Inexhaustible: Patents on Self-Replicating Technologies

Abstract

The first sale or patent exhaustion doctrine reflects the limited nature of patents. In Quanta Computer, Inc. v. LG Electronics, Inc., the Supreme Court reaffirmed the principle that the authorized sale of a patented item exhausts the patent as to that item.

However, in the context of self-replicating technology, it is unclear how the patent exhaustion/first sale doctrine should apply. This is exemplified by genetically-modified or transgenic seeds. The patent exhaustion/first sale doctrine establishes that the authorized sale of a genetically-modified seed exhausts the patent rights in that seed, so that the purchaser may deal freely with that seed. Yet, if the purchaser plants the seed, and thus grows a plant that generates seed, what are the patent rights in that second generation seed? The Federal Circuit has concluded that the patentholder has full patent rights in the second generation seed, so that the purchaser is limited under patent law as to what may be done with that seed. Monsanto Co. v. Scruggs, 459 F.3d 1328 (Fed. Cir. 2006); Monsanto Co. v. McFarling, 302 F.3d 1291 (Fed. Cir. 2002). The potentially extreme results of this approach may be seen in Monsanto Co. v. Bowman, 686 F.Supp.2d 834, 2009 U.S. Dist. LEXIS 96986, 2009 WL 3242103 (S.D. Ind. 2009), where a farmer who purchased second generation seed that was mixed with other seed was found to have infringed Monsanto’s patents.

This paper reviews the patent exhaustion/first sale doctrine and its application to genetically-modified or transgenic seeds, and proposes that contract law rather than patent law should govern the patentholder’s rights in an object embodying self-replicating technology after the authorized sale of that object.

Keywords: Self-Replicating Technology, First Sale Doctrine, Patent Exhaustion, Patents, Quanta Computer, Monsanto, Scruggs, Mcfarling, Bowman, Authorized Sale, Genetically-Modified Seed, Transgenic Seed, Second Generation Seed, Self-Replicating, First Sale, Genetically-Modified, Transgenic, Saved Seed

JEL Classification: K12, K29, K39, O30, O31, O32, O33, O34, O38, O39