Canada: U.S. Supreme Court Rules That The Authorized Sale Of Patented Seed Does Not Convey A Right To Produce A Crop — Comparison To The Canadian Approach

In its May 13, 2013, decision in Bowman v Monsanto Company ("Bowman"), 569 U.S. ___ (2013), the Supreme Court of the United States held that farmers who buy patented seeds may not reproduce them through planting and harvesting without the patent holder's permission. The Bowman decision provides relief for purveyors of self-replicating technologies facing the prospect of their U.S. patent rights being extinguished upon the first authorized sale. However, holders of Canadian patents should not be quick to conclude that Canadian patent law relating to self-replicating technologies is the same as that set forth in the Bowman decision.

Background. Monsanto Company ("Monsanto") holds United States patents covering its ROUNDUP READY soybeans, which contain a gene that allows the beans to survive exposure to the herbicide glyphosate. Monsanto sells these patented ROUNDUP READY soybeans pursuant to a licensing agreement that authorizes the production and sale of beans from a single crop but prohibits the purchaser from saving such beans for replanting.

This matter centred on Vernon Bowman's growth of commodity soybeans intended for consumption that he purchased from a grain elevator. Working on the assumption that the vast majority of soybeans in cultivation are ROUNDUP READY soybeans, Bowman planted the beans and treated the fields with glyphosate. As anticipated, he was able to harvest glyphosate-resistant soybeans and save some of the harvested seed for future growing seasons. Upon learning of Bowman's activities, Monsanto sued for infringement of its patents.

Bowman raised the doctrine of patent exhaustion, which limits a patentee's right to control what others can do with a patented article, as a defence. Under the doctrine, the initial authorized sale of a patented item terminates all patent rights to that item in the absence of an agreement to the contrary. Bowman reasoned that Monsanto could not control his use of the ROUNDUP READY soybeans because they were the subject of a prior authorized sale from local farmers to the grain elevator.

Decision. The Court agreed with Bowman that Monsanto's rights in the seeds sold to the grain elevator had been exhausted. However, the Court further held that the doctrine restricts a patentee's rights only as to the "particular article" sold but leaves the patentee's ability to prevent the purchaser from making new copies of the patented item untouched. Accordingly, the Court held that while Bowman could do several things with the patented soybeans he purchased from the grain elevator – including eat them, feed them to his animals, or resell them – he was not permitted to make additional patented soybeans without Monsanto's permission. The Court reasoned that applying the doctrine in this manner would allow farmers to benefit from the ROUNDUP READY technology, even as it rewards Monsanto for its innovation.

The Canadian context. Monsanto has also enforced patents on its ROUNDUP READY technology in Canada. In Monsanto Canada Inc v Schmeiser ("Schmeiser"), 2004 SCC 34, the Supreme Court of Canada held that cultivation of a plant constituted "use" of the patented plant cell contained therein. However, the facts of Schmeiser differ significantly from Bowman. Monsanto's Canadian claims were directed to genes, expression vectors, and cells, i.e. not to seeds or plants, in view of subject matter restrictions in Canadian patent law. More importantly, the Schmeiser decision did not involve the cultivation of material obtained through an authorized sale so as to bring patent exhaustion into play. Accordingly, whether the purchase of commodity seed from a grain elevator would exhaust the patentee's right to control the use of that seed in Canada, including production of a crop from the seed, remains an open question of law. Moreover, the Bowman decision was based on the U.S. Supreme Court's finding that Bowman's reproduction of the patented seeds constituted "making" new copies of the invention. On the contrary, the Supreme Court of Canada in Schmeiser was not inclined to view the growth of a plant containing patented cells as "making" the claimed cells or genes.

Canadian courts could potentially conclude that growing a second generation of plants from purchased commodity seed would constitute infringing "use" of the patented cells with a practical result similar to that in Bowman. Nevertheless, Canadian patent holders would be prudent to complement their patent rights with licensing agreements that precisely and unambiguously express any and all conditions that are intended to affect the rights of subsequent purchasers of a patented item. Patent holders should further consider mechanisms to effectively notify potential purchasers of such conditions placed on sales of patented items.

  The preceding is intended as a timely update on Canadian intellectual property and technology law. The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly.

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