Talk:Monsanto v. Good F.Supp.2d, WL 1664013 (D.N.J.) (2003)

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The following facts are undisputed, except where otherwise specified. Plaintiff developed and obtained a patent for a chimeric gene which, when expressed in soybeans seeds, enables the seeds to withstand certain insecticides. Roundup Ready™ soybean seeds containing plaintiff's patented chimeric gene were commercially introduced in 1996, and have been sold pursuant to a limited use license. This license prohibits purchasers from saving harvested seed and replanting that seed to produce a second crop.

In 2001, Good Farm employees replanted seed saved from the company's 2000 purchases, rather than purchasing additional seed. After discovering that defendants had done so, plaintiff filed this suit for patent infringement. Subsequent to filing suit, plaintiff inspected and conducted samples on crops produced by defendants in 2001. These samples were tested and the overwhelming majority (488 out of 498 samples) were shown to contain plaintiff's patented biotechnology. The few soybean stems that were not shown to contain plaintiff's technology were dried stems and, according to plaintiff, could not be sufficiently tested. In addition, other samples were taken and were confirmed to contain plaintiff's patented technology.

Good Farm's citation to the U.S. Patent and Trademark's Office (“USPTO”) Utility Examination Guidelines is likewise unavailing. These guidelines were developed by the USPTO to aid its personnel in ensuring that patent applications meet the “utility” requirement of 35 U.S.C. § 101. 66 FR 1092. Within this document, the USPTO states that “isolated and purified DNA molecules” are entitled to patent protection. Id. at 1093. However, the context in which this statement was made makes clear that the “isolated and purified” requirement applies only to genes that naturally occur in nature, as opposed to chimeric genes. See id. (responding to comment that naturally occurring genetic sequences should not be patentable). The document further clarifies that a DNA molecule isolated from its natural environment is patentable if “it can be used to produce a useful protein,” as is the case with plaintiff's chimeric gene. See id. at 1094. Read in whole, the USPTO guidelines stand for the proposition that “[i]f a patent application claims a composition of matter comprising DNA, and the claims meet all the statutory requirements of patentability, there is no legal basis for rejecting the application.” Id. Therefore, defendants' reliance on the guidelines is misplaced. (a) Plant Variety Protection Act Good Farm first argues that the Plant Variety Protection Act precludes plaintiff from enforcing its patent against farming operations that save and replant seed. However, this argument has been rejected by several courts including the U.S. Supreme Court. See J.E.M. AG Supply, Inc. v. Pioneer Hi-Bred Int'l, Inc., 534 U.S. 124, 606 (2001) ( “J.E.M.” ) (stating that the PVPA “does not limit the scope of [35 U.S.C.] § 101's coverage.”); McFarling, 302 F.3d at 1299 (“The right to save seed of plants registered under the PVPA does not impart the right to save seed of plants patented under the Patent Act.”); Scruggs, 249 F.Supp.2d at 756 (“[T]he PVPA is no impediment to the enforceability of ... patents.”). Indeed, two of these authorities concluded that the PVPA is no bar to the enforcement of plaintiff's '605 patent against farms where employees saved and replanted seed. See McFarling, 302 F.3d at 1299; Scruggs, 249 F.Supp.2d at 757.

  • 7 Good Farm attempts to distinguish J.E.M. on its facts, arguing that its holding applies only to patents for plant varieties. But the Supreme Court's holding as to the superiority of the utility patent right over PVPA protection was not dependent upon the type of patent sought in that case. Rather, its holding was a generally applicable legal conclusion that “utility patent holders receive greater rights of exclusion than holders of [PVPA] protection.” J.E.M., 534 U.S. at 143; see McFarling, 302 F.3d at 1299 (applying J.E.M. in case involving Monsanto's '605 patent). Accordingly, Good Farm's cross-motion for partial summary judgment on this ground is denied.

(b) Contract-Related Defenses At the outset, the Court notes that Good Farm's contract-related arguments are presented in a convoluted manner. For example, in connection with its post-sale limitation argument in its opposition and cross-motion papers, Good Farm states “[t]he question of whether a patent holder's claimed license use restriction is enforceable against a user of a patented item is not controlled by any federal statute, but is instead controlled by principles of state contract law.” Def. Opp. at 17. Yet, throughout the remainder of its argument, Good Farm relies upon Federal Circuit cases discussing the federal patent doctrines of repair/reconstruction and implied license. See id. (citing Hewlett-Packard Co. v. Repeat-O-Tyle Stencil Mfg. Corp., Inc., 123 F.3d 1445, 1451 (Fed.Cir.1997), and Kendall Co. v. Progressive Med. Tech., Inc., 85 F.3d 1570 (Fed.Cir.1996)). Then, in a subsequent section, Good Farm relies on state law and the Uniform Commercial Code to make what appear to be post-sale limitation and exhaustion-like arguments. See Def. Opp. at 18-25. Given the muddled nature in which Good Farm's arguments were presented, the Court restructures and characterizes their arguments in a manner more consistent with the applicable legal authorities.

Furthermore, Good Farm failed to argue that no non-infringing uses of the seeds exist. Indeed, such an argument could not be made because the seeds could be used for one planting season without infringing upon plaintiff's patent. Therefore, Good Farm's implied license defense is rejected and its cross-motion for partial summary judgment on this ground is denied.

Plaintiff admits that Good Farm did not enter into any license agreement with plaintiff, but its infringement claim against Good Farm is not based on Good Farm's violation of the license. Plaintiff's argument on summary judgment is that Good Farm planted Roundup Ready™ seed, saved that seed's progeny, and replanted the progeny, all without any authority whatsoever from plaintiff. See Pl. Br. at 10. Such conduct constitutes direct infringement under 35 U.S.C. § 271(a), which prohibits purchasers of a patented article from “mak[ing]” or “us[ing]” that article “without [the patent holder's] authority.” FN4 By reproducing the purchased seed to create more seed, Good Farm manufactured plaintiff's patented technology without having first obtained permission. Cf. McFarling, 302 F.3d at 1299-1300 (“The original sale of seeds did not confer a license to construct new seeds....”); Scruggs, 249 F.Supp.2d at 753 (“A patent holder is granted the exclusive right to make, use or vend [its] invention.”) (emphasis added). In light of this conclusion, the Court need not further address Good Farm's post-sale limitation argument.

   FN4. Although plaintiff need not show that Good Farm had actual knowledge of the use restriction to recover for direct infringement, see Hilton Davis Chem. Co. v. Warner-Jenkinson Co., Inc., 62 F.3d 1512, 1519 (Fed.Cir.1995) overruled on other grounds by Warner-Jenkinson Co., Inc. v. Hilton Davis Chem. Co., 520 U.S. 17 (1997), Good Farm can not reasonably contend that it was not aware of the restriction, since the restriction was placed on the seed bags and the purchase orders, one of which was signed by a Good Farm employee. See Deposition of Richard S. Good at 60:15-18 (acknowledging that document was signed but denying that it was his signature); Deposition of D. Longstreet (Pioneer seed dealer) at 27:13-14 (stating that document was signed).

(IV) Exhaustion Defense

  • 10 Finally, the Court interprets Good Farm's opposition and cross-motion papers as stating an argument under the patent doctrine of exhaustion. Under the doctrine of patent exhaustion, a patent holder's rights in a patented article extend only to the first sale of the article. Fuji Photo Film Co., Ltd. v. Jazz Photo Corp., 249 F.Supp.2d 434, 449 (D.N.J.2003). After the first sale, the holder's rights are “exhausted.” Id. Thus, under this doctrine, a patent holder can not restrict the use of its product beyond its first sale. Id. The theory underlying this doctrine is that the patent holder should not be entitled to recover more than one royalty for an invention. Trantham, 156 F.Supp.2d at 869 (citing B.Braun Med., Inc., 124 F.3d at 1426).

While the exhaustion doctrine might appear on its face to benefit defendant, the Federal Circuit has held that the doctrine does not encompass saved seeds:

The “first sale” doctrine of exhaustion is not implicated, as new seeds grown from the original batch had never been sold. The price paid by the purchaser “reflects only the value of the ‘use’ rights conferred by the patentee.” B. Braun Medical Inc. v. Abbott Labs., 124 F.3d 1419, 1426, 43 USPQ2d 1896, 1901 (Fed.Cir.1997). The original sale of seeds did not confer a license to construct new seeds, and since the new seeds were not sold by the patentee they entailed no principal of patent exhaustion.

McFarling, 302 F.3d at 1299-1300. Accordingly, Good Farm's exhaustion argument is without legal basis and its cross-motion for partial summary judgment on this ground is denied.

B. Leave to Amend At oral argument on this matter, the Court granted Defendant Good's motion for summary judgment. In that motion, Mr. Good argued that he could not be sued in his individual capacity for direct infringement unless plaintiff pierced the corporate veil accorded his business, Good Farm. During oral argument on this precise issue, plaintiff argued that piercing was not necessary under 35 U.S.C. § 271(a) and that, in any event, it could make out an inducement claim against Mr. Good under 35 U.S.C. § 271(b) without piercing the veil. The Court pointed out, however, that plaintiff's complaint did not clearly assert which causes of action it intended to pursue against Mr. Good because it referred only to 35 U.S.C. § 271 generally, and did not state facts going to piercing the corporate veil or inducement. For this and other reasons stated on the record, the Court granted Mr. Good's motion for summary judgment.

Following oral argument, plaintiff filed a motion for leave to amend its complaint to more specifically state the bases upon which it sought to recover from Mr. Good, and to include facts relevant to piercing the corporate veil. In the alternative, plaintiff further moved for reconsideration of the Court's grant of summary judgment to Mr. Good. Upon consideration of the moving and opposition papers submitted, the Court grants plaintiff's motion for leave to amend.

  • 11 Federal Rule of Civil Procedure 15(a) governs motions for leave to amend. Under this rule, “a party may amend [its] pleading ... by leave of court ...; and leave shall be freely given when justice so requires.” Lorenz v. CSX Corp., 1 F.3d 1406, 1413 (3d Cir.1993). The Third Circuit has interpreted this rule to mean that leave should be granted unless the non-movant can show that he will be substantially or unduly prejudiced by the grant. Id. at 1413-14. “In the absence of substantial or undue prejudice, denial [may only] be based on bad faith or dilatory motives, truly undue or unexplained delay, repeated failures to cure the deficiency by amendments previously allowed, or futility of the amendment.” Id. at 1414 (citation omitted).

Reading his opposition papers liberally, Mr. Good puts forth two arguments in response to plaintiff's motion for leave to amend. He argues, first, that he will be prejudiced if plaintiff's motion is granted. Mr. Good describes this prejudice as “the expense and harassment of filing more pleadings, defending new claims and enduring even more intrusive discovery whose only purpose will be to improperly pry into Mr. Good's personal finances.” Brief of Defendant, Richard S. Good, in Opposition to Plaintiff's Motion for Leave to Amend Complaint or, in the Alternative for Reconsideration (“Good Opp.”) at *4. FN5 Mr. Good's second argument is that granting leave to amend would be futile. See Good Opp. at *3 (discussing Symbol Tech., Inc. v. Metrologic Instr., Inc., 771 F .Supp. 1390 (D.N.J.1991)).

   FN5. This document is not numbered, therefore, the Court has denoted page numbers on the document as “ *1” through “ *6” beginning with the cover page.

However, neither of Mr. Good's arguments are convincing. As to his first argument, the type of prejudice that he describes does not rise to level of substantial or undue prejudice that would justify denying plaintiff' motion, given that leave to amend should be “freely given.” Lorenz, 1 F.3d at 1413 (quoting Fed.R.Civ.P. 15(a)). See Harter v. GAF Corp., 150 F.R.D. 502, 509 (D.N.J.1993) (finding prejudice where motion for leave to amend was filed three-and-a-half years after the close of discovery). Even though discovery has closed in this matter, trial has not yet been scheduled and Mr. Good has not suggested that he will be “unfairly disadvantaged or deprived of the opportunity to present facts or evidence which [he] could have offered had the amendment been timely .” Azarbal v. Med. Ctr. of Delaware, Inc., 724 F.Supp. 279, 285 (D.Del.1989).

Regarding his second argument, that granting leave would be futile, the Court finds Mr. Good's argument perplexing. He begins his argument by attempting to distinguish the case cited by plaintiff in its moving papers in support of its inducement claim against Mr. Good, Symbol Tech., Inc., supra. See Def. Opp. at *3. Symbol Tech., Inc. stands for the proposition that a corporate officer may be found liable for inducing his corporation where the evidence shows that he “actively engaged in assisting [the] corporation's infringement.” Id. at 1404. In attempting to distinguish Symbol Tech., Inc., Mr. Good argues that “after full discovery, it is clear that Richard S. Good, upon learning of Monsanto's claimed infringement, immediately offered to pay a technology fee and later, in a desperate attempt to resolve the matter, offered Monsanto his entire 2001 crop. Thus there is no direct or circumstantial evidence of inducement.” Def. Opp. at *3.

  • 12 As noted, Mr. Good is correct in stating that discovery is closed. Moreover, Mr. Good has been part of the case from its inception. It can be said, therefore, that plaintiff has had ample opportunity to gather evidence to support its claims against Mr. Good. Nevertheless, defendant's futility argument falls short because it is ultimately based on a dispute of fact. Mr. Good argues that plaintiff can not show inducement because “upon learning of Monsanto's claimed infringement, [Mr. Good] immediately offered to pay a technology fee....” Id. But the time at which Mr. Good became aware of any infringement is a question of fact. To conclude that an amendment would be futile, a court must determine whether the amendment states a claim for which relief may be granted assuming that the facts pled in the complaint are true. See Alvin v. Suzuki, 227 F.3d 107, 121 (3d Cir.2000) (describing futility inquiry as asking whether amended claim could withstand a motion to dismiss). Mr. Good's argument, by contrast, seeks to foreclose plaintiff's based on his version of the facts and, therefore, does not demonstrate futility.

Accordingly, plaintiff's motion for leave to amend is granted because Mr. Good has failed to demonstrate that he will be prejudiced by the granting of this motion, or that its granting would be futile. The Court need not reach plaintiff's motion for reconsideration in light of its grant of the motion for leave to amend.

IV. CONCLUSION For the foregoing reasons, plaintiff's motion for partial summary judgment is granted on its patent infringement claim against Good Farm. Likewise, its request for leave to amend on the claims asserted against Mr. Good is granted. However, partial summary judgment is denied on Good Farm's cross-motion for partial summary judgment.

ORDER This matter having been opened to the Court by Michael J. Vassalotti, Esq. of Brown & Connery, LLP, and Miles P. Clements, T.A ., Wayne K. McNeil, Esq., and Joel E. Cape, each of Frilot, Partridge, Kohnke & Clements, L.C., on behalf of plaintiff, seeking partial summary judgment on its patent infringement claims against defendants, and an additional matter having been opened to the Court by Timothy E. Annin, on behalf of defendants, for partial summary judgment on plaintiff's patent infringement claims, and another matter having been opened to the Court by plaintiff's counsel, seeking leave to amend its complaint and, in the alternative, reconsideration of the Court's prior grant of summary judgment to Defendant Richard S. Good on the patent infringement claims against him, and the Court having considered the moving, opposition, and reply papers, and the Court considering the motion for leave to amend pursuant to Fed.R.Civ.P. 78, and for the reasons set forth in the Court's Opinion of this date, and for good cause shown,

IT IS on this 23rd day of July, 2003,

ORDERED that plaintiff's motion for partial summary judgment on its patent infringement claims against Defendant Good Farm, Inc. is granted; and it is further

  • 13 ORDERED that defendants' cross-motion for partial summary judgment is denied; and it is further

ORDERED that plaintiff's motion for leave to amend is granted; and it is further

ORDERED that plaintiff's motion for reconsideration is denied without prejudice as moot.

D.N.J.,2003. Monsanto Co. v. Good Not Reported in F.Supp.2d, 2004 WL 1664013 (D.N.J.)