Mississippi Farmer Gets Big Break From Appeals Court In Monsanto Biotech Seed Case

By Robert Schubert
CropChoice editor
April 26, 2004

After losing to Monsanto in federal district court in late 2002, Homan McFarling thought he'd have to pay the company $780,000 for illegally saving and replanting its genetically engineered soybean seed. However, a federal appeals court earlier this month threw out the award for damages. The Mississippi farmer likely will end up owing the company a fraction of the original amount. What's more, his lawyer is considering an appeal to the Supreme Court on antitrust grounds.

"It's one thing to subsidize Monsanto, but why do farmers have to subsidize the seed companies that have nothing to do with development of the [transgenic] seed but are charging higher prices," says Tupelo, Miss. attorney Jim Waide.

Monsanto's press office did not return a call seeking comment on this story. Its counsel in the federal appeals case, Seth P. Waxman of Wilmer, Cutler & Pickering, declined to comment.

Monsanto v. McFarling

In 1998, Homan McFarling purchased and planted 1,000 bags of genetically engineered RoundUp Ready soybean seed on his Mississippi farm. Two years later, Monsanto sued the farmer in the U.S. District Court for the Eastern District of Missouri, home turf for the St. Louis company, after tests showed his saved seeds were RoundUp Ready.

RoundUp Ready soybeans are so named because they're engineered with a gene conferring resistance to the glyphosate herbicide Monsanto makes and markets under the tradename RoundUp.

A "Technology Agreement" is critical to marketing the seed. Monsanto licenses the patented gene for glyphosate resistance, referred to as "the 435 patent," (Patent No. 5,633,435) to seed companies. They then integrate the gene into their soybean seed lines. With those genes inside the cells, the seeds themselves are now resistant to glyphosate, or RoundUp. They're RoundUp Ready, and covered by "the 605 patent" (No. 5,352,605). Monsanto charges seed companies, including its subsidiaries that control some 20 percent of this market, a "Technology Fee" as compensation for its innovation.

The seed companies actually collect the tech fee from farmers buying the RoundUp Ready seed -- the 1998 charge was $6.50 per 50-pound bag -- and then forward it to Monsanto. In addition, they include a "Technology Agreement" bearing the farmers' signatures. This contract licenses farmers to plant the seed for one season, and disallows both seed saving and selling or giving the seed to anyone for planting, research or breeding.

In federal district court, McFarling admitted saving 1,500 bushels of seed harvested from the '98 crop and sowing it in 1999. Furthermore, he planted 3,075 bags of saved seed in 2000.

Monsanto argued that McFarling, by saving and replanting the seed, infringed its '435 and '605 patents and breached the technology agreement, according to this reporter's interpretation of the appeals court decision. The company eventually sought a summary judgment against him for infringement of the '605 patent only and breach of the technology agreement. The court granted the request and ruled against McFarling's claims that Monsanto had:

Beyond the issue of liability, the court ultimately ordered McFarling to pay Monsanto damages of $780,000.

McFarling appealed to the U.S. Court of Appeals for the Federal Circuit, which sided with the district court on all of the claims except the large damage award -- 120 times the $6.50 technology fee McFarling paid for each of the 1,000 bags of seed. The 120 multiplier that Monsanto has made standard in its technology agreements for soybeans, corn and cotton, even though they are different plants, did not reasonably predict the harm caused by breaching of the agreement and it was not difficult to measure, according to the decision. The appellate judges ordered the district court to reconsider and recalculate. McFarling will end up paying about $10,000, says his attorney, Jim Waide.

Monsanto's technology agreement, with the 120 multiplier, not only likely breaks the law of every state, it also violates federal due process, which limits punitive damages to 10 times actual damages, Waide says. Monsanto "uses it [the 120 muliplier] to frighten farmers into settling rather than fighting the company in court." He thinks Monsanto has used it to threaten about 70 farmers into settlement instead of going to court.

Antitrust appeal?

The appeals court ruled that seed saving prohibitions in the technology agreements are legal. In effect, farmers not only have to pay the fee, but they also have to buy new, more expensive seed every year instead of using saved seed, a longtime soybean farmer practice, Waide says. Approximately 200 soybean companies have agreements with Monsanto to sell the biotech seed to farmers. "The effect of this is farmers are forced to subsidize the seed companies that had nothing to do with developing the technology."

Waide, who represented McFarling in district court, told the appellate judges that Monsanto included "a count of infringement under the '435 patent" covering the glyphosate-resistant gene in its complaint but did not request "summary judgment on this count." He also argued that no court has ruled on the validity of the patent, and so it was improper to assume its validity. The court ruled against him and said he should have brought up the issue in district court.

Were Waide to appeal the decision to the Supreme Court, a spokesperson in his office says he would likewise assume validity of the '435 patent and then argue that Monsanto is tying the original technology for herbicide resistance to the second generation seeds. In other words, the '435 and '605 patents, referring to different products, are "tied." Farmers can't buy one without the other. This is similar to the U.S. government's case against Microsoft Corporation, which hinged on the claim that users of the Windows computer operating system had to use the company's Internet Explorer program, Waide says.

Norwegian Importers Concerned About Genetically Modified Wheat

by Robert Schubert
CropChoice news
April 27, 2004

Norwegian grain importers are in Minneapolis this week to make their case against the prospect of genetically engineered wheat, and what they'll do if it's grown.

"We are not talking about what might happen," said Helge Remberg, marketing director for Unikorn, Norway's major grain importing company. "We're talking about what will happen the moment" the sale and planting of genetically engineered wheat is allowed. Norway, like other wheat buying countries, would not just refuse gene-modified wheat. It would shun all U.S. wheat rather than run the risk of unwanted grain ending up in a shipment of conventional wheat.

The Unikorn delegation chose Minneapolis because it's home to the Minneapolis Grain Exchange, where spring wheat and wheat futures are traded.

RoundUp Ready wheat

Monsanto has engineered a gene into a variety of hard red spring wheat -- high in protein and often used in bread -- that makes it resistant to glyphosate, a herbicide the St. Louis company makes and markets under the tradename RoundUp. The result is RoundUp Ready wheat, which would allow farmers to spray RoundUp to kill many types of weeds without harming the wheat. The biotechnology and chemical corporation has been field testing the wheat in the United States and Canada. It has applications pending with the Canadian, Japanese, U.S. and other governments for approval of commercial planting and sales.

"We are pursuing regulatory approval in various markets to make sure the food, feed and environmental safety of RoundUp Ready wheat is demonstrated," said Chris Horner, a Monsanto spokesman.

That's the first in a series of six milestones the company has established for itself on the road to commercial introduction of its product. Regulatory approvals and marketing arrangements must be in place in major export markets, according to the Winter 2004 edition of Monsanto's "Roundup Ready Wheat Stewardship Bulletin." To make that happen the company has "...initiated dialogue with wheat buyers in export markets including the European Union and Japan to increase acceptance of biotech wheat..."

Norway is by no means a major wheat importer. Spring wheat, much of it from North America, will make up about 60,000 of the 100,000 metric tons of mill quality wheat the country anticipates importing in the almost completed 2003/2004 marketing year.

As of April 15, by comparison, the European Union had imported almost 1.8 million metric tons from the United States, 1.16 million of which was hard red spring wheat, according to U.S. Wheat Associates, the marketing arm of the American wheat exporting industry.

But Norway's inclinations against genetically engineered wheat -- and biotech food in general -- are shared by European countries, including Austria, Italy and the United Kingdom, Remberg said.

Norway was early on the scene with concern over the issue. It introduced the Gene Technology Act in 1993, which regulates the import of all living genetically modified products, including soy, corn, wheat and other crops for both livestock feed and human food. Authorities require certificates stating that imports contain less than 0.01 percent modified content, according to Unikorn. That makes its law stricter than the labeling and traceability protocol the European Union recently enacted.

Both laws would seem to bode ill for Monsanto's wheat. "Generally, we don't have any bias one way or the other" on the issue of biotech wheat itself, but the customer does matter, said a representative of the U.S. grain trade, speaking on condition of anonymity. "Customers in Europe, none, want GMO wheat."

In fact, approximately 80 percent of world buyers, including Japan, South Korea and other markets in Asia and the Middle East, do not want RoundUp Ready wheat, according to sources in the grain trade.

"We prefer the quality of North American spring wheat, but if GM wheat is grown there, we would have to switch to other suppliers such as Australia, Kazakhstan or Ukraine," said Remberg with Unikorn. The company -- operating in a 49 percent -51 percent state to local farmer cooperative ownership structure -- accounts for about 80 percent of Norwegian grain sales for the milling industry. Norway could also look to itself, having produced some 300,000 metric tons of wheat suitable for milling this year, and elsewhere in Europe.

Monsanto's segregation plan

Given its concern over countries that want non-genetically modified wheat, Monsanto dedicates a significant portion of its milestone program to working with its partners and representatives in the wheat industry to establish a system to segregate RoundUp Ready wheat, said Horner, company spokesman.

It's fourth milestone focuses on developing and implementing protocols and sampling and detection methods. "Research indicated that separating biotech and non-biotech supplies is possible with reasonable thresholds...We are continuing discussions with grain handlers to establish protocols to handle RoundUp Ready wheat grain."

But the company also is working to identify buyers who want wheat with biotech traits: "We identified and met with numerous domestic wheat users who currently are not sourcing away from other biotech crop ingredients. We are exploring the potential for value-added benefits due to variety selection and variety-specific origination."

The grain trader mentioned earlier is skeptical of this plan. Building such a segregation system would be "tremendously difficult logistically," he said. "We would have to go to farmers and buy their acreage and make sure the wheat stays separate" throughout the planting, growing, harvesting, processing and distribution process.

Back in the United States, some see the potential loss of the European wheat market harming the entire wheat industry, especially farmers.

"The [grain] coops are very worried that the moment the USA grows GMO wheat, they'll have to close a lot of their local elevators because business will plunge," said Nicolaas Konijnendijk, who works with a number of European grain importers through his Agro Consulting and Trading company. Wheat of all classes and varieties that was formally exported would have nowhere to go. Much of it likely would end up being used to feed livestock. That in turn would put downward pressure on the prices farmers receive from agribusiness for the corn and other traditionally livestock feed grains they grow.

Konijnendijk thinks that Canada ultimately will decide against RoundUp Ready wheat. The Canadian Wheat Board, which sells the country's wheat abroad, and the National Farmers Union are vehemently opposed, he said. Given the quality of its wheat and a relatively small population, the country is inclined to export.

What if genetically modified wheat were grown in all the major wheat growing nations?

"If we couldn't find completely free non-GMO sources, we might be forced to change the Gene Technology Act in Norway," Remberg said.

That prospect irritates Konijnendijk: "This is not fair anymore when the public is not willing to eat it [genetically modified food], but has no choice. We have a right to the food we want."

Confidential Report on a Worrying GM Corn

by Herve Kempf
Le Monde
April 22, 2004

The French commission for genetic engineering, which delivers an opinion on GMOs, has become worried about the marketing of a GM corn after studying the results of an experiment on rats.

The European scientific committee however gave the GMO the green light on 19 April. A corn produced by Monsanto company, MY 863, received on April 19 the go-ahead for marketing from the European scientific committee.

This corn, in the experts' view, does not affect the health of the animals, or, moreover, that of humans.

Though the opinion is public, official reports of meeting of this scientific committee, the EFSA (European Food Safety Authority), are confidential. As are the debates of the committees of the Member States, including those of the French commission for genetic engineering (CGB).

However the CGB, on the contrary, put out on October 28, 2003 an unfavourable report, and was very disturbed by the malformations observed in a sample of rats fed on MY 863 corn.

No one would ever have known anything of it if an association, the Committee of research and of information on genetic engineering (Crii-Gen), chaired by the lawyer Corinne Lepage, ex-Minister for the environment of Alain Juppe, had not forced the door of the CGB while obtaining, thanks to the commission of access to administrative documents (CADA), these official reports, of which Le Monde was made aware.

The opinion of the CGB is clear: the commission "is not able to show the absence of health risks to animals with regard to MY 863 corn."

Quarrels of experts? Undoubtedly, but this at least leads us to think that the scientific question of the influence of GMOs on health is not closed, and that the expert procedures are not always able to bring clear answers.

The new Minister for ecology, Serge Lepeltier, said on April 15, at the time of its first emergence in the press: "One needs much transparency. Our fellow-citizens must know what it is. And then rigour is needed."

Much apparently is at stake. The story starts in August 2002, when Monsanto company submitted a request for authorization of marketing of a corn genetically engineered to produce insecticidal proteins.

It did it in Germany: in the European procedure, the request for examination of the GMO is lodged with a first State, which gives a preliminary opinion.

The Commission of Brussels then distributes it to the Member States, in order to collect their opinion. The opinions are finally brought before the EFSA in Brussels, which makes a decisive "opinion". The German experts immediately expressed reservations on MY 863, giving the reason that it integrates an antibiotic resistance gene.

The file was passed in June 2003 to the scientific committees of the various countries, with the precise details provided by Monsanto company.

But it is not the antibiotic which posed a problem with the French. The file indeed included a study of nutrition on rats, the usual test to evaluate the harmlessness of GMOs. One feeds with GM food a group of animals, which one compares at the end of 90 days with a control group of rats fed with the same corn, but not modified. The biological examination of tens of indicators on all the rats makes it possible for toxicologists to judge if there is a significant variation.

However, the French commission for genetic engineering (CGB) worried about many biological effects: "significant increase in the white blood cells and lymphocytes in the males" of the batch fed with the MY 863;"reduced levels of reticulocytes"(immature red blood cells) in the females; "significant increase in blood sugar in the females"; "higher frequency of anomalies (inflammation, regeneration)" in kidneys of the males.

After a long debate, the CGB indicated, in "the absence of satisfactory interpretation of some of the significant differences observed", that it was not "able to show the absence of health risks to animals".

Such an opinion is exceptional from a commission which was always rather favorable, since its creation in 1986, to the authorization of GMOs.

However, a few days later, November 6, 2003, another French commission, the French Agency of health safety of food (Afssa), returned, on the basis of the same file, an opposite opinion: the differences observed, determined the agency, "are without biological significance", and it estimates that MY 863 "does not present a nutritional risk".

In Brussels, the EFSA concluded in the same direction on April 19. It however entered in detail the differences observed in the hematologic [blood] parameters, the renal reticulocytes, malformations and albumin levels. But, for each one, it estimates that these differences "fall into the normal variation in control populations" or, in connection with renal malformations, that they are "of minimal importance".

However, the CGB will not budge from its position an inch. Gerard Pascal, director of research at the National Institute of agronomic research (INRA), who was a rapporteur of the file on MY 863 with the CGB, of which he has been a member since 1986, maintains his doubts.

"I hear the argument of natural variability, but what struck me in this file is the number of anomalies. There are too many elements here where significant variations are observed. I never saw that in another file. It will have to be done again."

All the questioned experts confirm that the analysis of the statistical results implies a share of subjectivity: "One can have different feelings on the same case", notes Joel Guillemain, who studied MY 863 for Afssa.

There also exist, in other files, details of effects on animals: on the four GMOs examined by the CGB in 2003, which gave place to nutritional tests on rats, anomalies were raised.

For oilseed rape WP 73, "significant effects" were observed on the liver and the kidneys of the animals, but they were related to a parameter which has since been rectified.

However, the tests on the rats were not carried out during 90 days as is usual, but only for 28. The commission also regrets that "the idea to ask for a test on dairy cows" was not retained or that follow-up data after the marketing in Canada are not available.

On the corn T 1507, the commission observes "a significant difference in food consumption" of the rats which ate the GMO. For corn NK 603, "significant differences" in 50 statistical comparisons out of 1 200 were found, but they "do not have toxicological significance".

A Member of the Commission worries finally about allergies to this product, and estimates that "it is not possible to conclude in such a final manner on the absence of such a risk ". In spite of internal dissent, these files however received a favourable opinion from the commission, then from the EFSA.

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