Good News for Biotech

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The recent ruling of the Supreme Court of Canada in Monsanto vs. Schmeiser (2004 SCC 34), a patent infringement case, received much attention in the general media. This 5-4 decision is of particular interest to those in the biotech industry for the following reasons:

(i) it confirms the patentability of genes and cells;

(ii) it confirms that exclusive rights over a patented gene or cell extend to plants containing the patented gene or cell; and

(iii) it provides an important discussion on the question of patent infringement, and specifically the issue of use of an invention by an innocent (unknowing) infringer.

Briefly stated, the majority of the Court held that Monsanto Co.’s (St. Louis, MO) patent relating to Roundup Ready® canola was valid and was infringed by Percy Schmeiser, a Saskatchewan farmer, and the corporation under which Schmeiser operates his farming business. The patent included claims to a chimeric gene (a gene that does not exist in nature) and cells containing the gene. The patent did not include claims specifically directed to a plant.

Much of the flavour of the Monsanto case comes from Schmeiser’s argument that he should not be liable for simply practising farming as he had done for years, selecting plants from one year’s crop to make into seed for the next year. The canola containing the patented gene is not discernable from regular canola without having it tested or sprayed with Roundup® herbicide.

The specific activities that gave rise to the dispute between Monsanto and Schmeiser began in about 1996. In that year, Schmeiser saved canola seed from one of his fields for planting in the spring of 1997. Once the 1997 crop began to grow, Schmeiser sprayed part of it with Roundup and found that more than half of the plants survived. The Court ruled that this indicated the presence of the patented gene and cell. Schmeiser saved the canola that survived the Roundup spraying to make seed for planting in the spring of 1998.

Before the planting, Monsanto advised Schmeiser that it believed he had grown Roundup Ready canola without a licence. This was based on samples taken in 1997 from road allowances bordering two of Schmeiser’s fields. Despite Monsanto’s warning, Schmeiser used the seed from the 1997 crop for planting some 1,030 acres. Various tests later revealed that 95 to 98 per cent of the canola planted by Schmeiser contained the patented gene.

Monsanto brought suit for patent infringement in August 1998. Monsanto prevailed at trial and Schmeiser appealed, first to the Federal Court of Appeal and then to the Supreme Court of Canada.

The Supreme Court’s
Analysis The principal area of disagreement between the judges in the majority and those in the minority concerns whether a patent for a gene, or a cell containing the gene, can give the patent owner exclusive rights over plants made up of the patented cells containing the patented genes.

Both the majority and dissenting decisions referred to the Supreme Court’s decision just 18 months earlier in Harvard College vs. Canada (Commissioner of Patents) ([2002] 4 SCR. 45, 2002 SCC 76). In that decision, a 5-4 majority ruled that higher life forms (including plants) could not be patented. However, there was no dispute that claims to a plasmid and a somatic cell culture — which the majority in the Monsanto decision noted are somewhat analogous to the gene and cell at issue in the Monsanto case — are valid.

The majority ruled that, while plants themselves cannot be patented, a patent claiming a gene or a cell containing the gene could effectively give the patentee exclusive rights over a plant made up of the patented cells containing the patented genes. The majority used the following analogy: “if an infringing use were alleged in building a structure with patented Lego blocks, it would be no bar to a finding of infringement that only the blocks were patented and not the entire structure. If anything, the fact that the Lego structure could not exist independently of the patented blocks would strengthen the claim, underlining the significance of the patented invention to the whole product, object, or process.”

For its part, the minority of the Court in the Monsanto case stated that to conclude that Monsanto’s patent extends to plants made up of patented cells containing the patented gene would allow Monsanto to do indirectly what it could not do directly: acquire patent protection over plants. The dissenting judges would have held the claims in issue valid but would have limited Monsanto’s exclusive rights to exclude plants themselves.

When is an Invention Used?
Exclusive rights granted by a patent are defined in Section 42 of the Patent Act. This section gives the patentee “the exclusive right, privilege and liberty of making, constructing and using the invention and selling it to others to be used.” Most of the judges doubted that Schmeiser made or constructed any of the claims of Monsanto’s patent. The bulk of the analysis by the judges in the majority concentrated on the question of whether Schmeiser used the patented genes or cells.

The majority stated the key question as “did the defendant’s activity deprive the inventor in whole or in part, directly or indirectly, of full enjoyment of the monopoly conferred by law?” They stated that a patentee would normally be deprived of full enjoyment of the monopoly when another person, without permission, uses the invention to further a business interest. The judges in the minority attacked the idea of defining “use” as commercial use, noting that the Supreme Court has stated previously that the inventor is not obliged to describe the utility of his invention and that the invention need not even have commercial utility. However, the majority noted that commercial exploitation is just one way of using an invention.

To determine whether the defendant “used” the invention, the judges in the majority compared the object of the patent to the defendant’s actions. The majority noted that a third party can benefit from the advantage of an invention even if it is not used as contemplated in the patent. Rather, the invention may be used for its stand-by or insurance value, such as a fire extinguisher, which is “used” simply by being available to extinguish a fire, if necessary. This statement dismissed Schmeiser’s argument that he had not infringed since he had not sprayed Roundup on the crop in issue and therefore had not benefited from the advantage of the invention. The majority of the Court was influenced by the fact that he could have sprayed Roundup at any time, if the need had arisen. Therefore, he did benefit from the invention.

The majority acknowledged the general rule that a defendant’s intention is not relevant to the question of patent infringement. However, it noted that intention becomes relevant where a defendant argues that it had possession of the invention without use. If the defendant can prove that its possession was “innocent of any actual use or intention to use,” it will not be found to infringe. While the majority cited some articles and some British decisions on this issue, this discussion appears to be new in Canadian jurisprudence. This discussion offers those sued for patent infringement an additional defence if they can show that their possession of the invention was without use or intention of use.

This discussion on the question of possession of an invention without use is consistent with the defence of non-infringement where use is private or experimental. While not fully defined in the Patent Act, the private and experimental use exceptions extend to private use on a non-commercial scale or for a non-commercial purpose as well as use solely for the purpose of experimentation.

In the end, the majority of the Court found that Schmeiser knew, or should have known, that the canola he planted, harvested and then sold in 1998 had the Roundup-resistant gene. Therefore, he could not show that, at the time of his possession of the invention, he had no intention to use it.

The majority acknowledged that inventions in the field of agriculture give rise to issues that may not be relevant in other fields. For example, living cells can reproduce without human intervention. Also, there may be moral concerns with the manipulation of genes. The majority stated that it is up to Parliament, not the courts, to make distinctions in the law to take account of these issues. This approach is in marked contrast with that of the majority in the Harvard College decision, which took the view that higher life forms should not be included within the definition of “invention” because Parliament could not possibly have contemplated patents on life forms at the time the word “invention” was defined.

Remedy
Having found that Schmeiser and his company infringed the patent, the judges in the majority saved a twist for the end of its reasons: they ruled that Monsanto should not be entitled to any monetary award.

As is typical in patent infringement actions, Monsanto claimed an award of either its damages or the defendants’ profits resulting from the infringement. At trial, Monsanto elected an accounting of the defendants’ profits.

The majority ruled that, since Schmeiser had not sprayed Roundup on the crop in issue, he had not received any financial advantage as a result of the use of the invention. His crop was no more valuable than if he had used non-patented canola, and any profit the defendants made arose from qualities other than resistance to Roundup.

Conclusion
The Monsanto decision is helpful to those in the biotech industry for a number of reasons. First, it confirms that genes and cells can be patented. In fact, all the judges agreed on this point. Second, this decision confirms that patent rights in a gene or cell extend to plants incorporating such a gene or cell. The Court also discussed under what conditions an innocent party could avoid liability for patent infringement. Specifically, the majority of the Court held that possession of an invention is not infringement where it can be shown that the possessor did not use, or intend to use, the invention. This discussion is in line with the private and experimental use non-infringement defences, and may be of interest to those in a research setting.

George R. Locke and Judith Robinson are partners in the Intellectual Property Group of Ogilvy Renault in the firm’s Montreal, Que. office. Robinson is also co-chair of Ogilvy Renault’s Life Sciences Team.