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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,
v.
The CALIFORNIA TABLE GRAPE COMMISSION, Defendant-Appellee, and
United States, Department of Agriculture, and Thomas J. Vilsack, Secretary of Agriculture, Defendants-Appellees.
No. 2010-1546.
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").
1. The Commission argues that Delano has not preserved its argument that the USDA can be joined in the patent law claims, because Delano took the position in the district court that it could proceed on those claims against the Commission alone and that it could proceed separately against the USDA under the APA. We do not regard Delano's argument that the USDA is not a necessary party to the patent law claims to constitute an abandonment of its original contention that the Commission and the USDA can be sued jointly on those claims.
2. The parties refer to section 10 of the APA by the section numbers used in the United States Code, so we use the same convention.
3. The Senate and the House reports are nearly identical. For simplicity, we will cite to the House version.
4. Other courts have ruled similarly. See, e.g., Blagojevich v. Gates, 519 F.3d 370, 372 (7th Cir.2008) (section 702 waives immunity for lawsuit by state governor alleging that Department of Defense violated a statute requiring governor's approval before transferring a National Guard unit out of state); Commonwealth of P.R. v. United States, 490 F.3d 50, 57-58 (1st Cir.2007) (section 702 waiver covers all equitable actions for specific relief against a federal agency or officer acting in an official capacity); Black Hills Inst. of Geological Research v. S.D. Sch. of Mines & Tech., 12 F.3d 737, 740 (8th Cir.1993) (section 702 waives immunity for suit to quiet title to fossil seized by the Department of Justice, even though suit not brought as APA action challenging final agency action); Specter v. Garrett, 995 F.2d 404, 410 (3d Cir.1993) ("Our cases are also clear that the waiver of sovereign immunity contained in § 702 is not limited to suits brought under the APA."), rev'd on other grounds, Dalton v. Specter, 511 U.S. 462, 114 S.Ct. 1719, 128 L.Ed.2d 497 (1994); Sheehan v. Army & Air Force Exch. Serv., 619 F.2d 1132, 1139 (5th Cir.1980) (section 702 waives immunity for causes of action arising under generally applicable statutes and the Constitution), rev'd on other grounds, 456 U.S. 728, 102 S.Ct. 2118, 72 L.Ed.2d 520 (1982).
The Commission cites cases such as SEC ex rel. Glotzer v. Stewart, 374 F.3d 184 (2d Cir. 2004), as holding that section 702 waives sovereign immunity only for actions falling within the APA. Those cases hold that section 702 waives sovereign immunity for non-monetary claims brought under the APA seeking review of agency action, but they do not hold that the waiver of sovereign immunity is inapplicable to non-monetary claims arising under statutes other than the APA, such as the patent law claims in this case.
5. In a section entitled "Other Exclusive Remedies or Statutory Limitations," the House Report explains:
Clause (2) of the third new sentence added to section 702 contains a second proviso concerned with situations in which Congress has consented to suit and the remedy provided is intended to be the exclusive remedy. For example, in the Court of Claims Act, Congress created a damage remedy for contract claims with jurisdiction limited to the Court of Claims except in suits for less than $10,000. The measure is intended to foreclose specific performance of government contracts. In the terms of the proviso, a statute granting consent to suit, i.e., the Tucker Act, "impliedly forbids" relief other than the remedy provided by the Act. Thus, the partial abolition of sovereign immunity brought about by this bill does not change existing limitations on specific relief, if any, derived from statutes dealing with such matters as government contracts, as well as patent infringement, tort claims, and tax claims.
6. The Commission makes a separate argument that section 702 waives immunity for equitable actions alleging that an agency "acted or failed to act" and that because the USDA does not collect royalties directly from plaintiffs, the agency has not "acted or failed to act" and thus the waiver of sovereign immunity in section 702 does not apply. To the contrary, USDA's act of obtaining ownership of the patents makes it subject to the declaratory judgment action seeking to invalidate the patents or hold them unenforceable. Such an action arises under the Patent Act, see Franchise Tax Bd. v. Laborers Vacation Trust, 463 U.S. 1, 19 n. 19, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983); Jacobsen v. Katzer, 535 F.3d 1373, 1377 (Fed.Cir.2008), and states a claim against the patent owner for relief under the Declaratory Judgment Act, 28 U.S.C. § 2201, over which the district court has jurisdiction under 28 U.S.C. § 1338. Because that action seeks non-monetary relief based on the agency's official acts, section 702 waives the agency's sovereign immunity.
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