In re Trantham

• Citation: 286 B.R. 650
• Decision Date: 18 December 2002
• Docket Number: Bankruptcy No. 02-27859-K.,Adversary No. 02-0596.
• Parties: In re William Farris TRANTHAM, Debtor. Monsanto Company, Plaintiff, v. William Farris Trantham, Defendant.
• Court: United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Western District of Tennessee

286 B.R. 650

In re William Farris TRANTHAM, Debtor.

Monsanto Company, Plaintiff, v. William Farris Trantham, Defendant.

Bankruptcy No. 02-27859-K.

Adversary No. 02-0596.

United States Bankruptcy Court, W.D. Tennessee, Western Division.

December 18, 2002.

COPYRIGHT MATERIAL OMITTED

Joseph N. Mole, New Orleans, LA, Toni Campbell Parker, Memphis, TN, for Monsanto Co.

William M. Gotten, Memphis, TN, for Mr. Trantham.

Norman P. Hagemeyer, Memphis, TN, Chapter 7 Trustee.

MEMORANDUM AND ORDER RE PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT COMBINED WITH NOTICE OF THE ENTRY THEREOF

DAVID S. KENNEDY, Chief Judge.

Plaintiff, Monsanto Company ("Monsanto"), has filed a motion for summary judgment pursuant to Fed. R. Bankr. P. 7056, arising out of the above-captioned adversary proceeding previously filed by Monsanto against the defendant, the above-named chapter 7 debtor, Mr. William Farris Trantham ("Mr. Trantham"). Monsanto seeks a judicial determination that the particular debts owed to it in the aggregate amount of $592,677.89 arising out of a prepetition patent infringement judgment against Mr. Trantham are nondischargeable under 11 U.S.C. § 523(a)(6).

The ultimate and sole issue for judicial determination here is whether Monsanto's prepetition judgment for patent infringement should be excepted from Mr. Trantham's chapter 7 general discharge. By virtue of 28 U.S.C. § 157(b)(2)(I), this is a core proceeding. The court has subject matter jurisdiction under 28 U.S.C. §§ 1334(a)-(b) and 157(a)-(b). Based on the relevant prepetition record of the United States District Court for the Western District of Tennessee and also the relevant postpetition record of the Bankruptcy Court including the pleadings¹ and statements of counsel, the following shall constitute the court's findings of fact and conclusions of law in accordance with Fed. R. Bankr. P. 7052.

The Parties

Mr. Trantham, the debtor in this chapter 7 case and also the defendant in the above-captioned adversary proceeding, resides in Tipton County, Tennessee, and farms primarily cotton and soybean crops in West Tennessee. Mr. Trantham is a career farmer. Like many other farmers throughout America, Mr. Trantham has encountered difficult circumstances over the years. (Mr. Trantham previously filed a chapter 7 case in the early 1980's due to financial distress.)

Monsanto, a global agribusiness, serves farmers by engaging in the business of developing, manufacturing, licensing, and selling agricultural biotechnology, agricultural chemicals, seed, and other agricultural products including scientifically engineered cotton and soybean seeds. More specifically here, Monsanto has patented a genetically superior/ genetically-engineered seeds for cotton and soybean production under the brand names Roundup Ready®, Bollgard®, and Bollgard with Roundup Ready® that are resistant to certain insecticides and herbicides. This biotechnology involves genetically altered cotton and soybean seeds and was the subject of the parties' prepetition patent infringement lawsuit in the United States District Court for the Western District of Tennessee (discussed more fully hereinafter). Monsanto's patented seeds allow farmers to more efficiently harvest cotton and soybean crops; however, the use of this biotechnology is subject to various costs for each unit used and other regulations.

Monsanto markets and authorizes use of the seed Roundup Ready®, Bollgard®, and Bollgard with Roundup Ready® to growers at the retail level through local cooperatives and agribusinesses. Monsanto profits from not only the sale of the seeds, but also from the revenues derived from the payment of licensing fees which must be paid by growers for each commercial unit of seed purchased. The Monsanto licensing agreements also restrict growers (e.g., farmers) from saving excess seeds or seeds not planted in the current crop year for use in subsequent years. In essence, farmers purchasing the seeds developed by Monsanto must either market a crop derived in the form of a commodity and/or dispose of the seed in a terminal market. The required use or disposition of the seeds requires growers to purchase new seed as well as absorb new licensing/technological fees for each subsequent year a crop is planted.

Notice of the patents and intellectual property rights are typically provided on the bags containing the patented seeds identifying the content of the bag with a U.S. patent number. Claimants whose patents are infringed have the statutory right to bring a civil action against infringers of the patents or other registered intellectual property rights seeking, for example, injunctive relief, damages, an award of reasonable attorney's fees, and other related costs. See 35 U.S.C. §§ 281, 283, 284, and 285.

Prepetition Background Facts and District Court Judicial History

The relevant prepetition background facts and judicial history in the District Court patent infringement action involving these parties may be summarized as follows. Prior to his 1999 crop planting season, Mr. Trantham purchased cottonseeds from Burlison Gin and soybean seeds from an entity named Terra Seed and Chemical Company in order to plant crops for that growing year. After harvesting the crops in 1999, Mr. Trantham retained portions of both the Roundup Ready® cottonseeds and soybean seeds that were believed to be genetically resistant to Roundup herbicide.

Being able to identify the portion of the seeds that were resistant to Roundup herbicide, Mr. Trantham planted the retained seeds in the spring of 2000, but he failed to pay the required licensing fees. He treated his crops with Monsanto's Roundup® herbicide in order to maximize the yields for that crop year seeking to enhance the efficiency and profitability of his farming operations.

On June 25, 2000, Pharmacia Company/Monsanto (plaintiff herein) filed an original civil action patent infringement lawsuit in the United States District Court for the Western District of Tennessee against Mr. Trantham for retaining and planting the seeds and also for failing to pay the required licensing fees in violation of the license agreements for use of the patented seed technology. Monsanto later obtained judicial authorization from the District Court to collect samples of Mr. Trantham's cotton and soybean crops in order to test the samples for the presence of the patented biotechnology. The sampling results indicated that 93% of the cotton samples and 100% of the soybean samples contained Monsanto's patented seed technology.

Subsequently, Monsanto amended its original District Court complaint to specifically include three counts of patent infringement. All three counts alleged that Mr. Trantham infringed upon a duly and legally issued patent for Roundup Ready® cottonseeds and Roundup Ready® soybean seeds and used the patented agricultural seeds without authorization from Monsanto in violation of title 35 U.S.C. § 271.² Monsanto successfully obtained summary judgment in the patent infringement action.

Monsanto's prepetition patent infringement action also included allegations of Mr. Trantham's unlawful retention of soybean seeds purchased with a legitimate license from the previous year and the unlawful retention, ginning, and spraying of herbicide on the cottonseeds that he planted to eliminate non-patented seeds without remitting the necessary licensing/royalty fees owed to the patent holder Monsanto. A jury trial was held on September 25-28, 2001, for the dual purpose of determining whether Mr. Trantham willfully infringed upon Monsanto's patent and to establish the amount of damages as result of the patent infringement.

The jury issued its unanimous verdict on September 28, 2001, concluding that the appropriate amount of damages that should be levied against Mr. Trantham was $34,392.00. The jury also found that Mr. Trantham willfully infringed upon Monsanto's patented seed technology. Multiple post-trial motions were filed and were addressed in two separate orders and accompanying memoranda by the Honorable Thomas A. Wiseman, Jr. Senior United States District Judge for the Middle District of Tennessee, sitting by designation in the Western District of Tennessee.

Judge Wiseman's first order and memorandum dated March 5, 2002, addressed and decided three specific issues. Firstly, Monsanto was not entitled to a summary judgment as a matter of law that the appropriate royalty/licensing fee was conclusively established at $205.00 per bag of seed owed on the retained bags of cottonseed because the evidence was not definitely and incontrovertibly established at $205.00. The parties introduced evidence to support both a high and low valuation in regard to the reasonable royalty for each bag of cottonseed resulting in a genuine issue of fact regarding the correct amount of damages. The conflicting evidence rendered the issue inappropriate for judgment as a matter of law.

Secondly, Judge Wiseman held that the jury finding of willfulness exhibited by Mr. Trantham should not be disturbed. Judge Wiseman's memorandum substantiating the finding of willfulness clearly articulated and found that Mr. Trantham's actions indeed were willful under the circumstances. Judge Wiseman noted that the issue of willfulness is a question of fact for the jury, and "liability for willfulness of infringement turns on consideration of intent, state of mind, and culpability." See the Memorandum dated March 5, 2002, at page 3; plaintiff's Exhibit D (citing National Presto Industries, Inc. v. West Bend Co., 76 F.3d 1185, 1192 (Fed.Cir.1996)). Additionally, Judge Wiseman affirmed the fact that "ample evidence" existed to support a jury finding that Mr. Trantham willfully infringed Monsanto's patents, and even noted that Mr. Trantham admitted at trial that he simply could not (or did not want to pay) the prices Monsanto charged to utilize the patented seeds. See the Memorandum dated March 5, 2002, at page 4; plaintiff's Exhibit D....