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`No. 2:20-CV-00181-SAB
`
`ORDER DENYING
`DEFENDANTS’ MOTION TO
`DISMISS FOR FAILURE TO
`JOIN A NECESSARY PARTY
`
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`
`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF WASHINGTON
`
`HER MAJESTY THE QUEEN IN RIGHT
`OF CANADA AS REPRESENTED BY
`THE MINISTER OF AGRICULTURE
`AND AGRI-FOOD, a Canadian
`governmental authority,
`
`
`Plaintiff,
`
`v.
`VAN WELL NURSERY, INC., a
`Washington Corporation; MONSON
`FRUIT COMPANY, INC., a Washington
`Corporation; GORDON GOODWIN, an
`individual; and SALLY GOODWIN, an
`individual,
`
`
`The Court held a videoconference motion hearing in the above-captioned
`
`matter on January 8, 2021. During the hearing, the Court heard oral arguments in
`support of and against Defendants’ Motion to Dismiss for Failure to Join a
`Necessary Party, ECF No. 40. Plaintiff was represented by Jennifer Bennett,
`Daniel Short, and Katherine McMorrow. Ms. Bennett presented Plaintiff’s
`ORDER DENYING DEFENDANTS’ MOTION TO DISMISS FOR
`FAILURE TO JOIN A NECESSARY PARTY * 1
`
`
`Defendants.
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`FILED IN THE
`U.S. DISTRICT COURT
`EASTERN DISTRICT OF WASHINGTON
`
`SEAN F. MCAVOY, CLERK
`
`Jan 13, 2021
`
`
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`Case 2:20-cv-00181-SAB ECF No. 51 filed 01/13/21 PageID.1004 Page 2 of 17
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`arguments. Defendants Van Well Nursery, Gordon Goodwin, and Sally Goodwin
`were represented by Quentin Batjer. Defendant Monson Fruit Company was
`represented by Kevin Regan and Mark Walters. Mr. Regan presented Defendants’
`arguments.
`
`Defendants argue that Summerland Varieties Corporation, formerly known
`as PICO (hereinafter “SVC”) is absent from this case and must be joined in order
`to satisfy Federal Rule of Civil Procedure 19 and principles of statutory standing
`unique to patent cases. They argue that SVC should either be joined as a party
`plaintiff in this case or, if joinder is impossible, the case should be dismissed.
`Plaintiff opposes the motion, arguing it has standing to sue on its own behalf
`without joinder of SVC but, if the Court does find joinder necessary, concedes that
`SVC will consent to being joined. The Court took the motion under advisement.
`Having reviewed the briefing and the relevant case law and having heard from the
`parties, the Court denies the motion.
`
`Facts
`
`On a Rule 12(b)(7) motion, the Court accepts as true the allegations in
`Plaintiff’s complaint and draws all reasonable inferences in Plaintiff’s favor. Dine
`Citizens Against Ruining Our Environment v. Bureau of Indian Affairs, 932 F.3d
`843, 851 (9th Cir. 2019). Thus, the following facts are drawn from Plaintiff’s
`Complaint, ECF No. 1, and are accepted as true.
`1. General Factual Background
`Plaintiff is the owner of United States Patent No. PP 20,551 P3, a distinct
`
`variety of cherry tree known commercially as Staccato (“the ‘551 patent” or
`“Staccato”). The patent application was filed on March 6, 2003, and was issued on
`December 15, 2009. Plaintiff is also the owner of the registered trademark
`Staccato. Staccato was developed by W. David Lane on Plaintiff’s behalf.
`Staccato’s most distinguishing characteristic is that the fruit matures significantly
`
`ORDER DENYING DEFENDANTS’ MOTION TO DISMISS FOR
`FAILURE TO JOIN A NECESSARY PARTY * 2
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`Case 2:20-cv-00181-SAB ECF No. 51 filed 01/13/21 PageID.1005 Page 3 of 17
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`later than most other commercial cherry varieties. This extends the cherry harvest
`season and gives growers a distinct financial advantage.
`
`In order to receive a royalty stream for its breeding program and to protect
`the interests of Canadian cherry growers, Plaintiff entered into a commercialization
`agreement with SVC to control the distribution of, among other plants, Staccato
`cherry trees. The first agreement was entered into in 1994 and has been renewed
`and amended since then. The most recent amendment was executed in March
`2019.
`Plaintiff alleges that Defendants have infringed its patent on Staccato cherry
`
`trees. In July 1998, Defendant Van Well entered into a contract with SVC to
`propagate, market, and sell a different cherry variety bred by Plaintiff known as
`Sonata. Van Well planted the Sonata cherry trees and, at some later point,
`Defendant Goodwin purchased them from Van Well. It is believed that SVC
`inadvertently gave Van Well—and Van Well then gave Goodwin—Staccato cherry
`trees in addition to the Sonata cherry trees. Unbeknownst to the Goodwins, they
`planted all the trees in their orchards. Later, Mr. Goodwin noticed that one of the
`trees—which he thought was a Sonata cherry tree—was different from the others
`and assumed that the different tree was a whole tree mutation of the Sonata tree.
`Mr. Goodwin propagated and planted the different trees in 2005, and the trees
`fruited in 2008 and 2010. On December 1, 2010, Mr. Goodwin applied for a U.S.
`patent on the different tree, and commercially named it Glory. Goodwin was
`granted the patent on May 1, 2012, which he subsequently assigned to Van Well.
`The first commercial picking of Glory cherries occurred in August 2010.
`
`In 2008, Mr. Goodwin provided Glory budwood to Defendant Monson.
`Defendant Monson grafted the budwood and has since propagated hundreds of
`acres of Glory cherry trees. Monson continues to sell Glory cherries.
`
`ORDER DENYING DEFENDANTS’ MOTION TO DISMISS FOR
`FAILURE TO JOIN A NECESSARY PARTY * 3
`
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`Case 2:20-cv-00181-SAB ECF No. 51 filed 01/13/21 PageID.1006 Page 4 of 17
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`In May 2013, Van Well and Goodwin entered into an agreement relating to
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`certain rights in Glory, including commercialization rights. That agreement was
`terminated in 2015. Van Well reassigned the patent back to Goodwin in 2015.
`
`Sometime in 2012, Plaintiff and SVC learned that Mr. Goodwin had an
`allegedly new cherry variety called Glory, had filed for patent protection, and that
`Defendant Van Well was, at that point, the owner of the patent. Defendants
`provided samples of Glory to SVC, and in early 2014 genetic tests revealed the
`Glory variety was identical to the Staccato variety. Van Well soon thereafter
`agreed to sell to SVC whatever Glory trees it had in its possession or to destroy
`them. As far as Plaintiff was aware, by 2015, SVC and Van Well had settled the
`dispute, and Van Well had agreed not to sell Glory cherries or cherry trees any
`longer.
`
`However, in spring 2018, Plaintiff believes Van Well sold 6,000 Glory trees
`to Defendant Monson, and sold it an additional 9,000 trees in 2019. Plaintiff
`believes Defendant Monson planted those trees and plans to sell the fruit once the
`trees mature.
`2. Commercialization Agreements Between SVC and Plaintiff
`Fundamental to the arguments here are commercialization agreements
`
`between SVC and Plaintiff, dated from 1994 through 2019, filed at ECF Nos. 42-1,
`42-2, 42-3, and 42-4. Although neither party has filed a motion for judicial notice
`or argued that the agreements are incorporated into the Complaint by reference,
`neither party objected to the Court’s consideration of the documents. Furthermore,
`neither party questions the authenticity of the documents. Accordingly, the Court
`will consider these documents. See UNILOC 2017, LLC v. Google, LLC, --- F.
`Supp. 3d ---, 2020 WL 7626430, at *5, *12 n.21 (N.D. Cal. Dec. 22, 2020). The
`parties agree that the 2013 Agreement, as amended by the 2019 Amendment
`controls here. ECF No. 42-3, 42-4. Relevant portions of the Agreement are
`discussed at length below.
`ORDER DENYING DEFENDANTS’ MOTION TO DISMISS FOR
`FAILURE TO JOIN A NECESSARY PARTY * 4
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`Case 2:20-cv-00181-SAB ECF No. 51 filed 01/13/21 PageID.1007 Page 5 of 17
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`Procedural History
`Plaintiff filed its case in federal court on May 18, 2020. ECF No. 1. It
`
`alleges eight causes of action: (1) plant patent infringement in violation of 35
`U.S.C. § 271; (2) correction of inventorship under 35 U.S.C. § 256 against the
`Goodwin Defendants; (3) declaratory judgment under 28 U.S.C. § 2201 against the
`Goodwin Defendants; (4) unfair competition and false designation of origin in
`violation of the Lanham Act; (6) conversion; (7) tortious interference with
`economic relations; and (8) unfair competition in violation of Wash. Rev. Code.
`19.86.020. It also requests injunctive relief enjoining Defendants from growing,
`using, offering for sale, selling, reproducing, propagating, exchanging, transferring,
`or possessing the Glory/Staccato trees and its cuttings, budwood and fruit, and
`requiring Defendants to remove and destroy all Glory and unauthorized Staccato
`trees. It also seeks an order directing the Goodwin Defendants assign right, title,
`and ownership of the Glory patent to Plaintiff. Finally, Plaintiff seeks
`compensatory, consequential, and enhanced damages, as well as attorney’s fees
`and costs.
`
`Legal Standard
`
`1. Rule 12(b)(7) and Rule 19
`Rule 12(b)(7) provides that a party may move to dismiss a complaint for
`
`failure to join a party under Rule 19. Fed. R. Civ. P. 12(b)(7). Rule 19, in turn,
`provides that a person must be joined in an action if, in that person’s absence, the
`court cannot accord complete relief among the existing parties. Fed. R. Civ. P.
`19(a)(1)(A). Rule 19 also provides that a person must be joined if the person
`claims an interest in the subject of the action and is so situated that disposing of the
`action in their absence may impair their ability to protect the interest or would
`leave an existing party subject to multiple or inconsistent obligations because of
`the interest. F. R. Civ. P. 19(a)(1)(B).
`
`ORDER DENYING DEFENDANTS’ MOTION TO DISMISS FOR
`FAILURE TO JOIN A NECESSARY PARTY * 5
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`If the court finds that a person should be joined under Rule 19 and has not
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`been joined, the court must order that the person be joined as a party. Fed. R. Civ.
`P. 19 (a)(2). If joinder is not feasible, the court must determine whether, in equity
`and good conscience, the action should proceed among the existing parties or
`should be dismissed. Fed. R. Civ. P. 19(b); Salt River Project Agr. Imp. & Power
`Dist. v. Lee, 672 F.3d 1176, 1179 (9th Cir. 2012). The factors a court should
`consider in determining whether to dismiss where joinder is not possible include:
`(1) the extent to which a judgment rendered in the person’s absence might
`prejudice that person or the existing parties; (2) the extent to which any prejudice
`could be lessened or avoided by protective provisions in a judgment, shaping the
`relief, or other measures; (3) whether a judgment rendered in the person’s absence
`would be adequate; and (4) whether the plaintiff would have an adequate remedy if
`the action were dismissed for nonjoinder. Fed. R. Civ. P. 19(b).
`2. Statutory Standing in Patent Cases
`Patent statutes give rise to a right to sue others for patent infringement,
`
`defining the nature and source of the infringement claim and determining the party
`that is entitled to judicial relief. Morrow v. Microsoft Corp., 499 F.3d 1332, 1339
`(Fed. Cir. 2007).1 A patentee is entitled to bring an infringement action. 35 U.S.C.
`§ 281. This includes the party to whom the patent was originally issued, successors
`in title to the original patentee, and the person holding legal title to the patent. 35
`U.S.C. § 100(d); Morrow, 499 F.3d at 1339. The patent statutes—taken as a
`whole—grant the patent holder a “bundle” of rights associated with the patent,
`
`
`1 Patent infringement cases can be filed in any federal district court having
`personal jurisdiction over the defendant. However, patent appeals cases are heard
`by the Court of Appeals for the Federal Circuit regardless of which district court
`they originated in, and opinions from the Federal Circuit are precedential as to the
`question of statutory standing in patent infringement actions. 28 U.S.C. §
`1295(a)(1); WiAV Sols. LLC v. Motorola, Inc., 631 F.3d 1257, 1265 (Fed. Cir.
`2010).
`ORDER DENYING DEFENDANTS’ MOTION TO DISMISS FOR
`FAILURE TO JOIN A NECESSARY PARTY * 6
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`primarily the right to exclude others from making, using, selling, or offering to sell
`the patented invention. See 35 U.S.C. §§ 154, 271. This bundle of rights “may be
`divided and assigned, or retained in whole or part.” Vapuel Textilmaschinen KG v.
`Meccanica Euro Italia SPA, 944 F.2d 870, 875 (Fed. Cir. 1991).
`
`To retain the ability to bring suit, the rights holder must satisfy two
`requirements: Article III and statutory standing under § 281. See UNILOC 2017,
`2020 WL 7626430, at *3. Like all other cases in federal court, the plaintiff must
`show that it suffered an injury in fact that is fairly traceable to the challenged
`conduct of the defendant, and that its injury is likely to be redressed by a favorable
`judicial decision. Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016). In patent
`cases, constitutional injury under Article III occurs when a party performs at least
`one prohibited action with respect to the patented invention that violates the patent
`holder’s exclusionary rights and infringes on the patent. Morrow, 499 F.3d at 1339.
`Exclusionary rights “involve the ability to exclude others from practicing an
`invention or ‘to forgive activities that would normally be prohibited under the
`patent statutes.’” Lone Star Silicon Innovations LLC v. Nanya Tech. Corp., 925
`F.3d 1225, 1234 (Fed. Cir. 2019) (quoting Morrow, 499 F.3d at 1342). A plaintiff
`in a patent suit must also have statutory or statutory standing under § 281. Morrow,
`499 F.3d at 1344. To have statutory standing, the plaintiff must possess substantial
`rights to the patent in suit. Id.
`
`Generally speaking, there are three types of plaintiffs in patent infringement
`suits. First, there are those who can sue in their own names alone; they hold all
`rights or all substantial rights to the patent. Id. No other parties need be joined in
`this type of action in order to satisfy Rule 19 and statutory standing. Second, there
`are those that can sue so long as both the patent owner and a licensee is joined in
`the suit; this covers persons who hold some rights, but not all substantial rights, to
`the patent, such as an exclusive licensee. Id. In this context, both the patent owner
`and the licensee must be joined, and the patent rights are enforced through or in the
`ORDER DENYING DEFENDANTS’ MOTION TO DISMISS FOR
`FAILURE TO JOIN A NECESSARY PARTY * 7
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`name of the owner. Id. at 1340. Third, there are those who cannot participate as a
`party to an infringement suit at all; these parties hold less than all substantial rights
`to the patent and lack the exclusionary rights necessary to satisfy the injury in fact
`requirement for standing, and this deficiency cannot be cured by adding the patent
`owner to the suit. Id. at 1341.
`
`To determine which category a particular plaintiff falls into, and whether
`that party has statutory standing to bring suit on their own or whether another party
`must be joined in the action, the court must determine whether that plaintiff
`possesses all, some, or no substantial rights in the patent. Lone Star, 925 F.3d at
`1229. If the party asserting infringement is not the patent’s original patentee, the
`court must look to whether the agreement transferring patent rights to the party is
`an assignment of all rights or a mere license. Id. at 1229 (citing AsymmetRX, Inc. v.
`Biocare Med., LLC, 582 F.3d 1314, 1318-19 (Fed. Cir. 2009)). An agreement that
`transfers all substantial rights to a patent is tantamount to an assignment of that
`patent to the exclusive licensee. Alfred E. Mann Found. for Sci. Research v.
`Cochlear Corp., 604 F.3d 1354, 1358-59 (Fed. Cir. 2010).
`
`To determine whether an exclusive license is tantamount to an assignment of
`all rights in a patent, the court must ascertain the intents of the parties to the
`agreement and examine the substance of what was granted. Id. at 1359. This is
`based on the totality of the agreement, rather than the formalities, labels, or “magic
`words.” Lone Star, 925 F.3d at 1229 (citing Waterman v. Mackenzie, 138 U.S. 252,
`256 (1891)). A licensee has all substantial rights if it becomes an “effective
`patentee” and has the interests and exclusionary rights of a patentee. Morrow, 499
`F.3d at 1340, n.6. Although there is no exhaustive list of rights that can transform
`an exclusive licensee into the holder of all substantial rights to a patent, courts have
`identified two particularly salient rights: (1) enforcement, and (2) alienation.
`Immunex Corp. v. Sandoz Inc., 964 F.3d 1049, 1059-60 (Fed. Cir. 2020); Alfred E.
`Mann, 604 F.3d at 1361 (noting that a licensor’s retained right to sue accused
`ORDER DENYING DEFENDANTS’ MOTION TO DISMISS FOR
`FAILURE TO JOIN A NECESSARY PARTY * 8
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`infringers “often precludes a finding that all substantial rights were transferred to
`the licensee”). Other factors a court can consider include the scope of the
`licensee’s right to sublicense, the nature of license provisions regarding reversion
`of rights, the duration of the license grant, and the nature of any limits on the
`licensee’s right to assign its interest in the patent. Immunex Corp., 964 F.3d at
`1089-60.
`
`Discussion
`Defendants argue that SVC must be joined as a party to this case. They
`
`argue that the commercialization agreements entered into by Plaintiff and SVC
`gave SVC several key “sticks” of Plaintiff’s bundle of rights to the ‘551 Staccato
`patent. They argue that this shows that Plaintiff lacks all substantial rights to the
`patent and therefore lacks statutory standing to sue on its own. If joinder is not
`possible, Defendants request that the Court dismiss the case because non-joinder of
`SVC would cause prejudice, risk inconsistent liabilities and multiple litigation, and
`could put their customers at risk of further infringement suits. In response, Plaintiff
`argues that it has all substantial rights in the ‘551 Staccato plant to give it statutory
`standing such that SVC is not a necessary party. Plaintiff also argues that, if the
`Court finds joinder is necessary, SVC has consented to be joined and dismissal is
`not warranted.
`
`There is no dispute that Plaintiff, as the owner of the patent, has
`constitutional standing. See Pandrol USA, LP v. Airboss Ry. Prod., Inc., 320 F.3d
`1354, 1368 (Fed. Cir. 2003). Instead, what must be determined is whether Plaintiff
`has statutory standing. As the parties admit, the case at bar is the “converse”
`situation of most patent infringement cases—Defendants are seeking joinder of a
`licensee, not the patent owner.
`//
`//
`//
`ORDER DENYING DEFENDANTS’ MOTION TO DISMISS FOR
`FAILURE TO JOIN A NECESSARY PARTY * 9
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`1. Whether Plaintiff Conveyed Substantial Rights in the ‘551 Staccato Patent to
`SVC
`In order to determine whether SVC is a necessary party, the Court must first
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`determine whether Plaintiff conveyed substantial rights to it sufficient to destroy its
`own statutory standing. Defendants argue that the 2013 Agreement, as amended in
`2019, conveyed enough rights to SVC that Plaintiff now lacks all substantial rights
`to the ‘551 Staccato patent and therefore lacks statutory standing unless SVC is
`joined as a party.
`a. Enforcement Rights
`As discussed above, a party’s right to enforcement is a pivotal right in
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`determining whether substantial rights have been retained by a patent owner or
`given away to a licensee. Defendants argue that Plaintiff gave SVC “unfettered”
`and “important” enforcement rights, and therefore no longer has substantial rights
`itself.
`
`The Court considers the terms of the 2013 Agreement, as amended by the
`2019 Amendment, itself. Section 10.3 of the 2013 Agreement provides that SVC:
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`shall have the right to enforce the [patent rights] against any infringement or
`alleged infringement thereof, and shall at all times keep AAFC informed as
`to the status thereof. Subject to AAFC’s prior written approval (which will
`not be unreasonably withheld), [SVC] may, at its own expense, institute suit
`against any such infringer or alleged infringer and prosecute such suit in a
`manner consistent with the terms and provisions hereof. AAFC shall
`reasonably cooperate in any such litigation and [SVC]’s expense, and [SVC]
`shall keep AAFC appraised in a timely manner of all litigation activities. In
`any litigation under this paragraph 10.3, [SVC] shall not have the right to
`settle or otherwise compromise AAFC’s position as a licensor or owner of
`the [patent rights] without AAFC’s prior written consent.
`ECF No. 41 at 112, ¶ 10.3. The 2013 Agreement also covers when Plaintiff may
`sue for patent infringement:
`
`If [SVC] elects not to enforce the [patent] rights, then [SVC] shall so notify
`AAFC in writing within six (6) months of receiving notice that an
`
`ORDER DENYING DEFENDANTS’ MOTION TO DISMISS FOR
`FAILURE TO JOIN A NECESSARY PARTY * 10
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`infringement exists, and AAFC may, in its sole judgment and at its own
`expense, take steps to enforce its [patent] and related rights, settle, and
`defend such suit in a manner as AAFC deems fit, even if such settlement
`might compromise viability of this License, and recover for its own account
`any damages, awards, or settlements resulting therefrom.
`
`ECF No. 41 at 113, ¶ 10.5.
`
`Defendants argue that, because Plaintiff lacks unconditional and unilateral
`enforcement rights in the ‘551 Staccato patent, it lacks all substantial rights and
`that SVC must be joined. The Court is not convinced. By its terms, the Agreement
`placed strict limitations on SVC’s enforcement rights and retained significant
`enforcement rights for itself. Despite Defendants’ assertions to the contrary,
`Plaintiff maintained significant control over the course of patent enforcement
`litigation and had unfettered rights to bring enforcement actions if SVC declined to
`bring suit. And unlike SVC, Plaintiff has the right to make any litigation decisions
`it wanted without first consulting SVC, even if that decision undermined the
`validity of the Agreement. Although Defendants are correct that there do not
`appear to be limits on SVC’s right to pursue non-judicial enforcement actions—
`such as the sending of cease-and-desist letters—those rights do not outweigh the
`significant rights retained by Plaintiff compared to the limited rights given to SVC.
`Furthermore, the Agreement here gave less rights to SVC and retained more rights
`for Plaintiff than cases where the Federal Circuit has previously found a licensee
`lacked substantial rights to a patent to give it statutory standing to sue for
`infringement. See Alfred E. Mann, 604 F.3d at 1362-63. This suggests Plaintiff
`maintained substantial rights in the ‘551 Staccato patent and, in turn, that SVC
`does not have substantial rights.
`b. Sub-Licensing Rights
`The Court next considers SVC’s sub-licensing rights. Defendants argue that
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`SVC had broad sub-licensing rights to the ‘551 Staccato patent, and this deprives
`
`ORDER DENYING DEFENDANTS’ MOTION TO DISMISS FOR
`FAILURE TO JOIN A NECESSARY PARTY * 11
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`Case 2:20-cv-00181-SAB ECF No. 51 filed 01/13/21 PageID.1014 Page 12 of 17
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`Plaintiff of all substantial rights to the patent. The 2013 Agreement provides in
`relevant part:
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`[SVC] is permitted to sub-license non-affiliated or non-controlled parties on
`the same terms and conditions of this License. The terms and conditions of
`any sub-license also apply to sub-sub-licensees granted by [SVC] and shall
`include but are not limited to the following:
`• be royalty-bearing and revocable;
`• [SVC] shall negotiate a consideration with the sub-licensee that will
`result in Gross Revenues to [SVC];
`• be only within a Territory or any portion thereof;
`• be only within the Field of Use or a subset thereof;
`• be subject to the same obligations and restrictions as those required of
`[SVC] under this License;
`• be in a contractual form determined by [SVC] who will inform AAFC
`beforehand. AAFC reserves a right of refusal on any sub-licensing or
`sub-sub-licensing agreement or any other agreement [SVC] could
`engage involving AAFC’s intellectual property. Such refusal from
`AAFC would be an exceptional measure based on reasonable ground
`and proper justification;
`• be copied to AAFC immediately following execution; and
`• not be a de facto assignment.
`Irrespective of the nature of the commercial or corporate devices used by
`[SVC] to Commercialize, (whether via sub and sub-sub-licensees or
`otherwise), all Commercialization by such entities are deemed to be
`Commercialization by [SVC]. Furthermore, [SVC] shall ensure that any
`monies owing to AAFC from the sub-licensee or sub-sub-licensee (or
`other commercial or corporate devise used by [SVC]) is paid to AAFC
`when due.
`
`ECF No. 42 at 100, ¶¶ 2.9-2.9.8.
`
`Whether a licensee has the right to sub-license is a key factor in assessing
`whether a plaintiff has all substantial rights to a patent in suit. Alfred E. Mann, 604
`F.3d at 1360-61 (citing Prima Tek II, LLC v. A-Roo Co., 222 F.3d 1372, 1378-80
`(Fed. Cir. 2000)). For example, the Federal Circuit has concluded that a licensee
`that had a completely unfettered right to grant sub-licenses—and could effectively
`negate enforcement actions by the patent owner by giving an infringer a
`ORDER DENYING DEFENDANTS’ MOTION TO DISMISS FOR
`FAILURE TO JOIN A NECESSARY PARTY * 12
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`Case 2:20-cv-00181-SAB ECF No. 51 filed 01/13/21 PageID.1015 Page 13 of 17
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`retroactive, royalty-free sub-license—had substantial rights in the patent in issue.
`Speedplay, Inc. v. Bebop, Inc., 211 F.3d 1245, 1251 (Fed. Cir. 2000). The Federal
`Circuit has also recognized the opposite scenario—it held that a licensee lacked all
`substantial rights because the patent owner could negate enforcement actions
`brought by a licensee by granting retroactive sub-licenses to an alleged infringer.
`Lone Star, 925 F.3d at 1231-32.
`
`The Court concludes that SVC does not have enough sub-licensing rights to
`find that Plaintiff lacks substantial rights in the ‘551 Staccato patent. As detailed
`above, the 2013 Agreement imposed detailed limitations on SVC’s right to sub-
`license and expressly retained for Plaintiff the right to withhold permission for any
`sub-license. Accordingly, SVC’s sub-licensing rights did not give it all substantial
`rights in the ‘551 Staccato patent, nor does its rights deprive Plaintiff of all
`substantial rights.
`c. Intellectual Property Maintenance Responsibilities
`Defendant also argues that Plaintiff gave SVC broad responsibility to obtain
`
`legal protection for its plants, therefore “divest[ing] itself of important rights and
`responsibilities to obtain and maintain intellectual property.” ECF No. 40 at 18.
`The 2019 Amendment to the 2013 Agreement provides:
`
`SVC, concurrent with exercising their right to Commercialize a Line, must
`apply for intellectual property rights on behalf of AAFC, such as [plant
`variety rights], as well as any regulatory registration and legislation,
`necessary to enable the sale and protection of the Line as a Variety in the
`chosen country or countries of the Territory. All applications and
`registrations shall be in the same of Her Majesty the Queen in Right of
`Canada, as represented by the Minister of Agriculture and Agri-Food, with
`all costs being the responsibility of SVC. . . . Should it provide impossible to
`obtain [plant variety rights] for a variety, SVC may decide to obtain a
`Trademark to be used in association with a Variety. SVC may also choose to
`obtain a Trademark in addition to [plant variety rights] to be used in
`association with a Line or Variety in the name of Her Majesty the Queen in
`Right of Canada, as represented by the Minister of Agriculture and Agri-
`Food. The denomination used for a Trademark cannot be the same
`ORDER DENYING DEFENDANTS’ MOTION TO DISMISS FOR
`FAILURE TO JOIN A NECESSARY PARTY * 13
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`denomination used for [plant variety rights] within the same Territory. The
`cost of applying for and maintaining a Trademark is the responsibility of
`SVC.
`
`ECF No. 42 at 141, ¶ 2.5. Defendants argue this provision shows that Plaintiff gave
`away an essential “stick” of its bundle of patent rights because it limited its
`ownership rights in the patents.
`
`Although Defendant is correct that “[t]he responsibility to maintain a patent
`is one of the obligations that has been recognized by [the Federal Circuit] as an
`indication that the party with that obligation has…an ownership in the patent,”
`Propat Intern. Corp. v. Rpost, Inc., 473 F.3d 1187, 1191 (Fed. Cir. 2007), the
`Agreement here shows that this is not the case here. Here, SVC was responsible for
`applying for, paying for, and maintaining intellectual property rights for lines it
`chose to commercialize. However, SVC was required to make such application in
`Plaintiff’s name and on Plaintiff’s behalf, not on its own. The Federal Circuit has
`recognized that the fact that a licensee has paid maintenance fees for patents does
`not necessarily mean the licensor has lost all substantial ownership rights by virtue
`of contracting for the licensee to handle the administrative and logistical duties of
`obtaining intellectual property protection. See Lone Star, 925 F.3d at 1232, n.4.
`Plaintiff retains ownership rights in its intellectual property, and therefore has
`substantial rights in the ‘551 Staccato patent.
`d. Intellectual Property Rights
`The Court next considers Plaintiff’s intellectual property rights. Plaintiff
`
`argues that it retained significant and substantial rights in its intellectual property
`and argues that SVC has only limited rights to test and commercialize certain lines
`and varieties. It also argues it retained the right to review and approve SVC’s
`testing and commercialization plans “in its sole discretion.” It also argues that
`SVC’s rights came with territorial and field of use imitations, see ECF No. 42 at
`99, ¶ 2.7.2, and were royalty bearing. Defendants argue that Plaintiff wrongfully
`ORDER DENYING DEFENDANTS’ MOTION TO DISMISS FOR
`FAILURE TO JOIN A NECESSARY PARTY * 14
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`Case 2:20-cv-00181-SAB ECF No. 51 filed 01/13/21 PageID.1017 Page 15 of 17
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`focuses on the rights it retained in the Agreement rather than those it gave away to
`SVC.
`Plaintiff has retained substantial rights in its intellectual property. Indeed,
`
`the Agreement provides that “each Line or Variety…are the sole property of
`[Plaintiff],” ECF No. 42 at 107, ¶ 7.1.1, and that