Canada: Mouse Trapped: Canada’s Supreme Court Corners Harvard Mouse in Schmeiser v. Monsanto

Published in International Asset Management, Oct./Nov. 2004.

For the second time in two years, the Supreme Court of Canada has split on the question of the scope of patent protection for higher life forms. In the most recent case—Schmeiser v. Monsanto—the Supreme Court ruled 5:4 that Schmeiser infringed Monsanto’s patent to modified canola genes and cells by planting seeds and growing plants containing the patented genes and cells, although Monsanto’s patent did not claim canola plants or seeds themselves.

The decision is welcome news for the biotechnology and agriculture sectors in Canada, which were concerned that the Court might apply its controversial 2002 judgment in Harvard College v. Canada (Commissioner of Patents) (Harvard Mouse). In that case, a different 5:4 majority of the Court decided that higher life forms, including plants and animals, are unpatentable. That decision seems to have been effectively overruled by Schmeiser. The Schmeiser decision is also important for patent applicants in Canada because claims to modified genes and cells—of plants or animals—should now be allowable without the post–Harvard Mouse limitations imposed by the Canadian Intellectual Property Office (CIPO).

Percy Schmeiser, a Saskatchewan farmer, was sued by Monsanto for patent infringement. The patent in question claimed genetically engineered genes, and cells containing those genes, that confer herbicide resistance on canola plants. The patent did not claim the canola plants or seeds themselves. Monsanto alleged that Schmeiser had infringed its patent rights by reproducing canola seeds and plants that contained genes and cells covered by Monsanto’s patent claims, and by selling the harvested canola seed.

Three principal issues were argued before the Supreme Court: (1) Was the scope of Monsanto’s patent sufficient to permit Monsanto to claim rights in canola plants and seeds carrying the patented genes and cells? (2) If so, what constitutes infringing "use" of Monsanto’s invention? and (3) How should the law deal with "innocent bystanders" whose personal property inadvertently becomes contaminated with patented material? The Supreme Court was also asked to consider Monsanto’s remedy if Schmeiser was found to have infringed.

Five judges decided that Schmeiser had infringed Monsanto’s patent. In so finding, the majority decision makes important rulings on the scope of patent claims to genes and cells, and on the meaning of infringing "use" of an invention.

The majority rejected Schmeiser’s argument that, on the reasoning in Harvard Mouse, the modified gene and cell claims of Monsanto’s patent are unpatentable subject matter. The majority observed that there had been no disagreement in that case that genes and cells are patentable. On this basis, it held that Monsanto’s patent is valid. Significantly, the majority held that the question whether patent protection for genes and cells extends to activities involving the whole plant is irrelevant to a validity analysis; it is relevant only to infringement. It follows that gene and cell claims can confer enforcement rights over whole plants despite the unpatentability of the plants themselves.

A second key ruling concerns whether possession can amount to infringing "use" of an invention.

In this case, the evidence was that Schmeiser collected, saved and planted seed containing Monsanto’s patented genes and cells. However, Schmeiser contended that he did not "use" Monsanto’s invention because the real benefit of the modified genes and cells was to confer herbicide resistance on the canola plants. A farmer could kill weeds by spraying with Monsanto’s herbicide rather than by tillage, and so reduce labor costs. Schmeiser had not sprayed his crops with Monsanto’s herbicide.

The majority rejected this argument, holding that possession, at least in a commercial context, raises a presumption of use. While intention is usually not relevant to an infringement analysis, the majority held that the presumption can be rebutted by establishing the absence of an intention to employ or gain any advantage from the invention. Schmeiser had failed to adduce sufficient evidence to rebut the presumption in this case. For the majority, it was not enough to refrain from spraying with herbicide because the patented genes and cells had a "stand-by utility"—that is, their presence in the canola plants made it possible to spray with herbicide if needed, even if spraying had not in fact been done.

The majority rejected Schmeiser’s contention that an "innocent bystander" should be granted an implied licence to use an invention that becomes intermixed with personal property. Rather, an innocent bystander could refute the presumption of infringing use by showing, for instance, that he or she had acted quickly to have the patented material removed.

The majority held that there was no evidence that Schmeiser had earned any profit from Monsanto’s invention. He had not sprayed the crop with herbicide and so had not reduced his production costs. Accordingly, there was no evidence of a causal connection between the profits that Schmeiser was found to have earned by growing the patented canola and the invention. The majority thus held that Monsanto was entitled to nothing on its claim for an accounting of profits.

The majority’s ruling signifies that caution is in order when electing a remedy for infringement. Where there is a question whether the utility of the invention has been exploited, it may be difficult to prove the required causal connection between any profits earned by the defendant and the invention itself. The decision also underlines the importance in such cases of a complete evidentiary record.

Applicants for patents in Canada will welcome Schmeiser’s case. Since the Supreme Court’s decision in Harvard Mouse, CIPO had initially refused to grant claims to genes and cells except where "isolated," presumably on the theory that unlimited gene and cell claims could indirectly confer patent rights over plants. The judgment in Schmeiser means that gene and cell claims—whether for plants or animals—should be allowable without being limited to isolated material. CIPO’s policy on gene and cell claims now appears to reflect this, at least with respect to plants.

Monsanto’s claims to genes and plant cells were held by the majority to confer enforcement rights over the entire plant. This outcome is strikingly at odds with the Court’s decision in Harvard Mouse, and in fact seems effectively to overrule it.

On the reasoning in Schmeiser, claims to genes and animal cells in vivo should confer enforcement rights over animals themselves. The Schmeiser decision may stimulate innovation in the drug development sector because patentees of transgenic animals genes and cells may now have an effective means of enforcing their patent rights against infringers, regardless of the unpatentability of the whole animal. While it may take another Supreme Court decision to confirm this, the state of the law at present is encouraging for inventors and investors in biotechnology in Canada.