Don’t Go Over 1%, or the Seed Giant May Come After You!

Last month, we reported on seed giant, Monsanto’s Supreme Court victory involving the question of patent exhaustion with regard to its sale of seed incorporating its patented seed technologies. On Monday, June 10, Monsanto appeared to emerge victorious from another litigation related to its seed technology and business when the Federal Circuit affirmed a lower court ruling that a coalition of organic farmers and seed sellers had no standing to seek declaratory judgments of non-infringement and invalidity with respect to Monsanto’s patented seed technologies.

In March 2011, the Organic Seed Growers and Trade Association (“OSGATA”) and other organic farmers and seed sellers decided to take preemptive action against Monsanto, filing suit in district court, challenging Monsanto’s seed patents because they were concerned that Monsanto would be accusing them of patent infringement. OSGATA decided to file the declaratory judgment action because it was concerned that the seeds they used would be “contaminated” with Monsanto trait even though they had no desire or intention to use or sell seeds incorporating Monsanto’s patented seed technologies (“transgenic seeds”), nor did they approve of the use of glyphosate herbicide on their crops. In other words, even if their seeds were inadvertently contaminated with trace amounts of Monsanto’s transgenic seeds, these farmers and seed sellers would not be exploiting the “advantageous” traits of the seeds.

These plaintiffs requested a covenant not to sue from Monsanto, but Monsanto refused. Instead, Monsanto referred to the statement on its website, “[i]t has never been, nor will it be, Monsanto policy to exercise its patent rights where trace amounts of our patented traits are present in farmers’ fields as a result of inadvertent means.” Monsanto also offered assurances that it had no intention of asserting patent-infringement claims against OSGATA, and that fears of any such suit, or decisions not to grow certain crops (out of such fear) was unjustified.

The District Court granted Monsanto’s motion to dismiss for lack of subject matter jurisdiction. The Court found no actual controversy under the Declaratory Judgment Act, 28 U.S.C. § 2201(a), and no injury to OSGATA and others, traceable to Monsanto. In addition, the Court noted that Monsanto’s aggressive stance in regards to “patent-infringement suits against other, dissimilar parties . . .” by itself was insufficient to create subject matter jurisdiction.

In affirming the District Court’s dismissal, the Federal Circuit concluded that Monsanto’s website statement had a similar effect as a covenant not to sue, and that Monsanto was now judicially estopped from taking a contrary position in future litigation. Furthermore, the Court adopted OSGATA’s argument that “trace amounts” should be defined as approximately 1% and that Monsanto, who did not contest this, “disclaimed any intent to sue inadvertent users or sellers of seed that are inadvertently contaminated with up to one percent of seeds carrying Monsanto’s patented traits.”

Although this ruling went in favor of Monsanto, it could be viewed as a partial victory for both sides. Monsanto, and other patent holders for that matter, through the use of websites or other public messages, now appear to have another tool to stave off plaintiff standing in declaratory judgment actions. Farmers and seed sellers who wish to avoid the threat of future Monsanto patent infringement actions apparently might be able to do so by taking steps to ensure that their seeds are not contaminated with more than “trace” (greater than 1%) amounts of Monsanto’s transgenic seeds. Additionally, farmers seeking to challenge Monsanto’s patents potentially can avoid standing issues by alleging contamination in excess of 1%.

OSGATA and other appellants are considering an appeal to the Supreme Court. Stay tuned.

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