No Patent Misuse When Based On Regulatory Prohibition

In Monsanto Company v. Scruggs , (No. 05-1120, August 16, 2006), the Federal Circuit affirms the district court's judgment in favor of Monsanto, but remands a permanent injunction against Scruggs. Monsanto, which obtained patent protection for a glyphosate-herbicide-resistant seed, licenses its technology to seed sellers who, in turn, may sell the seed to growers that agree to a Monsanto license. Monsanto separately sells a glyphosate herbicide product.

At issue is the Monsanto license provision requiring growers, who use a glyphosate herbicide on Monsanto's seed, to use only Monsanto's glyphosate herbicide product (the “Herbicide Restriction”). While other glyphosate herbicides were available, at the time Monsanto's glyphosate herbicide was the only glyphosate herbicide approved by the EPA for use with Monsanto' seed. Scruggs, a grower who purchased Monsanto seed from an authorized seed seller, never signed a license agreement with Monsanto. Monsanto brought suit against Scruggs claiming, among other things, that Scruggs was infringing its patents. Scruggs countered by arguing that Monsanto's Herbicide Restriction is tantamount to patent misuse.

The Federal Circuit applies to the rule of reason to find that Monsanto's Herbicide Restriction lacks any anticompetitive effect since, at the time, EPA's regulations prohibited growers from using competing glyphosate herbicides with Monsanto's seed. The Federal Circuit further notes that Monsanto's competitors sought and eventually obtained EPA approval for other glyphosate herbicides, after which time Monsanto modified its contracts accordingly.