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Gajendra Khichi, an intern at Khurana and Khurana talks about the case of patent exhaustion or doctrine of exhaustion. Through this post, he gives special emphasis on the recent case of Vernon Hugh Bowman v/s Monsanto Company, which created quite a stir regarding the patentability of seeds and plants.
Today, when you acquire a newly patented machine, you gain certain rights which you attain by paying for that machine. So you can sell it, use it or lend it to someone. But what if you somehow come to know about the method to make the machine and now you want to produce new copies of this patented machine? Unfortunately, this is not permissible and the doctrine of exhaustion does not provide any exception to this.
The factual situation is that Mr. Bowman purchased patented Soyabean seeds produced by Monsanto also known as Roundup Ready Seeds. These seeds had a special property that enabled soybean plants to survive exposure to glyphosate (the active ingredient in many herbicides). The seeds were sold under a licensing agreement that the growers could plant seeds only once then they could consume them or sell them. Further, the farmer couldn’t save any of the harvested soybeans for replanting, nor could he supply them to anyone else for that purpose.
But next time as he did not want to pay a premium price for Monsanto’s seeds, Mr. Bowman went to a grain elevator; purchased “commodity soybeans” intended for human or animal consumption; and planted them in his fields for continuous eight crops. He used the commodity seeds with the view that those were probably Monsanto’s seeds grown by other farmers.
This use by Mr. Bowman was challenged by Monsanto, interestingly, the defense taken by the Bowman was that such use is protected by the doctrine of exhaustion, but the District Court rejected his claim which was affirmed by the Federal Circuit saying that, “right to use” a patented article following an authorized sale, does 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 was argued by Mr. Bowman that his use was protected under the doctrine of exhaustion and that, his use was normal to use of the seeds, that is planting and exhaustion prevents a patentee from controlling the use of a patented product following an authorized sale.
Another argument made by Mr. Bowman was, “seeds are special” according to which, “it was the planted soybean, not Bowman himself, that made replicas of Monsanto’s patented invention.
Looking into the doctrine of exhaustion, the court observed that the doctrine of patent exhaustion limits a patentee’s right to control what others can do with an article embodying or containing an invention. Under the doctrine, “the initial authorized sale of a patented item terminates all patent rights to that item.” The court stating the purpose of the doctrine enunciated “the purpose of the patent law is fulfilled with respect to any particular article when the patentee has received his reward . . . by the sale of the article”; once that “purpose is realized the patent law affords no basis for restraining the use and enjoyment of the thing sold.”
So, the doctrine restricts a patentee’s rights only as to the “particular article” sold, it leaves untouched the patentee’s ability to prevent a buyer from making new copies of the patented item.
According to the court, the application of the exhaustion has been limited so that the patentee retains an undiminished right to prohibit others from making the thing his patent protects.
If the purchaser is allowed to make copies of the patented articles then what would the patentee be left with? This would imply that the patent would effectively protect the invention for just a single sale!
The patent law provides a monopoly right to the holder for a limited time. If anyone who purchases the patented article is allowed to replace it, obviously the competitors would also make copies of the same and there would be no monopoly and thus, no incentive for the creators.
Following J. E. M. Ag Supply, Inc. v. Pioneer Hi-Bred Int’l, Inc the court stated that seeds and plants are patentable and the Plant Variety Protection Act does not repeal the Patent Act’s coverage.
The second argument was also rejected by the court saying that Mr. Bowman was not passively watching the seeds growing; he was the one who harvested crop eight times. He devised and executed a novel way to harvest crops from Roundup Ready seeds without paying the usual premium.
The court held that Mr. Bowman, by making replicas of patented seeds of Monsanto, has deprived the company of its reward which patent law provides and patent exhaustion provides no heaven or such conduct.
The judgment of the Court is totally on the line of patent law and I agree with the reasoning of the court.
Since patent rights have been considered as strong monopoly rights as compared to any other intellectual property rights, so some exceptions have been made in the public interest to serve social purposes.
These exceptions ensure that the rights granted are not used prejudicially to the interest of the public. The doctrine of patent exhaustion is one of these exceptions which allows the purchaser to use the purchased article in any manner, but this exception has its own boundaries that the user should not be prejudicial to the interest of the patent owner.
TRIPS Agreement states the three-step test where the exceptions are made against the rights of patent holders. The three steps are:
- Exceptions are limited.
- There should be no unreasonable interference with the normal exploitation of the patent.
- There should be no unreasonable prejudice to the legitimate interest of the patent owner.
In this case, if Mr. Bowman or any other purchaser would have been allowed to make a copy of the patented seeds which were purchased legally, then the right of the Monsanto to “make” under Section 35 U. S. C. §154(a)(1)Patent Act would have been infringed and this would be given rise to a situation where nobody would buy seeds from Monsanto since they could grow the seeds, leaving Monsanto with no award for its invention which is the object of patent law.
The court has limited the holding to the facts of the case only as it observed that the doctrine of patent exhaustion would apply in circumstances where the article’s self-replication might get out of the purchaser’s control or might be incidental in using the article itself.
If we see this case under Indian law, the result will be totally different. As a signatory to TRIPS, India has incorporated patent law but as far as plant varieties are concerned Article 27.3 provides that a member state can either make it a patentable subject matter or may protect it under sui generis system. India has opted for a sui generis system and has enacted the Protection of Plant Varieties and Farmers Right Act, 2001, keeping in mind the economical and social situations of the country. So Indian law provides the two important flexibilities:
– seeds and plant varieties are not patentable in India.
– Section 39 of the PPVF Act, 2001 provides for “Farmer’s Rights” and allows the farmers to re-sow the seeds.
Quanta Computer, Inc. v. LG Electronics, Inc.,553 U. S. 617, 625 (2008)
Cotton-Tie Co. v. Simmons, 106 U. S. 89, 93-94 (1882)
534 U. S. 124 (2001)
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