The patentability of self-replicating products has been presented to the Supreme Court in two recent cases that have been closely watched by biotechnology companies and their investors.
In the first of the two cases, Bowman v. Monsanto, the Court handed down a 9-0 opinion, authored by Justice Elena Kagan, giving a clear victory to Plaintiff Monsanto. At the heart of the case was how to reconcile the exhaustion doctrine with a self-replicating product. The exhaustion doctrine serves to end the patentee’s monopoly in an item, giving the “purchaser, or any subsequent owner, ‘the right to use [or] sell the thing as he sees fit.’” However, there are limits to the exhaustion doctrine, and purchasers are prohibited from engaging in certain activities that could undermine the patentee’s patent. The exhaustion doctrine extends only to the “particular item” that is purchased, and does not protect buyers who seek to create copies of the original product.
For example, when a buyer purchases a printer, the buyer can use the printer in any fashion she pleases except that she cannot use the printer she purchased to make more printers. Thus, the patentee’s patent is exhausted with regard to the individual printer that the buyer purchased. However, he patent on the printer still serves to enforce the patent against the buyer should she try to create more copies of the printer from the original, or particular, item purchased.
Case law instructs that failure to limit the exhaustion doctrine to the particular item would undermine the purpose of the patent system by allowing purchasers to buy one copy then reproduce the patentee’s product without compensating her for each use of her patent. Justice Kagan stated that “The exhaustion doctrine is limited to the “particular item” sold to avoid . . . a mismatch between invention and reward.”
Monsanto’s “Roundup Ready” soybeans present a unique problem in this domain. Bowman, the farmer-defendant in this case, bought soybeans at a grain elevator and then, in violation of the license agreement that Monsanto attaches to its soybean seed, planted the seed rather than consuming it in the usual manner. Bowman then sprayed the soybeans he planted with glyphosate, a herbicide more commonly known as Roundup. Any of the soybeans from the grain elevator that did not contain Monsanto’s Roundup Ready gene would be killed by the glyphosate, leaving only Roundup Ready soybeans. Bowman then kept some of the soybeans from each successive crop, removing the need to buy new seed from Monsanto or its retailers.
Monsanto argued that patent exhaustion would not apply in this case because Bowman’s use of part of the yield from his soybean crop as seed for the next season was an impermissible replication of product. The Court differentiated normal consumption activities from patent-infringing planting of seeds. Justice Kagan dismantled Bowman’s argument to the contrary by noting:
“[I]f simple copying were a protected use, a patent would plummet in value after the first sale of the first item containing the invention. The undiluted patent monopoly, it might be said, would extend not for 20 years (as the Patent Act promises), but for only one transaction. And that would result in less incentive for innovation than Congress wanted. Hence our repeated insistence that exhaustion applies only to the particular item sold, and not to reproductions.
Nor do we think that rule will prevent farmers from making appropriate use of the Roundup Ready seed they buy. Bowman himself stands in a peculiarly poor position to assert such a claim. As noted earlier, the commodity soybeans he purchased were intended not for planting, but for consumption.”
The Court also dismissed Bowman’s assertion that the soybeans, as inherently self-replicating products, were to blame for the duplication and not Bowman. The “blame-the-bean” defense did not sway Justice Kagan, as she pointed out that the beans did not “spontaneously create eight successive crops.”
While the Supreme Court delivered a clear victory for biotech in Bowman, commentators are less optimistic that they will do the same in Myriad. At issue in the case is the patenting of human genes, though even the nomenclature is contested. Myriad genetics received patents, which expire in two years, for the BRCA-1 and BRCA-2 gene sequences, two genes that have been linked with an increased risk of breast and ovarian cancer in women. In part two of this series, we will present the prospects for gene patentability, and how the Supreme Court’s decision in Myriad could reshape the business landscape for biotech companies and their investors.