Organic Seed Growers and Trade Association v. Monsanto Co.

( Disponible en anglais seulement )

octobre 27, 2013 | David G. Gerecke, Q.C., Kit McGuinness

A recent decision by the U.S. Federal Circuit court refusing to issue a declaratory judgment in Organic Seed Growers and Trade Associate v. Monsanto Co. is interesting to consider in light of Canadian law. Read the decision and an American opinion on it.

The Plaintiffs in Organic Seed Growers were a group of organic food producers and other agricultural organizations (including Canadian groups from Manitoba and Alberta). They sought declaratory judgments of non-infringement against Monsanto to prevent it from taking “legal action against growers whose crops might inadvertently contain traces of Monsanto biotech genes”. According to the judgment, Monsanto has begun legal proceedings in relation to its patent rights against other growers and sellers, with 144 separate suits and 700 settlements.

The key products in question are Roundup Ready seeds. These seeds have been genetically modified to resist a powerful herbicide, glyphosate, which kills conventional weeds and other plants. Using Roundup Ready seeds allows farmers to spray glyphosate over their crops without damaging the crop itself. Monsanto sells seed and licences others to grow and sell the seeds under a limited-use licence that permits the authorized grower to plant, harvest, and sell a single generation of these genetically-modified seeds. In Organic Seed Growers, the Plaintiffs asserted that inadvertent use of this seed can occur through drift or scatter, crosspollination, and co-mingling via tainted equipment at any part of the growth, harvest, and storage phases of production.

The U.S. Federal Court declined to render a decision in Organic Seed Growers because Monsanto had given assurances to the growers that it would not take legal action against them in such circumstances. The Court found that such assurances would be binding on Monsanto and prevent them from bringing lawsuits contrary to those assurances, by operation of “judicial estoppel”. This finding was made despite the fact that Monsanto’s assurances were restricted to where growers or sellers of seed had only “trace” amounts of Roundup Ready seeds, with “trace” being defined as less than 1%.

Canada has its own judicial history involving Monsanto and Roundup Ready seeds, Monsanto Canada Inc. v. Schmeiser [2004] 1 S.C.R. 902. Schmeiser concerned the use of Roundup Ready canola by Saskatchewan farmer Percy Schmeiser, or more specifically Schmeiser’s use of Roundup Ready product without a licence. Schmeiser claimed that his use of the genetically-modified seed was inadvertent, and any use of it was likely due to accident such as spillage from a truck or drifting on pollen.

At the Federal Court of Canada, Monsanto introduced evidence that Schmeiser’s canola crop was 95%-98% Roundup Ready canola. This is far beyond the “trace amounts” threshold that Monsanto articulated as acceptable in Organic Seed Growers. The Federal Court did not accept that Schmeiser’s canola had been polluted by spillage or drift, and instead found that he had stored the Roundup Ready and then re-used it without renewing the licence with Monsanto. This unauthorized use by Schmeiser constituted an infringement of Monsanto’s patents.

Both the Federal Court of Appeal and Supreme Court of Canada upheld this ruling. Could a decision like the one reached in Organic Seed Growers happen under Canadian law? Two central questions need to be addressed: first, could a similar case be brought in Canada, and second, could a Canadian court arrive at the same decision?

Under American law, the (US) Declaratory Judgment Act governs declaratory judgment actions. No such specific statute exists in Canada, although provincial and federal courts here have allowed such proceedings based on their inherent jurisdiction in copyright and trademark cases. While it seems that Canadian courts could take jurisdiction over a Canadian case factually similar to Organic Seed Growers, we can only speculate as to whether a Canadian court would place the same emphasis on a company’s assurances in a manner so as to create a judicial estoppel or its equivalent. It is unclear whether judicial estoppel is even a valid legal doctrine in Canada.

There are other equitable principles, such as promissory estoppel, that might be available but it could be very difficult to fit an Organic Seed Growers type of situation into their threshold requirements.

Furthermore, there is a very broad range between the “trace amounts” threshold of less than 1%, as articulated in Organic Seed Growers, and Schmeiser’s crop with 95%-98% Roundup Ready canola. At which threshold of spillage or drifting might a seed company take legal action against a producer? What happens if the spillage or drifting occurs with a producer that has no prior history of dealings with Monsanto? Canadian courts have not directly addressed such issues, and these questions should be considered by both producers and seed companies in developing their business and risk mitigation strategies.

Ultimately, in Organic Seed Growers the U.S. Federal Circuit court refused to issue a declaratory judgment and is holding Monsanto to their word regarding assurances. Whether Canadian courts can do the same is not as clear, but ultimately the Organic Seed Growers decision should provide little comfort to growers who have not received direct and clear assurances from seed companies that would amount to promissory estoppel.

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