Delano Farms Patent Litigation Documents

LAW OFFICES OF BRIAN C.
LEIGHTON
1 BRIAN C. LEIGHTON (SBN 090907)
701 Pollasky Avenue
2 Clovis, CA 93612
Phone: (559) 297-6190
3 Fax (559) 297-6194
bleighton@arrival.net
4
HENNIGAN, BENNETT & DORMAN LLP
5 LAWRENCE M. HADLEY (SBN 157728)
OMER SALIK (SBN 223056)
6 865 South Figueroa Street, Suite 2900
Los Angeles, California 90017
7 Phone: (213) 694-1200
Fax: (213) 694-1234
8 hadleyl@hbdlawyers.com;
saliko@hbdlawyers.com
9
THE LAW OFFICES OF RALPH B. WEGIS
10 RALPH B. WEGIS (SBN 67966)
1930 Truxtun Avenue
11 Bakersfield, CA 93301
Telephone: (661) 635-2100
12 Facsimile: (661) 635-2107
Hennigan, Bennett & Dorman llp
13 Attorneys for Plaintiffs,

DELANO FARMS COMPANY; FOUR STAR FRUIT, INC.;
los angeles, california
14 GERAWAN FARMING, INC.

lawyers
15
16
17 UNITED STATES DISTRICT COURT
18 EASTERN DISTRICT OF CALIFORNIA
19 DELANO FARMS COMPANY; FOUR STAR ) CASE NO. 1:07-CV-1610 OWW (SMS)
FRUIT, INC.; GERAWAN FARMING, INC. )
20 )
Plaintiffs, )
21 ) SECOND AMENDED COMPLAINT
vs. )
22 ) DEMAND FOR JURY TRIAL
THE CALIFORNIA TABLE GRAPE )
23 COMMISSION; UNITED STATES OF )
AMERICA; UNITED STATES )
24 DEPARTMENT OF AGRICULTURE; TOM )
VILSACK, SECRETARY OF THE UNITED )
25 STATES DEPARTMENT OF AGRICULTURE )
(IN HIS OFFICIAL CAPACITY) )
26 )
Defendants. )
27
28
767173.3
1 For their second amended complaint against Defendant The California Table Grape
2 Commission (“the Commission”) and Defendants the United States of America (“U.S.”), the United
3 States Department of Agriculture (“USDA”) and Tom Vilsack, Secretary of the United States
4 Department of Agriculture (in his official capacity) (“Secretary Vilsack”), Plaintiffs Delano Farms
5 Company; Four Star Fruit, Inc.; and Gerawan Farming, Inc. (collectively “Plaintiffs”) allege as
6 follows:
7 PRELIMINARY STATEMENT
8 1. Plaintiffs bring this Second Amended Complaint (“SAC”) challenging the USDA
9 action in granting exclusive licenses to the Commission on certain grapevine varieties that the
10 government has patented. Plaintiffs contend that the terms of the exclusive licenses are unfair,
11 anticompetitive, and violate the law under which the government can license its patents because,
12 among other things, the government has allowed the Commission to charge significant royalties for
13 use of the grapevines, limited distribution of the grapevines to three hand-picked nurseries (at least
14 one with family ties to Commission board members), and prohibited the replacement of the
15 grapevines from existing plants. These restrictions discriminate against who may distribute the
16 grapevines at issue and what growers can afford to produce and sell table grapes from the patented
17 vines. Moreover, the licensing provisions are completely unnecessary for funding to bring the
18 patented grapevines (and fruit produced from the grapevines) to market or otherwise promote the
19 use of the patented grapevines (and fruit produced) by the public. To the contrary, the same farmers
20 who must now pay significant royalties and fees to plant and reproduce the patented varieties
21 already pay for a substantial portion of developing the patented grapevine varieties through a tax
22 charged by the Commission on each box of table grapes sold. For this reason, prior to licensing the
23 grapevine patents to the Commission, and allowing the Commission to impose royalty and
24 distribution restrictions, the USDA distributed newly-developed grapevine varieties to growers free
25 of charge, allowing unlimited distribution and reproduction.
26 2. Plaintiffs SAC further alleges that the Commission, who masterminded the patent
27 licensing scheme for the benefit of certain farmers and nurseries, has engaged in unfair competition
28 under California Unfair Competition Act, and seeks relief for unjust enrichment though imposition
1 SECOND AMENDED COMPLAINT
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1 of a constructive trust.
2 3. Plaintiffs’ prior complaints further alleged that the government’s table grape patents
3 are invalid, and that at least one patent was unenforceable due to inequitable conduct. As to the
4 latter patent, Plaintiffs alleged that the government’s enforcement of that patent through the
5 Commission resulted in an antitrust violation. Plaintiffs also alleged that the license agreements
6 between the USDA and the Commission were invalid because the patents were invalid and/or
7 unenforceable. Based on these claims, Plaintiffs sought declarations of invalidity and
8 unenforceability, declarations that the licenses were void and unenforceable, and antitrust damages
9 and an injunction against the Commission. The Court ruled, however, that Plaintiffs could assert
10 none of the claims for declaratory relief because the government was a necessary and indispensable
11 party to such claims, but that no claims could be stated against the government due to sovereign
12 immunity. Additionally, the Court found that Plaintiffs could not state a relevant market as defined
13 by the patent or the claimed grapevine variety for antitrust purposes. Accordingly, Plaintiffs’ SAC
14 eliminates those causes of action. Plaintiffs reserve the right to pursue those claims on appeal.
15 JURISDICTION AND VENUE
16 4. This is a civil action arising under the Administrative Procedure Act, 5 U.S.C. §§
17 701, et seq. as well as provision of the Bayh-Dole Act, 35 U.S.C. § 200, et seq. This Court has
18 federal jurisdiction of such federal question claims pursuant to 28 U.S.C. §§ 1331, 1337 and
19 1338(a).
20 5. This Court has supplemental jurisdiction over the claims in this Complaint against
21 the Commission that arise under statutory and common law of the State of California pursuant to 28
22 U.S.C §1367(a), because the state law claims are so related to the federal claims that they form part
23 of the same case or controversy and derive from a common nucleus of operative facts.
24 6. The acts and transactions complained of herein were conceived, carried out, made
25 effective, and had effect within the State of California and within this district, among other places.
26 Venue is proper under 28 U.S.C. §§1391(b) and 1391(c) in that Plaintiffs reside in this District,
27 Defendant the California Table Grape Commission resides in this District and has a regular and
28 established place of business in this District and in that a substantial part of the events or omissions
767173.3
1 giving rise to the claims and the threatened and actual harm to Plaintiffs occurred in this District by
2 reason of Defendants’ conduct as alleged below.
3 THE PARTIES
4 7. Plaintiff Delano Farms Company is a corporation duly organized and existing under
5 the laws of the State of Washington, with its principle place of business at 815 Eighth Street, P.O.
6 Box 240, Hoquiam, Washington 98550.
7 8. Plaintiff Four Star Fruit, Inc. is a corporation duly organized and existing under the
8 laws of the State of California, with its principle place of business at 13830 Avenue 24, Delano,
9 California 93215.
10 9. Plaintiff Gerawan Farming, Inc. is a corporation duly organized and existing under
11 the laws of the State of California, with its principle place of business at 15749 East Ventura,
12 Sanger, California 93657.
13 10. Plaintiffs are engaged in the business, inter alia, of growing, harvesting and selling
14 table grapes.
15 11. Defendant The California Table Grape Commission is a corporation of the State of
16 California, established by the 1967 Ketchum Act. Cal. Food & Agric. Code §§65550 – 65551.
17 Defendant’s principle place of business is at 392 W. Fallbrook, Suite 101, Fresno, California 93711.
18 12. The stated purpose of the Commission is to expand and maintain the market for
19 California table grapes for the benefit of the State of California as well as the State’s over five
20 hundred California table grape growers. The Commission is funded primarily by assessments levied
21 on each shipment of California table grapes and paid by the State’s table grape shippers. No general
22 revenues of the State fund the Commission.
23 13. Defendant the United States of America is a sovereign nation organized and existing
24 under the Constitution of the United States. Pursuant to Fed. R. Civ. P. 4(i), the United States may
25 be served through the United States Attorney for the Eastern District of California – Lawrence
26 Brown, United States Attorney's Office, 501 I Street, Suite 10-100, Sacramento, CA 95814.
27 Additionally, under Rule 4(i), a copy of the summons and complaint must be sent by registered or
28 certified mail to the Attorney General of the United States, Office of the Attorney General, U.S.
767173.3
1 Department of Justice, 950 Pennsylvania Avenue, NW, Washington, DC 20530-0001.
2 14. Defendant the United States of America and its representative, the United States
3 Department of Agriculture, reside and conduct business within the territorial jurisdiction of this
4 Court.
5 15. Defendant United States Department of Agriculture is a United States federal
6 executive department, established by 7 U.S.C. § 2201. Defendant USDA’s headquarters are located
7 at 1301 Independence Avenue, S.W., Washington, D.C. 20004.
8 16. The stated purpose of the USDA is to provide leadership on food, agriculture, natural
9 resources, and related issues based on sound public policy, the best available science, and efficient
10 management.
11 17. Defendant Tom Vilsack, Secretary of the United States Department of Agriculture,
12 has overall responsibility for the United States Department of Agriculture. He is named in his
13 official capacity and may be served at the Department of Agriculture at 1301 Independence Avenue,
14 S.W., Washington, D.C. 20004.
15 FACTS
16 Overview
17 18. For years, California table grape growers and shippers have funded a research
18 program under the USDA to develop new table grape varieties. Growers and shippers fund the
19 USDA research program through the Commission by an assessment on each box of table grapes
20 shipped in California. Prior to 2002, the USDA provided the new varieties under development to
21 area growers for evaluation of growing potential and commercial marketability. Once new varieties
22 appeared commercially viable, the USDA “released” the variety, and distributed plant material of
23 the variety to area growers free-of-charge. The USDA did not charge California growers for the
24 new varieties since California growers and shippers already paid for a large portion of the
25 development.
26 19. In the late 1990s, the Commission developed a secret scheme by which it and a few
27 select nurseries could profit from the new varieties that the USDA distributed for free. At the urging
28 of the Commission during a series of privately-held meetings, the USDA agreed to begin patenting
767173.3
1 new table grape varieties. Although California shippers already funded much of the development,
2 the USDA secretly agreed to give the Commission an exclusive license to all new patented varieties,
3 and to allow the Commission to charge royalties when growers wished to obtain the new varieties.
4 The USDA also agreed to give the Commission exclusive enforcement powers over its new patent
5 rights.
6 20. Under the Commission’s “patent and licensing” scheme, the Commission hand-
7 selected three nurseries, without public notice, to exclusively sell all new patented table grape
8 varieties. Unlike the prior free distribution, the hand-selected nurseries would be allowed to sell
9 new varieties to growers at a charge. Additionally, the nurseries would be required to pay a royalty
10 to the Commission for each plant sold, which the nursery could pass onto the growers. One of the
11 hand-selected nurseries now able to profit from newly developed varieties previously distributed
12 without charge is owned by the son of a long-standing Commission member.
13 21. When a grower seeks to obtain a new variety from a nursery, it is required to enter a
14 “Domestic Grower License Agreement” with the Commission. Under the terms of the Agreement,
15 the grower cannot propagate the variety beyond the plant purchased. Accordingly, to replace any
16 grapevine, a grower must purchase another plant from one of the three nurseries and pay a patent
17 royalty. If the Commission believes the grower has violated the License Agreement in any way, it
18 can void the Agreement and order that all purchased plants be destroyed.
19 22. The first three varieties that the Commission identified to the USDA for patenting
20 had been under development for years. Indeed, at least one of the varieties had been distributed to
21 growers for wide-scale commercial evaluation and sale.
22 23. Recognizing that at least one of the new varieties identified for patenting (and
23 perhaps all three) had been in the public domain for years, the Commission created a so-called
24 “amnesty program” to extort funds from growers already in possession of the varieties. Under the
25 amnesty program, the Commission widely disseminated notices to growers and shippers stating that
26 they were in violation of the law if they possessed the varieties intended for patenting, even though
27 no patents had yet been granted. The notices also offered confidential “settlements” to any growers
28 who, within a narrow window, agreed to license the varieties, pay a “penalty” to the Commission,
767173.3
1 and accept the Commission’s license restrictions on further propagation. Growers and shippers who
2 refused the “amnesty” were threatened with lawsuits, including money damages and injunctions.
3 On information and belief, the U.S, through the USDA, knew of and authorized the amnesty
4 program.
5 24. At least 17 growers confirmed possession of the varieties and agreed to pay the
6 penalties demanded by the Commission.
7 The Patented Varieties
8 Sweet Scarlet
9 25. On February 20, 2003, the USDA filed patent application No. 371,512 (the “’512
10 Application”) on a grapevine denominated “Sweet Scarlet.” The application listed David W.
11 Ramming and Ronald E. Tarallo as co-inventors. On July 26, 2005, the ‘512 Application issued as
12 U.S. Patent No. PP15,891, entitled “Grapevine Denominated Sweet Scarlet” (the “’891 patent”).
13 26. The United States of America, as represented by the Secretary of Agriculture, is the
14 owner by assignment of the ‘891 patent.
15 27. On information and belief, the Commission is the exclusive licensee of the ‘891
16 patent pursuant to a license agreement entered into between the United States Government, as
17 represented by the United States Department of Agriculture, Agricultural Research Services, and the
18 Commission. The exclusive license includes the right to license the ‘891 patent and to enforce the
19 ‘891 patent against alleged infringers.
20 Autumn King
21 28. On September 28, 2004, the USDA filed patent application No. 953,387 (the “’387
22 Application”) on a grapevine denominated “Autumn King.” The application listed David W.
23 Ramming and Ronald E. Tarallo as co-inventors. On February 21, 2006, the ‘387 Application
24 issued as U.S. Patent No. PP16,284, entitled “Grapevine Denominated Autumn King” (the “Autumn
25 King or ’284 patent”).
767173.3
1 patent pursuant to a license agreement entered into between the United States Government, as
5 Scarlet Royal
6 31. On September 28, 2004, the USDA filed patent application No. 953,124 (the “’124
7 Application”) on a grapevine denominated “Scarlet Royal.” The application listed David W.
8 Ramming and Ronald E. Tarallo as co-inventors. On January 31, 2006, the ‘124 Application issued
9 as U.S. Patent No. PP16,229, entitled “Grapevine Denominated Scarlet Royal” (the “Scarlet Royal
10 or ’229 patent”).
14 patent pursuant to a License Agreement entered into between the United States Government, as
18 The Patent and Licensing Program
19 34. The Commission requires that California grape shippers pay an assessment of
20 approximately $0.13 per box of table grapes. The Commission operates at an annual surplus from
21 these assessments, but does not return any of the assessment money back to the California growers
22 or shippers.
23 35. Dr. Ramming, the co-inventor of the patented Autumn King, Sweet Scarlet and
24 Scarlet Royal varieties, is a researcher at the Agriculture Research Center (“ARC”) of the USDA
25 located in Fresno, California. For at least 20 years, Dr. Ramming has operated a research program
26 at the ARC relating to the development of new table grape varieties. Since the early 1980s, the
27 Commission has funded a significant portion of Dr. Ramming’s grapevine breading program with
28 funds collected through the shipper assessments. In many years, the Commission’s funding has
767173.3
1 amounted to over one-third of the total table grape research budget at the ARC, excluding employee
2 salaries.
3 36. Prior to 2003, the USDA had never sought patent protection for any new table grape
4 variety developed at the ARC. Instead, for nearly two decades, new grape varieties developed by
5 the ARC with California table grape shipper assessment revenues were distributed freely to
6 California growers by the USDA. Specifically, once Dr. Ramming and his researchers developed a
7 new variety that had commercial potential, a number of growers would be selected to produce the
8 new variety as part of a “grower trial.” If the grower trials appeared successful, then the results
9 would be made publicly available and the variety would be “released” for distribution. Releasing a
10 new variety was not an “official” act; rather, the USDA would announce the availability of the new
11 variety, and any grower (or any other person) could obtain “sticks” (i.e., plant material) of the new
12 variety without cost from the USDA ARC facility in Fresno, California. Once a grower obtained the
13 sticks, the grower could plant the new variety at its sole discretion, and reproduce and distribute
14 plant material of the new variety without restriction. In other words, the commercial risk associated
15 with producing and selling table grapes from new USDA-developed varieties rested solely with
16 growers (who had already funded much of the development costs).
17 37. Growers participating in the “trials” were given plant material for the new variety,
18 and allowed to reproduce the variety as needed, grow the new variety at their discretion, sell the fruit
19 produced, and retain any profits. While certain growers were selected for the trials, the USDA
20 provided no mechanism for preventing other growers from accessing and reproducing the varieties
21 as well. Accordingly, when a variety under development appeared commercially successful, it was
22 not uncommon for many growers to have reproduced and commercially sold the variety prior to an
23 “release” by the USDA. For example, when the USDA developed the “Princess” variety, it was
24 well known that growers throughout the central valley had been reproducing Princess grapevines
25 and selling Princess fruit for years.
26 38. Neither the USDA nor the Commission had any incentive to restrict the distribution
27 of new grapevines prior to a release, and never sought to do so. Widespread reproduction and sales
28 of new varieties allowed greater customer acceptance prior to release. Additionally, growers and
767173.3
1 shippers contributed substantially to the development of new varieties in Dr. Ramming’s grapevine
2 breeding program. Moreover, even after release, the USDA provided plant material from which
3 growers could reproduce the variety free of charge. For years, this system allowed for the successful
4 commercialization of grapevine varieties developed by the USDA that were funded by California
5 growers.
6 39. The USDA, Dr. Ramming, and the Commission knew that plant material for varieties
7 under development frequently entered the public domain prior to release.
8 40. In the late 1990s, the Commission formed a plan to change this procedure.
9 Specifically, the Commission adopted a plan to request that the USDA seek patent protection on all
10 new table grape varieties developed prior to general release. Initially, the patents were intended to
11 control competition from foreign growers. In the past, foreign growers frequently obtained new
12 table grape varieties developed through assessments on California growers, then competed with
13 California growers in market for the new varieties. Under the Commission’s plan, the distribution
14 of new table grape varieties would operate as follows: (1) USDA would seek patent protection for
15 all new varieties, (2) the USDA would grant an exclusive license to the Commission to administer
16 the distribution of new patented varieties, (3) California table grape growers would be provided
17 patented varieties free of charge, and (4) the new patented varieties would either be excluded from
18 foreign growers or provided to foreign growers at high royalty rates.
19 41. After several secret meetings between the Commission and the USDA, the USDA
20 ultimately agreed to seek patent protection as requested by the Commission. The USDA further
21 agreed that the Commission could serve as the exclusive licensee for patented varieties in the
22 collection of royalties and enforcement against infringers. However, unknown to Plaintiffs, the
23 USDA told the Commission that it could not, under U.S. trade agreements, refuse to provide the
24 new patented varieties to foreign growers, block foreign growers from importing table grapes from
25 the new patented varieties, or discriminate against foreign growers in charging royalties.
26 42. Even though the USDA barred the Commission from implementing the original goals
27 behind the patenting program – namely, to control foreign competition – the Commission decided to
28 proceed with a patent and licensing plan. The Commission secretly decided that it could effectively
767173.3
1 increase its powers without any action from the California State Legislature, if the USDA would
2 patent all new varieties, and give the Commission exclusive control over how the varieties were
3 distributed. In effect, such a plan would give the Commission a new source of revenue beyond that
4 allowed under California law, and would place with the Commission complete power over the sale,
5 reproduction, and distribution of new table grape varieties – powers that the Commission lacked
6 under the USDA’s prior distribution program. For example, the Commission recognized that if it
7 charged royalties to all growers of the new patented varieties, the Commission could effectively
8 collect an additional tax on table grape growers beyond the $0.13 per box of table grapes allowed
9 under California law. Further, the Commission, which is controlled by a number of large growers,
10 recognized that it could limit access to new varieties, particularly by smaller growers, through the
11 amount of royalties it charged for obtaining the patented varieties, and through the terms of its
12 sublicense agreements. Finally, the Commission recognized that it could control the reproduction
13 and distribution of new patented varieties by granting distribution rights to a few entities that it
14 would hand-select.
15 43. In or about August 2001, the Commission entered into a secret Memorandum of
16 Understanding (“MOU”) with the USDA, outlining the framework under which the USDA would
17 seek patent protection for new grapevine varieties and grant exclusive licenses to the Commission.
18 The MOU made clear that the Commission would be obligated to grant rights to foreign growers.
19 Neither the USDA nor the Commission provided notice of the MOU, and the existence and terms of
20 the MOU were not published in the Federal Register for notice and comment.
21 44. Separate from the MOU, the Commission and the USDA secretly agreed that, in
22 exchange for seeking patent protection, and providing an exclusive license to the Commission, the
23 Commission would limit the number of entities licensed to distribute, reproduce, and sell the new
24 patented varieties. Although the USDA indicated that it was not interested in obtaining payments
25 for, or profiting from, any patents on new varieties, the USDA agreed that the Commission could
26 collect royalties on the sale of each patented grapevine plant and that the Commission would share
27 the royalty revenue with the USDA. The USDA further agreed to eliminate “grower trials” and
28 place stricter controls on the access to new varieties prior to an official “release.” These “side”
767173.3
1 terms were not disclosed publicly or published in the Federal Register for notice and comment.
2 The Commission’s Licenses to Nurseries and Plaintiffs
3 45. Ultimately, the Commission, with permission from the USDA, hand-select three
4 nurseries to reproduce, distribute and sell the patented varieties. The section of these nurseries was
5 not disclosed publicly or published in the Federal Register for notice and comment. The three
6 selected nurseries are: Sunridge Nurseries, Vintage Nurseries, and Casa Crystal Nurseries (the
7 “Licensed Nurseries”). Casa Crystal Nursery is owned by Andrew Zaninovich. Andrew’s father is
8 Marco Zaninovich, who has been a long-time and active board member of the Commission.
9 46. Each Licensed Nursery is authorized to sell Autumn King, Sweet Scarlet and Scarlet
10 Royal vines to growers who execute a “Domestic Grower License Agreement” with the
11 Commission. In accordance with the agreement between the Commission and the USDA, the
12 Commission charges nurseries who distribute patented varieties a $5,000 participation fee per
13 patented variety and an additional $1 per production unit royalty. These costs are then passed on by
14 the nurseries to the California grape growers who purchase the patented plant material from the
15 nurseries, including Plaintiffs who purchased the Patented Varieties. These payment terms,
16 including the permission to allow the nurseries to charge the royalties to growers, who must also
17 purchase the plant material, were not disclosed publicly or published in the Federal Register for
18 notice and comment prior to their adoption.
19 47. The Domestic Grower Agreements prohibit growers who purchase the Patented
20 Varieties from propagating the vines or distributing the vines to third parties. Under the Domestic
21 Grower Agreements, the Commission may revoke the patent sub-license of any grower who violates
22 the terms, and require the grower to destroy all Patented Varieties purchased. The terms of the
23 Domestic Grower Agreements, created by the Commission with the approval of the USDA, were not
24 disclosed publicly or published in the Federal Register for notice and comment prior to their
25 adoption.
26 48. All royalties are paid to the Commission. On information and belief, the
27 Commission pays approximately one-half of the collected royalties to the USDA.
28 49. The California table grape growers who bear the ultimate costs of the royalty fees
767173.3
1 imposed by the Commission are the same California table grape growers who bear the cost of the
2 per box assessment charged by the Commission, which funds much of Dr. Ramming’s breeding
3 program. Thus, California table grape growers essentially pay for the development of patented
4 varieties, then pay again to obtain the varieties.
5 50. The Commission’s Research Committee and Board oversee and administer the patent
6 and licensing program. Specifically, the Board sets the royalty rates on patented plants, determines
7 penalties for infringement, and establishes enforcement policy. The Research Committee oversees
8 Dr. Ramming’s breeding program and makes recommendations regarding which new varieties
9 should be patented and released. To date, the USDA has only patented new varieties that the
10 Commission has recommended for patenting, and has only applied for patents after receiving a
11 recommendation from the Commission to do so.
12 Release of the Patented Varieties
13 51. Development of the Patented Varieties began in about 1993. Prior to 2003, the Dr.
14 Ramming had reproduced each of the Patented Varieties, produced fruit from each of the Patent
15 Varieties, and had evaluated the potential commercialization of each Patented Variety.
16 52. By 2001, the Commission’s Research Committee was actively evaluating the Sweet
17 Scarlet, Autumn King, and Scarlet Royal varieties (among others) for USDA release. In 2002, the
18 Commission recommended that Sweet Scarlet be released. The Commission also recommended that
19 the USDA seek patent protection on Sweet Scarlet as the first variety for patenting under the
20 Commission’s new patent and licensing program. After receiving the Commission’s
21 recommendation, the UDSA proceeded with the release of Sweet Scarlet and filed a patent
22 application on the Sweet Scarlet variety in February 2003.
23 53. Although the Commission recommended proceeding with the release of Sweet
24 Scarlet, the Commission decided to delay any release and patenting of Autumn King and Scarlet
25 Royal. Instead, the Commission recommended that Autumn King and Sweet Scarlet undergo
26 further evaluation prior to release. Approximately two years later, in 2004, the Commission finally
27 recommended release of Autumn King and Scarlet Royal. At that time, the Commission further
28 recommended that the UDSA seek patent protection for Autumn King and Scarlet Royal.
767173.3
1 54. On information and belief, the Sweet Scarlet, Autumn King, and Scarlet Royal
2 varieties were already in the public domain prior to the time the USDA applied for patent protection
3 on each respective variety.
4 55. For example, the Sweet Scarlet variety and its fruit was used, distributed, offered for
5 sale and sold by growers and shippers prior to February 20, 2002, including uses by growers who
6 were not part of grower trials. Both the Commission and USDA knew of at least some non-grower-
7 trial uses. In May 2004, the Commission sent a notice to all California table grape growers and
8 shippers stating that the UDSA had applied for a patent on the Sweet Scarlet variety. Although no
9 enforceable patent had yet issued, the Commission offered “amnesty” for any grower who had
10 previously reproduced Sweet Scarlet. Under its so-called “amnesty” program, a grower with Sweet
11 Scarlet could keep the vines reproduced, so long as the grower (i) admitted to possession prior to
12 July 2004, (ii) paid $2 per vine reproduced, (iii) paid $2 per box of Sweet Scarlet grapes previously
13 shipped, and (iv) agreed to no further propagation of the Sweet Scarlet variety from the plants
14 possessed.
15 56. In July 2004, the Commission sent another notice to all California table grape
16 growers and shippers extending the “amnesty” time period for one month, and extending the
17 “amnesty” to include Autumn King and Scarlet Royal varieties.
18 57. In both notices, the Commission threatened to sue growers who did not come
19 forward, and to seek money damages and injunctions. Yet, at the time of the second notice, the
20 USDA patent application on Sweet Scarlet not only remained un-issued, but had been rejected by
21 the USPTO. Moreover, the USDA had not even applied for a patent on either Autumn King or
22 Scarlet Royal.
23 58. On April 29, 2003, the USDA published notice in the Federal Register of its intent to
24 grant an exclusive license to the Commission for the Sweet Scarlet patent. The Federal Register
25 notice did not state the terms of the license, and provided no information on whether growers would
26 be authorized to reproduce or distribute the Sweet Scarlet variety, whether growers would incur any
27 costs to obtain the Sweet Scarlet variety, or whether growers would incur any royalty expenses for
28 the Sweet Scarlet variety. Indeed, the Federal Register notice contained no information whatsoever
767173.3
1 regarding the exclusive licensing terms and conditions that the Commission had secretly negotiated
2 with the USDA. In or about 2003, the USDA entered into an exclusive license with the Commission
3 for the Sweet Scarlet patent.
4 59. On December 23, 2004, the USDA published notice in the Federal Register of its
5 intent to grant an exclusive license to the Commission for the Autumn King and Scarlet Royal
6 patents. The Federal Register notice did not state the terms of the license, and provided no
7 information on whether growers would be authorized to reproduce or distribute the Autumn King
8 and Scarlet Royal varieties, whether growers would incur any costs to obtain the Autumn King and
9 Scarlet Royal varieties, or whether growers would incur any royalty expenses for the Autumn King
10 and Scarlet Royal varieties. Indeed, the Federal Register notice contained no information
11 whatsoever regarding the exclusive licensing terms and conditions that the Commission had secretly
12 negotiated with the USDA. In or about June, 2005, the USDA entered into an exclusive license with
13 the Commission for the Autumn King and Scarlet Royal patents.
14 Plaintiffs’ Purchase of the Patented Varieties
15 60. Plaintiffs are in possession of the Autumn King, Sweet Scarlet and Scarlet Royal
16 varieties, which they purchased through Licensed Nurseries. Plaintiffs paid the royalties on each
17 purchased plant imposed by the Commission.
18 61. Plaintiffs have entered into a Domestic Grower License Agreement with the
19 Commission for the ‘891 patent. In consideration for this limited, nonexclusive license, Plaintiffs
20 have paid a license fee to a Licensed Nursery. Under the terms of this Agreement, Plaintiffs have a
21 limited, nonexclusive license to the ‘891 patent to grow the Sweet Scarlet variety plants that they
22 purchased, and sell the fruit produced from those plants. Plaintiffs cannot propagate the grapevines
23 or distribute the vines to third parties. Furthermore, Plaintiffs are obligated to destroy all Sweet
24 Scarlet plant material upon termination of the agreement.
25 62. Plaintiffs have entered into a Domestic Grower License Agreement with respect to
26 the ‘284 patent. In consideration for this limited, nonexclusive license, Plaintiffs have paid a license
27 fee to a Licensed Nursery. Under the terms of this Agreement, Plaintiffs have a limited,
28 nonexclusive license to the ‘284 patent to grow the Autumn King variety plants that they purchased,
767173.3
1 and sell the fruit produced from those plants. Plaintiffs cannot propagate the grapevines or distribute
2 the vines to third parties. Furthermore, Plaintiffs are obligated to destroy all Autumn King plant
3 material upon termination of the agreement.
4 63. Plaintiffs have entered into a Domestic Grower License Agreement with respect to
5 the ‘229 patent. In consideration for this limited, nonexclusive license, Plaintiffs have paid a license
6 fee to a Licensed Nursery. Under the terms of this Agreement, Plaintiffs have a limited,
7 nonexclusive license to the ‘229 patent to grow the Scarlet Royal variety that they purchased, and
8 sell the fruit produced from those plants. Plaintiffs cannot propagate the grapevines or distribute the
9 vines to third parties. Furthermore, Plaintiffs are obligated to destroy all Scarlet Royal plant
10 material upon termination of the agreement.
11 FIRST CLAIM FOR RELIEF
12 (Violation of the Bayh-Dole Act Under APA
13 Against Defendants U.S., USDA and Secretary Vilsack)
14 64. Plaintiffs reallege and incorporate by reference all paragraph 1-63 as if fully set forth
15 herein.
16 65. This is an action for declaratory and injunctive relief brought, in part, under the
17 Administrative Procedure Act, 5 U.S.C. §§701, et seq. with respect to final agency actions of the
18 USDA and its officers. The discrete acts complained of herein constitute “agency action” as defined
19 by 5 U.S.C. §551(13) and are reviewable by this Court pursuant to 5 U.S.C. §704.
20 66. The U.S.’s, USDA’s and Secretary Vilsack’s actions with respect to licensing the
21 Patented Varieties to the Commission is subject to the procedural requirements of the
22 Administrative Procedure Act (“APA”), at 5 U.S.C. §§ 551, et seq.
23 67. The USDA engaged in a discrete and final agency actions under 5 U.S.C. §702 by
24 granting exclusive licenses to the Commission for each of the three Patented Varieties in accordance
25 with the terms and conditions set forth in the exclusive licenses and the terms, as well as the “side”
26 terms and conditions separately negotiated between the USDA and Commission, including the terms
27 that allowed the Commission to select licensees who would be exclusively allowed to reproduce,
28 distribute, and sell the Patented Varieties, and the terms allowing for establishment and collection of
767173.3
1 royalties on the Patented Varieties.
2 68. The acts complained of herein constitute final agency actions by the U.S., USDA and
3 Secretary Vilsack subject to review under the APA.
4 69. The acts complained of herein mark the consummation of the U.S.’s, USDA’s and
5 Secretary Vilsack’s decision-making process.
6 70. The acts complained of herein are not interlocutory, interim or tentative in nature.
7 71. The acts complained of herein are acts by which rights or obligations have been
8 determined and from which legal consequences have flowed, continue to flow and will flow.
9 Specifically, the acts complained of herein have directly determined the rights and obligations of
10 Plaintiffs and the Commission with respect to the growing, distribution, sale, propagation,
11 reproduction, and otherwise free use of the plant material of the Patented Varieties, and the right to
12 collect royalties and the right to exclude thereof.
13 72. The acts complained of herein by the U.S., USDA and Secretary Vilsack – in
14 particular, the action in granting the Commission exclusive licenses to the Patented Varieties under
15 the terms and conditional described in this SAC – are arbitrary, capricious, and otherwise not in
16 accordance with applicable laws and regulations. These actions violate the provision of the Bayh-
17 Dole Act codified at 35 U.S.C § 209(a), which provides authority for a federal agency to grant
18 exclusive or partially exclusive licenses on federally-owned inventions only in four limited
19 circumstances. Among other things, the exclusive licenses, along with terms and conditional agreed
20 to between the Commission and the USDA, violate the Bayh-Dole Act in the following ways:
21 a. The exclusive licenses were not a reasonable and necessary incentive to call
22 forth the investment capital and expenditures needed to bring the invention to
23 practical application or otherwise promote the invention’s utilization by the
24 public as required by 35 U.S.C. § 209(a)(1). No exclusive license to the
25 Commission was required to promote the utilization of the Patented Varieties
26 by the public. To the contrary, the growers already provided the capital and
27 expenditures needed to bring newly-developed USDA grapevine varieties to
28 practical application. Moreover, the Patented Varieties were already in the

767173.3
1 public domain and had been reproduced, distributed, and had produced fruit
2 sold commercially to the public prior to the grant of any exclusive licenses to
3 the Commission. Had the USDA distributed the Patented Varieties directly to
4 growers in accordance with their prior procedure, without the exclusive
5 license and terms imposed by the Commission, the new grapevine varieties
6 would achieve even greater public utilization.
7 b. The USDA made no finding that the public would be served by the granting
8 of the exclusive licenses as required by 35 U.S.C. § 209(a)(2), or if it did

9 make such a finding, the USDA did so in an arbitrary and capricious manner.
10 In fact, the exclusive licenses, including the terms and conditions imposed by
11 the Commission, limits the number of distributors of the Patented Varieties
12 and imposes significant additional costs on growers. These additional costs
13 disserve the public interest by limiting the availability of the Patented
14 Varieties and raising consumer costs for the Patented Varieties.
15 c. The exclusive licenses, including the terms and conditions imposed by the
16 Commission, tend to substantially lessen competition in violation of 35
17 U.S.C. § 209(a)(4). First, under the terms and conditions imposed by the
18 Commission, growers lacking substantial financial resources cannot incur the
19 costs of purchasing the Patented Varieties and paying royalties on the
20 Patented Varieties. Thus, competition among growers of the Patented
21 Varieties is lessened. Second, by limiting the right to reproduce, distribute,
22 and sell the Patented Varieties to three hand-picked nurseries, competition for
23 the sale of the Patented Varieties is reduced, resulting in an increase in the
24 cost of purchasing the Patented Varieties. Without the exclusive licenses,
25 each grower could effectively act as its own reproducer and distributor,
26 without incurring significant additional costs. Considering the costs and risk
27 associated with growing table grapevines, and bringing fruit to market, the
28 additional costs imposed though the USDA’s and Commission’s exclusive

767173.3
1 licensing program effectively limit competition to only certain growers –
2 some of which effectively control the Commission.
3 73. Plaintiffs have been harmed directly by the Commission’s, the U.S.’s, USDA’s and
4 Secretary Vilsack’s actions, have suffered a legal wrong because of the Commission’s, the U.S.’s,
5 USDA’s and Secretary Vilsack’s actions, and have been adversely affected and aggrieved by the
6 Commission’s, the U.S.’s, USDA’s and Secretary Vilsack’s actions. The Commission’s, the U.S.’s,
7 USDA’s and Secretary Vilsack’s actions have directly impacted Plaintiffs’ day-to day business,
8 including Plaintiffs’ ability to sell, grow, distribute, propagate and use the Patented Varieties.
9 74. Plaintiffs have been harmed directly by the exclusive licenses that the USDA granted
10 to the Commission and have suffered a legal wrong and have been adversely affected and aggrieved
11 as a result of those exclusive licenses. Because the exclusive licenses were not a reasonable and
12 necessary incentive to call forth the investment capital and expenditures needed to bring the
13 invention to practical application or otherwise promote the invention’s utilization by the public as
14 required by 35 U.S.C. § 209(a)(1), Plaintiffs have been directly harmed by an increase an their
15 business costs. Prior to the exclusive licenses, Plaintiffs along with other growers provided the
16 capital and expenditures needed to bring newly-developed USDA grapevine varieties to practical
17 application and in exchange received plan material for promising new varieties free of charge and
18 commercialized those varieties to the public. The exclusive license between the USDA and the
19 Commission increases Plaintiffs’ costs for commercializing the Patented Varieties, because
20 Plaintiffs are required to pay an additional royalty for the plant material needed to grow the Patented
21 Varieties. Moreover, the exclusive license between the USDA and the Commission restricts
22 Plaintiffs’ ability to expand its commercialization of the Patented Varieties, by restricting Plaintiffs’
23 ability to use plant material grown by Plaintiffs to propagate new plants and by restricting Plaintiffs
24 from distributing plant material for the Patented Varieties to other growers that could commercially
25 benefit Plaintiffs’ experience and expertise, thereby resulting in the increased commercialization of
26 the Patented Varieties. Moreover, on information and belief, the exclusive licenses’ negative impact
27 on the commercialization of the Patented Varieties harms Plaintiffs by reducing the public
28 acceptance and availability of the Patented Varieties, and by increasing the costs to consumers of the
767173.3
1 Patented Varieties, thereby reducing the market demand for the fruit of the Patented Varieties sold
2 by Plaintiffs.
3 75. Plaintiffs have been directly harmed by the USDA’s failure to find that the exclusive
4 licenses would serve the public as required by 35 U.S.C. § 209(a)(2) (which the USDA cannot do).
5 Plaintiffs have been directly harmed by this failure as members of the public. In addition, Plaintiffs
6 have been directly harmed, because exclusive licenses and the terms and conditions imposed by the
7 Commission limits the number of distributors of the Patented Varieties and imposes significant
8 additional costs on growers, including Plaintiffs. This also increases the costs and reduces the
9 availability of the Patented Varieties to the public. On information and belief, these acts also harm
10 Plaintiffs by reducing the public acceptance and corresponding demand for the Patented Varieties,
11 which, on information and belief, further reduces Plaintiffs’ ability to realize a return on their
12 substantial investment of obtaining and growing the Patented Varieties. On information and belief,
13 had the USDA undertaken a study of the Patent Licensing program as required by section 209(a)(2),
14 the USDA would have found that the program as implemented by the Commission would not
15 benefit the public (and possibly disserve the public), and would have continued to grant all growers
16 non-royalty-bearing licenses and allowed unlimited reproduction and distribution as it did under the
17 prior distribution procedure.
18 76. Plaintiffs have also been directly harmed by the exclusive licenses, because
19 competition has been reduced in violation of 35 U.S.C. § 209(a)(4). Plaintiffs have been directly
20 harmed, because by limiting the right to reproduce, distribute, and sell the Patented Varieties to three
21 hand-picked nurseries, on information and belief, the cost of purchasing plant material for the
22 Patented Varieties is greater than if the right to reproduce, distribute, and sell the Patented Varieties
23 were open to more than three nurseries hand-picked by the Commission. Indeed, without the
24 exclusive licenses, Plaintiffs could act as their own reproducer and distributor, without incurring
25 significant additional costs. Moreover, as a result of the exclusive license, Plaintiffs have been
26 barred from the market for distributing plant material for the Patented Varieties. In addition, under
27 the terms and conditions imposed by the Commission, growers without substantial financial
28 resources cannot incur the costs of purchasing the Patented Varieties and paying royalties on the
767173.3
1 Patented Varieties. As a result, on information and belief, the Patented Varieties are not as widely
2 distributed as they would have been without barrier to growers lacking substantial financial
3 resources, thereby resulting in reduced public acceptance for the Patented Varieties as well as a
4 reduced demand for the fruit of the Patented Varieties grown by Plaintiffs.
5 77. As a result of the U.S.’s, USDA’s and Secretary Vilsack’s actions, Plaintiffs have
6 been (1) restricted from growing, selling, distributing, reproducing, propagating or otherwise freely
7 using plant material for Patented Varieties, (2) restricted from growing, selling, reproducing,
8 distributing, propagating or otherwise freely using the fruit for the Patented Varieties, and (3) forced
9 to license and pay royalties to the Commission and its agents with respect to the Patented Varieties.
10 This has harmed and damaged Plaintiffs directly.
11 78. On April 29, 2003, the USDA published notice in the Federal Register of its intent to
12 grant an exclusive license to the Commission for the Sweet Scarlet patent. The Federal Register
13 notice did not state the terms of the license, and provided no information on whether growers would
14 be authorized to reproduce or distribute the Sweet Scarlet variety, whether growers would incur any
15 costs to obtain the Sweet Scarlet variety, or whether growers would incur any royalty expenses for
16 the Sweet Scarlet variety. Indeed, the Federal Register notice contained no information whatsoever
17 regarding the exclusive licensing terms and conditions that the Commission had secretly negotiated
18 with the USDA. In or about 2003, the USDA entered into an exclusive license with the Commission
19 for the Sweet Scarlet patent. On December 23, 2004, the USDA published notice in the Federal
20 Register of its intent to grant an exclusive license to the Commission for the Autumn King and
21 Scarlet Royal patents. The Federal Register notice did not state the terms of the license, and
22 provided no information on whether growers would be authorized to reproduce or distribute the
23 Autumn King and Scarlet Royal varieties, whether growers would incur any costs to obtain the
24 Autumn King and Scarlet Royal varieties, or whether growers would incur any royalty expenses for
25 the Autumn King and Scarlet Royal varieties. Indeed, the Federal Register notice contained no
26 information whatsoever regarding the exclusive licensing terms and conditions that the Commission
27 had secretly negotiated with the USDA. In or about June, 2005, the USDA entered into an exclusive
28 license with the Commission for the Autumn King and Scarlet Royal patents.
767173.3
1 79. At the time of these notices, Plaintiffs did not know and could not have known that
2 the USDA authorized and that the Commission intended to charge patent licensing royalties for the
3 distribution of the Patented Varieties from the same grower who already paid for a significant
4 portion of their development costs. Plaintiffs also did not know and could not have known that the
5 Commission intended to only allow three nurseries to distribute plant material for the Patented
6 Varieties. Plaintiffs also did not know and could not have known that the Commission intended
7 include restrictions on the distribution and propagation of plant material by growers who obtained
8 the Patented Varieties. At the time of the notices, Plaintiffs had every reason to believe that the
9 distribution of the Patented Varieties would continue to be free of charge and restrictions to local
10 growers (including Plaintiffs), as had been the case for over a decade with prior USDA-developed
11 grapevine varieties. Indeed, at the time of the notices, Plaintiffs expected that the Patent Licensing
12 program would be used for its original intended purpose – to protect Plaintiffs and other growers
13 from foreign competition. Plaintiffs did not know, and the USDA did not advice in the Federal
14 Register notices, the USDA had agreed to allow the Commission to use the Patent Licensing
15 program and a way to extract an additional tax from growers, and to effectively usurp complete
16 control over the reproduction and distribution of new grapevine varieties.
17 80. As such, Plaintiffs lacked information necessary and sufficient to raise any objections
18 to the noticed licenses, including objections to the licenses under the terms of the Bayh-Dole Act
19 raised in this SAC. Specifially, at the time of the notices, Plaintiffs did not have sufficient
20 information to determine or believe that the exclusive license between the USDA and the
21 Commission for the Patented Varieties violated any provisions of the Bayh-Dole Act. Because
22 Plaintiffs lacked the information needed to raise objections to the exclusive license granted to the
23 Commission for the Patented Varieties at the time of the Federal Register Notices, and because the
24 Federal Register notices lacked any information from which Plaintiffs could have concluded that the
25 exclusive licenses violated provisions of the Bayh-Dole Act, any exhaustion of Plaintiffs’ rights
26 resulting from a purported failure to raise those objections at that time of the Federal Register
27 notices should be excused.
28 81. Plaintiffs are entitled to a declaration from the Court that the U.S.’s, USDA’s and
767173.3
1 Secretary Vilsack’s granting of an exclusive license to the Commission in the Patented Varieties was
2 unlawful and invalid.
3 82. This Court may and should hold unlawful and set aside the U.S’s, USDA’s and
4 Secretary Vilsack’s actions giving rise to this First Claim for Relief pursuant to 5 U.S.C.
5 §706(2)(A), (C), and (D).
6 83. This Court may and should compel the U.S., USDA and Secretary Vilsack to comply
7 with their obligations under the Patent Act pursuant to 5 U.S.C. §706(1).
8 SECOND CLAIM FOR RELIEF

9 (Unfair Competition Under California Business and Professions Code §17200 and
10 California Common Law Against The Commission)
11 84. Plaintiffs reallege and incorporate by reference all paragraphs 1-83 as if fully set
12 forth herein.
13 85. The Commission has unlawfully and unfairly exploited the ‘284, ‘891 and ‘229
14 patents in a manner that violates antitrust laws and in a manner that attempts to extend these patents
15 beyond their lawful scope. Such acts constitute unfair trade practices and unfair competition under
16 California Business and Professions Code §17200, et seq., and under the common law of the State of
17 California, entitling Plaintiffs to relief.
18 86. Pursuant to California Business and Professions Code §17203, Defendant is required
19 to disgorge and restore to Plaintiffs all profits and property acquired by means of Defendant’s unfair
20 competition.
21 87. Due to the conduct of Defendant, Plaintiffs have suffered irreparable harm, have
22 suffered injury in fact and have lost money or property as a result of Defendant’s acts of unfair
23 business practices alleged herein. It would be difficult to ascertain the amount of money damages
24 that would afford Plaintiffs adequate relief at law for Defendant’s acts. Plaintiffs’ remedy at law is
25 not adequate to compensate Plaintiffs for the injuries inflicted by Defendant. Accordingly, Plaintiffs
26 are entitled to preliminary and permanent injunctive relief pursuant to California Business and
27 Professions Code §17203.
28 88. Plaintiffs are informed and believe and on that basis allege that Defendant’s conduct
767173.3
1 has been intentional and willful and in conscious disregard of Plaintiffs’ rights and, therefore,
2 Plaintiffs are entitled to its attorneys’ fees.
3 THIRD CLAIM FOR RELIEF
4 (Unjust Enrichment Against The Commission)
6 forth herein.
7 90. By acquiring licensing revenue for the ‘891 patent, which was fraudulently procured
8 and maintained, the Commission has received significant benefits. In addition, by acquiring
9 licensing revenue for the ‘284, ‘891 and ‘229 patents in a manner that expands these patents beyond
10 their lawful scope, the Commission has received significant benefits.
11 91. The Commission’s unjust receipt and retention of such benefits has unjustly enriched
12 them at the expense of the Plaintiffs and all California table grape growers who have paid the
13 Commission license fees.
14 FOURTH CLAIM FOR RELIEF
15 (Constructive Trust Against The Commission)
17 forth herein.
18 93. California table grape growers have transferred to the Commission licensing fees,
19 being induced by fraud, duress or undue influence of the Commission.
20 94. The Commission is subject to an equitable duty to convey the license fees it has
21 received from Plaintiffs and other California table grape growers on the ground that the Commission
22 would be unjustly enriched if the Commission were permitted to retain those license fees.
23 95. The licensing fees acquired by the Commission for the Patented Varieties should be
24 held in constructive trust for the benefit of California table grape growers who have paid the
25 Commission license fees with respect to the Patented Varieties.
26 PRAYER FOR RELIEF
27 Wherefore, Plaintiffs prays for the following relief against Defendants:
28 A. Declaring that the U.S., USDA and Secretary Vilsack acted arbitrarily, capriciously,
767173.3
1 and not in accordance with law under the APA by granting the Commission an exclusive license to
2 the ‘294, ‘891 and ‘229 patents and by allowing the Commission to impose the terms and conditions
3 adopted for the Patent Licensing program;
4 B. That the Court adjudge and decree that the Commission has violated California
5 statutory and common law unfair competition laws;
6 C. That the Court adjudge and decree that the Commission has been unjustly enriched;
7 D. That pursuant to 5 U.S.C. §706, the Court compel the U.S., USDA and Secretary
8 Vilsack to act in accordance with law, including 35 U.S.C. §209(a);

9 E. That the Court set aside the agency actions complained of herein:
10 F. An award of damages against the Commission, together with pre-judgment and post-
11 judgment interest;
12 G. Disgorgement of all royalty fees obtained by the Commission in connection with the
13 Patented Varieties;
14 H. That the licensing fees acquired by the Commission for the Patented Varieties be held
15 in constructive trust for the benefit of California table grape growers who have paid the Commission
16 license fees with respect to the Patented Varieties;
17 I. That Plaintiffs recover the costs of this suit together with reasonable attorneys’ fees;
18 J. That Plaintiffs have such other and further relief as the nature of this case may
19 require and as the Court may deem just and proper.
20
DATED: November 16, 2009 HENNIGAN BENNETT & DORMAN LLP
21
22
23 By /s/ Lawrence M. Hadley _
24 Lawrence M. Hadley
25 Attorney for Plaintiffs

DELANO FARMS COMPANY; FOUR STAR
26 FRUIT, INC.; GERAWAN FARMING, INC.
27
28
767173.3
1 DEMAND FOR JURY TRIAL
2 Plaintiffs hereby demand a trial by jury as to all issues so triable.
3
DATED: November 16, 2009 HENNIGAN BENNETT & DORMAN LLP
4
6 By /s/ Lawrence M. Hadley _
7 Lawrence M. Hadley
8 Attorney for Plaintiffs

DELANO FARMS COMPANY; FOUR STAR
9 FRUIT, INC.; GERAWAN FARMING, INC.
10
11
12
Hennigan, Bennett & Dorman llp
13
los angeles, california
14
lawyers
15
16
17
18
19
20
21
22
23
24
25
26
27
28
767173.3
1
2
3 UNITED STATES DISTRICT CO URT
4 FOR THE EASTER N DISTRICT OF C ALIFORNIA
5
6
DELANO F ARMS C OMPANY , FOU R
7 STAR FRU IT, IN C., an d 1:07-CV- 1610 OWW SMS
GERAWAN FARMIN G, INC .,
8 MEMORAND UM DEC ISION AND
Plai ntiff s, ORDER RE FEDER AL DEFENDANTS’
9 (DOC. 69) AND CALIFO RNIA
v. TABLE GR APE CO MMISSION’S
10
(DOC. 67 ) MOTI ONS TO
11 THE CALI FORNIA TABLE GRAP E DISMISS.
COMMISSI ON, UN ITED S TATES OF
12 AMERICA, UNITE D STAT ES
DEPARTME NT OF AGRICU LTURE ,
13 TOM VILS ACK, S ECRETA RY OF
THE UNIT ED STA TES DE PARTM ENT
14 OF AGRIC ULGURE (IN H IS
15 OFFICIAL CAPAC ITY),
16 Def endan ts.
17
18 I. INTRODUCTION
19 The Unit ed Sta tes, et al., (“ Federal Defendants”) and
20 the Cali fornia Table Grap e Commission (“Commissio n”),
21
separate ly mov e to d ismis s Plaintiffs’, Delano Fa rms C ompany
22
(“Delano ”), Fo ur Sta r Fru it, Inc. (“Four Star”), and G erawan
23
Farming, Inc. (“Gera wan”) , entire First Amended C ompla int
24
(“FAC”) pursua nt to Feder al Rules of Civil Proced ure 1 2(b)(1)
25
26 and 12(b )(6), and 19 . Fe deral Defendants argue ( 1) th at the
27 court la cks su bject matte r jurisdiction over Plai ntiff s’

28
1
1 claims b ecause the f edera l government has not wai ved i ts
2 sovereig n immu nity; and, (2) alternatively, that Plain tiffs
3
have not state d vali d cla ims against Federal Defe ndant s under
4
the Admi nistra tive P roced ure Act (“AP A”). Doc. 69. The
5
Commissi on’s m otion, whic h substantially overlaps that of the
6
Federal Defend ants, argue s (1) the United States is a
7
8 necessar y and indisp ensab le party that is immune from suit;
9 and (2) Plaint iffs’ remai ning claims fail as a ma tter of l aw.
10 Doc. 67. Plai ntiffs oppo se both motions. Docs. 70 & 71.
11 Defendan ts’ re plies, Docs . 72 & 73, the Commissio n’s n otice
12
of suppl ementa l auth ority , Doc. 76, as well as Pl ainti ffs’
13
notice o f supp lement al au thority, Doc. 79, and re lated
14
response s and replie s, Do cs. 80-83, h ave al so been
15
consider ed.
16
17
II. FACTUAL BACKGR OUND
18
A. Parties.
19
Plaintif f Dela no is a cor poration duly organized and
20
existing under the l aws o f the State of Washingto n, wi th its
21
principa l plac e of b usine ss in Hoquiam, Washingto n. F AC ¶4.
22
23 Plaintif f Four Star is a corporation duly organiz ed an d
24 existing under the l aws o f the State of Californi a, wi th its
25 principa l plac e of b usine ss in Delano, California . FA C ¶5.

26 Plaintif f Gera wan is a co rporation duly organized and
27
existing under the l aws of the State of Cal ifornia, wi th its
28
2
1 principa l plac e of b usine ss in Sanger, California . FA C ¶6.
2 Plaintif fs are engag ed in the business of growing , har vesting
3
and sell ing ta ble gr apes. FAC ¶7.
4
The Comm ission is a corpo ration of the State of
5
Californ ia, es tablished by the 1967 Ketchum Act. Cal. Food &
6
Agric. C ode §§ 65550 -6555 1. The Commission ’s principa l place
7
8 of busin ess is Fresn o, Ca lifornia. FAC ¶8. The state d
9 purpose of the Commi ssion is to expand and mainta in th e
10 market f or Cal iforni a tab le grapes for the benefi t of the

11 State of Calif ornia as we ll as the State’s more t han f ive
12
hundred table grape growe rs. The Commission is f unded
13
primaril y by a ssessm ents levied on each shipment of
14
Californ ia tab le gra pes. No general revenues of the S tate
15
fund the Commi ssion. FAC ¶9.
16
17 The Unit ed Sta tes De partm ent of Agriculture (“USD A”), of
18 which To m Vils ack is the Secretary, is an Executi ve Ag ency of

19 the Unit ed Sta tes. Among other things, USDA spon sors
20
agricult ural r esearc h pro grams to develop new var ietie s of
21
agricult ural c ommodi ties, and sometimes patents t hose
22
varietie s and/ or iss ues l icenses to utilize those vari eties.
23
See FAC ¶¶ 15- 16.
24
25
B. USDA Res earch Progra m.
26
Californ ia tab le gra pe gr owers and shippers have funde d
27
a USDA r esearc h prog ram t o develop new table grape var ieties
28
3
1 through assess ment i mpose d by the Commission on e ach b ox of
2 table gr apes s hipped in C alifornia. FAC ¶15. Pr ior t o 2002,
3
the USDA provi ded th e new varieties under develop ment to area
4
growers for ev aluati on of growing potential and c ommer cial
5
marketab ility. Id. Once new varieties app eared comme rcially
6
viable, the US DA “re lease d” the variety, and dist ribut ed
7
8 plant ma terial of th e var iety to area growers fre e of charge.
9 Id. It is all eged t hat USDA did not charge California
10 growers for th e new varie ties because Calif ornia growe rs and
11 shippers alrea dy pai d for a large portion of the devel opment.
12
Id.
13
14 C. Patentin g of G rape V ariet ies.
15 In the l ate 19 90s, a t the urging of the Commissio n, th e
16 USDA agr eed to begin pate nting new table grape va rieti es.
17 FAC ¶16. The first three varieties the Commissio n ref erred
18
to the U SDA fo r pate nting , Sweet Scarlet, Autumn King, and
19
Scarlet Royal, had b een u nder development for yea rs. It is
20
alleged that a t leas t one of the varieties, Sweet Scar let,
21
22 had been distr ibuted to g rowers for wide-scale commerc ial
23 evaluati on and sale. FAC ¶¶ 19, 59. Patent appl icati ons for
24 Sweet Sc arlet, Autum n Kin g, and Scarlet Royal, we re fi led

25 with the Unite d Stat es Pa tent and Trademark Offic e (“U SPTO”)
26
on Febru ary 20 , 2003 (App lica tion No. 371,512), Septem ber 28,
27
2004 (Ap plicat ion No . 953 ,387), and September 28, 2004 ,
28
4
1 (Applica tion N o. 953 ,124) , respectively. Patents were issued
2 on July 26, 20 05 (Pa tent No. PP15,891 (“891 Paten t”)),
3
February 21, 2 006 (P atent No. PP16,284 (“284 Patent”)), and
4
January 31, 20 06 (Pa tent No. PP16,229 (“229 Paten t”)).
5
The USDA agree d to g ive t he Commission an exclusi ve
6
license to all newly Pate nted Varieties, and to a llow the
7
8 Commissi on to charge roya lties when growers wishe d to obtain
9 the new variet ies. Id. The USDA also agreed to give the
10 Commissi on exc lusive enfo rcement powers over its new p atent
11 rights. FAC ¶ 16.
12
The Comm ission then selec ted three nurseries to
13
exclusiv ely se ll all new patented table grape var ietie s
14
(“Licens ed Nur series ”). FAC ¶17. Unlike the prior fr ee
15
distribu tion, the nu rseri es would be allowed to s ell n ew
16
17 varietie s to g rowers . Id. In accordance with the agr eement
18 between the Co mmissi on an d the USDA, the Commissi on ch arges

19 nurserie s who distri bute Patented Varieties a $50 00.00
20
particip ation fee pe r pat ented variety and an add ition al
21
$1.00 pe r prod uction unit royalty. FAC ¶45. The Lice nsed
22
Nurserie s are respon sible for paying the royalty, but the
23
Licensed Nurse ries a re al lowed to pass the royalt y amo unt on
24
25 to the p urchas ing gr owers , wh ich they do and have done . FAC
26 ¶17.
27 When a g rower seeks to ob tain a new variety from a

28
5
1 nursery, it is requi red t o enter into a “Domestic Grow er
2 License Agreem ent” ( “Lice nse Agreement”) with the Comm ission.
3
Under th e term s of t he Li cense Agreement, t he grower c annot
4
propagat e the variet y bey ond the plant purchased. FAC ¶18.
5
If the C ommiss ion be lieve s the grower has violate d the
6
License Agreem ent, i t can void the License Agreem ent a nd
7
8 order th at all purch ased plants be destroyed. Id.
9 Recogniz ing th at at least one of the new varieties
10 identifi ed for paten ting (and perhaps all three) had b een
11 previous ly in public use and/or sold commercially , the
12
Commissi on cre ated a so-calle d “amnesty program,” alle gedly
13
designed to hi de the fact that valid patent s coul d not be
14
obtained , and to “ex tort” funds from growers alre ady i n
15
possessi on of the va rieti es. FAC ¶20. Under the amne sty
16
17 program, the C ommiss ion w idely disseminated notic es to
18 growers and sh ippers stat ing that they were in vi olati on of

19 the law if the y poss essed the varieties int ended for
20
patentin g. Th e noti ces a lso offered confidential
21
“settlem ents” to any grow ers who, within a narrow wind ow,
22
agreed t o lice nse th e var ieties, pay a “penalty” to th e
23
Commissi on, an d acce pt th e Commission’s license r estri ctions
24
25 on furth er pro pagati on. Id.
26 Under it s so-c alled “amne sty” program, a grower with
27 Sweet Sc arlet could keep the vines reproduced, so long as the

28
6
1 grower ( i) adm itted to po ssession prior to July 2 004, (ii)
2 paid $2 per vi ne rep roduc ed, (iii) paid $2 per box of Sweet
3
Scarlet grapes previ ously shipped, and (iv) agree d to no
4
further propag ation of th e Sweet Scarlet variety from the
5
plants p ossess ed. F AC ¶ 65. In July 2004, the C ommis sion
6
sent ano ther n otice to al l California table grape grow ers and
7
8 shippers exten ding t he “a mnesty” time period for one m onth,
9 and exte nding the “a mnest y” to include Autumn Kin g and
10 Scarlet Royal variet ies. FAC ¶66.

11 In both notice s, the Comm ission threatened to sue
12
growers who di d not come forward, and to seek money da mage s
13
and inju nction s. Ye t, it is alleged that at the time of the
14
second n otice, the U SDA p atent application on Swe et Sc arlet
15
not only remai ned un -issu ed, but had been r ejected by the
16
17 USPTO. Moreov er, th e USD A had not even applied f or a patent
18 on eithe r Autu mn Kin g or Scar let Roya l. The USDA had no

19 patent r ights, and t he Co mmission lacked any enfo rceme nt
20
rights. FAC ¶ ¶ 66-6 7.
21
22 D. Prior Us e.
23 Plaintif fs all ege th at US DA knew that plant mater ial f or
24 varietie s unde r deve lopme nt frequently entered th e pub lic

25 domain p rior t o rele ase a nd/or patenting. See FA C ¶50 -56.
26
The vari eties underw ent s everal growing cycles be fore 2002,
27
at which time the Co mmiss ion recommended the rele ase o f Sweet
28
7
1 Scarlet. More over, prior to seeking patent prote ction , USDA
2 displaye d and discus sed t he varieties at public m eetin gs and
3
kept two fully devel oped varieties at an unsecure d, an d
4
easily a ccessi ble fa cilit y at California State Un ivers ity at
5
Fresno. FAC ¶ 56.
6
In early 2002, more than two years before any pat ent
7
8 applicat ions f or Aut umn K ing or Scarlet Roy al, a growe r in
9 Delano, J&J Fa rms, o wned by Jim and Jack Ludy, ob taine d
10 “sticks” of th e new varie ties. This grower in tu rn pr ovided

11 some of the pl ant ma teria l to their cousin, Lawre nce L udy,
12
who owne d and operat ed an adjacent farm. With these s ticks,
13
both J&J Farms and L awren ce Ludy produced Autumn King and
14
Scarlet Royal on the ir fa rms in 2002. FAC ¶¶ 61- 62. In
15
addition , in r espons e to the amnesty program, sev entee n
16
17 growers confir med po ssess ion of the varieties and agre ed to
18 pay the penalt ies de mande d by the Commission.

19 Plaintif fs mai ntain that under patent law, public use or
20
sale of an inv ention more than one year prior to filin g a
21
patent a pplica tion b ars p atentability. FAC ¶64.
22
23 E. Plaintif fs’ Li cense Agree ments
24 Plaintif fs are in possession of the Autumn King, Sweet
25 Scarlet and Sc arlet Royal varieties, which they p urcha sed
26
through Licens ed Nur serie s. FAC ¶35. Plaintiffs paid the
27
royaltie s impo sed by the Commission on each purch ased plant.
28
8
1 Id. Pla intiff s have ente red into a License Agreement with
2 the Comm ission for e ach o f the Patented Varieties . FA C ¶¶
3
36-37. In con sideration for this limited, nonexclusiv e
4
license, Plain tiffs have paid a license fee to a Licen sed
5
Nursery. Id. Under the term s of this agre ement, Plai ntiffs
6
have a l imited , none xclus ive license to grow the Paten ted
7
8 Varietie s and sell t he fr uit produced. Id. Plai ntiff s
9 cannot p ropaga te the grap evines or distribute the vine s to
10 third pa rties. Id. Further, Plaintiffs ar e obligated to

11 destroy all Pa tented Vari etie s’ plant mater ial upon
12
terminat ion of the a greem ent. Id.
13
14 F. Original Compl aint a nd Fe bruary 20, 2009 Decision .
15 Plaintif fs’ or iginal comp laint named only the Com missi on
16 as a def endant , alle ging (at claims 1-3) th e patents for all
17 three va rietie s shou ld be dec lared invalid, Doc. 1 at ¶¶ 66-
18
86; (at claim 4) the pate nt for the Sweet Scarlet vari ety
19
should b e decl ared u nenfo rceable because neither the
20
Commissi on nor USDA discl osed to the USPTO that t he th ree
21
22 varietie s had been i n pub lic use prior to Februar y 2002, id.
23 at ¶¶ 87 -85; ( at cla im 5) the Commission violated the Sherman
24 and Clay ton Ac ts by illeg ally monopolizing the ma rket for

25 table gr apes, id. at ¶¶ 9 6-103; (at claim 6 ) the Commi ssion
26
misused the pa tents “in v iolation of antitrust la ws an d in a
27
manner t hat at tempts to e xtend [the] patents beyo nd th eir
28
9
1 lawful s cope, id. at ¶¶ 1 04-109; (at claim 7) unfair
2 competit ion, i d. at ¶¶ 11 0-114; (at claim 8 ) unju st
3
enrichme nt, id . at ¶ ¶ 115 -117 ; and (at claim 9) constr uctive
4
trust, i d. at ¶¶ 118 -121. Th e Commis sion m oved to dis miss,
5
arguing the Un ited S tates is a necessary and indi spens able
6
party th at is immune from suit and that all of th e cla ims in
7
8 the case were withou t leg al foundation.
9 As to th e issu e of j oinde r, the February 20, 2009
10 Decision empha sized that because Plaintiffs ’ substantive

11 causes o f acti on sou ght t o invalidate patents hel d by the
12
United S tates, the U nited States is a necessary p arty under
13
Federal Rule o f Civi l Pro cedure Rule 19(a). Doc. 42 a t 22-
14
34. Onc e it h as bee n det ermined that an absent party to the
15
suit is “neces sary” under Rule 19(a), the inquiry is w hether
16
17 that par ty, th e Unit ed St ates, can be joined in t he ac tion.
18 Dawavend ewa v. Salt River Project Agr. Imp. and P ower Dist.,
19 276 F.3d 1150, 1159 (9th Cir. 2002). “Absent a w aiver,
20
sovereig n immu nity s hield s the Federal government and its
21
agencies from suit.” F.D .I.C . v. Meyer, 510 U.S. 471, 475
22
(1994). A wai ver of sove reign immunity must be u nequi vocally
23
expresse d. De partme nt of Arm y v. Blue Fox, Inc., 525 U.S.
24
25 255, 261 (1999 ). Th e Feb ruar y 20, 2009 Decision then applied
26 this fra mework to th e cla ims in the original comp laint :
27 A declar atory judgme nt seeking invalidity of a U. S.-

owned pa tent squarel y implicates sovereign immuni ty.
28 Further, property ow ners are generally necessary
10
1 parties to actions t hat could affect their proper ty
interest s adversely. The United States, as owner of
2 the Pate nted Varieti es, is no exception....
3 ***
4 Under th e only paten t-rel ated waiver of sov ereign
immunity , 28 U.S.C. § 149 8 pe rmits private parties
5 to bring patent infr ingement suits in United Stat es
Federal Claims Court to seek money damages only. 28
6 U.S.C. § 1498. “In waivi ng its own immunity from
patent i nfringement actions in 28 U.S.C. § 1498(a)
7 (1994) e d. and Supp. III),” the United States did
not cons ent to trebl e damages nor injunctive reli ef,
8 and perm itted reason able attorney’s fees in a nar row
class of specified i nstances. Florida Prep aid
9 Postseco ndary Educ. Expense Bd. v. College Sav.
Bank, 52 7 U.S. 627, 648, n.11 (1999). This suit
10 must be brought in Federal Claims Court aga inst t he
United S tates and by its plain terms 28 U.S.C.
11 § 1498 does no t cove r dec lara tory judgments seeki ng
to inval idate a pate nt. Further, the federal
12 statute covering dec laratory relief actions, the
Declarat ory Judgment Act, 28 U.S.C. §2201, standing
13 alone, d oes not waiv e sovereign immunity. Wyoming
v. Unite d States, 279 F.3 d 12 14, 1225 (10th Cir.
14 2002) (t he declarato ry judgment statute, 28 U.S.C .
§2201, i tself does n ot confer jurisdiction on a
15 federal court where none otherwise exists). “It is
well set tled, howeve r, that said Act [Declaratory
16 Act] doe s not of its elf create jurisdiction; it
merely a dds an addit ional remedy where the distri ct
17 court al ready has ju risdiction to entertain the
suit.” Wells v. Uni ted State s, 280 F .2d 275, 277
18 (9th Cir . 1960).
19 ***
20 The Unit ed States ca nnot be joined absent a clear
waiver o f sovereign immunity. Plaintiffs have no t
21 shown su ch a waiver exists. The United States
cannot b e joined.
22
23 Doc. 42 at 35- 38.
24 Plaintif fs arg ued that AP A section 702, 5 U .S.C. § 702 ,
25
constitu tes a suffic ient waiver of sovereign immu nity. After
26
discussi ng the APA’s waiv er of sovereign immunity and
27
relevant Ninth Circu it au thority, the February 20 , 200 9
28
11
1 decision concl uded:
2 Plaintif fs have cite d no case where the APA § 702
was invo ked as an as serted waiver of sovereign
3 immunity for purpose s of bringing a patent
invalidi ty case agai nst the United States. Howev er,
4 if Plain tiff can ame nd the Complaint to adequatel y
state a § 702 APA cl aim a gainst the United States,
5 it may.
6 Doc. 42 at 41.
7
Because the Un ited S tates was a necessary party t hat
8
could no t be j oined, the February 20, 2009 Decisi on
9
consider ed whe ther t he Un ited States was “indispe nsabl e.”
10
See Fed. R. Ci v. P. 19(b) . “ A party is ind ispensable if in
11
12 ‘equity and go od con scien ce,’ the court should no t all ow the
13 action t o proc eed in its absence.” Dawaven dewa, 276 F .3d at
14 1161, qu oting Fed. R . Civ . P. 19(b). Rule 19(b) sets out

15 four fac tors t o dete rmine whether a case must be dismi ssed:
16
(1) prejudic e to any party or to the absent party;
17
(2) whether relief can b e shaped to lessen
18 prejudic e;
19 (3) whether an adequate remedy, even if not

complete , can be awa rded without the absent party ;
20 and
21 (4) whether there exists an alternative forum.
22 Kescoli v. Bab bitt, 101 F.3d 1304, 1310-11 (9th Cir. 1996).
23 However, where the a bsent party cannot be joined in li ght of
24 sovereig n immu nity, “ther e may be very little nee d for

25 balancin g ... becaus e imm unity itself may be view ed as the
26
compelli ng fac tor.” Id. at 1311.
27
These fa ctors were a pplie d as follows:
28
12
1 The firs t factor wei ghs in favor of
dismissa l....Plainti ffs seek to invalidate and
2 declare unenforceabl e patents owned by the United
States. The validit y of the USDA’s patent has be en
3 challeng ed. If invalidat ed ... the Patents , woul d
be destr oyed, Patent ed Varieties would be freely
4 marketed , and the US DA would lose royalties. The
patents would be dec lared invalid under claims on e
5 through three of the Complaint and unenforceable
under cl aim four for inequita ble conduct and claim
6 six for patent misus e.
7 ***
8 The seco nd factor, w hether prejudice can be lesse ned
by shapi ng the relie f provided, also weighs in fa vor
9 of dismi ssal. No de claratory, injunctive or
compensa tory relief would be granted under the
10 Complain t if the patent’s validity were not
challeng ed. “Any me asures to lessen these
11 prejudic es would nec essarily dilute the efficacy of
the judg ment sought. ” Messerschmitt-Boelkow-Blohm
12 GmgH v. Hughes Aircr aft, 483 F. Supp. 49, 5 3
(S.D.N.Y . 1979). Al though the Complaint is broug ht
13 against the Commissi on alone, granting declarator y
relief r equires find ing that the Commission had n o
14 authorit y to enforce an invalid patent, that the
patent i s invalid an d unenforceable, a patent whi ch
15 is owned by the USDA , a branc h of the United States.
Here, an y judgment c annot be tailored to eliminat e
16 the prej udice to the United States. A finding fo r
Plaintif fs would dec lare invalid patents owned by
17 the Unit ed States, a brogating the United States’
interest in the pate nts, not only depriving the
18 United S tates of roy alties under the patents, but
ending t he United St ates’ ability to license the
19 patents.
20 ***
21 The thir d factor, ad equacy of remedy, also favors

dismissa l. “‘[A]deq uacy’ ref ers not to sat isfaction
22 of [Plai ntiffs’] claims, but to the ‘ public stake in
settling disputes by wholes, whenever possible.’”
23 Republic of Philippi nes, 128 S.Ct. at 2183, citing
Providen t Tradesmens Bank & Trust Co. v. Patterso n,
24 390 U.S. 102, 111 (1 968). As in Republic o f
Phillipp ines, “[g]oi ng forward with t he act ion in
25 the abse nce of” the United States, “would not
further this public interest because they could n ot
26 be bound by a judgme nt to which they were not
parties. ” Id. The Court held the University had
27 not waiv ed its Eleve nth Amendment immunity.
28 The four th factor is whether there is an availabl e
13
1 alternat ive forum. First is the Court of Federal
Claims, expressly au thorized by statute. Plainti ffs
2 have an opportunity to raise the defense of paten t
invalidi ty and unenf orceability in an action brought
3 against them for pat ent infringement brought by t he
United S tates or the Commission. See 35 U.S.C.
4 § 282. [Fo otnote ] However, t o require Plaintiffs t o
violate the license and wait to see whether the
5 patent o wner sues fo r infringement creates an
unfavora ble situatio n as damages could be
6 exacerba ted. Where “no alternative forum exists,
the dist rict court s hould be ‘extra cautious’ bef ore
7 dismissi ng an action .” Kesco li v. Babbitt, 101 F.3d
1304, 13 11 (9th Cir. 1996). But just as the cour ts
8 have hel d in actions involving tribal immunity an d
state im munity, sovereign immunity of the United
9 States c an justify d ismissal for inability to joi n
an indis pensable par ty, despite the fact that no
10 alternat ive forum is available. “If the necessar y
party is immune from suit, there may be ver y litt le
11 need for balancing R ule 19(b) factors because
immunity itself may be viewed as the compelling
12 factor.” Id. at 131 1 (in tern al citations and
quotatio ns omitted). The latest Supreme Court ca se,
13 Republic of Philippines v . Pi mentel, 128 S. Ct. 2180
(2008), to address R ule 19, held as to immunity
14 barring an action fr om proceeding without the
sovereig n party:
15
The anal ysis of the joinder issue in those
16 cases wa s somewhat p erfunctory, but the
holdings were clear: A case m ay not proceed
17 when a r equired-entity so vere ign is n ot
amenable to suit. T hese cases instruct us that
18 where so vereign immu nity is asserted, and the
claims o f the sovere ign are not frivolous,
19 dismissa l of the act ion must be ordered where
there is a potential for inju ry to the
20 interest s of the abs ent sovereign. 128 S.Ct. at
2190-91. In this context, dismissal is
21 appropri ate even if Plaintiffs have no
alternat ive forum fo r their claim. See
22 Dawavend ewa, 2 76 F.3 d at 1162 .
23 Because the proceedi ngs in this case threat en bot h
the prop erty and sov ereign immunity of the United
24 States, the United S tates’ failure to waive its
immunity from suit s trongly supports dismissing t his
25 litigati on in its ab sence.
26 Doc. 42 at 42- 47. A ll of the claims relati ng to paten t
27 invalidi ty, in equitable c onduct, and patent misuse wer e
28
14
1 dismisse d on t he gro und t hat the United States is a ne cessary
2 and indi spensa ble pa rty.
3
The Comm ission ’s sep arate motion to dismiss the a nti-
4
trust cl aim wa s gran ted w ith leave to amend becau se
5
Plaintif fs did not a dequately allege each of the Patented
6
Varietie s cons titute s its own relevant market. Id. at 62.
7
8 The misu se cla im was like wise dismissed. Id. Pl ainti ffs’
9 misuse c laim r ested in pa rt on allegations that t he
10 Commissi on ill egally mono polized interstate and foreig n

11 commerce in ba d fait h by enforcing alleged patent righ ts, as
12
the excl usive licens ee of the patents, and collec ting royalty
13
fees on the Pa tented Vari eties under its “amnesty ” pro gram.
14
The amne sty pr ogram was r ejected as a basis for a misuse
15
claim:
16
17 As to th e first theo ry, there is no viable claim for
the “amn esty program ” as the Commission could not
18 have mis used patents that did not exist and at mo st
were inv entions in t he pre-issuance stage. Licen se
19 agreemen ts entered i nto after a patent appl icatio n
has been filed but b efore the patent issues are n ot
20 necessar ily unenforc eable. Aronson v. Quick Point
Pencil C o., 44 0 U.S. 257, 264-65 (197 9). The “key
21 inquiry is whether, by imposing conditions that
derive t heir force f rom the patent, the patentee has
22 impermis sibly broade ned the scope of the patent
grant wi th anticompe titive effect.” C.R. Bard, Inc.
23 v. M3 Sy s., Inc., 157 F.3 d 13 40, 1372 (Fed. Cir.
1998). Pre-is suance , the re i s no patent ri ght to
24 impermis sibly broade n. The doctrine of patent
misuse c ould not be brought into play in Aronson,
25 which co ncerned a li cense agreement entered into
before i ssuance of t he patent, but after patent
26 applicat ion submitte d. 440 U.S. at 264-65; see also
Technolo gy Licensing Corp. v. Gennum Corp., No. 01-
27 04204, 2 007 WL 13195 28, at *23 (N.D. Cal. May 4,
2007) (“ As to Gennum ’s argument that TLC’s
28 interact ions with Ro ss Video constituted misuse o f
15
1 the ‘250 patent, it is a peculiar notion that a
party co uld “misuse” a patent that is not in
2 existenc e. While it has been called patent misus e
where a patentee see ks to collect royalties after
3 the expi ration of th e patent term, it appears tha t
in such cases the pa tentee and licensor have
4 typicall y entered in to the royalty agreement at a
time whe n the patent is in force. Ag ain, t o the
5 extent a party deman ds royalties or demands that
another cease using a product where no patent has
6 yet issu ed, the othe r party is not put to the typ e
of choic e that paten t misuse doctrine normally
7 guards a gainst. The other party is free to ignore
the dema nds.”)
8
Doc. 42 at 65- 66.
9
The Comm ission ’s motion t o dismiss th e unfa ir
10
11 competit ion cl aim wa s den ied to the extent that t he
12 allegati ons ex tended beyo nd the dismissed anti-trust
13 allegati ons. Id. at 67-71. Because the unfair compet ition

14 claim su rvived , the claim s for unjust enrichment and
15
construc tive t rust, which are purely derivative o f oth er
16
claims i n the case, survi ved as well. Id. at 71.
17
18 G. Claims i n the FAC.
19 The firs t caus e of a ction , arising under the APA,
20 5 U.S.C. § 702 , alle ges Feder al Defendants acted arbit rarily,
21
capricio usly, and ot herwi se not in accordance wit h app licable
22
laws and regul ations by u ndertaking the following “dis crete
23
and fina l agen cy act ion[s ]”:
24
• “[D]ecid ing and agre eing to engage in a
25 patentin g program wi th the Commission with respec t
to the P atented Vari eties and ... cooperating wit h
26 the Comm ission in co nnection with that patenting
program, ” FAC ¶74;
27
28
16
1 • “[D]ecid ing, approvi ng and cooperating in the
filing a nd prosecuti on of patent applications for
2 the Pate nted V arieti es,” FAC ¶75;
3 • “[E]ngag ing in inequ itable conduct before the
USPTO wi th respect t o the application for the ‘89 1
4 patent,” FAC ¶76;
5 • “[P]rocu ring, accept ing the issuance, and
maintain ing the ‘284 , ‘891 and ‘229 patents,” FAC
6 ¶77;
7 • “[G]rant ing th e Comm issio n an exclusive lic ense
in the ‘ 284, ‘891 an d ‘229 patents,” FAC ¶78;
8
• “[A]ppro ving, allowi ng and cooperating with the
9 Commissi on’s amnesty program, licensing program a nd
enforcem ent program with respect to the Patented
10 Varietie s,” FAC ¶79;
11 • “[A]llow ing the Comm ission to collect royalties
for the Patented Var ieties from farmers who had
12 funded t he USDA’s re search program that led to th e
developm ent of the P atented Varieties, where prio r
13 USDA pol icy was to a llow such farmers to benefit
from the USDA’s research free of charge,” FAC ¶80;
14 and
15 • “[C]oope rating, enco uraging and acting in
concert with the Com mission in the collection of
16 royaltie s for the Pa tented Varieties and by
receivin g a portion of those royalties from the
17 Commissi on,” id.
18 The seco nd, th ird, and fo urth causes of act ion, brough t
19 against all de fendan ts, s eek to have the patents decla red
20
invalid. FAC ¶¶ 103 -138. Th e fifth cause of action a gainst
21
all defe ndants , seek s a d eclaration that the 891 Paten t is
22
unenforc eable due to Defendants’ ineq uitabl e conduct. FAC ¶¶
23
139-152. The sixth cause of action a lleges that the
24
25 Commissi on vio lated the S herman and Clayton acts by
26 monopoli zing t he nat ional market for grapevine pl ant
27 material . FAC ¶¶ 15 3-165 . T he seventh cau se of actio n seeks

28
17
1 to have the ex clusiv e lic ense agreements between the U nited
2 States a nd the Commi ssion invalidated under the p atent laws
3
of the U nited States and the APA. FAC ¶¶ 166-176. The
4
eighth c laim s eeks t o hav e the exclusive licenses decl ared
5
void und er sta te law . FA C ¶¶ 177-185 . The ninth clai m,
6
against the Co mmissi on on ly, is for unfair compet ition in
7
8 violatio n of C alifor nia B usiness and Professions Code § 17200
9 and Cali fornia commo n law . FAC ¶¶ 186-190. Finally, the
10 tenth an d elev enth c laims are against the C ommission alone

11 for unju st enr ichmen t, FA C ¶¶ 191-93, and c onstructive trust,
12
FAC ¶¶ 1 94-97.
13
14 III. STANDARD S OF DECISION
15 A. Rule 12( b)(1).
16 Rule 12( b)(1) of the Fede ral Rules of Civil Procedure
17 allows a motion to d ismiss for lack of subject ma tter

18 jurisdic tion. It is a fundamental precept that f ederal
19
courts a re courts of limited jurisdiction. Limit s upon
20
federal jurisdiction must not be disregarded or e vaded.
21
Owen Equ ipment & Ere ction Co. v. Kroger, 43 7 U.S. 365, 374
22
23 (1978). The plainti ff has the burden to establish that
24 subject matter juris diction is proper. Kok konen v. Gu ardi an
25 Life Ins . Co., 511 U.S. 375, 377 (1994). This burden, at
26 the plea ding stage, must be met by pleading suffi cient
27
allegati ons to show a proper basis for the court to assert
28
18
1 subject matter juris diction over the action. McN utt v .
2 General Motors Accep tance Corp., 298 U.S. 178, 189 (1936);
3
Fed. R. Civ. P. 8(a) (1). When a defendant challe nges
4
jurisdic tion f acially, al l ma terial allegat ions in the
5
complain t are assume d true, and the questio n for the c ourt
6
is wheth er the lack of federal jurisdiction appea rs from the
7
8 face of the pleading itself. Doe v. Holy See, 557 F.3d
9 1066, 10 73 (9th Cir. 2009).
10
B. Rule 12( b)(6).
11
A motion to di smiss broug ht under Federal Rule of Civi l
12
Procedur e 12(b )(6) “ tests the legal suffici ency of a claim .”
13
14 Navarro v. Blo ck, 25 0 F.3 d 729, 732 (9th Ci r. 2001). To
15 survive a moti on to dismi ss, a complaint must “co ntain
16 sufficie nt fac tual m atter , accepted as true, to ‘ state a

17 claim to relie f that is p lausible on its face.’” Ashc roft v.
18
Iqbal, 1 29 S. Ct. 19 37, 1949 (May 18, 2009) (quoting Bell
19
Atl. Cor p v. T wombly , 550 U.S . 544, 570 (20 07)).
20
A claim has facial p lausibility when the plaintif f
21 pleads f actual conte nt that allows the court to d raw
22 the reas onable infer ence that the defendant is
liable f or the misco nduct alleged. The plausibili ty
23 standard is not akin to a “probability requiremen t,”
but it a sks for more than a sheer possibility tha t
24 defendan t has acted unlawfully. Where a complaint
pleads f acts that ar e “merely consist ent wi th” a
25 defendan t’s liabilit y, it “stops short of the lin e
between possibility and plausibility of ‘entitlem ent
26
to relie f.’”
27
Id. (cit ing Tw ombly, 550 U.S. 556-57) . Dis missal also can be
28
19
1 based on the l ack of a co gnizable legal theory. Balis treri
2 v. Pacif ica Po lice D ep’t, 901 F.2d 696, 699 (9th Cir. 1990).
3
In decid ing wh ether to gr ant a motion to dismiss, the
4
court “a ccept[ s] all fact ual allegations of the c ompla int as
5
true and draw[ s] all reas onable inferences” in th e lig ht most
6
favorabl e to t he non movin g pa rty. Rodriguez v. Panayi otou,
7
8 314 F.3d 979, 983 (9 th Ci r. 2002). A court is no t, ho wever,
9 “require d to a ccept as tr ue allegations that are merel y
10 concluso ry, un warran ted d eductions of fact, or un reaso nable

11 inferenc es.” M anufac tured Hom e Cmtys. Inc. v. City of San
12
Jose, 42 0 F.3d 1022, 1035 (9t h Cir. 2005) ( quotin g Sprewell
13
v. Golde n Stat e Warr iors, 266 F.3d 979, 988 (9th Cir. 2001)).
14
15 IV. ANALYSIS .
16 A. MedImmun e Does Not O verco me the Need to Identify a
Waiver o f the United Stat es’ Sovereign Immunity.
17
The Febr uary 2 0, 200 9 Dec ision dismissed the orig inal
18
complain t on t he gro und t hat the United States is a ne cessary
19
20 and indi spensa ble pa rty t hat is immune from suit. In the
21 FAC, Pla intiff s sugg est t hat a recent Supreme Cou rt ca se,
22 MedImmun e, Inc . v. G enent ech, Inc., 5 49 U.S . 118 (2007 ),
23
stands f or the propo sitio n that the United States ’ imm unity
24
does not bar d eclara tory relief claims against it for patent
25
invalidi ty. F ederal dist rict courts have “original
26
jurisdic tion [ over] any c ivil action arising under any Act of
27
28 Congress relat ing to pate nts, plant variety prote ction ,
20
1 copyrigh ts and trade marks .” 28 U.S.C. § 1338. T his i ncludes
2 suits br ought by pat ent h olders against alleged p atent
3
infringe rs und er 35 U.S.C . § 281. In response to such a
4
suit, an alleg ed inf ringe r ma y raise patent invalidity as a
5
defense. § 28 2.
6
Under ce rtain circum stanc es, when faced with an i mmine nt
7
8 threat t hat a patent holde r may sue for patent inf ringe ment,
9 the alle ged in fringe r may preemptively seek a dec larat ory
10 judgment of pa tent i nvalidity. In MedImmune, for exam ple,

11 MedImmun e ente red in to a license agreement with G enent ech,
12
which pe rmitte d MedI mmune ’s use of a particular, paten ted
13
drug man ufactu ring p roces s in exchange for the pa yment of
14
royaltie s to G enente ch. 549 U.S. at 121. Several years
15
later, G enente ch sen t Med Immune a letter expressi ng it s
16
17 belief t hat on e of M edImm une’s products was cover ed by the
18 licensed paten t and that MedImmune owed royalties on t hat

19 product under the li censi ng agreement. Id. MedI mmune
20
“conside red th e lett er to be a clear threat to en force the []
21
patent, termin ate th e [] license agreement, and s ue fo r
22
patent i nfring ement if [M edImmune] did not make r oyalt y
23
payments as de manded .” Id. a t 122.
24
25 If respo ndents were to prevail in a patent
infringe ment a ction, peti tion er could be or dered to
26 pay treb le damages a nd attorney’s fees, and could be
enjoined from sellin g [the product, which] has
27 accounte d for more t han 80 percent of its revenue
from sal es since 199 9. Unwilling to risk such
28
21
1 serious consequences, pet itioner paid the d emande d
royaltie s under prot est and with reservation of a ll
2 of its r ights.
3
Id. (int ernal citations a nd q uotations omit ted).
4
Acknowle dging that “ [t]he re is no dispute” that
5
exercisi ng jur isdict ion u nder the declaratory jud gment act
6
would be appro priate if M edImmune “had taken the final step
7
8 of refus ing to make royal ty payments under the [] lice nse
9 agreemen ts,” t he Sup reme Court inquired whether M edImm une’s
10 own acts , in d ecidin g to continue making royalty payme nts,

11 “causes the di spute no longer to be a case or controversy
12
within t he mea ning o f Art icle III?” Id. at 128. The Supreme
13
Court co nclude d that , so long as the facts allege that there
14
is a sub stanti al con trove rsy between the parties of
15
“suffici ent im mediac y and reality,” judicial review ov er the
16
17 declarat ory ju dgment clai m is permissible. Id. a t 127 -28.
18 Plaintif fs arg ue tha t, ju st as the plaintiffs in

19 MedImmun e coul d brin g a p reemptive declaratory re lief action
20
for pate nt inv alidit y aga inst a priva te patent holder where
21
there is a suf ficien tly i mmed iate and real contro versy
22
between the pa rties, so t oo can Plaintiffs bring a
23
declarat ory re lief a ction for patent invalidity a gains t the
24
25 United S tates. But, this ignores the legal effect of the
26 immunity affor ded th e Uni ted States as a sovereign.
27 MedImmun e expa nds th e cir cumstances in which an A rticl e III

28
22
1 “case or contr oversy ” is deemed to exist, but it says nothing
2 about th e Unit ed Sta tes’ immunity or suscep tibility to suit
3
over a U .S. ow ned pa tent.
4
Sovereig n immu nity shield s the United State s from pate nt
5
infringe ment l awsuit s bro ught under § 281. “Abse nt a waiver,
6
sovereig n immu nity s hield s the Federal government and its
7
8 agencies from suit.” Har gen v. Dept. of La bor, 5 69 F.3d 898,
9 904 (9th Cir. 2009) (citi ng Dep’t of Army v. Blue Fox, Inc.,
10 525 U.S. 255, 260 (1 999)) . “A waiver of sovereig n imm unity

11 must be unequi vocall y exp ressed ... and will not be im plied.
12
Id. (cit ing La ne v. Pena, 518 U.S. 187, 192 (1996)).
13
“Further , a wa iver o f imm unity will be strictly c onstr ued, in
14
terms of its s cope, in favor of the sovereign.” Id.
15
(interna l quot ation omitt ed).
16
17 A limite d waiv er of sover eign immunity is found i n 28
18 U.S.C. § 1498, 1 which permits private parties to bring patent

19
1
28 U. S. C. § 1 49 8 pr ov ide s, i n pe rt i nen t pa rt :
20
Whe ne ve r an i nv en ti on de sc ri be d in and c ov er ed b y a pa te nt of t he
21 Uni te d St at es i s us ed or m an uf ac tu r ed by o r fo r th e Un it ed St at es
wit ho ut l ic en se o f th e o wn er t he re o f o r la wf ul r ig ht t o use o r
22 man uf ac tu re t he s am e, th e ow ne r’ s r eme dy s ha ll b e by a ct ion a ga in st
the U ni te d St at es i n the U ni te d St a tes C ou rt o f Fe de ra l Cla im s fo r
23 the r ec ov er y of h is r eas on ab le a nd ent ir e co mp en sa ti on f or su ch u se
and m an uf ac tu re . Re as ona bl e an d en t ire c om pe ns at io n sh al l i nc lu de
24 the o wn er ’s r ea so na bl e c os ts , in cl u din g re as on ab le f ee s for e xp er t
wit ne ss es a nd a tt or ne ys, i n pu rs ui n g t he a ct io n if t he o wne r is a n
ind ep en de nt i nv en to r, a no np ro fi t o rga ni za ti on , or a n en tit y th at
25 had n o mo re t ha n 50 0 emp lo ye es a t a ny ti me d ur in g th e 5- yea r pe ri od
pre ce di ng t he u se o r man uf ac tu re o f th e pa te nt ed i nv en ti on by o r fo r
26 the U ni te d St at es . No thw it hs ta nd in g th e pr ec ed in g se nt en ces , un le ss
the a ct io n ha s be en p end in g fo r mo r e t ha n 10 y ea rs f ro m the t im e of
27 fil in g to t he t im e th at th e ow ne r a ppl ie s fo r su ch c os ts an d fe es ,
rea so na bl e an d en ti re co mp en sa ti on sha ll n ot i nc lu de s uc h c os ts a nd
28 fee s if t he c ou rt f in ds th at t he p o sit io n of t he U ni te d Sta te s wa s
23
1 infringe ment s uits a gains t the United States for money
2 damages in the Unite d Sta tes Court of Feder al Cla ims. A
3
prior or der in this case held that § 1498 did not operate as
4
a waiver :
5
“In waiv ing its own immunity from patent
6 infringe ment actions in 28 U.S.C. § 1498(a) (1994 )
ed. and Supp. III),” the Unit ed States did not
7 consent to treble da mages nor injunctive relief, and
permitte d reasonable attorney’s fees in a narrow
8 class of specified i nstances. Florida Prep aid
Postseco ndary Educ. Expense Bd. v. College Sav.
9 Bank, 52 7 U.S. 627, 648, n.11 (1999). This suit
must be brought in F ederal Claims Court against t he
10 United S tates and by its plain terms 28 U.S.C. §
1498 doe s not cover declaratory judgments seeking to
11 invalida te a patent. Further, the federal statut e
covering declaratory relief actions, the De clarat ory
12 Judgment Act, 28 U.S .C. §2201, standing alone, do es
not waiv e sovereign immunity. Wyoming v. U nited
13 States, 279 F.3d 121 4, 1225 (10th Cir. 2002) (the
declarat ory judgment statute, 28 U.S.C. §2201,
14 itself d oes not conf er jurisdiction on a fe deral
court wh ere none oth erwise exists). “It is well
15 settled, however, th at said Act [Declaratory Act]
does not of itself c reate jurisdiction; it merely
16 adds an additional r emedy where the district cour t
already has jurisdic tion to entertain the suit.”
17 Wells v. United Stat es, 2 80 F .2d 275, 277 ( 9th Cir.
1960).
18
Doc. 42 at 36- 37.
19
Alternat ively, the U nited States can waive its im munit y
20
21 through affirm ative actio n, by invoking the juris dicti on of a
22 particul ar cou rt in a par ticular lawsuit. For ex ample, the
23 United S tates, as th e hol der of a patent, could s ue a private

24 party fo r pate nt inf ringe ment under 35 U.S.C. § 2 81, t o which
25
the alle ged in fringe r may raise patent invalidity as a
26
defense under § 282. How ever, such a waiver is l imite d in
27
sub st an ti al ly j us ti fi ed or t ha t sp e cia l ci rc um st an ce s ma ke an a wa rd
28 unj us t.
24
1 nature. See T egic C ommun icat ions Corp. v. Board of Re gents
2 of Univ. of Te xas Sy s., 4 58 F .3d 1335, 1342-43 (9 th Ci r.
3
2006)(St ate’s filing of s uit in district court wa ives
4
Eleventh Amend ment i mmuni ty as to that suit in th at co urt as
5
well as to any compu lsory counterclaims filed by consu mer
6
defendan ts, bu t not as to suit in another distric t cou rt by
7
8 manufact urer).
9 Here, Pl aintif fs cor rectl y point out that as part of i ts
10 “amnesty progr am,” t he Co mmission sent out notice s in which

11 it threa tened to sue grow ers who did not come forward to
12
acknowle dge po ssessi on of the Patented Varieties and p ay
13
royaltie s. Bu t, the Comm issi on’s issuance of this not ice is
14
far from an un equivo cal w aiver of sovereign immun ity b y the
15
United S tates. Harg en, 569 F .3d at 904 (“A waiver of
16
17 sovereig n immu nity m ust be unequivocally expressed ... and
18 will not be im plied. ”). In the Eleventh Amendmen t con text,

19 for exam ple, w aiver is ge nerally found “either wh en th e state
20
makes a ‘clear decla ratio n’ that it intends to wa ive
21
immunity , such as by stat ute,” or “wh en the state volu ntarily
22
invokes federa l juri sdict ion” by becoming party t o a s uit.
23
Tegic, 4 58 F.3 d at 1 341. Her e, the United States has not
24
25 made a c lear d eclara tion that it intends to waive immu nity,
26 nor did it vol untari ly in voke federal juris dictio n. I t di d
27 not sue any gr ower, nor h as it invoked the jurisd ictio n of

28
25
1 any cour t to e nforce any patent in dispute.
2 Plaintif fs emp hasize the following passage, and c ases
3
cited, f rom Me dImmun e:
4
Our anal ysis must be gin with the recognition that ,
5 where th reaten ed act ion b y government is co ncerned,
we do no t require a plaintiff to expose himself t o
6 liabilit y before bri nging suit to challenge the
basis fo r the threat-for example, the
7 constitu tionality of a law threatened to be
8 enforced . The plaint iff’s own action (or in action)
in faili ng to violat e the law eliminates the
9 imminent threat of p rosecution, but nonetheless d oes
not elim inate Articl e III jurisdiction. For examp le,
10 in Terra ce v. Thompson, 2 63 U .S. 197 (1923) , the
State th reatened the plaintiff with forfeit ure of
11 his farm , fines, and penalties if he entered into a
12 lease wi th an alien in violation of the State’s
anti-ali en land law. Given this genuine thr eat of
13 enforcem ent, we did not require, as a prerequisit e
to testi ng the valid ity of the law in a suit for
14 injuncti on, that the plaintiff bet the farm, so t o
speak, b y taking the violative action. Id., at 216.
15 See also, e.g., Village o f Eu clid v. Ambler Realty
Co., 272 U.S. 365 (1926); Ex parte Young, 2 09 U.S.
16
123 (190 8). Likewise , in Steffel v. Thompson, 415
17 U.S. 452 (1974), we did not require the plaintiff to
proceed to distribut e handbills and risk actual
18 prosecut ion before h e could seek a declaratory
judgment regarding t he constitutionality of a sta te
19 statute prohibiting such distribution. Id., at 45 8-
460. As then-Justice Rehn quis t put it in his
20
concurre nce, “the de claratory judgment procedure is
21 an alter native to pu rsuit of the arguably illegal
activity .” Id., at 4 80. I n ea ch of these cases, the
22 plaintif f had elimin ated the imminent threat of h arm
by simpl y not doing what he claimed the right to do
23 (enter i nto a lease, or distribute handbills at t he
shopping center). Th at did not preclude subject-
24 matter j urisdiction because the threat-eliminating
25 behavior was effecti vely coerced. See Terra ce,
supra, a t 215- 216, 44 S.Ct. 15; Steff el, su pra, at
26 459. The dilemma pos ed by that coercion-put ting the
challeng er to the ch oice between abandoning his
27 rights o r risking pr osecution-is “a d ilemma that it
was the very purpose of the Declaratory Judgment Act
28
26
1 to ameli orate. ” Abbott La bora tories v . Gardner, 387
U.S. 136 , 152 (1967) .
2
Id. at 1 29 (pa rallel cita tion s omitted).
3
4 Despite the se emingl y hel pful holding that “where
5 threaten ed act ion by gove rnment is concerned,” a plain tiff is
6 not requ ired “ to exp ose h imself to liability before br inging

7 suit to challe nge th e bas is for the threat...,” t his p assage
8
has no b earing whats oever on the issue of soverei gn im munity,
9
as sover eign i mmunit y was not an issue in any of the c ited
10
cases. Ex Par te You ng carved out an except ion to a St ate’ s
11
12 Eleventh Amend ment i mmuni ty for suits against off icial s
13 acting u nconst itutio nally on behalf of a state. 209 U .S.
14 123. Te rrace applie d the Ex Parte Young do ctrine to permit

15 an antic ipator y suit for injunctive relief agains t a s tate
16
official who t hreate ned t o ap ply an allegedly
17
unconsti tution al sta tute. 263 U.S. 197. Village of E uclid,
18
272 U.S. 365, and St effel , 415 U.S. 452, follow Terrac e,
19
permitti ng ant icipat ory s uits for injunctive reli ef to
20
21 challeng e the threat ened application of allegedly
22 unconsti tution al sta te an d local laws. Because o f Ex Parte
23 Young, s overei gn imm unity was not an issue in eit her Village
24 of Eucli d or S teffel .
25
In sum, while MedImm une might support a pre emptive
26
declarat ory ju dgment laws uit here if the patent h older was a
27
private party, it do es no t provide jurisdic tion t o ove rcome
28
27
1 the Unit ed Sta tes’ s overe ign immunity.
2
B. APA Clai ms.
3
1. Section 701’s Limita tion on Section 702’s Waiver of
4 Sovereig n Immunity.
5 Plaintif fs adv ance t he AP A as an alternative sour ce fo r
6
a waiver of so vereig n imm unit y. APA section 702 provi des, in
7
pertinen t part :
8
A person suffering l egal wrong because of agency
9 action, or adversely affected or aggrieved by age ncy
action w ithin the me aning of a relevant statute, is
10 entitled to judicial review thereof. An action in a
court of the United States seeking relief o ther t han
11 money da mages and st ating a c laim that an agency or
an offic er or employ ee thereof acted or failed to
12 act in a n official c apacity or under color of leg al
authorit y shall not be dismissed nor relief there in
13 be denie d on the gro und that it is against the
United S tates or tha t the United States is an
14 indispen sable party.
15 5 U.S.C. § 702 .
16 Congress ’ waiv er of the f ederal government’s sove reign
17
immunity under APA § 702 is limited by § 701(a), which
18
provides :
19
(a) This chapter app lies, according to the
20 provisio ns thereof, except to the extent that--
21
(1) stat utes preclud e judicial review; or
22
(2) agen cy action is committed to agency
23 discreti on by law.
24 5 U.S.C. § 701 (a). Heckl er v. Chaney, 470 U.S. 8 21, 828

25 (1985) ( before bring ing a claim under § 702, “a p arty must
26
first cl ear th e hurd le of § 701(a)”).
27
28
28
1 a. The Pate nt Act Precl udes Judicial Review of
Plaintif fs’ Patent-Related APA Claims .
2
APA § 70 2’s wa iver o f sov ereign immunity does not appl y
3
where a partic ular s tatut e “precludes judic ial re view. ”
4
5 § 701(a) (1) 2 ; Heckler , 470 U.S . at 828. “Whether and to what
6 extent a parti cular statu te precludes judicial re view is
7 determin ed not only from its express language, bu t als o from

8 the stru cture of the stat utory scheme, its object ives, its
9
legislat ive hi story, and the nature of the admini strat ive
10
action i nvolve d.” B lock v. C omty. Nutritio n Inst., 46 7 U. S.
11
340, 345 (1984 ). Wh ile “ [a]ccess to judicial rev iew s hould
12
be limit ed onl y upon a sh owing of clear and convincing
13
14 evidence of a contra ry le gislative intent,” Eisin ger v . Fed.
15 Lab. Rel . Auth ., 218 F.3d 109 7, 1103 (9th Cir. 2000), this
16 standard is no t appl ied i n a “strict evidentiary sense ,” so

17 long as “congr ession al in tent to preclude judicia l rev iew is
18
fairly d iscern ible in the sta tutory scheme, ” Block, 46 7 at
19
351 (int ernal quotat ion o mitted).
20
In a com plex s tatuto ry sc heme, the provision of j udici al
21
22 review f or a p articu lar c lass of plaintiffs may e viden ce
23 Congress ional intent to f oreclose others from par ticip ating.
24 Block, 4 67 U.S . at 3 47-49 (“[W]hen a statut e prov ides a

25 detailed mecha nism f or ju dicial consideration of parti cular
26
2
Re la te dl y, 5 U .S .C . § 7 02 (2 ) pr ov i des t ha t no th in g in t he AP A “c on fe r s
27 aut ho ri ty t o gr an t re lie f if a ny o t her s ta tu te t ha t gr an ts co ns en t to
sui t ex pr es sl y or i mp lie dl y fo rb id s th e re li ef w hi ch i s sou gh t. ”
28
29
1 issues a t the behest of p articular persons, judic ial r eview
2 of those issue s at t he be hest of other persons ma y be found
3
to be im pliedl y prec luded .”). This is the case even w here
4
the stat ute ge nerall y all udes to the excluded cla ss’
5
interest s. Id . at 3 47. Whet her judicial r eview is pr eclu ded
6
for cert ain cl asses of pl aintiffs “turns ultimate ly on
7
8 whether Congre ss int ended for that cl ass to be relied upon to
9 challeng e agen cy dis regar d of the law.” Id. “Preclus ion of
10 such sui ts doe s not pose any threat to realizatio n of the

11 statutor y obje ctives ; it means only that those ob jecti ves
12
must be realiz ed thr ough the specific remedies pr ovided by
13
Congress and a t the behes t of the parties directl y aff ected
14
by the s tatuto ry sch eme.” Id. at 352 -53.
15
The Pate nt Act “reve als C ongress’s intent to prec lude
16
17 judicial revie w of U SPTO examination decisions at the behest
18 of third parti es pro testi ng the issue or reissue of a

19 patent.” Hita chi Me tals, Ltd. v. Quigg, 776 F. Supp. 3, 7
20
(D.D.C. 1991). The distr ict court in Hitac hi succinctly
21
summariz ed the opera tion of the Patent Act and it s jud icial
22
review p rovisi ons:
23
The Pate nt Statute i s addressed to patent owners and
24 patent a pplicants. T he patent examination process is
an ex pa rte proceeding, not an adversarial one, a nd
25 the Pate nt Statute’s judicial review provisions
contain no gaps requ iring the Court to exercise i ts
26 power. [FN8]
27 [FN8] Co ngress has explic itly designated ot her
PTO proc eedings as inter partes, including
28
30
1 patent i nterferences , 35 U.S.C. § 135(a), and
trademar k opposition s and cancellations, 15
2 U.S.C. § § 1063, 1064 , 1067. In contrast, the
provisio ns governing the patent application and
3 examinat ion process prescribe an ex parte
proceedi ng. 35 U.S.C . §§ 131, 132, 133, 134,
4 141, and 145. See also Williams Mfg. Co. v.
United S hoe Machiner y Corp., 121 F.2d 273, 277
5 (6th Cir .1941) ( “[T ]he granting of a patent is
not, exc ept when an interference is declare d,
6 the resu lt of an adv ersary proceeding.”);
Godtfred sen v. Banne r, 503 F. Supp. 6 42, 64 6
7 (D.D.C. 1980) (“It m ay well be desirable as a
matter o f policy to permit an individual to
8 protest the grant of a patent other than by an
infringe ment action, ... that is a de cision for
9 the Cong ress.”).
10 The Pate nt Statute e xplicitly authorizes patent
owners t o apply for reissue of a patent, 35 U.S.C . §
11 251, and confers on those applicants the right to
seek adm inistrative and judicial review of PTO
12 examinat ion decisions. See 35 U.S.C. § 131
(adminis trative appe al of examiner’s decision to the
13 Board of Patent Appe als and Interferences); 35
U.S.C. § 134 (direct appeal of Board decisions to
14 the Fede ral Circuit) ; 35 U.S.C. § 145 (judicial
review b y civil acti on in thi s court); 35 U.S.C. §
15 251 (the provisions governing original patent
applican ts also gove rn reissue applicants). In
16 contrast , Title 35 c ontains no provision expressl y
authoriz ing administ rative or judicial review of a
17 PTO deci sion at the behest of a third-party
protesto r.
18
Hitachi, 776 F . Supp . at *8. Hitachi rejected plainti ff’s
19
argument that its su it on ly challenged the proced ure u sed by
20
21 the USPT O, and was n ot an action to review the va lidit y or
22 enforcea bility of th e pat ent:
23 [P]laint iff’s distin ction is a superficial one.

Plaintif f’s suit is precluded by the Patent Statu te,
24 because plaintiff’s action, a suit brought by a
third-pa rty protesto r, seeks to overturn the PTO’s
25
decision to grant a reissue patent to [defendant] .
26 Although plaintiff s tates “that plain tiff d oes not
here see k a determin ation of the validity or
27 enforcea bility of th e patent,” in the same
memorand um plaintiff also requests an injunction
28
31
1 requirin g [defendant ] to surrender its reissue
patent.. . Furthermor e, the ultimate source of
2 Hitachi’ s alle ged in jurie s is not the alleged
procedur al violation by the Commissioner, but the
3
existenc e of [defend ant’s] reissue patent.
4
Id. at * 9. Se e also Synt ex v . U.S. Patent and Tradema rk
5
Office, 882 F. 2d 157 0, 1573-74 (Fed. Cir. 1989) (affir ming
6
dismissa l of c omplai nt, including APA claim, for lack of
7
8 jurisdic tion b ecause thir d-party requester of ree xamin ation
9 could no t coll ateral ly at tack the USPTO’s reexami ned d ecision
10 in favor of pa tent o wner, as the Patent Act does not p rovide

11 for such a cha llenge ); Hallmark Cards Inc., v. Lehman, 959 F.
12
Supp 539 , 542- 43 (D. D.C. 1997 )(rejecting th ird party’s
13
attempt to dir ectly chall enge the USPTO’s decisio n to issue a
14
certific ate of corre ction because the Patent Act precl udes
15
judicial revie w of s uch a n action unless is sue is raised as
16
17 defense to an infrin gemen t suit).
18 Plaintif fs att empt t o dis tinguish these cases on the

19 ground t hat th ey inv olved causes of action agains t the USPTO,
20
and not direct ly aga inst the patent owner. But, wheth er a
21
cause of actio n oper ates as a collateral attack does n ot turn
22
upon the parti es nam ed to the lawsuit. For examp le, Heck v.
23
Humphrey , 512 U.S. 4 77, 486 (1994), bars civil rights claims
24
25 for dama ges th at wou ld op erate to collaterally at tack an
26 underlyi ng cri minal convi ction, even though the partie s to
27 the unde rlying crimi nal c ase may not be the same as th ose
28
32
1 involved in th e civi l rig hts action. See, e.g., Anderson v.
2 Smith, 2 009 WL 21393 11 (E .D. Cal. Jul. 10, 2009).
3
Plaintif fs ass ert th at th e USDA’s reliance on Hit achi
4
and its assert ion th at Pl aintiffs claims ar e collatera l
5
attacks “defie s logi c” be cause “if the USDA’s def initi on of a
6
‘collate ral at tack’ were accepted, all invalidity clai ms
7
8 would co nstitu te ‘co llate ral attacks on the PTO’s deci sion to
9 grant th e pate nts,’ even those betwee n priv ate parties or
10 those ra ised a s coun tercl aims in an infringement suit brought

11 by the g overnm ent.” Doc. 70 at 8. But, the law permi ts
12
patents to be attack ed in certain suits between p rivat e
13
parties and in count ercla ims brought against infr ingem ent
14
suits in itiate d by t he go vernment. Such attacks, wher e
15
permitte d by l aw, ar e, by their very nature, not
16
17 impermis sible “colla teral ” attacks. This does no t add ress
18 the Unit ed Sta tes’ a rgume nt that the APA cannot b e use d to
19 create n ew way s to a ttack a patent where su ch mec hanis ms are
20
not othe rwise permitted b y la w. That is th e purpose o f
21
section 701(a) (1) an d Blo ck’s prohibi tion a gainst using the
22
APA to c arve o ut new aven ues for judicial review where a
23
comprehe nsive statut ory s cheme already exists. 3
24
25
3
Pl ai nt if fs a rg ue t ha t t he ir c la im s ar e no t “c ol la te ra l att ac ks ,” b ut ,
26 ins te ad , am ou nt t o “d ire ct a ct io n a gai ns t th e pa te nt o wn er un de r th e A PA
for a ct in g co nt ra ry t o l aw i n ob ta i nin g, m ai nt ai ni ng , li cen si ng , an d
27 enf or ci ng t he g ra pe vi ne pa te nt s. ” Doc . 70 a t 8. T he re is l it tl e
pra ct ic al d if fe re nc e bet we en a c ol l ate ra l at ta ck o n th e pat en t it se lf and
28 a c la im t ha t th e pa te nt wa s ob ta in e d u nl aw fu ll y
33
1 Here, ma ny of Plaintiffs allegations are direct attack s
2 on the v alidit y of t he pa tents themselves. Plain tiffs ’
3
allege t hat th e USDA acte d unlawfully by: “decidi ng an d
4
agreeing to en gage i n a p atenting program with th e Com mission
5
with res pect t o the Paten ted Varieties and ... co opera ting
6
with the Commi ssion in co nnection with that paten ting
7
8 program, ” FAC ¶74; “ decid ing, approving and coope ratin g in
9 the fili ng and prose cutio n of patent applications for the
10 Patented Varie ties,” FAC ¶75; “engaging in inequi table

11 conduct before the U SPTO with respect to the appl icati on for
12
the ‘891 paten t,” FA C ¶76 ; and “procuring, accept ing t he
13
issuance , and mainta ining the ‘284, ‘891 and ‘229 pate nts,”
14
FAC ¶77. Thes e APA claim s are barred under § 701 beca use the
15
Patent A ct pre cludes judi cial review of suc h claims.
16
17 Plaintif fs als o alle ge th at USDA acted unlawfully by:
18 “grantin g the Commis sion an exclusive license in the ‘ 284,

19 ‘891 and ‘229 patent s,” F AC ¶78; “approving, allo wing and
20
cooperat ing wi th the Comm ission’s amnesty program , lic ensing
21
program and en forcem ent p rogram with respect to t he Pa tented
22
Varietie s,” FA C ¶79; “all owing the Commission to colle ct
23
royaltie s for the Pa tente d Varieties from farmers who had
24
25 funded t he USD A’s re searc h program that led to th e
26 developm ent of the P atent ed V arieties, wher e prior USD A
27 policy w as to allow such farmers to benefit from the U SDA’s

28
34
1 research free of cha rge,” FAC ¶80; and “cooperati ng,
2 encourag ing an d acti ng in concert with the Commis sion in the
3
collecti on of royalt ies f or the Patented Va rieties and by
4
receivin g a po rtion of th ose royalties from the C ommis sion,”
5
id. In part, these licen se-related claims depend on
6
Plaintif fs’ as sertio n tha t the patents are unenfo rceab le,
7
8 see, e.g ., FAC ¶91 ( USDA’ s “action in grant ing the Com mission
9 an exclu sive l icense to t he ‘ 891 patent is arbitr ary,
10 capricio us, an d othe rwise not in accordance with laws and

11 regulati ons, b ecause the patent is unenforceable. ”).
12
Any APA claims in the FAC bas ed upon the in validity of
13
the pate nts mu st be dismi ssed because the A PA doe s not waive
14
sovereig n immu nity w here a particular statute, in this case
15
the Pate nt Act , prec ludes judicial review. 4 Defen dants ’
16
17 motion t o dism iss al l pat ent-related claims (e.g., those that
18
4
To t he e xt en t th at P lai nt if fs ’ ch a lle ng e th e Un it ed S ta tes ’ ti tl e
19 to th e pa te nt s, t he Q uie t Ti tl e Ac t al so i mp li ed ly f or bi ds Pl ai nt if fs ’
Cla im s. 5 U. S. C. § 7 02( 2) p ro vi de s th at n ot hi ng i n th e APA “ co nf er s
20 aut ho ri ty t o gr an t re lie f if a ny o t her s ta tu te t ha t gr an ts co ns en t to
sui t ex pr es sl y or i mp lie dl y fo rb id s th e re li ef w hi ch i s sou gh t.
21 Pla in ti ff s’ c la im s, w hic h ch al le ng e th e Un it ed S ta te s’ i nte re st i n
pro pe rt y, i mp li ca te t he Qu ie t Ti tl e Ac t, 2 8 U. S. C. § 2 40 9a( a) , wh ic h
22 wai ve s so ve re ig n im mu nit y fo r cl ai m s d is pu ti ng t he U ni te d S ta te s’ t it l e
to re al p ro pe rt y. A rel at ed w ai ve r ap pl ie s to c er ta in c lai ms i nv ol vi n g
23 “re al o r pe rs on al p ro per ty o n wh ic h th e Un it ed S ta te s ha s o r cl ai ms a
mor tg ag e or l ie n. ” 2 8 U .S .C . § 24 1 0(a ). Pa te nt s, h ow ev er, “ ha ve t he
24 att ri bu te s of p er so na l p ro pe rt y. ” 35 U. S. C. § 2 61 . T he Un it ed S ta te s
has n ot w ai ve d it s so ver ei gn i mm un i ty wi th r es pe ct t o pe rso na l pr op er t y
in wh ic h th e Un it ed S tat es c la im s a ti tl e in te re st , as o ppo se d to a l i en
25 int er es t. Du nn & B la ck, P .S . v. U n ite d St at es , 49 2 F. 2d 29 1, 2 92 ( 9t h
Cir . 19 73 ). Th e ab se nce o f an y wa i ver o f so ve re ig n im mu nit y wi th r es p ect
26 to ch al le ng es t o a fe der al a ge nc y’ s ri gh ts t o pe rs on al p rop er ty i mp li e dly
for bi ds s im il ar r el ie f u nd er t he A P A. T o th e ex te nt t ha t P la in ti ff s’ APA
27 cla im s ch al le ng e th e Uni te d St at es ’ ri gh t to p os se ss , ma nag e, a nd d is p ose
of th e pa te nt s, s uc h cha ll en ge s ar e ba rr ed .
28
35
1 challeng e the validi ty of the patent and/or the m ethod s by
2 which th e pate nt was obta ined) is GRANTED WITHOUT LEAV E TO
3
AMEND.
4
5 b. The Bayh-Dole Act Does not Commit Action With
Respect to Licensing to Agency Discretion.
6
In addit ion to chall engin g the validity of the Pa tents
7
themselv es, Pl aintif fs al lege that the USDA ’s licensing
8
activiti es vio late p rovis ions of the Bayh-Dole Ac t, 35 U.S.C.
9
10 § 200 et seq. Defen dants arg ue that these licensing c laim s
11 are barr ed by Sectio n 701 (a)(2) of the APA, which prec ludes
12 applicat ion of the A PA to any “agency action [tha t] is

13 committe d to a gency discr etion by law .” 5 U.S.C. §
14
701(a)(2 ). De fendan ts ma intain that the Bayh-Dol e act
15
commits the ac ts of licen sing to agency discretio n.
16
Agency a ction is com mitte d to agency discretion b y law
17
when the statu te whi ch au thorizes the agency’s action is
18
19 “drawn i n such broad term s that in a given case t here is no
20 law to a pply.” Citi zens to Preserve Overto n Park v. V olpe,
21 401 U.S. 402, 410 (1 971), overruled on other grou nds, see
22
Califano v. Sa nders, 430 U.S. 99 (1977); see also Webs ter v.
23
Doe, 486 U.S. 592, 600 (1 988) . Applying § 701(a)(2)
24
“require s care ful ex amina tion of the statute on w hich the
25
claim of agenc y ille galit y is based.” Webster, 4 86 U.S. at
26
27 600.
28 In Heckl er v. Chaney, 470 U.S. 821, 8 28 (19 85), the Fo od

36
1 and Drug Admin istrat ion’s (“F DA”) decision not to unde rtake
2 an enfor cement proce eding against the use of cert ain d rugs in
3
administ ering the de ath p enalty was not subject t o jud icial
4
review u nder t he APA beca use the statute conferri ng po wer on
5
the FDA to pro hibit the u nlawful misbranding or misuse of
6
drugs pr ovided no su bstan tive standards on which a cou rt
7
8 could ba se a r eview of th e challenged conduct. “ The A ct’s
9 enforcem ent pr ovisio ns th us commit complete discr etion to the
10 [FDA] to decid e how and w hen they should be exerc ised. ” Id.
11 at 835.
12
In contr ast, i n Overton Park, APA § 701(a)(2) did not
13
bar judi cial r eview of th e Department of Transpor tatio n’s
14
(“DOT”) releas e of f edera l funds to complete a se gment of
15
expressw ay tha t ran throu gh ha city park. 401 U. S. at 413-
16
17 14. The relev ant st atute s, w hich provided that DOT “s hall
18 not appr ove an y prog ram o r project that requires the u se of

19 any publ ic par kland unles s (1) there is no feasib le an d
20
prudent altern ative to th e use of such land, and (2) s uch
21
program includ es all poss ible planning to minimize har m to
22
such par k ..., ” prov ided “clear and specific dire ctive s.”
23
Id.
24
25 In gener al, th e Bayh -Dole Act authori zes fe deral
26 agencies to ap ply fo r, ob tain, and maintain paten ts:
27 Each Fed eral agency is authorized to apply for,

obtain, and maintain patents ... in the Uni ted
28 States . . . on inve ntions in which the Federal
37
1 Governme nt owns a ri ght, title, or interest.
2 35 U.S.C . § 20 7(a)(1 ).
3 Many of Plain tiffs’ APA allegations directly imp licat e
4
the auth orizat ion gr anted by the Bayh-Dole Act. Plain tiff s’
5
allege t hat th e USDA acte d unlawfully by “decidin g and
6
agreeing to en gage i n a paten ting program with the
7
Commissi on..., ” FAC ¶74; “filing and prosecut[ing ] of patent
8
9 applicat ions f or the Pate nted Varieties,” FAC ¶75 ; “en gaging
10 in inequ itable condu ct be fore the USPTO...,” FAC ¶76; and
11 “procuri ng, ac ceptin g the issuance, and maintaini ng th e ‘284,

12 ‘891 and ‘229 patent s,” F AC ¶77. Other allegatio ns
13
indirect ly imp licate the Bayh Dole Act’s authoriz ation , such
14
as those invol ving U SDA’s “granting the Com mission an
15
exclusiv e lice nse in the ‘284, ‘891 and ‘229 pate nts,” FAC
16
¶78; “ap provin g, all owing and cooperating with th e
17
18 Commissi on’s a mnesty prog ram, licensing program a nd
19 enforcem ent pr ogram with respect to the Patented Varie ties,”

20 FAC ¶79; “allo wing t he Co mmission to collec t royalties for
21
the Pate nted V arieti es... ,” FAC ¶80; and “coopera ting,
22
encourag ing an d acti ng in concert with the Commis sion in the
23
collecti on of royalt ies f or the Patented Varietie s and by
24
receivin g a po rtion of th ose royalties from the Commission,”
25
26 id.
27 As to al l thes e pate nting activities, Plain tiffs
28
38
1 identify no “c lear a nd sp ecific directives” conta ined in the
2 Bayh-Dol e Act (or an y oth er s tatute or regu lation ) aga inst
3
which US DA’s c onduct can be measured. Plaintiffs assert that
4
the Bayh -Dole act in fact “contains a comprehensi ve st atutory
5
scheme f or gov ernmen t age ncies to follow when see king to
6
patent i nventi ons, g rant exclusive licenses, and colle ct
7
8 royaltie s” and “leav es vi rtually nothing in these area s to
9 agency d iscret ion.” Doc. 70 at 11. To sup port this
10 assertio n, Pla intiff s not e only that the Bayh-Dol e Act

11 expressl y limi ts the gove rnment’s ability to seek pate nt
12
protecti on to “inven tions in which the Federal Go vernm ent
13
owns a r ight, title, or i nterest.” 35 U.S.C. § 2 07(a)(1).
14
“Inventi ons” i s defi ned a s “any invention or disc overy which
15
is or ma y be p atenta ble.” § 201(d). Plaintiffs argue “the
16
17 Bayh-Dol e Act expres sly l imit s a government agenc y’s
18 discreti on to seek p atent protection to subject m atter that

19 meets th e cond itions of p aten tability set forth elsewh ere in
20
the Pate nt Act .” Do c. 70 at 11. The Paten t Act is th e
21
source o f subs tantiv e law that underpins any such Bayh-Dole
22
act clai m, but the l atter contains no substantive stan dards
23
to aid j udicia l revi ew of the dispute d pate nting activ ities.
24
25 Plaintif fs not e that UDSA’s licensing activ ities are
26 subject to “cl ear an d spe cific directives” contai ned i n
27 section 209(a) , whic h pro vides:

28
39
1 Authorit y.--A Federa l age ncy may grant an e xclusive
or parti ally exclusi ve license on a f ederal ly owned
2 inventio n under sect ion 207(a)(2) only if--
3
(1) Gran ting the lic ense is a reasonable and
4 necessar y incentive to--
5 (A) call forth the i nvestment capital and

expendit ures needed to bring the invention to
6 practica l applicatio n; or
7 (B) othe rwise promote the invention’s
8 utilizat ion by the p ublic;
9 (2) the Federal agen cy finds that the public will be

served b y the granti ng of the license, as indicat ed
10 by the a pplicant’s i ntentions, plans, and ability to
bring th e invention to practical application or
11 otherwis e promote th e invention’s utilization by the
12 public, and that the proposed scope of exclusivit y
is not g reater than reasonably necessary to provi de
13 the ince ntive for br inging the invention to
practica l applicatio n, as proposed by the applicant,
14 or other wise to prom ote the invention’s utilizati on
by the p ublic;
15
(3) the applicant ma kes a commitment to achieve
16
practica l applicatio n of the invention within a
17 reasonab le time, whi ch time may be extended by th e
agency u pon the appl icant’s request and the
18 applican t’s demonstr ation that the refusal of suc h
extensio n would be u nreasonable;
19
(4) gran ting the lic ense will not tend to
20
substant ially lessen competition or create or
21 maintain a violation of the Federal antitrust law s;
and
22
(5) in t he case of a n inv enti on covered by a foreign
23 patent a pplication o r patent, the interests of th e
Federal Government o r United States industry in
24 foreign commerce wil l be enhanced.
25
35 U.S.C . § 20 9(a).
26
The FAC specif ically invo kes § 209(a)(4), allegin g tha t
27
“USDA’s action in gr antin g th e Commission a n excl usive
28
40
1 license to [th e Pate nted Varieties violates the A PA]
2 because. .. the exclu sive license is in violation of .. . [35
3
U.S.C.] § 209( a)(4), in t hat the exclusive licens e
4
substant ially lessen s com petition in the distribu tion,
5
producti on, an d repr oduct ion of the Patented Vari eties and
6
either c reates or ma intai ns a violation of the Fe deral
7
8 Antitrus t laws as al leged in the Sixth and Ninth Claim s for
9 Relief.” FAC ¶90. Secti on 209(a)(4)’s requireme nt th at an
10 exclusiv e or p artial ly ex clusive license must “no t ten d to

11 substant ially lessen comp etition or create or mai ntain a
12
violatio n of t he Fed eral antitrust laws,” is a “c lear and
13
specific direc tive” that may be enforced by way o f the APA’s
14
judicial revie w prov ision s.
15
In addit ion, a lthoug h no such violation is allege d in
16
17 the FAC, at or al arg ument Plaintiffs invoked § 20 9(a)( 1),
18 arguing that g rantin g the license was not a “reas onabl e and
19 necessar y ince ntive” to e ither “call forth the investm ent
20
capital and ex pendit ures need ed to bring the invention to
21
practica l appl icatio n”; o r “otherwise promote the inve ntion’s
22
utilizat ion by the p ublic .” This too is a “clear and
23
specific direc tive” that may be enforced by a cou rt.
24
25 Defenda nts’ m otion to di smiss Plaintiffs’ licens e-
26 related APA cl aims pursua nt to sectio n 701( a)(2)’s lim itation
27 on secti on 702 ’s wai ver o f sovereign immunity is DENIE D. As

28
41
1 to these remai ning l icens ing claims brought under sect ion
2 209(a) o f the Bayh-D ole A ct, Defendants adv ance a numb er of
3
alternat ive ar gument s for dismissal.
4
5 2. Standing .
6 Defendan ts arg ue tha t Pla intiffs do not have stan ding to
7 bring AP A lice nsing claim s against the Federal De fenda nts.

8 To maint ain an actio n in federal court, Plaintiff s mus t have
9
Article III st anding . See Lujan v. N at’l W ildlif e Fed’n, 497
10
U.S. 871 , 872 (1990) . “[ T]o satisfy Article III’ s sta nding
11
requirem ents, a plai ntiff must show (1)[he] has s uffer ed an
12
‘injury in fac t’ tha t is (a) concrete and particu lariz ed and
13
14 (b) actu al or immine nt, n ot conjectural or hypoth etica l; (2)
15 the inju ry is fairly trac eable to the challenged actio n of
16 the defe ndant; and ( 3) it is likely, as opposed t o mer ely

17 speculat ive, t hat th e inj ury will be redressed by a fa vorable
18
decision .” Fr iends of th e Ea rth v. Laidlaw Envtl. Ser vs.
19
(TOC), I nc., 5 28 U.S . 167 , 180-81 (2000). In add ition to the
20
Article III re quirem ents, plaintiffs bringing sui t und er the
21
22 APA, 5 U .S.C. § 706, must est ablish that th ey fall wit hin the
23 “zone of inter est” o f the statute under which the y bri ng
24 their la wsuit. See City of Sausalito v. O’ Neill, 386 F.3d

25 1186, at 1199 (9th C ir.20 04).
26
The burd en of establ ishin g the elements of standi ng
27
falls up on the party asse rting federal jurisdicti on. Lujan
28
42
1 v. Defen ders o f Wild life, 504 U.S. 555, 561 (1992). “ [E]ach
2 element of Art icle I II standi ng ‘must be supported in the
3
same way as an y othe r mat ter on which the plainti ff be ars the
4
burden o f proo f, i.e ., wi th the manner and degree of e vidence
5
required at th e succ essiv e stages of the litigati on.’”
6
Bennett v. Spe ar, 52 0 U.S. 154, 167 (1997) (quoti ng Lu jan,
7
8 504 U.S. at 56 1).
9
a. Injury i n Fact; Caus ation; Redressibility.
10
To satis fy the “inju ry in fact” requirement, Plai ntiff s
11
must pro vide e videnc e of either actual or threate ned i njury.
12
See Unit ed Sta tes v. Ensi gn, 491 F.3d 1109, 1116- 17 (9 th Cir.
13
14 2007). C ausati on req uires that the injury be “fai rly
15 traceabl e” to the ch allen ged action of the defend ant, and not
16 be “the result of th e ind ependent action of some third party

17 not befo re the court .” Tyler v. Cuomo, 236 F.3d 1124, 1132
18
(9th Cir . 2000 ). Th e causation element is lackin g whe re an
19
“injury caused by a third party is too tenuously conne cted to
20
the acts of th e defe ndant .” Citizens for B etter Forestry v.
21
22 U.S. Dep t. of Agric. , 341 F.3d 961, 975 (9t h Cir. 2003 ).
23 Finally, redre ssibil ity r equires that plain tiff s how i t is
24 “likely that a favor able court decision will redr ess t he

25 injury t o the plaint iff.” Lujan, 504 U.S. at 560.
26
“Redress ibilit y requ ires an analysis of whether t he co urt has
27
the powe r to r ight o r to prevent the claimed inju ry.”
28
43
1 Gonzales v. Go rsuch, 688 F.2d 1263, 1267 (9 th Cir. 198 2).
2 The Unit ed Sta tes do es no t challenge plaintiffs’ abili ty
3
to satis fy the Artic le II I requirements. However , the
4
Commissi on mai ntains that , with respect to the al legat ions
5
that the licen ses gr anted to the Commission by the USD A
6
should b e decl ared v oid, Plaintiffs “have not, an d can not
7
8 allege, any in jury f airly traceable to the challe nged action
9 of the U SDA.” Doc. 67 at 20 (internal quotation omitt ed).
10 Specific ally, the Co mmiss ion asserts that “[f]ar from

11 injuring plain tiffs, the USDA’s decision to licen se th e use
12
of its p atente d grap e var ieties presents an oppor tunit y to
13
plaintif fs tha t woul d not otherwise exist. Indee d, if the
14
Court we re to invali date the licenses, which prov ide t he
15
authorit y for plaint iffs’ sub-license s, then plaintiff s would
16
17 have no way to use t he Pa tented Varieties short o f inf ringing
18 the USDA ’s pat ents.” Id. Pl aintiffs do not respond t o this

19 argument .
20
The Comm ission ’s vie w of caus ation and redr ess is too
21
narrow. If, f or exa mple, the entire licens ing program was
22
declared inval id bec ause the USDA failed to satis fy th e terms
23
of secti on 209 (a) of the Bayh-Dole Ac t, the licensing program
24
25 would li kely b e rema nded to USDA and the Commissi on fo r
26 further consid eratio n and /or findings. In that event, in
27 order to compl y with 209( a), the licensing progra m mig ht have
28
44
1 to be re design ed in ways that would benefit Plain tiffs .
2 Plaintif fs hav e sati sfied the Article III standin g
3
requirem ents w ith re spect to their licensing-related APA
4
claims.
5
6 b. Zone of Interest.
7 “For a p lainti ff to have prudential standing unde r the
8 APA, the inter est so ught to be protected by the c ompla inant
9
must be arguab ly wit hin t he zone of interests to be pr otected
10
or regul ated b y the statu te in question.” Nat’l Credi t Union
11
Admin. v . Firs t Nat’ l Ban k & Trust Co., 522 U.S. 479, 488
12
(1998) ( citati on omi tted) . In determining whethe r a
13
14 plaintif f has assert ed an interest within the “zo ne of
15 interest s” pro tected by a statute, the relevant p rovis ion is
16 the “sta tutory provi sion whose violation forms th e legal

17 basis fo r [the plain tiffs ’] complaint.” Lujan, 497 U.S. at
18
883. A court is per mitte d to look beyond the ind ividu al
19
statutor y prov ision on wh ich the complaint is bas ed an d may
20
focus on the o bjecti ve of the entire statute in order to
21
22 better u nderst and it s pur pose. See Clarke v. Sec uriti es
23 Indus. A ss’n, 479 U. S. 38 8, 4 01 (1987) (sta ting that a cou rt
24 is “not limite d to c onsid ering the statute under which

25 responde nts su ed, bu t may consider any provision that helps
26
us to un dersta nd Con gress ’s o verall purposes” behind t he
27
relevant statu te); A ir Co urie r Conference v . Am. Posta l
28
45
1 Workers Union, 498 U .S. 5 17, 528 (1991) (citing Clarke );
2 Westland s Wate r Dist . v. U.S. Dep’t of Interior, 850 F. Supp.
3
1388, 14 25 (E. D. Cal . 199 4) (same).
4
Plaintif fs rem aining APA claims arise under the B ayh-
5
Dole Act . In Servic e Eng inee ring Corporati on v. U.S. Dep’ t
6
of Agric ulture , 1999 U.S. Dis t. LEXIS 21952 (D. Md. Ma rch 30,
7
8 1999), c orpora te pla intif fs were denied a patent licen se
9 because the fe deral government issued an ex clusive lic ense to
10 another corpor ation. The district court conclude d tha t

11 plaintif fs lac ked pr udent ial standing under the B ayh-Dole
12
Act, bec ause “ Congre ss’s primary policy and objec tive in
13
adopting the A ct was to p romote the utilization o f inventions
14
arising from f ederal ly su pported research and dev elopm ent.”
15
Id. at * 13-14 (quoting 35 U.S.C. § 200).
16
17 The cour t does not a gree with Plaintiffs’ positio n
that the Act was int ended to protect individuals,
18 includin g corporatio ns, from the anticompetitive
effects of governmen t licensing policies. Indeed ,
19 the Act clearly anti cipates, even encourages, suc h
anticomp etitive effe cts since it permits the
20 exclusiv e licensing of patented government
inventio ns. While i t is true that Congress direc ted
21 federal agencies not to grant exclusive or partia lly
exclusiv e licenses w here doing so would be
22 inconsis tent with th e antitrust laws, nothing in the
Act indi cates that C ongress intended to protect t he
23 specific economic in terests of parties in
competit ion wi th gov ernme nt l icensees.
24
Id. at * 14-15 (cita tions omi tted). The Service Engin eering
25
plaintif fs had no pr udent ial standing to challeng e the USDA’s
26
grant of an ex clusiv e lic ense to another entity b ecaus e their
27
28 “interes ts [fe ll] ou tside the zone of interests protec ted by
46
1 the Bayh -Dole Act.” Id. at *16.
2 The reas oning of Service Engineering on the issue of t he
3
anticomp etitiv e effe cts o f licensing is not persu asive .
4
Section 209(a) (4)’s prohibition of granting exclusive or
5
partiall y excl usive licen ses that wil l “ten d to substa ntially
6
lessen c ompeti tion o r cre ate or maintain a violat ion o f the
7
8 Federal antitr ust la ws... ” is a direct expression of
9 Congress ional intent to c ontrol the anticompetiti ve ef fects
10 of exclu sive l icensi ng pr ograms. Who else but pa rties in

11 competit ion wi th gov ernme nt licensees would have the
12
incentiv e to e nsure that this provision is enforc ed? The
13
connecti on bet ween P laint iffs ’ alleged inju ry -- that they
14
are rest ricted from freel y growing, selling, dist ribut ing,
15
reproduc ing, p ropaga ting or otherwise freel y using pla nt
16
17 material and t he fru it fr om the Patented Varietie s wit hout
18 acquirin g a li cense and p aying royalties to the C ommis sion --

19 and this prote ction again st anticompetitive licen sing
20
programs is le ss cle ar. Plaintiffs allege that some growers
21
lawfully acqui red th e Pat ented Varieties before t hey w ere
22
patented . If an inv entio n is known or used by th e pub lic
23
before i t was patent ed, t he patent may be void, 35 U.S .C §
24
25 102(b), but Pl aintif fs ca nnot challenge the paten t in this
26 lawsuit. It i s not clear whether and to what extent
27 Plaintif fs can frame a ca use of action under the Bayh- Dole

28
47
1 Act base d on a nticom petit ive effect of the licens ing p rogram
2 without challe nging the u nderlying Patent. Plain tiffs will
3
be affor ded an oppor tunit y to amend their c omplai nt, t o state
4
such a c laim, althou gh it see ms doubtful an amendment can be
5
made con sisten t with Rule 11.
6
Plaintif fs’ al so inv oke 3 5 U.S.C. § 209(a)(1), wh ich
7
8 requires that any ex clusi ve or partially exclusiv e lic ense be
9 a “reaso nable and ne cessary incentive to-- (A) ca ll fo rth the
10 investme nt cap ital a nd ex penditures needed to bri ng th e

11 inventio n to p ractic al ap plication; or (B) otherw ise p romote
12
the inve ntion’ s util izati on by the public.” Agai n, it is not
13
clear ho w Plai ntiffs have been harmed in an y way that
14
implicat es thi s prov ision . Do Plaintiffs assert that the
15
licensin g prog ram wa s a n ot “reasonable and neces sary”
16
17 incentiv e to c all fo rth i nvestment capital and/or othe rwise
18 promote the in ventio n’s u tilization by the public beca use

19 growers were a lready cont ribu ting to research and deve lopment
20
programs witho ut the exis tence of the licensing p rogra m? It
21
is not p ossibl e to f ully evaluate Plaintiffs’ cla im un der the
22
zone of intere st tes t bec ause Plaintiffs’ complai nt do es not
23
include suffic ient a llega tion s.
24
25 Defendan ts’ mo tion t o dis miss the licensing-related
26 claims f or lac k of s tandi ng is GRANTED WITH LEAVE TO A MEND.
27
28
48
1 3. Section 704’s Final Agency Action Requirement.
2 Alternat ively, Defen dants assert that Plaintiffs’ APA
3 claims f ail to satis fy th e “final agency ac tion” requi rement.
4
The Supr eme Co urt he ld th at “ agency a ction” is a prere quisite
5
to bring ing a claim under § 702:
6
This pro vision conta ins two separate requirements .
7 First, t he person cl aing a right to sue must
identify some “agenc y act ion” that affects him in
8 the spec ified fashio n; it is judicial review
9 “thereof ” to which h e is entitled. The meaning of
“agency action” for purposes of § 702 is set fort h
10 in 5 U.S .C. § 551(13 ), see 5 U.S.C. § 701(b )(2)
(“For th e purpose of this chapter ... ‘agen cy
11 action’ ha[s] the me anin[g] given ... by section 551
of this title”), whi ch defines the term as “the
12 whole or a part of a n agency rule, order, license ,
13 sanction , relief, or the equivalent or denial
thereof, or failure to act,” 5 U.S.C. § 551(13).
14
15 Lujan, 4 97 U.S . at 8 82. “Whe n, as here, review is sou ght not
16 pursuant to sp ecific auth orization in the substan tive
17
statute, but o nly un der t he general review provis ions of the
18
APA, the ‘agen cy act ion’ in question must be ‘fin al ag ency
19
action.’ ” Id. (citi ng 5 U.S.C. § 704 (“Age ncy action made
20
reviewab le by statut e and final agency action for whic h there
21
22 is no ot her ad equate reme dy in a court are subjec t to
23 judicial revie w.”)).
24 Plaintif fs cit e a nu mber of cases, including Jaffe v.

25 United S tates, 592 F .2d 7 12 (3d Cir. 1979) and Guerrero v.
26
Stone, 9 70 F.2 d 626, 627- 28 (9th Cir. 1992), for the
27
proposit ion th at APA § 70 2 waives sovereign immun ity f or any
28
49
1 equitabl e civi l acti on in voking a district court’ s fed eral
2 question juris dictio n. B ut, Supreme Court preced ent, such as
3
Lujan, 4 97 U.S . at 8 82, a nd Heckler v. Chaney, 470 U.S. at
4
828, mak e it c lear t hat § 702’s waiver is conditi oned upon
5
overcomi ng § 7 01 and 704’ s requirements. 5
6
7 a. Agency A ction.
8 The APA offers a rig ht of judicial review for equ itabl e
9
relief f or “[a ] pers on suffering legal wrong because of
10
5
Th e Ni nt h Ci rc ui t st ill r ec og ni ze s th e ex is te nc e of a n int ra -c ir cu it
11 spl it c on ce rn in g th e rel at io ns hi p o f § 7 04 t o § 70 2’ s wa ive r of s ov er e ign
imm un it y. Fo r ex am pl e, Th e Pr es by t eri an C hu rc h (U .S .A .) v. U .S ., 8 70
12 F.2 d 51 8, 5 25 ( 9t h Ci r. 19 89 ), h el d th at C on gr es s di d no t l im it § 7 02 ’ s
sov er ei gn i mm un it y wa ive r to t ho se act s li st ed i n § 55 1( 13) , wh ic h
13 def in es a ge nc y ac ti on to “ in cl ud e[ ] th e wh ol e or a p ar t of an a ge nc y
rul e, o rd er , li ce ns e, sa nc ti on , re l ief , or t he e qu iv al en t o r de ni al
14 the re of , or f ai lu re t o a ct .”
How ev er , sh or tl y af te r T he P re sb yt e ria n Ch ur ch w as d ec id ed, L uj an ,
15 497 U .S . at 8 82 , he ld th at “ ag en cy act io n” i s a re qu ir em ent o f § 70 2; see
als o Ra tt le sn ak e Co al iti on v . EP A, 509 F .3 d 10 95 , 11 03 ( 9th C ir . 20 07 ) ;
16 Gal lo C at tl e Co . v. U .S. D ep t. o f A gri cu lt ur e, 1 59 F .3 d 119 4 (9 th C ir .
199 8) . I t is n ot a t all c le ar h ow any a sp ec t of T he P re sby te ri an
Chu rc h’ s “a ge nc y ac ti on” h ol di ng s u rvi ve s Lu ja n an d re la ted N in th C ir c uit
17 pre ce de nt . S ee V et er ans f or C om mo n Se ns e v Pe ak e, 5 63 F . S up p. 2 d 10 4 9,
105 8 (N .D . Ca l. 2 00 8) (n ot in g th at Luj an “ ma de c le ar t ha t w ai ve r of
18 sov er ei gn i mm un it y un der § 7 02 i s c ons tr ai ne d by t he p ro vis io ns c on ta i ned
in § 70 4” ).
19 Nev er th el es s, t he N in th Ci rc ui t co n tin ue s to r ec og ni ze a n “ in tr a-
cir cu it ” sp li t. Gr os Ve nt re T ri be v. Un it ed S ta te s, 4 69 F. 3d 8 01 , 80 8 -
20 809 ( 9t h Ci r. 2 00 6) , not ed w it ho ut res ol vi ng t he c on fl ic t b et we en G al l o
Cat tl e, 1 59 F .3 d at 1 198 , wh ic h sp e cif ic al ly s ta te d th at “t he A PA ’s
21 wai ve r of s ov er ei gn i mmu ni ty c on ta i ns se ve ra l li mi ta ti on s,” i nc lu di ng §
704 ’s “ fi na l ag en cy a cti on ” re qu ir e men t, a nd T he P re sb yt eri an C hu rc h,
22 whi ch h el d th at § 7 02 ’s wa iv er i s n ot co nd it io ne d on t he AP A’ s “a ge nc y
act io n” r eq ui re me nt . Se e al so S is k iyo u Re gi on al E du c. P roj ec t v. U .S .
23 For es t Se rv ., 5 65 F .3 d 5 45 , 55 4 n. 8 (2 00 9) ( “I n li gh t of ou r
det er mi na ti on t ha t [p lai nt if f] c ha l len ge s fi na l ag en cy a cti on , we n ee d
24 not a dd re ss t he ‘ in tr a-c ir cu it s pl i t’ th at w e ha ve r ec og niz ed e xi st s o n
the q ue st io n wh et he r the ‘ fi na l ag e ncy a ct io n’ r eq ui re me nt of t he A PA is
jur is di ct io na l. ).
25 Sis ki yo u su gg es ts t ha t o ne w ay t o r eco nc il e Th e Pr es by te ria n Ch ur ch
and L uj an m ay b e to r eco gn iz e th at the re i s an i nt ra -c ir cui t sp li t as to
26 whe th er o r no t th e “a gen cy a ct io n” req ui re me nt i s ju ri sd ict io na l, o r
mer el y an e le me nt o f an AP A cl ai m. In t hi s ca se , th is i s a d is ti nc ti o n
27 wit ho ut a d if fe re nc e. A ft er L uj an it ca nn ot s er io us ly b e a rg ue d th at an
APA c la im c an s ur vi ve un le ss “ ag en c y a ct io n, ” as t ha t te rm is d ef in ed in
28 5 U .S .C . 55 1( 13 ), i s all eg ed .
50
1 agency a ction, or ad verse ly affected or aggrieved by a gency
2 action w ithin the me aning of a relevant statute.. ..”
3
5 U.S.C. § 702 . APA § 55 1(13) defines agen cy action to
4
“include [] the whole or a part of an agency rule, orde r,
5
license, sanct ion, r elief , or the equivalent or d enial
6
thereof, or fa ilure to ac t.” 5 U.S.C. § 551(13)(empha sis
7
8 added). “All of tho se categories involve circumscribed,
9 discrete agenc y acti ons, as their definitions mak e cle ar: ‘an
10 agency s tateme nt of futur e ef fect designed to imp lemen t,

11 interpre t, or prescr ibe l aw or policy’ (rule); ‘a fina l
12
disposit ion in a mat ter o ther than rule making’ ( order ); a
13
‘permit or oth er for m of permission’ (license); a
14
‘prohibi tion o r taki ng of other compulsory or res trict
15
action’ (sanct ion); or a ‘grant of money, assista nce,
16
17 license, autho rity,’ etc. , or ‘recognition of a c laim, right,
18 immunity ,’ etc ., or ‘taki ng of other action on th e

19 applicat ion or petit ion o f, and beneficial to a p erson ’
20
(relief) . Norton v. S. U tah Wilderness All iance, 542 U.S.
21
55, 62 ( 2004)( citing 5 U. S.C. §§ 551(4), (6), (8) , (10 ),
22
(11)).
23
USDA’s d ecisio n to g rant exclusive licenses to th e
24
25 Commissi on is the on ly ac tion about which plainti ffs c omplain
26 that eve n argu ably f alls with the definitio n of “ agenc y
27 action.” USDA’ s deci sions to engage in or coopera te in a

28
51
1 patentin g prog ram wi th th e Commission, to file an d pro secute
2 patent a pplica tions, and to procure, accept, and maint ain
3
issued p atents do no t qua lify.
4
5 b. Final Ag ency Action.
6 By its t erms, the APA per mits review only of “agency
7 action m ade re viewab le by statute and final agenc y act ion for
8 which th ere is no ot her a dequate remedy in a cour t.... ”
9
5 U.S.C. § 704 . Whe re, a s here, no specific stat utory
10
judicial revie w prov ision exists, the APA only applies to
11
“final a gency action .” Id.; Lujan, 497 U.S . at 8 82. An
12
agency a ction is dee med “ final” for purposes of A PA wh en it
13
14 meets th e foll owing two c riteria:
15 (1) The acti on must mark the “consummation” of

the agen cy’s decisio nmaking process–it must not b e
16 of a mer ely tentativ e or interlocutory nature; an d
17 (2) The acti on must be o ne by which “rights or
18 obligati ons have bee n determined,” or from which
“legal c onsequences will flow.”
19
Bennett v. Spe ar, 52 0 U.S. 154, 177-78 (199 7).
20
The USDA ’s act s of pursui ng patent pr otecti on for the
21
22 Patented Varie ties, as we ll as its efforts to coo perat e with
23 the Comm ission in a paten ting program, do not con stitu te
24 “final” agency actio n. U ntil the USPTO grants a paten t, the

25 applicat ion fo r the patent an d its prosecution no not
26
determin e any rights or o bligations from which le gal
27
conseque nces w ill fl ow. Ther e appears to be no disput e that
28
52
1 the USDA ’s dec ision to en gage in the licensing pr ogram was a
2 “final a gency action .”
3
With the excep tion o f the issuance of exclu sive l icens es
4
to the C ommiss ion, a ll of Plaintiffs’ APA allegat ions fail to
5
state a claim under the A PA because they are not “fina l
6
agency a ctions .” De fendants’ motion to dis miss the APA
7
8 claims b ecause an ad equat e alternative remedy exi sts i s
9 DENIED a s to t he exc lusiv e license claims and GRA NTED as to
10 all othe r clai ms.

11
4. Section 704’s No Ade quate Alternative Remedy
12 Requirem ent.
13 Addition ally, “[s]ec tion 704 of the Administrativ e
14
Procedur e Act bars r eview of agency action by the dist rict
15
court wh en the re is an ad equa te remedy in a nother foru m.”
16
Marshall Leasi ng, In c. v. United States, 893 F.2d 1096 , 1100
17
(9th Cir . 1990 ).
18
19 Defendan ts ass ert th at Pl aintiffs have an adequat e
20 alternat ive fo rum fo r rev iew of the validity and
21 enforcea bility of th e gov ernm ent’s patents in response to any

22
infringe ment s uit br ought by the government or au thori zed to
23
be broug ht by the Co mmiss ion against the Plaintif fs. See
24
Hallmark , 959 F. Sup p. at 543 (finding “the “Congressional
25
framewor k [of the Pa tent Act] precludes the right of third
26
27 parties to fil e a ci vil a ction in the case of the issu ance of
28 a Certif icate of Cor recti on; the third party’s re cours e for
53
1 the alle ged er rors m ade b y the PTO is to raise th e iss ue as a
2 defense in an infrin gemen t suit.”); Hitachi, 776 F. Supp. at
3
10 (“Ins tead o f prov iding third-party prote stors with the
4
right to judic ial re view of examination proceedin gs, C ongress
5
authoriz ed the m to r aise allegations of patent in valid ity as
6
a defens e to a n infr ingem ent action.”).
7
8 In respo nse, P lainti ffs a gain invoke MedImmune, which
9 arguably recog nizes that the remedy of a counterc laim to an
10 infringe ment s uit is not always adequate, holding that where

11 a plaint iff is threa tened with government action, Plai ntiff
12
is not r equire d “to expos e himself to liability before
13
bringing suit to cha lleng e the basis for the thre at... .” 549
14
U.S. at 128-29 . Bec ause MedImmune do es not , of its own
15
accord, permit antic ipatory suit by Plaintiffs against the
16
17 United S tates, Plain tiffs lack an adequate altern ative remedy
18 with res pect t o the paten t re lated claims, but th ese h ave
19 been dis missed on ot her g rounds.
20
As to th e lice nse-related claims, Defendant s poin t to no
21
alternat ive re medy. Defe ndants’ motion to dismis s the
22
licensin g-rela ted cl aims because an adequat e alternati ve
23
remedy e xists is DEN IED.
24
25
5. Exhausti on of Admini strative Remedies.
26
Defendan ts arg ue tha t the APA allegations should be
27
dismisse d beca use Pl ainti ffs’ failed to raise the m bef ore the
28
54
1 agency d uring admini strat ive proceedings. Exhaus tion may be
2 imposed either by st atute or the courts:
3
Of param ount importa nce to any exhaustion inquiry is
4 congress ional intent .” McCar thy v. Madigan, 503
U.S. 140 , 144 (1992) (citing Patsy v. Board of
5 Regents of Florida, 457 U .S. 496 (1982) (in ternal
quotatio n marks omit ted)), superceded by st atute as
6 stated i n Boot h v. C hurne r, 5 32 U.S. 731, 732
(2001).[ ] “Where Co ngress specifically mandates,
7 exhausti on is requir ed.” Id. (citing Coit
8 Independ ence Joint V enture v. FSLIC, 489 U.S. 561,
579 (198 9); Patsy, 4 57 U.S. at 502 n. 4). “But
9 where Co ngress has n ot clearly required exhaustio n,
sound ju dicial discr etion governs.” McCarthy, 503
10 U.S. at 144 (citing McGee v. United States, 402 U.S.
479, 483 n. 6 (1971) ). To discern the intent of
11 Congress , “‘[w]e loo k first to the plain language of
12 the stat ute, constru ing the provisions of the ent ire
law, inc luding its o bject and policy.’” United
13 States v . $493,850.0 0 in U.S. Currency, 518 F.3d
1159, 11 67 (9th Cir. 2008) (quoting Carson Harbor
14 Vill., L td. v. Unoca l Corp., 270 F.3d 863, 877 (9 th
Cir. 200 1)).
15
Cassirer v. Ki ngdom of Sp ain, 580 F.3d 1048, 1059 -60 ( 9th
16
17 Cir. 200 9).
18 Here, al though the B ayh-Dole Act does not explicitly

19 impose a n exha ustion requirement, it does p rovide for a
20
notice a nd com ment p eriod :
21
Public n otice.--No exclus ive or parti ally exclusive
22 license may be grant ed under section 207(a)(2)
unless p ublic notice of the intention to grant an
23 exclusiv e or partial ly exclusive license on a
federall y owned inve ntion has been provided in an
24 appropri ate manner a t least 15 days before the
license is granted, and the Federal agency has
25 consider ed all comme nts received before the end o f
the comm ent period i n response to that public
26 notice. This subsect ion shall not apply to the
licensin g of inventi ons made under a cooperative
27 research and d evelop ment agreement entered into
under se ction 12 of the Stevenson-Wyd ler Te chnology
28 Innovati on Act of 19 80 (15 U.S.C. 3710a).
55
1
35 U.S.C . § 20 9(e).
2
The Elev enth C ircuit has read an exhaustion requi remen t
3
4 into thi s noti ce and comm ent period. South ern Research Inst.
5 v. Griff in Cor p., 93 8 F.2d 1249, 1252-53 (1 1th Cir. 1991).
6 In South ern Re search, a c ompany challenged the go vernm ent’s

7 grant of an ex clusiv e pat ent license to another e ntity . The
8
Eleventh Circu it aff irmed dismissal of the action , hol ding
9
that by failin g to raise objections d uring the prescri bed
10
comment period , the compa ny had waived its right to ch allenge
11
the lice nsing decisi on. Id. at 1252-53. The court ex plained
12
13 that bec ause “ [t]he licen sing scheme under 35 U.S .C. § § 207
14 and 209 and th e appl icabl e re gulations provided an ave nue of
15 administ rative appea l of which [the plaintiff] fa iled to

16 avail it self,” judic ial r eview of the licensing decisi on was
17
preclude d. Id . at 1 253. Pla intiff offers no persuasi ve
18
argument why t he rea sonin g of Southern Research should not
19
apply he re to impose an exhaustion requirement on plaintiffs
20
21 challeng ing li censin g dec isions under the Bayh-Dole Act.
22 Here, in accor dance with 35 U.S.C. § 209(e), the USDA
23 issued a notic e in t he Fe deral Register on April 29, 2 003,

24 explaini ng the agenc y’s i ntent to grant an exclus ive l icense
25
to the C ommiss ion fo r the Sweet Scarlet var iety. 68 Fed.
26
Reg. 226 71 (Ap ril 29 , 200 3). 6 On December 23, 2004, th e USDA
27
28 6
P la in ti ff s ar gu e th at th e US DA i m pro pe rl y of fe rs e vi de nce
56
1 issued t wo not ices i n the Federal Register of its inte nt to
2 grant ex clusiv e lice nses for the Scarlet Ro yal and Aut umn
3
King var ieties to th e Com mission. 69 Fed. Reg. 7 6902 (Dec.
4
23, 2004 ). Al l thre e not ices informed the public that the
5
proposed licen ses wo uld b e granted within ninety days unless
6
the USDA recei ved “w ritte n evidence a nd arg ument which
7
8 establis hes th at the gran t of the license would n ot be
9 consiste nt” wi th the Bayh -Dol e Act and applicable
10 regulati ons. Plaint iffs failed to present any ev idenc e or

11 argument durin g the presc ribed comment period.
12
The Nint h Circ uit recognizes a number of ex ceptions to
13
judicial ly imp osed e xhaus tion requirements. For examp le, a
14
court “m ay dec ide an issu e not raised in an agenc y act ion if
15
the agen cy lac ked ei ther the power or the jurisdi ction to
16
17 decide i t.” R eid v. Enge n, 7 65 F.2d 1457, 1461 (9th C ir.
18 1985) (i nterna l cita tions and quotations om itted) . An othe r

19 exceptio n perm its a court to “decide issues over which an
20
agency h as pow er and juri sdiction when exceptiona l
21
circumst ances warran t suc h review, notwithstandin g the
22
petition er’s f ailure to p resent them to the agency.” Id. at
23
1461-62.
24
reg ar di ng i ts c om pl ia nce w it h th e n oti ce a nd c om me nt r eq uir em en ts . T h ese
25 not ic es , pu bl is he d in th e Fe de ra l R egi st er , ar e pr op er ly th e su bj ec t o f
jud ic ia l no ti ce . S ee 44 U .S .C . § 1 507 ( co nt en ts o f th e Fed er al R eg is t er
26 sha ll b e ju di ci al ly n oti ce d) . M or e ove r, 4 4 U. S. C. § 1 50 7 p ro vi de s th a t,
unl es s ot he rw is e pr oh ibi te d by s ta t ute , pu bl ic at io n of n oti ce i n th e
27 Fed er al R eg is te r cr ea tes a r eb ut ta b le pr es um pt io n th at p rop er n ot ic e w as
iss ue d.
28
57
1 Plaintif fs arg ue for the application of one or mo re of
2 these ex ceptio ns, as serti ng that they could not h ave b een
3
aware of certa in fac ts ne cessary to object to the USDA ’s
4
Federal Regist er not ices. Specifically, Pl aintif fs ar gue:
5
At the t ime of the n otice and comment periods,
6 Plaintif fs could not have known that (1) the USDA
obtained a patent on Sweet Scarlet through
7 inequita ble conduct; (2) the Patented Varieties h ad
8 already been in publ ic use and on sale more than a
year pri or to the fi ling of the patent applicatio ns;
9 (3) the USDA and the Commission would seek to
enforce, license, an d collect royalties on invali d
10 and unen forceable pa tents, and (4) the USDA would
allow th e Commission to limit distribution to a
11 small nu mber of nurs eries, including nurseries wi th
12 family t ies to Commi ssion board members. Indeed,
nothing in the notic es regarding the USDA’s inten t
13 to exclu sively licen se the Patented Varieties to the
Commissi on provided the details regarding the
14 planned royalty prog ram.
15 Doc. 70 at 19- 20.
16
The firs t thre e purp orted ly unknown facts all con cern
17
the vali dity o f the paten ts. Although these argu ably
18
implicat e the except ion f or matters outside of th e age ncy’s
19
power or juris dictio n, th ese patent-related arguments cannot
20
21 be adjud icated here becau se of sovereign immunity . Th e
22 fourth p urport edly u nknow n fact -- th at the USDA would allow
23 the Comm ission to li mit d istribution to a small n umber of

24 nurserie s, inc luding nurs eries with family ties t o Com mission
25
board me mbers -- is arguably relevant to a claim that the
26
Commissi on fai led to comp ly with 35 U.S.C. § 209( a), b ut it
27
is not c lear w hy thi s fac t alone, in light of all othe r known
28
58
1 facts, w ould h ave ca used Plaintiffs to comment on the
2 licensin g proc eeding . Plaintiffs have not demonstrated th at
3
exhausti on sho uld be excu sed in this case. Defen dants ’
4
motion t o dism iss fo r fai lure to exhaust is GRANT ED WI TH
5
LEAVE TO AMEND . Pla intif fs shall be afforded the oppo rtunity
6
to amend on th is iss ue an d shall allege the ir excuse-from-
7
8 exhausti on the ory in any amended complaint.
9
C. Patent I nvalid ity Cl aims (Second, Third, & Fourth Clai ms
10 for Reli ef).
11 The Seco nd, Th ird, a nd Fo urth Claims For Relief a gains t
12 all Defe ndants reque st de clarations that the thre e pat ents
13 are unla wful a nd inv alid under the Declaratory Judgment Act
14
and the APA. These claim s fail for the same reas ons t hat the
15
APA clai ms fai l. Th e Uni ted States is an indispe nsabl e party
16
to these claim s that cann ot be joined.
17
18 D. Declarat ion of Unenf orcea bility for Inequit able C onduc t
Regardin g the ‘891 P atent (Fifth Claim For Relief ).
19
The Fift h Clai m for Relie f against all Defendants
20
21 requests a dec larati on th at the ‘891 patent is un enfor ceable
22 because Defend ants f ailed to fully disclose to th e USP TO that

23 the Swee t Scar let va riety was in the public domain pri or to
24
the fili ng of the pa tent application. Because th is cl aim
25
concerns the e nforce abili ty of a patent held by t he Un ited
26
States, this c laim m ust b e DISMISSED WITH P REJUDI CE be caus e
27
the Unit ed Sta tes ca nnot be joined as a par ty.
28
59
1 E. Antitrus t Clai m (Six th Cl aim For Relief).
2 Plaintif fs all ege that the Commission violated fe deral
3 antitrus t laws by “e nforc ing patent rights ... an d col lecting
4
royaltie s ... while knowi ng that the patent on Sw eet S carlet
5
could no t be e nforce d due to prior public use and ineq uitable
6
conduct. ” FAC ¶155. Thi s claim would require pl ainti ffs to
7
demonstr ate th e unen force ability of the Sweet Sca rlet patent.
8
9 Accordin gly, t he ant itrus t claim must be dismisse d und er Rule
10 19 as we ll. P lainti ffs’ argument tha t thei r antitrust claim
11 “do[es] not re quest that the Court enter any judg ment
12 regardin g the validi ty or enforceability of any g overn ment
13
property ,” Doc . 71 a t 9, is unpersuasive, as the claim
14
explicit ly dep ends o n the allegation that the “pa tent on
15
Sweet Sc arlet could not b e enforced due to prior publi c use
16
and ineq uitabl e cond uct.” FAC ¶155.
17
18 Moreover , to e stabli sh th e type of monopoly Plain tiffs
19 allege, a “Wal ker Process” vi olation, it is “necessary to

20 appraise the e xclusi onary power of the illegal patent claim
21
in terms of th e rele vant market for the product i nvolv ed.”
22
See Walk er Pro cess, 382 U.S. at 177-78. It has p revio usly
23
been rec ognize d that it i s “dubious” whether each of t he
24
Patented Varie ties c ould constitute its own relev ant m arket,
25
26 Doc. 42 at 61, but p laint iffs were afforded leave to a mend to
27 attempt to ade quatel y all ege “that no other subst itute s for
28
60
1 each Pat ented Variet y exi st,” id. at 61-62. The FAC contains
2 no such allega tions; inst ead it asserts the relev ant m arkets
3
can be d efined by th e att ributes for each patente d var iety
4
describe d in t he rel evant patent. The FAC also a llege s that
5
each pat ented variet y has “unique characteristics ” and other
6
varietie s are not “r eason ably interchangeable” wi th an d do
7
8 not prov ide “e ffecti ve substitutes to ” the Patented
9 Varietie s. FA C ¶¶ 1 59-61.
10 The Comm ission argue s tha t Plaintiffs’ allegation s are

11 inadequa te to satisf y evo lving pleading standards . “T o
12
survive a moti on to dismi ss, a complaint must con tain
13
sufficie nt fac tual m atter , accepted a s true , to ‘state a
14
claim to relie f that is p lausible on its face.’” Iqba l, 129
15
S. Ct. a t 1949 (quot ing Twomb ly, 550 U.S. a t 570) . Co urts
16
17 define m arkets based on “ interchangeability of us e or the
18 cross-el astici ty of demand.” Todd v. Exxon Corp. , 275 F.3d

19 191, 200 (2d C ir. 20 01); Newcal Indus., Inc. v. I kon Office
20
Solution , 513 F.3d 1 038, 1045 (9th Cir. 2008). The relevant
21
inquiry is whe ther g rower s -- the con sumers of grapevines --
22
regard o ther v arieti es (o r other crops) as reason able
23
economic subst itutes for the Patented Varieties. Newc al, 513
24
25 F.3d at 1045; Apple, Inc. v. Psystar Corp., 586 F. Sup p. 2d
26 1190, 11 96 (N. D. Cal . 200 8).
27 Plaintif fs all ege no plau sible basis to conclude that

28
61
1 growers regard the P atent ed Varieties as irreplac eable , nor
2 do they allege that growe rs w ould not substitute other crops
3
for the Patent ed Var ietie s. See, e.g ., Uni ted States v. E.I.
4
DuPont d e Nemo urs, I nc., 351 U.S. 377, 394 (1956) (rejecting
5
argument cello phane was i n different market from other
6
wrapping mater ials e ven t houg h “each of the se wrapping
7
8 material s is d isting uisha ble”).
9 Plaintif fs hav e twic e bee n granted leave to amend this
10 claim. The Co mmissi on’s motion to dismiss the an titru st

11 claim is GRANT ED WIT H PRE JUDICE.
12
13 F. Exclusiv e Lice nse Cl aims (Seventh & Eighth Claims For
Relief).
14
The Seve nth Cl aim fo r Rel ief seeks a declaration that
15
the Comm ission ’s exc lusiv e license agreements for the
16
Patented Varie ties a re vo id and unlawful under fe deral law on
17
the grou nd tha t the paten ts are invalid and/or we re ob tained
18
19 through inequi table condu ct. This cl aim must be dismi ssed
20 pursuant to Ru le 19, as i t challenges the validit y of a
21 patent h eld by the U nited States, which cannot be join ed to

22
the laws uit.
23
The Eigh th Cla im for Reli ef against the Commissio n see ks
24
a declar ation that t he ex clus ive license ag reements fo r th e
25
Patented Varie ties a re vo id and unlawful under state law on
26
27 the grou nds th at the pate nts are invalid and/or w ere o btained
28 through inequi table condu ct. The Commission argu es th at this

62
1 state la w chal lenge to the li cense agreements between the
2 Commissi on and the U SDA i s preempted by federal l aw. It is
3
unnecess ary to engag e in a preemption analysis be cause , state
4
law cann ot be used t o cha llenge a contract entere d int o
5
pursuant to fe deral law w here the government is a part y. See
6
O’Neill v. Uni ted St ates, 50 F.3d 677, 682 (9th Cir. 1 995)
7
8 (“Federa l law govern s the interpretation of contr acts entered
9 into pur suant to fed eral law where the government is a
10 party.”) .
11 Defendan ts’ mo tions to di smiss the Seventh and Eighth
12
Claims f or Rel ief ar e GRA NTED WITHOUT LEAVE TO AM END.
13
14 G. Unfair C ompeti tion C laim.
15 The Comm ission initi ally sought dismissal of Plai ntiff s’
16 § 17200 claim in lig ht of plaintiffs’ inability t o sta te a

17 predicat e anti trust claim . Doc. 20 at 27-28. Th e Feb ruar y
18
20, 2009 Decis ion re jecte d this argument, conclud ing t hat the
19
unfair c ompeti tion c laim also encompassed the all egati on that
20
the Comm ission “coll ect[e d] patent royalties from grow ers who
21
22 paid for the r esearc h and development of the Pate nted
23 Varietie s thro ugh as sessment fees.” Doc. 42 at 69-71.
24 As a thr eshold matte r, th e portion of the Unfair

25 Competit ion cl aim th at re lies upon the Commission ’s
26
enforcem ent of an al leged ly “fraudulently” procur ed pa tent
27
must be dismis sed un der R ule 19.
28
63
1 The Comm ission also argues that Plaintiffs’ alter native,
2 “double paymen t” the ory f inds no support in the l aw, a s there
3
is no au thorit y for the p roposition that it is un lawfu l or
4
unfair u nder § 17200 for an entity created under state law to
5
require grower s to b oth f und research into the de velop ment of
6
new grap evine variet ies, and then force those sam e gro wers to
7
8 pay agai n for their use. But, California’s Unfai r
9 Competit ion la w is m eant to permit judicial revie w of a
10 “broad” and “s weepin g” ra nge of business activiti es. McKell

11 v. Wash. Mut. Inc., 142 C al. App. 4th 1457, 1471 (2006 ); Cal-
12
Tech Com mc’n, Inc. v . Los Angeles Cellular Tel. C o, 20 Cal .
13
4th 163, 180 ( 1999). The “unlawful” criteria enc ompas ses the
14
violatio n of “ any la w, ci vil or criminal, statuto ry or
15
judicial ly mad e, fed eral, state or local.” McKel l, 14 2 Ca l.
16
17 App. 4th at 14 74. T he “u nfair” prong is satisfie d “ev en if
18 not spec ifical ly pro scrib ed by some other law” so long as it

19 “offends an es tablis hed p ublic policy or ... is i mmora l,
20
unethica l, opp ressiv e, un scru pulus or substantially in jurious
21
to consu mers.” Kore a Supply Co v. Lockheed Marti n Cor p., 29
22
Cal. 4th 1134, 1143 (2003 ); Heighly v. J.C. Penny Life Ins.
23
Co., 257 F. Su pp. 2d 1241 , 12 59 (C.D. Cal. 2003).
24
25 Plaintif fs’ al legati ons c oncerning the “double payment ”
26 requirem ent ar guably meet the definition of “unfa ir,” at
27 least fo r plea ding p urpos es.

28
64
1 The Comm ission sugge sts, in the alternative, that the
2 Unfair C ompeti tion c laim is preempted by federal law, as it
3
would ta ke awa y the Commi ssion’s and USDA’s federal right to
4
assert p atents again st an y California table grape grow er.
5
Doc. 67 at 25. But, the Commission does not deve lop t his
6
argument or ad dress any o f the requirements for f edera l
7
8 preempti on.
9 The Comm ission ’s mot ion t o dismiss the Unfair
10 Competit ion cl aim is DENIED WITHOUT PREJUDICE.

11
H. Unjust E nrichm ent & Const ructive Trust Claims.
12
Plaintif fs’ un just e nrich ment and constructive tr ust
13
14 claims a re “de penden t upo n Plaintiffs’ substantiv e ...
15 antitrus t clai ms and unfa ir competition claims.” Doc 42 at
16 71; see also M cBride v. B ough ton, 123 Cal. App. 4th 37 9, 387
17 (2004); PCO In c. v. Christensen, Miller, Fink, Jacobs,
18
Glaser, Weil & Shapi ro, L LP, 150 Cal. App. 4th 38 4, 39 8
19
(2007). If ei ther s urviv es, so do the unjust enr ichme nt and
20
construc tive t rust c laims.
21
22
I. Reconsid eratio n of D eterm ination that United Stat es is
23 an Indis pensab le Par ty Un der Rule 19.
24 Plaintif fs als o seek reco nsideration of the
25 determin ation that t he Un ited States is an indisp ensab le
26 party un der Ru le 19( b). Plaintiffs cite a recent unpu blished

27 decision from the No rther n District of Illinois, Sourc eOne
28
65
1 Global P artner s, LLC v. K GK Synergize, Inc., 2009 WL 1 346250
2 (N.D. Il l. May 13, 2 009). 7 SourceOne consid ered w hethe r
3
plaintif fs cou ld cha lleng e the validity of a gove rnmen t-owned
4
patent i n a de clarat ory r elie f suit against the patent ’s co-
5
owner an d excl usive licen see without joining the Unite d
6
States. The c ourt c onclu ded that it had subject matte r
7
8 jurisdic tion o ver pl ainti ffs’ declaratory relief claim under
9 MedImmun e, bec ause t he na med defendant sent plaintiff a cease
10 and desi st let ter cl aiming that plaintiff’s product infrin ged
11 on the p atent held j ointl y by the named defendant and the
12
United S tates. Id. at *3 -4. The parties agreed that the
13
governme nt had not w aived its sovereign immunity and
14
therefor e that joind er wa s not feasible. Id. at *4. The
15
district court then turne d to the question of whe ther
16
17 dismissa l was requir ed un der Rule 19(b).
18 Examinin g the first Rule 19(b ) factor, “the extent to

19 which a judgme nt ren dered in the party’s absence might
20
prejudic e that perso n or the existing parties,” Source One
21
consider ed “wh ether the i nterests of the absent p arty are
22
‘adequat ely pr otecte d by those who are present.’” Id. at *6.
23
SourceOn e reli ed hea vily on Dainippon Screen Mfg. Co. v.
24
25 CFMT, In c., 14 2 F.3d 1266 , 1272 (Fed. Cir. 1998):
26 In Daini ppon, plaint iff s ued CFMT and CFM f or a

declarat ory judgment of noninfringement and
27
7
A di st ri ct c ou rt d ec isi on f ro m an o the r ci rc ui t ha s no b ind in g ef fe ct on
28 ano th er d is tr ic t co ur t.
66
1 invalidi ty of a pate nt that CFMT owned and licens ed
on an ex clusive basi s to its parent, CFM. That
2 license reserved to CFMT the exclusive right to
further sublicense t he patent, and to take legal
3 action i n the event of infringement. The trial co urt
dismisse d CFMT for l ack of personal jurisdiction,
4 and then dismissed t he claim against CFM on the
ground t hat under Ru le 19 the case could no t proceed
5 in the a bsence of CF MT.
6 On appea l, the Feder al Circuit reversed. The appe als
court he ld that the trial court erred in concludi ng
7 that it lacked juris diction over CFMT, and furthe r
held tha t even if CF MT could not be sued, the tri al
8 court ab used its discretion in concluding t hat CF MT
was an i ndispensable party. The Federal Circuit
9 found th at CFMT’s ow ners[h]ip interest would be
adequate ly protected by CFM, “a party that owns C FMT
10 in its e ntirety ... and that has manifested its
obvious concer n over the maintenance of CFM T’s
11 patents. ” Dainippon, 142 F.3d at 1272. The court
reasoned that even i n its absence, CFMT’s interes ts
12 would be protected b ecause CFMT and CFM “share th e
common g oal of assur ing that the [ ] patent not b e
13 held inv alid or be i nfrin ged by Dainippon ....” Id.
14 2009 WL 134625 0 at * 6 (footnote omitted)(em phasis added).
15 The Sour ceOne court then reas oned, “[a]s in Daini ppon, the
16
Rule 19( b)(1) factor weig hs strongly in favor of allow ing the
17
claims o n the ′125 P atent to proceed in the absence of the
18
Governme nt”:
19
The Gove rnment argue s that it will suffer prejudi ce
20 if its r ights under the ′125 Patent are adjudicat ed
in its a bsence becau se if the patent is declared
21 invalid, the Governm ent will have “lost substanti ve
rights w ithout an op portunity to defend its rights
22 to t h e claimed inv entions of the patent” (Gov’t
Stmt. at 4-5). However, we have been offered no
23 evidence that KGK an d the Government have any
conflict ing interest s with respect to the ′125
24 Patent, and no reaso n to believe that KGK i s unab le
to vigor ously assert and protect its mutual inter est
25 with the Government in asserting the validity of the
′125 Pat ent and chal lenging any alleged infringem ent
26 of it. T o the contra ry, KGK has demonstrated its
willingn ess to champ ion the validity of the ′125
27 Patent a nd to attack any alleged infringement of it,
as shown by the ceas e and desist letters it sent to
28
67
1 SourceOn e and its cu stomers and associates. The
Governme nt has not a sserted any dissatisfaction w ith
2 SourceOn e’s actions in doing so. KGK’s defense of
its comm ercial inter ests based in the ′125 Patent
3 will ade quately prot ect the Government’s interest s
as well.
4
We also consider thi s factor to be of special
5 importan ce in this c ase, due to the fact that the
absent p arty is the Government. In Pimental , the
6 Supreme Court stated that under Rule 19, “dismiss al
of the a ction must b e ordered where there is a
7 potentia l for injury to the interests of the abse nt
sovereig n.” 128 S.Ct . at 2191. Conversely, the
8 absence of prejudice to the Government in t his ca se,
due to t he ability o f KGK to protect the
9 Governme nt’s interes ts, weighs strongly in favor of
allowing the case to proceed.
10
Id. (foo tnote omitted).
11
The prin cipal case r elied upon in Sou rceOne , Dainippon
12
13 Screen M anufac turing Co. v. CMFT, Inc., 142 F.3d 1266 (Fed.
14 Cir. 199 8), wa s exte nsive ly discussed and disting uishe d by
15 the Febr uary 2 0, 200 9 Dec ision.

16 Plaintif fs cite Dainippon Scr een Mfg. Co., Ltd. v.
CFMT, 14 2 F.3d 1266 (Fed. Cir. 1998), to support
17 their ar gument that in an action challengin g the
validity of a patent , the action can proceed with out
18 the pate nt owner. Here, h owever, unlike in
Dainippo n, the re is no un ity of ownership or
19 interest between the patent owner and licensee. The
facts of Daini ppon are in structive. The pat ent ow ner
20 in the s uit wa s not an in dispensable party because
the suit was brought by a competitor against the
21 parent c ompany, who held an exclusive license fro m
its whol ly-owned subsidiary. Dainippon found no
22 indispen sability in part because the patent holde r
was the parent compa ny’s holding company for pate nts
23 and held an identity of interest and ownership wi th
the subs idiary. Id. at 1273. As to the first 19(b )
24 factor, there was an adequacy of protection of th e
subsidia ry’s interes ts, the patent owner, by the
25 parent c ompany , the licen see. Further, the patent
owner co uld interven e at any time. Id. at 1272.
26
Doc. 42 at 43- 44. A s in Dainippon, w here t here was un ity of
27
28 ownershi p betw een th e pat ent owner and licensee, the n amed
68
1 defendan t in S ourceO ne wa s a co-owner of the pate nt wi th the
2 United S tates. Here , in contrast, there is no su ch un ity of
3
ownershi p, and no gu arant ee that the Commission w ould fully
4
protect the go vernme nt’s interests. There is no way t o
5
assure t hat th e gove rnmen t and the Commission’s i ntere sts and
6
objectiv es coi ncide in im plementing and continuin g the
7
8 licensin g prog ram an d rel ated uses of the patents .
9 On the s econd factor , Sou rceO ne reasoned:
10 Turning to the secon d consideration set forth in

Rule 19( b), the Cour t does not see how it would b e
11 able to lessen any a lleged prejudice to the
Governme nt through p rotective provisions in the
12 judgment , shaping re lief, or other measures.
However, that factor carries little weight in thi s
13 case for two reasons . First, as we have explained ,
the pote ntial prejud ice to the Govern ment i s already
14 adequate ly addressed by the ability of KGK to ful ly
advocate and protect the Government’s interests.
15 Second, the Federal Circuit has held that “the
court’s ability to s hape relief to avoid prejudic e[
16 ] is of little relev ance in t he context of a patent
declarat ory judgment suit because the relief soug ht
17 in such a suit does not depend on the patentee’s
presence in court.” Dainippon, 142 F.3d at 1272-73.
18
2009 WL 134625 0 at * 7. This reasoning depe nds on the abil ity
19
of the p resent defen dant to r epresent the a bsent defen dant s’
20
interest s. In the a bsenc e of unity of ownership, ther e is no
21
22 guarante e that the p otent ial prejudice to the gov ernme nt
23 would be adequ ately addre ssed by the Commission’s abil ity to
24 advocate and p rotect the government’s inter ests.

25 SourceOn e dete rmined that the third factor favored
26
maintain ing th e suit :
27
28
69
1 The thir d factor set forth in Rule 19(b), whether a
judgment rendered in the absence of the missing
2 party wo uld be adequ ate, “refers to the public st ake
in settl ing disputes by wholes, whenever possible.”
3
Pimentel , 128 S.Ct. at 2193 (internal quotations and
4 citation s omitted)....[T] he F ederal Circuit noted,
the thir d factor may favor maintenance of a
5 declarat ory judgment suit because it does not
require an affirmative ac t by the abs ent party.
6 Dainippo n, 142 F.3d at 12 73. A declaration of
invalidi ty or noninf ringement would resolve the c ase
7 as a who le as to SourceOn e and the ′125 Pat ent. I d.
8
2009 WL 134625 0 at * 7 (emphasis added). Pl aintiffs do not
9
explain why th is rea sonin g, which relies on Daini ppon, a case
10
already consid ered b y the February 20, 2009 Decis ion,
11
12 justifie s reco nsider ation :
13 The thir d factor, adequac y of remedy, also favors

dismissa l. “‘[A]deq uacy’ ref ers not to sat isfaction
14 of [Plai ntiffs’] cla ims, but to the ‘public stake in
settling disputes by wholes, whenever possible.’”
15 Republic of Philippi nes, 128 S.Ct. at 2183, citing
Providen t Tradesmens Bank & T rust Co. v. Pa tterson,
16 390 U.S. 102, 111 (1 968). As in Republic o f
Phillipp ines, “[g]oi ng fo rwar d with the act ion in
17 the abse nce of” the United States, “would not
further this public interest because they could n ot
18 be bound by a judgme nt to which they were not
parties. ” Id. The Court held the University had
19 not waiv ed its Eleve nth Amendment immunity.
20 Doc. 42 at 45.
21 SourceOn e diff ers fr om the Fe bruary 2 0,2009 Decision’s

22 evaluati on of the alternative forum factor:
23
... Rule 19(b)(4) .. . requires us to consid er
24 whether the plaintif f would have an adequate reme dy
if the a ction were d ismissed for nonjoinder. This
25 factor f avors dismis sal if there exists another
forum in which all p arties could be joined in the
26 suit. Da inippon, 142 F.3d at 1273. Here, KG K’s only
suggesti on for an al ternative forum is the Court of
27
Federal Claims (KGK Mem. at 3). However, 28 U.S.C . §
28 1498(a) permits priv ate parties to bring patent
70
1 infringe ment suits a gainst the United States in t he
Court of Federal Cla ims for certain m oney d amages
2 only, an d thus it wo uld not provide an adequate
forum fo r SourceOne’ s dec laratory judgment claims .
3
4 Thus, KG K and the Go vernment are unable to point to
any adeq uate remedy that SourceOne would have, if
5 Counts V and VI are dismissed, to receive j udicia l
guidance on whether the ′125 Patent blocks its
6 efforts to market an d sell Cholesstrinol. That
factor w eighs heavil y in favor of allowing Counts V
7 and VI t o proceed.
8
KGK and the Governme nt are therefore reduced to
9 arguing, at bottom, that those are the brea ks for
SourceOn e: that this absence of any other remedy for
10 SourceOn e is simply “the inevitable effect” of th e
United S tates’ ability to assert sovereign immuni ty
11 (KGK Mem . at 6; Gov’ t Stm t. at 8). Apparent ly, KG K
12 and the Government s ee no unf airness in requiring
SourceOn e to wait un til they together decide to s ue
13 SourceOn e for infrin gement before SourceOne can
raise it s invalidity and noninfringement defenses
14 (KGK Mem . at 6), whi le KGK is left free to contin ue
threaten ing SourceOn e or its business associates and
15 customer s with suit for infringement of the ′125
Patent.
16
17 We do no t share KGK’ s and the Government’s comfort
with tha t approach. We view the Rule 19(b) factor s
18 through the prism of “equity and good conscience. ”
In so do ing, we cann ot di smis s as lightly a s do KGK
19 and the Government t he prejudice that SourceOne
would su ffer if its declaratory judgment claims
20
against KGK were dis missed. The approach urged by
21 KGK (and the Governm ent) would allow KGK to threa ten
legal ac tion against SourceOne (or others) with
22 impunity . For those who gave into those threats, KGK
would re ceive the be nefit of the patent (a cessat ion
23 of the a lleged infri nging conduct and perhaps
compensa tion) withou t the need to do anything mor e.
24 For thos e who might rear up and seek a judi cial
25 resoluti on, KGK coul d retreat behind the
Governme nt’s cloak of immunity and prevent the
26 infringe ment or vali dity of the ′125 Patent from
ever bei ng tested in court. That result not only
27 would cr eate prejudi ce to SourceOne in this case,
but also would disserve the broader public. We fa il
28
71
1 to see h ow the publi c interest is advanced by
allowing a private p atentee such as KGK that kind of
2 unreview able sway in exercising its patent rights .
3
WL 13462 50 at *7-8.
4
In contr ast, t he Feb ruary 20, 2009 De cision relied on
5
Ninth Ci rcuit and Su preme Court authority suggest ing t hat
6
immunity alone may b e vie wed as a compelling fact or in the
7
8 Rule 19 balanc e:
9
The four th factor is whether there is an availabl e
10 alternat ive forum. First is the Court of Federal
Claims, expressly au thorized by statute. Plainti ffs
11 have an opportunity to raise the defense of paten t
invalidi ty and unenf orceability in an action brou ght
12 against them for pat ent infringement brought by t he
United S tates or the Commission. See 35 U.S.C.
13 § 282. [Fo otnote ] However, t o require Plaintiffs t o
violate the license and wait to see whether the
14 patent o wner sues fo r infringement creates an
unfavora ble situatio n as damages could be
15 exacerba ted. Where “no alternative forum exists,
the dist rict court should be ‘extra c autious’ before
16 dismissi ng an action .” Kesco li v. Babbitt, 101 F.3d
1304, 13 11 (9th Cir. 1996). But just as the cour ts
17 have hel d in actions involving tribal immunity an d
state im munity, sove reign immunity of the Untied
18 States c an justify dismissal for inability to joi n
an indis pensable par ty, despite the fact that no
19 alternat ive forum is available. “If the necessar y
party is immune from suit, there may be very litt le
20 need for balancing R ule 19(b) factors because
immunity itself may be viewed as the compel ling
21 factor.” Id. at 131 1 (in tern al citations and
quotatio ns omitted). The latest Supreme Court ca se,
22 Republic of Philippi nes v. Pimentel, 128 S.Ct. 2180
(2008), to address R ule 19, held as to immunity
23 barring an action fr om proceeding wit hout the
sovereig n party:
24
The anal ysis of the joinder issue in those
25 cases wa s somewhat p erfunctory, but the
holdings were clear: A case may not proceed
26 when a r equired-entity so vere ign is n ot
amenable to suit. T hese cases instruct us that
27 where so vereig n immu nity is asserted, and t he
claims o f the sovere ign are not frivolous,
28 dismissa l of the act ion must be ordered where
72
1 there is a potential for injury to the
interest s of the abs ent sovereign.128 S.Ct. at
2 2190-91. In this context, dismissal is
appropriate ev en if Plain tiff s have no
3 alternat ive forum fo r their claim. See
Dawavend ewa, 2 76 F.3 d at 1162 .
4
Because the proceedi ngs in this case threaten bot h
5 the prop erty and sov ereign immunity of the United
States, the United S tates’ fa ilure to waive its
6 immunity from suit s trongly supports dismissing t his
litigati on in its ab sence.
7
Doc. 42 at 42- 47.
8
SourceOn e dist inguis hed Pimen tel:
9
We disag ree with KGK and the Government that
10 Pimentel requires a different result. In that case,
11 Merrill Lynch filed an interpleader a ction to
determin e the owners hip of some $35 million in fu nds
12 stemming from proper ty allegedly stolen by Ferdin and
Marcos w hen he was P resident of the Republic of t he
13 Philippi nes. Among t he parties named in the
interple ader action were the Republic of th e
14 Philippi nes and the Philippine Presidential
Commissi on on Good G overnance. Both the Republic of
15
the Phil ippines and the Commission were dismissed
16 from the case based on their assertion of foreign
sovereig n immunity. The trial court held, and the
17 appeals court agreed , that the case could proceed in
their ab sence. The t rial court ultimately awarded
18 the fund s to the Pim ental class, and the appeals
court af firmed. Empl oying a Rule 19(b) analysis, the
19
Supreme Court revers ed. 128 S.Ct. at 2191-94.
20 However, there are i mportant factors that
distingu ish this cas e from the situation that the
21 Supreme Court addres sed in Pimental.
22 First, t he Supreme C ourt found that the Republic of

the Phil ippines and the Commission would suffer r eal
23 prejudic e from the adjudi cation in their ab sence.
24 128 S.Ct . at 2191-92. How ever , in that case , no
other pa rty was alig ned with the interests of the
25 Republic of the Phil ippines and the Commission, a nd
thus no other party had the ability or incentive to
26 protect their intere sts. Indeed, the intere sts of
the fore ign sovereig ns and the other claimants we re
27 antagoni stic: they a ll asserted competing claims to
28 the fund s. By contra st, in th is case, KGK has a
73
1 common i nterest with the Government in protecting
the ′125 Patent and has the a bility and incentive to
2 fully pr otect their mutual interest.
3
Second, in Pimental, the Supreme Court expl ained
4 that the fourth fact or of Rule 19(b), whether the
plaintif f would have an adequate remedy if the ca se
5 were dis missed, weig hed in favor of dismiss al, In
reaching that conclu sion, the Supreme Court held
6 that the plaintiff t o consider under that factor was
Merrill Lynch, the s takeholder which had initiate d
7 the acti on, and not the claimants to the funds. 1 28
8 S.Ct. at 2193. The S upreme Court stated that
dismissa l would not cause prejudice to Merrill
9 Lynch, b ut in fact w ould serve some of the goals of
interple ader and wou ld “protect Merrill Lynch in
10 some res pects.” Id. By contrast, the prejud ice in
this cas e to SourceO ne if Counts V and VI are
11 dismissed is real, a nd is significant.
12
Third, t he Supreme C ourt found significant the
13 interest s of the for eign sovereigns in “comity an d
dignity, ” which in t hat case took the form of
14 “allowin g a foreign state to use its own courts f or
a disput e if it has a right to do so. The dignity of
15 a foreig n state is n ot enhanced if other nations
bypass i ts courts wi thout right or good cause.” 1 28
16
S. Ct. a t 2190. Those considerations are no t pres ent
17 in this case.
18 2009 WL 134625 0 at * 8-9 ( emph asis added). SourceOne i s no t

19 persuasi ve her e, because ther e is no unity of own ershi p
20
between the Co mmissi on an d the United States, and , alt hough
21
the two partie s poss ess o verlapping interests, th e Uni ted
22
States’ intere sts wi ll no t be sufficiently protec ted b y the
23
Commissi on, wh ich ha s parochi al interests in its overs ight of
24
25 the Cali fornia table grap e industry implicating a myri ad of
26 interest s not of con cern to the United States.
27
28
74
1 SourceOn e does not w arran t reconsideration of the
2 February 20, 2 009 ru ling on the indispensability of th e
3
United S tates.
4
5 J. Rule 19 Indisp ensabi lity Must Be Evaluated on a C laim-
by-Claim Basis .
6
Plaintif fs’ re ly on E.E.O .C. v. Peabody Wes tern C oal
7
Co., 400 F.3d 774, 7 81-82 (9th Cir. 2 005), to argue a
8
district court may d eclar e patents held by the Un ited States
9
10 to be in valid without imp lica ting sovereign immun ity “ so long
11 as Plain tiffs have p roper ly joined the United Sta tes t o this
12 case in any ma nner.” Doc . 70 at 6. Peabody does not support

13 Plaintif fs’ as sertio n. T here, the Ninth Ci rcuit held the
14
Navajo N ation was a neces sary party, properly joi ned because
15
its trib al sov ereign immunity did not apply in an suit
16
brought by the EEOC. 400 F.3d at 780-81. Even if the
17
governme nt had no di rect cause of action against the N avajo
18
19 Nation a nd was seeki ng no relief from the N avajo Nation, the
20 Nation m ay sti ll be joine d under Rule 19 because the
21 effectiv eness of the reli ef would be impaired in its a bsence.

22
Id. at 7 83-84. Here, by contrast, the government has not
23
waived i ts sov ereign immu nity as to the patent cl aims, and
24
plaintif fs see k reli ef th at w ould directly impair gove rnment
25
property inter ests.
26
27 Question s of j oinder unde r Rule 19 must be decide d on a
28 claim by claim basis . See Bassett v. Masha ntucket Peq uot

75
1 Tribe, 2 04 F.3 d 343, 358- 59 (2d Cir. 2000)(evalua ting Rule 19
2 indispen sabili ty on a cla im-by-claim basis) ; Makah Indian
3
Tribe v. Verit y, 910 F.2d 555 (9th Cir. 1990)(finding absent
4
party ne cessar y to s ome c laims but not others). The m otion
5
to recon sider the jo inder decision on this ground is D ENIED.
6
7
V. CONCLUSI ON
8
For the reasons set forth abo ve, Defendants ’ Moti ons to
9
10 Dismiss:
11 (1) the patent -relat ed AP A cl aims is GRANTED WITHOUT

12 LEAVE TO AMEND on so verei gn immunity grounds;
13
(2) the licens e-related APA claims is GRANT ED WIT H LEA VE
14
TO AMEND ;
15
(3) the Third, Fourt h, an d Fifth Claims For Relie f
16
(patent invali dity) is GRANTED WITHOU T LEAV E TO AMEND,
17
18 because the Un ited S tates is an indispensable par ty to
19 these cl aims a nd cannot b e joined due to its sovereign
20 immunity ;
21 (4) the Fifth Claim for R elief (unenforceability and
22
inequita ble co nduct) is G RANTED WITHOUT LEAVE TO AMEND ,
23
because the Un ited S tates is an indispensable par ty to
24
these cl aims a nd cannot b e joined due to so vereign
25
immunity ;
26
27 (5) the Sixth Claim for R elief under the Antitrust laws
28 against the Co mmissi on, is GR ANTED WITHOUT LEAVE TO

76
1 AMEND fo r fail ure to state a claim;
2 (6) the Sevent h Clai m for Relief (exclusive licen se
3
agreemen ts voi d unde r fed eral law) is GRANTED WIT HOUT
4
LEAVE TO AMEND becau se th e United States is an
5
indispen sable party to th ese claims and cannot be join ed
6
due to s overei gn imm unity ;
7
8 (7) the Eighth Claim for Relief (exclusive licens e
9 agreemen ts voi d unde r sta te law) is GRANTED WITHO UT
10 LEAVE TO AMEND becau se th e licenses between the

11 Commissi on and the U nited States are not subject to
12
state la w regu lation ;
13
(8) the Unfair Compe titio n Claim is DENIED; and
14
(9) the Unjust Enric hment and Constructive Trust claim s
15
is DENIE D.
16
17 In addit ion, P lainti ffs, motion for reconsiderati on of
18 the dist rict c ourt’s prio r determination that the Unit ed

19 States i s an i ndispe nsabl e pa rty under Rule 19 with re spec t
20
to the p atent- relate d cla ims is DENIED.
21
Plaintif fs sha ll hav e twe nty (20) days from elect ronic
22
service of thi s orde r to amend their complaint in conformity
23
with thi s memo randum deci sion and Rule 11.
24
25
SO ORDER ED
26 Dated: Octobe r 27, 2009
/s/ O liver W. Wanger
27 Oliver W. Wang er
United States Distri ct Judge
28
77
Delano Farms Co. v. California Table Grape Com'n, 623 F.Supp.2d 1144 (E.D. Cal., 2009)
623 F.Supp.2d 1144

DELANO FARMS COMPANY, Four Star Fruit, Inc., and Gerawan Farming, Inc., Plaintiffs,
v.
The CALIFORNIA TABLE GRAPE COMMISSION, Defendant.
No. 1:07-cv-1610 OWW SMS.
United States District Court, E.D. California.
February 20, 2009.
Brian C. Leighton, Law Offices of Brian C. III. FACTUAL BACKGROUND

Leighton, Clovis, CA, Lawrence Milton Hadley, A. Parties
Omer Salik, Hennigan Bennett & Dorman, Los Plaintiff Delano is a corporation duly organized
Angeles, CA, Ralph B. Wegis, The Law Offices of and existing under the laws of the State of
Ralph B. Wegis, P.C., Bakersfield, CA, for Plaintiffs. Washington, with its principal place of business at
Brian Matthew Boynton, Randolph D. Moss, Hoquiam, Washington. Plaintiff Four Star is a
PHV, Leon B. Greenfield, PHV, Wilmer Cutler corporation duly organized and existing under the
Pickering Hale and Dorr LLP, Washington, DC, for laws of the State of California, with its principal
Defendant. place of business at Delano, California. Plaintiff
MEMORANDUM DECISION AND ORDER Gerawan is a corporation duly organized and existing
[GRANTING IN PART AND DENYING IN PART] under the laws of the State of California, with its
DEFENDANT'S MOTION TO DISMISS AND principal place of business at Sanger, California.
[DENYING] DEFENDANT'S MOTION TO Plaintiffs are engaged in the business, inter alia, of
STRIKE (Doc. 19) growing, harvesting and selling table grapes.
OLIVER W. WANGER, District Judge. Defendant is a corporation of the State of
I. INTRODUCTION California, established by the 1967 Ketchum Act.
Defendant, The California Table Grape Cal. Food & Agric. Code §§ 65550-65551.
Commission ("Commission"), moves to dismiss Defendant's principal place of business is at Fresno,
Page 1149 California. The stated purpose of the Commission is
Plaintiffs' Delano Farms Company ("Delano"), Four to expand and maintain the market for California
Star Fruit, Inc. ("Four Star"), and Gerawan Farming, table grapes for the benefit of the State of California
Inc. ("Gerawan"), entire complaint pursuant to as well as the State's over five hundred California
Federal Rule of Civil Procedure 19(a), claiming the table grape growers. The Commission is funded
United States is a necessary party, and moves to primarily by assessments levied on each shipment of
dismiss pursuant to Federal Rule of Civil Procedure California table grapes and paid by the State's table
19(b), claiming the government is an indispensable grape shippers. No general revenues of the State fund
party and immune from this suit. Defendant the Commission. (Doc. 1, Complaint, ¶¶ 4-9).
additionally moves to dismiss Plaintiffs' remaining B. USDA Research Program
claims for (1) Inequitable Conduct, (2) Sherman and California table grape growers and shippers
Clayton Anti-Trust violations, (3) Patent Misuse, (4) have funded a research program under the U.S.
Unfair Competition, (5) Unjust Enrichment and (6) Department of Agriculture ("USDA") to develop new
Constructive Trust. Defendant moves to strike certain table grape varieties. Growers and shippers fund the
portions of Plaintiffs' complaint pursuant to Federal USDA research program through the Commission by
Rule of Civil Procedure 12(f). (Doc. 20, Motion to an assessment on each box of table grapes shipped in
Dismiss, Filed December 14, 2007). Plaintiffs oppose California. Prior to 2002, the USDA provided the
the motion. (Doc. 24, Opposition, filed January 9, new varieties under development to area growers for
2008.) Defendant filed a notice of supplemental evaluation of growing potential and commercial
authority on June 17, 2008, (Doc. 39). This matter marketability. Once new varieties appeared
was heard on May 19, 2008. commercially viable, the USDA "released" the
II. PROCEDURAL BACKGROUND variety, and distributed plant material of the variety
Plaintiffs filed their complaint on November 5, to area growers free-of-charge. The USDA did not
2007. (Doc. 1, Complaint). The Commission filed its charge California growers for the new varieties since
Motion to Dismiss on December 14, 2007, (Doc. 20), California growers and shippers already paid for a
which Plaintiffs opposed on January 9, 2008. (Doc. large portion of the development. (Complaint, ¶ 10).
24, Opposition). On January 21, 2008, Defendant Accordingly, when a variety under development
filed a reply to Plaintiffs' Opposition. (Doc. 26, appeared commercially successful, it
Reply). Page 1150
-1-
was not uncommon for many growers to have "settlements" to any growers who, within a narrow
reproduced and commercially sold the variety prior to window, agreed to license the varieties, pay a
an official "release" by the USDA. (Complaint, ¶ 43). "penalty" to the Commission, and accept the
C. Commission Patents Grape Varieties Commission's license restrictions on further
In the late 1990s, the Commission developed a propagation. (Complaint, ¶ 15).
scheme by which it and a few select nurseries could In May 2004, the commission sent a notice to all
profit from the new varieties that the USDA California table grape growers and shippers stating
distributed for free. At the urging of the Commission, that the USDA had applied for a patent on the Sweet
the USDA agreed to begin patenting new table grape Scarlet variety. Although no enforceable patent had
varieties. California shippers already funded much of yet issued, the Commission offered "amnesty" for
the development, but the USDA agreed to give the any grower who had previously reproduced Sweet
Commission an exclusive license to all new patented Scarlet. Under its so-called "amnesty" program, a
varieties, and to allow the Commission to charge grower with Sweet Scarlet could keep the vines
royalties when growers wished to obtain the new reproduced, so long as the grower (i) admitted to
varieties. The USDA also agreed to give the possession prior to July 2004, (ii) paid $2 per vine
Commission exclusive enforcement powers over its reproduced, (iii) paid $2 per box of Sweet Scarlet
new patent rights. (Complaint, ¶ 21). grapes previously shipped, and (iv) agreed to no
Under the Commission's "patent and licensing" further propagation of the Sweet Scarlet variety from
scheme, the Commission hand-selected three the plants possessed. (Complaint, ¶ 60).
nurseries to exclusively sell all new patented table Page 1151
grape varieties ("Licensed Nurseries"). Unlike the In July 2004, the Commission sent another
prior free distribution, the nurseries would be allowed notice to all California table grape growers and
to sell new varieties to growers. (Complaint, ¶ 13). shippers extending the "amnesty" time period for one
The Licensed Nurseries are responsible for paying month, and extending the "amnesty" to include
the royalty, but the Licensed Nurseries are allowed to Autumn King and Scarlet Royal varieties. (Complaint
pass the royalty amount on to the purchasing ¶ 61). In both notices, the Commission threatened to
growers, which they do and have done. The sue growers who did not come forward, and to seek
Commission pays a portion of the royalty to the money damages and injunctions. Yet, at the time of
USDA. (Complaint, ¶ 28). the second notice, the USDA patent application on
When a grower seeks to obtain a new variety Sweet Scarlet not only remained un-issued, but had
from a nursery, it is required to enter a "Domestic been rejected by the USPTO. Moreover, the USDA
Grower License Agreement" or "License Agreement" had not even applied for a patent on either Autumn
with the Commission. Under the terms of the License King or Scarlet Royal. The USDA had no patent
Agreement, the grower cannot propagate the variety rights, and the Commission lacked any enforcement
beyond the plant purchased. If the Commission rights. (Complaint, ¶ 62). On information and belief,
believes the grower has violated the License at the time the Commission sent the "amnesty"
Agreement, it can void the License Agreement and notices in May and June, 2004, the USDA, and Dr.
order that all purchased plants be destroyed. Ramming knew of the public use and sale with
(Complaint, ¶ 13). respect to the Sweet Scarlet that occurred prior to
The first three varieties that the Commission February 20, 2002—more than one year prior to the
identified to the USDA for patenting had been under filing of the '512 Application on the Sweet Scarlet
development for years. At least one of the varieties variety. (Complaint, ¶ 63). On information and belief,
had been distributed to growers for wide-scale the Commission, the USDA, and Dr. Ramming
commercial evaluation and sale. (Complaint, ¶ 14). learned (prior to the July 25, 2005, issue date for
Recognizing that at least one of the new varieties Sweet Scarlet) that at least some of the 17 growers
identified for patenting (and perhaps all three) had who agreed to the Commission's "amnesty" program
been previously in public use and/or sold for that variety had possessed and reproduced Sweet
commercially, the Commission created a so-called Scarlet prior to February 2002. On information and
"amnesty program" designed to hide the fact that belief, the Commission, the USDA, and Dr.
valid patents could not be obtained, and to extort Ramming knew that such information was material to
funds from growers already in possession of the the patentability of the Sweet Scarlet variety.
varieties. Under the amnesty program, the (Complaint, ¶ 64). Seventeen growers confirmed
Commission widely disseminated notices to growers possession of the varieties and agreed to pay the
and shippers stating that they were in violation of the penalties demanded by the Commission, confirming
law if they possessed the varieties intended for its expectation that varieties identified for patenting
patenting. The notices also offered confidential were in public use. (Complaint, ¶ 17).
-2-
D. Patents in Prior Use exclusive license includes the right to license the '284
The USDA and inventor of the new varieties patent and to enforce the '284 patent against alleged
breached their duty of candor to the United States infringers. (Complaint, ¶ 23).
Patent & Trademark Office ("USPTO") by not 3. Scarlet Royal
reporting these prior public uses and sales when On September 28, 2004, the USDA filed patent
applying for patents on the new varieties. Under application No. 953,124 (the "'124 Application") on a
Patent Law, public use or sale of an invention more grapevine denominated "Scarlet Royal." On January
than one year prior to filing a patent application bars 31, 2006, the '124 Application issued as U.S. Patent
patentability. Based on these facts, none of the No. PP16,229, entitled "Grapevine Denominated
patents on the new varieties are valid. The USDA and Scarlet Royal" (the "Scarlet Royal or '229 patent").
inventor committed inequitable conduct before the The United States of America, as represented by the
USPTO. The Commission demanded licenses and Secretary of Agriculture, is the owner by assignment
accepted royalties on knowingly invalid patents. of the '229 patent. (Complaint, ¶¶ 24, 25). On
Plaintiffs seek to hold the patents invalid so the information and belief, the Commission is the
varieties can be freely distributed, to obtain the return exclusive licensee of the '229 patent pursuant to a
of royalty payments illegally collected from growers License Agreement entered into between the United
and shippers, and to stop the Commission from States Government, as represented by the United
engaging in further illegal activities through the use States Department of Agriculture, Agricultural
of patents. (Complaint, ¶ 17). Research Services, and the Commission. The
E. Patents exclusive license includes the right to license the '229
1. Sweet Scarlet patent and to enforce the '229 patent against alleged
On February 20, 2003, the USDA filed patent infringers. (Complaint, ¶ 26).
application No. 371,512 (the "'512 Application") on a F. Plaintiffs' License Agreements
grapevine denominated "Sweet Scarlet." On July 26, Plaintiffs are in possession of the Autumn King,
2005, the '512 Application issued as U.S. Patent No. Sweet Scarlet and Scarlet Royal varieties, which they
PP15,891, entitled "Grapevine Denominated Sweet purchased through Licensed Nurseries. Plaintiffs paid
Scarlet" (the "'891 patent"). (Complaint, ¶ 18). The the royalties imposed by the Commission on each
United States of America, as represented by the purchased plant. (Complaint, ¶ 30). Plaintiffs have
Secretary of Agriculture, is the owner by assignment entered into a License Agreement with the
of the '891 patent. (Complaint, ¶ 19). On information Commission for each of the Patented Varieties. In
and belief, the Commission is the exclusive licensee consideration for this limited, nonexclusive license,
of the '891 patent pursuant to a license agreement Plaintiffs have paid a license fee to a Licensed
entered into between the United States Government, Nursery. Under the terms of this agreement, Plaintiffs
as represented by the United States Department of have a limited, nonexclusive license of the Patented
Agriculture, Agricultural Research Services, and the Varieties, to grow the variety and sell the fruit
Commission. The exclusive license includes the right produced. Plaintiffs cannot propagate the grapevines
to or distribute the vines to third parties. Further,
Page 1152 Plaintiffs are obligated to destroy all Patented
license the '891 patent and to enforce the '891 patent Varieties' plant material upon termination of the
against alleged infringers. (Complaint, ¶ 20). agreement. (Complaint, ¶¶ 31-33).
2. Autumn King G. Commission's Patent and Licensing Program
On September 28, 2004, the USDA filed patent The Commission requires that California grape
application No. 953,387 (the "'387 Application") on a shippers pay an assessment of approximately $0.13
grapevine denominated "Autumn King." On February per box of table grapes. The Commission operates at
21, 2006, the '387 Application issued as U.S. Patent an annual surplus from these assessments, but does
No. PP16,284, entitled "Grapevine Denominated not return any of the assessment money back to the
Autumn King" (the "Autumn King or '284 patent"). California growers or shippers. (Complaint, ¶ 34). Dr.
The United States of America, as represented by the Ramming, the co-inventor of the patented Autumn
Secretary of Agriculture, is the owner by assignment King, Sweet Scarlet and Scarlet Royal varieties, is a
of the '284 patent. (Complaint, ¶¶ 21, 22). On researcher at the Agriculture Research Center
information and belief, the Commission is the ("ARC") of the USDA located in Fresno, California.
exclusive licensee of the '284 patent pursuant to a For at least 20 years, Dr. Ramming has operated a
license agreement entered into between the United research program at the ARC relating to the
States Government, as represented by the United development of new table grape varieties. Since the
States Department of Agriculture, Agricultural early 1980s, the Commission has
Research Services, and the Commission. The Page 1153
-3-
funded a portion of Dr. Ramming's grapevine reproduced each of the Patented Varieties, Sweet
breeding program with funds collected through the Scarlet, Autumn King, and Scarlet Royal, produced
shipper assessments. In many years, the fruit from each of the Patented Varieties, and had
Commission's funding has amounted to over one- evaluated the potential commercialization of each
third of the total table grape research budget at the Patented Variety. (Complaint, ¶ 46).
ARC, excluding employee salaries. (Complaint, ¶ Dr. Ramming did not keep the development of
35). Prior to 2003, the USDA had never sought patent the Patented Varieties secret. To the contrary, Dr.
protection for any new table grape variety developed Ramming discussed each of the Patented Varieties
at the ARC. with the Commission over many years, including
The USDA agreed that the Commission could between 2001 and 2003. Dr. Ramming discussed the
serve as the exclusive licensee for patented varieties Patented Varieties during public meetings of the
in the collection of royalties and enforcement against Commission's Research Committee. Additionally,
infringers. (Complaint, ¶ 37). In exchange for seeking prior to 2003, Dr. Ramming displayed fruit from the
patent protection, and providing an exclusive license Patented Varieties at Commission meetings, which
to the Commission, the Commission and the USDA area growers and shippers attended. Attendees were
agreed that revenues from the patent licensing allowed to take samples of fruit from the three
program would be shared between the USDA and the varieties. (Complaint, ¶ 47).
Commission. However, the USDA indicated that it Page 1154
was not interested in profiting from the patenting By 2001, the Commission's Research
program. Additionally, Dr. Ramming received no Committee was actively evaluating the Sweet Scarlet,
extra compensation from the patenting of varieties he Autumn King, and Scarlet Royal varieties (among
developed. (Complaint, ¶ 39). others) for USDA release. The Commission
In accordance with the agreement between the recommended that Sweet Scarlet should be released
Commission and the USDA, the Commission charges in 2002. The Commission also recommended that the
nurseries that distribute patented varieties a $5,000 USDA seek patent protection on Sweet Scarlet as the
participation fee per patented variety and an first variety for patenting under the Commission's
additional $1 per production unit royalty. These costs new patent and licensing program. After receiving
are then passed on by the nurseries to the California the Commission's recommendation, the USDA
grape growers, who purchase the patented plant proceeded with the release of Sweet Scarlet and filed
material from the nurseries, including Plaintiffs who a patent application on the Sweet Scarlet variety in
purchased the Patented Varieties. (Complaint, ¶ 40). February 2003. (Complaint, ¶ 48). Although the
The California grape growers who bear the ultimate Commission recommended proceeding with the
costs of the royalty fees imposed by the Commission release of Sweet Scarlet, the Commission decided to
are the same California grape growers who bear the delay any release and patenting of Autumn King and
cost of the per box assessment charged by the Scarlet Royal. Instead, the Commission
Commission, which funds much of Dr. Ramming's recommended that Autumn King and Sweet Scarlet
breeding program. Thus, California table grape undergo further evaluation prior to release.
growers essentially pay for the development of Eventually, the Commission recommended release of
patented varieties, then pay again to obtain the Autumn King and Scarlet Royal approximately two
varieties. (Complaint, ¶ 41). years later, in 2004. At that time, the Commission
The Commission's Research Committee and further recommended that the USDA seek patent
Board oversee and administer the patent and protection for Autumn King and Scarlet Royal.
licensing program. Specifically, the Board sets the (Complaint, ¶ 49).
royalty rates on patented plants, determines penalties Despite waiting for the Commission's
for infringement, and establishes enforcement policy. recommendations on releasing new varieties to seek
The Research Committee oversees Dr. Ramming's patent protection, Dr. Ramming could have filed
breeding program and makes recommendations patent applications much earlier. All three Patented
regarding which new varieties should be patented and Varieties had been reproduced and undergone several
released. To date, the USDA has only patented new growing cycles well before the Commission
varieties that the Commission has recommended for recommended release in 2002 for Sweet Scarlet, and
patenting, and has only applied for patents once 2004 for Autumn King and Scarlet Royal. By 2001-
receiving a recommendation from the Commission to 2002 (if not before), all three varieties had been
do so. (Complaint, ¶ 42). developed to a point at which they were ready for
1. Prior Uses and Sales of Patented Varieties patenting. The Commission's recommendations
Development of the Patented Varieties began in regarding continued evaluation of the Autumn King
about 1993. Prior to 2003, Dr. Ramming had and Sweet Scarlet varieties prior to release did not
-4-
prevent the USDA from seeking patent protection on Autumn King and Scarlet Royal) to their cousin
these varieties long before receiving a (Lawrence Ludy) who owned and operated an
recommendation regarding releases. (Complaint, ¶ adjacent farm ("Ludy Farms"). With these sticks, the
50). Ludys reproduced Autumn King and Scarlet Royal
Although the USDA delayed the decision to grapevines on their farms in 2002. Lawrence Ludy
apply for patents on Autumn King and Scarlet Royal, reproduced additional Autumn King on his farm in
it made little effort to prevent these varieties from mid-2003. In total, J & J Farms and Ludy Farms
entering the public domain. The USDA did not reproduced more than five hundred Autumn King and
conceal the varieties. To the contrary, prior to Scarlet Royal plants before September 2003.
seeking patent protection, the USDA displayed and (Complaint, ¶ 57). J & J Farms and Ludy Farms
discussed the varieties at public meetings. Moreover, received the Autumn King and Scarlet Royal plant
the USDA kept its fully developed Autumn King and material without any written or verbal agreement or
Scarlet Royal plants at unsecured facilities at restrictions on disclosure or use. Neither the USDA,
California State University at Fresno ("Fresno nor Dr. Ramming oversaw or controlled the
State"), which could be accessed through the Fresno reproductions that occurred on the Ludy Farms.
State grounds. The USDA never made efforts to Although Ludy Farms was privately owned, it placed
secure plant materials sent to other facilities for no special restrictions such as fences or gates limiting
testing. (Complaint, ¶ 51).1 public access to its fields and the location of the
While delaying the decision to seek patent Autumn King and Scarlet Royal plants. Nor did Ludy
protection, and failing to implement security Farms place any confidentiality restrictions on
measures at its facilities, the USDA knew that public employees who viewed the reproduced new varieties.
use had been made of new varieties more than one Finally, prior to September 2003, both J & J Farms
year before applying for a patent would bar later and Ludy Farms showed the reproduced varieties to
filing for patent protection. Indeed, the Commission members of the public, including neighboring
and Dr. Ramming discussed the fact that public uses farmers, without any confidentiality restrictions.
and sales of new varieties prior to seeking patent (Complaint, ¶ 57). The USDA and Dr. Ramming did
protection could jeopardize the Commission's not disclose to the USPTO the information regarding
patenting program. (Complaint, ¶ 52). All three all the growers who possessed and reproduced Sweet
Patented Varieties entered the public domain more Scarlet prior to February 20, 2002, which the
than one year before the USDA sought patent Commission learned through its "amnesty" program.
protection (Complaint, ¶ 65).
Page 1155 On information and belief, both the USDA and
on each respective variety. (Complaint, ¶ 53). the Commission knew, before the respective patents
The Sweet Scarlet variety and its fruit was issued on the Patented Varieties, that (i) Sweet
publicly used, distributed, offered for sale and sold Scarlet had been in the public domain since before
by growers and shippers prior to February 20, 2002— February 2002, and (ii) either knew or suspected that
more than one year prior to the filing of the '512 Autumn King and/or Scarlet Royal had been in the
Application on the Sweet Scarlet variety. public domain since before September 2003.
Specifically, approximately nine growers received (Complaint, ¶ 58). Because the known public use and
Sweet Scarlet from Dr. Ramming for trials in 1999 sale of the Patented Varieties, more than one year
and 2000. At least three of these growers sold fruit before the patent application filing would prevent
produced into commercial markets before 2002. issuance of valid patents, the Commission (with the
(Complaint, ¶ 54). Additionally, at least 17 other USDA's knowledge and approval), created a scheme
growers, who were not part of trials, received and to prevent challenges to patentability based on these
reproduced the Sweet Scarlet variety. On information prior uses and sales. (Complaint, ¶ 59).
and belief, these reproductions took place prior to
2002. Neither the USDA, nor Dr. Ramming oversaw IV. REQUEST FOR JUDICIAL NOTICE
or controlled the reproductions created by these 17 Defendant Commission requests judicial notice
growers. (Complaint, ¶ 55). pursuant to Federal Rule of Evidence Rule 201, of
In early 2002, more than two years before filing Defendant Party-United States of America's
the patent applications for Autumn King and Scarlet memorandum of
Royal, a grower in Delano, California (J & J Farms, Page 1156
owned by Jim and Jack Ludy) obtained "sticks" of points and authorities filed in the District Court case
several new varieties, including Autumn King and of Nutrition 21 v. Thorne Research, Inc., 130 F.R.D.
Scarlet Royal. Jim and Jack Ludy provided some of 671 (D.Wash.1990) and Appellee Party-United States
the plant material for the new varieties (including of America's brief filed in Federal District appeal
-5-
case of Nutrition 21 v. United States, 930 F.2d 862 United States to this action, and this action must be
(Fed.Cir.1991). (Doc. 27, Commission Request for dismissed under Rule 19(b).
Judicial Notice, filed January 21, 2007, Exhibit 1 and Plaintiffs' first three causes of action seek a
Exhibit 2). Plaintiffs provide no objection to this declaration of the invalidity of the three U.S.-owned
request. "A judicially noticed fact must be one not patents under 35 U.S.C. § 102(b) ('891 Patent, '284
subject to reasonable dispute in that it is either (1) Patent and '229 Patent). Defendant seeks to dismiss
generally known within the territorial jurisdiction of these causes of action. Defendant's argument that the
the trial court or (2) capable of accurate and ready United States is a necessary and indispensable party
determination by resort to sources whose accuracy is based on the fact that the patents sought to be
cannot reasonably be questioned." Fed.R.Evid. invalidated are owned by the U.S., a sovereign entity,
201(b); see Biggs v. Terhune, 334 F.3d 910, 916, n. 3 and Plaintiffs have failed to identify a waiver of
(9th Cir.2003) ("Materials from a proceeding in sovereign immunity. Plaintiffs allege in the
another tribunal are appropriate for judicial notice.") Complaint that the USDA and Dr. Ramming, of the
Defendant's request for judicial notice is USDA, knowingly did not disclose to the USPTO
GRANTED as to the documents and their existence, that the Patented Varieties had been in the public
but not as to any disputed contents of those papers. Page 1157
domain more than one year before the patent
V. LEGAL STANDARD application filing dates in violation of the Patent Act.
Fed.R.Civ.P. 12(b)(6) provides that a motion to And they allegedly knew that this information would
dismiss may be made if the plaintiff fails "to state a prevent issuance of valid patents. (Doc. 1, Complaint,
claim upon which relief can be granted." However, ¶¶ 53, 58-9). Plaintiffs' Complaint is brought against
motions to dismiss under Fed.R.Civ.P. 12(b)(6) are the Commission only. Section 120 of the Patent Act
disfavored and rarely granted. Gilligan v. Jamco states:
Development Corp., 108 F.3d 246, 249 (9th A person shall be entitled to a patent unless-(b)
Cir.1997). In deciding whether to grant a motion to the invention was patented or described in a printed
dismiss, the Court "accept[s] all factual allegations of publication in this or a foreign country or in public
the complaint as true and draw[s] all reasonable use or on sale in this country, more than one year
inferences" in the light most favorable to the prior to the date of the application for patent in the
nonmoving party. TwoRivers v. Lewis, 174 F.3d 987, United States ...
991 (9th Cir.1999); see also, Rodriguez v. 35 U.S.C. § 120(b) (emphasis added).
Panayiotou, 314 F.3d 979, 983 (9th Cir.2002). A Defendant also seeks to dismiss Plaintiffs' fourth
court is not "required to accept as true allegations that and sixth claims on the same basis as the first three
are merely conclusory, unwarranted deductions of claims, the U.S. is a necessary and indispensable
fact, or unreasonable inferences." Sprewell v. Golden party and is a sovereign entity immune from this suit.
State Warriors, 266 F.3d 979, 988 (9th Cir.2001). Plaintiffs' fourth claim seeks a declaration that the
The question before the court is not whether the U.S.-owned patents are unenforceable, in part, due to
plaintiff will ultimately prevail; rather, it is whether alleged "inequitable conduct" by the USDA. This
the plaintiff could prove any set of facts in support of directly implicates the interests of the United States,
his claim that would entitle him to relief. See Hishon the patent owner, as it would render the patents
v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, useless if they are found unenforceable. Claim six is
81 L.Ed.2d 59 (1984). "A complaint should not be a patent misuse claim, in which Plaintiffs seek a
dismissed unless it appears beyond doubt that declaration that the patent is also unenforceable due
plaintiff can prove no set of facts in support of his to the Commission's misuse of the patents. Defendant
claim which would entitle him to relief." Van Buskirk argues this makes the United States a necessary and
v. CNN, Inc., 284 F.3d 977, 980 (9th Cir.2002) indispensable party to claims one through four and
(citations omitted). six.
"[W]here sovereign immunity is asserted, and
VI. ANALYSIS the sovereign's claims are not frivolous, dismissal
A. Joinder of Parties must be ordered where there is a potential for injury
Defendant argues that the United States is not a to the absent sovereign's interests." Republic of
named defendant and is a necessary and Philippines v. Pimentel, ___ U.S. ___, 128 S.Ct.
indispensable party to certain claims under Federal 2180, 2182-83, 171 L.Ed.2d 131 (2008). Rule 19
Rule of Civil Procedure 19. Further, because the governs the circumstances under which persons must
United States is not subject to suit under the doctrine be joined as parties to a lawsuit. Rule 19 provides in
of sovereign immunity, Plaintiffs cannot join the relevant part:
(a) Persons Required to Be Joined if Feasible.
-6-
(1) Required Party. A person who is subject to dismissed). In the final analysis, "[r]ule 19 uses the
service of process and whose joinder will not deprive word ìndispensable' only in a conclusory sense, that
the court of subject-matter jurisdiction must be joined is, a person is `regarded as indispensable' when he
as a party if: cannot be made a party and, upon consideration of
(A) in that person's absence, the court cannot the factors [in Rule 19(b)], it is determined that in his
accord complete relief among existing parties; or absence it would be preferable to dismiss the action,
(B) that person claims an interest relating to the rather than to retain it." Wilbur, 423 F.3d at 1112.2
subject of the action and is so situated that disposing 1. United States is a Necessary Party Under Rule
of the action in the person's absence may: 19(a).
(i) as a practical matter impair or impede the The United States has an "interest relating to the
person's ability to protect the interest; or subject of the action"— which is the validity and
(ii) leave an existing party subject to a enforceability of the three patents it owns and the
substantial risk of incurring double, multiple, or royalties under those patents that it receives. Fed.
otherwise inconsistent obligations because of the R.Civ.P. 19(a)(1)(B)(i). Disposition of the claims
interest .... without the participation of the United States will "as
(b) When Joinder Is Not Feasible. If a person a practical matter impair or impede" the United
who is required to be joined if feasible cannot be States' "ability to protect [its] interests." Id.
joined, the court must determine whether, in equity a. Joinder Voluntarily or Involuntarily of Patent
and good conscience, the action should proceed Owner.
among the existing parties or should be dismissed. The U.S. has retained substantive rights in a
The factors for the court to consider include: patent that is the subject of the exclusive license and
(1) the extent to which a judgment rendered in therefore is an indispensable party. Waterman v.
the person's absence might prejudice that person or Mackenzie, 138 U.S. 252, 255, 11 S.Ct. 334, 34
the existing parties; L.Ed. 923 (1890). The Ninth Circuit case Massa v.
(2) The extent to which any prejudice could be Jiffy Products Co., 240 F.2d 702 (9th Cir. 1957),
lessened or avoided by: holds that the patent owner is an indispensable party
(A) protective provisions in the judgment; in a case challenging the validity of the patent.
(B) shaping the relief; or "When ownership of the patent and the trademark in
(C) other measures; Massa appeared from his deposition, an involuntary
(3) whether a judgment rendered in the person's joinder of Massa as a party defendant under Rule 19,
absence would be adequate; and Fed.R.Civ.P. became proper. Massa, appearing as the
Page 1158 registered owner of the patent and trade mark,
(4) whether the plaintiff would have an adequate became an indispensable party in the declaratory
remedy if the action were dismissed for non-joinder. judgment action, in order that the alleged infringer
Fed.R.Civ.P. 19. might have tried in the one action, as to all parties,
The "[a]pplication of Rule 19 involves three the invalidity of the patent and the alleged improper
successive inquiries." Wilbur v. Locke, 423 F.3d recordation of the trade mark." Id. at 705 (emphasis
1101, 1111 (9th Cir.2005). "First, the court must added). The one exception to this rule, is when a
determine whether a nonparty should be joined under licensee is transferred all "substantial rights" in the
Rule 19(a)." The term "necessary" is used to describe patent from the patent owner. This exception
those persons to be joined if feasible. Id. at 1112. Page 1159
"The inquiry is a practical one and fact specific, and is not here applicable to the License Agreements
is designed to avoid the harsh results of rigid between the Commission and the United States.
application." Shermoen v. United States, 982 F.2d In the Federal Circuit case describing the "rule
1312, 1317 (9th Cir.1992). of reciprocity," Enzo APA & Son, Inc. v. Geapag
Second, "[i]f an absentee is a necessary party A.G., 134 F.3d 1090 (Fed.Cir.1998), the court held
under Rule 19(a)," the court is to determine "whether that where the non-exclusive licensee did not hold an
it is feasible to order that the absentee be joined." exclusive license with all "substantial rights," i.e., the
Wilbur, 423 F.3d at 1112. "Finally, [and thirdly,] if right to bring an enforcement action without joining
joinder is not feasible, the court must determine at the the patent owner, there can no declaratory judgment
third stage whether the case can proceed without the brought against the licensee, without joining the
absentee, or whether the absentee is an ìndispensable patent owner. "We have accorded standing, in certain
party' such that the action must be dismissed." Id.; limited circumstances, where all substantial rights
Shermoen, 982 F.2d at 1317 (a court must determine under the patent have been transferred in the form of
whether the absent party is "indispensable" so that in an exclusive license, rendering the licensee the
"equity and good conscience" the suit should be virtual assignee." Id. at 1093-94, citing Vaupel
-7-
Textilmaschinen KG v. Meccanica Euro Italia S.P.A., owner to licensee. In Intellectual Property

944 F.2d 870 (Fed.Cir.1991). Development Inc. v. TCI Cablevision of California,
The general rule in patent infringement suits, 248 F.3d 1333, 1347 (Fed.Cir.2001), the court gave
which applies in declaratory relief actions seeking dispositive weight to the licensee's ability to only
invalidity of a patent, is that the patent owner is to be bring enforcement actions in limited circumstances,
joined when fewer than all substantial rights have and only with consent of the patent owner. The Court
been transferred in an exclusive license to the also noted the licensee had no assignment rights. As a
licensee. Intellectual Property Development, Inc. v. result, no "substantial rights" existed with the
TCI Cablevision of Cal., 248 F.3d 1333 exclusive licensee. "In light of CPL's [patent holder]
(Fed.Cir.2001). "As a general rule, in accordance right to permit infringement in certain cases, the
with Independent Wireless, this court adheres to the requirement that CPL [patent holder] consent to
principle that a patent owner should be joined, either certain actions and be consulted in others, and the
voluntarily or involuntarily, in any patent limits in IPD's right to assign its interests in the '202
infringement suit brought by an exclusive licensee patent, we find that the CPL IPD agreement at issue
having fewer than all substantial patent rights." Id. at transfers fewer than all substantial rights in the '202
1347;3 see also Independent Wireless Tel. Co. v. patent from CPL [patent holder] to IPD." Id. at 1345;
Radio Corp. of Am., 269 U.S. 459, 468, 46 S.Ct. 166, see also Vaupel Textilmaschinen KG v. Meccanica
70 L.Ed. 357 (1926) (patent owner is an Euro Italia, 944 F.2d 870, 875 (Fed.Cir.1991) (The
indispensable party in infringement suit brought by a court noted the importance of having the right to sue
licensee); see also Tol-O-Matic, Inc. v. Proma for infringement in determining whether joinder of
Produkt-Und Marketing Gesellschaft, m.b.H., 690 patent owner is required.)
F.Supp. 798 (D.Minn.1987). In Abbott Laboratories v. Diamedix Corp., 47
There are two reasons in infringement actions F.3d 1128 (Fed.Cir.1995), the exclusive licensee did
for requiring joinder of the patent owner when fewer not have "substantial rights" because it lacked full
than all "substantial rights" have been transferred, in enforcement rights, and possessed no assignment
a suit for declaratory relief to invalidate a patent. rights: 1) the exclusive licensee, while possessing the
First, there is the possibility that the alleged infringer right of first refusal to sue alleged infringers of the
would be subject to multiple actions. Schwarz patent, could not "indulge" or permit an infringement,
Pharma, Inc. v. Paddock Laboratories, Inc., 504 F.3d which the court noted normally accompanies a
1371, 1374 (Fed.Cir.2007). Second, to ensure that the complete conveyance of the right to sue; 2) the
rights of the patent owner are protected in a suit exclusive licensee was prevented from assigning its
brought by the licensee. Id. Although Plaintiffs' rights under the license to any other party other than
action is not an infringement action, the second a successor in business; and 3) the patent owner
reason applies where patent invalidation is sought. retained the right to participate in a suit brought by
The United States and the USDA both have an the exclusive licensee.
interest in whether the Patents in suit are invalidated. Here, the License Agreements specify that the
If the patent is declared invalid, the United States Commission, as licensee, cannot file an infringement
loses the ownership and value of its patents and any suit without first obtaining authorization from USDA,
royalty derived from the patents.4 Second, the patent the patent holder:
owner is at risk that a licensee did not diligently In the event of [] infringement, the parties hereto
defend the patent in pending litigation. The patent shall confer and shall use best efforts to reach mutual
owner may have a different perspective because the agreement upon the best course of action.
licensee's interests are limited. See Ex. 1 (Sweet Scarlet License Agreement) §
Here, the USDA did not transfer all "substantial 8.1; Ex. 2 (Autumn King License Agreement) § 8.1;
rights" as required under case law, specifically the & Ex. 3 (Scarlet Royal License Agreement) § 8.1.5.
right of assignment The License Agreements further provide:
Page 1160 USDA may grant the right of enforcement to
and the ability to bring enforcement actions. The THE COMMISSION, pursuant to Title 35, Section
Commission ostensibly is unauthorized to defend the 207(a)(2) and Title 35, Chapter 29, of the U.S.Code.
declaratory suit seeking to invalidate the U.S.— Id. at § 8.2 (emphasis added).
owned patents, without the joinder of the United The granting of the right of enforcement to THE
States. "[A] patent should not be placed at risk of COMMISSION shall be given thorough
invalidation by the licensee without the participation consideration on a case by case basis.
of the patentee," Schwarz Pharma, Inc., 504 F.3d at Id. (emphasis added).
1374, especially here where fewer than all The agreements reserve the right in the United
"substantial rights" have been transferred from patent States, to forego enforcement against infringers: The
-8-
United States may "elect[ ] not to enforce the • The Commission has an "exclusive license" to
Licensed Patents or other intellectual property rights "make, use, offer for sale, propagate, maintain, sell
for the Licensed Variety against infringers." Id. There and otherwise exploit" the patented varieties. (EL §
is no indication here that the Commission sought or 2.1)
received authorization from the USDA to defend this • The Commission has the exclusive right to
declaratory judgment suit against the USDA's sublicense the patented varieties. (EL § 2.2)
patents. Last, the license agreements do not provide • The exclusive license has no expiration date.
for assignment rights in the Commission: (EL § 7.1)
Page 1161 Page 1162
This Agreement shall not be transferred or • The Commission is entitled to "use all
assigned by THE COMMISSION to any party other commercially reasonable efforts to protect USDA's
than to a successor or assignee of the entire business property rights in the Licensed Variety" and the
interest of THE COMMISSION relating to the USDA is required to confer with and reach mutual
Licensed Variety, but in no event shall THE agreement with the Commission regarding
COMMISSION assign or transfer this Agreement to infringement of the patents. (EL § 8.1)7
a party not a citizen, resident, or entity of the United Under the sublicense agreements, Plaintiffs cite
States of America. THE COMMISSION shall notify the following:8
USDA in writing prior to any transfer or assignment. • right to terminate the sub-license. (DGL § 8.2)
(EL § 12.1). • Right to force grower to destroy all wood of
While Section 35 U.S.C. § 207(a)(2) provides the Patented Variety. (DGL § 8.4)
federal agencies, such as the USDA, the ability to Plaintiffs cite Dow Chemical Co. v. Exxon
grant exclusive licenses, the USDA did not do so Corp., 139 F.3d 1470 (Fed.Cir.1998). But the Dow
here: Chemical court, in affirming the district court's
(a) Each Federal agency is authorized to— decision that joinder of the patent owner was not
(2) grant nonexclusive, exclusive, or partially required, noted first that the patent owner was a
exclusive licenses under federally owned inventions, wholly-owned subsidiary of the licensee defendant,
royalty-free or for royalties or other consideration, and was thus not required because its interests were
and on such terms and conditions, including the grant adequately protected, and second, because the
to the licensee of the right of enforcement pursuant to licensee had been granted the right to sue for
the provisions of chapter 29 of this title as determined infringement and defend the patent owner in
appropriate in the public interest. litigation:
35 U.S.C. § 207(a)(2) (emphasis added). And in [J]oinder was not required because, "as a
conjunction with 35 U.S.C. § 207(a)(2), Federal practical matter, Exxon [Corp.] has both the duty and
Regulations provide, pursuant to 37 C.F.R. § 404.5, the capability of protecting ECPI's interests."
licenses may contain provisions permitting the right [citation] Although ECPI remains the owner of the
to enforce the patent by the licensee, without joining '783 patent, it has granted certain significant rights in
the United States: the patent to Exxon Chemical Company ("ECC"), an
(b) Licenses shall contain such terms and unincorporated division of Exxon Corp. These rights
conditions as the Federal agency determines are include the right to sue for infringement of the patent,
appropriate for the protection of the interests of the the right to defend ECPI in litigation concerning the
Federal Government and the public and are not in patent, and the right to sublicense the patent without
conflict with law or this part. The following terms notifying ECPI.
and conditions apply to any license: Id. at 1479 (citation omitted). The facts differ
(2) Any patent license may grant the licensee the here.
right of enforcement of the licensed patent without Plaintiffs also cite Eastern District of
joining the Federal agency as a party as determined Pennsylvania, Pennsalt Chemicals Corp. v. Dravo
appropriate in the public interest. Corp., 240 F.Supp. 837 (E.D.Pa. 1965). The Court
37 C.F.R. § 404.5(b)(2). held in a declaratory suit seeking to invalidate a
Plaintiffs cite to various portions of the License patent, that the patent owner was not an indispensable
28 Agreements to demonstrate the rights transferred party even though the licensee did not have specific
to the Commission are "substantial rights" to the right to sue infringers. The court permitted the suit to
Patented Varieties.5 But none of these rights include proceed against a licensee who had no enforcement
the "right of enforcement" or the "right of rights.9 The Court noted that intervention was an
assignment," two determinative rights defining option if further protection was sought by the patent
"substantial rights" under present case law:6 owner. Despite this holding, the overall weight of the
cases heavily favors evaluating license agreements on
-9-
whether substantial rights are granted to the licensee. the court found it clearly had dwindled its right to
Here, the USDA did not provide the Commission, as choose a forum.
the licensee, with the right of enforcement, nor the Id. (emphasis added).
right of assignment, "substantial rights" in licensing Case law after Dickson, recognizes that it is an
the Patented Varieties. outlier case with its unique set of facts: "Recent case
Plaintiffs argue that Defendant overlooks case law has tended to articulate the implicit denominator
law where courts have applied a different standard in in the Dickson case. The emphasis today is upon the
determining necessary and indispensable defendants ability to bring suit to protect the patent against
in actions for declaratory judgment seeking infringement; and, as a manifestation of that power,
invalidity. They argue that courts have allowed to be free to select the forum in which the question of
declaratory judgment actions for invalidity to proceed infringement should be tried. Instead of predicating
against exclusive licensees without joining the patent the right to sue upon the semantic categorization of
owner. Plaintiffs cite A.L. Smith Iron Co. v. Dickson, litigants as `licensees' or àssignees,' the more recent
141 F.2d 3, 6-7 (2d Cir.1944) and Capri Jewelry Inc. cases have tended to place reliance upon the right to
v. Hattie Carnegie Jewelry Enterprises, Ltd., 539 bring suit in affirmance of the patent. Then, assuming
F.2d 846, 847 (2d Cir.1976) (Friendly, J.). that right exists in the licensee, the licensee may be
Capri Jewelry, however, is not applicable, as it sued to test the validity of the licensed patent without
was a case of shared counsel, and the facts here are the licensor-patentees being joined as a party
not similar. Counsel in defendant." Caldwell Mfg. Co. v. Unique Balance
Page 1163 Co., 18 F.R.D. 258, 263-264 (S.D.N.Y.1955); see
Capri Jewelry represented both the patent owner and also Alamo Refining Co. v. Shell Development Co.,
the licensee and a 19(b) dismissal was reversed 99 F.Supp. 790, 800 (D.Del.1951); Messerschmitt-
because the patent owner's interest was determined to Boelkow-Blohm v. Hughes Aircraft Co., 483 F.Supp.
be adequately protected. "Counsel representing [the 49, 52 (S.D.N.Y. 1979); Alamo Refining Co. v. Shell
licensee], Hattie Carnegie in this suit are acting both Dev. Co., 99 F.Supp. 790, 800 (D.Del.1951). "The
for it [licensee] and for [the patent owner,] James in rationale of the general rule is that, whether the
the infringement suit [brought against another exclusive license is considered an assignment of all
jewelry distributor]." Id. at 853 (emphasis added); see the patentee's rights or not, the owner suffers no
also Parkson Corp. v. Andritz Sprout-Bauer, Inc., 866 prejudice from a judgment of invalidity in his
F.Supp. 773, 775 (S.D.N.Y.1994) (highlighting absence if by agreement he has entrusted the licensee
shared counsel as critical fact in Capri Jewelry). The with the right to protect his interests by suing for
United States is not represented by the Commission's infringement." Messerschmitt-Boelkow-Blohm, 483
counsel. F.Supp. at 52. "A patent owner has a property right
A.L. Smith Iron Co. v. Dickson, 141 F.2d 3, 6-7 which ought not to be adjudicated in his absence.
(2d Cir.1944) ("Dickson"), Plaintiffs' second cite, a This is a salutary principle which the courts have
Second Circuit decision, does not comport with the long recognized." Technical Tape Corp. v. Minnesota
more general and recent case law in this area. Min. & Mfg. Co., 135 F.Supp. 505, 508 (S.D.N.Y.
Dickson first noted the patent owner has an interest in 1955).
deciding the forum and was a factor to be weighed: Page 1164
[I]ts only interest in the dismissal of the Because the United States, as patent owner,
complaint is the interest of every patent owner in the owns and controls enforcement of the patents and
choice of the forum in which, and the time at which, assignability rights of the patents, and insufficient
he will assert his rights. That too is an interest proper enforcement rights, without consent, were transferred
to be weighed against the plaintiff's interest in to the Commission, the United States is a necessary
settling its present controversy with [licensee] party to this action under Rule 19.
Dickson ... Indeed, the owner may have granted a 2. Sovereign Immunity: Joinder Not Possible.
number of licenses, and it would be exceedingly When it has been determined that an absent
oppressive to subject him to the will of all his party to the suit is "necessary" under Rule 19(a), the
licensees. inquiry is whether that party, the United States, can
Id. at 6. But due to the unique facts of the case, be joined in the action. Dawavendewa v. Salt River
the court held that the patent owner did not need to be Project Agr. Imp. and Power Dist., 276 F.3d 1150,
joined to proceed with the case: 1159 (9th Cir.2002) ("Having determined that the
The Court however, found that the patent owner Nation is thrice over a necessary party to the instant
had "plainly" used the licensee to enforce its right, litigation, we next consider whether it can feasibly be
and though it may not have surrendered its choice of joined as a party.") Here, unless it is clearly shown
forum, it had permitted the licensee to license, thus
- 10 -
that the United States has waived its sovereign F.3d 1335 (Fed.Cir.2006), Eleventh Amendment
immunity, it cannot be joined. immunity barred a suit against a state University.
"Absent a waiver, sovereign immunity shields Plaintiffs sought a declaratory judgment to invalidate
the Federal government and its agencies from suit." the University-owned patent. As a result, the patent
F.D.I.C. v. Meyer, 510 U.S. 471, 475, 114 S.Ct. 996, owner, the University, was dismissed. Id. at 1345; see
127 L.Ed.2d 308 (1994). "It is axiomatic that the also Xechem Intern., Inc. v. University of Tex. M.D.
United States may not be sued without its consent Anderson Cancer Center, 382 F.3d 1324
and that the existence of consent is a prerequisite for (Fed.Cir.2004) (parties and court accepted that absent
jurisdiction." United States v. Mitchell, 463 U.S. 206, waiver or abrogation, state sovereign immunity
212, 103 S.Ct. 2961, 77 L.Ed.2d 580 (1983). "It long precluded litigation against the state university in a
has been established, of course, that the United suit seeking to correct inventorship of patents owned
States, as sovereign, ìs immune from suit save as it by the university).
consents to be sued ... and the terms of its consent to Plaintiffs argue that Defendant's Eleventh
be sued in any court define that court's jurisdiction to Amendment state sovereignty cases are not
entertain the suit.'" United States v. Testan, 424 U.S. applicable here, because they concern state
392, 399, 96 S.Ct. 948, 47 L.Ed.2d 114 (1976) immunity. However, the state immunity cases
(internal quotation marks omitted, omission in demonstrate the importance of adhering to an entity's
original). Absent a waiver, sovereign immunity bars sovereign immunity, and absent a waiver of
any proceeding against property in which the United sovereign immunity, suits to invalidate a patent,
States has an interest. See United States v. Alabama, owned by a sovereign, federal or state, are barred. If
313 U.S. 274, 282, 61 S.Ct. 1011, 85 L.Ed. 1327 there is uncertainty, case law concludes that
(1941). If the United States is immune from suit and sovereign immunity applies. If ambiguity about
no waiver is available, the United States cannot be waiver of sovereign immunity remains, that
joined under Rule 19(a), and is an indispensable party ambiguity must be interpreted to preserve sovereign
under Rule 19(b). See e.g., Dawavendewa, 276 F.3d immunity of the United States. "[A] waiver of the
at 1161 (because tribe enjoys tribal sovereign Government's sovereign immunity will be strictly
immunity, it cannot be joined). construed, in terms of its scope, in favor of the
A waiver of sovereign immunity must be sovereign." Lane v. Pena, 518 U.S. 187, 192, 116
unequivocally expressed. Department of Army v. S.Ct. 2092, 135 L.Ed.2d 486 (1996).
Blue Fox, Inc., 525 U.S. 255, 256, 119 S.Ct. 687, 142 Under the only patent-related waiver of
L.Ed.2d 718 (1999). The Government's consent to be sovereign immunity, 28 U.S.C. § 1498 permits
sued must be construed strictly, in favor of the private parties to bring patent infringement suits in
sovereign. Id. Whether sovereign immunity has been United States Federal Claims Court to seek money
waived depends on the language of a federal statute. damages only. 28 U.S.C. § 1498. "In waiving its own
Good Samaritan Hosp. v. Shalala, 508 U.S. 402, 409, immunity from patent infringement actions in 28
113 S.Ct. 2151, 124 L.Ed.2d 368 (1993) ("The U.S.C. § 1498(a) (1994 ed. and Supp. III)," the
starting point in interpreting a statute is its language, United States did not consent to treble damages nor
for `[i]f the intent of Congress is clear, that is the end injunctive relief, and permitted reasonable attorney's
of the matter.'"); United States v. Turkette, 452 U.S. fees in a narrow class of specified instances. Florida
576, 580, 101 S.Ct. 2524, 69 L.Ed.2d 246 (1981) ("In Prepaid Postsecondary Educ. Expense Bd. v. College
determining the scope of a statute, we look first to its Sav. Bank, 527 U.S. 627, 648, n. 11, 119 S.Ct. 2199,
language.") This suit is against a United States' 144 L.Ed.2d 575 (1999). This suit must be brought in
agency, USDA. Any suit against a federal agency is a Federal Claims Court against the United States and
suit against the United States for the purposes of by its plain terms 28 U.S.C. § 1498 does not cover
sovereign immunity. United States v. Mitchell, 463 declaratory judgments seeking to invalidate a patent.
U.S. 206, 212, 103 S.Ct. 2961, 77 L.Ed.2d 580 Further, the federal statute covering declaratory relief
(1983). actions, the Declaratory Judgment Act, 28 U.S.C. §
A declaratory judgment seeking invalidity of a 2201, standing alone, does not waive sovereign
U.S.-owned patent squarely implicates sovereign immunity. Wyoming v. United States, 279 F.3d 1214,
immunity. Further, property owners are generally 1225 (10th Cir.2002) (the declaratory judgment
necessary parties to actions that could affect their statute, 28 U.S.C. § 2201, itself does not confer
property interests adversely.10 The United jurisdiction on a federal court where none otherwise
Page 1165 exists). "It is well settled, however, that said Act
States, as owner of the Patented Varieties, is no [Declaratory Act] does not of itself create
exception. In Tegic Communications Corp. v. Board jurisdiction; it merely adds an additional remedy
of Regents of the University of Texas System, 458 where the district court already has jurisdiction to
- 11 -
entertain the suit." Wells v. United States, 280 F.2d review under § 702 of the APA. Plaintiffs were not
275, 277 (9th Cir. 1960). afforded an opportunity to respond. However, in the
There are limited waivers of sovereign later case, Gallo Cattle Co. v. U.S. Dept. of
immunity enacted by Congress for suits involving Agriculture, 159 F.3d 1194 (9th Cir.1998), the Court
property interests of the United States, but such held that review of agency action under the APA,
statutes do not address a waiver for patent-property only is available if it constitutes "final agency action"
interests of the U.S.11 Generally property owners are for which there is no other adequate remedy in a
necessary parties to actions that could adversely court or agency action that is made reviewable by
Page 1166 statute. 5 U.S.C. § 704. However, in an earlier Ninth
affect their property interests and the United States is Circuit Court decision, The Presbyterian Church
no exception, as a patent owner.12 The United States (U.S.A.) v. U.S., 870 F.2d 518 (9th Cir. 1989), which
cannot be joined absent a clear waiver of sovereign involved an injunctive suit brought against the
immunity. Plaintiffs have not shown such a waiver Immigration and Naturalization Service ("INS"), for
exists. The United States cannot be joined. violation of First and Fourteenth Amendment rights,
Plaintiffs argue § 702 of the Administrative the court did not limit § 702's sovereign immunity
Procedure Act ("APA"), Title 5 United States Code, waiver to "agency action" as is technically defined in
eliminates in almost every circumstance, the defense § 551(13) of the APA: "àgency action' includes the
of sovereign immunity to actions seeking non- whole or a part of an agency rule, order, license,
monetary relief against unlawful action by sanction, relief, or the equivalent or denial
government agencies and officials. Section 702 of the Page 1167
APA states: thereof, or failure to act." 5 U.S.C. § 551(13).
A person suffering legal wrong because of Nothing in the language of the amendment
agency action, or adversely affected or aggrieved by suggests that the waiver of sovereign immunity is
agency action within the meaning of a relevant limited to claims challenging conduct falling in the
statute, is entitled to judicial review thereof. An narrow definition of "agency action" ... Moreover,
action is a court of the United States seeking relief nothing in the legislative history of the 1978
other than money damages and stating a claim that an amendment of § 702 suggests that Congress intended
agency or an officer or employee thereof acted or to limit the waiver of sovereign immunity to the
failed to act in an official capacity or under color of specific forms of "agency action" enumerated in §
legal authority shall not be dismissed nor relief 551(13). On the contrary, Congress stated that "the
therein be denied on the ground that it is against the time [has] now come to eliminate the sovereign
United States or that the United States is an immunity defense in all equitable actions for specific
indispensable party. The United States may be named relief against a Federal agency or officer acting in an
as a defendant in any such action, and a judgment or official capacity." H.Rep. No. 1656, 94th Cong., 2d
decree may be entered against the United States: Sess. 9, reprinted in 1976 U.S.Code Cong. &
Provided, that any mandatory or injunctive decree Admin.News 6121, 6129 (emphasis supplied).
shall specify the Federal officer or officers (by name Congress singled out types of government conduct
or by title), and their successors in office, personally similar to the alleged INS conduct in this case-"tax
responsible for compliance. investigations" and "control of subversive activities"-
5 U.S.C. § 702 (emphasis added). as appropriate for judicial review under the amended
The one limitation to this waiver of sovereign version of § 702.... This waiver was clearly intended
immunity for non-monetary actions against the to cover the full spectrum of agency conduct,
United States is if "any other statute that grants regardless of whether it fell within the technical
consent to suit expressly or impliedly forbids the definition of "agency action" contained in § 551(13).
relief which is sought." 5 U.S.C. § 702(2) (emphasis 870 F.2d at 525. A later Ninth Circuit decision,
added). Defendant refers to the text of § 702 to argue Gros Ventre Tribe v. United States, 469 F.3d 801,
that it forecloses Plaintiffs' argument concerning the 808-809 (9th Cir. 2006) recognized the split, but
APA as a waiver of sovereign immunity because provided no further guidance. "The parties go to great
Plaintiffs are not seeking a review of agency "action" pains to argue the issue whether the APA's waiver of
or "inaction," as the suit is brought against the sovereign immunity under 5 U.S.C. § 702 for non-
Commission only, the state agency and seeks, based monetary actions against the government is
on the actions of the Commission, a declaration of conditioned upon the parties challenging a `final
invalidity of the U.S.-owned patents. agency action' as set forth in 5 U.S.C. § 704. We now
In addition, Defendant for the first time in its recognize that there is a conflict in our caselaw
Reply, discusses the split in the Ninth Circuit on regarding this issue; however, we need not resolve it
whether final agency action is required to seek as we affirm the district court on its alternative." Id.
- 12 -
at 808. While the Gros Ventre Tribe court did not The first factor weighs in favor of dismissal.
provide any further guidance, it discussed the issue of "The first factor directs the court to consider, in
§ 702's waiver of sovereign immunity, at length: determining whether the action may proceed, the
Under The Presbyterian Church, § 702's waiver prejudice to absent entities and present parties in the
is not conditioned on the APA's "agency action" event judgment is rendered without joinder."
requirement. Therefore, it follows that § 702's waiver Republic of Philippines, 128 S.Ct. at 2182. Plaintiffs
cannot then be conditioned on the APA's "final seek to invalidate and declare unenforceable patents
agency action" requirement. See Reno v. Am-Arab owned by the United States. The validity of the
Anti-Discrimination Comm., 525 U.S. 471, 510 n. 4, USDA's patent has been challenged. If invalidated,
119 S.Ct. 936, 142 L.Ed.2d 940 (1999) (Souter, J., the USDA's assets, the Patents, would be destroyed,
dissenting) ("[The waiver of sovereign immunity Patented Varieties would be freely marketed, and the
found in 5 U.S.C. § 702] is not restricted by the USDA would lose royalties. The patents would be
requirement of final agency action that applies to declared invalid under claims one through three of
suits under the [APA]." (citing The Presbyterian the Complaint and unenforceable under claim four
Church, 870 F.2d at 523-26)). But that is directly for inequitable conduct and claim six for patent
contrary to the holding in Gallo Cattle where we misuse.
stated that "the APA's waiver of sovereign immunity Plaintiffs, however, argue that the Commission
contains several limitations," including § 704's final can and will adequately protect the USDA's interest
agency action requirement ... Nevertheless, we need in preserving the validity of the patents-in-suit. The
not make a sua sponte en banc call to resolve this Commission conceived of the patenting programs
conflict ... that resulted in the Patented Varieties and lobbied for
469 F.3d at 809. Plaintiffs have cited no case its acceptance by the USDA. There is a
where the APA § 702 was invoked as an asserted Memorandum of Understanding between the
waiver of sovereign immunity for purposes of Commission and the USDA that recognizes that their
bringing a patent invalidity case against the United interests in the patenting program are aligned. The
States. However, if Plaintiff can amend the Commission has aggressively enforced and litigated
Complaint to adequately state a § 702 APA claim the patents-in-suit in the past. If its interests are
against the United States, it may. prejudiced, Plaintiffs argue the United States could
3. United States is an Indispensable Party and intervene.
the Disputed Claims Must be Dismissed. Plaintiffs cite Dainippon Screen Mfg. Co., Ltd.
If a necessary party cannot be joined, a court v. CFMT, 142 F.3d 1266 (Fed.Cir. 1998), to support
must consider whether the party is indispensable. See their argument that in an action challenging the
Fed.R.Civ.P. 19(b). "A party is indispensable if in validity of a patent, the action can proceed without
èquity and good conscience,' the court should not the patent owner. Here, however, unlike in
allow the action to proceed in its absence." Dainippon, there is no unity of ownership or interest
Dawavendewa v. Salt River Project Agr. Imp. and between the patent owner and licensee. The facts of
Power Dist., 276 F.3d 1150, 1161 (9th Cir.2002), Dainippon are instructive. The patent owner in the
quoting Fed.R.Civ.P. 19(b). suit was not an indispensable party because the suit
Page 1168 was brought by a competitor against the parent
Rule 19(b) sets out four factors to determine company, who held an exclusive license from its
whether a case must be dismissed. However, where wholly-owned subsidiary. Dainippon found no
the absent party cannot be joined in light of sovereign indispensability in part because the patent holder was
immunity, "there may be very little need for the parent company's holding company for patents
balancing ... because immunity itself may be viewed and held an identity of interest and ownership with
as the compelling factor." Kescoli v. Babbitt, 101 the subsidiary. Id. at 1273. As to the first 19(b)
F.3d 1304, 1311 (9th Cir.1996).13 factor, there was an adequacy of protection of the
The four factors are: subsidiary's interests, the patent owner, by the parent
(1) prejudice to any party or to the absent party; company, the licensee. Further, the patent owner
(2) whether relief can be shaped to lessen could intervene at any time. Id. at 1272.
prejudice; Page 1169
(3) whether an adequate remedy, even if not The second factor, whether prejudice can be
complete, can be awarded without the absent party; lessened by shaping the relief provided, also weighs
and in favor of dismissal. No declaratory, injunctive or
(4) whether there exists an alternative forum. compensatory relief would be granted under the
Id. at 1310-11. Complaint if the patent's validity were not
challenged. "Any measures to lessen these prejudices
- 13 -
would necessarily dilute the efficacy of the judgment against them for patent infringement brought by the
sought." Messerschmitt-Boelkow-Blohm GmbH v. United States or the Commission. See 35 U.S.C. §
Hughes Aircraft, 483 F.Supp. 49, 53 (S.D.N.Y. 282.14
1979). Although the Complaint is brought against the Page 1170
Commission alone, granting declaratory relief However, to require Plaintiffs to violate the license
requires finding that the Commission had no and wait to see whether the patent owner sues for
authority to enforce an invalid patent, that the patent infringement creates an unfavorable situation as
is invalid and unenforceable, a patent which is owned damages could be exacerbated. Where "no alternative
by the USDA, a branch of the United States. Here, forum exists, the district court should be èxtra
any judgment cannot be tailored to eliminate the cautious' before dismissing an action." Kescoli v.
prejudice to the United States. A finding for Plaintiffs Babbitt, 101 F.3d 1304, 1311 (9th Cir.1996). But just
would declare invalid patents owned by the United as the courts have held in actions involving tribal
States, abrogating the United States' interest in the immunity and state immunity, sovereign immunity of
patents, not only depriving the United States of the Untied States can justify dismissal for inability to
royalties under the patents, but ending the United join an indispensable party, despite the fact that no
States' ability to license the patents. In a Western alternative forum is available. "If the necessary party
District of Pennsylvania case, Suprex Corp. v. Lee is immune from suit, there may be very little need for
Scientific, Inc., 660 F.Supp. 89 (W.D.Pa.1987), the balancing Rule 19(b) factors because immunity itself
court addressed similar facts relating to a university, may be viewed as the compelling factor." Id. at 1311
stated: (internal citations and quotations omitted). The latest
Because the university [patent owner] is a Supreme Court case, Republic of Philippines v.
necessary party, we must consider whether the action Pimentel, ___ U.S. ___, 128 S.Ct. 2180, 171 L.Ed.2d
can proceed in its absence. First, a judgment of patent 131 (2008), to address Rule 19, held as to immunity
invalidity in the university's absence would be barring an action from proceeding without the
prejudicial. Such a judgment would devalue the sovereign party:
university's asset, reduce royalties now accruing and The analysis of the joinder issue in those cases
severely restrict or even destroy the university's was somewhat perfunctory, but the holdings were
ability to develop and market the chromatography clear: A case may not proceed when a required-entity
technology. Second, the prejudice to the absent patent sovereign is not amenable to suit. These cases
owner cannot be lessened through the "shaping of instruct us that where sovereign immunity is asserted,
relief" because no declaratory, injunctive or and the claims of the sovereign are not frivolous,
compensatory relief would be granted under the dismissal of the action must be ordered where there is
existing complaint if the patent's validity were not a potential for injury to the interests of the absent
questioned ... such relief requires a finding that Lee sovereign.
Scientific has no authority to enforce an invalid 128 S.Ct. at 2190-91. In this context, dismissal
patent owned by the university. is appropriate even if Plaintiffs have no alternative
Id. at 93. forum for their claim. See Dawavendewa, 276 F.3d at
The third factor, adequacy of remedy, also 1162.
favors dismissal. "`[A]dequcy' refers not to Because the proceedings in this case threaten
satisfaction of [Plaintiffs'] claims, but to the `public both the property and sovereign immunity of the
stake in settling disputes by wholes, whenever United States, the United States' failure to waive its
possible.'" Republic of Philippines, 128 S.Ct. at 2183, immunity from suit strongly supports dismissing this
citing Provident Tradesmens Bank & Trust Co. v. litigation in its absence.
Patterson, 390 U.S. 102, 111, 88 S.Ct. 733, 19 Defendant also seeks to dismiss claims four and
L.Ed.2d 936 (1968). As in Republic of Philippines, six, for inequitable conduct and patent misuse on the
"[g]oing forward with the action in the absence of" same grounds that the United States is a necessary
the United States, "would not further this public and indispensable party. Plaintiffs' fourth claim
interest because they could not be bound by a alleges inequitable conduct against Defendant
judgment to which they were not parties." Id. The Commission. In the fourth claim for inequitable
Court held the University had not waived its Eleventh conduct, Plaintiffs allege actions by the USDA and
Amendment immunity. Mr. Ramming, and actions of the patent prosecuting
The fourth factor is whether there is an available attorneys ("Margaret A. Conner, John D. Fado,
alternative forum. First is the Court of Federal and/or Lesley Shaw, who prosecuted the application
Claims, expressly authorized by statute. Plaintiffs Sweet Scarlet variety") amount to inequitable
have an opportunity to raise the defense of patent conduct. (Doc. 1, Complaint ¶¶ 90, 91). The United
invalidity and unenforceability in an action brought States was not a named Defendant in this claim,
- 14 -
although its rights will clearly be implicated if there material information." Chiron Corp. v. Abbott
is a finding in Plaintiffs' favor. Claim six is a patent Laboratories, 156 F.R.D. 219 (N.D.Cal.1994);
misuse claim, seeking a judgment that the patents are Multimedia Patent Trust v. Microsoft Corp., 525
unenforceable. Again, the United States is not a F.Supp.2d 1200 (S.D.Cal.2007). (Inequitable conduct
named party, although this claim, if decided for is a breach of the patentee's duties to the PTO of
Plaintiffs, will adversely effect the rights of the candor, good faith, and honesty, may be stricken
United States. Because Plaintiffs are seeking a pursuant to Rule 12(f) for failure to plead with
judgment that the '284, '891 and '229 patents are particularity).
unenforceable for misuse, the United States is a The Ninth Circuit has described the
necessary party and indispensable party under Rule requirements of sufficiently pleading the facts to
19 to this claim. (Complaint, ¶ 109). meet the requirements of Rule 9(b):
Defendant's motion to dismiss pursuant to Rule We have held that Rule 9(b) "requires the
19(b) is GRANTED WITHOUT LEAVE TO identification of the circumstances constituting fraud
AMEND, except if Plaintiffs amend to name the so that the defendant can prepare an adequate answer
united States and consent to transfer of the case to the from the allegations." Bosse v. Crowell Collier &
Federal Court of Claims. Macmillan, 565 F.2d 602, 611 (9th Cir.1977); see
B. INEQUITABLE CONDUCT. also Walling v. Beverly Enterprises, 476 F.2d 393,
Defendant seeks, separately from its Rule 19 397 (9th Cir. 1973).
motion, to dismiss Plaintiffs' fourth claim for We have interpreted Rule 9(b) to mean that the
inequitable conduct on other grounds. Defendant's pleader must state the time, place, and specific
motion to dismiss on Rule 19 grounds has been content of the false representations as well as the
granted identities of the parties to the misrepresentation.
Page 1171 Schreiber Distributing Co. v. Serv-Well
with conditional leave to amend. The other grounds Furniture, 806 F.2d 1393, 1400-01 (9th Cir.1986)
on which Defendant argues for dismissal of the (RICO suit) (emphasis added).
fourth claim are briefly addressed here. Defendant Plaintiffs in their Complaint allege that the '891
moves to dismiss Plaintiffs' fourth claim for patent for Sweet Scarlet is unenforceable because of
inequitable conduct, which seeks a judgment that the the inequitable conduct by the USDA and Dr.
'891 Patent for Sweet Scarlet is unenforceable. Ramming, co-inventor of Sweet Scarlet, who "knew
Defendant argues that Plaintiffs fail to allege an of prior possession and reproduction under the
intent by USDA, and by Dr. Ramming, to deceive the Commission's àmnesty program' and the group of
PTO. Defendant also claims that Plaintiffs fail to individuals who "prosecuted the application on the
allege their claim with the specificity required under Sweet Scarlet Variety before the USPTO, [who]
Rule 9(b). Plaintiffs rejoin that although the knew of the prior possession and reproduction of the
Complaint does not allege the specific words Sweet Scarlet variety by growers who admitted to
"fraudulent intent," all the allegations pled by such possession and reproduction under the
Plaintiffs regarding inequitable conduct are more Commission's àmnesty program.'" (Doc. 1,
than sufficient to state such a claim and comply with Complaint, ¶ 90, IV. Claim, Inequitable Conduct).
Rule 9(b). Plaintiffs allege in their Complaint, that prior to the
A claim for inequitable conduct requires proof issuance of the '891 patent, neither the USDA, nor
that Defendant, one, affirmatively failed to disclose Dr. Ramming, nor Ms. Conner, Mr. Fado and/or Mr.
material information, or submitted false material Shaw notified the USPTO of the prior possession and
information, and two, did so with an intent to reproduction by the growers and this breached the
deceive. "To be guilty of inequitable conduct, one duty of candor owed to the USPTO.
must have intended to act inequitably." FMC Corp. v. Page 1172
Manitowoc Co., Inc., 835 F.2d 1411, 1415 The "breach of the duty of candor constitutes
(Fed.Cir.1987). "Materiality and intent to deceive are inequitable conduct." (Id. at ¶¶ 91-92).
distinct factual inquiries, and each must be shown by Plaintiffs state:
clear and convincing evidence." Life Technologies, Specifically, approximately nine growers
Inc. v. Clontech Laboratories, 224 F.3d 1320, 1324 received Sweet Scarlet from Dr. Ramming for trials
(Fed.Cir.2000). Inequitable conduct must be pled in 1999 and 2000. At least three of these growers sold
with particularity. See Central Admixture Pharmacy fruit produced into commercial markets before 2002.
Servs., v. Advanced Cardiac Solutions, 482 F.3d Additionally, at least 17 other growers, who were not
1347, 1356 (Fed.Cir.2007) (inequitable conduct must part of trials, received and reproduced the Sweet
be pled with particularity). "Inequitable conduct Scarlet variety. On information and belief, these
encompasses deception, fraud, or failure to disclose reproductions took place prior to 2002. Neither the
- 15 -
USDA nor Dr. Ramming oversaw or controlled the (2) that the party enforcing the patent was aware
reproductions created by these 17 growers. of the fraud when bringing suit;
(Doc. 1, Complaint, ¶¶ 54-55). The totality of (3) independent and clear evidence of deceptive
these assertions provide sufficient specificity for intent;
Plaintiffs have sufficiently pled a claim for (4) a clear showing of reliance, i.e., that the
inequitable conduct. This Rule 9(b) motion to dismiss patent would not have issued but
is DENIED. Page 1173
C. ANTI-TRUST for the misrepresentation or omission; and
Defendant moves to dismiss Plaintiffs' fifth (5) the necessary additional elements of an
claim for antitrust violations, specifically, Plaintiffs' underlying violation of the antitrust laws.
claim under Section 2 of the Sherman Act, 15 U.S.C. In re Netflix Antitrust Litigation, 50,6 F.Supp.2d
§ 2. Defendant argues that Plaintiffs' anti-trust claim 308 (N.D.Cal.2007), citing Nobelpharma AB,
fails on three bases: (1) Plaintiffs have failed to allege Nobelpharma v. Implant Innovations, Inc., 141 F.3d
a cognizable relevant market that the Commission 1059, 1068-71 (Fed.Cir.1998).15
could have monopolized; (2) Plaintiffs have failed to Plaintiffs' § 2 claim rests on allegations that
allege that the Commission even participates in the Defendant illegally monopolized interstate and
alleged market for the Patented Varieties; (3) and foreign commerce in bad faith by enforcing alleged
last, Defendant argues that Plaintiffs are indirect patent rights, as the exclusive licensee of the patents
purchasers and therefore lack standing to seek and collecting royalty fees on the Patented Varieties
damages under the anti-trust laws. Plaintiffs rejoin under its "amnesty" program, prior to issuance of a
that they have identified a relevant market, "the valid U.S. patent. It then enforced patent rights and
worldwide market," for table grapes of these collected royalties on the Sweet Scarlet variety
varieties; they have also alleged active participation knowing that the patent could not be enforced due to
by the Commission in the worldwide market; and prior public use.
they have standing to seek damages. In Walker Process Equip., Inc. v. Food Mach. &
"Fraud in the procurement of intellectual Chem. Corp., 382 U.S. 172, 177, 86 S.Ct. 347, 15
property rights can, upon a proper showing, give rise L.Ed.2d 247 (1965), the Court clarified that
to antitrust liability." 4 J. von Kalinowski, Antitrust "knowing and willful" fraud must be shown, and is a
Laws and Trade Regulation § 73.03 (2007). The predicate to a potential antitrust violation. "Fraud in
seminal Supreme Court case on this claim is Walker the procurement of a patent requires proof of the
Process Equip., Inc. v. Food Machinery & Chem. elements of common law fraud: (1) that a false
Corp., 382 U.S. 172, 86 S.Ct. 347, 15 L.Ed.2d 247 representation of a material fact was made, (2) with
(1965). Walker established that a claim for "the the intent to deceive, (3) which induced the deceived
enforcement of a patent procured by fraud on the party to act in justifiable reliance on the
Patent Office may be violative of § 2 of the Sherman misrepresentation, and (4) which caused injury that
Act provided the other elements necessary to a § 2 would not otherwise have occurred." C.R. Bard, Inc.
case are present." Id. at 174, 86 S.Ct. 347. Antitrust v. M3 Systems, Inc., 157 F.3d 1340, 1364
liability may arise when a patent has been procured (Fed.Cir.1998). "To establish fraud for purposes of
by knowing and willful fraud and the patentee antitrust violation, the defendant `must make a
gaining market power in the relevant market through greater showing of scienter and materiality' than
the use of its fraudulently obtained patent to restrain when seeking unenforceability based on conduct
competition. C.R. Bard, Inc. v. M3 Sys., Inc., 157 before the Patent Office." Id. (Bard).
F.3d 1340, 1367 (Fed.Cir.1998). 1. Indirect Purchasers.
Section 2 of the Sherman Act provides: Defendant argues that Plaintiffs cannot sue for
"Every person who shall monopolize, or attempt anti-trust damages as indirect purchasers under the
to monopolize, or combine or conspire with any other Illinois Brick doctrine, which denies standing to
person or persons, to monopolize any part of the indirect purchasers affected by allegedly anti-
trade or commerce among the several States ... shall competitive activity—that is, plaintiffs purchasing
be deemed guilty of a felony ..." products indirectly or through intermediaries. Illinois
15 U.S.C. § 2. Brick v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52
In a Walker Process fraud, the antitrust claimant L.Ed.2d 707 (1977). Defendant contends that
must show: Plaintiffs cannot seek damages by claiming that the
(1) that the asserted patent was obtained by prices of the grape vines they bought from the
knowingly and willfully misrepresenting the facts to nurseries were inflated because of the royalties the
the PTO; Commission impermissibly charged the nurseries.
- 16 -
Defendant cites a Fourth Circuit case decision in Walker Process claim, but must add these necessary
Kloth v. Microsoft Corp., 444 F.3d 312 (4th facts.
Cir.2006). In Kloth, the Court dismissed a 2. Active Participation.
monopolization claim against manufacturers brought Defendant also contends that the Commission
by purchasers of computers with pre-installed does not participate in the market, because the
software. The purchasers bought the computers from Commission's only involvement is the hand-selecting
and paid intermediaries and retailers, not the three nurseries to exclusively sell all new patented
manufacturer. The Court held that Plaintiffs who table grape varieties. Plaintiffs do not allege that the
purchased Microsoft licenses from intermediaries and Commission itself sells the Patented Varieties, rather
retailers when they purchased their pre-installed the three nurseries are marketers and their firms are
software computers fit the Illinois Brick paradigm. not named parties in this litigation.
They were indirect purchasers prohibited from Plaintiffs claim the Commission has been an
asserting a claim against the manufacturer. Id. at 323. active participant with direct and significant anti-
Page 1174 competitive activities in the relevant market,
Plaintiff's antitrust claim is not however solely sufficient to uphold an antitrust claim for:
premised on inflated prices by indirect purchasers. (1) the Commission was the party that collected
Rather, Plaintiffs' antitrust claim is more broadly on-going royalties for each sale of the Patented
based on the enforcement of a patent, knowingly Varieties;
procured through fraud, by an exclusive licensee. (2) the Commission threatened enforcement of
Plaintiffs allege that the Commission's threat of the patents for the Patented Varieties;
enforcement and enforcement of a fraudulently (3) the Commission threatened and sought
obtained patent caused Plaintiffs to obtain a license it removal of plant material for the Patented Varieties
would not have otherwise been required to obtain. from growers' land, including growers who have
Under that license, Plaintiffs must comply with a licensed the Patented Varieties;
number of anticompetitive clauses. (Doc. 24, (4) the Commission required growers to pay for
Opposition, p. 23:22-24-24:1-4). Plaintiffs state that and obtain new licenses in order to expand existing
"[b]ecause [it's] antitrust claim is not based on an crops of the Patents Varieties;
inflated price paid by an indirect purchaser, Illinois (5) the Commission granted "amnesty" to
Brick is wholly inapplicable." (Id. at p. 24:10-12). growers in exchange for royalty fees for the Patented
In Walker Process Equipment, Inc. v. Food Varieties under the threat of enforcement of
Machinery & Chemical Corp., 382 U.S. 172, 86 S.Ct. fraudulently procured patent(s); and
347, 15 L.Ed.2d 247 (1965), the Supreme Court held Page 1175
that "the enforcement of a patent procured by fraud (6) the Commission granted licenses to a limited
on the Patent Office may be violative of § 2 of the number of nurseries to distribute the plant material
Sherman Act ..." Id. at 174, 86 S.Ct. 347. As the for the Patented Varieties to the exclusion of other
Supreme Court explained, obtaining a patent "by nurseries and on terms dictated by the Commission.
knowing and willfully misrepresenting facts to the (Doc. 24, Opposition, p. 23).
Patent Office ... would be sufficient to strip [the "The gravamen of a section 2 claim is the
patentee] of its exemption from the antitrust laws." deliberate use of market power by a competitor to
Id. at 177, 86 S.Ct. 347. "This conclusion applies control price or exclude competition." Mercy-
with equal force to an assignee who maintains and Peninsula Ambulance, Inc. v. County of San Mateo,
enforces the patent with knowledge of the patent's 791 F.2d 755, 758 (9th Cir.1986). If the Commission
infirmity." Id. at 177 n. 5, 86 S.Ct. 347. does not compete in the relevant market, then it
Defendant also argues that Plaintiffs have not cannot be liable for monopolizing a business in
alleged that they have suffered compensable damages which it does not compete. Id. at 759. In Mercy-
from having been unable to propagate their own Peninsula, an ambulance company sued San Mateo
vines or distribute vines to other distributors. County for a monopolization claim, claiming the
However, Plaintiffs' Complaint makes a general county wrongfully excluded it from a health care
allegation in paragraph 101 of their anti-trust claim provision market by refusing to grant it a contract to
that "[t]he existence and misuse of the patents on the provide such services. Id. In its decision, the Ninth
Patented Varieties has deprived Plaintiffs of revenues Circuit noted that the County, during the brief period
and profits that it would have otherwise enjoyed prior to the enactment of the EMS Act, which
absent the Commission's anticompetitive activities provided it state immunity under antitrust laws, the
and patent misuse." (Complaint, ¶ 101). Although County was not a competitor in the health care
Plaintiffs do not specify what is the basis for such provision market, the relevant market. Id. The Court
lost revenues and profits, they are alleging a basic provided no discussion, nor cited to relevant law on
- 17 -
the issue. But it is clear from case law that Plaintiffs not encompass all interchangeable substitute products
must allege that Defendant has monopoly power in even when all factual inferences are granted in
the relevant market, that is, the power to control plaintiff's favor, the relevant market is legally
prices and exclude competition. U.S. v. Grinnell insufficient, and a motion to dismiss may be
Corp., 384 U.S. 563, 570, 86 S.Ct. 1698, 16 L.Ed.2d granted." Apani, 300 F.3d at 628. Defendant argues
778 (1966). Here, the Commission sub-licenses the that just as in Tanaka and Apani, the instant
patented grape stock to the nurseries and the Complaint should be dismissed because it fails to
nurseries sell grape stock to Plaintiffs, with allege any facts even remotely suggesting that the
restrictions, imposed and monitored by the Patented Varieties are not interchangeable with a host
Commission, on use, re-sale ability and propagation. of other varieties.
The Commission sets the prices. It is the primary "The relevant market is `the narrowest market
party enforcing the licenses. The nurseries do not which is wide enough so that products from adjacent
have the power to lessen or destroy competition, they areas or from other producers in the same area cannot
only sell the Patented Varieties based on the compete on substantial parity with those included in
restrictions placed by the Commission and the the market.' Sullivan, Antitrust 41 (1977)." Home
USDA. The Commission remains the primary actor Placement Service, Inc. v. Providence Journal Co.,
dictating terms of marketing and use for the varieties 682 F.2d 274, 280 (1st Cir.1982). "[T]he term
in-suit. `relevant market' encompasses notions of geography
3. Relevant Market. as well as product use, quality, and description. The
Monopoly power is defined as "`the power to geographic market extends to the àrea of effective
control prices or exclude competition.' The existence competition' ... where buyers can turn for alternative
of such power ordinarily may be inferred from the sources of supply.' The product market includes the
predominant share of the market." Id. at 571, 86 S.Ct. pool of goods or services that enjoy reasonable
1698. To determine if a monopoly exists, it is first interchangeability of use and cross-elasticity of
necessary to determine the market, both in terms of demand." Tanaka v. University of Southern
geography and product, that is being monopolized, California, 252 F.3d 1059, 1063 (9th Cir. 2001),
that is the "relevant market." Thurman Industries, Inc. quoting Oltz v. St. Peter's Cmty. Hosp., 861 F.2d
v. Pay `N Pak Stores, 875 F.2d 1369, 1373 (9th 1440, 1446 (9th Cir.1988).
Cir.1989). "[T]he definition of the relevant market is The Supreme Court in Eastman Kodak Co. v.
a factual inquiry for the jury, and the court may not Image Technical Services, Inc., 504 U.S. 451, 482,
weigh evidence or judge witness credibility." Rebel 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992), stated: "The
Oil, 51 F.3d at 1435. "A submarket exists if it is proper market definition in this case can be
sufficiently insulated from the larger market so that determined only after a factual inquiry into the
supply and demand are inelastic with the larger `commercial realities' faced by consumers." 504 U.S.
market." Morgan, Strand, Wheeler & Biggs v. at 482, 112 S.Ct. 2072. "The purpose of market
Radiology, Ltd., 924 F.2d 1484, 1490 (9th Cir.1991). definitions is not to frustrate anti-trust plaintiffs by
Defendant cites Tanaka v. University of requiring the proof of bright lines which do not exist,
Southern California, 252 F.3d 1059 (9th Cir.2001) but is to help identify monopoly power, that is, `the
and Apani Southwest, Inc. v. Coca-Cola Enterprises, power to control prices or exclude competition.'"
Inc., 300 F.3d 620 (5th Cir.2002). In Tanaka, a Home Placement Service, Inc. v. Providence Journal
college soccer player seeking to play for a college Co., 682 F.2d 274, 280 (1st Cir.1982), quoting
program in Los Angeles made a conclusory United States v. E.I. du Pont de Nemours & Co., 351
allegation that the "UCLA women's soccer program" U.S. 377, 391, 76 S.Ct. 994, 100 L.Ed. 1264 (1956).
constituted its own relevant product market. Tanaka, Motions to dismiss are not the place to delve
252 F.3d at 1063. The court rejected such a limited into a factual inquiry on whether, in the market, local,
definition of the relevant market and held that regional, national, or international, for table grapes, if
women's college soccer programs "compete in the other varieties of table grapes are effective
recruiting of student-athletes and, hence, are substitutes. As the Second Circuit court case
interchangeable with each other for antitrust discussed, Todd v. Exxon Corp., 275 F.3d 191, 199-
purposes." Id. at 1064. In Apani, the Court stated: 200 (2d Cir.2001), "[b]ecause market definition is a
"where the plaintiff fails to define its proposed deeply fact-intensive inquiry, courts hesitate to grant
relevant motions to dismiss for failure to plead a relevant
Page 1176 product market." "To survive a Rule 12(b)(6) motion
market with reference to the rule of reasonable to dismiss, an alleged product market must bear a
interchangeability and cross-elasticity of demand, or `rational relation to the methodology courts prescribe
alleges a proposed relevant market that clearly does to define a market for antitrust purposes—analysis of
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the interchangeability of use or the cross-elasticity of If there are effective substitutes, they must be
demand' ... and it must be `plausible.'" Id. at 200 considered part of the relevant market. Plaintiffs do
(citations omitted). The court further explained: not allege in the Complaint that no other substitutes
dismissals in such cases on the pleadings typically for each Patented Variety exist, but state for the first
occur in matters involving (1) a failure to attempt to time in their opposition papers, that there are
limit a product market to a single brand, franchise, submarkets and that each Patented Variety, Sweet
institution, or comparable entity that competes with Scarlet, Autumn King and Scarlet Royal, are
potential substitutes or (2) a failure to attempt a inherently unique as each grapevine and fruit must
plausible explanation as to why a market should be derive from the single parent plant. Although
limited in a particular way. Id. (citations omitted). dubious, it is not impossible that each Patented
"[A] complaint may be dismissed under Rule Variety constitutes a relevant market. See Walker,
12(b)(6) if the complaint's `relevant market' 382 U.S. at 177-178, 86 S.Ct. 347 ("To establish
definition is facially unsustainable." Newcal Indus., monopolization or attempt to monopolize a part of
Inc. v. Ikon Office Solution, 513 F.3d 1038, 1045 trade or commerce under § 2 of the Sherman Act, it
(9th Cir.2008). would then be necessary to appraise the exclusionary
Brown Shoe Co. v. United States, 370 U.S. 294, power of the illegal patent claim in terms of the
82 S.Ct. 1502, 8 L.Ed.2d 510 relevant market for the product involved. Without a
Page 1177 definition of that market there is no way to measure
(1962) set forth the standards for defining relevant Food Machinery's ability to lessen or destroy
product markets and submarkets and demonstrates competition. It may be that the device-knee-action
the fact-intensive considerations: swing diffusers—used in sewage treatment systems,
The outer boundaries of a product market are does not comprise a relevant market. There may be
determined by the reasonable interchangeability of effective substitutes for the device, which do not
use or the cross-elasticity of demand between the infringe the patent. This is a matter of proof, as is the
product itself and substitutes for it. However, within amount of damages suffered by Walker.")
this broad market, well-defined submarkets may exist The market must include all economic
which, in themselves, constitute product markets for substitutes, "... it is legally permissible to premise
antitrust purposes. United States v. E.I. du Pont de antitrust allegations on a submarket. That is, an
Nemours & Co., 353 U.S. 586, 593-595, 77 S.Ct. antitrust claim may, under certain circumstances,
872, 877, 1 L.Ed.2d 1057. The boundaries of such a allege restraints of trade within or monopolization of
submarket may be determined by examining such a small part of the general market of substitutable
practical indicia as industry or public recognition of products. In order to establish the existence of a
the submarket as a separate economic entity, the legally cognizable submarket, the plaintiff must be
product's peculiar characteristics and uses, unique able to show (but need not necessarily establish in the
production facilities, distinct customers, distinct complaint) that the alleged submarket is
prices, sensitivity to price changes, and specialized economically distinct from the general product
vendors. market." Newcal Industries, Inc.
370 U.S. at 325, 82 S.Ct. 1502. Page 1178
"This Court's prior cases support the proposition v. Ikon Office Solution, 513 F.3d 1038, 1045 (9th
that in some instances one brand of a product can Cir.2008).
constitute a separate market." Eastman Kodak Co. v. Because Plaintiffs allege for the first time in
Image Technical Services, Inc., 504 U.S. 451, 482, their Opposition to these Motions that each Patented
112 S.Ct. 2072, 119 L.Ed.2d 265 (1992). Plaintiffs' Variety is a distinct product market within the table
Complaint alleges that the Commission conspires to grape market, and do not allege that the Commission
"monopolize the world-wide market for the four holds market power in each Patented Variety market
Patented Varieties of table grapes ..." (Complaint, ¶ or the scope of that market, they are GRANTED
102). Plaintiffs' claim the geographic market is the LEAVE TO AMEND to allege the relevant market.
"world-wide market" and the relevant product market D. Patent Misuse.
is each Patented Variety, the existence of the plant Defendant seeks, on separate grounds from its
patents limits the myriad of other varieties of table Rule 19 motion, to dismiss Plaintiffs' sixth claim for
grapes from being substitutes for the Patented patent misuse. Defendant's motion to dismiss on Rule
Varieties in the world-wide market. This does not 19 grounds has been granted. Nonetheless, the other
follow logically or legally without further definition grounds Defendant advances for dismissal of the
and description of the table grape market, such as sixth claim are briefly addressed. "The concept of
unique characteristics that set the three varieties apart patent misuse arose to restrain practices that did not
in sub-markets. in themselves violate any law, but that drew
- 19 -
anticompetitive strength from the patent right, and Plaintiffs' complaint alleges the following three
thus were deemed to be contrary to public policy. theories of patent misuse:
The policy purpose was to prevent a patentee from Page 1179
using the patent to obtain market benefit beyond that (i) enforcing alleged patent rights and collecting
which inheres in the statutory patent right." royalty fees on the Patented Varieties under its
Mallinckrodt, Inc. v. Medipart, Inc., 976 F.2d 700, "amnesty" program prior to issuance of a valid
705 (Fed.Cir.1992). "Patent misuse is viewed as a United States patent,
broader wrong than antitrust violation because of the (ii) enforcing patent rights (including demanding
economic power that may be derived from the the removal of Patented Varieties) and collecting
patentee's right to exclude. Thus misuse may arise royalties on the Sweet Scarlet variety while knowing
when the conditions of antitrust violation are not that the patent on Sweet Scarlet could not be enforced
met." C.R. Bard, Inc. v. M3 Systems, Inc., 157 F.3d due to prior public use and inequitable conduct, and
1340, 1372 (Fed.Cir.1998). (iii) imposing on growers a Domestic Growers'
A court's inquiry into a misuse claim is whether, License Agreement, which purport to extend the
by imposing conditions that derive their force from Commission's rights to Patented Varieties even after
the patent, the patentee has impermissibly broadened sale despite the exhaustion of those rights upon sale
the scope of the patent grant with anticompetitive of the patented plant.
effect. Id. Since patent misuse arises in equity, if (Complaint, ¶ 106).
found to be patent misuse, the patent is rendered As to the first theory, there is no viable claim for
unenforceable. And remains unenforceable until the the "amnesty program" as the Commission could not
misuse ends, the patent however is not invalidated. have misused patents that did not exist and at most
Id. were inventions in the pre-issuance stage. License
"When a practice alleged to constitute patent agreements entered into after a patent application has
misuse is neither per se patent misuse [e.g. tying been filed but before the patent issues are not
arrangements or post-expiration royalties] nor necessarily unenforceable. Aronson v. Quick Point
specifically excluded from a misuse analysis by § Pencil Co., 440 U.S. 257, 264-65, 99 S.Ct. 1096, 59
271(d) [Patent Misuse Reform Act, 35 U.S.C. § L.Ed.2d 296 (1979). The "key inquiry is whether, by
271(d)], a court must determine if that practice is imposing conditions that derive their force from the
`reasonably within the patent grant, i.e., that it relates patent, the patentee has impermissibly broadened the
to subject matter within the scope of the patent scope of the patent grant with anticompetitive effect."
claims.' [citation.] If so, the practice does not have C.R. Bard, Inc. v. M3 Sys., Inc., 157 F.3d 1340, 1372
the effect of broadening the scope of the patent (Fed.Cir.1998). Pre-issuance, there is no patent right
claims and thus cannot constitute patent misuse. to impermissibly broaden. The doctrine of patent
[citation.] If, on the other hand, the practice has the misuse could not be brought into play in Aronson,
effect of extending the patentee's statutory rights and which concerned a license agreement entered into
does so with an anti-competitive effect, that practice before issuance of the patent, but after patent
must then be analyzed in accordance with the `rule of application submitted. 440 U.S. at 264-65, 99 S.Ct.
reason.' [citation]. Under the rule of reason, `the 1096; see also Technology Licensing Corp. v.
finder of fact must decide whether the questioned Gennum Corp., No. 01-04204, 2007 WL 1319528, at
practice imposes an unreasonable restraint on *23 (N.D.Cal. May 4, 2007) ("As to Gennum's
competition, taking into account a variety of factors, argument that TLC's interactions with Ross Video
including specific information about the relevant constituted misuse of the '250 patent, it is a peculiar
business, its condition before and after the restraint notion that a party could "misuse" a patent that is not
was imposed, and the restraint's history, nature, and in existence. While it has been called patent misuse
effect.'" Virginia Panel Corp. v. MAC Panel Co., 133 where a patentee seeks to collect royalties after the
F.3d 860, 869 (Fed.Cir.1997) (citations omitted). expiration of the patent term, it appears that in such
Defendant claims that two of Plaintiffs' theories cases the patentee and licensor have typically entered
do not constitute patent misuse: collecting royalties into the royalty agreement at a time when the patent
before a patent issues, and imposing post-sale is in force. Again, to the extent a party demands
restrictions on propagation of new vines and royalties or demands that another cease using a
distributions to third parties. Plaintiffs' third theory product where no patent has yet issued, the other
also fails because Plaintiffs have failed to identify a party is not put to the type of choice that patent
cognizable market required for this type of patent misuse doctrine normally guards against. The other
misuse claim. This last argument has already been party is free to ignore the demands.")16
addressed for the anti-trust claim and need not be
repeated.
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The motion to dismiss the pre-issuance claim of both consumers and competitors by promoting fair
misuse is GRANTED WITHOUT LEAVE TO competition in commercial markets for goods and
AMEND. services. [Citation.]" Kasky v. Nike, Inc., 27 Cal.4th
Defendant also seeks to dismiss Plaintiffs' claim 939, 949, 119 Cal.Rptr.2d 296, 45 P.3d 243 (2002). It
about the restrictions imposed through the License "defines ùnfair competition' to mean and include
Agreements prohibiting the propagation of the àny unlawful, unfair or fraudulent business act or
grapevines or distribution of the vines to third parties practice and unfair, deceptive, untrue or misleading
(Plaintiffs' third theory—extending "the advertising and any act prohibited by [the false
Commission's rights to Patented Varieties even after advertising law (§ 17500 et seq.)].' (§ 17200.)." Id. at
sale despite the exhaustion of those rights upon sale 949, 119 Cal.Rptr.2d 296, 45 P.3d 243. The scope of
of the patented varieties.") (Complaint, ¶ 27). the UCL has been viewed by California Courts as
Plaintiffs appear to concede in their Opposition that "quite broad." McKell v. Washington Mut., Inc., 142
they cannot assert a patent misuse claim on the basis Cal.App.4th 1457, 1471, 49 Cal.Rptr.3d 227 (2006).
that the Commission has allegedly attempted to "Because the statute is framed in the disjunctive, a
extend patent rights business practice need only meet one of the three
Page 1180 criteria to be considered unfair competition." Id. Such
by prohibiting "growers who purchased the Patented a claim can cover anticompetitive business practices
Varieties from propagating the grapevines or and injuries to consumers. It can encompass
distributing the vines to third parties." (Id.) "Second, violations of other laws, treating them as unlawful
the Commission contends that its restrictions on practices, that are independently actionable under the
propagation of new vines and distribution to third unfair competition law, but a practice can be deemed
parties do not constitute misuse. While this may be unfair even if not specifically proscribed by some
true, the Commissions licensing agreements do not other law. Cel-Tech Communications, Inc. v. Los
simply limit growers from distributing new vines." Angeles, 20 Cal.4th 163, 180, 83 Cal.Rptr.2d 548,
(Opposition, p. 26);17 see Mallinckrodt, Inc. v. 973 P.2d 527 (1999).
Medipart, Inc., 976 F.2d 700, 708 (Fed.Cir.1992) (a Page 1181
patent holder may lawfully restrict a licensee's right The seventh claim states: "The Commission has
to use or sell a patented invention, so long as the unlawfully and unfairly exploited the '284, '891 and
restriction is "reasonably within the patent grant," but '229 patents in a manner that violates antitrust laws
not if "the patentee has ventured beyond the patent and in a manner that attempts to extend these patents
grant and into behavior having an anticompetitive beyond their lawful scope. Such acts constitute unfair
effect not justifiable under the rule of reason."); trade practices and unfair competition under
Monsanto Co. v. McFarling, 363 F.3d 1336, 1341 California Business and Professions Code § 17200, et
(Fed.Cir.2004) ("In the cases in which the restriction seq., and under the common law of the State of
is reasonably within the patent grant, the patent California, entitling Plaintiffs to relief." (Complaint,
misuse defense can never succeed."); B. Braun Med. ¶ 111).
v. Abbott Labs., 124 F.3d 1419, 1426 (Fed.Cir.1997) To state an UCL claim under the "unlawful"
("[E]xpress conditions accompanying the ... license prong, Plaintiffs are required to allege a violation of
of a patented product are generally upheld.") Here, it another law. "The ùnlawful' practices prohibited by
is not misuse of a plant patent to prevent the plant's section 17200 are any practices forbidden by law, be
disclosure to prevent its reproduction. it civil or *839 criminal, federal, state, or municipal,
Defendant's motion to dismiss Plaintiffs' sixth statutory, regulatory, or court-made." Saunders v.
claim as to theories one and portions of three is Superior Court, 27 Cal.App.4th 832, 839, 33
GRANTED WITHOUT LEAVE TO AMEND. Cal.Rptr.2d 438 (1994). Defendant moves to dismiss
E. Unfair Competition. this portion of the Unfair Competition claim.
Defendant moves to dismiss Plaintiffs' seventh Plaintiffs argue that they have stated a
claim for unfair competition under California cognizable antitrust claim for relief under Walker
Business and Professional Code § 17200 and Process, including the allegation of a relevant market.
California Common Law. Defendant contends that Defendant contends that Plaintiffs have failed to state
Plaintiffs have not alleged unlawful conduct because a claim under the "unfair" prong, because the
Plaintiffs' only allegation of violation of another law anticompetitive acts Plaintiffs allege for an unfair
is Section 2 of the Sherman Act. Absent a Section 2 practice claim are based primarily on the same
violation, Defendant argues Plaintiffs fail to state a conduct as their antitrust claim. Plaintiffs rejoin that
claim under the "unlawful" prong of § 17200. their allegations of the Commission's unfair actions
The purpose of the Unfair Competition Law, go beyond antitrust complaints and that California's
Cal. Bus. & Prof.Code § 17200 et seq., "is to protect unfair competition law is "broad" and "sweeping" and
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may include a vast range of unfair conduct. An unfair to charge royalties when growers wished to obtain
act under § 17200 is defined as one that "offends an the new varieties. The USDA also agreed to give the
established public policy or ... is immoral, unethical, Commission exclusive enforcement powers over its
oppressive, unscrupulous or substantially injurious to new patent rights.
consumers." Heighley v. J.C. Penney Life Ins. Co., (Complaint, ¶¶ 10-11). This alleged "double
257 F.Supp.2d 1241, 1259 (C.D.Cal.2003); quoting payment scheme" is entirely premised on the patent
Walker v. Countrywide Home Loans, Inc., 98 laws and the monopoly effect resulting from a valid
Cal.App.4th 1158, 1170, 121 Cal.Rptr.2d 79 (2002). patent. This claim is entirely derivative of the patent
"Ùnfair' simply means any practice whose harm to claim, which cannot proceed in this Court.
the victim outweighs its benefits." Saunders v. Defendant's motion to dismiss Plaintiffs' seventh
Superior Court, 27 Cal.App.4th 832, 839, 33 claim is DENIED.
Cal.Rptr.2d 438 (1994). F. Unjust Enrichment and Constructive Trust
Plaintiffs argue they have satisfied the "broad Defendant moves to dismiss Plaintiffs' eighth
and sweeping" "unfair" competition claim and ninth causes of action for unjust enrichment and
requirement because they have alleged that the constructive trust, respectively. These claims are
Commission has engaged in a broad range of dependent upon Plaintiffs' substantive claims seeking
unlawful and unfair activities, including the monetary relief, the antitrust claims and unfair
enforcement of a patent known to be fraudulently competition claims. Defendant's motion to dismiss
procured, improperly seeking to extend the scope of the eighth and ninth causes of action is based on the
the patent monopoly, and collecting patent royalties argument that they have proved that the substantive
from growers who paid for the research and claims must be dismissed, therefore the unjust
development of the patented varieties through enrichment and constructive trust claims must also be
assessment fees. dismissed as well. Plaintiffs' substantive claim for
Defendant disputes Plaintiffs' contention that unfair competition has not been dismissed.
they alleged the Commission was "collecting Defendant's motion to dismiss Plaintiffs' eighth
royalties from grower" who already paid assessments. and ninth causes of action is DENIED.
Defendant asserts that the theory is not alleged in G. Motion to Strike.
Plaintiffs' Complaint. Plaintiffs' Complaint provides Defendant moves to strike certain portions of the
adequate notice to Defendant by the allegations: Complaint. Rule 12(f) provides that "redundant,
For years, California table grape growers and immaterial, impertinent, or scandalous matters" may
shippers have funded a research program under the be "stricken from any pleading." Fed. R.Civ.P. 12(f)
U.S. Department of Agriculture ("USDA") to develop (emphasis added). A motion to strike is limited to
new table grape varieties. Growers and shippers fund pleadings. See Sidney-Vinstein v. A.H. Robins Co.,
the USDA research program through the Commission 697 F.2d 880, 885 (9th Cir.1983). However, a
by an assessment on each box of table grapes shipped "motion to strike" materials that are not part of the
in California. Prior to 2002, the USDA provided the pleadings may be regarded as an "invitation" by the
new varieties under development to area growers for movant "to consider whether [proffered material]
evaluation of growing potential and commercial may properly be relied upon." United States v. Crisp,
marketability. Once new varieties appeared 190 F.R.D. 546, 551 (E.D.Cal.1999); quoting Monroe
commercially viable, the USDA "released" the v. Board of Educ., 65 F.R.D. 641, 645
variety, and distributed plant material of the variety (D.Conn.1975). A motion to strike has sometimes
to area growers free-of-charge. The USDA did not been used to call to courts' attention questions about
charge California growers for the new varieties since the admissibility of proffered material in ruling on
California growers motions. Id.
Page 1182 Defendant moves to strike allegations in
and shippers already paid for a large portion of the Plaintiffs' antitrust claim regarding the Commission's
development. "amnesty" program because Plaintiffs have not
In the late 1990s, the Commission developed a alleged they participated in the program nor that they
scheme by which it and a few select nurseries could suffered any injury in fact as a result of the amnesty
profit from the new varieties that the USDA program. Plaintiffs rejoin that these allegations are
distributed for free. At the urging of the Commission, highly relevant to their claim and not stated simply
the USDA agreed to begin patenting new table grape for antitrust damages suffered by Plaintiffs. The
varieties. Although California shippers already allegations regarding the "amnesty" program are that
funded much of the development, the USDA agreed 17 growers were in possession of Sweet Scarlet prior
to give the Commission an exclusive license to all to February 2002 and show: (1) the Commission's
new patented varieties, and to allow the Commission knowledge that the patent on Sweet Scarlet was
- 22 -
fraudulently procured; (2) the Commission's attempts 6. Defendant's motion to dismiss Plaintiffs'
to avoid invalidity challenges to the Sweet Scarlet claims for constructive trust and disgorgement is
Patent, knowing it was fraudulently procured; (3) the DENIED; and
Commission's threat of enforcement and 7. Defendant's motion to strike is DENIED.
Page 1183 IT IS SO ORDERED.
enforcement of patents known to be fraudulently ---------------
procured; and (4) the Commission's attempt to extend Notes:
the scope of its patents beyond their legal bounds. 1. The USDA considered placing a fence around its
Motions to strike are however disfavored and facilities adjacent to the Fresno State campus, but
infrequently granted. See Pease & Curren Refining, declined to do so. Although the USDA purportedly
Inc. v. Spectrolab, Inc., 744 F.Supp. 945, 947 told employees that they were not to take or distribute
(C.D.Cal. 1990), abrogated on other grounds by plant materials from new varieties, the USDA made
Stanton Road Associates v. Lohrey Enters., 984 F.2d no efforts to examine materials removed from the
1015 (9th Cir.1993). Such motions should be granted USDA facility to ensure that persons entering the
only where it can be shown that none of the evidence facility did not remove plant material for these
in support of an allegation is admissible. See id. varieties. (Complaint, ¶ 51).
Defendant's motion to strike the "amnesty 2. The terms "necessary" and "indispensable" are
program" allegations is DENIED. terms of art in Rule 19 jurisprudence: "Necessary"
Defendant also moves to strike portions of refers to a party who should be "[j]oined if
Plaintiffs' prayer for relief sections. Plaintiffs respond [f]easible." Disabled Rights Action Comm. v. Las
that striking certain prayers for relief is not the proper Vegas Events, Inc., 375 F.3d 861, 867 n. 5 (9th
subject of a motion to strike and cite to a Cir.2004). "Ìndispensable' refers to a party whose
Massachusetts District Court case, Massachusetts v. participation is so important to the resolution of the
Russell Stover Candies, Inc., 541 F.Supp. 143, 145 case that, if the joinder of the party is not feasible, the
(D.Ma.1982) which denied a motion to strike prayers suit must be dismissed." Id.
for relief, finding it did not fall within any of the 3. "As a prudential principle, an exclusive licensee
categories referred to in Rule 12(f). Rule 12(f) states having fewer than all substantial patent rights
"The court may strike from a pleading an insufficient possesses standing under the Patent Act as long as it
defense or any redundant, immaterial, impertinent, or sues in the name of, and jointly with, the patent
scandalous matter." Fed.R.Civ.P. 12(f). There does owner and meets the Lujan requirements." Id.; citing
not appear to be any Ninth Circuit law addressing the Prima Tek II L.L.C. v. A-Roo Co., 222 F.3d 1372
striking of the prayer for relief sections. However, the (Fed.Cir.2000).
prayer for relief section is not a substantive part of 4. Patents have long been considered a species of
the pleading and is irrelevant if not supported by property. See Brown v. Duchesne, 60 U.S. 183, 197,
evidence. The relief provided for the various claims 19 How. 183, 15 L.Ed. 595 (1856) ("For, by the laws
will be determined if any entitlement to remedies is of the United States, the rights of a party under a
proved. patent are his private property"); cf., Consolidated
Defendant's request to strike various portions of Fruit-Jar Co. v. Wright, 94 U.S. 92, 96, 24 L.Ed. 68
the prayer for relief sections is DENIED. (1876); Florida Prepaid Postsecondary Educ.
VII. CONCLUSION Expense Bd. v. College Savings Bank, 527 U.S. 627,
For all the reasons stated above: 642, 119 S.Ct. 2199, 144 L.Ed.2d 575 (1999).
1. Defendant's motion to dismiss Plaintiffs' 5. Plaintiffs cite Speedplay, Inc. v. Bebop, Inc., 211
declaratory relief claims pursuant to Rule 19 is F.3d 1245 (Fed.Cir.2000), which states "the proper
GRANTED WITH LEAVE TO AMEND to transfer focus is on the `substance of what was granted.'" Id.
the case to the Federal Court of Claims; at 1250. In Speedplay, the licensor retained the right
2. Defendant's motion to dismiss Plaintiffs' to bring infringement actions. Specifically, if the
inequitable conduct claim is DENIED; licensee did not halt an infringement on the patent, it
3. Defendant's motion to dismiss Plaintiffs' had the right to bring an infringement action. This
antitrust claim is GRANTED WITH LEAVE TO right was found "illusory" by the court because the
AMEND; licensee could grant a royalty-free sublicense to an
4. Defendant's motion to dismiss all Plaintiffs' alleged infringer under the license agreement, thereby
patent misuse claims is GRANTED WITHOUT making the licensor's right to sue nugatory. Here, the
LEAVE TO AMEND; USDA does not have such an "illusory" right.
5. Defendant's motion to dismiss Plaintiffs' 6. "EL" refers to the exclusive licenses for the
unfair competition claim is DENIED; Patented Varieties, attached as Exhibits 1-3 to the
Commission's Motion to Dismiss. "DGL" refers to
- 23 -
the Domestic Grower License Agreements for the 14. The following shall be defenses in any action
Patented Varieties, attached as Exhibits 1-3 to involving the validity or infringement of a patent and
Plaintiffs' Opposition. shall be pleaded:
7. Plaintiffs' also cite sections: EL § 1.1; EL § 1.2; (1) Noninfringement, absence of liability for
EL § 1.3; EL § 2.2. infringement or unenforceability,
8. Plaintiffs also cite sections DGL § 5.1 and DGL § (2) Invalidity of the patent or any claim in suit
8.4. on any ground specified in part II of this title as a
9. "The fact that the agreement does not specifically condition for patentability.
authorize defendant to sue alleged infringers does not (3) Invalidity of the patent or any claim in suit
preclude a finding that defendant is the substantial for failure to comply with any requirement of
owner of the patent for purposes of this declaratory sections 112 or 251 of this title,
judgment action." Id. at 839. (4) Any other fact or act made a defense by this
10. McShan v. Sherrill, 283 F.2d 462, 463 (9th title.
Cir.1960); Stewart v. United States, 242 F.2d 49, 51 35 U.S.C. § 282.
(5th Cir.1957). 15. The law of the circuit in which the district court
11. For example, actions brought under the Quiet sits governs the antitrust law issues. "[W]hether
Title Act, 28 U.S.C. § 2409a, waiving immunity for conduct in procuring or enforcing a patent is
actions brought against the United States involving sufficient to strip a patentee of its immunity from the
"real property" in which the United States claims an antitrust laws is to be decided as a question of
interest, and Section 2410, Title 28, waiving Federal Circuit law." Nobelpharma, 141 F.3d at 1068.
immunity for certain actions involving "real or "When ... the courts consider a patentee's behavior
personal property on which the United States has or under Federal Circuit law and determine that it
claims a mortgage or other lien." 28 U.S.C. § 2410. involved either an inappropriate attempt to procure a
The Tucker Act, 28 U.S.C. § 1491, permits monetary patent or an inappropriate attempt to enforce a patent,
suits brought against the United States based on an the remainder of the antitrust inquiry must proceed
alleged violation of a constitutional provision, statute, under the law of the regional circuit."
or regulation, if brought in the Federal Claims Court. 16. Plaintiffs cite several cases which do not support
28 U.S.C. § 1498(a). It authorizes suits against the a patent misuse claim pre-issuance patent, including a
United States for patent infringement by the Untied Texas Court of Appeals case, Reich v. Reed Tool
States, but limits the patent owner's recovery to Co., 582 S.W.2d 549 (Tex.Civ.App.1970), which is
monetary damages in the Federal Claims Court. 35 not applicable in the Ninth Circuit. And none of these
U.S.C. § 282 provides affirmative defenses that can cases addresses whether collecting royalties per-
be asserted by the federal government in suits issuance of patent on its own constitutes a "rule of
brought under 28 U.S.C. § 1498. reason" patent misuse claim.
12. See McShan v. Sherrill, 283 F.2d 462, 463 (9th 17. Plaintiffs also argue in response to Defendant's
Cir. 1960) (Any order that would affect title to motion to dismiss its' sixth claim that the
property requires all parties interested in the title and Commission restricts third party distribution that
that will be directly affected by the judgment, be extends into foreign territories and cite Extractol
before the court); Stewart v. United States, 242 F.2d Process v. Hiram Walker & Sons, 153 F.2d 264 (7th
49, 51 (5th Cir.1957). Cir.1946). Extractol is an older Seventh Circuit
13. In regard to challenges to real property interests, decision that does not address patent misuse. Neither
i.e., interests in federal land, implicating sovereign party fully briefed this issue, which cannot be
immunity, the Supreme Court and Appeals Courts resolved as the arguments are unclear.
have consistently held that the United States is an ---------------
indispensable party. See e.g. United States v.
Alabama, 313 U.S. 274, 282-83, 61 S.Ct. 1011, 85
L.Ed. 1327 (1941) (invalidating tax sale of federal
land. "A proceeding against property in which the
United States has an interest in a suit against the
United States."); Stewart v. U.S., 242 F.2d 49, 51
(1957) (affirming dismissal of quiet title action
against United States); Lambert v. R.F.C., 71 F.Supp.
509, 513 (E.D.N.Y.1947) (dismissing suit to cancel
lease and force sale of government land).
- 24 -

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LAW OFFICES OF BRIAN C.

13 Attorneys for Plaintiffs,

14 GERAWAN FARMING, INC.

17 UNITED STATES DISTRICT COURT

18 EASTERN DISTRICT OF CALIFORNIA

25 of charge, allowing unlimited distribution and reproduction.

7 unenforceable. Based on these claims, Plaintiffs sought declarations of invalidity and

15 JURISDICTION AND VENUE

2 reason of Defendants’ conduct as alleged below.

6 Box 240, Hoquiam, Washington 98550.

12 Sanger, California 93657.

22 revenues of the State fund the Commission.

5 15. Defendant United States Department of Agriculture is a United States federal

7 at 1301 Independence Avenue, S.W., Washington, D.C. 20004.

14 S.W., Washington, D.C. 20004.

12 without charge is owned by the son of a long-standing Commission member.

21 growers for wide-scale commercial evaluation and sale.

6 penalties demanded by the Commission.

7 The Patented Varieties

10 Application”) on a grapevine denominated “Sweet Scarlet.” The application listed David W.

14 owner by assignment of the ‘891 patent.

19 ‘891 patent against alleged infringers.

22 Application”) on a grapevine denominated “Autumn King.” The application listed David W.

25 King or ’284 patent”).

27 owner by assignment of the ‘284 patent.

4 ‘284 patent against alleged infringers.

7 Application”) on a grapevine denominated “Scarlet Royal.” The application listed David W.

12 owner by assignment of the ‘229 patent.

17 ‘229 patent against alleged infringers.

18 The Patent and Licensing Program

16 growers (who had already funded much of the development costs).

25 and selling Princess fruit for years.

7 under development frequently entered the public domain prior to release.

18 foreign growers or provided to foreign growers at high royalty rates.

2 The Commission’s Licenses to Nurseries and Plaintiffs

18 notice and comment prior to their adoption.

27 Commission pays approximately one-half of the collected royalties to the USDA.

4 varieties, then pay again to obtain the varieties.

11 recommendation from the Commission to do so.

12 Release of the Patented Varieties

22 application on the Sweet Scarlet variety in February 2003.

3 on each respective variety.

17 “amnesty” to include Autumn King and Scarlet Royal varieties.

3 for the Sweet Scarlet patent.

14 Plaintiffs’ Purchase of the Patented Varieties

17 purchased plant imposed by the Commission.

24 Scarlet plant material upon termination of the agreement.

3 material upon termination of the agreement.

10 material upon termination of the agreement.

11 FIRST CLAIM FOR RELIEF

12 (Violation of the Bayh-Dole Act Under APA

13 Against Defendants U.S., USDA and Secretary Vilsack)

21 Patented Varieties to the Commission is subject to the procedural requirements of the

22 Administrative Procedure Act (“APA”), at 5 U.S.C. §§ 551, et seq.

3 Secretary Vilsack subject to review under the APA.

5 Secretary Vilsack’s decision-making process.

12 collect royalties and the right to exclude thereof.

18 exclusive or partially exclusive licenses on federally-owned inventions only in four limited

23 practical application or otherwise promote the invention’s utilization by the

24 public as required by 35 U.S.C. § 209(a)(1). No exclusive license to the

25 Commission was required to promote the utilization of the Patented Varieties

27 expenditures needed to bring newly-developed USDA grapevine varieties to

28 practical application. Moreover, the Patented Varieties were already in the