Rhone-Poulenc Agro S.A. v. Monsanto Co., 1:97CV1138.

• Court: United States District Courts. 4th Circuit. Middle District of North Carolina
• Citation: 73 F.Supp.2d 540
• Decision Date: 01 April 1999
• Docket Number: No. 1:97CV1138.,1:97CV1138.
• Parties: RHOÔNE-POULENC AGRO S.A., Plaintiff, v. MONSANTO COMPANY and Dekalb Genetics Corp., Defendants.

73 F.Supp.2d 540

RHOÔNE-POULENC AGRO S.A., Plaintiff, v. MONSANTO COMPANY and Dekalb Genetics Corp., Defendants.

No. 1:97CV1138.

United States District Court, M.D. North Carolina.

April 1, 1999.

Michael E. Ray, Winston-Salem, NC, Timothy G. Barber, Charlotte, NC, John F. Morrow, Winston-Salem, NC, Richard D. Levin, Wilmington, DE, for plaintiff.

James Donald Cowan, Jr., Greensboro, NC, Robert N. Sayler, Washington, DC, John F. Lynch, Houston, TX, Daniel W. Fouts, Greensboro, NC, W. Winburne King, III, Greensboro, NC, for defendants.

MEMORANDUM OPINION

TILLEY, District Judge.

This case comes before the Court on the Defendants' motions for summary judgment on several of Plaintiff Rhône-Poulenc Agro S.A.'s ("RPA") claims, (see DeKalb Mot.Summ.J. [Doc. # 216]; Monsanto Mot.Summ.J. [Doc. # 222]), and on RPA's motion for summary judgment on Defendant DeKalb Genetics Corporation's ("DeKalb") Second Counterclaim, (RPA Mot.Summ.J. [Doc. # 225]).

RPA's First Supplemental and Amended Complaint ("Complaint") contained six claims: (I) misappropriation of RPA technology by DeKalb and Defendant Monsan-to Company ("Monsanto"); (II) breach of a 1991 agreement by DeKalb; (III) breach of the covenant of good faith and fair dealing as to a 1994 agreement by DeKalb; (IV) rescission of the 1994 agreement; (V) patent infringement against Monsanto and DeKalb; and (VI) antitrust violations against Monsanto and DeKalb. (See Compl. [Doc. # 68].) Count II was dismissed with prejudice pursuant to a stipulation approved by the Court on February 2, 1999. (See Stipulation of Voluntary Dismissal [Doc. # 242], at 1.) Both Defendants have filed motions to dismiss Count VI, which are under consideration by the Court. Discovery on Count VI has been postponed until after the Court rules on the motions. Therefore, of RPA's six claims, this Opinion will address only the Defendants' summary judgment motions for Counts I, III, IV, and V.¹ DeKalb initially made two counterclaims: (1) RPA's breach of the 1994 agreement; and (2) RPA's breach of the 1991 agreement. (See DeKalb's Answer [Doc. # 78].) The first counterclaim was dismissed pursuant to a stipulation approved by the Court on February 2, 1999. (See Stipulation of Voluntary Dismissal [Doc. # 242], at 1.) Therefore, of the two counterclaims, this Opinion will address only RPA's summary judgment motion for the second counterclaim.

Finally, Monsanto initially made a single counterclaim for tortious interference. (Amended Answer and Countercl. [Doc. # 74].) However, this counterclaim was dismissed pursuant to a stipulation approved by the Court on February 2, 1999. (See Stipulation of Voluntary Dismissal [Doc. # 242], at 1.) Therefore, RPA's motion for summary judgment on this claim [Doc. # 227] is DISMISSED as MOOT.

For the reasons set forth below, Defendants' motions for summary judgment are DENIED as to Count IV. Decision regarding all other motions is postponed until after it is determined whether the 1994 agreement is rescinded.

I.

RPA is "a leading worldwide manufacturer and vendor of diversified agricultural products, and is engaged in chemical and biotechnological research and development with particular interests in the area of weed control and crops." (Compl.[Doc.#68], ¶ 6.) Monsanto manufactures and sells a diversified line of agricultural products as well, including herbicides, and is engaged in biotechnological research and development. (Id. ¶ 7.) DeKalb, which is at least partially owned by Monsanto,² (id. ¶ 3), is involved in agricultural genetics and biotechnology for seed, and is one of the largest seed suppliers in the United States, (id. ¶ 7). RPA and Monsanto compete directly with each other in the general agricultural market and particularly in the fields of herbicides and biotechnology. (Id. ¶ 8.)

This case involves sophisticated biotechnology and genetic engineering. However, for the purposes of these summary judgment motions, the essence of the case can be reduced to the following explanation. Monsanto produces an herbicide called Roundup, whose active ingredient is "glyphosate." Glyphosate is apparently a very powerful, yet relatively safe, herbicide that will kill all green foliage with which it comes into contact. This case revolves around the attempt to use genetic engineering to create corn that is tolerant to glyphosate herbicides, such as Roundup. The ability to grow glyphosate-tolerant corn would increase the efficiency of farmers, because they could spray glyphosate-herbicide over the entire crop of corn, killing all of the weeds but not damaging any of the corn plants.

In 1985, DeKalb and Calgene, Inc. ("Calgene") entered into an agreement for the joint development of crops containing Calgene's C-AroA gene that would make corn crops tolerant to glyphosate (the "1985 Agreement"). The 1985 Agreement called for the formation of a "Project Review Committee," composed of scientists from each company, that would have general oversight responsibility for the progress of each party under the agreement. It also provided for various royalty payments to be made by DeKalb to Calgene for products developed under the agreement. As part of the 1985 Agreement, DeKalb received an exclusive license for two patents of certain mutated genes (the "Comai" patents) in the field of use of corn. In 1991, RPA, DeKalb, and Calgene entered into an "Assignment and Assumption Agreement," (the "1991 Agreement") whereby RPA assumed Calgene's rights and obligations under the 1985 Agreement.

At a November 1992 meeting, RPA stated that it would provide to DeKalb new genetic material containing an OTP/maize double mutant EPSPS construct ("EPSPS construct").³ At some point after that meeting DeKalb received the genetic material. Moreover, the record indicates that at this meeting RPA notified DeKalb of its decision to withdraw from at least some of its responsibilities under the 1985 and 1991 Agreements. There is a factual dispute as to the extent of this withdrawal, and as to the responsibilities of each party under the 1985 and 1991 Agreements afterwards. RPA claims that it was "generally suspending work on glyphosate tolerance," (RPA's Answering Br. [Doc # 246], at 3), while DeKalb asserts that RPA "ceased its participation in the joint project," (DeKalb Br.Supp.Mot.Summ.J. [Doc. # 217], at 4).

In late 1993 and early 1994, in a greenhouse, DeKalb succeeded in growing transformed corn plants containing RPA's EPSPS construct that were tolerant to Roundup herbicide at potentially commercial levels. On February 18, 1994, DeKalb sent RPA a report of its results, stating that:

[W]e have now demonstrated tolerance in transgenic plants in the greenhouse to up to four times the field application recommended by Monsanto for tolerant corn! We will repeat these experiments in the field in the summer of 1994. It is obvious from these results that the mutant maize gene has been the key to success.

(DeKalb App. B. [Doc. #219], Ex. 23.) RPA responded with a three sentence letter stating: "I thank you for the report on development of glyphosate resistant corn. The results look good. I hope they will be confirmed by the field experiments." (Id. at Ex. 24.) Then, on March 10, 1994, DeKalb sent RPA another letter that once again mentioned the summer field trials and the gains DeKalb had achieved in the greenhouse regarding the glyphosate tolerance of corn with the EPSPS construct. (Id. at Ex. 25.) In addition, that letter requested RPA's opinion regarding the use of the EPSPS construct for other projects, and also requested a response to the "many questions" that need to be answered regarding the "recent success" of the EPSPS construct. (Id.)

DeKalb conducted field tests in the summer of 1994, and on September 6, 1994, DeKalb received results indicating that corn plants containing RPA's EPSPS construct were resistant to four-times the normal level of Roundup herbicide. The report from the field testing was not sent to RPA. Rather, on September 7, 1994, DeKalb sent RPA a letter which stated, in its entirety, that:

As the results that we have obtained in maize with the glyphosate resistant double mutant maize gene provided by RPA to DEKALB have been very encouraging, we are interested in whether this gene would also function as a selective marker in soybeans. Is it possible for DEKALB to use this gene in soybeans as a selectable marker?

I will await your answer.

(Id. at Ex. 26.) These letters seem to be the extent of the communications between DeKalb and RPA regarding the EPSPS construct and its introduction into corn lines.

Also during the summer of 1994, Calgene and RPA filed a patent infringement action against Monsanto in which Calgene and RPA accused Monsanto of using the patented technology contained in the Comai patents in making, using, and selling glyphosate resistant soybeans. Calgene owned the Comai patents, and RPA had certain exclusive rights under these patents in soybeans. DeKalb also had an interest in the litigation, because under the 1985 Agreement, DeKalb was the exclusive licensee of the Comai patents in the field of use of corn.

In December 1994, two agreements were negotiated arising from these events. First, RPA, Calgene, and Monsanto agreed to a settlement of the patent litigation begun in July 1994. Monsanto paid $8 million in return for an exclusive license (shared with DeKalb) under the Comai patents, for use in all fields. Concurrent with this settlement process, RPA and DeKalb entered a new agreement (the "1994 Agreement") in which DeKalb agreed to share its exclusive license under the Comai patents in the field of use of corn with Monsanto. Under the 1994 Agreement, DeKalb was provided with $500,000, as its share of the Monsanto settlement proceeds. Moreover, the 1994 Agreement dissolved the 1985 and 1991 Agreements, and RPA granted DeKalb the "world-wide, paid-up right to use" various technologies, including the EPSPS construct, in the field of use of corn. The ...