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Posted by: James Cartiglia & Nina Bergmar on Jul 1, 2013

Journal Issue Date: Jul 2013

Journal Name: July 2013 - Vol. 49, No. 7

Court Says Exhaustion Doctrine Applies to Imported Textbooks, But Not Genetically Modified Seeds

In two recent decisions, the Supreme Court addressed the doctrine of “exhaustion,” also known as the “first sale” doctrine, finding that self-replicating genetically-modified seeds do not trigger the doctrine, but imported books do. While the unanimous rejection of the first sale doctrine in Bowman v. Monsanto[1] signaled a victory for patent holders in agribusiness, Kirtsaeng v. John Wiley & Sons[2] limits the rights of copyright holders by embracing the rule of “international exhaustion.”

In layman’s terms, “exhaustion” means that, once a patent owner sells a patented device, article, etc., the buyer can do anything he/she wants with it, including re-selling it, without owing anything further to the patent owner. In other words, the patent owner’s rights are exhausted by the first sale. Similar reasoning applies to copyright exhaustion. However, nothing in the exhaustion doctrine permits copying of the protected article.

The Supreme Court first introduced the exhaustion doctrine in 1852, stating “when the machine passes to the hands of the purchaser, it is no longer within the limits of the monopoly. It passes outside of it, and is no longer under the protection of the act of Congress.”[3] At the heart of this now well-known axiom was a desire to strike a balance between the interests of individual patentees on one hand and society on the other;[4] while the patentee deserves to be rewarded for his invention, continued monopoly over a product would cause “inconvenience and annoyance to the public that … are too obvious to require illustration,” the court said.[5]

As it stands today, according to “exhaustion,” or the “first sale” doctrine, a patent or copyright owner’s rights are terminated upon the initial sale of the article.[6] Section 109 of the Copyright Act codifies the first-sale doctrine for copyrighted works, stating that “the owner of a particular copy or phonorecord lawfully made under this title … is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.”[7] Patent exhaustion, which remains a judicially created doctrine, similarly holds that “the initial authorized sale of a patented article terminates all patent rights to that item.”[8] The purchaser, or any subsequent owner, then possesses “the right to use [or] sell” the article as he sees fit.[9] The purpose of the doctrine remains to prevent patentees and copyright owners from “controlling postsale use of a patented item and extracting double recoveries from downstream purchasers for patent infringement.”[10] A patent or copyright holder is entitled to his reward for the initial sale of his work, but “once that purpose is realized the patent [or copyright] law affords no basis for restraining the use and enjoyment of the thing sold.”[11]

In Monsanto, the court addressed the scope of patent exhaustion in the context of self-replicating genetically modified seeds.[12] Monsanto Company (through a subsidiary) sells “Roundup”, a glyphosate-based herbicide. Monsanto is also the owner of a glyphosate herbicide-resistant “Roundup Ready” soybean seed. The Monsanto seeds have been genetically modified to withstand treatment with a glyphosate-based herbicide. This allows farmers to treat their fields with glyphosate-based herbicide to control weed growth without damaging their crop.[13] Monsanto holds two patents that cover different aspects of the seed technology.[14] In addition, Monsanto requires all purchasers of their seeds to sign a license agreement that prohibits growers from saving and replanting the “Roundup Ready” seeds.[15]

It is common practice in farming to sell excess seeds on the commodity market, where they are sold at significantly lower prices. The Monsanto license agreement does not prohibit farmers from selling their excess seeds on the commodity market since it would be difficult, if not impossible, to police such an agreement. As a result, a significant percentage of “commodity seeds” contain Monsanto’s glyphosate-resistant gene.[16]

Starting in 1999, Indiana farmer Vernon Bowman planted “Roundup Ready” seeds as his first-crop. For his late-season planting (“second-crop”), however, he purchased commodity seeds from a local grain elevator at a cheaper price, as he considered the second-crop to be a riskier planting.[17] Aware of the large percentage of commodity seeds containing the “Roundup Ready” gene, Bowman treated his field with glyphosate-based herbicide to determine which plants were glyphosate resistant.[18] After killing the soybean plants without the Monsanto trait, Bowman “harvested the resulting soybeans … and saved some of these harvested seeds to use in his late-season planting [the] next year.”[19] Through this process of planting commodity seeds and then harvesting the seeds demonstrating glyphosate resistance, Bowman was able to make “additional copies of Monsanto’s patented invention.”[20]

Monsanto filed a patent infringement action against Bowman, claiming that by replicating the seeds, Bowman was not merely using the article for which patent rights had been exhausted under the “first sale” doctrine; rather, he was making unauthorized copies of a patented product. Bowman raised patent exhaustion in defense, claiming “Monsanto could not control his use of the soybeans because they were the subject of a prior authorized sale (from local farmers to the grain elevator).”[21] The gist of Bowman’s argument is twofold: First, because the seeds he purchased are meant to be planted, his conduct conforms to normal use.[22] Second, since “soybeans naturally ‘self-replicate’ or ‘sprout’ unless stored in a controlled manner, ‘it was the planted soybean, not Bowman himself, that made replicas of Monsanto’s patented invention.”[23]

The court rejected Bowman’s “blame-the-bean” defense, agreeing with Monsanto that the replication of the seed constituted copying of a patented product — not mere use thereof.[24] Bowman, the court stressed, was hardly a passive observer of the bean’s self-reproduction; rather, he “devised and executed a novel way to harvest crops from Roundup Ready seeds without paying the usual premium.”[25] The court ruled that patent exhaustion “does not permit a farmer to reproduce patented seeds through planting and harvesting without the patent holder’s permission.”[26]

Considering the ease with which seeds may be replicated, the Monsanto ruling signals a significant victory for patent holders involved in agribusiness. Had the court decided differently, “the potential consequences could be dire for the biotechnology industry, since so much as a single sale of a self-replicating product could snowball into an unregulated, uncompensated secondary market.”[27] For farmers, however, the decision came as a blow. Under a strict reading of the case, a farmer could commit patent infringement any time he or she plants a soybean seed, as the “Roundup Ready” crops can easily cross-pollinate with unmodified crops.[28] Yet such a strict reading is unlikely. Even Monsanto has announced that it does not intend to sue farmers who unintentionally grow “Roundup Ready” crops: “It has never been, nor will it be Monsanto policy to exercise its patent rights where trace amounts of our patented seed or traits are present in farmer’s fields as a result of inadvertent means.”[29]

The ruling may have more far-reaching consequences for inventors of other self-replicating technologies. If Monsanto is read broadly, the integrity of the “first sale” doctrine may be significantly eroded, as many products can be replicated as part of their use. Importantly, however, the court tried to frame its decision narrowly, intentionally leaving open the question of what constitutes “copying” in different contexts. Justice Kagan writes, “Our holding today is limited — addressing the situation before us, rather than every one involving a self-replicating product. We recognize that such inventions are becoming more prevalent, complex, and diverse.”[30] The court’s prediction that “in another case, the article’s self-replication might occur outside the purchaser’s control” suggests that future cases will center largely on the level of the purchaser’s involvement in the replication process.[31]

In Kirtsaeng, the court looked at exhaustion from a different angle and addressed the geographic scope of the first-sale doctrine in the copyright context. Supap Kirtsaeng is a Thai national who moved to the United States in 1997 to study mathematics at Cornell University. After discovering that his textbooks could be purchased at a considerably lower price in Thailand, Kirtsaeng asked his family and friends to buy copies of the textbooks at Thai book shops and ship them to the United States. Kirtsaeng then resold the books to his classmates, reimbursed his family and friends, and kept the difference.[32]

In 2008, John Wiley & Sons Inc. (“Wiley”) brought suit against Kirtsaeng for copyright infringement, claiming Kirtsaeng’s unauthorized importation and later resale of the books amounted to an infringement of Wiley’s exclusive right to distribute the textbooks in the United States.[33] Kirtsaeng responded by arguing that Wiley’s rights to the copyrighted works were exhausted upon the lawful initial sale of the books in Thailand.[34] The central question before the court was whether the first-sale doctrine applies to goods made abroad with the copyright owner’s permission.[35] More specifically, whether the words “lawfully made under this title” geographically restrict the scope of the Copyright Act’s “first sale” doctrine.[36]

The Second Circuit, the Ninth Circuit, Wiley, and the Solicitor General (as amicus) interpreted the words “lawfully made under this title” as imposing a geographic limitation.[37] According to Wiley, those five words limit the “first sale” doctrine “to copies made in conformance with the [United States] Copyright Act where the Copyright Act is applicable.”[38] Hence the doctrine does not, in Wiley’s view, apply to copies made outside the United States.[39] Kirtsaeng, however, reads the words “lawfully made under this title” as imposing a non-geographic limitation: to trigger the first sale doctrine, the particular product need only be in compliance with the U.S. Copyright Act; the Act need not in fact be applicable in the country of production.[40]

In rejecting the arguments of the lower courts, the Supreme Court found that “§ 109’s language, its context, and the common-law history of the ‘first sale’ doctrine, taken together, favor a non-geographical interpretation” of the words “lawfully made under this title.”[41] Presuming that the words “lawfully made under this title” carry the same meaning when they appear in different but related sections, the court listed a parade of supposed “horribles” resulting from a geographical interpretation: “one who buys a copyrighted work of art, a poster, or even a bumper sticker, in Canada, in Europe, in Asia, could not display it in America without the copyright owner’s further authorization”; “an arcade owner could not (‘without the authority of the copyright owner’) perform or display arcade games (whether new or used) originally made in Japan”; and “the teacher could not (without further authorization) use a copy of a film during class if the copy was lawfully made in Canada, Mexico, Europe, Africa, or Asia.”[42]

As demonstrated by the majority’s “horribles,” the court’s adoption of the international exhaustion rule serves practical purposes in accommodating an increasingly globalized world. Yet, as pointed out by the dissent, it is unclear whether a more limited scope of the first sale doctrine would in fact produce such results. Indeed, Justice Ginsburg goes as far as to call these scenarios “imaginary.”[43]

Importantly, the Kirtsaeng decision signals a departure from the national-exhaustion framework repeatedly adopted by the United States in international trade negotiations. It “places the United States at the vanguard of the movement for international exhaustion of copyrights — a movement the United States has steadfastly resisted on the world stage.”[44] For American copyright holders, Kirtsaeng makes it exceedingly difficult to divide up the global market to accommodate significant differences in supply and demand. Justice Ginsburg laments, “Copyright owners have a financial incentive to charge different prices for copies of their works in different geographic regions. Their ability to engage in such price discrimination is undermined if arbitrageurs are permitted to import copies from low-price regions and sell them in high-price regions.”[45] By allowing for importation of copyrighted grey market goods, Kirtsaeng significantly limits American copyright owners’ rights domestically and abroad.

While Kirtsaeng and Monsanto highlight the parallel expansion and contraction of the first sale doctrine in copyright and patent law, what remains unclear is the interaction of the two decisions in future cases. Will an international exhaustion regime be extended to patented articles? And will copyrighted works capable of replication, such as software, gain the additional protections provided by Monsanto? Such questions are left for the lower courts to resolve.


  1. Bowman v. Monsanto Co., No. 11-796, 2013 WL 1942397 (U.S. May 13, 2013).
  2. Kirtsaeng v. John Wiley & Sons Inc., 133 S. Ct. 1351 (2013).
  3. Bloomer v. McQuewan, 55 U.S. 539, 549 (1852).
  4. See Kendall v. Winsor, 62 U.S. 322, 329 (1858) (“Whilst the remuneration of genius and useful ingenuity is a duty incumbent upon the public, the rights and welfare of the community must be fairly dealt with and effectually guarded.”).
  5. Keeler v. Standard Folding Bed Co., 157 U.S. 659, 667 (1895).
  6. See 17 U.S.C.A. § 109 (West 2013); Quanta Computer Inc. v. LG Electronics Inc., 553 U.S. 617, 625 (2008).
  7. 17 U.S.C.A. § 109(a).
  8. Quanta, 553 U.S. at 625.
  9. United States v. Univis Lens Co., 316 U.S. 241, 249-50 (1942).
  10. Yuichi Watanabe, The Doctrine of Patent Exhaustion: The Impact of Quanta Computer Inc. v. LG Elecs. Inc., 14 Va. J.L. & Tech. 273, 273 (2009).
  11. Id. at 251; see Univis Lens Co., 316 U.S. at 251 (“[T]he purpose of the patent law is fulfilled ... when the patentee has received his reward....”).
  12. Monsanto, No. 11-796, 2013 WL 1942397, at *1.
  13. Id. at *2.
  14. Id.
  15. Id.
  16. Id. at *3.
  17. Monsanto Co. v. Bowman, 657 F.3d 1341, 1345 (Fed. Cir. 2011) cert. granted, 133 S. Ct. 420 (U.S. 2012) and aff’d, 133 S. Ct. 1761 (U.S. 2013).
  18. Id. at 1346.
  19. Monsanto, No. 11-796, 2013 WL 1942397, at *1.
  20. Id. at *2.
  21. Id. at *3.
  22. Id. at *5.
  23. Id. at *6.
  24. Id.
  25. Id.
  26. Id. at *1.
  27. Ryan Levy, “Patent Law and Edible Self-Replicating Technologies,” 12 Nashville Bar J. 10, 18 (2012).
  28. Id.
  29. Monsanto, “Monsanto’s Commitment: Farmers and Patents,” (2013)
  30. Monsanto, No. 11-796, 2013 WL 1942397, at *6.
  31. Id.
  32. Kirtsaeng, 133 S. Ct. at 1356.
  33. Id. at 1357 (citing 17 U.S.C. §§ 106(3) (2006 ed.), 602(a) (2006 ed. Supp. V)).
  34. Id.
  35. Id.
  36. Id.
  37. Id.
  38. Id. at 1358 (emphasis in original).
  39. Id.
  40. Id.
  41. Id.
  42. Id. at 1362.
  43. Id.
  44. Id. at 1373 (Ginsburg, J., dissenting).
  45. Id. at 1374.

JIM CARTIGLIA is a patent attorney specializing in life sciences and chemical engineering, and is a shareholder at Waddey & Patterson PC in Nashville. He has a degree in biology from the State University of New York at Stony Brook, and a law degree from St. John’s University School of Law. He has filed and prosecuted more than 1,000 patent applications worldwide in a variety of disciplines, and has appeared before the U.S., European, Japanese and Korean Patent Offices, as well as having represented clients in litigation, both in the U.S. and in Europe. Cartiglia is a member of the Board of Governors of the Tennessee Bar Association, and holds a seat on the TBA House of Delegates.

NINA MAJA BERGMAR will be starting her third year at Vanderbilt Law School this fall and is a 2011 graduate of Dartmouth College with a degree in government and a degree in women’s and gender studies.