Nov. 30 (Bloomberg) -- DuPont Co., the most valuable U.S. chemical maker, lied to a federal court and investors about its right to use Monsanto Co. seed technology as a central part of its defense in a patent lawsuit, a judge ruled.
DuPont “knowingly perpetrated a fraud against the court,” according to a Nov. 16 order by U.S. District Judge Richard Webber unsealing sanctions he levied last December that limited the company’s defenses in the lawsuit brought by Monsanto. The two companies are the largest in the $34 billion commercial seed market.
E-mails from DuPont executives and lawyers show they knew the company didn’t have an agreement allowing it to combine Monsanto’s Roundup Ready soybeans with a second trait, while telling the court and public for years that it had such a right, Webber ruled. Because the sanction order was sealed, DuPont has “been able to continue their public relations spin,” the judge wrote.
“The public is entitled to a full disclosure of the defendants’ fraud, which unduly delayed resolution of this litigation,” Webber wrote in his order. “Possible embarrassment or discomfort is not enough to justify sealing court records.”
Webber will decide whether to uphold or increase the $1 billion award to Monsanto made in the patent case by a federal jury on Aug. 1 after 40 minutes of deliberations. He’ll also preside in an October trial over DuPont’s claims that Monsanto illegally extended its market dominance in genetically modified crops.
DuPont today asked Webber to unseal more documents that show “we told the truth,” Thomas L. Sager, DuPont general counsel, said in a statement. “The sanctions ruling is dead wrong,” he said.
DuPont has probably damaged its relationship with the judge, perhaps to the point he may triple the jury award, said Ronald A. Cass, dean emeritus of the Boston University School of Law. The judge can increase the award based on the jury’s finding that the infringement was intentional.
“I wouldn’t put a lot of money on DuPont winning the antitrust claim, either,” Cass, who is also president of Cass & Associates, a legal consultancy, said by phone yesterday. “What DuPont did was pretty outrageous and put Monsanto in a difficult position because they were being raked over the coals in public.”
Monsanto sued DuPont in 2009, claiming the company was infringing a patent for seeds that are genetically modified to tolerate application of the herbicide Roundup. Monsanto argued that DuPont wasn’t allowed to combine its own seed trait with Monsanto’s Roundup Ready trait.
DuPont in turn accused Monsanto of trying to monopolize the seed market. Webber split the dispute, with the patent issue tried first and the antitrust case scheduled for trial next year.
After ruling in December that DuPont had misled the court, Webber prevented the company from arguing to the jury that it acted within the terms of a 2002 licensing contract. The judge also ordered DuPont to pay some of Monsanto’s legal bills.
“Defendants show no remorse for their wrongdoing, but to compound the seriousness of their behavior, insist on maintaining their bogus arguments, despite the overwhelming evidence that those arguments are clearly contradicted by the facts,” Webber wrote in his order sanctioning DuPont. “Defendants have made a mockery of this proceeding.”
Webber, in his November order, said he provided the Department of Justice’s antitrust division with a copy of his fraud findings in February. The department announced this month it dropped its investigation into possible anti-competitive practices in the seed industry.
“The DOJ decision may not bode well for DuPont’s remaining antitrust claims against Monsanto,” Greg Neppl, a Washington-based antitrust partner with Foley & Lardner LLP, said in an e-mail.
“DuPont, its employees, and its counsel throughout this litigation have adhered to the highest ethical standards,” DuPont said in an earlier statement. “All of the company’s representations to the court or the public regarding its claims and defenses in this case have been accurate.”
Webber’s orders “speak for themselves,” said Kelli Powers, a Monsanto spokeswoman, who declined to comment further.
A federal jury in Monsanto’s hometown of St. Louis found DuPont willfully infringed a Monsanto patent by making soybeans that combined the Roundup Ready trait with a similar DuPont technology known as GAT. In the December 2011 order that is now unsealed, the judge threw out the heart of DuPont’s defense, preventing the company from arguing that the combination was allowed under terms of the 2002 agreement.
Webber said he sealed the document to avoid publicity that would taint the pool of jurors who would hear the case. Following the verdict, Monsanto asked the judge to make the order public, saying DuPont has continued to make false public statements.
“Monsanto contends that allowing the sanctions order to remain unsealed merely allows defendants to perpetuate their fraud,” Webber said. “This court agrees.”
DuPont’s argument that Monsanto is trying to make the order public out of spite is “ironic,” he said. The evidence showed “a calculated, strategic effort by defendants to demonize Monsanto and to portray themselves as the seed industry’s David to Monsanto’s Goliath.”
DuPont has asked Webber to put the antitrust case on hold and issue a final judgment on the patent verdict so it can immediately be appealed. After Webber’s sanctions, DuPont wants to get the case before the U.S. Court of Appeals for the Federal Circuit in Washington, which specializes in patent law, Cass said.
“They should get to the Federal Circuit quickly and hopefully get a reset on the case,” said John Dragseth, a patent lawyer with Fish & Richardson in Minneapolis. “They have to show not only the judge got it wrong, there’s an honest explanation of all of this.”
The case is Monsanto Co. v. E.I. du Pont de Nemours & Co., 09cv686, U.S. District Court, Eastern District of Missouri (St. Louis).
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