ASGROW SEED COMPANY, PETITIONER v. DENNY WINTERBOER AND BECKY
WINTERBOER, DBA DEEBEES
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT
Argued November 7, 1994
Decided January 18, 1995
Petitioner Asgrow Seed Company has protected two varieties of soybean seed under the Plant Variety Protection Act of 1970 (PVPA), which extends patent-like protection to novel varieties of sexually reproduced plants (plants grown from seed). After respondent farmers planted 265 acres of Asgrow's seed and sold the entire saleable crop - enough to plant 10,000 acres - to other farmers for use as seed, Asgrow filed suit, alleging infringement under, inter alia, 7 U.S.C. 2541 (1), for selling or offering to sell the seed, and 2541 (3), for "sexually multiply[ing] the novel varieties as a step in marketing [them] (for growing purposes)." Respondents contended that they were entitled to a statutory exemption from liability under 2543, which provides in relevant part that "[e]xcept to the extent that such action may constitute an infringement under [ 2541 (3)]," a farmer may "save seed . . . and use such saved seed in the production of a crop for use on his farm, or for sale as provided in this section: Provided, That" such saved seed can be sold for reproductive purposes where both buyer and seller are farmers "whose primary farming occupation is the growing of crops for sale for other than reproductive purposes." In granting Asgrow summary judgment, the District Court found that the exemption allows a farmer to save and resell to other farmers only the amount of seed the seller would need to replant his own fields. The Court of Appeals reversed, holding that 2543 permits a farmer to sell up to half of every crop he produces from PVPA-protected seed, so long as he sells the other half for food or feed.
A farmer who meets the requirements set forth in 2543's proviso may sell for reproductive purposes only such seed as he has Page II saved for the purpose of replanting his own acreage. Pp. 6-14.
SCALIA, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and O'CONNOR, KENNEDY, SOUTER, THOMAS, GINSBURG, and BREYER, JJ., joined. STEVENS, J., filed a dissenting opinion. [ ASGROW SEED COMPANY v. WINTERBOER, ___ U.S. ___ (1995) , 1]
RICHARD L. STANLEY, Houston, Texas (JOHN F. LYNCH, ARNOLD, WHITE & DURKEE, BRUCE STEIN, SIDNEY B. WILLIAMS JR., LAWRENCE C. MAXWELL, MARY ELLEN MORRIS, and TRABUE, STURDIVANT & DEWITT, on the briefs) for petitioner; WILLIAM H. BODE, Washington, D.C. (LUIS M. ACOSTA, and WILLIAM H. BODE & ASSOCIATES, on the briefs) for respondents. RICHARD H. SEAMON, Assistant to Solicitor General (DREW S. DAYS III, Sol. Gen., FRANK W. HUNGER, Asst. Atty. Gen., EDWIN S. KNEEDLER, Dpty. Sol. Gen., and BARBARA C. BIDDLE and WENDY M. KEATS, Dept. of Justice attys., on the briefs) for U.S. as amicus curiae.
JUSTICE SCALIA delivered the opinion of the Court.
The Plant Variety Protection Act of 1970, 7 U.S.C. 2321 et seq., protects owners of novel seed varieties against unauthorized sales of their seed for replanting purposes. An exemption, however, allows farmers to make some sales of protected variety seed to other farmers. This case raises the question of whether there is a limit to the quantity of protected seed that a farmer can sell under this exemption.
In 1970, Congress passed the Plant Variety Protection Act (PVPA) 84 Stat. 1542, 7 U.S.C. 2321 et seq., in order to provide developers of novel plant varieties with "adequate encouragement for research, and for marketing when appropriate, to yield for the public the benefits of new varieties," 2581. The PVPA extends patent-like protection to novel varieties of sexually reproduced plants (that is, plants grown from seed) which parallels the protection afforded asexually reproduced plant varieties (that is, varieties reproduced by propagation or [ ASGROW SEED COMPANY v. WINTERBOER, ___ U.S. ___ (1995) , 2] grafting) under Chapter 15 of the Patent Act. See 35 U.S.C. 161-164.
The developer of a novel variety obtains PVPA coverage by acquiring a certificate of protection from the Plant Variety Protection Office. See 7 U.S.C. 2421, 2422, 2481-2483. This confers on the owner the exclusive right for 18 years to "exclude others from selling the variety, or offering it for sale, or reproducing it, or importing it, or exporting it, or using it in producing (as distinguished from developing) a hybrid or different variety therefrom." 2483.
Petitioner, Asgrow Seed Company is the holder of PVPA certificates protecting two novel varieties of soybean seed, which it calls A1937 and A2234. Respondents, Dennis and Becky Winterboer, are Iowa farmers whose farm spans 800 acres of Clay County, in the northwest corner of the state. The Winterboers have incorporated under the name "D-Double-U Corporation" and do business under the name "DeeBee's Feed and Seed." In addition to growing crops for sale as food and livestock feed, since 1987 the Winterboers have derived a sizable portion of their income from "brown-bag" sales of their crops to other farmers to use as seed. A brownbag sale occurs when a farmer purchases seed from a seed company, such as Asgrow, plants the seed in his own fields, harvests the crop, cleans it, and then sells the reproduced seed to other farmers (usually in nondescript brown bags) for them to plant as crop-seed on their own farms. During 1990, the Winterboers planted 265 acres of A1937 and A2234, and sold the entire saleable crop, 10,529 bushels, to others for use as seed enough to plant 10,000 acres. The average sale price was $8.70 per bushel, compared with a then-current price of $16.20 to $16.80 per bushel to obtain varieties A1937 and A2234 directly from Asgrow.
Concerned that the Winterboers were making a business out of selling its protected seed, Asgrow sent a [ ASGROW SEED COMPANY v. WINTERBOER, ___ U.S. ___ (1995) , 3] local farmer, Robert Ness, to the Winterboer farm to make a purchase. Mr. Winterboer informed Ness that he could sell him soybean seed that was "just like" Asgrow varieties A1937 and A2234. Ness purchased 20 bags of each; a plant biologist for Asgrow tested the seeds and determined that they were indeed A1937 and A2234.
Asgrow brought suit against the Winterboers in Federal District Court for the Northern District of Iowa, seeking damages and a permanent injunction against sale of seed harvested from crops grown from A1937 and A2234. The complaint alleged infringement under 7 U.S.C. 2541 (1), for selling or offering to sell Asgrow's protected soybean varieties; under 2541 (3), for sexually multiplying Asgrow's novel varieties as a step in marketing those varieties for growing purposes; and under 2541 (6), for dispensing the novel varieties to others in a form that could be propagated without notice that the seeds were of a protected variety. 1 [ ASGROW SEED COMPANY v. WINTERBOER, ___ U.S. ___ (1995) , 4]
The Winterboers did not deny that Asgrow held valid certificates of protection covering A1937 and A2243, and that they had sold seed produced from those varieties for others to use as seed. Their defense, at least to the 2541 (1) and (3) charges, rested upon the contention that their sales fell within the statutory exemption from infringement liability found in 7 U.S.C. 2543. That section, entitled "Right to save seed; crop exemption," reads in relevant part as follows:
The United States Court of Appeals for the Federal Circuit reversed. 982 F.2d 486 (1992). Although "recogniz[ing] that, without meaningful limitations, the crop exemption [of 2543] could undercut much of the PVPA's incentives," id., at 491, the Court of Appeals saw nothing in 2543 that would limit the sale of protected seed (for reproductive purposes) to the amount necessary to plant the seller's own acreage. Rather, as the Court of Appeals read the statute, 2543 permits a farmer to sell up to half of every crop he produces from PVPA-protected seed to another farmer for use as seed, so long as he sells the other 50 percent of the crop grown from that specific variety for nonreproductive purposes, e.g., for food or feed. The Federal Circuit denied Asgrow's petition for rehearing and suggestion for rehearing en banc by a vote of six judges to five. 989 F.2d 478 (1993). We granted certiorari. 511 U.S. ___ (1994).
It may be well to acknowledge at the outset that it is quite impossible to make complete sense of the provision at issue here. One need go no further than the very first words of its title to establish that. Section 2543 does not, as that title claims and the ensuing text says, reserve any "[r]ight to save seed" - since nothing elsewhere in the Act remotely prohibits the saving of seed. Nor, under any possible analysis, is the proviso in the first sentence of 2543 ("Provided, That") really a proviso.
With this advance warning that not all mysteries will be solved, we enter the verbal maze of 2543. The entrance, we discover, is actually an exit, since the provision begins by excepting certain activities from its operation: "Except to the extent that such action may [ ASGROW SEED COMPANY v. WINTERBOER, ___ U.S. ___ (1995) , 7] constitute an infringement under subsections (3) and (4) of section 2541 of this title, it shall not infringe any right hereunder for a person to save seed produced by him . . . and use such saved seed in the production of a crop for use on his farm, or for sale as provided in this section . . . ." (emphasis added). Thus, a farmer does not qualify for the exemption from infringement liability if he has
The PVPA does not define "marketing." When terms used in a statute are undefined, we give them their ordinary meaning. FDIC v. Meyer, 510 U.S. ___, ___ (1994) (slip op., at 5-6). The Federal Circuit believed that the word "marketing" requires "extensive or coordinated selling activities, such as advertising, using an intervening sales representative, or similar extended [ ASGROW SEED COMPANY v. WINTERBOER, ___ U.S. ___ (1995) , 8] merchandising or retail activities." 982 F.2d, at 492. We disagree. Marketing ordinarily refers to the act of holding forth property for sale, together with the activities preparatory thereto (in the present case, cleaning, drying, bagging and pricing the seeds). The word does not require that the promotional or merchandising activities connected with the selling be extensive. One can market apples by simply displaying them on a cart with a price tag; or market a stock by simply listing it on a stock exchange; or market a house (we would normally say "place it on the market") by simply setting a "for sale" sign on the front lawn. Indeed, some dictionaries give as one meaning of "market" simply "to sell." See, e.g., Oxford Universal Dictionary 1208 (3d ed. 1955); Webster's New International Dictionary 1504 (2d ed. 1950). Of course effective selling often involves extensive promotional activities, and when they occur they are all part of the "marketing." But even when the holding forth for sale relies upon no more than word-of-mouth advertising, a marketing of goods is in process. Moreover, even if the word "marketing" could, in one of its meanings, demand extensive promotion, we see no reason why the law at issue here would intend that meaning. That would have the effect of preserving PVPA protection for less valuable plant varieties, but eliminating it for varieties so desirable that they can be marketed by word of mouth; as well as the effect of requiring courts to ponder the difficult question of how much promotion is necessary to constitute marketing. We think that when the statute refers to sexually multiplying a variety "as a step in marketing," it means growing seed of the variety for the purpose of putting the crop up for sale. 3 Under the exception set out in [ ASGROW SEED COMPANY v. WINTERBOER, ___ U.S. ___ (1995) , 9] the first clause of 2543, then, a farmer is not eligible for the 2543 exemption if he plants and saves seeds for the purpose of selling the seeds that they produce for replanting.
Section 2543 next provides that, so long as a person is not violating either 2541 (3) or (4),
There are two ways to read the provision, depending upon which words the phrase "for sale as provided in this section" is taken to modify. It can be read "production of a crop . . . for sale as provided in this section"; or alternatively "use such saved seed . . . for sale as provided in this section." The parallelism created by the phrase "for use on his farm" followed immediately by "or for sale as provided in this section, suggests the former reading. But the placement of the comma, separating "use [of] such saved seed in the production of a crop for use on his farm," from "or for sale" favors the latter reading. So does the fact that the alternative reading requires the reader to skip the lengthy "Provided, That" clause in order to find out what sales are "provided [for] in this section" - despite the parallelism between "provided" and "Provided," and despite the presence of a colon, which ordinarily indicates specification of what has preceded. It is surely easier to think that at least some of the sales "provided for" are those that are "Provided" after the colon. (It is of course not unusual, however deplorable it may be, for "Provided, That" to be used as prologue to an addition rather than an exception. See Springer v. Philippine Islands, 277 U.S. 189, 206 (1928); 1A N. Singer, Sutherland on Statutory Construction 20.22 (5th ed. 1992).)
We think the latter reading is also to be preferred because it lends greater meaning to all the provisions. Under the former reading, ("production of a crop . . . for sale as provided in this section") the only later text that could be referred to is the provision for "bona fide sale[s] for other than reproductive purposes" set out in the second sentence of 2543 - the so-called "crop exemption". (The proviso could not be referred to, since it does not provide for sale of crops grown from saved seed, but only for sale of saved seed itself.) But if the "or for sale" provision has such a limited referent, the opening clause's ("Except to the extent that . . .") reservation of [ ASGROW SEED COMPANY v. WINTERBOER, ___ U.S. ___ (1995) , 11] 2541 (3) infringement liability (i.e., liability for growing as a step in marketing for reproductive purposes) would be devoid of content, since the provision to which it is attached would permit no sales for reproductive purposes. Under the latter reading, by contrast, the farmer may not "use [his] saved seed . . . for sale" as the proviso allows if the seed was intentionally grown for the purpose of such sale - i.e., "sexually multipl[ied] . . . as a step in marketing (for growing purposes) the variety." 4 A second respect in which our favored reading gives greater meaning to the provision is this: The other reading ("crop . . . for sale as provided in this section") causes the "permission" given in the opening sentence to extend only to sales for nonreproductive purposes of the crops grown from saved seed, as opposed to sales of the saved seed itself. But no separate permission would have been required for this, since it is already contained within the crop exemption itself; it serves only as a reminder that crop from saved seed can be sold under that exemption - a peculiarly incomplete reminder, since the saved seed itself can also be sold under that exemption.
To summarize: By reason of its proviso the first sentence of 2543 allows seed that has been preserved for reproductive purposes ("saved seed") to be sold for such purposes. The structure of the sentence is such, however, that this authorization does not extend to [ ASGROW SEED COMPANY v. WINTERBOER, ___ U.S. ___ (1995) , 12] saved seed that was grown for the very purpose of sale ("marketing") for replanting - because in that case, 2541 (3) would be violated, and the above-discussed exception to the exemption would apply. As a practical matter, since 2541 (1) prohibits all unauthorized transfer of title to or possession of the protected variety, this means that the only seed that can be sold under the proviso is seed that has been saved by the farmer to replant his own acreage. 5 (We think that limitation is also apparent from the text of the crop exemption, which permits a farm crop from saved seeds to be sold - for nonreproductive purposes - only if those saved seeds were "produced by descent on such farm" (emphasis added). It is in our view the proviso in 2543, and not the crop exemption, which authorizes the permitted buyers of saved seeds to sell the crops they produce.) Thus, if a farmer saves seeds to replant his acreage, but for some reason changes his plans, he may instead sell those seeds for replanting under the terms set forth in the proviso (or of course sell them for nonreproductive purposes under the crop exemption). [ ASGROW SEED COMPANY v. WINTERBOER, ___ U.S. ___ (1995) , 13]
It remains to discuss one final feature of the proviso authorizing limited sales for reproductive purposes. The proviso allows sales of saved seed for replanting purposes only between persons "whose primary farming occupation is the growing of crops for sale for other than reproductive purposes." The Federal Circuit, which rejected the proposition that the only seed sellable under the exemption is seed saved for the farmer's own replanting, sought to achieve some limitation upon the quantity of seed that can be sold for reproductive purposes by adopting a "crop-by-crop" approach to the "primary farming occupation" requirement of the proviso. "[B]uyers or sellers of brown bag seed qualify for the crop exemption," it concluded, "only if they produce a larger crop from a protected seed for consumption (or other nonreproductive purposes) than for sale as seed." 982 F.2d, at 490. That is to say, the brown-bag seller can sell no more than half of his protected crop for seed. The words of the statute, however, stand in the way of this creative (if somewhat insubstantial) limitation. To ask what is a farmer's "primary farming occupation" is to ask what constitutes the bulk of his total farming business. Selling crops for other than reproductive purposes must constitute the preponderance of the farmer's business, not just the preponderance of his business in the protected seed. There is simply no way to derive from this text the narrower focus that the Federal Circuit applied. Thus, if the quantity of seed that can be sold is not limited as we have described - by reference to the original purpose for which the seed is saved - then it is barely limited at all (i.e., limited only by the volume or worth of the selling farmer's total crop sales for other than reproductive purposes). This seems to us a most unlikely result. [ ASGROW SEED COMPANY v. WINTERBOER, ___ U.S. ___ (1995) , 14]
The judgment of the Court of Appeals for the Federal Circuit is
[ Footnote 2 ] Congress has recently amended this section by striking from the first sentence the words "`section: Provided, That' and all that follows through the period and inserting `section.'" Plant Variety Protection Act Amendments of 1994, Pub. L. 103-349, 108 Stat. 3136, 3142. That amendment has the effect of eliminating the exemption from infringement liability for farmers who sell PVPA-protected seed to other farmers for reproductive purposes. That action, however, has no bearing on the resolution of the present case, since the amendments affect only those certificates issued after April 4, 1995, that were not pending on or before that date. See id., 14 (a), 15, 108 Stat. 3144, 3145.
[ Footnote 3 ] The dissent asserts that the Federal Circuit's more demanding interpretation of "marketing" is supported by the ancient doctrine disfavoring restraints on alienation of property, see post, at 2-3. [ ASGROW SEED COMPANY v. WINTERBOER, ___ U.S. ___ (1995) , 9] The wellspring of that doctrine, of course, is concern for property rights, and in the context of the PVPA it is the dissent's interpretation, rather than ours, which belittles that concern. The whole purpose of the statute is to create a valuable property in the product of botanical research by giving the developer the right to "exclude others from selling the variety, or offering it for sale, or reproducing it, or importing it, or exporting it," etc. 7 U.S.C. 2483. Applying the rule disfavoring restraints on alienation to interpretation of the PVPA is rather like applying the rule disfavoring restraints upon freedom of contract to interpretation of the Sherman Act.
[ Footnote 4 ] This reading also gives meaning to the proviso's statement that "without regard to the provisions of section 2541 (3) . . . it shall not infringe any right hereunder" for a person to engage in certain sales of saved seed for reproductive purposes (emphasis added). This serves to eliminate the technical argument that a production of seed which was originally in compliance with 2541 (3) (because it was not done as a step in marketing for reproductive purposes) could retroactively be rendered unlawful by the later sale permitted in the proviso, because such sale causes the earlier production to have been "a step in the marketing" for reproductive purposes.
[ Footnote 5 ] For crops such as soybeans, in which the seed and the harvest are one and the same, this will mean enough seeds for one year's crop on that acreage. Since the germination rate of a batch of seed declines over time, the soybean farmer will get the year-after-next's seeds from next year's harvest. That is not so for some vegetable crops, in which the seed is not the harvest, and a portion of the crop must be permitted to overripen ("go to seed") in order to obtain seeds. One of the amici in the Court of Appeals asserted (and the parties before us did not dispute) that it is the practice of vegetable farmers to "grow" seeds only every four or five years, and to "brown bag" enough seed for four or five future crops. A vegetable farmer who sets aside protected seed with subsequent replantings in mind but who later abandons his plan (because he has sold his farm, for example), would under our analysis be able to sell all his saved seed, even though it would plant (in a single year) four or five times his current acreage. [ ASGROW SEED COMPANY v. WINTERBOER, ___ U.S. ___ (1995) , 1]
JUSTICE STEVENS, dissenting.
The key to this statutory puzzle is the meaning of the phrase, "as a step in marketing," as used in 7 U.S.C. 2541 (a)(3). If it is synonymous with "for the purpose of selling," as the Court holds, see ante, at 7-8, then the majority's comprehensive exposition of the statute is correct. I record my dissent only because that phrase conveys a different message to me.
There must be a reason why Congress used the word "marketing" rather than the more common term "selling." Indeed, in 2541 (a)(1), contained in the same subsection of the statute as the crucial language, Congress made it an act of infringement to "sell the novel variety." Yet, in 2541 (a)(3), a mere two clauses later, Congress eschewed the word "sell" in favor of "marketing." Because Congress obviously could have prohibited sexual multiplication "as a step in selling," I presume that when it elected to prohibit sexual multiplication only "as a step in marketing (for growing purposes) the variety," Congress meant something different.
Moreover, as used in this statute, "marketing" must be narrower, not broader, than selling. The majority is correct that one dictionary meaning of "marketing" is the act of selling and all acts preparatory thereto. See ante, [ ASGROW SEED COMPANY v. WINTERBOER, ___ U.S. ___ (1995) , 2] at 7-8. But Congress has prohibited only one preparatory act - that of sexual multiplication - and only when it is a step in marketing. Under the majority's broad definition of "marketing," prohibiting sexual multiplication "as a step in marketing" can be no broader than prohibiting sexual multiplication "as a step in selling," because all steps in marketing are, ultimately, steps in selling. If "marketing" can be no broader than "selling," and if Congress did not intend the two terms to be coextensive, then "marketing" must encompass something less than all "selling."
The statute as a whole and as interpreted by the Court of Appeals - indicates that Congress intended to preserve the farmer's right to engage in so-called "brown-bag sales" of seed to neighboring farmers. Congress limited that right by the express requirement that such sales may not constitute the "primary farming occupation" of either the buyer or the seller. Moreover, 2541 (a)(3) makes it abundantly clear that the unauthorized participation in "marketing" of protected varieties is taboo. If one interprets "marketing" to refer to a subcategory of selling activities, namely merchandising through farm cooperatives, wholesalers, retailers, or other commercial distributors, the entire statute seems to make sense. I think Congress wanted to allow any ordinary brown-bag sale from one farmer to another; but, as the Court of Appeals concluded, it did not want to permit farmers to compete with seed manufacturers on their own ground, through "extensive or coordinated selling activities, such as advertising, using an intervening sales representative, or similar extended merchandising or retail activities." 982 F.2d 486, 492 (CA Fed. 1992).
This reading of the statute is consistent with our time-honored practice of viewing restraints on the alienation of property with disfavor. See, e.g., Sexton v. Wheaton, 8 Wheat. 229, 242 (1823) (opinion of Marshall, [ ASGROW SEED COMPANY v. WINTERBOER, ___ U.S. ___ (1995) , 3] C.J.). * The seed at issue is part of a crop planted and harvested by a farmer on his own property. Generally the owner of personal property even a patented or copyrighted article is free to dispose of that property as he sees fit. See, e.g., United States v. Univis Lens Co., 316 U.S. 241, 250 -252 (1942); Bobbs-Merrill Co. v. Straus, 210 U.S. 339, 350-351 (1908). A statutory restraint on this basic freedom should be expressed clearly and unambiguously. Cf. Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 530 -531 (1972). As the majority recognizes, the meaning of this statute is "by no means clear." Ante, at 14. Accordingly, both because I am persuaded that the Court of Appeals correctly interpreted the intent of Congress, and because doubts should be resolved against purported restraints on freedom, I would affirm the judgment below.
[ Footnote * ] "It would seem to be a consequence of that absolute power which a man possesses over his own property, that he may make any disposition of it which does not interfere with the existing rights of others, and such disposition, if it be fair and real, will be valid. The limitations on this power are those only which are prescribed by law." Sexton v. Wheaton, 8 Wheat. 229, 242 (1823). Page I