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Patent Exhaustion Rejected: Patented Seed Purchaser Has No Right to Make Copies

by Paul Devinsky, Cynthia Chen and Lincoln Mayer

The Supreme Court in Bowman v. Monsanto Co. ruled unanimously that a farmer’s replanting of harvested seeds constituted making new infringing articles. While the case is important for agricultural industries, the Supreme Court cautioned that its decision is limited to the facts of the Bowman case and is not a pronouncement regarding all self-replicating products.

To read the full article, click here.

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Potato Price-Fixing Case Survives Motion to Dismiss Holds That Pre-Production Agricultural Output Restrictions Are Not Exempt Under Capper-Volstead

by Gregory E. Heltzer and Nicole Castle

On December 2, 2011, a federal judge overseeing multidistrict litigation involving an alleged potato price-fixing conspiracy denied a motion to dismiss the antitrust conspiracy claims despite the potato grower cooperatives asserting that the concerted action was permissible under the Capper-Volstead Act.  In Re: Fresh and Process Potatoes Antitrust Litigation, No. 10-2186 (D. Idaho).

In particular, the plaintiffs alleged that defendants increased the price of potatoes through reduction of potato planting acreages and by paying farmers to destroy existing stocks.  Not only did the court deny the motion to dismiss on several grounds, but took the “extraordinary step” of providing an “advisory opinion” regarding an area of law with scant precedent.  The court was willing to offer its opinion at this stage because there were no disputed facts on this legal issue, the parties had fully briefed and argued the matter, and in the court’s view providing this holding at this juncture was consistent with the “command of Rule 1” of the Federal Rules of Civil Procedure – the opinion would help secure the just, speedy and inexpensive determination of the proceeding.

The court’s “advisory opinion” held that pre-production agricultural output limitations among growers are not defensible agreements under the Capper-Volstead Act.  The court explained that the plain language of the Capper-Volstead Act protects concerted action after production, that is, growers can collectively process, prepare for market, handle and market its products.  According to the court, coordinating and reducing acreage for planting are not defensible because these actions come before production.

The court later opined that the distinction between pre-production output limitation agreements and post-production marketing decisions to withhold product from markets comports with underlying antitrust theory because if prices rise, “farmers will produce more and consumers will not be overcharged.”  The court explained that this is a “safety-valve against private abuse that ameliorates the adverse consumer impact of the Capper-Volstead exemption” and that this safeguard is not in play if cooperatives can enforce pre-production limitations.

This decision offers new law and should lead cooperatives to revisit any production curtailment agreements and consider whether any such programs comport with this court’s interpretation of the Capper Volstead Act.

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Antitrust Agriculture Update: Mushroom Grower Direct Purchaser Litigation

by Lincoln Mayer and Gregory E. Heltzer

On August 23, the Third Circuit denied interlocutory review of an order from the Eastern District of Pennsylvania, which held that defendant mushroom growers were "not a proper agricultural cooperative under the Capper-Volstead Act because one of its members was not technically a grower of agricultural produce."  In re: Mushroom Direct Purchaser Antitrust Litigation, Nos. 09-2257, 09-2258, slip op. at 13 (3d Cir. Aug. 23, 2011).

The Third Circuit agreed with the growers that "whether the arguably inadvertent inclusion of an ineligible member strips an agricultural cooperative of Capper-Volstead protection, is both serious and unsettled."  Id. at 16 n.4.  However, the court considered and rejected the growers’ argument that Capper-Volstead provides not merely a defense to liability, but immunity from suit:  "Neither the language of the Capper-Volstead Act nor Supreme Court cases interpreting it indicate that the Act entitles an agricultural cooperative to avoid entirely the burden of litigation.  Because the Act does not provide an immunity from suit, a district court order denying a defendant its protections is not effectively unreviewable after final judgment . . . ."  Id. at 24; see id. at 18-24.

While the holding that the Capper-Volstead Act does not confer immunity from suit is unsurprising, multiple courts have accepted that de minimis accidental inclusion of non-growers in a cooperative does not defeat Capper-Volstead protection.  This decision, however, heightens the antitrust risk associated with such a scenario, and reinforces the importance for Capper-Volstead cooperatives of vigilantly policing their membership roles.  Even just one ineligible member risks exposing the cooperative to unwanted and potentially protracted litigation.

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Proposed GIPSA Rule

by Carrie G. Amezcua

Earlier this week, The Tribune (Greely, Colorado) published the article below discussing proposed changes to livestock marketing rules.  The article discusses the pros and cons of the Grain Inspection, Packers and Stockyards Administration proposed rule – commonly referred to as the GIPSA rule.  

"New rules were mandated by the 2008 Farm Bill, which required the U.S. Department of Agriculture to conduct rulemaking that ‘improves fairness in the marketing of livestock and poultry.’"

The rule aims to promote fairness and transparency, and would make it easier for a plaintiff to bring a case under the Packers & Stockyards Act by no longer requiring that the plaintiff  first show harm to competition in a complaint alleging certain unfair trade practices.  However, critics say that the changes will promote unnecessary litigation and would result in anywhere from 22,800 to 104,000 jobs lost.

Comments on the new rule were due November 22, 2010 and are currently being reviewed.  However, on January 21, 2011, the USDA published one change to their regulations requiring testing of scales twice per year, at defined 6 month intervals. 

More information on GIPSA  and the 2008 Farm Bill can be found here:

Proposed changes in livestock marketing rules prompt fears, confusion
Link to article:

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Antitrust and Agriculture: Summary of DOJ/USDA Workshops and New Article on Capper-Volstead

by Greg E. Heltzer, Carrie G. Amezcua and Jennifer L. Westbrook

The DOJ and USDA just completed a series of five workshops on competition in the agriculture industry.  The two agencies have a renewed their focus on competition in this industry and have promised more activity in this area.  The highlights from each of the workshops is described below.

An overview of all five workshops:
Issues of Concern to Farmers, March 12, 2010, Iowa

  • Opening statements and roundtable remarks by Attorney General Eric Holder, Assistant Attorney General Christine Varney and Secretary of Agriculture Tom Vilsack.
  • There was discussion about concentration in the seed industry and lack of choice among seed trait companies.  Also, farmers voiced concern about patents that nearing expiration where there are no generics yet in the pipeline.  (Subsequent to this workshop Monsanto announced it would pay for all regulatory approvals of Round Up Ready soybean patent through 2021 even though the patent expires in 2014).
  • The discussion from pork and livestock farmers centered on fairness, transparency and increased enforcement of existing laws such as the Packers and Stockyards Act.

Poultry Industry, May 21, 2010, Alabama

  • Opening statements and roundtable remarks by Attorney General Eric Holder, Assistant Attorney General Christine Varney and Secretary of Agriculture Tom Vilsack.
  • Mr. Holder announced the launch of the Agriculture Competition Joint Task Force, which is comprised of individuals from the DOJ and USDA.
  • There was discussion about the fairness of poultry contracts and transparency in the industry.
  • There were also comments on the lack of concentration of poultry processing companies, which reduces the choice farmers have.

Dairy Industry, June 25, 2010, Wisconsin

  • Opening statements and roundtable remarks by Assistant Attorney General Christine Varney and Secretary of Agriculture Tom Vilsack. (AG Eric Holder did not attend).
  • There was discussion about the gap between the prices consumers pay (relatively high) and prices that dairy farmers are paid by processors (relatively low).  The farmers are getting squeezed and having to sell below cost.
  • Consolidation in grocery retailing and the price pressure exerted by large retailers on dairy coops, as well as consolidation in dairy processors, were cited as a cause of low prices to farmers.

Livestock Industry, August 27, 2010, Colorado

  • Opening statements and roundtable remarks by Attorney General Eric Holder, Assistant Attorney General Christine Varney and Secretary of Agriculture Tom Vilsack.
  • The workshop focused on issues regarding the ability of cattle and hog producers to earn sustainable returns.
  • There was discussion about whether reducing the market power of the packers and increasing bid competition for cattlemen’s animals would raise prices that cattlemen could obtain.
  • There was also discussion about how concentration of packers and concentration among retail grocers negatively affects prices producers can get for their livestock.

Margins, December 8, 2010, Washington, D.C.

  • Opening statements and roundtable remarks by Attorney General Eric Holder, Assistant Attorney General Christine Varney and Secretary of Agriculture Tom Vilsack.
  • The workshop focused on margins at each [...]

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