In re Wood

• Decision Date: 14 April 2004
• Docket Number: Bankruptcy No. 02-25981-WHB.,Adversary No. 02-0597.
• Citation: 309 B.R. 745
• Parties: In re James Edward WOOD, Debtor. Monsanto Company, Plaintiff, v. James Edward Wood, Defendant.
• Court: U.S. Bankruptcy Court — Western District of Tennessee

309 B.R. 745

In re James Edward WOOD, Debtor Monsanto Company, Plaintiff, v. James Edward Wood, Defendant.

Bankruptcy No. 02-25981-WHB.

Adversary No. 02-0597.

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

April 14, 2004.

Miles P. Clements, Joseph N. Mole, Michael H. Pinkerton, New Orleans, LA, Jack Marlow, Memphis, TN, for Monsanto Company.

P. Preston Wilson, Virginia Beach, VA, for James Edward Wood.

MEMORANDUM OPINION ON COMPLAINT TO DETERMINE DISCHARGEABILITY

WILLIAM H. BROWN, Bankruptcy Judge.

Plaintiff Monsanto Company ("Monsanto") commenced this adversary proceeding seeking a nondischargeable judgment against Mr. Wood ("Debtor") for his infringement of Monsanto's patent based upon the "willful and malicious" exception to discharge set forth in § 523(a)(6) of the Bankruptcy Code. Monsanto also seeks a permanent injunction against future infringement. The Debtor contends that the infringement was inadvertent and therefore the Debtor lacked the intent necessary to establish that his actions meet the willful and malicious requirements for nondischargeability. The Debtor also disputes the amount of damages claimed by Monsanto.

The trial of this proceeding took place on August 18 and 19, 2003, and since that time the parties have submitted post-trial briefs. The Court held this matter in abeyance pending the decision by the Bankruptcy Appellate Panel in Monsanto Co. v. Trantham (In re Trantham), 304 B.R. 298 (6th Cir. BAP 2004), which is a similar proceeding to the one in this case. Upon consideration of the evidence and testimony presented at trial, the statements of counsel, the parties' memoranda, and the entire record in this cause, including the District Court's summary judgment opinion, the Court finds and concludes that the damages incurred by Monsanto, as determined by this Court and as will be discussed in this opinion, as a result of the Debtor's patent infringement constitute a nondischargeable debt under the willful and malicious exception to discharge set forth in § 523(a)(6) of the Bankruptcy Code.

This is a core proceeding. See 28 U.S.C. § 157(b)(2)(A) and (b)(2)(I). The following constitutes the Court's findings of fact and conclusions of law pursuant to Fed. R. Bankr.P. 7052.

SUMMARY OF FACTUAL FINDINGS

It is important to note that the United States District Court had a suit pending between these parties prior to the Debtor's bankruptcy filing, and the automatic stay was lifted to permit the District Court to enter its summary judgment opinion. That opinion is a part of the record in this adversary proceeding as docket entry 25, and, of course, this Court is bound by the factual findings made in that opinion. As a part of that opinion, the District Court quoted from findings made in a companion suit in that Court, Monsanto Co. v. Trantham, 156 F.Supp.2d 855 (W.D.Tenn.2001):

This case stems from [Monsanto's] patents on technology that allows a seed producer of cottonseed and soybean seeds to insert genes into the seed to make the resulting plants resistant to glysophate herbicides, such as Roundup herbicide, a product manufactured by [Monsanto]. Seeds with the patented technology are called Roundup Ready(R). A grower using the Roundup Ready(R) seed can spray his crops with the Roundup herbicide, or another glysophate herbicide, thereby killing the weeds in his field without damaging his crops. The technology can also be injected into cottonseed to make the resulting cotton plants insect repellant. Cottonseed using the technology is called Bollgard(R) Cotton. Cottonseed containing both versions of the technology is called Bollgard(R) with Roundup Ready(R) Cotton. [Monsanto's] Roundup Ready(R) and Bollgard(R) gene technology is protected by three patents, which were issued prior to the events giving rise to this controversy. Plaintiff sells the gene technology to seed producers under a license to use the technology in the production of cottonseed and soybeans. The seed producers then sell the seed treated with the technology to retailers or to growers, both of whom must obtain licenses from [Monsanto] before selling or using the seeds with the Roundup Ready(R) or Bollgard(R) technology. The license agreement does not require the seed producers or retailers to sell the seed developed with the Monsanto technology at any specific price nor does the license restrict the grower or the retailer from selling conventional types of seed.

In order for an individual farmer to use seed produced with the patented gene technology, the farmer must be licensed to use the product. Under the licensing arrangement, a grower is only allowed to use the technology in one growing season and is prohibited from saving for later planting any of the seed produced from plants grown using the purchased seed. The grower is also prohibited from selling saved seed or transferring the seed to anyone else for planting.

Id. at 858-59 (footnotes omitted), as quoted in the District Ct.Summ. J. Op., docket entry 25, pages 3-4.

This finding of Monsanto's technology and the licensing that is required for use of its patented seed is consistent with the proof heard in the trial in this Court. Moreover, there was proof that the terms of the licensing agreement provide that the grower must follow requirements for insect resistance monitoring, a term of its technology agreement necessary to assist Monsanto in meeting the insect resistance monitoring requirements imposed upon it by the Environmental Protection Agency for its Bollgard(R) products.

Monsanto produced proof that farmers were fully aware, during the relevant time period involved in this litigation, that saving and replanting its patented seed is prohibited. When the technology was introduced to the public, Monsanto sponsored informational meetings for prospective purchasers and explained the terms of permissible use. In addition, Monsanto sent direct mailings to growers, including the Debtor, explaining the technology and the conditions for its use. In compliance with patent law, Monsanto marks all seed bags containing Roundup Ready(R) soybean seed and Bollgard(R) with Roundup Ready(R) cottonseed with notice that the seed is protected by patents. In the District Court's opinion, the following finding was made, again consistent with proof heard in this Court:

Additionally, in compliance with 35 U.S.C. § 287, all seed bags containing Roundup Ready(R) soybean seed and Bollgard(R) with Roundup Ready(R) cottonseed are marked with the '605 patent number under which the seeds are protected. Printed on all bags of Roundup Ready(R) soybean seed marketed for sale is the following: "A LICENSE MUST BE OBTAINED FROM MONSANTO BEFORE THESE SEEDS CAN BE USED IN ANY WAY." A similar message is printed on bags of Bollgard(R) with Roundup Ready(R) cottonseed marketed for sale: "IT IS A VIOLATION OF FEDERAL PATENT LAW TO USE THIS SEED FOR ANY PURPOSE WITHOUT OBTAINING A LICENSE FROM MONSANTO CO."

District Ct. Summ. J. Op., docket entry 25, page 5. There was no proof that this Debtor actually signed a licensing agreement, and no signed agreement was produced at trial; however, the Debtor admitted that he was aware that the seed purchased by him in two planting years was subject to the patents. In the absence of an executed agreement between the parties, there is no viable breach of contract claim; however, there are still valid patent infringement claims. The Debtor does not defend this action on the basis that he was unaware of restrictions against saving patented seed; rather, he defends on the basis that any saving was a mistake.

In the 1999 growing season, the Debtor, a farmer in Tipton County, Tennessee, purchased 24 bags of Bollgard(R) with Roundup Ready(R) cottonseed from a local dealer and he planted that seed on his farm designated by the Farm Service Agency as Farm No. 1915, also known as the Lackey Farm. The Debtor also planted conventional, non-genetically altered cotton on Farm No. 1919. Although no evidence was introduced that the Debtor signed a licensing or technology agreement upon purchasing the Monsanto seed, invoices from the retailer indicate that the Debtor paid the required technology fee, Exhibits 1 & 2, and the Debtor does not deny that, at the time of planting the patented seed on Farm No. 1915 in 1999, he was aware that the seed extracted from the resulting cotton on that farm could not be saved and replanted under the terms of Monsanto's technology agreement.

The Debtor testified in this Court that at all times he intended to save seed only from the conventional cotton planted and harvested from Farm No. 1919, and that he never intended to save seed from his Bollgard(R) with Roundup Ready(R) cotton. Of course, the fatal flaw to this contention is that the District Court found otherwise:

After harvesting the 1999 cotton crop, Wood and William Trantham decided to save a portion of the seed ginned from the crop. In accordance with Wood's instructions, the Charleston Gin saved cottonseed ginned from three modules of cotton harvested from Farm No. 1915. The saved cottonseed was sent to Sinkers, Inc., a seed cleaning and conditioning company, for delinting and chemical treatment. Sinkers returned 725 bags of cottonseed to [Wood], who transferred a portion to Trantham for planting.

Id., at pages 5-6 (footnote omitted).

Not only is this Court bound by that finding, it is consistent with the persuasive proof presented to this Court. Notwithstanding the Debtor's contention that he told a representative of the Charleston Gin that he wanted to save the seed from the conventional cotton harvested from Farm No. 1919, the compelling proof, by a preponderance of the evidence, does not support his position. A receipt from the Gin dated October 16 indicates that cotton was received from Farm No. 1919, but it also labels Farm No. 1919 as the Lackey Farm. Ms. Glass, who acts as secretary for the Gin, testified that the identifying farm...