Law For Food: The law affects what you eat. What you buy to eat affects the law.

An Apologia
11 August 2007, 8:41 am
Filed under: Uncategorized

I have been preparing to move this week, and been not at all able to work on this website.  My apologies.  Next week I am traveling, first home to visit my mother, and then to law school.  I will be back in late August or early September.  In the mean time, keep checking the blogroll — there’s good stuff being talked about.


Monsanto, Revoked Patents, Litigation Reform, and Antitrust
11 August 2007, 8:38 am
Filed under: antitrust, Economics of Eating, GMOs, Patented Foods

First, via Ethicurean, some good news: back in September 2006, the Public Patent Foundation filed a formal request with the US Patent and Trademark Office for review and revocation of four patents on bioengineered seed which were held by Monsanto.  That review did in fact lead to a revocation of those four patents.

Some better news: those four patents had been used by Monsanto to harrass, intimidate, and litigate against U.S. farmers for patent infringement. 

Ethicurean asks the salient and important question of whether these farmers will be able to receive legal fees incurred in fighting these suits, now that the patents have been revoked. These farmers fall into roughly two classes, licensee farmers and independent farmers, as defined below.

This raises the following questions:
1) Whether farmers are likely to receive an award of legal fees incurred in preparation for or defense of litigation based on breach of license of patented seeds, and on infringement of patent, when the patents upon which that litigation was based have been revoked.
2) Whether farmers are able to reclaim monies already paid in settlement of lawsuits, when those lawsuits were based on patents now revoked.
3) Whether farmers are required to make outstanding future payments pursuant to, and fulfill terms of, settlement agreements, when the underlying lawsuits are based on patents now revoked.
4) Whether settlement terms which require farmers to purchase future seeds and other products from Monsanto constitute unlawful exclusive dealing arrangements in violation of Section 3 of the Clayton act and Section 1 of the Sherman Act.

NOTE: I have to point out here that I am not a lawyer and this is not legal advice. Moreover, I have prepared this without access to a legal library, so it is even more possible that I have missed certain fine points of law. What follows is what I understand to be true in law and in fact. The legal doctrines implicated, as far as I can tell, include patent law, contract law, and possibly antitrust.

Since we are not talking about any single case here but rather a class of cases, the following review of the facts will necessarily be general, rather than specific.  Much of what follows was taken from this report by the Center for Food Safety.

Monsanto makes bio-engineered, patented seeds which are, e.g., herbicide resistant or insect-repellant, and it sells these patented seeds to farmers under a license.  These farmers we will call “licensee farmers.”  The license under which these patented seeds are sold stipulates that the licensee farmer is unable to keep any seeds for re-planting the following year.  This term disrupts the age-old practice of keeping some seeds over from one year to the next.  

Such a practice is an integral part of the economics of farming.However, many licensee farmers, whether in ignorance of this term of the contract or out of a belief that the term would not be enforced, did in fact replant patented seeds from one year to the next, as farmers have done for thousands of years.   Other farmers, whose fields were downwind of the fields planted with patented seeds, kept and replanted seeds which had been cross-pollinated with the patented seeds.  We will call these farmers, have no legal relationship with Monsanto, we will call ‘independent farmers’.

Monsanto, through investigations which seem to me to be egregious and harassing, discovered that some licensee farmers had violated the terms of their licenses, and threatened these licensee farmers with lawsuits for violation of the terms of their license, and for patent infringement.  In addition, it threatened many independent farmers, with whom it had no legal relationship, with lawsuits for patent infringement.

Monsanto has a lot of resources to put into these sorts of lawsuits, and indeed has much incentive to pursue them.   A patent-holder may be barred, under a doctrine known as laches, from an infringement action if it has waited until its patented technology has become widespread in a market. It is probable that Monsanto will use this fact as a justification for its tactics in bringing suit against both the licensee farmers and the independent farmers.

The defendant farmers, both licensee and independent, have significantly fewer resources to put into defending this sort of a lawsuit. This is not a heavy-handed attempt to shoehorn these facts into a David-and-Goliath narrative: this is fact. None of the farmers in the CFS study have a full-time legal team of even a single lawyer. Monsanto has 75 employees who do nothing other than investigate and prosecute farmers, and has dedicated $10 Million to those efforts. In addition, the investigation and subsequent litigation has a disruptive effect on the business of the farmer, while it is not unfair to say that this same investigation and litigation is a part of Monsanto’s business.

Given these imbalances, when faced with these threats of lawsuits, many farmers settle out of court. This is the rational decision. Fighting a lawsuit, even a lawsuit one is likely to win, takes time and money. Court awards of legal fees are uncertain, and may be overturned on appeal.

Settlements are often confidential, both in amount and terms. However it has been reported that settlements often will include the requirement that the farmer purchase Monsanto products in the future. Where cases have gone to trial, defendants who have lost have paid a mean judgement amount of $412,259.54. Monsanto has made a total of $15,253,602.82 from recorded judgements alone. To this amount should be added the undisclosed settlement amounts. One farmer, Carlyle Price of North Carolina, paid a settlement of $1.5 Million.

1) Whether farmers are likely to receive an award of legal fees incurred in preparation for or defense of litigation based on breach of license of patented seeds, and on infringement of patent, when the patents upon which that litigation was based have been revoked.

Probably not. One of the criticisms of the U.S. civil legal system is that legal fees are generally awarded as sanctions when a lawyer has wasted the court’s time, for instance by delaying discovery or advancing spurious arguments. This creates an imbalance in favor of parties who are able to out-litigate their opponents, and is one of the driving forces behind settlements in file-sharing cases, for instance. Defendants who are in the right may be out of pocket defending their rights, and it may make more economic sense simply to settle out of court than to subject the matter to litigation, which is lengthy and costly, even where a defendant is in the right.
In a case like this, Monsanto’s litigation efforts, by themselves, almost certainly do not qualify farmers to receive legal fees if Monsanto was at the time of suit simply enforcing the legal rights which the U.S. Patent Office had granted it in approving the patent applications, and which the licensee farmers had granted it in signing the licensing agreements. Without getting into the details of the individual suits, it seems to me likely that Monsanto’s actions, while perhaps distasteful and heavy-handed, do not demand sanction in this manner.

2) Whether farmers are able to reclaim monies already paid in settlement of lawsuits, when those lawsuits were based on patents now revoked.

Probably not. From what I can tell a settlement is an agreement not to litigate, and is therefore unlike a judgment. Thus, settlement may be considered as if it were an agreement to pay the plaintiff or potential plaintiff so as to preclude the possibility of litigation, and is therefore a calculated risk on behalf of both parties. I think it may be best to think of settlement agreements as licensing agreements made under pre-existing threat of litigation. I am unable to find a conclusive authority as to whether a licensing agreement becomes unenforceable with respect to any licensed patent subsequently revoked, but I should think it would. However, this doesn’t mean that the parties to a licensing agreement are automatically restored to their positions prior to signing that agreement following the revocation of all licensed patents. Quite the opposite, I should think.
Equitable relief may be available in the form of exemption from future action to enforce the licensing agreement, however. This is small comfort indeed to the many farmers who have been forced into bankruptcy due to Monsanto’s actions.
However, farmers who have chosen to litigate may have an advantage over those who chose to settle their cases, even if the farmers received adverse judgments at the end of that litigation. From what I can tell based on consultation of § 127 of the Restatement, Second, of Judgments, equitable relief is available where, subsequent to the judgment, facts or circumstances change such that enforcement of the judgment would be inequitable. I understand equitable relief to be distinct from legal relief, however, in that it generally does not include monetary awards. This means that an adverse judgment is unlikely to be enforced going forward, but that monies already paid in the judgment are probably no longer available.

3) Whether farmers are required to make outstanding future payments pursuant to, and fulfill terms of, settlement agreements, when the underlying lawsuits are based on patents now revoked.

I should think not, as this is contrary to the aims of patent law. The patent agreement is a contract under which each party provides something of value: the patent-holder provides the license to use in a commercial context patented technology — that is, technology which the licensee would otherwise be unable to use. The licensee provides money and/or other valuable considerations for this license. When a patent is revoked, the value of the patented technology is critically diminished in that now, unlicensed enterprises can use the technology without paying for it. Thus, continued future enforcement of agreements to license revoked patented technology place the licensee at a commercial disadvantage. The patent-holder is no longer providing anything of value.
However this may depend on the terms of the settlement agreement. If these agreements have included the continued use of other patented technology, then they may be enforceable in toto rather than in the specific portions which are not eradicated by the patent revocations. However, I should think that this sort of situation were precisely what the blue-pencil rule was invented for, and that courts might be willing to refrain from enforcing those sections of settlement or licensing agreements which solely pertain to patented technology now revoked.

4) Whether settlement terms which require farmers to purchase future seeds and other products from Monsanto constitute unlawful tying or exclusive dealing arrangements in violation of Section 3 of the Clayton act and Section 1 of the Sherman Act.

I thought this an interesting question to ask even though I don’t have the answer to it offhand. In antitrust there are two recognized offenses, tying arrangements and exclusive dealing arrangements, and the terms of the Monsanto settlement agreements may fall under one or both of those offenses. Tying arrangements occur when a seller has market power in a single market (such as computer operating systems or photocopiers) and uses that power to compel buyers to purchase a product in another market (such as web browsers or photocopier parts and services). These arrangements are generally unlawful per se.

Exclusive dealing arrangements occur when a seller compels a buyer not to do business with a competitor. These are not unlawful per se as the courts recognize that such arrangements can benefit not only the seller and the buyer but also the competitiveness of the market as a whole. Exclusive dealing arrangements do become unlawful when buyers are coerced into them by the seller and the agreements affect a substantial dollar volume of the relevant market. While patents do not always create economic power in the seller, they have been held to do so. The threat of lawsuit may, insofar as it can do irreparable harm to the buyer, also constitute coercion. A detailed inquiry on both counts is required.

Antitrust litigation on this count is likely to be detailed, lengthy, and expensive, and the outcome unclear at this time, as the details of the settlement agreements are sealed.

My conclusion, therefore, and please keep in mind that this has been done without access to a law library and should not be considered a proper brief, is that the farmers, ill-treated though they have undoubtedly been, are probably without much recourse in terms of getting back any legal fees or settlement amounts already paid, and that litigation on an antitrust basis would be a substantial risk on behalf of the farmers.

Having said all of these things, I feel the need to get up on my soapbox again and point out that this case illustrates the necessity of three reforms in the U.S. legal system and food industry.

First, the advantages that U.S. civil law gives to the plaintiff in terms of encouraging settlement. These advantages have been notably taken advantage of by the recording industry in pursuing alleged filesharers, and they are being taken advantage of here. It is an unfortunate reality that the rules relating to legal fees promote litigation by those with deep pockets and discourage litigation by those without. There exist a number of cases where people who have been critical of various organizations have been sued by those organizations for slander or copyright violation, and due to the silencing effects of settlements a number of states have passed SLAPP statutes making it unlawful for organizations to use the law to silence participation in public discourse. While SLAPP statutes are a reform to protect First Amendment rights, such reform is probably needed across the civil law playing field.

Second, it seems to me that the policy kinks have not yet been worked out with regards to GMO patents, as illustrated by suits against farmers whose crops have cross-pollinated. Much more consideration than was given is required.

Third, the economic conditions which have required U.S. farmers to use products like Monsanto’s herbicide-resistant seeds are in desperate need of consumer-driven reform of the sort that I imagine many readers of this site and the sites it links to are already promoting. Farmers are often required to grow much much more food than they will sell in order to meet the contracts they have with processors and retailers, and many have turned to GMOs in order to increase output. The story of Monsanto v. U.S. Farmers illustrates some of the many hidden costs of our bountiful food supply. We need to realize that there are better things in life than being able to buy iceberg lettuce all year long for 69¢/head. Until we do, the economic pressures that supermarkets place on farmers will keep driving them to sup with the devil, and without the benefit of a long-handled spoon.

History of the FDA
3 August 2007, 8:24 am
Filed under: FDA

I found this on the FDA website.  It’s a chronological list of FDA “milestones.”

Farm Bill Update
2 August 2007, 8:50 pm
Filed under: Development, Economics of Eating, Farm Bill, Food Policy

The always-worthwhile Ethicurean has a lot of good links to analysis and commentary about the Food and Farm Bill which recently passed the House. I found the UK Guardian’s analysis particularly compelling.

today’s agricultural programs give large commodity subsidies to less than one-third of American farmers, most of them large-scale producers who grow a limited number of crops. Such massive commodity subsidies actually fuel the consolidation of land, since family farms are forced to compete with subsidised big producers. Smaller farmers – especially those that have historically faced discrimination – face even bigger challenges in trying to make a living from the land….

By encouraging overproduction of certain crops, such as rice and cotton, commodity subsidies create a glut that drives down world prices, undermining the livelihoods of farmers and depriving developing countries of their rightful earnings and market share. Simply put, family farmers all over the world are working hard to make a decent living, but they are thwarted by the policies of governments halfway around the world.

Ag policy seems to tie in to so many other policy areas which make frequent appearances on the political stump: public health, nutrition, and care, rural domestic poverty, poverty overseas, energy. Has anybody compared the major presidential candidates’ agricultural policies?

FDA Retention Bonuses
2 August 2007, 4:56 pm
Filed under: FDA, food politics, Food Safety

According to the Washington Post, FDA officials received $13.6 in “retention bonuses” from public funds. Associate Commissioner Glavin, she of the alleged congressional witness intimidation, has personally received over $170,000 in the past 4.5 years on top of her yearly $159,840 salary. The total amount of bonus disbursements has risen from $7.2 million in 2004. Over this same period, I think it bears repeating, incidence of food-borne illnesses rose to the same levels they had been in 2000.

FDA Halts Plans to Close Inspection Lab
2 August 2007, 4:45 pm
Filed under: FDA, Food Safety, Inspections

The FDA has suspended plans to close the Alameida laboratory. You know, the one which provided valuable backup services around the clock and on weekends in order to help California health officials trace last year’s e. coli spinach outbreak. Money quote:

“I think the FDA finally realized that it doesn’t make sense to close half your labs when you’re struggling to deal with an array of food-safety problems, like they are right now,” said Chris Waldrop, food-safety director for the Consumer Federation of America.

The closure, one of a number of closures planned, oddly enough, in response to widespread public and increasing congressional concern about the safety of the U.S. food supply, is according to FDA officials part of a larger reorganization plan, and was supposed to free up funds to pay for more staff and equipment at the remaining labs. However, as Rep. Stupak (D-Mich) of the House Energy and Commerce Subcommittee said yesterday:

“Not once, in the 70,000 pages of documents that our subcommittee received from the FDA, does the FDA justify why this reorganization plan makes sense from either a safety or a cost standpoint,”

Stay tuned. I suspect a major shakeup in the agency within the next six to eight months.

Update: Commissioner Eschenbach has said that he is likely to increase the number of health inspectors working for the FDA, presumably so that the agency can inspect more than 1% of the U.S. food supply. I love how managers use straw men to buy themselves time:

“We have to increase the inspector field force,” said von Eschenbach, “but I’d like to do that by not simply saying we have to have more inspectors. I’d like to do it from the point of view that we are doing so strategically. What kind of inspectors, where do we need them, what kinds of tools do we need to provide for them.”

Really. Apparently it’s not just a matter of hiring people. Turns out we actually need them in particular places, and doing particular jobs. We’re paying this guy for these insights?

New Food Inspection Rules – Prelim
1 August 2007, 11:30 am
Filed under: FDA, Food Safety, Regulation

I’m not yet sure what I think about the new food inspection rules, primarily owing to the fact that I haven’t yet looked at them. The message seems to be that the new rules create “uniform” food inspections, but uniformity is useless unless the inspections are rigorous. Indeed it seems to me that more food-borne illness would be likely to be caught by the application of various inspection standards. Particularly where products from a single source are inspected in various locations, I should think that various inspection standards would reveal a fuller picture of food-borne illness risks. But I haven’t looked at the standards yet, so all of this may be moot. More later.