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Monsanto's GMO Seeds May No Longer Be Invincible

By Rich Duprey - Feb 13, 2014 at 2:00PM

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A lawsuit in Australia could pose a threat to the biotech's genetically modified seed empire.

Ever since the introduction of genetically modified crops into the food chain, the tussle has been largely between farmers and Monsanto (MON), which says since 1997 it has filed 145 lawsuits against farmers who've improperly reused its patented seeds, or on average about one lawsuit every three weeks for 16 straight years.

Canola field. Source: SXC.hu.

In that time frame, the biotech hasn't lost a single case, even when farmers like the organic growers who had their case against Monsanto tossed last year sued for cross-contamination of their crops. DuPont (DD), the world's second-largest seed producer behind Monsanto, is similarly seeking to police the use of its seeds by hiring retired police officers to ferret out farmers allegedly improperly using its patented seeds. Defeating the well-financed GMO behemoth has been a losing battle, but that may be about to change.

In 2010, a western Australia organic farmer, Steve Marsh, found that his harvest had been contaminated by his neighbor's genetically modified canola/rapeseed crops planted with Monsanto Roundup Ready seed. Marsh subsequently had 70% of his farm's organic status for produce stripped from him causing severe financial harm, some $85,000 in earnings. In a first of its kind lawsuit, Marsh is suing his neighbor for the loss resulting from the seeds blowing onto his oat and wheat crop, contaminating them.

The significance of the case is that if Marsh can successful defend his property rights, it will create a disincentive for farmers to use GM seeds if they know they will be held liable for the equivalent of "polluting" a neighbor's property. Just as a company can be held liable for toxic runoff that contaminates an adjacent piece of land, this lawsuit seeks to hold GM farmers liable for their "runoff" that ruins a neighbor's livelihood.

But the lawsuit could cut both ways if successful, because it may cause Australia to relax its otherwise-strict zero-tolerance policy toward GM produce. Unlike the U.S. and elsewhere where the probability of cross-contamination is acknowledged and trace amounts of GMOs are permitted in crops that are otherwise labeled "organic," Australia doesn't have that distinction. Organic means 100% organic with no trace GMOs permitted, and that might change in a bid to allow peaceful coexistence. But if Marsh loses the case, then GM farmers and Monsanto can rest easy knowing they'll be able to plant their lab-altered seed without consequence.

Monsanto, DuPont, and Syngenta (NYSE: SYT) control 53% of the world's seed production with their GM variants. Virtually all alfalfa, corn, soybean, and sugar beet seed are genetically modified, and because of their widespread use in processed foods, it means anywhere from 60% to 70% of all food on supermarket shelves is genetically modified. Dupont and Syngenta have teamed up with Dow Chemical (DOW) to fight a new law in Hawaii that prohibits the planting of new GM crops on the big island. 

The Australian farmer Marsh regained his organic certification last November following his neighbor agreeing to modify his harvesting methods to minimize the opportunity for his GM seeds to cross contaminate adjacent properties. Unfortunately for organic farmers not located in Australia, the tolerance for GMO traces in organic produce means they would have a steeper hill to climb, though perhaps on the basis of a property rights protection issue, it could be a wedge to sever the unrestrained proliferation of genetically modified seed.

Because Monsanto requires farmers to sign non-liability clauses when they purchase seeds from the biotech, it's insulated from being a party to the lawsuit directly, though it demurred when specifically asked whether it was providing financial assistance to the defense. But a win by Marsh could show there is indeed a chink in Monsanto's armor of invincibility.

Rich Duprey has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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