August 2, 2015

Proprietary Cultivars Reaping Fresh Patent Litigation

In January, amid a case docket otherwise dominated by electronics and pharmaceuticals, the U.S. Court of Appeals for the Federal Circuit, the group of D.C.-based justices whose jurisdiction over patent matters is second only to the Supreme Court, issued a decision concerning a seemingly more elemental technology: grapes.  The decision in Delano Farms Co. v. California Table Grape Commission marked the conclusion (barring further appeal) of a dispute whose tendrils have been twisting their way up and down the trelliswork of the federal court system since 2007.  The nearly decade-long struggle stands as testament to the growing importance of proprietary cultivars in American agriculture and the growing willingness of the owners of these valuable intellectual property assets to enforce their rights.

Delano Farms involved two grape varieties developed and patented by the USDA: “Scarlet Royal” and “Autumn King.”  The USDA licensed its patents to the California Table Grape Commission, who in turn licensed them to various growers.  Apparently dissatisfied with the royalty payments demanded by the CTGC, several Scarlet Royal/Autumn King licensees banded together to file a lawsuit in the Eastern District of California, asking the district court to declare the patents invalid.

Patents over vegetation come in three flavors: utility patents, the same type of protection available to other types of novel inventions; plant patents, a special category of patent created by the Plant Patent Act of 1930; and plant variety protection certificates (PVPs), a right created by the Plant Variety Protection Act of 1970 which confers patent-like protection but which is administered by the USDA rather than the USPTO.  In the case of vineyards, PVPs are generally of less interest since they apply only to plants propagated sexually or by tuber.  That leaves utility and plant patents.  In theory, a grape breeder could protect a new variety with a standard utility patent, but, in practice, a plant patent may be easier to obtain since the requirements for a plant patent application are more accommodating of the realities of botanical innovation.  And, indeed, it was this specialized form of patent that covered both Scarlet Royal and Autumn King.

A plant patent, which among other things confers the exclusive right to asexually reproduce the patented cultivar, is subject to many of the same eligibility restrictions as a utility patent.  Under Section 102 of U.S. patent law, inventions must be “novel” in order to be protected, and public use of an invention before the patent’s effective filing date can invalidate the patent.  In the case of Scarlet Royal and Autumn King, the Delano Farms plaintiffs claimed that, prior to the USDA’s filing date, the grapes had been grown at J&J Ludy Farms in Bakersfield, CA, invalidating the patents.

However, the Federal Circuit found that the activities of cousins Jim and Larry Ludy, who had apparently obtained vine cuttings surreptitiously from a rogue USDA employee, did not amount to “public use” given their covert nature.  Though the rows of Royal Scarlet and Autumn King propagated by the Ludys were visible from public roads, their novel characteristics could not be discerned by anyone outside the cousins’ small circle of co-conspirators, all of whom acknowledged the hush-hush nature of the operation.

Delano Farms is an important precedent for intellectual property practitioners in terms of defining the boundaries of “public use.”  But for growers, the more immediate takeaway may simply be the increasing role of cultivar patents in the industry.  Once relatively unusual, litigation over plant patents appears to be on the rise, as agribusinesses chase the premium price points that come with boasting a proprietary varietal and patent holders move to enforce their rights accordingly.

On January 20, less than two weeks after the Federal Circuit’s Delano Farms decision brought that lawsuit to a close, a new patent infringement claim was filed in the Eastern District of California.  This time, the patented grape strain was developed not by the USDA but by a private research firm, International Fruit Genetics.  The defendant grower, Sandrini Farms (whose owner also had a cameo in the Delano Farms litigation as a friend and confidante of the Ludys) allegedly cultivated the proprietary vines—given the dispassionate identifier “IFG Four” by their creator but marketed under the more colorful names “Nicolo” and “Sweet Romance”—under license from IFG.

When Sandrini allegedly exceeded the scope of that license by grafting IFG Four vines into a second vineyard without permission (and without paying the agreed 5 percent royalty on the grapes thereby produced), IFG filed suit.  Like the Delano growers before it, Sandrini Farms filed a counterclaim asking the court to declare the IFG patent invalid.  Sandrini alleges, among other things, that he was given the grapes by IFG for purposes of cultivation more than two years before IFG filed its patents, which, if true, could undermine the novelty required of a patentable invention.

Whether IFG and Sandrini choose to battle their way up to the Federal Circuit as did Delano Farms and the CTGC, or whether the dispute ends up quietly fizzling under the cloak of a confidential settlement, what’s certain is that the federal courts sitting in California’s fertile valleys probably haven’t seen the last of plant patent lawsuits.