The recent U.S. Supreme Court decision in Bowman v. Monsanto, No. 11-796,was limited to the specific facts and was tailored to avoid the issue of post-sale exhaustion. The classic view of post-sale exhaustion holds that a patentee loses the right to control the disposition of a patented item once the patentee has gained the benefit of the patented invention through a sale.
As a result of exhaustion, the purchaser has the right to sell or repair the patented item without interference from the patentee. However, the owner does not have the right to reconstruct or repair a spent device that incorporates the invention so extensively that it creates a "new" device that embodies the invention.
The issue in Monsanto was seemingly distorted in an attempt to make the focus one of exhaustion. However, it was clear from the outset that the Roundup Ready soybean was never repaired or modified in any way to remediate a wear condition or repair any experienced malfunction. Rather, from the outset, the farmer sought and obtained the exact invention in exactly the inventive condition for exactly the purpose of the invention. There was no transformation of the bean and no transformation was desired.
At bottom, it was clear that the farmer’s only reasoning in support of non-infringement was the theory that the bean replicated itself in the same way that beans have always grown. In a sense, this is an argument that the farmer discovered a natural Roundup Ready soybean. However, this requires one to ignore the farmer’s intervention by spraying the crop with Roundup to kill off all of the beans that did not have the resistant characteristic that was the patented invention and collecting the surviving beans.
A review of the positions advanced in briefing before the Supreme Court and the current state of the law on exhaustion gives credence to the view that the Supreme Court wanted to decide the case in Monsanto’s favor without creating a sea change in the law of "exhaustion" or "making of the invention."
Review of the Supreme Court Briefings
Petitioner Vernon Hugh Bowman’s numerous supporters included the Automotive Aftermarket Industry Association, the Automotive Parts Remanufacturers Association, the International Imaging Technology Council, the Center for Food Safety, Save Our Seeds, the American Antitrust Institute, the National Farmers Union, Food & Water Watch, the Organization for Competitive Markets, the National Family Farm Coalition, Knowledge Ecology International and the Public Patent Foundation.
Bowman’s side argued that exhaustion required only an authorized sale of the patented seed, that post-sale restrictions are beyond the scope of patent protection, and that farming does not constitute "making" of the patented technology.
Monsanto’s supporters included the United States, BayhDole 25 Inc., the Intellectual Property Owners Association, the New York Intellectual Property Law Association, Agilent Technologies, the American Soybean Association, the Wisconsin Alumni Research Foundation, BSA — The Software Alliance, Christopher Holman, CHS Inc., CropLife America, CropLife International, Pioneer Hi-Bred International Inc., the American Intellectual Property Law Association, the American Seed Trade Association, the Biotechnology Industry Organization and the Washington Legal Foundation.
Monsanto’s side argued that the planting of unspecified seed to cultivate a specific seed through targeted intervention is a "making" of the patented technology, that the right to repair is irrelevant to the "making" of new seeds, any potential exhaustion was limited to the original authorized sale of the seeds sold, and Bowman’s replanting of open-market seeds was a violation of a legitimate post-sale restriction associated with the original authorized sale.
Review of the Case Law
The Supreme Court, in Aro Manufacturing v. Convertible Top Replacement, 365 U.S. 336 (U.S. 1961), set out the standard for the right to repair in a dispute over replacement fabrics for patented convertible automobile tops, holding that repairs to maintain the useful operation of a lawfully sold patented product are permissible so long as the part replaced is not itself patented. Repairs are distinct from reconstruction, which involves rebuilding the product to effectively make a new device.
In a later case applying the Aro holding, Wilbur-Ellis v. Kuther, 377 U.S. 422 (U.S. 1964), the Supreme Court affirmed the right to repair and discussed the exhaustion doctrine without addressing those cases where the invention is embodied in the parts that are modified or replaced. The court held that the patented article may be repaired to permit continued use until it has reached the end of its useful life. So long as the repair is for wear that is partial, it is not reconstruction.
The U.S. Court of Appeals for the Federal Circuit has held that post-sales restrictions are permissible, as long as they do not violate any other law, and are enforceable under the patent law. In Mallinckrodt v. Medipart, 976 F.2d 700 (Fed. Cir. 1992), the patentee sold medical devices with a label restricting the product to a "single use only," but Medipart refurbished the devices for repeat use by the hospitals. The Federal Circuit held that the post-sale restriction was not negated by the application of patent exhaustion.
In another case addressing post-sale restrictions, B. Braun Medical v. Abbott Laboratories, 124 F.3d 1419 (Fed. Cir. 1997), the Federal Circuit held that an unconditional sale exhausted patent rights, but exhaustion did not necessarily apply to a conditional sale. Where the buyer accepts a product with a limitation on where it may be used, but uses the product outside of those restrictions, the patentee may seek redress under patent or contract law.
In Quanta Computer v. LG Electronics, 553 U.S. 617 (U.S. 2008), the U.S. Supreme Court affirmed exhaustion in a case involving a patented method associated with a combination invention and a license requiring the exclusive use of specified components to complete the combination. The Supreme Court rejected the Federal Circuit’s holding and held that the authorized sale of an article that is only capable of practicing the patented invention is exhaustion with respect to the article sold and method patents are not treated differently. The Federal Circuit’s later en banc decision, in Princo v. International Trade Commission, 616 F.3d 1318 (Fed. Cir. 2010), raises the question of whether the circuit is applying the Supreme Court’s Quanta holding.
Impact on Future Cases
The Supreme Court’s per curium decision in Monsanto was not centered on exhaustion and did not alter the law on exhaustion. The decision reflects the view that the issue was whether the invention could be duplicated if someone found a way to use the "self-replication" aspect of the invention to duplicate the invention. The decision turns on the fact that the farmer undertook an active intervention that isolated certain plants in the crop, destroyed the other plants, and altered the "natural" course of events by retaining the harvested beans for a future planting rather than selling them for consumption. This narrow decision left many issues for future cases and there are likely to be other farmers who seek a way to avoid the premium associated with "engineered" crop seeds.
Anthony S. Volpe is a shareholder at Volpe and Koenig, an intellectual property law firm with offices in Philadelphia and Princeton, N.J. He has corporate and private-practice experience in securing, licensing and enforcing all aspects of intellectual property rights.
Matthew E. Herd, a law clerk with Volpe and Koenig, contributed to this article.