March 12 (Bloomberg) -- Monsanto Co., facing antitrust probes into its genetically modified seeds, may benefit from previous court rulings in which intellectual property rights
trumped competition concerns, antitrust lawyers say.

The Department of Justice and seven state attorneys general are investigating whether the world’s largest seed company is using gene licenses to keep competing technologies off the
market. At issue is how the St. Louis-based company sells and
licenses its patented trait that allows farmers to kill weeds
with Roundup herbicide while leaving crops unharmed. The
company’s Roundup Ready gene was in 93 percent of U.S. soybeans
last year.

“Justice is clearly trying every way it can to see whether Monsanto is exceeding its rights under the patent,” said James Weiss, a Washington-based attorney at K&L Gates LLP who helped
defend Microsoft Corp. against a federal antitrust probe. “At
the end of the day, they may not be able to do much with it
because of the scope of those patents. In almost all the cases,
the courts come out on the side of intellectual property.”

Yet Monsanto’s seeds are so ubiquitous that they have become like AT&T’s telephone lines before the company’s 1984 breakup or Microsoft Corp.’s Windows operating system in the
1990s, said James P. Denvir, an attorney who represents rival
seedmaker DuPont Co. and led the government’s AT&T case.

“Both cases involve what I think of as a classic platform monopoly,” Denvir said. “It’s a facility that competitors need access to, to compete against the monopolist.”

Monsanto and DuPont, which are suing each other over a biotech seed license, both hired former Justice Department lawyers who have handled high-profile cases.

‘Revolutionizing the Marketplace’

Monsanto’s attorney, Dan Webb, defended Microsoft in 2002 against government antitrust claims. A former U.S. Attorney in Chicago, he also prosecuted Admiral John Poindexter in the Iran-
Contra affair.

Webb credits Monsanto with “revolutionizing the agriculture marketplace” and said antitrust claims such as those in DuPont’s suit aren’t an uncommon response to patent
infringement cases such as Monsanto’s.

“The perception among farmers is that DuPont’s complaints about exclusivity are without merit,” said Webb, a Chicago- based Winston & Strawn LLP partner.

Denvir, who represents DuPont, said farmers are among the victims.

“Clearly, we are too,” he said. “The bigger harm, the more important harm, is to farmers in denying them the best seeds they can get at the lowest possible prices.”

Legal Monopoly

While patents provide some protection from antitrust claims, giving a company a legal monopoly for a specified time, patent rights can be abused, DuPont lawyers and others said.

“The question becomes whether or not somebody in that position has engaged in some bad acts that either got it in that position or are designed to maintain that position or to extend
that position to other markets,” said Charles “Rick” Rule, a
lawyer at Cadwalader Wickersham & Taft LLP who ran the Justice
Department’s antitrust unit under President Ronald Reagan.

Christine Varney, who heads the antitrust division in President Barack Obama’s administration, has signaled she’ll be more aggressive than the Bush administration, Rule said.

Varney said today that the Justice Department is investigating whether biotech-seed patents are being abused to extend or maintain companies’ dominance in the industry. She is
in Ankeny, Iowa, for a workshop on agriculture-market
competition that was organized by the Justice Department and the
Department of Agriculture.

‘Robust Patent System’

“There is a very robust patent system in this country and if you are abusing a patent to extend or maintain a monopoly, that is not legal,” Varney said. “We are looking at those very
important issues.”

The department probably is reviewing whether Monsanto’s licensing restrictions on seeds have a legitimate business justification, said Rule, who occasionally advises Monsanto and
isn’t working with Webb on the antitrust case.

“When you have that sort of monopoly power, it can lead to abuse, which is what we’ve been experiencing over the past several years,” said Thomas L. Sager, DuPont’s general counsel.

Wilmington, Delaware-based DuPont claims Monsanto protects its lead in biotech seeds, including the Roundup Ready seeds sold since 1996, by controlling whether competitors can add
their own genetics.

Roundup Ready 2 Yield

Monsanto also has begun switching seedmakers and growers from Roundup Ready soybeans to the newer Roundup Ready 2 Yield version in advance of the original’s patent expiration in 2014.
DuPont says Monsanto is using incentives and penalties to switch
the industry to the new product in a way that unlawfully extends
the Roundup Ready monopoly.

“This is about trying to obtain a level playing field so innovators can introduce combinations of choices to the farmer that increase yield and of course feed the world,” Sager said.

At least seven states are investigating many of the same claims, as well as whether Monsanto illegally offered rebates to distributors who limit sales of competing seed, according to one
person involved in the probe who asked not to be named because
he isn’t authorized to discuss it.

3M Co.’s use of rebates to induce retailers to buy more transparent tape and curtail purchases from a smaller supplier was ruled anticompetitive by the U.S. Circuit Court of Appeals
in 2003.

Addressing Criticisms

Monsanto has amended its practices to address some criticisms. The company will help the introduction of generic Roundup Ready soybeans by maintaining foreign import approvals
during the transition, a process that will be followed for off-
patent biotech seeds in the future, Chief Executive Officer Hugh
Grant said in a January interview. Monsanto last year stopped
giving rebates to dealers who limited competing seeds’ sales,
said Kelli Powers, a spokeswoman.

Monsanto will maintain foreign import approvals for generic Roundup Ready soybeans through 2017 and is willing to provide an industry group with the necessary health and safety data to
maintain foreign registrations beyond then, Jim Tobin, a company
vice president said today.

Monsanto pays as much as $2 million a year to maintain approvals in the seven countries that require periodic renewals, he said.

DuPont filed its federal antitrust case last year after Monsanto sued to block its rival from adding the Roundup Ready trait to seeds already modified to tolerate Roundup weed killer.

Trait Development ‘Stunted’

“Trait development has been stunted by the inability to get access to the Roundup Ready platform,” Denvir, an attorney with Boies Schiller & Flexner LLP, said in an interview in his
Washington office. The firm was founded by David Boies, who led
the government’s successful antitrust suit against Microsoft.
Roundup Ready is “licensed so broadly that if you want to offer
any trait, it has to be somehow combined with that trait.”

While Monsanto has promised to allow generic versions of its products to emerge, Denvir said he is unconvinced that will happen without government intervention.

Monsanto got its lead in seed biotechnology because it invested in research long before DuPont and other competitors, said Webb, Monsanto’s counsel. The company spent $6 billion on
seed research in the 10 years through 2008 and $1 billion a year
since then, said Powers, the company spokeswoman.

Among the cases relevant to the claims against Monsanto is a 2004 Supreme Court decision that Verizon Communications Inc. and other phone companies didn’t break laws by doing too little
to encourage competition, said Rule, the former antitrust
division head.

Xerox Ruling

A Federal Circuit Court of Appeals ruling in February 2000 that Xerox Corp. can’t be sued for using patents to establish or entrench a monopoly also may apply to the Monsanto disputes, he
said.

The cases reflect how U.S. courts have given intellectual property owners leeway to control licensing to make the property more valuable, encourage the owner to widely license the
technology and support further investment, he said.

Greg Neppl, with Foley & Lardner, agreed that intellectual property rights often trump antitrust concerns.

“The patent concerns are well protected in the law,” said Neppl. “Where the patent rights are clear, the antitrust issues are secondary. The antitrust concerns must respect the patent
owner.”

Monsanto persuaded U.S. District Judge Richard Webber in September to separate the licensing case from DuPont’s antitrust counterclaim. The seedmaker won an additional incremental
victory in January when Webber ruled that DuPont violated the
companies’ licensing agreement by combining Monsanto’s Roundup-
tolerance gene with a DuPont gene that does the same thing.

Counterclaim ‘Clutter’

Patent infringement is “a fair and proper case,” Webb said. “Monsanto will have its day in court and it will not be cluttered with the antitrust counterclaim.”

Monsanto shares climbed 1 percent to $72.35 at 4:01 p.m. in New York Stock Exchange composite trading, paring the decrease since DuPont filed its antitrust case in mid-June to 15 percent.
DuPont rose 14 cents to $35.49.

Justice Department probes typically move in tandem with related civil litigation because plaintiffs share information with the government, Neppl said.

“The antitrust division today is more willing to look at assertions” of anticompetitive behavior, Rule said. “This is something they have a right to look at. Once they get into an
investigation, they are pretty good at making up their own
mind.”

The case is Monsanto Co. v. E.I. DuPont de Nemours & Co., 09cv686, U.S. District Court, Eastern District of Missouri (St. Louis).