Supreme Court Restores Status Quo in Monsanto Patent Dispute: Monsanto Technology LLC vs. Nuziveedu Seeds Ltd. (2019)

Date of the Judgment: January 08, 2019

Citation: (2019) INSC 12

Judges: Rohinton Fali Nariman, J., Navin Sinha, J.

Can a patent for a man-made DNA construct extend to the plant that contains it? The Supreme Court of India recently addressed this complex question in a dispute between Monsanto Technology LLC and Nuziveedu Seeds Ltd. The core issue revolves around whether a patent on a specific DNA sequence (NAS) gives the patent holder rights over the plant that incorporates this sequence, particularly when the plant is developed through conventional breeding methods. This case highlights the intersection of patent law and plant variety protection, with significant implications for the agricultural sector. The judgment was delivered by a two-judge bench comprising Justice Rohinton Fali Nariman and Justice Navin Sinha, with the majority opinion authored by Justice Navin Sinha.

Case Background

The dispute began with a sub-license agreement dated February 21, 2004, between Monsanto Technology LLC (plaintiffs) and Nuziveedu Seeds Ltd. (defendants). This agreement allowed the defendants to develop genetically modified hybrid cotton seeds using the plaintiffs’ patented technology, specifically the “BOLGARD” and “BOLGARD II” brand cotton technology. The agreement stipulated that the defendants would pay a license fee/trait value to the plaintiffs for using their patented technology. The initial agreement was for ten years, and it was later extended. However, disputes arose regarding the payment of the license fee/trait value due to the introduction of a price control regime by the State. Consequently, the plaintiffs terminated the agreement on November 14, 2015.

Following the termination, the plaintiffs filed a civil suit seeking a permanent injunction to restrain the defendants from using their trademark and patented technology. The defendants, in their written statement, argued that their rights were protected under the Protection of Plant Varieties and Farmers’ Rights Act, 2001 (PPVFR Act). They also contended that the plaintiffs’ patent was invalid under Section 3(j) of the Patents Act, 1970, as it related to plants and seeds containing DNA sequences. The defendants also filed a counter-claim seeking revocation of the patent.

Timeline:

Course of Proceedings

The Single Judge, on March 28, 2017, while considering the plaintiffs’ application for an injunction, observed that the issues required formal proof and expert opinion, especially in complex patent matters. The court held that the parties should remain bound by their obligations under the sub-license agreement during the pendency of the suit, and that the license fee/trait value payable by the defendant would be governed by the laws in force. The Single Judge only issued notice on the counter claim. The Single Judge did not consider the counter claim.

Aggrieved by the order of the Single Judge, both the plaintiffs and the defendants filed appeals. The Division Bench dismissed the plaintiffs’ appeal, upholding the defendants’ contention that the patent was excluded under Section 3(j) of the Patents Act, 1970. The Division Bench concluded that the plaintiffs were at liberty to claim registration under the PPVFR Act. The Division Bench allowed the counter claim of the defendants. However, the suit was permitted to continue with regard to the claim for damages and other reliefs. The defendants were required to continue with their obligations under the sub-license agreement, including the payment of license fee/trait value as per law.

Legal Framework

The case primarily revolves around the interpretation of the following legal provisions:

• Section 3(j) of the Patents Act, 1970: This section excludes from patentability “plants and animals in whole or any part thereof other than micro-organisms but including seeds, varieties and species and essentially biological processes for production or propagation of plants and animals.”
• Section 64 of the Patents Act, 1970: This section provides for the revocation of a patent based on a counter claim in a suit.
• The Protection of Plant Varieties and Farmers’ Rights Act, 2001 (PPVFR Act): This Act provides for the protection of plant varieties and the rights of farmers.
• Section 48 of the Patents Act, 1970: This section defines the rights granted to a patentee.

The core legal question is whether the plaintiffs’ patent, which is on a man-made DNA construct (NAS), falls under the exclusion of Section 3(j) of the Patents Act, 1970, especially when this NAS is inserted into a plant to confer insect tolerance. The defendants argued that the patent was essentially for a plant or part of a plant, or an essentially biological process, and thus not patentable under the Patents Act, 1970. They contended that the plaintiffs’ invention should be protected under the PPVFR Act instead.

Arguments

Plaintiffs’ Arguments:

• The plaintiffs argued that their suit was for an injunction to restrain infringement of a valid patent. The issue of patentability was not the primary concern of the suit.
• The counter claim for revocation of patent was not adjudicated by the Single Judge.
• They contended that the issue of patent exclusion under Section 3(j) of the Patents Act, 1970, was a mixed question of law and fact requiring formal proof and expert evidence.
• The plaintiffs stated that the DNA construct (NAS) was a man-made chemical composition created in a laboratory, not a living organism. It did not exist in nature and was not part of a plant.
• The plaintiffs argued that the NAS, upon insertion into a plant, confers insect tolerance, and this process involves significant human intervention.
• The plaintiffs clarified that their patent was for the NAS and its use in a plant cell, not for the plant itself.
• The plaintiffs submitted that the NAS gene, once inserted into a plant, was removable and did not become part of the plant genome, retaining its patentable characteristics.
• The plaintiffs argued that a chemical/gene/DNA construct is not a plant variety and not eligible for protection under the PPVFR Act.
• The plaintiffs fairly admitted that they are bound by the statutory price regime for license fee/trait value.

Defendants’ Arguments:

• The defendants argued that no patent rights could be exercised with respect to genetically modified cotton planting seeds developed through conventional breeding methods.
• They contended that the plaintiffs’ claim was essentially that of a “breeder” and should be registered under the PPVFR Act, with benefit sharing under Section 26.
• The defendants argued that the NAS, by the wording of claims 25-27, is a plant gene meant to be an inherent part of the plant at the sub-cellular level, and thus not patentable.
• The defendants claimed that the NAS gene, once inserted into the plant, becomes an inseparable part of the plant through an irreversible biological process.
• The defendants argued that the plaintiffs did not bring the NAS in a vial but imported plant seeds containing it.
• The defendants argued that Indian seed companies cross-bred the plaintiffs’ plants with their proprietary varieties, not using the NAS in isolation or the patented method of insertion.
• The defendants argued that there is no inventive step in the plaintiffs’ patent claim until the artificial NAS is inserted into a plant.
• The defendants argued that the patent of an artificial gene and the process for inserting it into the genome of a plant will not entitle the exercise of rights under Section 48 of the Patents Act, 1970 in respect of a plant that contains the artificial gene on which it has a patent.

Interveners’ Arguments:

• The interveners argued that the NAS is not “capable of industrial application” unless it becomes part of the plant cell.
• They argued that the Biodiversity Act necessitates prior permission from the National Bio Diversity Authority for the use of biological resources, which the plaintiffs did not obtain.
• They argued that the seeds are not patentable under Section 3(j) of the Patents Act, 1970.

Submissions by Parties:

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section. However, the following issues were central to the case:

1. Whether the Division Bench was right in considering the counter claim in a summary manner.
2. Whether the order of the Single Judge was justified.
3. Whether the plaintiffs’ patent on the NAS was valid and enforceable.
4. Whether the defendants had infringed the plaintiffs’ patent rights.
5. Whether the plaintiffs’ invention falls under the exclusion of Section 3(j) of the Patents Act, 1970.
6. Whether the PPVFR Act is the appropriate legislation for the protection of the plaintiffs’ invention.

Treatment of the Issue by the Court:

Authorities

The Supreme Court did not explicitly mention any cases or books that it relied upon for its decision. However, it considered the following legal provisions:

• Section 3(j) of the Patents Act, 1970: Exclusion of patentability for plants, animals, and essentially biological processes.
• Section 64 of the Patents Act, 1970: Revocation of patent based on a counter claim in a suit.
• The Protection of Plant Varieties and Farmers’ Rights Act, 2001 (PPVFR Act): Protection of plant varieties and rights of farmers.
• Section 48 of the Patents Act, 1970: Rights granted to a patentee.

Judgment

The Court did not explicitly cite any authorities but considered the provisions of the Patents Act, 1970 and the PPVFR Act, 2001. The Court’s reasoning was primarily based on procedural aspects and the need for a detailed trial with expert evidence rather than a summary disposal.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the procedural impropriety of the Division Bench’s summary disposal of the case. The Court emphasized that complex patent matters, such as the one at hand, require a thorough examination of evidence, including expert testimony, rather than a decision based solely on pleadings and documents. The Court was also influenced by the fact that the Single Judge had not adjudicated the counter claim and had only issued notice on it. The Court was also influenced by the fact that the defendants themselves had contended in their appeal that the issues were complicated requiring expert evidence to be considered in a full-fledged trial. The Court also noted that the issues raised were complicated requiring technological and expert evidence with regard to issues of chemical process, biochemical, biotechnical and micro-biological processes.

The Court’s reasoning was primarily based on the legal framework of civil procedure and the need for a fair trial, with a greater emphasis on the legal aspects of the case.

Logical Reasoning

Judgment

The Supreme Court set aside the order of the Division Bench and restored the order of the Single Judge dated March 28, 2017. The Court remanded the suit to the Single Judge for disposal in accordance with law. The Court emphasized that the issues involved were complex and required a full trial with expert evidence. The Court observed that the Division Bench ought not to have examined the counter claim itself usurping the jurisdiction of the Single Judge to decide unpatentability of the process claims in the summary manner done. The Court held that summary adjudication of a technically complex suit requiring expert evidence at the stage of injunction in the manner done, was certainly neither desirable or permissible in the law.

The Court observed that Section 64 of the Patents Act, 1970, presupposes a valid consideration of the claims in the suit and the counter claim in accordance with law and not summary adjudication sans evidence by abstract consideration based on text books only. The Court also observed that the Civil Procedure Code provides a detailed procedure with regard to the manner in which a suit, including a counter claim, has to be considered and adjudicated.

The Court observed that the Division Bench ought to have confined itself to examination of the validity of the order of injunction granted by the Single Judge only. However, the Court was not inclined to remand the matter for that purpose to the Division Bench as the Court was satisfied in the facts and circumstances of the case that the nature of the injunctive relief granted by the Single Judge was in order and merits no interference during the pendency of the suit.

The Court did not delve into the merits of the patent dispute, leaving all questions of facts and law open to be urged for consideration in appropriate proceedings. The Court highlighted that the suit involved complicated mixed questions of law and facts with regard to patentability and exclusion of patent, which could be examined in the suit on basis of evidence.

“The Division Bench therefore ought to have confined its adjudication to the question whether grant of injunction was justified or unjustified in the facts and circumstances of the case. The Division Bench ought not to have examined the counter claim itself usurping the jurisdiction of the Single Judge to decide unpatentability of the process claims 1-24 also in the summary manner done.”

“Summary adjudication of a technically complex suit requiring expert evidence also, at the stage of injunction in the manner done, was certainly neither desirable or permissible in the law.”

“The suit involved complicated mixed questions of law and facts with regard to patentability and exclusion of patent which could be examined in the suit on basis of evidence.”

There were no dissenting opinions in this case. The judgment was delivered by a two-judge bench comprising Justice Rohinton Fali Nariman and Justice Navin Sinha, with the majority opinion authored by Justice Navin Sinha.

Key Takeaways

• Complex patent disputes involving technical and scientific issues require a full trial with expert evidence.
• Courts should not summarily dispose of cases involving complicated mixed questions of law and fact, especially at the stage of interim injunction.
• The validity of a patent and its infringement should be determined after a thorough examination of evidence.
• The Supreme Court restored the order of the Single Judge, which means that the sub-license agreement between the parties remains in effect during the pendency of the suit, and the defendants are bound to pay the license fee/trait value as per law.
• The Supreme Court has not decided on the validity of the patent or the applicability of Section 3(j) of the Patents Act, 1970, leaving these issues open for consideration by the Single Judge.
• The Supreme Court’s decision emphasizes the importance of procedural fairness and the need for a comprehensive trial in complex cases.

Directions

The Supreme Court restored the order of the Single Judge dated March 28, 2017, and remanded the suit to the Single Judge for disposal in accordance with law. The Court expected the parties to cooperate and facilitate the learned Single Judge in early disposal of the suit.

Development of Law

The Supreme Court’s judgment does not introduce any new legal principles but reinforces the importance of procedural fairness and the need for a comprehensive trial in complex cases. The ratio decidendi of the case is that complex patent disputes involving technical and scientific issues require a full trial with expert evidence, and that courts should not summarily dispose of such cases, especially at the stage of interim injunction. The Court did not make any changes to the previous position of law.

Conclusion

The Supreme Court’s decision in Monsanto Technology LLC vs. Nuziveedu Seeds Ltd. sets aside the Division Bench’s order and restores the Single Judge’s order, emphasizing the need for a full trial with expert evidence in complex patent disputes. The Court did not make any findings on the validity of the patent or its infringement, leaving these issues to be decided by the Single Judge. The judgment underscores the importance of procedural fairness and the need for a thorough examination of evidence in cases involving complicated mixed questions of law and fact. The case has been remanded back to the Single Judge for a full trial.