Monsanto Court Win Tosses Patent Suit by Organic Farmers

Monsanto Co. (MON) won’t have to face a challenge to its patents on genetically modified seeds as long as it doesn’t sue organic farmers and seed sellers, a U.S. appeals court said today.

The world’s largest seed company has made “binding assurances” that it won’t take patent action against farmers whose crops inadvertently contain traces of Monsanto’s biotechnology products, so there’s no reason to sue, the U.S. Court of Appeals for the Federal Circuit in Washington said in an opinion posted on its website. The decision affirmed a lower court ruling dismissing the case.

Monsanto has pursued more than 800 patent cases against farmers who plant its seeds without paying royalties. The case at issue today, filed in March 2011, was a preemptive action by farmers, seed sellers and agricultural groups that said they had no desire to sow the company’s seeds, took steps to avoid doing so and yet feared becoming litigation targets if traits modified by Monsanto showed up in their corn, soybeans or other crops.

“Monsanto’s binding representations remove any risk of suit against the appellants as users or sellers of trace amounts (less than 1 percent) of modified seed,” Circuit Judge Timothy Dyk wrote for the three-judge panel. “The appellants have alleged no concrete plans or activities to use or sell greater than trace amounts of modified seed, and accordingly fail to show any risk of suit on that basis.”

‘Inadvertent Means’

Between 1997 and 2010, Monsanto brought 144 infringement lawsuits and settled about 700 other cases without suing, according to the opinion. The St. Louis-based company’s practices have been upheld by courts, including a May decision from the U.S. Supreme Court.

On its website, St. Louis-based Monsanto said it “has never been nor will it be Monsanto policy to exercise its patent rights where trace amounts of our patented seeds or traits are present in farmer’s fields as a result of inadvertent means.”

Monsanto said there had not been a “a single act of patent enforcement” against any of the companies or people who brought the complaint at issue in today’s decision.

“The assertion that Monsanto would pursue patent infringement against farmers that have no interest in using the company’s patented seed technology was hypothetical from the outset,” Thomas Helscher, a company spokesman, said in a statement.

Monsanto gained 4.5 percent at the close today in New York trading, rising to $106.25. It was the biggest gain since Jan. 5, 2012, according to data compiled by Bloomberg.

Trace Amounts

It isn’t clear what would happen if more than trace amounts were found, the court said. With about half of the nation’s farmland sown with genetically modified crop varieties, it’s possible some growers have been contaminated by Monsanto’s technology that makes plants able to survive the application of the popular Roundup weedkiller, the panel said.

Dan Ravicher, executive director of the Public Patent Foundation, which sued on behalf of the organic farmers, said the ruling was a partial victory.

“Before this suit, the Organic Seed plaintiffs were forced to take expensive precautions and avoid full use of their land in order to not be falsely accused of patent infringement by Monsanto,” he said in a statement posted on the group’s website. “The decision today means that the farmers did have the right to bring the suit to protect themselves, but now that Monsanto has bound itself to not suing the plaintiffs, the Court of Appeals believes the suit should not move forward.”

Other Costs

The Federal Circuit panel said a challenge to the Monsanto patents wouldn’t help the farmers’ other complaints about the economic costs they incur to avoid contamination or their claims of a potential long-term medical or environmental impact of genetically modified seeds.

The seed company is facing lawsuits over claims it failed to take appropriate steps to prevent such a contamination after an experimental wheat variety was found in an Oregon field. Japan and South Korea suspended some purchases of U.S. grain following the discovery. Monsanto has said the contamination may have been the result of an “accidental or purposeful” act.

The case is Organic Seed Growers and Trade Association v. Monsanto Co., 12-1298, U.S. Court of Appeals for the Federal Circuit (Washington). The lower court case is Organic Seed Growers and Trade Association v. Monsanto Co., 11cv2163, U.S. District Court for the Southern District of New York (Manhattan).

To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net; Jack Kaskey in Houston at jkaskey@bloomberg.net

To contact the editors responsible for this story: Bernard Kohn at bkohn2@bloomberg.net; Simon Casey at scasey4@bloomberg.net

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