does not have a patent in Argentina. Since there is no protection of the right of Monsanto, the fact that it sold the seeds to Argentina exhausted it from its right. The rule of exhaustion does apply, without asking the question about the rule of the consent and the putting on the EU market. We don’t need to go this further.
Yes, this analysis would have been different, but not the result. Indeed, the exhaustion rule would definitely apply if Monsanto had itself sold the seeds in the EU market. For the licensees, it is a little bit more complicated. If they had sold the seeds without respecting the conditions of the licensee contract, we could say that the consent of Monsanto was not given and the exhaustion rule would not apply as a consequence. On the other hand, if the licensees had respected the conditions of the contract, the exhaustion rule would apply since it would have meant that Monsanto had agreed.
To conclude, we can say that the transgenic soy of Monsanto is not even “safe”. Indeed, there is a controversy because some unknown DNA material in those seeds has been discovered, meaning that there is an infringement of EU law. The EU imposes to know the whole DNA code of a plant before giving the authorization to sell it, in order to establish the risks that could occur.
(1) U.S. Amicus Br. at 14 & n.8, McFarling v. Monsanto Co., 545 U.S. 1139 (2005) (No. 04-31).
(2) Chris Holman, Quanta and Its Impact on Biotechnology, found at http://holmansbiotechipblog.blogspot.com/2008/06/quanta-and-its-impact-on-biotechnology.html
Consulted source: http://m2bde.u-paris10.fr/content/la-doctrine-de-l%C3%A9puisement-du-droit-des-brevets-analyse-compar%C3%A9e-franco-am%C3%A9ricaine-par-sandr
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OK in general. Good to do some research online but not sure your quotes add a lot. Your response on 3 is not correct (also, the following extract is difficult to understand: “the fact that it sold the seeds to Argentina exhausted it from its right. The rule of exhaustion does apply, without asking the question about the rule of the consent and the putting on the EU market. We don’t need to go this further.”)
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First of all I am sorry for such a late post. I admit I have completely forgotten about this last topic since the last weeks have been extremely busy (because I tried to balance my exams and my part time job …) and I have been reminded about it only this morning. I hope you will still take my contribution into account.
FIRST QUESTION
In the Monsanto v Cefetera case, several questions have been raised.
The first one leads to a reminder of what is the scope of patent protection. It is known that the protection covers what has been included in the claims of the patent, i.e. the key elements of the invention and the way it works. The specifications provide a clarification of those by setting the context.
The ECJ here states that “ Article 9 of the Directive must be interpreted as not conferring patent right protection in circumstances … in which the patented product is contained in the soy meal, where it does not perform the function for which it was patented, but did perform that function previously in the soy plant, of which the meal is a processed product, or would possibly again be able to perform that function after it had been extracted from the soy meal and inserted into the cell of a living organism”.
What has to be stressed out in this answer is that the Court pays attention to the function which has been declared in the patent (both by explaining the functioning in the claims and setting in the specifications the goal to be achieved by the use of the invention). Indeed, it won’t admit the existence of patent protection if only the technical part of the claim is involved in the case but the use is different. Here, the use isn’t the same since we are not in case of a soy plant (agriculture) but of a soy meal (gastronomic context).
The second question leads to a corroboration of what has been said right before. “Article 9 of the Directive effects an exhaustive harmonisation of the protection it confers, with the result that it precludes the national patent legislation from offering absolute protection to the patented product as such, regardless of whether it performs its function in the material containing it”.
It is logical consequence: a directive has as goal harmonization of MS’s national law and EU law enjoys “preemption” advantage: where the Union decided to act, MS cannot intervene. Hence, if national law contradicts EU law, it has to be set aside…
The third question continues in the same direction: the Court answers by reminding that “new rules apply, as a matter of principle, immediately to the future effects of a situation which arose under the old rule” and therefore, “Article 9 of the Directive precludes the holder of a patent issued prior to the adoption of that directive from relying on the absolute protection for the patented product accorded to it under the national legislation then applicable”.
Finally, the court reminds that the TRIPS Agreement provisions have no direct effect and also do not have any interpretative value in this precise case.
In the Monsanto v Bowman case, the question of exhaustion and its scope is raised.
The Court refers to former decisions where it hold that ““[t]he ‘first sale’ doctrine of patent exhaustion . . . [wa]s not implicated, as the new seeds grown from the original batch had never been sold. The price paid by the purchaser ‘reflects only the value of the ‘use’ rights conferred by the patentee.’” Moreover, “there was no unrestricted sale because the use of the seeds by seed growers was conditioned upon obtaining a license from Monsanto”.
Hence the requirement of a product “put on the market” isn’t met if the product is used under license: the exhaustion argument cannot be raised.
Another, point stressed out it that “the fact that a patented technology can replicate itself does not give a purchaser the right to use replicated copies of the technology. Applying the first sale doctrine to subsequent generations of self-replicating technology would eviscerate the rights of the patent holder.” “The right to use “do[es] not include the right to construct an essentially new article on the template of the original, for the right to make the article remains with the patentee.”
Still, it raises the question of the right to “improve” the invention covered by the patent. Indeed, in US Patent Act it is clearly authorized to patent improvement of already existing patents, even without the initial patent owner’s authorization. Nevertheless, in this precise case, it is obvious that the farmers didn’t intend to make any improvement …
Both cases deal with the scope of patent protection: one by redefining the exact limits of the protected invention (importance of both the features AND functioning), the other by specifying the conditions for exhaustion in a specific context (to put on market ≠ allow use under license and right to use the invention ≠ right to also construct sth new on basis of the used invention… it will be nuanced by the Quanta decision …).
QUESTION 2
The Court considers in the Quanta case that “the License Agreement authorized Intel to sell products that practiced the LGE Patents. No conditions limited Intel’s authority to sell products substantially embodying the patents. Because Intel was authorized to sell its products to Quanta, the doctrine of patent exhaustion prevents LGE from further asserting its patent rights with respect to the patents substantially embodied by those products”. Further, “the authorized sale of an article that substantially embodies a patent exhausts the patent holder’s rights and prevents the patent holder from invoking patent law to control postsale use of the article”.
Here this argument has been raised but not followed by the Court.
Indeed, here the issue isn’t about any sale of a product embodying the seeds, just about cultivating second generation seeds, no matter what may be later done out of the so cultivated plants.
“The court disagrees with Bowman that a seed “substantially embodies” all later generation seeds, at least with respect to the commodity seeds, because nothing in the record indicates that the “only reasonable and intended use” of commodity seeds is for replanting them to create new seeds. Indeed, there are various uses for commodity seeds, including use as feed.”
Somehow this remark answer the here above mentioned issue of “possibility to patent improvements of existing patents”: Quanta provides a tool to avoid being sued by the owner of the original patent: exhaustion of the latter’s right if the improvement consists in a new invention substantially embodying the former one.
QUESTION 3
In the Monsanto v Cefetara case an argument based on the Quanta principle could be raised: we might consider that the meal substantially embodies the soy seed and it is clear that the seeds are here used only to prepare meals, hence only in an “embodied form”, not as such.
Show lessIf the seeds have been sold by a licensee, the situation would be different since licensing does not involve the right to sell the invention, only to use it, unless otherwise specified in the contract.
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It is late but not too late though. Fine but I do not follow your reasoning in both 1 and 2 about the patenting of improvements and the absence of any obligation to get a prior authorisation. Not sure I can follow you on question 3 (PS: soy meal has nothing to do with a gastronomic context as you put it! Your wrong understanding of meal = farine here explains this).
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I intended to make a link with § 101 of the US Patent Act which mentions the possibility to patent “useful improvements”.
Show lessSince the Court held that “the right to use do[es] not include the right to construct an essentially new article on the template of the original, for the right to make the article remains with the patentee”, it appeared to me as a à priori limitation of this possibility to improve a patented good (question 1).
Then, (in question 2), in my opinion, the Court seems to provide a solution to this contradiction between “possibility to improve” and “impossible to construct a new article”. Exhaustion by substantial embodying is indeed a solution in so far it allows to create a new product, on basis of a patented one, without fearing any judicial proceedings brought by the patent owner.
All in all, it seems in some cases possible to patent an improvement without required authorization of a “former” patent owner: essentially, in case of exhaustion. In all other cases, lack of such authorization does not prevent from applying for a patent but de facto, makes it quite unlikely to be delivered (because of probable opposition – annulment proceedings by the initial patent owner).
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In question 3, I consider that the soy seeds are substantially embodied in soy meal: you cannot get them out of the meal into their initial form AND it is impossible to distinguish them from the meal they became.
So the Quanta argument seems possible in this case: exhaustion of right has occurred since there is substantial embodying and such embodying is the basic requirement set in Quanta.
Is there any other element of my contribution I should reformulate? I guess I should develop more in order to avoid launching ideas difficult to understand if just mentioned without any precision… I notice it now once I read my contribution: it was clear to me, but maybe not so clear to any reader.
Show lessThanks for those clarifications. You could have a look at the solution that some patent laws have adopted to solve some issues related to patents on improvements. No need to continue the online discussion.