On June 9, 2008 The Supreme Court ruled on a patent case between Quanta Computer and LG Electronics. Some have speculated that this ruling negates or somehow weakens patents and licensing agreements relative to seeds and biotech traits. This isn’t the case.
Here’s the background. Quanta assembles computers from component parts that it purchases from others. It sells assembled computers to companies like HP and Gateway. It had purchased chipsets from Intel for use in its computers. Intel had been authorized by LG to make and sell the chipsets. However, Intel’s license with LG required that they notify Quanta that Quanta did not have a license from LG to sell the chipsets. LG sued Quanta for patent infringement when Quanta did not sign a separate license with LG. The Court ruled against LG.
This case involves the patent exhaustion doctrine, which holds that, once title to a patented article passes to a purchaser in an unrestricted sale, the patent owner has no further patent rights in that article against downstream users or second-hand purchasers.
The technology and agreements involved in the Quanta ruling are fundamentally different than the agreement used by Monsanto in its biotech seeds and traits business.
Quanta bought chipsets and incorporated them into computers that it resold to customers. This is analogous to buying a book from a bookstore, and then selling it later on eBay. The Supreme Court ruling determined that due to the terms of the agreements between LG and Intel, Quanta was authorized to resell the Intel-sourced chipsets as part of the computer system marketed by Quanta, just as someone can resell a book on eBay.
Seeds are very different from microchips. Monsanto sells seeds to farmers and allows them to plant and sell the harvest as a commodity. We don’t allow them to save and use or sell the offspring of those seeds for planting. This would be the same as buying a book from a bookstore, photocopying it numerous times, and then selling the copies on Ebay. The patent exhaustion doctrine simply does not pertain to copies of products.
Aside from the protection afforded by patents, Monsanto is careful to ensure that its contractual agreements with seed companies and farmers are clear about what they may do with seeds and traits.
There is also ample legal precedent that existing patents and licenses used with seeds are legally binding. Both the Federal Circuit Court and the U.S. Court of Appeals have ruled that seed and trait patents are legal. In Quanta v. LG, the Supreme Court crafted its decision very narrowly. Nothing in the ruling overturns these earlier decisions.
Aside from the legal protections that remain in place, an important fact is that seed and trait patents don’t just benefit seed companies – they benefit everyone. Without the protection of patents, there would be no incentive for private industry to invest in research and the development of the products that benefit so many farmers and consumers.