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November 6, 2007

Grape Rape

Varieties of table grapes may be patented. The U.S. Department of Agriculture (USDA) is a cultivator of new varieties, releasing them on a trial basis to growers, to evaluate growing potential and commercial viability. The USDA also patents grapes.

The California Table Grape Commission (CTGC), established by the state legislature in 1967, is funded by a 13¢ per box assessment levied on shippers of table grapes in the state. In the late 1990s, CTGC started licensing table grape patents from the USDA, and enforcing licenses on state grape growers. From there the story peels.

Delano Farms, Four Star Fruit, and Gerawan Farming are suing the CTGC in the Eastern District of California for extorting licenses on rummy patents: Sweet Scarlet (PP15,891); Autumn King (PP16,284); and Scarlet Royal (PP16,229). CTGC is exclusive licensee of the patents from the USDA.

From the complaint, filed Monday:

For years, California table grape growers and shippers have funded a research program under the U.S. Department of Agriculture (“USDA”) to develop new table grape varieties. Growers and shippers fund the USDA research program through the Commission by an assessment on each box of table grapes shipped in California. Prior to 2002, the USDA provided the new varieties under development to area growers for evaluation of growing potential and commercial marketability. Once new varieties appeared commercially viable, the USDA “released” the variety, and distributed plant material of the variety to area growers free-of-charge. The USDA did not charge California growers for the new varieties since California growers and shippers already paid for a large portion of the development.

In the late 1990s, the Commission developed a scheme by which it and a few select nurseries could profit from the new varieties that the USDA distributed for free. At the urging of the Commission, the USDA agreed to begin patenting new table grape varieties. Although California shippers already funded much of the development, the USDA agreed to give the Commission an exclusive license to all new patented varieties, and to allow the Commission to charge royalties when growers wished to obtain the new varieties. The USDA also agreed to give the Commission exclusive enforcement powers over its new patent rights.

Under the Commission’s “patent and licensing” scheme, the Commission hand-selected three nurseries to exclusively sell all new patented table grape varieties. Unlike the prior free distribution, the nurseries would be allowed to sell new varieties to growers. Additionally, the nurseries would be required to pay a royalty to the Commission for each plant sold, which the nursery could pass onto the growers. One of the hand-selected nurseries now able to profit from newly developed varieties previously distributed without charge is owned by the son of a longstanding Commission member.

When a grower seeks to obtain a new variety from a nursery, it is required to enter a “Domestic Grower License Agreement” with the Commission. Under the terms of the Agreement, the grower cannot propagate the variety beyond the plant purchased. Moreover, if the Commission believes the grower has violated the License Agreement, it can void the Agreement and order that all purchased plants be destroyed.

The first three varieties that the Commission identified to the USDA for patenting had been under development for years. Indeed, at least one of the varieties had been distributed to growers for wide-scale commercial evaluation and sale.

Recognizing that at least one of the new varieties identified for patenting (and perhaps all three) had been previously in public use and/or sold commercially, the Commission created a so-called “amnesty program” designed to hide the fact that valid patents could not be obtained, and to extort funds from growers already in possession of the varieties. Under the amnesty program, the Commission widely disseminated notices to growers and shippers stating that they were in violation of the law if they possessed the varieties intended for patenting. The notices also offered confidential “settlements” to any growers who, within a narrow window, agreed to license the varieties, pay a “penalty” to the Commission, and accept the Commission’s license restrictions on further propagation. Growers and shippers who refused the “amnesty” were threatened with lawsuits, including money damages and injunctions.

Confirming the Commission’s expectation that varieties identified for patenting were in public use, at least 17 growers confirmed possession of the varieties and agreed to pay the penalties demanded by the Commission. Astonishingly, the Commission threatened growers and demanded penalties even before the USDA had been issued patents on the new varieties. Even more troublesome, the USDA and inventor of the new varieties breached their duty of candor to the United States Patent & Trademark Office (“USPTO”) by not reporting these prior public uses and sales when applying for patents in the new varieties. Under Patent Law, public use or sale of an invention more than one year prior filing a patent application bars patentability.

Based on these facts, none of the patents on the new varieties are valid. Moreover, the USDA and inventor committed inequitable conduct before the USPTO. In demanding licenses and accepting royalties on knowingly invalid patents, the Commission violated federal antitrust laws, and committed other violations of federal and state law. This action seeks to remedy these wrongs, to hold the patents invalid so the varieties can be freely distributed, to obtain the return of royalty payments illegally collected from growers and shippers, and to stop the Commission from engaging in further illegal activities through the use of patents.

Brian Leighton, attorney for the plaintiffs: "The growers paid for the development of those patented grapevines, and then they turn around and ask us for licensing fees to grow the very vines that we funded the development of."

Posted by Patent Hawk at November 6, 2007 8:48 PM | Patents In Business

Comments

What a crock of @#%. At least 11th amendment sovereign immunity doesn't apply to states as *patentees*.

Posted by: Purple Pete at November 11, 2007 3:50 AM