Yoder Bros., Inc. v. California-Florida Plant Corp., CALIFORNIA-FLORIDA

Citation193 USPQ 264,537 F.2d 1347
Decision Date07 September 1976
Docket NumberNo. 75-2141,CALIFORNIA-FLORIDA,75-2141
Parties, 1976-2 Trade Cases 61,047 YODER BROTHERS, INC., Plaintiff-Appellant-Cross Appellee, v.PLANT CORPORATION et al., Defendants-Appellees-CrossAppellants.PLANT CORPORATION et al., Plaintiffs-Appellees-CrossAppellants, v. YODER BROTHERS, INC., Defendant-Appellant-Cross Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Charles M. Ullman, David L. Foster, Frederick L. McKnight, New York City, for plaintiff-appellant-cross appellee.

Frederick P. Furth, Arthur L. Martin, San Francisco, Cal., John H. Boone, San Francisco, Cal., Thomas E. Schatzel, Santa Clara, Cal., for defendants-appellees-cross appellants.

Appeals from the United States District Court for the Southern District of Florida.

Before BROWN, Chief Judge, and JONES and GOLDBERG, Circuit Judges.

GOLDBERG, Circuit Judge:

In this clash between two giants of the chrysanthemum business, we confront a myriad of antitrust and plant patent issues. Yoder Brothers (Yoder), plaintiff in the district court, sued, alleging infringement of twenty-one chrysanthemum plant patents by California-Florida Plant Corp. (CFPC) and California-Florida Plant Corp. of Florida (CFPCF) (sometimes referred to collectively as Cal-Florida). CFPC and CFPCF denied the infringement and filed antitrust counterclaims under sections 1 and 2 of the Sherman Act. As to seven of the chrysanthemum plant patents, the lower court directed verdicts for Yoder that the patents were valid and infringed and awarded treble damages. The court also ruled for Yoder on Cal-Florida's section 2 claim. CFPC and CFPCF, however, prevailed in their antitrust counterclaim under section 1 and received treble damages for Yoder's derelictions.

Because many of the issues in this case turn on the particular nature of the ornamental plant industry and the specific characteristics of chrysanthemums, we shall describe the background facts in some detail before discussing the many complex legal issues presented on this appeal. Following our description of the facts, we shall briefly sketch the procedural history of the case. Finally, we shall consider the antitrust claims and the issues relating to the plant patent law.

I. General Background
A. The Chrysanthemum Industry

Chrysanthemums, in their natural state, blossom only during the fall. This is because they are photoperiodic in nature, meaning that their growth is affected by the relative lengths of lightness and darkness in the day. When the days are long, the chrysanthemum plant remains in a vegetative state. As the nights become longer, the initiation process of the chrysanthemum bud begins. Thus, in early August, when the nights achieve a duration of nine and one-half continuous dark hours, the chrysanthemum plant in its natural state will begin the process of developing a flower. During the fall and early winter months, the mature flower appears.

Yoder began doing business in the 1930's as a simple greenhouse operator, specializing in tomatoes. Soon thereafter, because the fall tomato crop was less profitable than the spring crop, it decided to replace the fall crop with chrysanthemums. In 1939 or 1940, Yoder employees began research into out-of-season flowering of chrysanthemums. By applying black cloth shades over the chrysanthemums when dark hours were needed and applying artificial light when light hours were needed, it became possible to flower chrysanthemums on a year-round basis. Yet this breakthrough was not without its problems. For example, the use of black cloth shades resulted in an abnormally high temperature build-up around the plants, which in turn retarded bud initiation. Similarly, when the finishing temperatures were too warm, the chrysanthemums would not hold their color. In an effort to adjust for these conditions and to improve the quality of the chrysanthemum generally, Yoder initiated a breeding program in the early 1940's. One of the most important goals of the breeding program was the development of new varieties for consumers.

Although the ornamental plant industry encompasses many different kinds of flowers, including azaleas, carnations, roses, african violets, geraniums, snapdragons, and others, chrysanthemums are one of the most popular of the genre. According to the United States Department of Agriculture, in 1971 approximately 2,134 growers in twenty-three states sold nearly 145 million blooms from about 129 million standard variety chrysanthemum plants, 34.5 million blooms from 136 million pompon chrysanthemum plants, and 17.5 million potted chrysanthemum plants. At the time of the trial there were over 475 different varieties of chrysanthemums available. The total wholesale value of growers' sales in the twenty-three states that year was approximately 83.5 million dollars.

Chrysanthemums have been subject to intensive breeding efforts over the past thirty years; each individual specimen is a genetically unique complex organism. Several definitions of the term "variety" of chrysanthemum were offered at trial. Mr. Duffett, Yoder's head breeder, defined a variety as a group of individual plants which, on the basis of observation by skilled floriculturists and according to reasonable commercial tolerances, display identical characteristics under similar environments. Cal-Florida defined variety in its complaint as "a subspecies or class of chrysanthemums distinguishable from other subspecies or classes of chrysanthemums by distinct characteristics, such as color hue, shape and size of petal or blossom or any of them."

New varieties of chrysanthemums are developed in two major ways: by sexual reproduction and by mutagenic techniques. Sexual reproduction, the result of self or cross pollination, produces a genetically unique seedling, the characteristics of which are impossible to predict. Mutagenic techniques simply accelerate the natural rate of mutation in the chrysanthemum plant itself. A mutation was defined by Mr. Duffett as "a change in the number of chromosomes or a change in the chromosome position or a specific change in the genes within those chromosomes." Technically, only those mutations that first express themselves as bud variations are properly called "sports"; however, the word is used loosely in the industry as a general synonym for mutation, and we will so use it. Two types of sports can appear: spontaneous sports and radiation sports. The cells of all living things occasionally mutate, and spontaneous sports are simply the result of that process. Radiation sports, on the other hand, are induced artificially, through exposure to such things as gamma radiation from radioactive cobalt and X-rays. These techniques do nothing that could not occur in nature apart from speeding up the natural mutation process. Although most of the mutations induced by radiation are not commercially usable plants, a skilled breeder will select for further development those that display such desirable characteristics as fast response time, temperature tolerance, durability, size, and vigor.

After a breeder has successfully isolated a new variety, the only way he can preserve his creation is by means of asexual reproduction. In the case of chrysanthemums, the most common technique of asexual reproduction is the taking of cuttings from a stock plant. Cuttings, as defined in the Cal-Florida complaint, are "sections or parts of chrysanthemum plants which may be grown into mature plants for sale as cut flowers and/or potted plants or from which additional cuttings may be harvested." According to Yoder's suggested definition, cuttings are simply immature chrysanthemum plants. Since a cutting is genetically identical to the parent plant, it will develop into a plant whose characteristics match the parent's exactly, so long as the same environmental conditions obtain. A central fact of life in the chrysanthemum industry is the ease with which cuttings can be taken from parent plants: from one chrysanthemum, it is theoretically possible to develop an infinitely large stock, by taking cuttings, maturing some into flowered plants, taking more cuttings, and so on.

Over the years since Yoder first entered the chrysanthemum business, the industry has become internally specialized. At the first functional level are the breeders, who create new varieties of chrysanthemums. Breeding is an expensive, complex procedure. The breeder must possess the skill and discrimination to spot potential new varieties and recognize whether they possess desirable traits; facilities for elaborate testing and development must be available. Because chrysanthemums mutate rapidly, a breeder must always be on the lookout for new changes.

At the next level in the industry are the propagator-distributors. The propagator-distributors build up mother stock from sources such as breeders, retail florists, or their existing flowers, and reproduce cuttings from that mother stock. In a sense they are simply mass producers of cuttings. They do not develop cuttings to the mature flower stage (except for purposes of their own testing). Next are the growers, who develop cuttings purchased from propagator-distributors into mature plants either for cut flowers or potted plants. Combining the function of propagator-distributors and growers are the self-propagators. Cal-Florida defined a "self-propagator" as "a person who either buys or establishes stock and takes cuttings for the sole purpose of producing cut flowers and/or potted plants for resale or own use." In other words, the self-propagators are vertically integrated into one step. Finally, the growers (or self-propagators) sell their products to retail florists, who in turn sell to ultimate consumers.

B. The Parties

During the times relevant to this litigation, Yoder operated on two levels in the business: as a substantial (if not the largest) breeder of new varieties of chrysanthemums, and as a large...

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