Gerawan Farming, Inc. v. Townsend & Townsend & Crew LLP, CASE NO. CV F 10-2011 LJO JLT

• Decision Date: 22 October 2012
• Docket Number: CASE NO. CV F 10-2011 LJO JLT
• Court: U.S. District Court — Eastern District of California
• Parties: GERAWAN FARMING, INC., Plaintiff, v. TOWNSEND AND TOWNSEND AND CREW LLP, et al., Defendants.

GERAWAN FARMING, INC., Plaintiff,

v.TOWNSEND AND TOWNSEND AND CREW LLP, et al., Defendants.

CASE NO. CV F 10-2011 LJO JLT

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA

Dated: October 22, 2012

SUMMARY JUDGMENT DECISION ON

LIMITATIONS DEFENSE

(Docs. 91, 94.)

INTRODUCTION

Defendant attorney and law firms seek summary judgment that plaintiff Gerawan Farming, Inc.'s ("Gerawan's") legal malpractice claims arising from Gerawan's diminished trademark are barred by the one-year limitations of California Code of Civil Procedure section 340.6 ("section 340.6"). Gerawan responds that it timely pursued it claims in that it did not suffer actual injury until a legal challenge to its trademark. This Court considered defendants' summary judgment motions on the record¹ without a hearing, pursuant to Local Rule 230(g). For the reasons discussed below, this Court DENIESdefendants summary judgment on the limitations defense.

BACKGROUND

Summary

Gerawan, a family-owned California corporation, is the United States' largest grower of peaches, plums and nectarines and among the leaders in table grapes. Gerawan has marketed its produce under its Prima brand, and its standard character and stylized Prima trademarks are registered with the U.S. Patent and Trademark Office ("USPTO"). During the 1990s, defendants attorney Rodney Worrel ("Mr. Worrel") and his law firm Worrel & Worrel (collectively "Worrel") prosecuted for Gerawan three plum tree patents and a peach tree patent which include Prima in the patent name. In 2001, defendant law firm Townsend and Townsend and Crew ("Townsend") prosecuted for Gerawan a nectarine tree patent which includes Prima in the patent name. Gerawan pursues against Worrel and Townsend (collectively "defendants") legal malpractice claims that inclusion of Prima in the patents diminishes its trademark. Defendants contend that section 340.6 bars Gerawan's claims in that Gerawan knew of alleged malpractice and had suffered actual injury more than a year in advance of effective filing of this action. Gerawan argues the section 340.6 limitations period was tolled until the Prima trademarks were challenged in litigation.

Origination Of Prima Trademark

In the 1970s, Gerawan adopted the Prima brand for fresh produce it grows and distributes. In 1987, Gerawan registered with the USPTO its standard character Prima trademark which Gerawan characterizes as "associated with high quality produce." In March 2009, Gerawan registered with the USPTO its stylized Prima trademark to cover its use on fresh fruits.² The Prima trademark primarily covers peaches, plums, nectarines and table grapes after Gerawan deleted vegetables and certain fruits from the registration. Gerawan notes its extensive advertising and sales of fresh produce throughout the United States and goodwill associated with the Prima trademark.

Worrel's Representation Of Gerawan

During 1984 through October 28,1997, Worrel represented Gerawan regarding the Primatrademark and Gerawan's intellectual property. Worrel prosecuted for Gerawan three plum tree patents which were issued on December 8 and 22, 1992 and identified as Prima Red Plum 9-1, U.S. Patent Plant No. 8,057, Prima Black Plum 5-25, U.S. Patent Plant No. 8,067, and Prima Black Plum 8-15, U.S. Patent Plant No. 8,068 (collectively the "plum patents"). Worrel also prosecuted for Gerawan a peach tree patent which was issued on October 28, 1997 and identified as Prima Gattie Peach Tree, U.S. Patent Plant No. 10,085 (the "peach patent").

Townsend's Representation Of Gerawan

In 1996, Gerawan retained Townsend to assist in a trademark infringement action and thereafter, as Townsend notes, worked on specific projects assigned by Gerawan. In 1999, Townsend prosecuted for Gerawan a nectarine tree patent which was issued on July 24, 2001 and identified as Nectarine Tree Named Prima Diamond 19, U.S. Patent Plant No. 12,011 (the "nectarine patent").³

Gerawan characterizes Townsend's retention to oversee Gerawan's intellectual property portfolio, including "obtaining, preserving and enforcing intellectual property rights, including trademarks and patents." Gerawan principal and owner Dan Gerawan states in his declaration that Townsend became "Gerawan's outside counsel regarding substantially all matters pertaining to Gerawan's trademarks and patents, including acquisition, preservation and enforcement. During the period from at least January of 1998 to January 20, 2009, all applications for new trademarks and patents for an on behalf of Gerawan were prepared by and prosecuted" by Townsend.

Discovery Of Prima Plant Patents' Problem

Gerawan Chief Financial Officer John Sweet's ("Mr. Sweet's") October 20, 2003 letter to Townsend attorney William Hynes ("Mr. Hynes") asked for advice to obtain protection for the peach patent in Chile, South Africa and Mexico. Mr. Hynes responded with an October 21, 2003 email with a draft letter ("October 21 draft letter") "which lays out the main problems we have uncovered." Townsend characterizes the October 21 draft letter as a "preliminary assessment" of the defect in Prima's trademark protection in that it explains:

. . . We have reason to suspect that insofar as the mark "Prima" is applied to peaches, the mark is as a matter of trademark law invalid in its application to peaches.

Our reading of McCarthy On Trademarks at section 12:36 notes the following:

The Trademark Manual instructs examining attorneys to refuse registration if the words sought for registration as a mark for live plants or agricultural seats [sic] comprise a varietal or cultivar name.

As an example TMEP (TradeMark Manual of Examining Procedure) section 1202.12 is quoted:

Whenever an application is filed to register a mark containing wording for live plants or agricultural seeds, the examining attorney must inquire of the applicant whether the term has ever been used as a varietal name and whether such name has been used in connection with a Plant Patent, or a certificate for plant varietal protection.

"Prima" without question appears in the patent name. Should you bring suit on this trademark, for peaches, the mark will be invalid.

. . .

We note that in the registration of the mark "Prima", many other species of fruit and vegetable were mentioned. We wonder if the "Prima" mistake is recurrent throughout other patents owned by Gerawan Farms.

To avoid this mistake in the future we make two recommendations.

First, new plants should be given an arbitrary name in patents related to them. . . .

Second, we would phase-in the use of a new trademark, certainly as to peaches and any other patented plant where the mark "Prima" was used in the Plant Patent. . . .

I am genuinely sorry to uncover this defect in your trademark protection.

On October 22, 2003, Mr. Sweet and Mike Gerawan, a Gerawan principal and owner, had a telephone conference with Mr. Hynes, to discuss, using Mike Gerawan's deposition testimony, "that the two different attorneys had allowed us to include the brand name in the variety name in the patent" and "that the Prima brand was discussed as being potentially challenged." Mike Gerawan further testified:

Q. Certainly as of October 27, 2003 there was no doubt in your mind about what the basic problem was, correct?

A. Correct.

Q. And you knew that four of those patents had been prosecuted by Mr. Worrel and the fifth one had been prosecuted by Townsend at that time, true?

A. True.

Q. An you believed at that stage that those were errors, mistakes that had been madeby each of those sets of lawyers, true?

A. True.

Mr. Hynes' October 28, 2003 letter ("October 28 letter") reiterated Prima trademark protection problems:

. . . U.S. law prohibits exclusive ownership of trademark rights in a term that is used as a varietal name. . . .

McCarth On Trademarks, the leading treatise on U.S. trademark law, notes that "[t]he Trademark Manual instructs Examining Attorneys to refuse registration if the words sought for registration as a mark for live plants or agricultural products comprise a varietal or cultivar name. The Trademark Manual itself instructs Examining Attorneys that, "[w]henever an application is filed to register a mark containing wording for live plants or agricultural seeds, the Examining Attorney must inquire of the applicant whether the term has ever been used as a varietal name and whether such name has been used in connection with a Plant Patent, or a certificate for plant varietal protection."

Unfortunately, "Prima" appears in the patent name of at least four of your five subsisting U.S. plant patents. The term is also used in the patents themselves to identify the plant variety. The use of "Prima" as a varietal name in your U.S. plant patents significantly undermines your trademark right in PRIMA, in our opinion.

If Gerawan were to attempt to enforce its trademark rights in PRIMA against a motivated and well-represented infringer, either directly or through the U.S. Customs Bureau in an effort to control infringing imports or police its overseas licensees, Gerawan's use of "PRIMA" as a varietal designation could come to light and be grounds to invalidate your trademark rights, at least in connection with peaches and plums. A diligent review of the company's intellectual property assets by an experienced counsel with expertise in trade mark issues relating to plant varieties might also identify this as an impediment on your rights. Such a review could occur in a license transaction or sale of any part of your business.

Because this problem might not be immediately apparent, even to many intellectual property law specialists, Gerawan might have a reasonable chance of stopping some unauthorized uses of PRIMA as a trademark, even for peaches and plums. Of course, we would argue that your use of PRIMA trademark for some thirty years should be taken into account. All the same, we believe there are potentially serious impediments to your ability to enforce trademark rights in PRIMA in the U.S. and overseas.

In light of...