Limiting
Patent Exhaustion and Seed Saving through Licence Agreements
Both the research exemption and farmer’s ability to save
seed limit the IPP provided by the PVPA. Although utility patents do provide
broader IPP than PVPCs do, stand-alone utility patents do not prevent seed
saving because the patentee’s rights are ‘exhausted’ after the initial sale to
the farmer. The exhaustion doctrine only applies to an unconditional sale or
licence of a patented article (
B. Braun Medical, Inc. v Abbott Laboratories
, 1997). In a conditional
transaction, the court will infer ‘that the parties negotiated a price that
reflects only the value of the “use” rights conferred by the patentee’ (
B. Braun Medical, Inc
.). The patent-holder retains
the IPRs expressly reserved in the transaction, assuming there is no antitrust
violation or patent misuse (Osborne, 2004, p. 658).
Owners of IP generally reserve their rights through the
use of licence agreements accompanying the sale of the patented good. Authority
supports the patent owner’s ability to limit use of the good to a defined field
of use (
General
Talking Pictures Corp. v Western Electric Co
., 1938), as well as restrain use of the patented
device to a single application (
Mallinckrodt, Inc. v Medipart, Inc
., 1992).
In addition to formal licensing agreements, notices on
the product itself may condition the sale of the patented good. In
ProCD, Inc. v Seidenberg
(1996) and
Bowers v Baystate
Technologies
(2003),
the Seventh and Federal Circuits, respectively, upheld the right of
copyright-holders to limit the fair use doctrine via ‘shrinkwrap licences’.
Buyers who find the terms of the shrinkwrap licences unacceptable can prevent
formation of the contract simply by returning the product (
ProCD, Inc
.).
Like other patented goods, seed sales are often
conditioned by technology licensing agreements (
Monsanto Co. v McFarling
, 2002) and/or tags attached to
the individual bags of seed, otherwise known as ‘bag tags’ (
Pioneer Hi-Bred
International, Inc. v Ottawa Plant Food, Inc
., 2003;
Monsanto Co. v Trantham
, 2001). For example, Monsanto,
the patent-holder for Roundup Ready
®
soybeans,
requires each sale of its patented seed to be accompanied by an executed
technology use agreement.
1
To date, courts have
uniformly upheld seed-use restrictions contained in express licensing
agreements and bag tags, and farmers planting seeds purchased subject to these
licensing arrangements risk liability for saving seed for personal use or
‘brown-bagging’ (Uchtmann, 2002, pp. 3–7).