Monsanto Canada Inc. v. Schmeiser
copyright 2010 Donald M. Cameron, Cameron MacKendrick LLP
1 This case concerns a large scale, commercial farming operation that grew canola containing a patented cell and gene without obtaining licence or permission. The main issue is whether it thereby breached the Patent Act, R.S.C. 1985, c. P-4. We believe that it did.
4 Percy Schmeiser has farmed in Saskatchewan for more than 50 years. In 1996 he assigned his farming business to a corporation in which he and his wife are the sole shareholders and directors. He and his corporation grow wheat, peas, and a large amount of canola.
5 In the 1990s, many farmers, including five farmers in Mr. Schmeiser’s area, switched to Roundup Ready Canola, a canola variety containing genetically modified genes and cells that have been patented by Monsanto. Canola containing the patented genes and cells is resistant to a herbicide, Roundup, which kills all other plants, making it easier to control weeds. This eliminates the need for tillage and other herbicides. It also avoids seeding delays to accommodate early weed spraying. Monsanto licenses farmers to use Roundup Ready Canola, at a cost of $15 per acre.
6 Schmeiser never purchased Roundup Ready Canola nor did he obtain a licence to plant it. Yet, in 1998, tests revealed that 95 to 98 percent of his 1,000 acres of canola crop was made up of Roundup Ready plants. The origin of the plants is unclear. They may have been derived from Roundup Ready seed that blew onto or near Schmeiser’s land, and was then collected from plants that survived after Schmeiser sprayed Roundup herbicide around the power poles and in the ditches along the roadway bordering four of his fields. The fact that these plants survived the spraying indicated that they contained the patented gene and cell. The trial judge found that “none of the suggested sources [proposed by Schmeiser] could reasonably explain the concentration or extent of Roundup Ready canola of a commercial quality” ultimately present in Schmeiser’s crop ((2001), 202 F.T.R. 78, at para. 118).
7. The issues on this appeal are whether Schmeiser infringed Monsanto's patent, and if so, what remedies Monsanto may claim.
A. The Patent: Its Scope and Validity
8 Canola is a valuable crop grown in Canada and used to make edible oil and animal feed. The respondents are the licensee and owner, respectively, of Canadian Patent No. 1,313,830. This patent, titled “Glyphosate-Resistant Plants”, was issued on February 23, 1993, and expires on February 23, 2010. It discloses the invention of genetically engineered genes and cells containing those genes which, when inserted into plants (in this case canola), dramatically increase their tolerance to herbicides containing glyphosate. Ordinarily, glyphosate inhibits an enzyme essential for plant survival. Most plants sprayed with a glyphosate herbicide do not survive, but a canola plant grown from seed containing the modified gene will survive.
9 Since 1996, canola seed containing the patented gene and cell has been produced in Canada under licence from the respondents; this seed has been marketed to farmers under the trade name “Roundup Ready Canola”, reflecting its resistance to the glyphosate herbicide “Roundup” manufactured by the respondents. Roundup can be sprayed after the canola plants have emerged, killing all plants except the canola. This eliminates the need for tillage and other herbicides. It also avoids delaying seeding to accommodate early weed spraying.
15 The scope of the patent is largely uncontroversial.
16 The trial judge found that “it is the gene and the process for its insertion . . . and the cell derived from that process” that comprise the invention (para. 88 (emphasis added); see also para. 26). The Federal Court of Appeal likewise endorsed the claims as being for “genes and cells which are glyphosate-resistant” ( 2 F.C. 165, at para. 40).
17 Everyone agrees that Monsanto did not claim protection for the genetically modified plant itself, but rather for the genes and the modified cells that make up the plant. Unlike our colleague, Arbour J., we do not believe this fact requires reading a proviso into the claims that would provide patent protection to the genes and cells only when in an isolated laboratory form.
19 A purposive construction therefore recognizes that the invention will be practised in plants regenerated from the patented cells, whether the plants are located inside or outside a laboratory. It is difficult to imagine a more likely or more evident purpose for patenting "a method of genetically transforming plant cells which causes the cells and plants regenerated therefrom to become resistant to glyphosate" (trial judgment, para. 20 (emphasis added)).
20 More particularly, the patented claims are for:
1. A chimeric gene: this is a gene that does not exist in nature and is constructed from different species.
2. An expression vector: this is a DNA molecule into which another DNA segment has been integrated so as to be useful as a research tool.
3. A plant transformation vector: used to permanently insert a chimeric gene into a plant’s own DNA.
4. Various species of plant cells into which the chimeric gene has been inserted.
5. A method of regenerating a glyphosate-resistant plant. Once the cell is stimulated to grow into a plant, all of the differentiated cells in the plant will contain the chimeric gene, which will be passed on to offspring of the plant.
[The claims protect only a gene and a cell but restrict the use of a plant and a seed.]
21 The appellant Schmeiser argues that the subject matter claimed in the patent is unpatentable. While acknowledging that Monsanto claims protection only over a gene and a cell, Schmeiser contends that the result of extending such protection is to restrict use of a plant and a seed. This result, the argument goes, ought to render the subject matter unpatentable, following the reasoning of the majority of this Court in Harvard College v. Canada (Commissioner of Patents),  4 S.C.R. 45, 2002 SCC 76 (“Harvard Mouse”). In that case, plants and seeds were found to be unpatentable “higher life forms”.
22 This case is different from Harvard Mouse, where the patent refused was for a mammal. The Patent Commissioner, moreover, had allowed other claims, which were not at issue before the Court in that case, notably a plasmid and a somatic cell culture. The claims at issue in this case, for a gene and a cell, are somewhat analogous, suggesting that to find a gene and a cell to be patentable is in fact consistent with both the majority and the minority holdings in Harvard Mouse.
23 Further, all members of the Court in Harvard Mouse noted in obiter that a fertilized, genetically altered oncomouse egg would be patentable subject matter, regardless of its ultimate anticipated development into a mouse (at para. 3, per Binnie J. for the minority; at para. 162, per Bastarache J. for the majority).
24 Whether or not patent protection for the gene and the cell extends to activities involving the plant is not relevant to the patent’s validity. It relates only to the factual circumstances in which infringement will be found to have taken place, as we shall explain below. Monsanto’s patent has already been issued, and the onus is thus on Schmeiser to show that the Commissioner erred in allowing the patent: Apotex Inc. v. Wellcome Foundation Ltd.,  4 S.C.R. 153, 2002 SCC 77, at paras. 42-44. He has failed to discharge that onus. We therefore conclude that the patent is valid.
C. Did Schmeiser "Use" the Patented Gene or Cell, Thus Infringing the Patent?
28. The central question on this appeal is whether Schmeiser, by collecting, saving and planting seeds containing Monsanto's patented gene and cell, "used" that gene and cell.
31. Determining the meaning of "use" under s. 42 is essentially a matter of statutory construction. The starting point is the plain meaning of the word, in this case "use" or "exploiter". The Concise Oxford Dictionary defines "use" as "cause to act or serve for a purpose; bring into service; avail oneself of": The Concise Oxford Dictionary of Current English (9th ed. 1995), at p. 1545. This denotes utilization for a purpose. The French word "exploiter" is even clearer. It denotes utilization with a view to production or advantage: "tirer parti de (une chose), en vue d'une production ou dans un but lucratif. [. . .] Utiliser d'une manière avantageuse": Le Nouveau Petit Robert (2003), at p. 1004.
36 A purposive approach is complemented by a contextual examination of s. 42 of the Patent Act, which shows that the patentee's monopoly generally protects its business interests. Professor D. Vaver, in Intellectual Property Law: Copyright, Patents, Trade-marks (1997), suggests that the common thread among "`making, constructing and using the invention and selling it to others to be used'. . . is that the activity is usually for commercial purposes -- to make a profit or to further the actor's business interests" (p. 151). This is particularly consistent with the French version of s. 42, which uses the word "exploiter".
37. As a practical matter, inventors are normally deprived of the fruits of their invention and the full enjoyment of their monopoly when another person, without licence or permission, uses the invention to further a business interest. Where the defendant's impugned activities furthered its own commercial interests, we should therefore be particularly alert to the possibility that the defendant has committed an infringing use.
38. With respect for the contrary view of Arbour J., this does not require inventors to describe in their specifications a commercial advantage or utility for their inventions. Even in the absence of commercial exploitation, the patent holder is entitled to protection. However, a defendant's commercial activities involving the patented object will be particularly likely to constitute an infringing use. This is so because if there is a commercial benefit to be derived from the invention, a contextual analysis of s. 42 indicates that it belongs to the patent holder. The contextual analysis of the section thus complements -- and confirms -- the conclusion drawn from its purposive analysis. It is the reverse side of the same coin.
42. By analogy, then, the law holds that a defendant infringes a patent when the defendant manufactures, seeks to use, or uses a patented part that is contained within something that is not patented, provided the patented part is significant or important. In the case at bar, the patented genes and cells are not merely a "part" of the plant; rather, the patented genes are present throughout the genetically modified plant and the patented cells compose its entire physical structure. In that sense, the cells are somewhat analogous to Lego blocks: 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.
45 In determining whether the defendant "used" the patented invention, one compares the object of the patent with what the defendant did and asks whether the defendant's actions involved that object. In Betts v. Neilson (1868), L.R. 3 Ch. App. 429 (aff'd (1871), L.R. 5 H.L. 1), the object of the patent was to preserve the contents of bottles in transit. Though the bottles were merely shipped unopened through England, the defendant was held to have used the invention in England because, during its passage through that country, the beer was protected by the invention. Lord Chelmsford said, at p. 439:
“It is the employment of the machine or the article for the purpose for which it was designed which constitutes its active use; and whether the capsules were intended for ornament, or for protection of the contents of the bottles upon which they were placed, the whole time they were in England they may be correctly said to be in active use for the very objects for which they were placed upon the bottles by the vendors.”
[Possession of the invention can be “use”]
80 Provided the patented invention is a significant aspect of the defendant's activity, the defendant will be held to have "used" the invention and violated the patent. If Mr. Schmeiser's activities with Roundup Ready Canola plants amounted to use interfering with Monsanto's full enjoyment of their monopoly on the gene and cell, those activities infringed the patent. Infringement does not require use of the gene or cell in isolation.
81. Second, Mr. Schmeiser argued at trial that he should not be held to have "used" Monsanto's invention because he never took commercial advantage of the special utility that invention offered -- resistance to Roundup herbicide. He testified that he never used Roundup herbicide as an aid to cultivation. (That he used it in 1996 in his initial gathering of the Roundup Ready seed is clear.)
84. Their argument fails to account for the stand-by or insurance utility of the properties of the patented genes and cells. Whether or not a farmer sprays with Roundup herbicide, cultivating canola containing the patented genes and cells provides stand-by utility. The farmer benefits from that advantage from the outset: if there is reason to spray in the future, the farmer may proceed to do so.
86. Further, the appellants did not provide sufficient evidence to rebut the presumption of use. It may well be that defendant farmers could rebut the presumption by showing that they never intended to cultivate plants containing the patented genes and cells. They might perhaps prove that the continued presence of the patented gene on their land was accidental and unwelcome, for example, by showing that they acted quickly to arrange for its removal, and that its concentration was consistent with that to be expected from unsolicited "blow-by" canola. Knowledge of infringement is never a necessary component of infringement. However, a defendant's conduct on becoming aware of the presence of the patented invention may assist in rebutting the presumption of use arising from possession.
87. However, the appellants in this case actively cultivated canola containing the patented invention as part of their business operations. Mr. Schmeiser complained that the original plants came onto his land without his intervention. However, he did not at all explain why he sprayed Roundup to isolate the Roundup Ready plants he found on his land; why he then harvested the plants and segregated the seeds, saved them, and kept them for seed; why he next planted them; and why, through this husbandry, he ended up with 1030 acres of Roundup Ready Canola which would otherwise have cost him $15,000. In these circumstances, the presumption of use flowing from possession stands unrebutted.
92. The issue is not the perhaps adventitious arrival of Roundup Ready on Mr. Schmeiser's land in 1998. What is at stake in this case is sowing and cultivation, which necessarily involves deliberate and careful activity on the part of the farmer. The appellants suggest that when a farmer such as Mr. Schmeiser actively cultivates a crop with particular properties through activities such as testing, isolating, treating, and planting the desired seed and tending the crops until harvest, the result is a crop which has merely "grown itself". Such a suggestion denies the realities of modern agriculture.
101 It is settled law that the inventor is only entitled to that portion of the infringer's profit which is causally attributable to the invention: Lubrizol Corp. v. Imperial Oil Ltd.,  2 F.C. 3 (C.A.); Celanese International Corp. v. BP Chemicals Ltd.,  R.P.C. 203 (Pat. Ct.), at para. 37. This is consistent with the general law on awarding non-punitive remedies: "[I]t is essential that the losses made good are only those which, on a common sense view of causation, were caused by the breach" (Canson Enterprises Ltd. v. Boughton & Co.,  3 S.C.R. 534, at p. 556, per McLachlin J. (as she then was), quoted with approval by Binnie J. for the Court in Cadbury Schweppes Inc. v. FBI Foods Ltd.,  1 S.C.R. 142, at para. 93).
102 The preferred means of calculating an accounting of profits is what has been termed the value-based or "differential profit" approach, where profits are allocated according to the value contributed to the defendant's wares by the patent: N. Siebrasse, "A Remedial Benefit-Based Approach to the Innocent-User Problem in the Patenting of Higher Life Forms" (2004), 20 C.I.P.R. 79. A comparison is to be made between the defendant's profit attributable to the invention and his profit had he used the best non-infringing option: Collette v. Lasnier (1886), 13 S.C.R. 563, at p. 576, also referred to with approval in Colonial Fastener Co. v. Lightning Fastener Co.,  S.C.R. 36.
103. The difficulty with the trial judge's award is that it does not identify any causal connection between the profits the appellants were found to have earned through growing Roundup Ready Canola and the invention. On the facts found, the appellants made no profits as a result of the invention.
104. Their profits were precisely what they would have been had they planted and harvested ordinary canola. They sold the Roundup Ready Canola they grew in 1998 for feed, and thus obtained no premium for the fact that it was Roundup Ready Canola. Nor did they gain any agricultural advantage from the herbicide resistant nature of the canola, since no finding was made that they sprayed with Roundup herbicide to reduce weeds. The appellants' profits arose solely from qualities of their crop that cannot be attributed to the invention.
105. On this evidence, the appellants earned no profit from the invention and Monsanto is entitled to nothing on their claim of account.
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