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Wednesday, 16 November 2011

Letter from AmeriKat: What's blue, black, green and yellow and can cost a fortune?



The AmeriKat - small, black, brown, stripey,
and worth millions but thankfully 
 only costs the price of a chai tea latte
What’s small, black, brown, blue, yellow or green and costs millions in patent litigation? If you guessed a soybean give yourself a Round(up Ready) of applause. A terrible joke for a serious issue that has plagued the US farming community and US courts for years – most recently in an appeal from the Southern District of Indiana to the United States Court of Appeals for the Federal Circuit ("CAFC") in the case of Monsanto v Bowman. Readers of the blog will be well aware of Monsanto’s Roundup Ready® soybeans. The soybeans are genetically engineered to resist N-phosophonomethylglycine (aka glyphosate) - based herbicides, including Monsanto’s Roundup herbicide. The patents at issue in this case are US Patent Nos 5,352,605 (“’605 Patent”) and RE39247E (“’247E Patent”) which cover various aspects of the Roundup Ready soybean. The AmeriKat’s background is in chemistry, so she has attempted her paw at explaining, as one chemistry professor dubbed it, the "lesser" science that go to these patents – her professor's view, not necessarily hers.  

The ‘605 Patent 

CaMV genomic map
In 1994, the USPTO granted Monsanto the ‘605 Patent for “chimeric genes for transforming plant cells using viral promoters”.  The patent relates to the use of viral nucleic acid from the cauliflower mosaic virus (CaMV). CaMV is a virus capable of infecting plant cells which allows a route into the cell to incorporate new genetic material into the plant cell. Loosely speaking the CaMV opens the door to the plant cell to allow the transformation of the plant cell. In order to achieve the transformation the CaMV promoter region -- the part of the DNA that facilitates the creation of a copy of the complementary RNA of the DNA sequence -- is isolated from the CaMV genome. It is then combined with another sequence - a heterologous protein-encoding DNA sequence. The combination of the two sequences cause a chimeric gene to be expressed in the plant cell. Monsanto claimed infringement of claims 1, 2, 4 and 5 of the ‘605 patent. The representative claims, 1 and 4 of the ‘605 patent are as follows
1. A chimeric gene which is expressed in plant cells comprising a promoter from a cauliflower mosaic virus, said promoter selected from the group consisting of a CaMV (35S) promoter isolated from CaMV protein-encoding DNA sequences and a CaMV (19S) promoter isolated from CaMV protein-encoding DNA sequences, and a structural sequence which is heterologous with respect to the promoter.

4. A plant cell which comprises a chimeric gene that contains a promoter from cauliflower mosaic virus . . .
The ‘247E Patent


Molecular represntation of glyphosate
 In 2006, the USPTO reissued US Patent No. 5,633,435 (“’435 Patent”) as the ‘247E Patent for -- pens at the ready -- “glyphosate-tolerant 5-enolpyruvylshikimate-3-phosphate syntheses” [(“EPSPS”)]” [The AmeriKat will personally deliver a cupcake to any reader who can say that correctly after a few drinks]. EPSPS is a glyphosate-tolerant enzyme. The ‘247E Patent involves the transformation of plant cells using, for example, the CaMV promoters disclosed in the ‘605 Patent, to transform plant cells with novel protein-encoding gene sequences that encode for EPSPS. The resulting genetically modified plants express EPSPS and exhibit resistance to glyphosate. The benefit is that farmers can treat their fields with glyphosate-based herbicide, such as Roundup, to control weed growth without damaging the crops that incorporate this technology. Monsanto claimed infringement of 17 claims of the ‘247E Patent – the representative claims being 103, 116, 122, 128, 129 and 130
103. A recombinant, double-stranded DNA molecule comprising in sequence:
(a) a promoter which functions in plant cells to cause the production of an RNA sequence; 
(b) a structural DNA sequence that causes the production of an RNA sequence which encodes an EPSPS enzyme having the sequence of SEQ ID NO:70; and 
(c) a 3' non-translated region that functions in plant cells to cause the addition of a stretch of polyadenyl nucleotides to the 3' end of the RNA sequence; 
where the promoter is heterologous with respect to the structural DNA sequence and adapted to cause sufficient expression of the encoded EPSPS enzyme to enhance the glyphosate tolerance of a plant cell transformed with the DNA molecule..

116. A glyphosate-tolerant plant comprising a DNA sequence encoding an EPSPS enzyme having the sequence of SEQ ID NO: 70 122. A seed of the plant of claim 116, wherein the seed comprises the DNA sequence encoding an EPSPS enzyme having the sequence of SEQ ID NO: 70

128. A glyphosate tolerant plant cell comprising the recombinant DNA molecule of claim 103

129. A plant comprising the glyphosate tolerant plant cell of claim 128.

130. A method for selectively controlling weeds in a field containing a crop having planted crop seeds or plants comprising the steps of:
(a) planting the crop seeds or plants which are glyphosate-tolerant as a result of a recombinant double-stranded DNA molecule being inserted into the crop seed or plant 
(b) applying to the crop and weeds in the field a sufficient amount of glyphosate herbicide to control the weeds without significantly affecting the crop.
Monsanto’s Technology Agreement

Monsanto's Roundup Ready
Soybeans
Monsanto sells its Roundup Ready soybean seeds directly to growers, but it also licences the technology to seed producers who insert the claimed genetic traits into their own seed varieties. The seed producers in turn sell Roundup Read seeds to growers. Sales to growers, whether from Monsanto or from its licensed producers, are governed by a licence agreement known as the “Monsanto Technology Agreement”. The agreement covers several of Monsanto’s patented agricultural technologies, including the Roundup Ready soybeans and the ‘605 and ‘247E Patents. Because the genetic traits in the Roundup Ready seed carries forward to successive generations, under the agreement the licensed grower agrees to
  • use the seed containing the Monsanto technology for planting a commercial crop only in a single season
  • not to supply any of the seed to any other person for planting
  • not to save any crop or second-generation seed produced from the single season crop for replanting
  • not to use this seed or provide it to anyone for crop breeding, research, seed production, etc.
Monsanto does authorize growers to sell second-generation seed to local grain elevators as a commodity. Commodity seeds are a mixture of seeds harvested from farms that may or may not use Roundup Ready seeds. In Indiana, however, approximately 94% of the soybeans planted in 2007 were herbicide resistant varieties. Monsanto does not require growers to place restrictions on grain elevators’ subsequent sales of that seed. The CAFC said that twice Monsanto, by way of its appeal brief and oral argument, confirmed that there is no burden on the grower to ensure that when it sells the seed to a grain elevator the seeds are not subsequently used for planting.

The Defendant's activities

Gary, Indiana, Gary, Indiana, Gary, Indiana...
Between 1999-2007, Knox County, Indiana grower Vernon Hugh Bowman planted Roundup Ready seeds as his first-crop in each growing season. Bowman did not save seeds from the first-crop planting. In 1999, Bowman also purchased commodity seeds from a local grain elevator for riskier late-season planting, otherwise known as “second-crop planting”. Recognizing that the plants from his second-crop exhibited glyphosate resistance, Bowman  saved these seeds and re-planted them for second-crops in subsequent years which enabled him to use glyphosate-based herbicide. In 2002, one of Monsanto’s licensed seed producers, Pioneer Hi-Bred (“Pioneer”) sold its brand seeds containing the Roundup Ready technology to Bowman. Pioneer required Bowman to execute an agreement which contained identical language and restrictions as the Monsanto agreement.   The agreement covered only seeds purchased from Monsanto or from a licensed dealer, such as Pioneer.  Complying with this agreement, Bowman did not save any of these seeds from these crops. Bowman’s use of the commodity seed was not within the scope of the agreement.

In 2006, Monsanto contacted Bowman to investigate his planting activities. Bowman openly explained his practices in respect of the second-crop soybeans in correspondence with Monsanto’s representatives. The following fall, in October 2007, Monsanto filed a patent infringement claim against Bowman. The following month Monsanto investigated Bowman’s 299.1 acres of fields and confirmed that the second-crop soybeans from the commodity seeds contained the patented Roundup Ready technology. Monsanto did not allege infringement or breach of the agreement in respect of the first-generation seeds. In September 2009, the district court in Indiana granted summary judgment on patent infringement for Monsanto for $84,456.20. Bowman appealed.

The CAFC’s Decision

Reportedly a soybean field
Bowman argued that Monsanto’s patent rights were exhausted under the first sale doctrine in respect to all second-generation Roundup Ready soybean seeds that are present in the grain elevators. Under the Monsanto agreement second-generation seeds are authorized to be sold by its growers to grain elevators. Grain elevators then sell them to purchasers like Bowman. Bowman argued that these authorized sales are exhausting sales. Bowman argued that if the right to use the patented seeds does not include the unlimited right to grow subsequent generations free from liability then any exhaustion determination is useless. Bowman cited the 2008 Supreme Court case of Quanta v LG Electronics.  In Quanta, the Supreme Court held that sales of products that “substantially embody” the disputed patents will also be considered sales that exhaust the patent right (a good summary of the case can be found here). Bowman argued that the court should hold that subsequent generations of the seeds are “substantial embodiments” of the first generation seeds, and thus the sales of these seeds would be exhausting sales. In doing so, Bowman asked the court to adopt a robust exhaustion doctrine that  would encompass the progeny of seeds and other self-replicating biotechnologies. Bowman argued that because the Supreme Court disapproved of undermining the exhaustion doctrine by eliminating its application to method patents, the CFAC should likewise not restrict the doctrine's applicability to self-replicating products.

Monsanto argued that growers’ sales of second-generation seeds to grain elevators did not exhaust Monsanto’s patent rights because under the agreement there is an express condition that the progeny of licensed seeds are never be sold for planting - although as the Amerikat understands it Monsanto said there is no burden on the grower to place such conditions on the grain elevators' sales to subsequent purchasers.  Monsanto argued that a grower’s sale of harvested soybeans to a grain elevator is not an “authorized sale” if it results in those soybeans subsequently being re-planted. Even if the sale of the second-generation seeds to grain elevators is exhausted, the planting of those seeds is not exhausted because patent protection “is independently applicable to each generation of soybeans (or other crops) that contain the patented trait.”  If Bowman’s argument were permitted, then patent protection for self-replicating inventions would be “eviscerated”.  In Monsanto v McFarling (2006) and Monsanto v Scruggs (2002), the CAFC addressed the issue of unauthorized planting of second-generation seeds. In McFarling, the court stated 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.’” (McFarling at 1299 citing B. Braun Med v Abbott Labs (1997)).
In both McFarling and Scruggs, the planting of the second-generation seeds came from the defendants first crops from the purchased seed which were subject to the Monsanto agreement. In Bowman, the second-generation seeds came from the grain elevator not subject to the Monsanto agreement. However, the CAFC said that the doctrine of patent exhaustion did not bar the infringement claims in McFarling or Scruggs and likewise it did not in this case.
“Even if Monsanto’s patent rights in the commodity seeds are exhausted, such a conclusion would be of no consequence because once a grower, like Bowman, plants the commodity seeds containing Monsanto’s Roundup Ready technology and the next generation of seed develops, the grower has created a newly infringing article. "
The court went on to cite Scruggs
“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 type of beans
the AmeriKat would rather
be counting.
Under Quanta, the doctrine of exhaustion is triggered when a product that substantially embodies the patent’s essential features is sold and when “the only reasonable and intended use” of that product is to practice the patent (citing US v Univis Lens Co at 249-251 which states "“the authorized sale of an article which is capable of use only in practicing the patent is a relinquishment of the patent monopoly with respect to the article sold.”). The CAFC held that they did not agree that a seed substantially embodies all later generation seeds because there was nothing on the record that suggested the “only reasonable and intended use” of the commodity seeds was for replanting and creating new generation seeds. The CAFC said there were indeed other uses, such as use as feed or “any other conceivable use” which may be permitted. Farmers, however, cannot “replicate” Monsanto’s patented technology by planting it to create newly infringing genetic material, seeds and plants. Besides using it as feed, what are these other conceivable uses they are referring to? Refrigerator art? "Guess how many soybeans are in a jar"- type competitions at the local fair?  

Bowman also argued that Monsanto could not recover pre-Complaint damages because it did not provide actual notice of the infringement and did not require growers to mark second-generation seeds in compliance with Section 287(a) of Title 35. Bowman argued that
“if Monsanto is going to complain about farmers using the age old practice of buying commodity grain for seed; they could have. . . had their agreements require farmers to sell their patented grain to pre-approved grain dealers who would keep Monsanto’s patented traits separate. . .”
...but no need to refer to
commodity seeds.
“Too right” says Merpel. However, because Bowman had received a letter in 1999 from Monsanto that explained that if Bowman planted Roundup Ready sees he would infringe the claimed patents, this was deemed actual notice not withstanding that the letter did not specifically mention commodity seeds. The CAFC said the fact the letter did not specifically mention commodity seeds was
“of no import because the specific accused products are not commodity seeds as a class, but rather Monsanto’s Roundup Ready seeds. Bowman planted Roundup Ready seeds with actual notice that Monsanto considered this activity to infringe its patents."
"Hmmmmm...", says the AmeriKat, furrowing her whiskers.  The end-result is that the CAFC affirmed the federal circuit’s decision and again affirmed the line of decisions that patent exhaustion applies to seeds that are first sold, but not to the subsequent generation of seeds. Even though subsequent generations of seeds still embody the essential features of the patented technology, as long as there is another use for the seed other than working the invention, the doctrine of exhaustion does not apply.  Is that correct?  The AmeriKat can see why extension of the doctrine to self-replicating technologies would be a living nightmare for patentees, but given the facts in Bowman the reasoning in this case does not sit well.  Further, without identification as to the source and composition of the seeds in the grain elevator, the AmeriKat assumes that the farmer only knows whether they planted patented seed when their crops withstand the glyphosate-based herbicide and/or they are sued.  Caveat emptor...

3 comments:

P Dant said...

Thanks for this full report of a most interesting case.

I think you are slightly off beam when you characterise the CaMV DNA as the key that opens the route into the cell to incorporate new genetic material into the cell. That was done (in this case) by a Ti plasmid. The CaMV DNA is a promoter sequence for the gene conferring glyphosate resistance - it acts as a switch that is always on.

Interesting as to whether subsequent generations of seeds infringe or are covered by exhaustion (implied licence). Repair or rebuilding? It's going a bit far to suggest that multiplying the protected article can be covered by an implied licence (it would hardly do if copyright were in question, would it?). This will shortly arise in connection with machines: specifically, 3-D printers. It is already proposed to use these to make parts for assembly into the machine that produced them.

Another point is Bowman's objection to Monsanto interfering with 'the age-old practice of buying commodity grain for seed'. But it depends on the nature of the 'commodity grain'. There is an age-old practice of selling goods to which you apply laudatory epithets. But it's not lawful to apply someone else's trade mark to them. As to notice, US farmers know that the great majority of soybeans currently planted in that country are GM, and patented by Monsanto. So Bowman must have expected that a fair proportion of the 'commodity' soybeans would be so.

As to 'other conceivable uses' (on which such scorn is poured), the primary and ultimate use of all seeds is consumption (you do not plant seeds to plant seeds to plant seeds ad infinitum - there's no point in doing this unless the seeds are useful for something else). Besides feeding to stock (a major use) soybeans are pressed to make edible oils.

Kharol said...

I think my preferred point of view would be that the allegedly infringing seeds didn't bear an appropriate patent marking and should thus be considered not elegible for damage claims..
Let's than wait and see whether company M. comes up with a variety that carries the patent number on the outside..

P Dant said...

I don't think it's an objection to recovery of damages that the accused infringement wasn't marked by the infringer with the number of the patent he is accused of infringing. The seeds originally sold by Monsanto were marked on the bag containing them (I imagine). One might code the number of the granted patent into the DNA of the seeds - maybe I'll file a patent on that (if it's a new idea...).

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