Court of Appeals Rules that DuPont Acted in Bad Faith but Did Not Engage in Fraud

E.I du Pont de Nemours & Co. (DuPont), an American chemical company that makes genetically modified crops, recently settled a lawsuit with Monsanto Company (Monsanto), a competitor in the same market. In 1992, Monsanto secured a patent on a genetically engineered trait named Roundup Ready that makes soybean plants immune to a specific herbicide called glyphosate. Monsanto eventually sold this genetically engineered trait and DuPont licensed the patent. However in 2006, DuPont claimed to have developed its own herbicide named Optimum GAT (OGAT) that would also protect against glyphosate. To increase OGAT’s efficiency, DuPont combined it with Monsanto’s Roundup Ready, otherwise also known as “stacking.” Although DuPont never sold the new combined trait commercially, Monsanto brought suit against them, alleging breach of contract and patent infringement. Monsanto argued that the licensing agreement between DuPont and Monsanto did not allow for stacking the traits. Monsanto further argued that DuPont infringed on the patent that was licensed to them. In response, DuPont argued that the licensing agreement did permit stacking.

District Judge Irritated by DuPont’s Vexatious Conduct

In response to DuPont’s claim that the licensing agreement permitted stacking, U.S. District Judge E. Richard Webber in St. Louis, Missouri found the contrary. Webber ruled that e-mails from DuPont executives and lawyers prove that they had knowledge that the licensing agreement did not permit stacking. He further ruled that DuPont had misled the court and made a mockery of the proceeding by stating, “defendants show no remorse for their wrongdoing, but to compound the seriousness of their behavior, insist on maintaining their bogus arguments despite overwhelming evidence that those arguments are clearly contradicted by the facts.” Judge Webber went on to rule that DuPont had committed a “fraud on the court” and issued a sanctions order. The sanctions ordered DuPont to pay for Monsanto’s attorney fees and struck from the record any pleadings related to DuPont’s defense of the breach of contract claim.

Monsanto and DuPont Reach a $1.75 Billion Dollar Settlement

In August of 2012, a jury awarded Monsanto $1 billion dollars for damages stemming from patent infringement. Later, DuPont and Monsanto reached a $1.75 billion dollar settlement agreement. As part of their agreement, DuPont was allowed to appeal Judge Webber’s ruling that it had committed “fraud of the court.” DuPont argued that its arguments cannot be “transformed into fraud of the court simply because the court chose not to credit them” and that the company was concerned about its reputation.

U.S. Court of Appeals Rules that DuPont Didn’t Engage in Fraud but Rather Acted in Bad Faith

Although the U.S. Court of Appeals affirmed the sanctions placed on DuPont for the payment of Monsanto’s attorney fees, the Court did rule that DuPont’s conduct did not rise to the level of “fraud on the court.” According to the Court of Appeals, “fraud of the court” typically refers to more outrageous conduct such as “bribery of a judge or jury or fabrication of evidence by counsel.” In the current case, the Court of Appeals ruled that DuPont acted in bad faith because they engaged vexatious conduct by making arguments in the case that contradicted evidence.

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