Post-Sale Restrictions on Patented Seeds: Which Law Governs?

Abstract

Since the agrichemical industry entered the business of creating genetically engineered seeds, farming in America has never been the same. Patents on these GE seeds have been reinforced with so-called “license” agreements that accompany their sale to farmers. Failure to abide the terms of these agreements can land a farmer in federal district court defending a patent infringement lawsuit. Several states have passed legislation relating to the terms of these contracts (known in the industry as “Technology Use Agreements” or colloquially as “bag-tag” agreements). Are these state laws appropriate contract regulation or are the agreements, as the industry claims, non-exclusive patent licenses governed by federal patent law? In order to resolve that question, one must first determine whether the transfer of the seeds to the farmer exhausts the patent-holder’s rights in the technology accompanying the seeds. Generally, when someone purchases a patented good she is free to use it, take it apart and rebuild it, and even re-sell it to another without infringing the patent through the “first sale” or exhaustion doctrine. A recent Supreme Court case analyzing the patent exhaustion doctrine calls into question the seed industry’s characterization of the transaction as a mere license to farmers as opposed to a sale of goods. This article explores that issue and whether or not state laws relating to bag-tag agreements are preempted by federal patent law.

Keywords: patents, genetically engineered, genetically modified, preemption, licensing, exhaustion