In a unanimous decision, the Supreme Court ruled against Myriad Genetics saying that the company cannot patent natural DNA.  Association for Molecular Pathology et al., v. Myriad Genetics, Inc., et al.  (SCt 12-398_8njq; No. 12–398, June 13, 2013).

The District Court concluded that Myriad’s claims were invalid because they covered products of nature. The Federal Circuit initially reversed, but on remand in light of Mayo v. Prometheus Labs, found both isolated DNA and cDNA patent eligible.

The Supreme Court looked at only one question:

Are human genes patentable?

Now, the Supreme Court has held that naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated, but cDNA is patent eligible because it is not naturally occurring.

Importantly, the Court noted:

(a) cDNA is not a “product of nature,” so it is patent eligible under§101. cDNA does not present the same obstacles to patentability as naturally occurring, isolated DNA segments.

(b) This case, it is important to note, does not involve method claims, patents on new applications of knowledge about the BRCA1 and BRCA2 genes, or the patentability of DNA in which the order of the naturally occurring nucleotides has been altered.

Under the Patent Act, “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” 35 U.S.C. § 101.

ex-13016921Myriad discovered the precise location and sequence of what are now known as the BRCA1 and BRCA2 genes. Mutations in these genes can dramatically increase an individual’s risk of developing breast and ovarian cancer.  Knowledge of the location of the BRCA1 and BRCA2 genes allowed Myriad to develop medical tests that are useful for detecting mutations in a patient’s BRCA1 and BRCA2 genes and thereby assessing whether the patient has an increased risk of cancer.

Myriad obtained patents on two “isolated” human genes, BRCA1 and BRCA2 and certain mutations in these genes associated with a predisposition to breast and ovarian cancers. Representative composition claims include claims 1, 2, and 5 of the ’282 patent:

1.  An isolated DNA coding for a BRCA1 polypeptide, said polypeptide having the amino acid sequence set forth in SEQ ID NO:2.

2.  The isolated DNA of claim 1, wherein said DNA has the nucleotide sequence set forth in SEQ ID NO:1.

5.  An isolated DNA having at least 15 nucleotides of the DNA of claim 1.

Myriad’s patents would, if valid, give it the exclusive right to isolate an individual’s BRCA1 and BRCA2 genes (or any strand of 15 or more nucleotides within the genes) by breaking the covalent bonds that connect the DNA to the rest of the individual’s genome. The patents would also give Myriad the exclusive right to synthetically create BRCA cDNA.

Below, the Court explains it’s decision:

It is undisputed that Myriad did not create or alter any of the genetic information encoded in the BRCA1 and BRCA2 genes. The location and order of the nucleotides existed in nature before Myriad found them. Nor did Myriad create or alter the genetic structure of DNA. Instead, Myriad’s principal contribution was uncovering the precise location and genetic sequence of the BRCA1 and BRCA2 genes within chromosomes 17 and 13. The question is whether this renders the genes patentable.

Groundbreaking, innovative, or even brilliant discovery does not by itself satisfy the §101 inquiry. In Funk Brothers Seed Co. v. Kalo Inoculant Co., 333 U. S. 127 (1948),this Court considered a composition patent that claimed a mixture of naturally occurring strains of bacteria that helped leguminous plants take nitrogen from the air and fix it in the soil. Id., at 128–129. The ability of the bacteria to fix nitrogen was well known, and farmers commonly “inoculated” their crops with them to improve soil nitrogen 13 Cite as: 569 U. S. ____ (2013) levels. But farmers could not use the same inoculant for all crops, both because plants use different bacteria and because certain bacteria inhibit each other. Id., at 129–130. Upon learning that several nitrogen-fixing bacteria did not inhibit each other, however, the patent applicant combined them into a single inoculant and obtained a patent. Id., at 130. The Court held that the composition was not patent eligible because the patent holder did not alter the bacteria in any way. Id., at 132 (“There is no way in which we could call [the bacteria mixture a product of invention] unless we borrowed invention from the discovery of the natural principle itself ”). His patent claim thus fell squarely within the law of nature exception. So do Myriad’s. Myriad found the location of the BRCA1 andBRCA2 genes, but that discovery, by itself, does not render the BRCA genes “new . . . composition[s] of matter,” §101, that are patent eligible.

Indeed, Myriad’s patent descriptions highlight the problem with its claims.

The Court also spelled out what remains patent eligible:

cDNA does not present the same obstacles to patentability as naturally occurring, isolated DNA segments. As already explained, creation of a cDNA sequence from mRNA results in an exons-only molecule that is not naturally occurring.8 Petitioners concede that cDNA differs from natural DNA in that “the non-coding regions have been removed.” Brief for Petitioners 49. They nevertheless argue that cDNA is not patent eligible because “[t]he nucleotide sequence of cDNA is dictated by nature, not by the lab technician.” Id., at 51. That may be so, but the lab technician unquestionably creates something new when cDNA is made. cDNA retains the naturally occurring exons of DNA, but it is distinct from the DNA from which it was derived. As a result, cDNA is not a “product of nature” and is patent eligible under §101, except insofar as very short series of DNA may have no intervening introns to remove when creating cDNA. In that situation, a short strand of cDNA may be indistinguishable from natural DNA.9

It is important to note what is not implicated by this decision. First, there are no method claims before this Court. Had Myriad created an innovative method of manipulating genes while searching for the BRCA1 and BRCA2 genes, it could possibly have sought a method patent. But the processes used by Myriad to isolate DNA were well understood by geneticists at the time of Myriad’s patents “were well understood, widely used, and fairly uniform insofar as any scientist engaged in the search for a gene would likely have utilized a similar approach,” 702 F. Supp. 2d, at 202–203, and are not at issue in this case. Similarly, this case does not involve patents on new applications of knowledge about the BRCA1 and BRCA2 genes. Judge Bryson aptly noted that, “[a]s the first party with knowledge of the [BRCA1 and BRCA2] sequences,

Nor do we consider the patentability of DNA in which the order of the naturally occurring nucleotides has been altered. Scientific alteration of the genetic code presents a different inquiry, and we express no opinion about the application of §101 to such endeavors. We merely hold that genes and the information they encode are not patent eligible under §101 simply because they have been isolated from the surrounding genetic material.

Clearly, the market recognized that the decision does not eliminate the ability to patent diagnostic tests.  Shares of Myriad Genetics (MYGN) jumped nearly 11% to a four-year high in morning trading Thursday after the U.S. Supreme Court issued the mixed ruling on whether its genetic products could be patented and affirmed the right for Myriad to patent synthetic DNA (cDNA).

image credit: breast examination from bigstock

 

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American Conference Institute’s Advanced Summit on Global Patenting Strategy & Practice unites seasoned counsel with experience practicing in critical jurisdictions to share their wealth of knowledge and help you understand not only the mechanics of obtaining patents around the world, but also strategies for the most effective and efficient means of protecting IP in a global marketplace.

Monday, July 15 to Tuesday, July 16, 2013 at the Carlton Hotel, New York, NY

untitledRepresenting companies in an array of industry sectors, expert faculty will address questions like:

  • How do you select the right local counsel depending on your needs?
  • What jurisdictions provide effective patent protection for your products and which ones do not and what are
    the specific costs involved?
  • How to reconcile the issues that arise when coordinating with inventors in numerous countries simultaneously?
  • What written description requirements meet the standards required by multiple jurisdictions including the EU
    and Asian countries?
  • When do outcomes from opposition proceedings in one jurisdiction impact the ability to protect a product in others?
  • Can evidence obtained in one country be used in litigation for other countries?
    And much more!

Enhance your conference experience by attending the post conference workshops:

    • Mastering the Foreign Patent Law and Regulatory Requirements for Life Sciences Companies in a Global Context and the Post Conference Interactive Working Group Session
    • Negotiating the Obstacles and Challenges Associated with Patenting a Product in Numerous Jurisdictions

Reserve your spot by calling 888-224-2480 or online here.

**Note:  Readers of Patent Baristas get a $200 discount by entering the discount code “PB200″ during registration.

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The White House announced plans for a set of executive actions President Barack Obama will take that are aimed at reining in certain patent-holding firms, known as “patent trolls.”

[I]nnovators continue to face challenges from Patent Assertion Entities (PAEs), companies that, in the President’s words “don’t actually produce anything themselves,” and instead develop a business model “to essentially leverage and hijack somebody else’s idea and see if they can extort some money out of them.” These entities are commonly known as “patent trolls.” Likewise, the so-called “Smartphone Patent Wars” have ballooned in recent years and today, several major companies spend more on patent litigation and defensive acquisition than on research and development.

To help deter some lawsuits, the administration plans to direct the U.S. Patent and Trademark Office to start a rule-making process aimed at requiring patent holders to disclose the owner of a patent.

LEGISLATIVE RECOMMENDATIONS

Souvenir trollsThe Administration recommends that Congress pursue at least seven legislative measures:

  1. Require patentees and applicants to disclose the “Real Party-in-Interest,” by requiring that any party sending demand letters, filing an infringement suit or seeking PTO review of a patent to file updated ownership information, and enabling the PTO or district courts to impose sanctions for non-compliance. [You should not be able to sell/transfer private property.]
  2. Permit more discretion in awarding fees to prevailing parties in patent cases, providing district courts with more discretion to award attorney’s fees under 35 USC 285 as a sanction for abusive court filings (similar to the legal standard that applies in copyright infringement cases).  [You should be punished for losing to a well-financed opponent.]
  3. Expand the PTO’s transitional program for covered business method patents to include a broader category of computer-enabled patents and permit a wider range of challengers to petition for review of issued patents before the Patent Trial and Appeals Board (PTAB).  [Because business methods are less worthy.]
  4. Protect off-the-shelf use by consumers and businesses by providing them with better legal protection against liability for a product being used off-the-shelf and solely for its intended use. Also, stay judicial proceedings against such consumers when an infringement suit has also been brought against a vendor, retailer, or manufacturer. [Because, hey, if you can construct a patented device by buying the parts from someone else, go for it.]
  5. Change the ITC standard for obtaining an injunction to better align it with the traditional four-factor test in eBay Inc. v. MercExchange, to enhance consistency in the standards applied at the ITC and district courts. [Why should plaintiff's being harmed be able to avail themselves of a quicker venue?  It just makes our clogged court system look worse.]
  6. Use demand letter transparency to help curb abusive suits, incentivizing public filing of demand letters in a way that makes them accessible and searchable to the public.  [We should always discourage private settlements of disputes.]
  7. Ensure the ITC has adequate flexibility in hiring qualified Administrative Law Judges. [Qualified employees are always good.]

The $64,000 Question:  Is all this really going to change anything?  And, will individual inventors (who don’t make a product) be thrown under the bus?

EXECUTIVE ACTIONS

The Administration is also announcing a number of steps it is taking to help what it says will level the playing field for innovators. Those steps include:

  1. Making “Real Party-in-Interest” the New Default. Patent trolls often set up shell companies to hide their activities and enable their abusive litigation and extraction of settlements. This tactic prevents those facing litigation from knowing the full extent of the patents that their adversaries hold when negotiating settlements, or even knowing connections between multiple trolls. Today, the PTO will begin a rulemaking process to require patent applicants and owners to regularly update ownership information when they are involved in proceedings before the PTO, specifically designating the “ultimate parent entity” in control of the patent or application.
  2. Tightening Functional Claiming. The AIA made important improvements to the examination process and overall patent quality, but stakeholders remain concerned about patents with overly broad claims — particularly in the context of software. The PTO will provide new targeted training to its examiners on scrutiny of functional claims and will, over the next six months develop strategies to improve claim clarity, such as by use of glossaries in patent specifications to assist examiners in the software field.
  3. Empowering Downstream Users. Patent trolls are increasingly targeting Main Street retailers, consumers and other end-users of products containing patented technology — for instance, for using point-of-sale software or a particular business method. End-users should not be subject to lawsuits for simply using a product as intended, and need an easier way to know their rights before entering into costly litigation or settlement. Today, the PTO is announcing new education and outreach materials, including an accessible, plain-English web site offering answers to common questions by those facing demands from a possible troll.
  4. Expanding Dedicated Outreach and Study. Challenges to U.S. innovation using tools available in the patent space are particularly dynamic, and require both dedicated attention and meaningful data. Engagement with stakeholders — including patent holders, research institutions, consumer advocates, public interest groups, and the general public — is also an important part of our work moving forward. Roundtables and workshops that the PTO, DOJ, and FTC have held in 2012 have offered invaluable input to this process. Today, we are announcing an expansion of our outreach efforts, including six months of high-profile events across the country to develop new ideas and consensus around updates to patent policies and laws. We are also announcing an expansion of the PTO Edison Scholars Program, which will bring distinguished academic experts to the PTO to develop — and make available to the public — more robust data and research on the issues bearing on abusive litigation.
  5. Strengthen Enforcement Process of Exclusion Orders. Once the U.S. International Trade Commission (ITC) finds a violation of Section 337 and issues an exclusion order barring the importation of infringing goods, Customs and Border Protection (CBP) and the ITC are responsible for determining whether imported articles fall within the scope of the exclusion order. Implementing these orders present unique challenges given these shared responsibilities and the complexity of making this determination, particularly in cases in which a technologically sophisticated product such as a smartphone has been successfully redesigned to not fall within the scope of the exclusion order. To address this concern, the U.S. Intellectual Property Enforcement Coordinator will launch an interagency review of existing procedures that CBP and the ITC use to evaluate the scope of exclusion orders and work to ensure the process and standards utilized during exclusion order enforcement activities are transparent, effective, and efficient.

See the entire memo here.

image credit: troll image from bigstock

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The Chisum Patent Academy will hold its fifth annual Seattle summer seminars on July 31-August 2, 2013and August 5-7, 2013. Both seminars will cover the same material. The interactive, roundtable-format, advanced patent law seminars are limited to ten (10) participants each, and all sessions are co-taught by patent treatise authors and educators Donald Chisum and Janice Mueller

Discussion topics for Seattle will include:

  • Patent Practice Gone Wrong: Lessons from Recent Cases on Patent Malpractice and Rule 11 Sanctions
  • CLS Bank v. Alice Corp.: Making Sense Out of Nonsense
  • Blockbuster Supreme Court and en banc Federal Circuit cases: AMP v. Myriad Genetics (patent eligible subject matter–pending), Lighting Ballast Control v. Philips Elecs. (claim interpretation standard of review–pending)
  • Giving Meaning to Means Clauses
  • Drafting and Enforcing Method and System Claims: Active Inducement, Divided Infringement, and Territoriality Issues
  • Design Patents and Injunctions: Apple v. Samsung as a Case Study
  • AIA Review: Where Are We So Far?
  • Recent Nonobviousness Developments
  • Pleading Requirements for Patent Infringement Actions

Complete syllabi from the 2012, 2011, 2010, and 2009 seminars are available here.

The Academy will apply for 18 CLE credits per seminar. The registration fee for the three-day Seattle seminars is $2,000 per person, which includes extensive written materials plus daily breakfast and break refreshments. For location and registration details, please visit their website or emailinfo@chisum.com.

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Confused ManPatent Baristas inked a deal with Bigstock stock image company. Bigstock offers over 13 million royalty-free photographs and illustrations from talented photographers and artists around the globe, available for almost any purpose.

This is not the same as the Getty Images and iStockphoto fiasco where images were made available for free on Google Drive and contributors got huge $12 checks. We won’t be stripping out the metadata.

Let us know what you think.

Ed.

image credit: people image from bigstock

 

 

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Practical Strategies, Tactics and Tips for the Optimization of IP Assets in a Dynamic Business Environment

International Performance Management Institute (IPMI) is holding the IP Law & Management Institute on November 3rd -5th, 2013 at the Paradise Point Resort & Spa in San Diego, CA.

Hailed as “One of the few programs geared to experienced in-house IP Counsel”, the Institute is a CLE-accredited program designed to provide time-starved Heads of IP with the opportunity to meet and network with their peers, learn from best practices and validate solutions and services.

Topics include:

  • A Whole New World?  In-House Counsel Perspectives on the America Invents Act and its Implications
  • Proven Strategies for Resolving Patent Lawsuits Efficiently and Cost Effectively
  • Ensuring Effective Alignment of Your Patent Strategy with Corporate Strategy
  • Freedom to Operate: Strategic Considerations in a Post-AIA World
  • Maneuvering in the Cloud: Containing E-Discovery Costs and Avoiding Sanctions in an Evolving Legal Framework
  • Ensuring Freedom of Operation – Strategies for Avoiding Disruptive Assertions by Non Practicing Entities
  • Crafting an Effective Patent Strategy that Optimally Aligns with Regulatory Laws and Provides the Best Market Protection for Medical Products
  • Patent Litigation Forums – Strategies for Choosing Between District Court, International Trade Commission and/or Post-Grant Challenges in the USPTO
  • Honing Your Transactional Acumen: Best Practices in Drafting and Negotiating a Myriad of Agreements
  • A Complaint Shows Up – Voilà, You’re a Defendant.  What Do You Do in the First 24 Hours?
  • Best Practices for Time Sensitive M&A Patent Due Diligence and Analysis
  • Patent Monetization Success: Working with NPEs to Drive Bottom-Line Results
  • Managing Intellectual Property as a Business Strategy
  • Navigating Patent Enforcement Systems and Winning Strategies in Cross-Border Patent Litigation: Spotlight on China, Asia Pacific and Emerging Patent Markets
  • Staying Ahead of the Game – Managing CEO Expectations
  • “We’ve Just Been Sued, What’s our Exposure?”  Using the Litigation Damages Model to Assess Potential Exposure for Your CEO
  • The Innovation Eco-System for Technology-Centric New Business Creation: From Assets to Exit
  • Strategies to Mitigate Your Risk of Trade Secret Theft

Visit their website here for more information.

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Love Stamp

    • Upon consideration en banc, a majority of the court affirms the district court’s holding that the asserted method and computer-readable media claims are not directed to eligible subject matter under 35 U.S.C. § 101.
    • An equally divided court affirms the district court’s holding that the asserted system claims are not directed to eligible subject matter under that statute.

May 10, 2013

717 Madison Place, N.W.
Washington, D.C. 20439

United States Supreme Court
1 1st St NE
Washington, D.C. 20543

RE: CLS BANK INTERNATIONAL v. ALICE CORPORATION PTY. LTD. PER CURIAM

Dear Supreme Court:

When Alice kindly petitions for cert, please grant it – we just can’t figure out how to apply Bilski v. Kappos when it comes to computer system claims (and some of us are also unhappy when it comes to the method claims).

“The court, now rehearing this case en banc, hoped to ameliorate this uncertainty by providing objective standards for section 101 patent-eligibility. Instead we have propounded at least three incompatible standards, devoid of consensus, serving simply to add to the unreliability and cost of the system of patents as an incentive for innovation. Concurring-in-part and dissenting-in-part opinion filed by NEWMAN, Circuit Judge.

Lourie thinks that “[a]t its most basic, a computer is just a calculator capable of performing mental steps faster than a human could. Unless the claims require a computer to perform operations that are not merely accelerated calculations, a computer does not itself confer patent eligibility.” (Concurring opinion filed by LOURIE, Circuit Judge, in which DYK, PROST, REYNA, and WALLACH, Circuit Judges, join.)

But, Rader “[d]isagree[s] with Judge Lourie that a computer must do something other than what a computer does before it may be considered a patent-eligible invention…. Requiring a computer to do something that a human could not would mean that computer implementation could never produce patent eligibility.” (Concurring-in-part and dissenting-in-part opinion filed by RADER, Chief Judge, LINN, MOORE, and O’MALLEY, Circuit Judges, as to all but part VI of that opinion. RADER, Chief Judge, and MOORE, Circuit Judge, as to part VI of that opinion.)

Rader “doubt[s] that innovation is promoted when subjective and empty words like ‘contribution’ or ‘inventiveness’ are offered up by the courts to determine investment, resource allocation, and business decisions.” (Additional Reflections of Chief Judge Rader.)

Plus, Moore pointed out “[l]et’s be clear: if all of these claims, including the system claims, are not patent-eligible, this case is the death of hundreds of thousands of patents, including all business method, financial system, and software patents as well as many computer implemented and telecommunications patents.” (Dissenting-in-part opinion filed by MOORE, Circuit Judge, in which RADER, Chief Judge, and LINN and O’MALLEY, Circuit Judges, join.)

Not to be left out, Linn and O’Malley contest that the method claims should be vilified under 35 USC 101 because “[w]e do not see how Chief Judge Rader and Judge Moore, when analyzing the method claims, can ignore the fact that the specific functionality described in the figures applies just as much to them as to the system claims.” (Dissenting opinion filed by LINN and O’MALLEY, Circuit Judges.)

Newman cut to the heart of the matter:  “I propose that the court make clear that patent eligibility does not depend on the form of the claim, whether computer implemented innovations are claimed as a method or a system or a storage medium, whether implemented in hardware or software. Patent eligibility does not turn on the ingenuity of the draftsman.” (Concurring-in-part and dissenting-in-part opinion filed by NEWMAN, Circuit Judge.)

Besides, if you don’t grant cert, “with today’s judicial deadlock, the only assurance is that any successful innovation is likely to be challenged in opportunistic litigation, whose result will depend on the random selection of the panel.” (Concurring-in-part and dissenting-in-part opinion filed by NEWMAN, Circuit Judge.)

Please help us!

Sincerely yours,

Justices Lourie, Dyk, Prost, Reyna,
Wallach, Radar, Linn, Moore, O’Malley,
Linn and Newman

See the entire 135 page opinion here:  CLS BANK  v. ALICE (11-1301.Opinion.5-8-2013.1)


Today’s post is by Guest Barista Ria Farrell Schalnat* (ria.schalnat@dinsmore.com)  *The views conveyed herein are solely those of the author and do not reflect the views of Dinsmore & Shohl LLP or any of its clients.

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In a unanimous decision, the Supreme Court laid out that patent exhaustion does not permit a farmer to reproduce patented seeds through planting and harvesting without the patent holder’s permission. And….Boom Goes the Dynamite! (Bowman v. Monsanto Co. et al., (Bowman v Monsanto 11-796)

The decision will have an impact on a plethora of businesses besides agriculture including gene therapies, vaccines, cell lines, nano-technologies, software and any invention that can be easily replicated (since soybeans must be planted, cultivated, and harvested — soybeans do not regenerate themselves – they are not exactly “self-replicating”).

soybean seedsMake no mistake, this case is not about the $84,456 in damages awarded to Monsanto. Monsanto has about $13.5 billion in annual sales with half of that coming from seeds and about 10% from the sale of glyphosate.  Monsanto sold over $1.7 billion of soybeans last year so this is not without market desire. The seeds provide such a tremendous benefit that over 90% of corn, cotton, sugar beet, and canola planted in the United States is now Roundup-Ready.

In short, the Court held that:

(a) Under the patent exhaustion doctrine, “the initial authorized sale of a patented article terminates all patent rights to that item,” (Quanta Computer 553 U. S. 625), and confers on the purchaser, or any subsequent owner, “the right to use [or] sell” the thing as he sees fit, United States v. Univis Lens Co., Syllabus 316 U. S. 241, 249–250. However, the doctrine restricts the patentee’s rights only as to the “particular article” sold, id., at 251; it leaves untouched the patentee’s ability to prevent a buyer from making new copies of the patented item. By planting and harvesting Monsanto’s patented seeds, Bowman made additional copies of Monsanto’s patented invention, and his conduct thus falls outside the protections of patent exhaustion. Were this otherwise, Monsanto’s patent would provide scant benefit. After Monsanto sold its first seed, other seed companies could produce the patented seed to compete with Monsanto, and farmers would need to buy seed only once.

(b) Bowman argues that exhaustion should apply here because he is using seeds in the normal way farmers do, and thus allowing Monsanto to interfere with that use would create an impermissible exception to the exhaustion doctrine for patented seeds. But it is really Bowman who is asking for an exception to the well-settled rule that exhaustion does not extend to the right to make new copies of the patented item. If Bowman was granted that exception, patents on seeds would retain little value. Further, applying the normal rule will allow farmers to make effective use of patented seeds. Bowman, who purchased seeds intended for consumption, stands in a peculiarly poor position to argue that he cannot make effective use of his soybeans. Bowman conceded that he knew of no other farmer who planted soybeans bought from a grain elevator. In the more ordinary case, when a farmer purchases Roundup Ready seed from Monsanto or an affiliate, he will be able to plant it in accordance with Monsanto’s license to make one crop.

Justice Kagan delivered the unanimous opinion of the Court.

Under the doctrine of patent exhaustion, the authorized sale of a patented article gives the purchaser, or any subsequent owner, a right to use or resell that article. Such a sale, however, does not allow the purchaser to make new copies of the patented invention.

The question in this case is whether a farmer who buys patented seeds may reproduce them through planting and harvesting without the patent holder’s permission. The Court said “No, way.”

Monsanto markets soybean seed containing this altered genetic material as Roundup Ready seed. Farmers planting that seed can use a glyphosate based herbicide to kill weeds without damaging their crops. Two patents issued to Monsanto cover various aspects of its Roundup Ready technology, including a seed incorporating the genetic alteration (U. S. Patent Nos. 5,352,605 and RE39,247E).

Monsanto sells, and allows other companies to sell, Roundup Ready soybean seeds to growers who assent to a special licensing agreement. That agreement permits a grower to plant the purchased seeds in one(and only one) season. He can then consume the resulting crop or sell it as a commodity, usually to a grain elevator or agricultural processor. But under the agreement, the farmer may not save any of the harvested soybeans for replanting, nor may he supply them to anyone else for that purpose. These restrictions reflect the ease of producing new generations of Roundup Ready seed. Because glyphosate resistance comes from the seed’s genetic material, that trait is passed on from the planted seed to the harvested soybeans: Indeed, single Roundup Ready seed can grow a plant containing dozens of genetically identical beans, each of which, if replanted, can grow another such plant—and so on and so on. The agreement’s terms prevent the farmer from co-opting that process to produce his own Roundup Ready seeds, forcing him instead to buy from Monsanto each season.

Petitioner Vernon Bowman is a farmer in Indiana who purchased Roundup Ready each year, from a company affiliated with Monsanto, for his first crop of the season. In accord with the agreement, he used all of that seed for planting, and sold his entire crop to a grain elevator (which typically would resell it to an agricultural processor for human or animal consumption).

According to the Court:

Bowman, however, devised a less orthodox approach for his second crop of each season. Because he thought such late-season planting “risky,” he did not want to pay the premium price that Monsanto charges for Roundup Ready seed. Id., at 78a; see Brief for Petitioner 6. He therefore went to a grain elevator; purchased “commodity soybeans” intended for human or animal consumption; and planted them in his fields. Those soybeans came from prior harvests of other local farmers. And because most of those farmers also used Roundup Ready seed, Bowman could anticipate that many of the purchased soybeans would contain Monsanto’s patented technology. When he applied glyphosate-based herbicide to his fields, he confirmed that this was so; a significant proportion of the new plants survived the treatment, and produced in their turn a new crop of soybeans with the Roundup Ready trait. Bowman saved seed from that crop to use in his late-season planting the next year—and then the next, and the next, until he had harvested eight crops in that way. Each year, that is, he planted saved seed from the year before (sometimes adding more soybeans bought from the grain elevator),sprayed his fields with glyphosate to kill weeds (and any non-resistant plants), and produced a new crop of glyphosate resistant, i.e., Roundup Ready-soybeans.

After discovering this practice, Monsanto sued Bowman for infringing its patents on Roundup Ready seed. Bowman raised patent exhaustion as a defense, arguing that Monsanto could not control his use of the soybeans be-cause they were the subject of a prior authorized sale(from local farmers to the grain elevator).

The District Court rejected that argument, and awarded damages to Monsanto of $84,456. The Federal Circuit affirmed. It reasoned that patent exhaustion did not protect Bowman because he had created a newly infringing article:

The “right to use” a patented article following an authorized sale, the court explained, “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.” Ibid. (brackets and internal quotation marks omitted). Accordingly, Bowman could not “‘replicate’ Monsanto’s patented technology by planting it in the ground to create newly infringing genetic material, seeds, and plants.” Ibid.

The doctrine of patent exhaustion limits a patentee’s right to control what others can do with an article embodying or containing an invention.2 Under the doctrine, “the initial authorized sale of a patented item terminates all patent rights to that item.” Quanta Computer, Inc. v. LG Electronics, Inc., 553 U. S. 617, 625 (2008). “The sale confers on the purchaser, or any subsequent owner, “the right to use [or] sell” the thing as he sees fit. United States v. Univis Lens Co., 316 U. S. 241, 249–250 (1942).

[T]he doctrine restricts a patentee’s rights only as to the “particular article” sold, ibid.; it leaves untouched the patentee’s ability to prevent a buyer from making new copies of the patented item. “[T]he purchaser of the [patented] machine . . . does not acquire any right to construct another machine either for his own use or to be vended to another.”

What this means for Farmer Bowman:

Unfortunately for Bowman, that principle decides this case against him. Under the patent exhaustion doctrine, Bowman could resell the patented soybeans he purchased from the grain elevator; so too he could consume the beans himself or feed them to his animals. Monsanto, although the patent holder, would have no business interfering in those uses of Roundup Ready beans. But the exhaustion doctrine does not enable Bowman to make additional patented soybeans without Monsanto’s permission (either express or implied). And that is precisely what Bowman did. He took the soybeans he purchased home; planted them in his fields at the time he thought best; applied glyphosate to kill weeds (as well as any soy plants lacking the Roundup Ready trait); and finally harvested more (many more) beans than he started with. That is how “to ‘make’ a new product,” to use Bowman’s words, when the original product is a seed. Brief for Petitioner 37; see Webster’s Third New International Dictionary 1363 (1961) (“make” means “cause to exist, occur, or appear,” or more specifically, “plant and raise (a crop)”). Because Bowman thus reproduced Monsanto’s patented invention, the exhaustion doctrine does not protect him.

Were the matter otherwise, Monsanto’s patent would provide scant benefit. After inventing the Roundup Ready trait, Monsanto would, to be sure, “receiv[e] [its] reward” for the first seeds it sells. Univis, 316 U. S., at 251. But in short order, other seed companies could reproduce the product and market it to growers, thus depriving Monsanto of its monopoly. And farmers themselves need only buy the seed once, whether from Monsanto, a competitor, or (as here) a grain elevator. The grower could multiply his initial purchase, and then multiply that new creation, ad infinitum—each time profiting from the patented seed without compensating its inventor. Bowman’s late-season plantings offer a prime illustration. After buying beans for a single harvest, Bowman saved enough seed each year to reduce or eliminate the need for additional purchases.

The exhaustion doctrine is limited to the “particular item” sold to avoid just such a mismatch between invention and reward.

Bowman principally argues that exhaustion should apply here because seeds are meant to be planted. The exhaustion doctrine, he reminds us, typically prevents a patentee from controlling the use of a patented product following an authorized sale. And in planting Roundup Ready seeds, Bowman continues, he is merely using them in the normal way farmers do. Bowman thus concludes that allowing Monsanto to interfere with that use would “creat[e] an impermissible exception to the exhaustion doctrine” for patented seeds and other “self-replicating technologies.”

But it is really Bowman who is asking for an unprecedented exception—to what he concedes is the “well settled” rule that “the exhaustion doctrine does not extend to the right to ‘make’ a new product.”

That is because, once again, if simple copying were protected use, a patent would plummet in value after the first sale of the first item containing the invention. The undiluted patent monopoly, it might be said, would extend not for 20 years (as the Patent Act promises), but for only one transaction. And that would result in less incentive for innovation than Congress wanted. Hence our repeated insistence that exhaustion applies only to the particular item sold, and not to reproductions.

Nor do we think that rule will prevent farmers from making appropriate use of the Roundup Ready seed they buy. Bowman himself stands in a peculiarly poor position to assert such a claim. As noted earlier, the commodity soybeans he purchased were intended not for planting, but for consumption.

Still, Bowman has another seeds-are-special argument: that soybeans naturally “self-replicate or ‘sprout’ unless stored in a controlled manner,” and thus “it was the planted soybean, not Bowman” himself, that made replicas of Monsanto’s patented invention.

But we think that blame-the-bean defense tough to credit. Bowman was not a passive observer of his soybeans’ multiplication; or put another way, the seeds he purchased (miraculous though they might be in other respects) did not spontaneously create eight successive soybean crops. As we have explained, supra at 2–3, Bowman devised and executed a novel way to harvest crops from Roundup Ready seeds without paying the usual premium. He purchased beans from a grain elevator anticipating that many would be Roundup Ready; applied a glyphosate-based herbicide in a way that culled any plants without the patented trait; and saved beans from the rest for the next season. He then planted those Roundup Ready beans at a chosen time; tended and treated them, including by exploiting their patented glyphosate-resistance; and harvested many more seeds, which he either marketed or saved to begin the next cycle. In all this, the bean surely figured. But it was Bowman, and not the bean, who controlled the reproduction (unto the eighth generation) of Monsanto’s patented invention.

Note that the Court did try to limit the holding somewhat:

Our holding today is limited—addressing the situation before us, rather than every one involving a self-replicating product. We recognize that such inventions are becoming ever more prevalent, complex, and diverse. In another case, the article’s self-replication might occur outside the purchaser’s control. Or it might be a necessary but incidental step in using the item for another purpose. Cf. 17 U. S. C. §117(a)(1) (“[I]t is not [a copyright] infringement for the owner of a copy of a computer program to make . . . another copy or adaptation of that computer program provide[d] that such a new copy or adaptation is created as an essential step in the utilization of the computer program”). We need not address here whether or how the doctrine of patent exhaustion would apply in such circumstances. In the case at hand, Bowman planted Monsanto’s patented soybeans solely to make and market replicas of them, thus depriving the company of the reward patent law provides for the sale of each article. Patent exhaustion provides no haven for that conduct. We accordingly affirm the judgment of the Court of Appeals for the Federal Circuit.

*Side Note: Monsanto seeds do not contain a “terminator gene” that kills seeds. While Monsanto has rights to the patented processes – which could be used to prevent farmers from saving seeds – the company has vowed not to use it due to global food security and developing-country agriculture concerns over sterile seed sales.

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