Monsanto Co. v. McFarling

• Decision Date: 23 August 2002
• Docket Number: No. 01-1390.,01-1390.
• Citation: 302 F.3d 1291
• Parties: MONSANTO COMPANY, Plaintiff-Appellee, v. Homan McFARLING, Defendant-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

302 F.3d 1291

MONSANTO COMPANY, Plaintiff-Appellee, v. Homan McFARLING, Defendant-Appellant.

No. 01-1390.

United States Court of Appeals, Federal Circuit.

Decided: August 23, 2002.

Rehearing En Banc Denied: October 16, 2002.^*

Seth P. Waxman, Wilmer, Cutler & Pickering, of Washington, DC, argued for plaintiff-appellee. On the brief was Joseph C. Orlet, Husch & Eppenberger, LLC, of St. Louis, MO. Also of counsel on the brief was Douglas P. Matthews, Frilot, Partridge, Kohnke & Clements, of New Orleans, LA.

Jim Waide, Waide & Associates, P.A., of Tupelo, MS, argued for defendant-appellant.

Before NEWMAN, CLEVENGER, and BRYSON, Circuit Judges.

Opinion for the court filed by Circuit Judge PAULINE NEWMAN. Dissenting opinion filed by Circuit Judge CLEVENGER.

PAULINE NEWMAN, Circuit Judge.

Mr. Homan McFarling appeals the grant of a preliminary injunction by the United States District Court for the Eastern District of Missouri,¹ prohibiting Mr. McFarling, pendente lite, from using the plant genes and seed obtained from crops grown from Monsanto Company's patented soybean seed having the brand name Roundup Ready. We conclude that the district court acted within its discretion in granting the preliminary injunction.

BACKGROUND

Monsanto developed genetically modified plants that are resistant to glyphosate herbicides such as Roundup® brand herbicide. The herbicide can then be sprayed broadly in planted fields, killing the weeds but not harming the resistant crops. This results in substantial savings in labor costs for weed control. Monsanto's United States Patents Nos. 5,633,435 and 5,352,605 claim the glyphosate-tolerant plants, the genetically modified seeds for such plants, the specific modified genes, and the method of producing the genetically modified plants.

Monsanto authorizes various companies to manufacture the patented seeds, which are then sold to farmers. Monsanto requires that sellers of the patented seeds obtain from the farmers/purchasers a "Technology Agreement," and the farmers pay a license fee to Monsanto of $6.50 per 50-pound bag of soybean seed. Mr. McFarling, a farmer in Mississippi, purchased Roundup Ready® soybean seed in 1997 and again in 1998; he signed the Technology Agreement and paid the license fee for each purchase. The signature line is immediately below the following statement: "I acknowledge that I have read and understand the terms and conditions of this Agreement and that I agree to them."

The agreements include the requirement that the seeds are to be used "for planting a commercial crop only in a single season" and direct the licensee not to "save any crop produced from this seed for replanting, or supply saved seeds to anyone for replanting." Mr. McFarling does not dispute that he violated the terms of the Technology Agreement. He saved 1,500 bushels of the patented soybeans from his harvest during one season, and instead of selling these soybeans as crop he planted them as seed in the next season. He repeated this activity in the following growing season, and stated that unless enjoined he intended to plant soybeans saved from the 2000 harvest in 2001. McFarling paid no license fee for this saved soybean seed, which retained the genetic modifications of the Roundup Ready® seed.

Monsanto filed suit in the Eastern District of Missouri, charging patent infringement and breach of contract, and seeking a preliminary injunction. Mr. McFarling challenged the Missouri court's jurisdiction, and raised various counterclaims and defenses including charges of antitrust violation, patent misuse, and violation of the Plant Variety Protection Act, 7 U.S.C. § 2321 et seq. (PVPA). The district court interpreted the argument concerning violation of the PVPA as a request for declaration that the patents are invalid or unenforceable, granted McFarling's motion to stay the proceeding pending review by the Supreme Court of this court's ruling that plant seeds and seed-grown plants are within the subject matter of § 101 of the Patent Act. The Court affirmed that ruling in J.E.M. AG Supply, Inc. v. Pioneer Hi-Bred International, Inc., 534 U.S. 124, 122 S.Ct. 593, 151 L.Ed.2d 508, 60 USPQ2d 1865 (2001).

The district court denied Mr. McFarling's motion to dismiss for lack of personal jurisdiction and granted Monsanto's motion for a preliminary injunction. This appeal followed.

DISCUSSION

The Forum Selection Clause

Mr. McFarling argues that the district court did not acquire personal jurisdiction over him based on the forum selection clause in the 1998 Technology Agreement. This clause was printed in capital letters, indeed the only provision of the Technology Agreement that is in all capital letters. All of the provisions of the Technology Agreement are on the same page, on the reverse side of the signature page:

THIS AGREEMENT IS GOVERNED BY THE LAWS OF THE STATE OF MISSOURI AND THE UNITED STATES (OTHER THAN THE CHOICE OF LAW RULES). THE PARTIES CONSENT TO THE EXCLUSIVE JURISDICTION OF THE U.S. DISTRICT COURT FOR THE EASTERN DISTRICT OF MISSOURI, EASTERN DIVISION, AND THE CIRCUIT COURT OF THE COUNTY OF ST. LOUIS, STATE OF MISSOURI, FOR ALL DISPUTES ARISING UNDER THIS AGREEMENT.

McFarling states that he never turned over the agreement,² and that he did not consent to jurisdiction in Missouri based on a forum selection clause that he did not intentionally sign. McFarling argues that he has no contacts with Missouri, and that the Missouri district court's exercise of personal jurisdiction violates his due process rights under the Fifth Amendment.

Whether a district court has personal jurisdiction of a defendant in a patent infringement action is subject to plenary review. Inamed Corp. v. Kuzmak, 249 F.3d 1356, 1359, 58 USPQ2d 1774, 1776 (Fed.Cir.2001). The issue here is not the reach of a state's long-arm statute, but the effect of a forum selection clause whereby jurisdiction is obtained by contractual consent or waiver. Such a clause is enforceable unless the party challenging it clearly demonstrates that it is invalid or that enforcement would be unreasonable and unjust. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 n. 14, 105 S.Ct. 2174 85 L.Ed.2d 528 (1985) (noting that the enforcement of freely negotiated forum selection provisions "does not offend due process" when the provisions are neither unreasonable nor unjust); see also M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972) (holding that a forum selection clause requiring suit in a foreign court should be enforced unless the plaintiff attempting to avoid it "could clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud or overreaching").

The district court held that the forum selection clause of the Technology Agreement is valid and enforceable. Mr. McFarling, challenging this holding on the ground of fairness, refers to Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991), in which the Court held enforceable a forum selection clause printed on a cruise ticket, but stated that "forum-selection clauses contained in form passage contracts are subject to judicial scrutiny for fundamental fairness." Id. at 595, 111 S.Ct. 1522. McFarling states that unlike a cruise ship that carries passengers to and from many places, he purchased, planted, and harvested the seeds, and executed the Technology Agreements, all in Mississippi, and thus that Mississippi is clearly the fairest forum. He states that the plaintiffs in Carnival conceded that they had notice of the forum selection provision, but that he did not have notice because he did not read the back of the agreement. McFarling cites Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102, 112, 107 S.Ct. 1026, 94 L.Ed.2d 92 (1987), for the proposition that minimum contact jurisdictional standards are not met unless the defendant performed an act "purposefully directed toward the forum State," and argues that his "negligent" signing of the agreement was not purposeful. The district court correctly viewed the issue as one of validity of the contract provision, not an issue of minimum contacts.

Forum selection clauses are valid and accepted unless they are clearly unreasonable or fraudulent. Monsanto argues that the clause is reasonable because of Monsanto's legitimate interest in litigating disputes arising from these Technology Agreements in the venue of its principal place of business, one of the justifications asserted by the cruise line in Carnival. Monsanto also states that this common venue enhances judicial efficiency, produces greater uniformity of result, and decreases litigation costs.

The district court found that Mr. McFarling did not dispute that his ignorance of the clause was solely the result of his voluntary failure to read what he signed. A party who signs an agreement is bound by its terms, unless he was fraudulently induced not to read it or was fraudulently misled as to its content or significance. See Bradley v. Chiron Corp., 136 F.3d 1317, 1322, 45 USPQ2d 1819, 1822 (Fed.Cir.1998) (applying California law that a person is bound to a written agreement that he signs but neglects to read). Both Missouri and Mississippi contract law reflect this universal rule, making it unnecessary to consider choice of law issues. See, e.g., Binkley v. Palmer, 10 S.W.3d 166, 171 (Mo.Ct.App.1999) ("It has long been settled in Missouri that absent a showing of fraud, a party who is capable of reading and understanding a contract is charged with the knowledge of that which he or she signs."); Oglesbee v. National Security Fire & Casualty Co., 788 F.Supp. 909, 913 (S.D.Miss.1992) ("Under Mississippi law, unless a party was induced not to read the contract or have it read to him by fraudulent representation made by another party, he will be required to abide by its terms."). McFarling's argument that his voluntary failure to read the...