Canada: Supreme Court Rules on Schmeiser v. Monsanto

Published in CBA's National Intellectual Property Section Newsletter, June 2004.

The Supreme Court of Canada has ended the closely watched battle between Percy Schmeiser and Monsanto, with the release of its judgment on May 21. In another split decision over the patentability of higher life forms, the Court ruled 5 to 4 that Monsanto’s patent is valid and that claims to modified genes and cells can give rise to enforcement rights over activities involving whole plants. Schmeiser was successful on the question of remedy.

The battle began in 1998 when Monsanto sued Schmeiser, a Saskatchewan farmer, for patent infringement. Monsanto’s patent claims genetically engineered genes, and cells containing those genes, that render canola plants resistant to a specific herbicide. The patent does not claim canola plants or seeds. Monsanto alleged that Schmeiser infringed its patent rights by reproducing canola seeds and plants containing genes and cells covered by Monsanto’s patent, and by selling the harvested seed.

Both the Federal Court Trial Division and the Federal Court of Appeal found Schmeiser liable to Monsanto for infringement. On further appeal to the Supreme Court of Canada, a majority of the Court affirmed on the issue of infringement on two key grounds, but allowed the appeal on the issue of remedy.

The majority and dissenting judges parted company on the critical issue of the applicability of the Court’s 2002 decision in Harvard College v. Commissioner of Patents (Harvard Mouse), and whether gene and cell claims can give rise to rights over plants. In Harvard Mouse, a majority of the Court held that higher life forms—including plants and animals—are unpatentable subject matter.

Arbour J., writing for the minority, would have allowed Schmeiser’s appeal on the basis that claims to genes and cells cannot, in view of Harvard Mouse, extend patent protection to plants. Thus, the cultivation of seeds and plants containing Monsanto’s patented genes and cells cannot amount to infringement.

McLachlin C.J.C. and Fish J., writing for the majority, disagreed. They held that there was no dispute in Harvard Mouse that genes and cells are patentable. Moreover, whether patent protection for genes and cells extends to activities involving whole plants is irrelevant to the validity analysis. On this basis, the majority decided that Monsanto’s patent is valid, and that gene and cell claims can confer enforcement rights in respect of whole plants despite the unpatentability of plants themselves.

The majority also set out the criteria that are relevant to infringing use of a patented invention.

According to Schmeiser, merely growing and harvesting canola with Monsanto’s modified genes and cells cannot constitute infringing use. Rather, the real benefit of Monsanto’s invention is to confer herbicide resistance on the plants. By exploiting that trait, a farmer can reduce production costs by killing weeds with in-crop spraying rather than by tilling. Use of the invention, and hence infringing use, thus requires spraying the canola with herbicide, which Schmeiser had not done.

The majority rejected this argument, holding that possession in the commercial context raises a presumption of use. The presumption can be rebutted by establishing the absence of an intention to realize any advantage from the use of the invention—for instance, by showing that steps were quickly taken to remove the patented material. In this case, however, Schmeiser had saved, cultivated and harvested seeds and plants containing Monsanto’s patented genes and cells, and so the presumption was not rebutted. It was not enough that Schmeiser refrained from spraying the canola crops with herbicide because the patented genes and cells had a "stand-by utility". That is, their presence in the canola plants makes it possible to spray with herbicide if necessary or desirable, even if spraying is not actually carried out.

The majority overturned the lower courts’ decisions as to remedy, holding that there was no evidence that Schmeiser had earned any profit from Monsanto’s invention. By not spraying the crop with herbicide, Schmeiser had not reduced his production costs. Nor had he earned more than he would have for unmodified canola seed. On this basis, the majority held that Monsanto was entitled to nothing on its claim for an accounting of profits.

The Schmeiser decision seems to be a step back from the Court’s controversial ruling in Harvard Mouse. The majority judgment will be welcomed at least in the biotechnology and agricultural industry quarters, where there were concerns after Harvard Mouse that intellectual property protection in Canada was falling out of step with major trading partners that allow patents for plants and other higher life forms. The decision will also come as good news for patent applicants in Canada, who should now be assured of broader patent protection for gene and cell claims than seemed likely in the wake of Harvard Mouse. It will be interesting to watch how the division in the Court over the scope of Harvard Mouse unfolds in future cases.

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