Nathan Fan is a JD candidate at Osgoode Hall Law School
On July 6th, the European Court of Justice (ECJ) ruled in favour of importers of soy meal from Argentina, soy meal that was produced from the Roundup Ready soybean patented by Monsanto. In its decision (C-428/08 Monsanto Technology LLC v Cefetra BV and Others) , the ECJ held that EU patent law cannot be used to bar imports of the soy meal. The court reasoned that the scope of protection afforded to Monsanto’s soybean gene patent could not be extended to such processed products where the patented gene did not “perform its function”.
Monsanto is the world’s largest seed company. Monsanto began its success when it first introduced its globally used herbicide ‘Roundup’. The company also produces genetically modified crops that are engineered to be tolerant to glyphosate, the active ingredient in ‘Roundup’. These tolerant crops are part of Monsanto’s ‘Roundup Ready’ line of products, including the soybean variant first introduced in 1996.
The defendants in this case are Cefetra and Toepfer, traders of soy meal who imported soy meal from Argentina that arrived in Amsterdam. The soy meal in question was produced from Roundup Ready soybean plants in Argentina, where Monsanto has not secured patent protection. Roundup Ready soybean is cultivated on a large scale in Argentina, with approximately 95% of the soybeans grown in Argentina containing the Roundup Ready DNA according to Monsanto.
Monsanto brought the lawsuit against the importers claiming that the Argentine soy meal still contained the Roundup Ready DNA sequence, thus violating Monsanto’s patent in the DNA sequence when the soy meal was imported into Europe. From a preliminary ruling of a Dutch court, four questions concerning the scope of patent protection were referred to the ECJ. Of principle concern was Article 9 of Directive 98/44/EC, which states: “The protection conferred by a patent on a product containing or consisting of genetic information shall extend to all material...in which the product is incorporated and in which the genetic information is contained and performs its function”.
The First Question:
The first question asked whether Article 9 was to be interpreted as conferring patent right protection where the patented DNA sequence was contained in the soy meal and where it does not presently perform the function for which it was patented, but did perform that function previously in the soy plant (and where the DNA sequence was still intact so that it could possibly be able to perform its function after it has been extracted from the soy meal and inserted into the cell of a living organism). The ECJ held that the language of Article 9 creates the condition that the genetic information contained in the product must be performing its function in the ‘material...in which’ that information is contained. The Court reasoned that the usual meaning of the present tense language used by the legislature (i.e. ‘material...in which’) implies that the function of the patented material is being performed at the present time and in the actual material in which the DNA sequence is found.
In the Roundup Ready patent, its patented function is to allow the soybean plant to grow despite the otherwise toxic presence of the herbicide. The ECJ held that the use of the herbicide on the already processed soy meal was not foreseeable or even normally conceivable. Even if the herbicide were to be used on the soy meal, the patented genes could not perform its function as the soy meal was already “dead material”. As further support, the ECJ also cited recital 23 of the preamble to the Directive which states that “a mere DNA sequence without indication of a function does not contain any technical information and is therefore not a patentable invention”. As the patentability of a DNA sequence is subject to its indication of the function it performs, the patent protection cannot thus be offered to a DNA sequence that is unable to perform the specific function for which it was patented. Therefore, Monsanto’s claim that their patent protection is absolute, regardless of any link to the present performance of its specified function, was rejected.
The Second Question:
The second question asked whether Article 9 effects an exhaustive harmonization of the protection it confers, such that it would preclude any national patent legislation from offering absolute protection to a patented product (i.e. regardless of whether it performs its indicated function). In referring to the Directive’s preamble, the ECJ noted that the legislature’s intentions for Article 9 was to ensure “the same protection for patents in all Member States” and was intended to avoid barriers to trade. This intention represents a balance between the interests of patent holders and the need for proper functioning of the internal market. The ECJ held that minimalist harmonization would be an unbalanced approach that would foster barriers to trade. Therefore, the harmonization effected under Article 9 must be exhaustive.
The Third Question:
The third question asked whether Article 9 precludes the holder of a patent issued prior to the adoption of the Directive from relying upon any absolute protection afforded to the holder under the then applicable national legislation. To this question, the ECJ cited Case C-334/07 P Commission v Freistaat Sachsen  ECR I-9465, which established that new rules apply immediately to the future effects of a situation which arose under the old rule. The Directive in this case is not subject to any exception to that principle.
The Fourth Question:
The last question asked whether Articles 27 and 30 of the TRIPS Agreement affect the interpretation of Article 9. To this question, the ECJ noted that while EU laws may supply laws that keep in line with the TRIPS Agreement, TRIPS on its own will not have any direct effect. The ECJ also noted that its decision here to restrain the scope of patents from absolute protection does not “conflict unreasonably with a normal exploitation of the patent” and does not “unreasonably prejudice the legitimate interests of the patent owner” within the meaning of Article 30 of TRIPS.
The ECJ’s decision to reject Monsanto’s claims of absolute patent protection thus mirrors the opinion of the Advocate General Paolo Mengozzi delivered back in March 2010. However, Monsanto settled with the importers and withdrew its legal complaint just days before the judgment was released, calling into question the legal force of the ECJ’s decision.
According to commentators, this decision could lead to an increase of exports to the EU of biotech products produced in countries that have weaker patent protection. However, the European Commission, which drafted the Directive, has stated that the ECJ’s decision is in line with the Commission’s interpretation of the Directive. According to Cefetra representatives, the decision “takes into account the circumstances and still leaves room for a fair biotech patent protection in Europe”. Despite the loss, Monsanto remains optimistic and believes that the place for resolution of these matters is in Argentina, where it has struggled to obtain patent protection for its Roundup Ready crops.