‘Commerce among the several states’

States potentially run afoul of the dormant Commerce Clause when their actions interfere in the free movement of goods among states. Seed-saving programmes may implicate the dormant Commerce Clause if the statutes directly (or by their necessary operation) interfere with the importation of goods from other states ( Oregon Waste Systems, Inc. v Department of Environmental Quality of the State of

Oregon , 1994). Seed-saving statutes may also violate the dormant Commerce Clause, if their regulation of otherwise purely intrastate activities has extraterritorial effects that directly burden interstate commerce ( Brown-Forman Distillers v New York State Liquor Authority , 1986). For example, in Brown-Forman , the Supreme Court found a New York law that regulated only intrastate liquor sales

to have an illegal extraterritorial reach. The law setting the maximum price of liquor sales in New York based on the minimum price of liquor sales in bordering states had the practical effect of controlling prices in other states.

However, ‘not every exercise of local power is invalid merely because it affects in some way the flow of commerce between the States’ ( Great Atlantic & Pacific Tea Co. v Cottrell , 1976; Wille, 1996, pp. 1092–1093). In contrast to Brown-Forman , the proposed state seed-saving statutes probably do not have a controlling effect on sales beyond the borders of the regulating state. The ability of in-state farmers to save seeds by registering with, and paying a fee to, the state department of agriculture does not require seed dealers to modify their sales to farmers in other states. Farmers outside of the state would not be able to register to save seeds. Nor could in-state farmers provide saved seeds to farmers in other states. Likewise, proposals to eliminate contractual prohibitions to saving seed do not compel seed dealers in other states to follow suit. Moreover, all contracts could retain existing PVPA prohibitions on brown-bag sales to third parties.

Absent a direct effect on interstate commerce, courts may examine whether the statute imposes an indirect obstruction. Indirect burdens on interstate commerce typically involve state laws that discriminate against out-of-state interests in favour of domestic constituents ( C & A Carbone, Inc. v Town of Clarkson , 1994; New Energy Company of Indiana v Limbach , 1988). Professor Regan argues that in evaluating dormant Commerce Clause issues within the movement of goods context, the Supreme Court’s sole concern is avoiding state protectionism (Regan, 1986, p. 1104). A law with a protectionist purpose attempts only to transfer wealth from foreigners to local competitors (Regan, 1986, p. 1145; White v Samsung Electronics America, Inc ., 1993). Accordingly, laws with protectionist purposes are invalid while laws that regulate the movement of goods without a protectionist purpose are valid (Regan, 1986, p. 1104; Stearns, 2003, pp. 69–70). Therefore, even facially neutral statutes may none the less impermissibly burden interstate commerce if the legislature’s purpose was to establish a protectionist regime at the expense of competitors in other states.

Although determining whether the proposed statutes have an underlying protectionist motivation may prove difficult, a protectionist effect (i.e. the statute’s effect is to improve the competitive position of local actors at the expense of foreign counterparts) is evidence of an underlying protectionist motivation (Regan, 1986, p. 1105). If a protectionist effect results from the statute, the court will determine whether legitimate state interests justify the harmful protectionist effects ( Pike v Bruce Church, Inc ., 1970).

The various iterations of seed-saving statutes discussed earlier do not appear to be motivated by protectionist purposes or to have a protectionist effect, i.e. increasing the wealth of domestic farmers at the expense of farmers from other states. Admittedly, farmers allowed to save seed have a theoretical reduction in input costs (payment of the registration fee plus any seed-cleaning and seed-conditioning costs as opposed to payment of the technology fee and the purchase price of new seed). These cost reductions probably do not transfer wealth to domestic farmers at the expense of farmers in other states. Assuming that all who take advantage of the soybeanseed reservation programmes would have

otherwise planted soybeans (i.e. the existence of the seed-saving programme did not induce farmers to switch from planting hybrid corn to soybeans), the overall market supply of soybeans will remain constant and market prices received by farmers, regardless of location, should be unaffected by the seed-saving statutes. Because overall market prices do not change, out-of-state farmers will be in the same economic position after implementation of a seed-saving statute.

Seed-saving provisions may be more akin to a state subsidy for domestic businesses – a concept the Supreme Court has upheld indirectly in other contexts. Justice Stevens, writing for the majority in West Lynn Creamery, Inc. v Healy (1994), noted that ‘[a] pure subsidy funded out of general revenue  ordinarily imposes no burden on interstate commerce, but merely assists local business’. In contrast to the combined tax and subsidy scheme on review in West Lynn Creamery , the proposed seed-saving programmes function as a direct subsidy funded solely by domestic producers desiring to participate in the seed reservation programme. As discussed, the seed-saving programme has no price effect on out-of-state farmers and requires no payments from them for support. It merely lowers in-state producer costs. Accordingly, current seed-saving proposals should survive challenges under the dormant Commerce Clause.

Conclusion

Farmers have traditionally saved a portion of each season’s harvest for planting as seed the following season. For well over 100 years, the federal government encouraged this practice and provided, free of charge, new seed varieties. The widespread adoption of varieties protected by utility patents and PVPCs, coupled with technology licensing agreements, has drastically changed the agricultural seed market. As state legislatures struggle with farmer demands for seed saving, IP-holders will make equally compelling arguments for preserving incentives to develop improved varieties to benefit the same farmers. Although the proposed seed-saving statutes discussed herein may, with minor revision, survive constitutional challenges, legislators should carefully balance farmers’ traditional ‘right’ to save seed with the costs required to develop improved varieties through genetic engineering and traditional breeding. The goal of this chapter was not to balance the equation, but merely to provide insight to stakeholders regarding constitutional issues raised by proposed seed-saving statutes.

References pertinent to this module of information are available in the book “Agricultural Biotechnology and Intellectual Property”