Aug 2 (Reuters) - 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 weed killer, 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 percent 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 percent Thursday to $87.52, while
DuPont shares fell 1.1 percent 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 introduced its Roundup Ready technology in 1996 in
soybeans. The Roundup Ready trait makes crops tolerate sprayings
of Roundup, or glyphosate-based, herbicide. Monsanto licenses
Roundup Ready technology for corn, alfalfa, cotton, canola, and
sugar beets.
Monsanto filed suit against DuPont and Pioneer in May 2009
citing the unlicensed use of the trait.
Both companies hold strong positions in the U.S. seed
industry and have been racing each other and other competitors
to develop improved crops through genetic modifications and
other means.
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 Pioneer Y Series soybeans, which are built upon the
original Roundup Ready technology.
The case is in Re: Monsanto Co vs E.I. Dupont De Nemours,
U.S. District Court, Eastern District of Missouri, No. 09-00686.
For Monsanto: Adam Nadelhaft of Winston and Strawn.
For EI Dupont De Nemours: Amy Mauser of Boies and Schiller.
(Reporting by Carey Gillam; Additional reporting by Ernest
Scheyder)
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