DELANO FARMS CO. v. CALIFORNIA TABLE GRAPE COM'N
655 F.3d 1337 (2011)
DELANO FARMS COMPANY, Four Star Fruit, Inc., and Gerawan Farming, Inc., Plaintiffs-Appellants,
The CALIFORNIA TABLE GRAPE COMMISSION, Defendant-Appellee, and
United States, Department of Agriculture, and Thomas J. Vilsack, Secretary of Agriculture, Defendants-Appellees.
United States Court of Appeals, Federal Circuit.
August 24, 2011.
Susan L.C. Mitchell, Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for the defendants-appellees United States Department of Agriculture and Thomas J Vilsack, Secretary of Agriculture. Of counsel on the brief were Tony West, Assistant Attorney General, and John J. Fargo, Director.
Before BRYSON, SCHALL, and PROST, Circuit Judges.
BRYSON, Circuit Judge.
The United States Department of Agriculture ("USDA") is the owner by assignment of three patents issued under the Plant Patent Act for grapevines that produce table grapes. The three patented varieties are known as Sweet Scarlet (U.S. Patent No. PP15,891), Scarlet Royal (U.S. Patent No. PP16,229), and Autumn King (U.S. Patent No. PP16,284).
The USDA licensed its rights in the three patents to the California Table Grape Commission, an agency of the State of California. The Commission's mission is to promote that state's table-grape industry. The Commission is funded by a tax levied on each box of table grapes produced in California.
The relationship between the Commission and the USDA is complex. Although the USDA owns the three patents at issue in this case, the Commission paid much of the cost of developing the patented varieties. The licenses for the three patents give the Commission the right to sublicense the patents and entitle the Commission to retain 60 percent of all royalties from its sublicensing efforts, with the remaining 40 percent to go to the USDA. Exercising its sublicensing power, the Commission authorized three nurseries to serve as exclusive distributors of the patented varieties. Grape growers who purchase the patented plants from those nurseries each sign a "Domestic Grower License Agreement." That agreement requires the growers to pay a royalty and forbids them from propagating the plants. The agreement also permits the Commission to order the destruction of the purchased plants if the Commission believes the growers to be violating the agreement.
The plaintiffs (collectively referred to as "Delano") are all California grape growers who purchased grapevines covered by the patents, signed the Domestic Grower License Agreement, and paid the licensing fee. They brought this action in the United States District Court for the Eastern District of California challenging the validity and enforceability of the three patents, as well as the conduct of the Commission and the USDA in licensing and enforcing the patents.
Delano sought a declaratory judgment that all three patents are invalid because of prior use and that the Sweet Scarlet patent is unenforceable because of inequitable conduct during prosecution. As outlined in Delano's complaint, the USDA began development of the patented varieties in the early 1990s. Dr. David Ramming, a USDA employee and one of the co-inventors of each of the three varieties, allegedly displayed the fruit of the patented varieties at public meetings that were held before the critical dates for each patent. According to the complaint, Dr. Ramming had distributed the Sweet Scarlet vines to
approximately nine growers for "trials" before the critical date, and at least three of those growers sold the fruit of those vines. Delano also alleged that a California grape grower had obtained the other varieties and had reproduced those varieties in advance of the critical date.
As to its inequitable conduct claim, Delano alleged that in May 2004 the Commission sent a letter to all table-grape growers and shippers in California. The letter informed growers who were in possession of the Sweet Scarlet variety that they could keep their vines and avoid a lawsuit if they admitted to the fact of possession, paid the Commission $2 per vine reproduced, paid the Commission $2 per box of Sweet Scarlet grapes previously shipped, and agreed not to take further steps to propagate the plants. According to Delano's complaint, 17 growers responded to the Commission, each acknowledging possession and propagation of the patented variety more than one year before the patent application was filed. That information was not disclosed to the Patent and Trademark Office ("PTO").