Is there Any Local Protection in the Patent & Anti Monopoly Lawsuit between Monsanto and DuPont?

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Visit to St. Louis in the US, Part II

(By You Yunting) At the end of this past March, at the invitation of the US government, the author visited America with other Chinese legal experts with the goal of better understanding its IPR system. The third city in the visit was St. Louis, located in the middle of the United States. On March 26 2013, the day where the most-watched lawsuit in the bio-science industry, the lawsuit between Monsanto and DuPont, entered into a mediation agreement, and coincidently, the second day after that, namely on March 28, the author visited Monsanto’s legal department in St. Louis to better understand the facts involved in the case. The day after that, the author went to the Federal Court in the Eastern District, in St. Louis, Missouri, and exchanged opinions regarding the case with the judge hearing it. Considering the influence coming from that lawsuit would not be less than that produced by the lawsuit between Samsung and Apple in the tech industry, the author would like to introduce to the readers some of the facts presented to us by the judge. Also, we would like to remind our readers that the title of this essay covers only part of the content of this post; that being said, it shall not be taken as suited for a professional study.

In our discussion with Monsanto’s legal department, the senior officer of the company mentioned that they once confronted a rival infringing their IPR, but that it was later settled in mediation, the result of which being that the infringer is obliged to pay them an annual licensing fee, and in return, Monsanto would license them the genetic material. The author asked them: are you referring to DuPont, and if so, could you share with us some of the facts of the case? Possibly due to the circumstances surrounding the mediation by the two parties, the senior officer only introduced the case to us briefly: basically, Monsanto’s patented gene was licensed to DuPont, and pursuant to the licensing agreement, DuPont produced seeds using the genetic material. However, later on DuPont surpassed the scope of its license with Monsanto, and this amounted to a breach of contract or infringement of Monsanto’s IPR, if perceived from another angle. Therefore, Monsanto filed a lawsuit against them, and the court allowed the suit to be heard. At the end, DuPont agreed to a request for mediation, and they agreed to pay Monsanto a licensing fee totalling $ 1.75 billion during a 14-year period, and pursuant to this licensing agreement Monsanto would allow DuPont to use its patented IPR.

Based on what we could find, DuPont’s Pioneer seed unit entered into a patent license agreement with Monsanto in 2002, pursuant to which Monsanto would grant DuPont a license to use its Roundup Ready patent, and DuPont then guaranteed it would not stack the licensed genetic material with any other type of genetic material. Sometime later, Monsanto discovered its patented subject matter in the genetically modified beans developed by DuPont, and subsequently filed a lawsuit in court.

DuPont defended, alleging that although the genetically modified beans contained Monsanto’s patented genetic material, its beans were an improved product, and this fact should prevent the court from ruling in Monsanto’s favor, because such a decision would stifle innovation and uphold Monsanto’s monopoly on its exclusive technology. Armed with this line of defense, DuPont filed a lawsuit in the same court accusing Monsanto of abusing its monopoly powers to kill innovation.

On August 1, 2012, the Jury in the Federal Court in the Eastern District of Missouri brought the following decision: DuPont shall compensate Monsanto $US 1 billion for its intentional infringement of Monsanto’s IPR. Despite this finding, the court plans to hear the monopoly dispute filed by DuPont against Monsanto this coming October. Yet, as the parties involved have entered into mediation, the lawsuit will not be heard, and the previous ruling handed down by the court in regard to DuPont’s compensation to Monsanto will not be enforced either. As disclosed in the document submitted by DuPont to the U.S. S.E.C. (the “Security & Exchange Commission”), the mediation findings demand DuPont pay Monsanto a patent licensing fee totalling $US 1.75 billion before 2023, among which $US 326 million will be paid during 2014-2015, and $US 456 million for the two years following that, and during the period from 2018 to 2023, DuPont shall pay Monsanto no less than $US 950 million in total.

It is interesting that although the information regarding the mediation settlement amount of both parties can be checked on the Internet, the judge told the author when visiting the court that he also learned of the mediation settlement amount from the newspaper, and personally had no further understanding regarding the details of the facts surrounding the mediation. This practice is markedly different from that of China’s, where the parties involved present a mediation agreement to the court for its consideration. The idea is that since the mediation agreement had been submitted to the court for its consideration, the mediation agreement would be more legally binding on both parties, and in the event that one party to the agreement refused to fulfill its responsibilities, the court would step in to ensure justice. The judge receiving us for a discussion was very kind, and presented his tie as a gift to one of author’s associates. In a later visit, when we told a US lawyer that we spoke with that judge, our US counterparts expressed envy, for they apparently have rarely had such a chance to speak with that well-respected and honored judge.

Moreover, the judge also told us the basic circumstances surrounding the case: the case was heard for 17 days in total, and on each day, it started at 8:30 a.m. But after several days hearing the case, the jury only spent 45 minutes in making its final decision. As for the judge himself, in preparation for hearing the case he studied DNA, genetic order, and bio-chemical information. He stated, rather clearly, that without any knowledge in the related fields, it would be impossible for him to fairly hear the case.

When raising questions to the judge, the author asked: this case, as well as the lawsuit between Samsung and Apple, has gained the world’s attention. Furthermore, both cases share common features in that they are heard in a court where the plaintiff is domiciled. If the dispute were not heard in St. Louis, but in other cities Monsanto is not domiciled, what would the compensation be then? (This question is related to local protectionism)

The judge replied that more than one person has asked him the very same question, and in fact many U.S. companies have the same concern (it seems not only Chinese worry about local protectionism), but that the jury system acts as a balance to help resolve the issue where different results are found depending on the region in which the case is heard. As the judge of the case, he was very confident that no prejudice would affect the jury’s decision-making. As for the case itself, the evidence in the case was clear enough, and the facts involved in the case were easily investigated, and therefore the results of the hearing would not be vastly different among juries in different regions.

A joining visitor also asked questions regarding jurisdiction: generally, a case is heard in a court where the defendant is domiciled; why then was the case heard in a court located where the plaintiff is domiciled? The judge simply answered that issues regarding jurisdiction were already decided pursuant to a contractual agreement. Therefore, the case would be transferred to the current court even it was brought in another court. The judge also supplemented his answer by stating that the hearing of the patent dispute in the Eastern District Court was very quick, and that many patent disputes are brought in that court, and if a contract has no agreement concerning jurisdiction, the dispute could then be filed within the defendant’s jurisdiction.

In closing, the above record was taken by the author himself, and some of the content may be incomplete or inaccurate. We have decided to publish our notes in order to share them with our readers, and any opinions or corrections are warmly welcomed. Out of respect to the U.S. officials and authorities who were very generous and helpful in answering our questions, unless they agree prior, we will not publicize the names of any of the involved parties on the Internet; thank you for your understanding.

Lawyer Contacts

You Yunting86-21-52134918  youyunting@debund.com/yytbest@gmail.com

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