Last month, we looked at a case that delved into
the essence of inventing. This month, we look into
one way to market an invention. It's a story of
how that quintessential American businessman, the
farmer, took on a chemical company over the rights
to soybeans... and lost.
Monsanto of St. Louis used to be a big chemical
company, manufacturing lines of agricultural chemicals
and plastics. One of its best sellers is Roundup,
a herbicide. It's plastic lines, used in products
such as carpets and windshields, followed the ups
and downs of the chemical industry, leading to a
spin off company by the name of Solutia. Solutia's
stock price is currently near rock bottom, proof
that you don't have to be a dot-com to feel the
pain of the stock market blues.
Monsanto diversified into agricultural biotech,
a natural fit with its agricultural chemicals line.
One of the inventions coming out of its research
pipeline was a soybean, genetically modified to
be resistant to glyphosate herbicides such as Monsanto's
Roundup. A farmer plants the Roundup Ready soybeans
and is able to control weeds even after the soybeans
emerge from the ground. A spraying or two of Roundup
over the field kills a broad variety of weeds, while
sparing the soybeans themselves.
The way Monsanto sees things, the combined use of
its beans and herbicide saves farmers money since
fewer chemicals have to be used and labor costs
are lower in weeding the fields. Because of the
cost savings, Monsanto charges a higher price for
its modified soybeans. To minimize competition and
recoup its research and development costs, Monsanto
applied for and obtained utility patents on its
genetically modified plants. Roundup Ready crops
are important to the company's future because the
patent for Roundup expired, leading to a price cut
for the herbicide.
Homan McFarling is a farmer who plants soybeans,
and a Mississippi farmer to boot. He bought the
pricey soybeans, planted them and harvested his
crop. The harvest was so successful that McFarling
held back about 1500 bushels of soybeans. That's
roughly 25 acres worth of beans. Instead of selling
the beans, he wanted to participate in that time-honored
practice of saving seeds for replanting the next
season.
The problem for Monsanto lay in the simple fact
that its invention could be readily duplicated by
the end-user. A soybean is merely a seed to propagate
the plant species, even a manmade species. Computer
software developers face a similar problem in that
the invention can be easily copied with computer
technology. If customers can make their own invention,
why bother paying any price, much less the higher
price?
Experienced about both plant and human natures,
Monsanto anticipated the tendency of people to cheat,
requiring everyone who bought the modified seeds
to sign a Technology Agreement. The agreement placed
restrictions on what users could do with its patented
seeds. One restriction was that the seed be used
for planting a commercial crop only in a single
season. After learning of McFarling's practice of
growing his own seed, Monsanto sued.
One of the funniest issues in the case was where
the lawsuit should be brought. Monsanto sued in
its home state of Missouri. McFarling wanted the
case in Mississippi, just down the river from St.
Louis. Monsanto declined, no doubt leery of the
reputation of those plaintiff-leaning Mississippi
juries, citing a forum selection clause on the agreement.
McFarling made an argument only a farmer can get
away with; that the forum clause was on the reverse
side of the paper and he never turned it over before
signing. Because he never saw the clause, it ought
not to be enforced. While that kind of argument
works in Congress during an election year, the court
of federal judges, who need not run for election,
remained unimpressed.
McFarling attacked the validity of Monsanto's restrictions
by claiming Monsanto engaged in antitrust behavior.
The basis of his defense lay in that Monsanto was
stretching its patent rights too far by the restrictions.
The court though affirmed the right of a patent
owner to impose some restrictions on its products
incorporating an invention. Monsanto competed in
an industry with a number of different sources of
soybeans, some of which were herbicide-resistant.
Thus, the farmer had a choice of whether to buy
the patented product, or somebody else's product.
In addition, Monsanto's practice of using the agreements
put the buyer on notice of the restrictions. Without
notice, the patent rights become exhausted by the
sale of the product.
Now, if only Monsanto could do something with tofu...
Originally Published in the Fort Worth Businss Press |
