Monsanto Co, facing antitrust probes into its genetically modified seeds, may benefit from previous court rulings in which intellectual property rights trumped competition concerns, antitrust lawyers say.
The Department of Justice and seven state attorneys general are investigating whether the world's largest seed company is using gene licenses to keep competing technologies off the market. At issue is how the St Louis-based company sells and licenses its patented trait that allows farmers to kill weeds with Roundup herbicide while leaving crops unharmed. The company's Roundup Ready gene was in 93 per cent of US soybeans last year.
"Justice is clearly trying every way it can to see whether Monsanto is exceeding its rights under the patent," said James Weiss, a Washington-based attorney at K&L Gates LLP who helped defend Microsoft Corp against a federal antitrust probe. "At the end of the day, they may not be able to do much with it because of the scope of those patents. In almost all the cases, the courts come out on the side of intellectual property."
Yet Monsanto's seeds are so ubiquitous they have become like AT&T's telephone lines before the company's 1984 breakup or Microsoft Corp's Windows operating system in the 1990s, said James P Denvir, an attorney who represents rival seedmaker DuPont Co and led the government's AT&T case.
"Both cases involve what I think of as a classic platform monopoly," Denvir said. "It's a facility that competitors need access to, to compete against the monopolist."
Monsanto and DuPont, which are suing each other over a biotech seed license, both hired former Justice Department lawyers who have handled high-profile cases.
'Revolutionising the marketplace'
Monsanto's attorney, Dan Webb, defended Microsoft in 2002 against the government antitrust claims. A former US Attorney in Chicago, he also prosecuted Admiral John Poindexter in the Iran- Contra affair.
Webb credits Monsanto with "revolutionising the agriculture marketplace" and said antitrust claims such as those in DuPont's suit aren't an uncommon response to patent infringement cases such as Monsanto's.
"The perception among farmers is that DuPont's complaints about exclusivity are without merit," said Webb, a Chicago-based Winston & Strawn LLP partner.
Denvir, who represents DuPont, said farmers are among the victims.
"Clearly, we are too," he said. "The bigger harm, the more important harm, is to farmers in denying them the best seeds they can get at the lowest possible prices."
Legal monopoly
While patents provide some protection from antitrust claims, giving a company a legal monopoly for a specified time, patent rights can be abused, DuPont lawyers and others said.
"The question becomes whether or not somebody in that position has engaged in some bad acts that either got it in that position or are designed to maintain that position or to extend that position to other markets," said Charles "Rick" Rule, a lawyer at Cadwalader Wickersham & Taft LLP who ran the Justice Department's antitrust unit under President Ronald Reagan.
Christine Varney, who heads the antitrust division in President Barack Obama's administration, has signaled she'll be more aggressive than the Bush administration, Rule said.
Varney today said the Justice Department is investigating whether biotech-seed patents are being abused to extend or maintain companies' dominance in the industry. She is in Ankeny, Iowa, for a workshop on agriculture-market competition that was organized by the Justice Department and the Department of Agriculture.
'Robust patent system'
"There is a very robust patent system in this country and if you are abusing a patent to extend or maintain a monopoly, that is not legal," Varney said. "We are looking at those very important issues."
The department probably is reviewing whether Monsanto's licensing restrictions on seeds have a legitimate business justification, said Rule, who occasionally advises Monsanto and isn't working with Webb on the antitrust case.
"When you have that sort of monopoly power, it can lead to abuse, which is what we've been experiencing over the past several years," said Thomas L Sager, DuPont's general counsel.
Wilmington, Delaware-based DuPont claims Monsanto protects its lead in biotech seeds, including the Roundup Ready seeds sold since 1996, by controlling whether competitors can add their own genetics.
Roundup Ready 2 Yield
Monsanto also has begun switching seedmakers and growers from Roundup Ready soybeans to the newer 'Roundup Ready 2 Yield' version in advance of the original's patent expiration in 2014. DuPont says Monsanto is using incentives and penalties to switch the industry to the new product in a way that unlawfully extends the Roundup Ready monopoly.
"This is about trying to obtain a level playing field so innovators can introduce combinations of choices to the farmer that increase yield and of course feed the world," Sager said.
At least seven states are investigating many of the same claims, as well as whether Monsanto illegally offered rebates to distributors who limit sales of competing seed, according to one person involved in the probe who asked not to be named because he isn't authorised to discuss it.
3M Co's use of rebates to induce retailers to buy more transparent tape and curtail purchases from a smaller supplier was ruled anticompetitive by the US Circuit Court of Appeals in 2003.
Addressing criticisms
Monsanto has amended its practices to address some criticisms. The company will help the introduction of generic Roundup Ready soybeans by maintaining foreign import approvals during the transition, a process that will be followed for off- patent biotech seeds in the future, Chief Executive Officer Hugh Grant said in a January interview. Monsanto last year stopped giving rebates to dealers who limited competing seeds' sales, said Kelli Powers, a spokeswoman.
Monsanto will maintain foreign import approvals for generic Roundup Ready soybeans through 2017 and is willing to provide an industry group with the necessary health and safety data to maintain foreign registrations beyond then, Jim Tobin, a company vice president said today. Monsanto pays as much as $2 million a year to maintain approvals in the seven countries that require periodic renewals, he said.
DuPont filed its federal antitrust case last year after Monsanto sued to block its rival from adding the Roundup Ready trait to seeds already modified to tolerate Roundup weed killer.
