Jersey Asparagus Farms, Inc. v. Rutgers Univ.

• Decision Date: 31 May 2011
• Docket Number: Civil No. 10–2849 (FLW).
• Citation: 274 Ed. Law Rep. 888,803 F.Supp.2d 295
• Parties: JERSEY ASPARAGUS FARMS, INC., Plaintiff, v. RUTGERS UNIVERSITY, Defendant.
• Court: U.S. District Court — District of New Jersey

274 Ed. Law Rep. 888

803 F.Supp.2d 295

JERSEY ASPARAGUS FARMS, INC., Plaintiff,

v.RUTGERS UNIVERSITY, Defendant.

Civil No. 10–2849 (FLW).

United States District Court, D. New Jersey.

May 31, 2011.

Donald Clark Simpson, Moorestown, NJ, for Plaintiff.

Stephen R. Buckingham, Michael J. Hahn, Lowenstein Sandler, PC, Roseland, NJ, for Defendant.

OPINION

WOLFSON, District Judge:

This matter arises out of a now-terminated, exclusive license agreement through which Plaintiff Jersey Asparagus Farms, Inc. (“JAFI”) was authorized by Defendant Rutgers University (“Rutgers”) to sell the latter's patented varieties of asparagus. Presently before the Court is Plaintiff's motion to amend the Amended Complaint and to file its Proposed Second Amended Complaint (“SAC”). Also before the Court is Defendant's motion to dismiss the Amended Complaint for lack of statutory standing pursuant to Federal Rule of Civil Procedure 12(b)(1) or, in the alternative, for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6).

At oral argument, the parties agreed with the Court that, in the interest of judicial economy, the Court should focus its inquiry on the SAC in ruling on both parties' motions. For the reasons that follow, the Court grants Defendant's motion to dismiss with prejudice with respect to Plaintiff's federal and state RICO claims. Plaintiff's antitrust and Declaratory Judgment Act, 28 U.S.C. § 2201, et seq. (“DJA”), claims are dismissed without prejudice. The Court denies Plaintiff's motion to amend and file its Second Amended Complaint, yet grants Plaintiff leave to file a Third Amended Complaint in the manner described herein.

I. BACKGROUND

On both motions to dismiss for statutory standing (Rule 12(b)(1)) and motions to dismiss for failure to state a claim (Rule 12(b)(6)), I must accept as true the plaintiff's material allegations and construe them in the light most favorable to the plaintiff. Baldwin v. Univ. of Pittsburgh Med. Ctr., 636 F.3d 69, 73–4 (3d Cir.2011) (citing Alston v. Countrywide Fin. Corp., 585 F.3d 753, 758 (3d Cir.2009)). Thus, the following facts are taken from Plaintiff's SAC.

A. Facts

While JAFI served as Rutgers' exclusive distributor for over twenty years, their relationship soured once JAFI allegedly discovered that some of the patents underlying the parties' license agreement had expired or were otherwise invalid. Generally, Plaintiff brings antitrust monopolization, RICO, and DJA claims against Rutgers for its actions in allegedly fraudulently obtaining the patents and entering into the exclusive license agreement premised on those patents, as well as for seeking return of plants provided to JAFI and the payment of royalties under the license agreement. As explained in more detail below, Plaintiff's Second Amended Complaint alleges that the exclusive license agreement authorized Plaintiff to cross-breed Rutgers patented asparagus parent plants, harvest all-male hybrid seed from those plants, and sell that seed to farmers with a license restriction prohibiting both Plaintiff and the purchasing farmers from asexually reproducing new hybrid plants by dividing the crowns of the plants grown from the purchased seed.

1. Asparagus Reproduction

As background for the ensuing discussion, I include a brief primer on asparagus reproduction. Asparagus may be reproduced sexually or asexually. Sexual reproduction is typically referred to as natural “propagation,” and describes the process by which two parent plants are bred to produce seed. The seed produced is hybrid if the parent plants were from two different varieties.

Additionally, the crown ( i.e., the root system of a one-year old asparagus plant) of an asparagus plant may be divided in such a manner as to produce new plants. This is referred to as asexual reproduction or crown division. The process of crown division effectively clones the plant, keeping intact its hybrid or non-hybrid nature.

2. Fraud on the PTO Allegations

According to the Proposed Second Amended Complaint, Rutgers began developing an all-male, hybrid asparagus seed in the late 1970's. PSAC, ¶ 20. Rutgers ultimately obtained patents for ten varieties of such all-male, hybrid asparagus (“Rutgers' varieties”). Id. These varieties are Greenwich, Jersey Giant, Jersey Knight, Jersey General, Jersey Titan, Jersey Gem, Jersey Jewel, NJ854, NJ953, and NJ977. Id. at 22. Rutgers, further, produced three additional varieties for which it has not obtained patents—Jersey King, Jersey Prince, and Jersey Supreme. Id. at ¶ 23. Plaintiff alleges that, despite not having obtained patents for these latter three varieties, Rutgers attempts to control the use and sale of these varieties through the patents for the varieties' parent plants. Moreover, Rutgers obtained patents over several parent plants from which the hybrid varieties were cross-bred. See id. at ¶ ¶ 22–24. In Plaintiff's view, Rutgers fraudulently obtained almost all of its patents by asserting on its patent applications that each asparagus variety had not been described in a publication, and/or been in public use, or on sale, or both, in the United States for more than one year prior to the date upon which the respective applications were filed.¹ Id. at ¶¶ 9, 27.

Plaintiff specifically alleges that in each of the patent applications, the inventors (who worked for Rutgers) filed declarations stating

... that we do not know and do not believe that this invention or discovery thereof was ever known or used before our invention or discovery thereof, or has been ... described in any printed publication in the country before our invention or discovery thereof, or more than one year prior to this application, or in public use or on sale in the United States for more than one year prior to this application.

Id. at ¶ 7.² By way of example, Plaintiff describes the patent application for the Greenwich variety, which application was filed in 1983. Plaintiff alleges that this variety was in public use as early as 1978 at Oklahoma State University and Michigan State University, id. at ¶ 29, and that a Michigan-based research farm sold harvested Greenwich spears more than one year prior to the filing of the Greenwich patent application. Plaintiff alleges that similar examples of prior publication, use, or sale (collectively, “prior use”) occurred in connection with the Jersey Giant, Jersey Knight, Jersey Titan, Jersey Gem, Jersey Jewel, Jersey Deluxe and NJ977, NJ44P, and NJ22–34 (the male parent plants for the Jersey Deluxe variety) applications. Id. at ¶¶ 30–42. Plaintiff alleges that the inventor misrepresentations are material because, without the declaration that no publication, use, or sale had occurred more than one year prior to the filing of the applications, no patent would have been issued and “the public would be free to use [Rutgers'] invention[s].” Id. at ¶ 28.

3. Antitrust Allegations

Plaintiff alleges that Rutgers used its fraudulently obtained patents to “dominate and control the nationwide market for asparagus crowns and seed that produce ‘all-male plants' and to expand its domination over the entire market for asparagus crowns and seeds in the colder, wet climate market.” Id. at ¶ 45. Specifically, Plaintiff alleges, Rutgers engages in anti-competitive activities by establishing an exclusive licensing program that, in conjunction with Rutgers' patents, prevents JAFI and other competitors from “selling asparagus crowns and seeds that produce ‘all-male’ plants ....” Id. at ¶ 46. By virtue of this licensing program, farmers may purchase Rutgers' patented varieties only through selected licensees. The farmers are, further, prevented from asexually reproducing new plants through crown-division. Id.

Plaintiff categorizes Rutgers' anticompetitive conduct or scheme into what it contends are four distinct steps:

(1) Rutgers uses fraudulently obtained patents to limit asexual reproduction of its patented all-male hybrid varieties.

(2) Rutgers exclusively licenses the right to grow the seed and sell the seed to a distributor.

(3) As a result of the licensing program, the only source of the seed is the through the distributor.

(4) “Because Rutgers controls asexual reproduction of the fraudulently patented plant, it's [sic] exclusive licensing of seed production also effectively controls the market for asparagus crowns: the only way that either a distributor or a farmer can acquire asparagus crowns in the fraudulently patented plant is to either buy seed and grow the crowns or buy the crowns from an intermediary who has grown the crowns—from seed acquired from the exclusive distributor. Thus, it is impossible (without the threat of patent infringement claims) for anyone to grow the fraudulently patented asparagus variety unless the plants ultimately passed through the exclusive seed distributor.”

Id. at ¶ 47.

For the unpatented hybrid varieties, JAFI alleges that Rutgers utilized similar tactics by claiming that it owned and controlled all right, title and interest in the varieties' parent plants. See id. at ¶ 55. Furthermore, through the exclusive licencing practice, JAFI alleges that Rutgers created, and maintains, a monopoly with respect to the sale of these varieties. In addition, JAFI alleges that Rutgers continued to behave as if had active patents on the parent plants even after those patents expired. Id.

Thus, other than by purchasing seeds, the only means by which a new crop may be had from the Rutgers' varieties is if a farmer practices crown division. Id. at ¶¶ 58–65. Through crown-division, 2 to 5 new plants may yield from the original crown. However, because Rutgers prohibits farmers from practicing crown-division, farmers who wish to use Rutgers' varieties must repurchase those varieties every year. The prohibition against crown-division, in Plaintiff's view, decreases competition by increasing farmers' costs. Id. at ¶ 65 (“As a result of [Rutgers'] unfair competitive advantage, Rutgers is able to...