Shares of Monsanto, the world’s largest seed company, rose on Thursday and DuPont shares fell after Monsanto won a $1 billion victory over its archrival in a lawsuit concerning patents in the agricultural seed market.
The victory, which dealt with genetically modified seeds that allow crops to tolerate herbicides, should have little immediate impact in that lucrative marketplace. But it underscores Monsanto’s dominance over popular seed technology and could slow DuPont’s advancement, analysts said.
"This litigation and the product it covers is very backward looking," said industry analyst Mark Gulley, who pegged profit margins at 80 per cent for seed traits. "Those old products are being replaced with new technology. I don’t think this will affect either company in the short term."
After a three-week trial in St. Louis, the jury took less than an hour on Wednesday to find in favor of Monsanto, which claimed DuPont and its agricultural crop subsidiary DuPont Pioneer Hi-bred International, violated a 2002 licensing agreement.
That agreement gave DuPont the right to use Monsanto’s glyphosate-tolerant Roundup Ready trait, a wildly popular technology. But it said DuPont did not have the right to stack that with other traits. Monsanto said DuPont included the licensed Roundup Ready trait in combination with its own glyphosate-resistant genetic trait.
DuPont pledged to appeal the verdict.
Jefferies Co. analyst Laurence Alexander said the continued legal battles between the companies could "distract from the momentum" at DuPont’s agricultural seed unit Pioneer Hi-Bred International, and he said DuPont could see higher licensing costs in the future, which would dampen profits.
Monsanto’s shares rose 1.3 per cent Thursday to $87.52, while DuPont shares fell 1.1 per cent to $49.40.
The U.S. District Court in St. Louis ruled in 2010 that the Roundup Ready license agreements between DuPont and Monsanto contain an unwritten "implied" term that prohibited DuPont from stacking its Optimum GAT trait with Monsanto’s Roundup Ready trait in soybeans or corn.
DuPont claims that Monsanto acted fraudulently in obtaining the patent and thus rendered it invalid.
"There were several fundamental errors in the case which deprived the jury of important facts and arguments and led to the disappointing outcome," DuPont said in a statement.
Besides appealing this verdict, DuPont is pressing a separate patent misuse case and antitrust claims against Monsanto and a trial on those issues is set for September 2013.
Monsanto maintained that DuPont willfully violated its patent because its own technology was failing.
"This verdict highlights that all companies that make early and substantial investments in developing cutting edge technology will have their intellectual property rights upheld and fairly valued," David Snively, Monsanto general counsel, said in a statement.
Monsanto’s patent on Roundup Ready soybeans expires in 2014 and both Monsanto and DuPont have fresh versions of the technology rolling out.
Monsanto’s Genuity Roundup Ready 2 Yield soybeans are going up against PioneerY Series soybeans, which are built upon the original Roundup Ready technology.