Food for Thought: Genetically Modified Seeds as De Facto Standard Essential Patents

Abstract

For several years, courts have been improperly calculating damages in cases involving the unlicensed use of genetically-modified (GM) seed technology. In particular, when courts determine patent damages based on the hypothetical negotiation method, they err in exaggerating these damages to a point where no rational negotiator would agree. In response, we propose a limited affirmative defense of an implied license due to the patent’s status as a de facto standard essential patent. To be classified as a de facto standard essential patent, the farmer must prove three elements that reflect the peculiarities of GM seeds used in farming: (1) dominance, (2) impracticability, and (3) necessary to fulfill a basic need. Based on the approaches used by courts and standard setting organizations in licensing standard essential patents in technological fields such as cell phones and software, designation of some GM seeds as standard essential patents allows the courts to imply a license from patentees to farmers on reasonable and non-discriminatory (RAND) terms. Doing so shifts the case from a tort-based patent infringement suit to a breach of contract dispute and alters the damages regime from one based in compensation, deterrence, and punishment (a tort approach) to one based solely in compensation (a contractual approach). As a result of this novel proposal, the damages calculations in these suits return to economic reality.

Keywords: genetically modified seeds, GM seed, Monsanto, patent, damages, standard essential patent, RAND, FRAND, reasonable royalty, farm, farming, infringement, contract, tort, license, established royalties, Bowman, Ralph, plants, soybean, cotton, herbicide, Roundup, farmer, SSO, standard setting, standard

JEL Classification: K00, K10, K11, K12, K19, K30, K39, Q00, Q16, Q19