Live by the Lawsuit, Die by the Lawsuit? Monsanto, its Seeds, Before the Supreme Court

by YCharts Staff October 12, 2012

Monsanto’s (MON) had a pretty good year. The drought that baked the Midwest didn’t dent it and may have helped by driving more farmers to its seeds. Monsanto tinkers with genetics to make seeds that have desired traits, like higher yields or resistant to drought.

It reported fourth quarter results in October, and chief Hugh Grant boasted about 25% earnings per share growth and a record amount in cash flow.

MON EPS Diluted TTM data by YCharts

MON Free Cash Flow TTM data by YCharts

What could interrupt this happy picture? The U.S. Supreme court agreed to hear an appeal that addresses Monsanto’s patents, arguably cutting to the heart of its business model.

Monsanto makes seeds, “biotechnology trait products,” and herbicides. It makes Roundup herbicides, as well as Roundup-ready seeds that can survive while the herbicide kills weeds around it. It licenses seeds to farmers. Three years ago, when Forbes wrote a cover story celebrating the much-hated company, 90% of the U.S. soybean cop and 80% of the corn and cotton crops already had some Monsanto technology.

Monsanto aggressively defended those patents. It has sued other companies – it just won a $1 billion judgment against DuPont (DD). It has also sued farmers, co-ops and seed dealers, as laid out in a Vanity Fair story from 2008.

Now the U.S. Supreme Court has agreed to hear an appeal in a case involving a soybean farmer in Indiana, who was found to have infringed upon Monsanto’s patents. The issue is that seeds replicate, and he planted second-generation seeds that he bought from a local elevator that were contaminated with Monsanto seeds.

The decision will either cement this or crack it.