Her Majesty Queen in Right of Can. v. Van Well Nursery Inc.

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HER MAJESTY THE QUEEN IN RIGHT OF CANADA AS REPRESENTED BY THE MINISTER OF AGRICULTURE AND AGRI-FOOD, a Canadian governmental authority, Plaintiff/Counter-Defendant, v. VAN WELL NURSERY, INC., a Washington Corporation; MONSON FRUIT COMPANY, INC., a Washington Corporation; GORDON GOODWIN, an individual; and SALLY GOODWIN, an individual, Defendants/Counter-Plaintiffs, v. SUMMERLAND VARIETIES CORPORATION, Third Party Defendant/ Counter-Defendant.

No. 2:20-CV-00181-SAB

United States District Court, E.D. Washington

January 3, 2022

ORDER DENYING PLAINTIFF'S MOTION TO DISMISS AND DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT

STANLEY A. BASTIAN, CHIEF UNITED STATES DISTRICT JUDGE

Before the Court are Defendants' Motion for Partial Summary Judgment on In validity, ECF No. 78, and Plaintiff and Third-Party Defendant's Motion to Dismiss Counterclaim Number 3, ECF No. 90. The Court held oral argument on November 9, 2021. ECF No. 157. Plaintiff Her Majesty the Queen in Right of Canada as represented by the Minister of Agriculture and Agri-Food (“AAFC”) is represented by Gaspare Bono, Jennifer Bennett, Leanna Anderson, Leslie Barry, and Daniel Short; Third-Party Defendant Summerland Varieties Corporation (“SVC”) is also represented by Daniel Short and Jennifer Bennett.^[1] Defendant Van Well Nursery Inc. (“Van Well”) is represented by Ken t Doll Quentin Batjer, and Timothy Billick; Defendants Gordon Goodwin and Sally Goodwin (the “Goodwins”) are also represented by Quentin Batjer and Timothy Billick. Defendant Monson Fruit Company, Inc. (“Monson Fruit”) is represented by Mark Walters, Mitchell West an d Kevin Regan.

The Court has reviewed the parties' briefing and applicable caselaw, heard oral argument from counsel, an disfully in formed. Th e Court h olds t hat genuine disputes of material fact preclude judgment as a matter of law on patent invalidity, and therefore, Defendants' Motion for Partial Summary Judgment is denied. Construing facts in the light most favorable to AAFC and SVC, a reasonable jury could find that the testing agreements did not amount to a commercial sale or offer.

With respect to Plaintiff and Third-Party Defendant's Motion to Dismiss Counterclaim Number 3, the Court holds that Mon son Fruit, Van Well, an d t he Goodwins have stated a plausible claim under Section 2 of the Sherman Antitrust Act of 1890, 15 U.S.C. § 2, an d theory of Walker Process fraud. Because t he counterclaim meets the pleading standard of Twombly, the motion is denied.

Procedural History

Plaintiff AAFC filed this action on May 18, 2020. ECF No. 1. It alleges eight causes of action: (1) plant patent infringement in violation of 35 U.S.C. § 271; (2) correction of inventorship under 35 U.S.C. § 256 against the Goodwins; (3) declaratory judgment under 28 U.S.C. § 2201 against the Goodwins; (4) unfair competition and false designation of origin in violation of the Lanham Act; (5) false advertising under the Lanham Act; (6) conversion; (7) tortious interference with economic relations; and (8) unfair competition in violation of Wash. Rev. Code § 19.86.020. Monson Fruit, Van Well, and the Goodwins deny all claims against them; they also present counterclaims against AAFC and SVC. Monson Fruit, Van Well, and the Goodwins seek declaratory judgment of patent invalidity and unenforceability; as is relevant here, they also assert a third cause of action for unlawful restraint of trade under the theory of Walker Process Equipment, Inc. v. Food Machinery Chemical Corp., 382 U.S. 172 (1965). AAFC and SVC den y each claim.

The Court issued a Jury Trial Scheduling Order in this matter on August 6, 2020. ECF No. 29. Shortly after, the Court granted the parties' Stipulated Motion for Protective Order. ECF Nos. 32, 33. Monson Fruit filed a Stipulated Motion to Seal on October 29, 2020, ECF No. 34, which the Court granted on October 30, 2020. ECF No. 36. Monson Fruit, Van Well, and the Goodwins filed a Motion to Dismiss on November 5, 2020. ECF No. 40. The Court denied the Motion to Dismiss on January 13, 2021. ECF No. 51.

On March 18, 2021, Monson Fruit filed a Motion for Leave to File an Amended Answer to assert counterclaims against AAFC and SVC. ECF No. 55. The Court granted the Motion for Leave on April 23, 2021. ECF No. 62. Monson Fruit, Van Well, and the Goodwins filed the present Motion for Partial Summary Judgment on Invalidity on July 22, 2021, ECF No. 78, and AAFC and SVC filed the Motion to Dismiss Counterclaim Number 3 on July 27, 2021. ECF No. 90.

On September 28, 2021, the Court issued an Amended Jury Trial Scheduling Order. ECF No. 141. Monson Fruit filed a Motion to Compel on September 23, 2021, ECF No. 138, Motion for Order for International Judicial Assistance on October 11, 2021, ECF No. 146, and associated Motion to Expedite Hearing the same day. ECF No. 148.

On December 6, 2021, the Court granted, in part, Monson Fruit's Motion to Compel. ECF No. 158. The Court also granted Monson Fruit's Motion for Order for Judicial Assistance on December 8, 2021. The jury trial in this action is set for October 17, 2022.

Background

A. Development of Staccato

The following facts are undisputed and derive from Monson Fruit, Van Well, and the Goodwins' Statement of Material Facts Not in Dispute, ECF No. 79; AAFC and SVC's Response to Defendants' Rule 56 Statement of Material Facts, ECF No. 102; and Monson Fruit, Van Well, and the Goodwins' Statement of Responsive Facts re: Motion for Partial Summary Judgment on Invalidity, ECF No. 128.

Staccato is a Canadian-b re d and late-maturing sweet cherry tree. Th e Staccato variety was first crossed at the Pacific Agri-Food Research Center in 1982 and discovered by the inventor, Dr. David Lane, the same year. Stacca t o was planted out as a seedling in 1984, and beginning around 1990, the fruit was evaluated from this seedling. In August 1990, four Staccato trees were created by T-budding^[2] vegetative buds of Staccato onto Mazzard rootstock in Canada. The resulting trees were grown in a nursery, dug up in the fall of 1991, and stored over winter. In 1991, Staccato was given the Breeders Reference Number 13S-20-09. Then, in spring of 1992, the trees were removed from storage and planted in a field. The specific trees were stable in their horticultural traits and no off-types or variants occurred in the environment tested. For each season after 1992, Staccato was asexually reproduced in Canada and its distinguishing traits were conserved over each successive generation.

Third-Party Defendant SVC, also known as Okanagan Plant Improvement Corporation, is responsible for managing and licensing AAFC's intellectual property for certain fruit varieties. SVC entered into “testing agreements” or “growing contracts” whereby it supplied growers with designated varieties of scions, including Staccato, to plant on specific rootstocks. The agreements permitted growers to “access, test and evaluate the plant material” of Staccato, provided that SVC remained the “holder of exclusive evaluation, distribution, propagation, and commercialization rights for the Agriculture and Agri-Food Canada, Summerland[.]” ECF No. 82 at 6-8. Among other things, m an y agreements on record provided that the Staccato plant material “remain[ed] the property of the party of origin (Agriculture and Agri-Food Canada, Summerland Research Centre), ” and that the grower would not “give, sell, transfer or otherwise dispose of the plant material to any other person” or “propagate or reproduce the plant material.” See, e.g., ECF No. 111-1 at 2-3.

On March 13, 2000, SVC filed an application for plant variety protection for Staccato in Canada. On March 6, 2002, AAFC filed Application Serial Nu m be r 10/379, 714 in the United States, claiming a U.S. patent for Staccato. ECF No. 1-1. SVC, working with the inventor Dr. Lane, also filed U.S. Application Serial No. 60/363, 574 on March 13, 2002. A patent (U.S. Patent Number 20, 551 P3, or the “'551 Patent”) was issued for Staccato in the United States on December 15, 2009. The '551 Patent claims priority to the provisional application filed on March 13, 2002. // //

B. Counterclaim Number 3: Unlawful Restraint of Trade

The following facts relate only to Monson Fruit, Van Well, and the Goodwins' allegations as pleaded in support of their antitrust counterclaims against AAFC and SVC.

Monson Fruit, Van Well, and the Goodwins allege that AAFC and SVC withheld critical information from the United States Patent Office (“U.S. PTO”) regarding prior distribution of Staccato during prosecution of its patent. ECF No. 63 at 59, ¶ 38. Monson Fruit, Van Well, and the Goodwins declare that the growing contracts described above amount to “public use” and commercialization of Staccato; and if the U.S. PTO had been aware of the contracts, the U.S. PTO would have denied the patent application due to the on-sale bar.^[3]

In their Amended Answers, Monson Fruit, Van Well, and the Goodwins name individuals who they allege intentionally and knowingly withheld information that was material to the U.S PTO's decision. Id. at ¶ 37. They assert that the U.S. PTO Examiner requested information from Dr. Lane and SVC on if, and when, the claimed plant variety “was publicly available prior to the filing date of the instant application, ” including “catalogs” depicting the invention. Id. at 58, ¶¶ 35-36. In response to the U.S. PTO correspondence, Monson Fruit, Van Well, and the Goodwins assert that Wendy Couriard and Ken Haddrell, as well as Dr. Lane, withheld material information from the Examiner, including a C&O Nursey 1999 fall catalog depicting Staccato and the growing agreements that were executed. Id. at 59-60, ¶ 38. Monson Fruit, Van Well, and the Goodwins assert this information was material to granting the...