Monsanto Co.’s $1 billion jury victory against DuPont Co. over a patent for genetically modified soybeans may be vulnerable, mostly because of the amount of the damages.

The award, handed down Aug. 1 by a federal jury in Monsanto’s hometown of St. Louis, was the largest in the U.S. this year and the fourth biggest patent verdict in U.S. history. Two of the three awards that exceeded that amount were thrown out on appeal and the other was cut by almost two-thirds after a settlement.

“No court is going to let a billion-dollar verdict stand without a hard look,” said John Dragseth, a patent lawyer with Fish & Richardson in Minneapolis.

Monsanto and DuPont are the two biggest companies in the $34 billion commercial seed market. [Monsanto maintains a major presence in North Carolina, which is a growing hub for the biocrop industry.]

The St. Louis jury took just 45 minutes to reject DuPont’s challenges to a Monsanto patent on genetically modified crops that survive the weedkiller Roundup. The panel decided DuPont willfully infringed the patent by making soybeans that combined the Roundup Ready trait with a similar DuPont technology known as GAT.

DuPont, which generated $38 billion in revenue last year, said in a statement that it will appeal, focusing on the Monsanto patent, the amount of damages and “fundamental errors” in the case. For example, Monsanto told the jury in closing arguments that DuPont’s decision not to commercialize soybean seeds that combine the two traits was irrelevant, Daniel Turner, a company spokesman, said in a telephone interview.

Startling Size

“I’m startled by the size of the verdict in the absence of any commercial sales,” said Warren Woessner, a lawyer who specializes in biotechnology patents at Schwegman, Lundberg & Woessner in Minneapolis. “Infringement has historically been found in cases like this, but there are no damages awarded.”

Monsanto argued that DuPont violated a licensing agreement and infringed the Roundup Ready patent when it began making soybeans that added the GAT trait. DuPont made the combination to patch problems with GAT, Monsanto said. DuPont argued that Monsanto deceived the U.S. Patent and Trademark Office to obtain its patent, rendering it invalid and unenforceable.

Roundup Ready

DuPont infringed the Roundup Ready patent six years before its expiration, Monsanto told the jury. DuPont expected to generate $3 billion of revenue from soybeans that tolerate GAT and Roundup over those six years, which translates into $800 million to $1 billion in damages to Monsanto, the company’s lawyers argued.

Federal law defines infringement as anyone making, using, selling, offering to sell or importing a patented invention.

The law indicates DuPont shouldn’t have begun to work with the Roundup Ready trait until the patent expires in September 2014, Mark Gulley, a New York-based analyst with Gulley & Associates, said in a note to clients.

The jury determined the award by calculating a reasonable royalty rate from the time the infringement was said to begin, said Oskar Liivak, an associate professor at Cornell Law School in Ithaca, New York, who specializes in intellectual property. Monsanto said at the trial that DuPont rebuffed an offer for a $1.5 billion license.

‘Large Figure’

“The fact that DuPont ultimately never sold the seed was not relevant for the reasonable royalty calculation and, as the damages showed, that reasonable royalty added up to a rather large figure,” Liivak said.

DuPont will get a chance to make its arguments first to U.S. District Judge Richard Webber, who presided over the trial. Whichever side loses may then seek review before the U.S. Court of Appeals for the Federal Circuit in Washington, which specializes in U.S. patent law. Monsanto will be able to argue the award should be higher because the jury found the infringement was intentional.

An appeal by DuPont may force the Federal Circuit court to decide where the line is between permissible experimentation to improve upon an invention, and a violation of a patent owners’ right to exclude others from using it, Woessner said.

“Usually you are entitled to improve on a patented gene or work on it, even with commercial purposes in mind,” Woessner said. “It’s certainly a highly appealable issue.”

The largest U.S. patent verdict to be upheld on appeal was a $200 million jury award that grew to $300 million with added royalties and interest, against Microsoft Corp. over a feature in Word, part of the Office software used by more than 1 billion people.

New Trials

Microsoft won new trials in three cases where the original verdicts exceeded $368 million, including two that centered on the calculation of damages. All of those cases were later settled, with terms never disclosed.

“The size of the verdict will give the panel that gets the case over at the Federal Circuit a reason to look hard at the basis of it,” said Dirk Thomas, a patent lawyer with McKool Smith in Washington. “They’re not immune to a lot of zeros on the left side of the decimal. A very large verdict like that is going to garner greater scrutiny than a small verdict.”

The appeals court has been curbing damage awards over the past five years, particularly as they relate to the value of small components compared with the entire price of a computer, Thomas said.

Of the top 10 patent verdicts , four were against Microsoft, according to data compiled by Bloomberg. Two others, against Apple Inc. and Johnson & Johnson, are on appeal before the Federal Circuit. A $345 million verdict against SAP Inc., which dropped off the top 10 list with the addition of the Monsanto decision, is on appeal.

Biggest Verdicts

The biggest two verdicts in history — $1.67 billion won by Johnson & Johnson against Abbott Laboratories over technology underpinning an arthritis drug, and $1.52 billion against Microsoft over digital music — were thrown out based on the facts of the cases.
The only other verdict exceeding $1 billion, a dispute begun in 1990 between Litton Systems Inc. and Honeywell Inc. over aircraft navigation gyroscopes, was settled in 2001 for $440 million.

Dragseth, who was part of the team that got the $1.52 billion verdict against Microsoft overturned, said the sheer size of the jury award was a factor in that victory.

“If they had come in on $30 million on that invention, there’s a good chance we would have lost,” he said.

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