Beyond secrets: the creation of statutory-based intellectual property

In response to pressure from the nursery industry to curb competitors’ reproduction of valuable plant varieties via grafting, Congress passed the first sui generis IP scheme for plants, the Plant Patent Act (PPA) of 1930 (Kesan and Janis, 2002, pp. 5–6). By prohibiting only asexual reproduction of varieties protected by a plant patent (35 U.S.C. §161), the PPA offers no protection for breeders of seed for commercial grain agriculture. Accordingly, seed saving, and appropriation by competitors, remained legal and commonplace.

Congress did not create a statutory-based IP regime for varieties reproduced by seed until 1970. The Plant Variety Protection Act (PVPA) protected the seed developer’s IP by granting exclusive rights to the plant variety, including its seed (7 U.S.C. §2541). In recognition of traditional farm practices, the original version of the PVPA allowed farmers to save seed from a protected variety to either plant the next growing season or sell the saved seed (commonly known as ‘brown bag’ seed) to third parties. The 1994 amendments to the PVPA narrowed the ‘saved seed’ exemption by eliminating third-party sales (7 U.S.C. §2543). Although breeders enjoy modest protection of their soybean innovations from competitors under the PVPA (Janis and Kesan, 2002, p. 751), the saved seed exemption prevents PVPC-holders from compelling farmers to purchase the protected variety on an annual basis and hinders the seed breeder’s ability to engage in the monopolistic behaviour typical of most IP regimes.

Utility patents represented a dramatic step forward in the protection of breeders’ IP. Although available since 1793, the use of utility patents in agriculture was traditionally confined to tractors, plows and countless other mechanical or chemical inventions. In 1980, the Supreme Court, in Diamond v Chakrabarty , upheld the patentability of a genetically engineered microorganism as a ‘manufacture’ or ‘composition of matter’. This decision opened the door for the PTO to issue pa tents for genetically engineered plants. In 1985, the Board of Patent Appeals and Interferences issued its landmark decision in re Hibberd that addressed the patentability of maize plant technologies, including seeds, with increased tryptophan levels. Relying on Diamond , the Board held that utility patents are available for man-made life forms, including plant life.

Utility patents, by prohibiting almost any unauthorized activity using the patented invention, eliminate the PVPA’s research ‘free-rider’ problem (7 U.S.C. §2544). Competitors who develop equivalent plant varieties or even new, distinct varieties derived from the patented seed may be liable for patent infringement.

Exhaustion: why utility patents acting alone may not foreclose seed saving

Utility patent protection may not unilaterally foreclose farmers’ ability to save seed. The doctrine of patent exhaustion provides that the patent-holder’s rights are ‘exhausted’ after the first legal sale of the patented good. In conjunction with the initial sale, the patentee will have received full consideration for releasing the patented article to the purchaser and warrants no additional remuneration for any subsequent use of the patented good. Accordingly, the lawful purchaser of an article embodying a patented invention may use and resell it without permission from, or compensation to, the patentee ( United States v Univis Lens Co ., 1942).

For example, if the patented article purchased by the farmer were an improved plow, few (if any) would argue that the farmer would violate the patent laws by reselling the plow to a third party because the patent-holder’s rights on that particular plow were exhausted upon the initial sale to the farmer. On the other hand, the farmer is liable for patent infringement if he or she constructs an exact copy of the patented plow in his or her machine shed and sells it to a neighbour.

The seed, however, is different. Each patented seed has the capability, and is purchased with the sole intention, of reproducing multiple exact copies (genetic mutation aside). The seed’s value to the farmer lies only in its ability to generate additional seeds. Plows, on the other hand, have inherent commercial value apart from reproduction. Accordingly, seeds do not fit comfortably within the trad itional rules of patent exhaustion developed to protect IPRs in mechanical or similar inventions.

A careful examination of the Univis Lens case may provide some insight into the application of exhaustion principles to patented seeds. In Univis Lens , the Court addressed patent exhaustion in the context of the sale of eyeglass lens ‘blanks’. Each blank required further processing at the retail level to conform to individual customers’ prescriptions. The patent-holder (or licensee) sold the blanks to retail processors for customization according to each end-user’s needs. Absent further processing, the blank lenses had no commercial value or non-infringing use. The Court concluded that ‘[t]he authorized sale of an article which is capable of use only in practicing the patent is a relinquishment of the patent monopoly with respect to the article sold’.

Utility patents issued for seeds require a similar exhaustion analysis. Like lens blanks, the seed is worthless to the farmer absent the ability to engage in additional processing. Implicit in the sale of each seed is the fact that the farmer will practise the other steps claimed in the patent, such as planting and growing the seed to produce additional seeds. There is no ‘non-infringing use . . . , since the only use of the seed [is] to [plant it] for crops’ ( Monsanto Co. v Trantham , 2001). Following the logic in Univis Lens , the sale of the patented seed to the farmer ‘exhausts’ the patent-holder’s monopoly rights in that seed.

The reproducibility of the seed, although a unique product feature, is irrelevant for exhaustion purposes. Once sold outright, the patentee cannot later recapture IPRs in that item. For example, when a patentee sells a patented machine that has a single function of performing a patented process, the patentee releases to the purchaser the IPRs in the machine as well as future use of the machine to perform the patented process. Subsequent owners of the machine benefit from the exhausted patent rights ( Bloomer v McQuewan , 1853). Likewise, once exhausted, the patentee cannot recapture IPRs in the second generation of seed. The farmer may freely use or resell the patented seed, and its progeny, subject only to nonexhausted IPRs such as those provided under the PVPA.

A counterbalance to the principle of patent exhaustion is the law of prohibited reconstruction. Although the doctrine of reconstruction generally prohibits the recreation of a second patented article, reconstruction, as opposed to permissible repair, requires the original patented article to have lost its usefulness ( Cotton-Tie Co. v Simmons , 1882; Jazz Photo Corp. v ITC , 2001). Reproduction of identical seeds, however, is not for the purpose of reconstructing a product whose usefulness is spent, but rather because the product is still useful (i.e. a viable seed), a process closer to repair than reconstruction. Moreover, the equitable principles underlying the doctrine attempt to balance the purchaser’s right to repair a machine that he or she otherwise has a right to use with the patentee’s right to exclude others from practising the invention ( Wilson v Simpson , 1850). Absent the right to repair, a machine with parts susceptible to wear would be of limited use to the purchaser ( Wilson ). Similarly, seeds have no use to the farmer absent the right to plant and grow additional grain (seed). Therefore, an unconditional sale of patented seed probably exhausts the patentee’s IPRs with respect to that seed, and the act of planting saved seed would not constitute impermissible reconstruction.