Delano Farms Co. v. Cal. Table Grape Comm'n

• Decision Date: 25 March 2013
• Docket Number: No. 1:07–CV–01610–LJO–JLT.,1:07–CV–01610–LJO–JLT.
• Citation: 940 F.Supp.2d 1229
• Parties: DELANO FARMS COMPANY; Four Star Fruit, Inc.; and Gerawan Farming, Inc., Plaintiffs, v. The CALIFORNIA TABLE GRAPE COMMISSION; United States of America; United States Department of Agriculture; and Tom Vilsack, Secretary of the United States Department of Agriculture (In His Official Capacity), Defendants.
• Court: U.S. District Court — Eastern District of California

940 F.Supp.2d 1229

DELANO FARMS COMPANY; Four Star Fruit, Inc.; and Gerawan Farming, Inc., Plaintiffs,

v.The CALIFORNIA TABLE GRAPE COMMISSION; United States of America; United States Department of Agriculture; and Tom Vilsack, Secretary of the United States Department of Agriculture (In His Official Capacity), Defendants.

No. 1:07–CV–01610–LJO–JLT.

United States District Court, E.D. California.

March 25, 2013.

16,229, 16,284. Cited.Brian C. Leighton, Law Offices of Brian C. Leighton, Clovis, CA, Lawrence Milton Hadley, McKool Smith Hennigan, Los Angeles, CA, Ralph B. Wegis, The Law Offices of Ralph B. Wegis, P.C., Bakersfield, CA, for Plaintiff.

Brian Matthew Boynton, Randolph D. Moss, PHV, Deborah Anne Yates, PHV, Leon B. Greenfield, PHV, Thomas Saunders, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, DC, John J. Fargo, Department Of Justice, Susan L. C. Mitchell, Govt., United States Department of Justice, Washington, DC, for Defendants.

MEMORANDUM DECISION AND ORDER RE CROSS MOTIONS FOR SUMMARY JUDGMENT (DOCS. 185, 192 & 194)

LAWRENCE J. O'NEILL, District Judge.

I. INTRODUCTION

This case concerns two varieties of table grape (i.e., grapes for fresh consumption), Autumn King and Scarlet Royal, developed and patented by the United States Department of Agriculture (“USDA”) as a part of a program partially funded by the California Table Grape Commission (“Commission”). Plaintiffs, Delano Farms Company, Four Star Fruit, Inc., and Gerawan Farming, Inc., seek to invalidate the patents for these two varieties under 35 U.S.C. § 102(b) on the ground that the varieties were in “public use” more than a year before USDA sought patent protection.

This case has a long and complicated procedural history, see Doc. 169 at 2–5, and the parties previously have engaged in substantial litigation against one another, see Doc. 186 at 3 n 1. To make a long story short, after extensive proceedings in this Court (much of which took place before the previously assigned district judge) and the Ninth Circuit, the only two claims that remain seek declarations that the Autumn King and Scarlet Royal patents are invalid based upon the following alleged acts of public use: (1) Jim, Jack, and Larry Ludy's cultivation of Autumn King and Scarlet Royal plant material on their own farms; and (2) cultivation of Scarlet Royal by Dr. Sayed Badr, a professor at California State University, Fresno (“Fresno State”).

The parties filed cross motions for summary judgment on January 17, 2013, Docs. 185 (Commission's MSJ), 192 (Federal Defendants' Joinder), 194 (Plaintiffs' MSJ), along with voluminous supporting documents. Oppositions were filed February 14, 2013. Docs. 204, 206, 211. Replies were filed February 21, 2013. Docs. 213–215. The matter was originally set for hearing on February 28, 2013, but the matter was taken under submission without oral argument pursuant to Local Rule 230(g). Doc. 212.

Judges in the Eastern District of California carry the heaviest caseload in the nation, and this Court is unable to devote inordinate time and resources to individual cases and matters. Given the shortage of district judges and staff, this Court addresses only the arguments, evidence, and matters necessary to reach the decision in this order. The parties and counsel are encouraged to contact the offices of United States Senators Feinstein and Boxer to address this Court's fast-approaching inability to accommodate the parties and this action. The parties are required to consider consent to a Magistrate Judge to conduct all further proceedings in that the Magistrate Judges' availability is far more realistic and accommodating to parties than that of U.S. District Judge Lawrence J. O'Neill, who must prioritize criminal and other civil cases.

II. BACKGROUND¹

A. The Autumn King and Scarlet Royal Patents.

Autumn King and Scarlet Royal were developed by Dr. David Ramming, former director of USDA's grape breeding program, and his assistant, Ronald Tarailo. Joint Statement of Undisputed Fact in Support of Commission's Motion for Summary Judgment (“CJSUF”), Doc. 187,4–5. Ramming and Tarailo applied for patents on the new grape varieties on September 28, 2004. CJSUF # 3. Both varieties were officially released to the public on July 13, 2005. CJSUF6–7. The Scarlet Royal patent (U.S. Patent PP16,229 or “the '229 patent”) issued on January 31, 2006. CJSUF # 2. The Autumn King patent (U.S. Patent PP16,284 or “the '284 patent”) issued on February 21, 2006. CJSUF # 1. ²

The two patents are owned by the Secretary of Agriculture on behalf of the United States and are exclusively licensed to the Commission, a state entity established by the California Legislature to promote the consumption of fresh California grapes. CJSUF8–9; Cal. Food & Agric. Code 65550, et seq. The Commission in turn sublicenses Autumn King and Scarlet Royal to eligible nurseries, which pay royalties to the Commission and make the varieties available to growers. CJSUF # 9. The Commission pays a portion of royalties collected from nurseries to the USDA. Plaintiffs allege the sublicensed nurseries pass royalty costs on to growers.

B. The Sandrini Lawsuit.

On July 3, 2006, the Commission filed a patent infringement suit against a table grape grower named Richard Sandrini, who had been growing unlicensed Autumn King vines. See generally California Table Grape Comm'n v. RB Sandrini, Inc., 1:06–CV–00842 OWW TAG, 2007 WL 1847631 (E.D.Cal. June 27, 2007). Following discovery, the parties filed cross-motions for summary judgment on numerous issues, including whether the Autumn King patent is invalid due to the alleged public use of the variety by three cousins, Jim, Jack, and Larry Ludy, who obtained the variety before its official release. Id. at *11–*17. The cross motions were denied and the case proceeded to trial. Id. at *28;Sandrini, 1:06–cv–0842, Doc. 153 (Pretrial Order). After opening statements, Mr. Sandrini agreed to settle by removing all of his unauthorized Autumn King vines and dropping his claim that the Autumn King patent is invalid, in exchange for a release of the Commission's claims against him. See Sandrini, 1:06–cv–0842, Doc. 201 (Stipulated Settlement and Order).³

C. The Ludys' Uses.

Jim and Jack Ludy are brothers who grew grapes at J & J Ludy Farms from 1976 to 2003. CJSUF # 12. Their first cousin, Larry Ludy, and his brother, Don Ludy, farmed nearby. Jim Ludy “JL” 2012 Depo. 142:11–13; Don Ludy (“DL”) Sandrini Depo. 9:23–10:1, 11:22–25. In August 2001, Jim Ludy and Larry Ludy attended a meeting organized by the Commission to allow growers to provide feedback to the USDA on promising new selections of table grapes that were still under development. CJSUF # 14. Fruit from the USDA's Scarlet Royal grapevines (then known as B34–82) and Autumn King grapevines (then known as C67–120) was on display at the meeting. JL 2012 Depo., Ex. 6. Neither variety had been publicly released by the USDA at that point and thus had not yet been named. See CJSUF6–7. Jim and Larry Ludy referred to Scarlet Royal as “Crimson Killer” and Autumn King as “Big White” or “Late White.” JL 2012 Depo. 164:15–18; Larry Ludy (“LL)” 2012 Depo. at 23:9–15; CJSUF18–19.

Also attending the meeting was Rodney Klassen, the tractor operator at the USDA's experimental facility and a longtime acquaintance of Jim Ludy. JL 2012 Depo. 64:8–10, 93:4–21, 95:16–96:11; David Ramming (“DR”) 2012 Depo. 32:11–12; CJSUF13, 15. As a tractor driver, Klassen was not authorized to remove plant material from the USDA facility or to provide it to anyone outside the USDA. CJSUF9–10; Tarailo Decl. ¶¶ 6–7. Tarailo specifically instructed Klassen that he was not allowed to remove plant material from the USDA facility. Tarailo Decl. ¶ 7.

Nonetheless, when Jim Ludy said at the meeting that he was impressed with “Crimson Killer” and “Big White,” Klassen said that he would get him some of the unreleased plant material. JL 2012 Depo. 101:10–22, 107:13–19; see also CJSUF # 15. Larry Ludy was present during this conversation. CJSUF # 16.

Sometime later, Jim Ludy and Klassen arranged to meet at a farm show, where Klassen provided Jim Ludy with a paper bag containing cuttings that he had taken from the USDA facility. JL 2012 Depo. 108:20–109:1; JL Sandrini Depo. 79:14–15. Jim Ludy knew that he was receiving unreleased USDA selections. Commission's Statement of Undisputed Facts (“CSUF”) 29. Although Jim Ludy does not remember the exact words Klassen used, Jim recalls generally that Klassen did not want Jim to let the material “get away from” him. CSUF # 31. Klassen also explained that Jim Ludy should use the cuttings only for a test plot to learn how to grow them so that he would be ready when they were officially released. JL 2012 Depo. 68:14–19, 74:19–21, 127:8–10. Klassen warned that Jim Ludy should not expand the test plot or sell the grapes commercially. JL 2012 Depo. 109:17–21.

Jim Ludy understood he should keep the plant material secret. CSUF # 33. He therefore avoided telling many people about it. JL 75:14–16 (“At the time I knew we were getting it early and that, you know, not to tell too many people about it, that type of thing.”); JL 76:21–22 (“I didn't go around telling everybody”); JL(S) 163:24–164:2 (“I didn't want to tell anybody. I had done a real good job of having my little test plot, and I didn't try to make it public to anybody. I was trying to keep it a little quiet.”).

Whether and to what extent Jim passed this desire for secrecy on to his cousin Larry is disputed. It is Defendants' position, supported by the testimony of Jim Ludy and others, that Jim provided the cuttings to Larry “in confidence,” told Larry that he should not share the cuttings with others, that the cuttings were “just to experiment with,” and that Larry was “not to produce a crop for sale.” See CSUF47–49, 51. On the other hand, Larry recalls only that Jim indicated he should not tell Richard Sandrini about the plant material. LL 2012 Depo. 76:14–27.

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