## Facts

- Pioneer owned patents covering certain hybrid and inbred seed-corn varieties and sold seed through an authorized dealer system.
- Pioneer placed a “limited label license” on seed bags stating the buyer agreed the seed was licensed only for producing a crop for grain or forage for feeding or processing, and that no other rights were granted.
- Ottawa, not an authorized Pioneer dealer, acquired Pioneer seed corn from authorized sources and resold it to farmers in the original, unopened Pioneer-branded bags.
- Pioneer alleged Ottawa’s resales were outside the scope of the bag-label license and constituted patent infringement.
- Ottawa argued the label restricted use but did not restrict resale, so Pioneer’s patent rights were exhausted by the initial authorized sales.
- The matter came before the district court on cross-motions for summary judgment (or partial summary judgment) and Ottawa’s motion to strike an affidavit offered by Pioneer on labeling/notice.

## Issues

1. Whether Pioneer’s authorized sales of patented seed exhausted its patent rights as to downstream resales under the first-sale doctrine.
2. Whether the “limited label license” on seed bags imposed enforceable restrictions that, as a practical and legal matter, barred Ottawa’s resale of seed for planting.
3. Whether the record showed the restrictive label terms were present on the bags Ottawa resold and that Ottawa had sufficient notice to be bound by those terms.

## Decision

- The court denied Ottawa’s summary judgment motion premised on patent exhaustion.
- The court granted summary judgment (or partial summary judgment) for Pioneer on key liability issues, concluding Ottawa’s unauthorized resales were infringing because they exceeded the scope of the limited label license.
- The court rejected Ottawa’s motion to strike Pioneer’s supporting affidavit and considered the evidence regarding the existence and visibility of the label restrictions.

## Legal Principles

- An authorized, unconditional sale of a patented article generally exhausts the patentee’s rights in that article, but exhaustion does not apply where the patentee’s authorization is conditioned on clearly communicated, lawful restrictions that define the scope of the license.
- Label-based “limited license” terms may function as scope-defining field-of-use and single-use restrictions; conduct outside the license can be pursued as patent infringement rather than treated solely as a contract dispute.
- A downstream purchaser or reseller may be held to license restrictions where the restrictions are present on the product and the purchaser has actual or constructive notice of them.
- A restriction need not use a specific “no resale” phrase to limit downstream disposition if, read in context, the license grants only a narrow right (e.g., a single crop for specified purposes) and prohibits other uses or dispositions that facilitate unlicensed planting.

## Conclusion

The court held that Pioneer’s seed sales were made subject to an enforceable limited label license, so patent exhaustion did not immunize Ottawa’s downstream resale of seed for planting; because Ottawa resold bags bearing the restrictive terms with at least constructive notice, its resales were outside the license and infringed Pioneer’s patents.


Pioneer Hi-Bred Int'l, Inc. v. Ottawa Plant Food, Inc., 283 F. Supp. 2d 1018 (N.D. Iowa 2003)