## Facts

- Monsanto owned patents covering Roundup Ready herbicide-resistant soybean technology and sold seed to growers under a standard Technology Agreement.
- The Technology Agreement permitted a grower to plant purchased Roundup Ready seed for one commercial crop in a single season.
- The agreement prohibited saving seed for replanting and prohibited supplying saved seed to others.
- The agreement included a liquidated-damages provision setting damages at 120 times the applicable technology fee per 50-pound bag for any seed saved, supplied, sold, or acquired in violation of the agreement.
- Homan McFarling, a Mississippi soybean farmer, bought 1,000 bags of Roundup Ready seed, signed the agreement, and saved and replanted substantial quantities of seed from his 1998 and 1999 crops rather than buying new seed.
- Monsanto sued for breach of contract; Monsanto acknowledged that the harm from violations differed materially depending on whether seed was saved only for self-use or transferred to other growers.

## Issues

1. Whether saving and replanting Roundup Ready seed violated the Technology Agreement and supported summary judgment for Monsanto on breach of contract.
2. Whether McFarling’s counterclaims and defenses (including patent-misuse and antitrust theories) raised a genuine issue of material fact precluding summary judgment.
3. Whether the Technology Agreement’s 120× technology-fee liquidated-damages provision was enforceable under Missouri law or was an unenforceable penalty.

## Decision

- The Federal Circuit affirmed summary judgment that McFarling breached the Technology Agreement by saving and replanting seed in violation of the agreement’s express terms.
- The Federal Circuit affirmed summary judgment rejecting McFarling’s counterclaims and affirmative defenses, finding no genuine dispute of material fact.
- The Federal Circuit vacated the $780,000 liquidated-damages award, holding the 120× formula was an unenforceable penalty under Missouri law.
- The case was remanded for determination of Monsanto’s actual damages.

## Legal Principles

- A clear contractual restriction limiting a licensee’s use of patented seed technology to a single-season commercial crop and prohibiting saved-seed replanting is enforceable under state contract law.
- Under Missouri law, a liquidated-damages clause is enforceable only if (1) the anticipated harm is difficult to estimate and (2) the stipulated amount is a reasonable forecast of just compensation; otherwise, it is a penalty and unenforceable.
- A liquidated-damages formula that applies a single, large multiplier without accounting for materially different types and magnitudes of breach-related harm may be treated as punitive rather than compensatory.

## Conclusion

The court enforced Monsanto’s contractual prohibition on saving and replanting Roundup Ready seed and upheld rejection of the farmer’s defenses, but invalidated a uniform 120× fee liquidated-damages clause as a penalty under Missouri law and remanded for proof of actual damages.


Monsanto Co. v. McFarling, 363 F.3d 1336 (Fed. Cir. 2004)