2004 -- CropChoice news: After losing to Monsanto
in federal district court in late 2002, Homan McFarling
thought he'd have to pay the company $780,000 for illegally
saving and replanting its genetically engineered soybean
seed. However, a federal appeals court earlier this
month threw out the award for damages. The Mississippi
farmer likely will end up owing the company a fraction
of the original amount. What's more, his lawyer is considering
an appeal to the Supreme Court on antitrust grounds.
"It's one thing to subsidize Monsanto, but why
do farmers have to subsidize the seed companies that
have nothing to do with development of the [transgenic]
seed but are charging higher prices," says Tupelo,
Miss. attorney Jim Waide.
Monsanto's press office did not return a call seeking
comment on this story. Its counsel in the federal appeals
case, Seth P. Waxman of Wilmer, Cutler & Pickering,
declined to comment.
Monsanto v. McFarling
In 1998, Homan McFarling purchased and planted 1,000
bags of genetically engineered RoundUp Ready soybean
seed on his Mississippi farm. Two years later, Monsanto
sued the farmer in the U.S. District Court for the Eastern
District of Missouri, home turf for the St. Louis company,
after tests showed his saved seeds were RoundUp Ready.
RoundUp Ready soybeans are so named because they're
engineered with a gene conferring resistance to the
glyphosate herbicide Monsanto makes and markets under
the tradename RoundUp.
A "Technology Agreement" is critical to marketing
the seed. Monsanto licenses the patented gene for glyphosate
resistance, referred to as "the 435 patent,"
(Patent No. 5,633,435) to seed companies. They then
integrate the gene into their soybean seed lines. With
those genes inside the cells, the seeds themselves are
now resistant to glyphosate, or RoundUp. They're RoundUp
Ready, and covered by "the 605 patent" (No.
5,352,605). Monsanto charges seed companies, including
its subsidiaries that control some 20 percent of this
market, a "Technology Fee" as compensation
for its innovation.
The seed companies actually collect the tech fee from
farmers buying the RoundUp Ready seed -- the 1998 charge
was $6.50 per 50-pound bag -- and then forward it to
Monsanto. In addition, they include a "Technology
Agreement" bearing the farmers' signatures. This
contract licenses farmers to plant the seed for one
season, and disallows both seed saving and selling or
giving the seed to anyone for planting, research or
In federal district court, McFarling admitted saving
1,500 bushels of seed harvested from the '98 crop and
sowing it in 1999. Furthermore, he planted 3,075 bags
of saved seed in 2000.
Monsanto argued that McFarling, by saving and replanting
the seed, infringed its '435 and '605 patents and breached
the technology agreement, according to this reporter's
interpretation of the appeals court decision. The company
eventually sought a summary judgment against him for
infringement of the '605 patent only and breach of the
technology agreement. The court granted the request
and ruled against McFarling's claims that Monsanto had:
- violated the Plant Variety Protection Act, which
permits the saving of registered seed;
- misused the '435 patent covering the herbicide-resistant
gene by applying it to the entire germplasm, by which
point the '605 patent applies;
- violated patent exhaustion and first sale doctrines;
- broken federal antitrust laws.
Beyond the issue of liability, the court ultimately
ordered McFarling to pay Monsanto damages of $780,000.
McFarling appealed to the U.S. Court of Appeals for
the Federal Circuit, which sided with the district court
on all of the claims except the large damage award --
120 times the $6.50 technology fee McFarling paid for
each of the 1,000 bags of seed. The 120 multiplier that
Monsanto has made standard in its technology agreements
for soybeans, corn and cotton, even though they are
different plants, did not reasonably predict the harm
caused by breaching of the agreement and it was not
difficult to measure, according to the decision. The
appellate judges ordered the district court to reconsider
and recalculate. McFarling will end up paying about
$10,000, says his attorney, Jim Waide.
Monsanto's technology agreement, with the 120 multiplier,
not only likely breaks the law of every state, it also
violates federal due process, which limits punitive
damages to 10 times actual damages, Waide says. Monsanto
"uses it [the 120 muliplier] to frighten farmers
into settling rather than fighting the company in court."
He thinks Monsanto has used it to threaten about 70
farmers into settlement instead of going to court.
The appeals court ruled that seed saving prohibitions
in the technology agreements are legal. In effect, farmers
not only have to pay the fee, but they also have to
buy new, more expensive seed every year instead of using
saved seed, a longtime soybean farmer practice, Waide
says. Approximately 200 soybean companies have agreements
with Monsanto to sell the biotech seed to farmers. "The
effect of this is farmers are forced to subsidize the
seed companies that had nothing to do with developing
Waide, who represented McFarling in district court,
told the appellate judges that Monsanto included "a
count of infringement under the '435 patent" covering
the glyphosate-resistant gene in its complaint but did
not request "summary judgment on this count."
He also argued that no court has ruled on the validity
of the patent, and so it was improper to assume its
validity. The court ruled against him and said he should
have brought up the issue in district court.
Were Waide to appeal the decision to the Supreme Court,
a spokesperson in his office says he would likewise
assume validity of the '435 patent and then argue that
Monsanto is tying the original technology for herbicide
resistance to the second generation seeds. In other
words, the '435 and '605 patents, referring to different
products, are "tied." Farmers can't buy one
without the other. This is similar to the U.S. government's
case against Microsoft Corporation, which hinged on
the claim that users of the Windows computer operating
system had to use the company's Internet Explorer program,