Summary of a Recent
Judicial Development in
Biotechnology

Rejected Defenses to Patent Violation

Eric Pendergrass
National AgLaw Center Graduate Assistant

In Monsanto Co. v. Scruggs, 459 F.3d 1328, (C.A. Fed. Aug. 16, 2006), the United States Court of Appeals held that Mitchell Scruggs, a cotton and soybean farmer, violated Monsanto's patent and licensing agreement for Roundup Ready soybeans and cotton despite claims of patent exhaustion and antitrust violations.

The court held that Scruggs violated the patent owned by Monsanto Company (hereinafter Monsanto) by saving and reusing soybean and cotton seeds containing genetic traits that made them resistant to glyphosate herbicides, including Roundup. Id. at 1336. In response to Monsanto's claims that Scruggs violated its patent, Scruggs asserted several defenses including patent exhaustion brought about by unrestricted sale of seed, antitrust violations for tying the sale of the Roundup Ready seed to other Monsanto products, and unlawful monopolization. Id. at 1333. The first unrestricted sale of patented material by the patentee eliminates the rights in the patent and removes the restrictions on its use. Id. at 1336. In this situation, however, there was no patent exhaustion because the sale of the seeds was conditioned upon obtaining a license from Monsanto, and saving seeds from a prior season does not constitute a sale. Id. The court stated that "[a]pplying the first sale doctrine to subsequent generations of self-replicating technology would eviscerate the right of the patent holder." Id.

Scruggs also argued that Monsanto violated Section 1 of the Sherman Antitrust Act by conditioning the sale of one product on the purchase of another in which it had a substantial stake in the market. Id. at 1338. Monsanto did not commit such a violation because while the purchase of Roundup Ready seed did lead to encouragement to purchase Roundup herbicide, it was the only glyphosate herbicide approved by the EPA at the time and participation in the purchase incentive programs where entirely voluntary. Id. at 1339. Scruggs' argument that Monsanto violated Section 2 of the Sherman Antitrust act by gaining and maintaining a monopoly through anti-competitive practices was also rejected. Id. at 1340. Monsanto's exclusivity provision, no-replant policy, and technology fee did not qualify as anti-competitive practices because the patent itself gives it the right to prevent others from making, using, or selling the product while charging a royalty to those licensed to used the seeds. Id.

The case was decided on August 16, 2006; this summary was posted July 20, 2007.