throbber
Case 2:20-cv-00181-SAB ECF No. 55 filed 03/18/21 PageID.1025 Page 1 of 15
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`The Honorable Stanley A. Bastian
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`No. 2:20-CV-00181-SAB
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`DEFENDANTS’ MOTION FOR
`LEAVE TO AMEND THE
`ANSWER
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`Hearing Date: April 20, 2021
`With Oral Argument: 1:30 pm
`(By Video Conference)
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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,
`
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`VAN WELL NURSERY, INC. a
`Washington Corporation, MONSON
`FRUIT COMPANY, INC., a Washington
`Corporation, GORDON GOODWIN, an
`individual, and SALLY GOODWIN, an
`individual
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` Defendants.
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`DEFENDANTS’ MOTION FOR LEAVE TO AMEND THE ANSWER
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`Case 2:20-cv-00181-SAB ECF No. 55 filed 03/18/21 PageID.1026 Page 2 of 15
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`TABLE OF CONTENTS
`I. INTRODUCTION ...................................................................................... 1
`II. FACTS........................................................................................................ 2
`A. The Development and Testing of Staccato…………………………. 2
`B. Efforts to Commercialize Staccato before the ’551 Patent’s Critical
`Date …………………………………………………………………3
`C. Staccato Described in Printed Publications before the ’551 Patent’s
`Critical Date…………………………………………………………4
`D. Materiality and Intent to Deceive the Patent Office………………... 5
`III. ARGUMENT ............................................................................................. 6
`A. Legal Standard……………………………………………………… 6
`B. AAFC Cannot Meet its Burden to Show that Leave to Amend should
`be Denied…………………………………………………………… 7
`1. Defendants Sufficiently Plead Inequitable Conduct……………… 7
`2. Defendants Sufficiently Plead Unlawful Restraint of Trade……….9
`IV. CONCLUSION ........................................................................................10
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`TABLE OF AUTHORITIES
`Cases
`Adrain v. Hypertech, Inc., No. . 2:98-CV-37C 2001 U.S. Dist. LEXIS 19182 (D.
`Utah April 18, 2001) ............................................................................................... 5
`
`Breakdown Services, Ltd. v. Now Casting, Inc., 550 F. Supp. 2d 1123 (C.D. Cal
`2007) ....................................................................................................................... 6
`
`DCD Programs, Ltd. v. Leighton, 833 F.2d 183 (9th Cir. 1987)) ............................. 6
`
`Delano Farms Co. v. California Table Grape Comm’n, 623 F. Supp. 2d 1144 (E.D.
`Cal. 2009) ............................................................................................................... 9
`
`Delano Farms Co. v. California Table Grape Comm’n, 655 F.3d 1337 (Fed. Cir.
`2011) .................................................................................................................8, 10
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`Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009) ................ 8
`
`In re Wyer, 655 F.2d 221 (CCPA 1981)……………………………………………5
`
`Lacey v. Maricopa, 693 F.3d 896 (9th Cir. 2012) ..................................................... 6
`
`Mirmehdi v. United States, 689 F.3d 975 (9th Cir. 2012) ......................................... 6
`
`Southwest Software, Inc. v. Harlequin, Inc., 226 F.3d 1280 (Fed. Cir. 2000) .......... 5
`
`United States v. Corinthian Colleges, 655 F.3d 984 (9th Cir. 2011) ........................ 7
`
`Walker Process Equipment, Inc. v. Food Machinery Chemical Corp., 382 U.S. 172,
`86 S.Ct. 347, 15 L.Ed.2d 247 (1965) ..................................................................... 9
`Statutes
`35 U.S.C. § 102(b) .................................................................................................3, 7
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`35 U.S.C. § 255 .......................................................................................................... 5
`Rules
`37 C.F.R. § 1.105 ....................................................................................................... 1
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`Fed. R. of Civ. P. 9(b) ................................................................................................ 8
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`Fed. R. of Civ. P. 15(a)(2) ......................................................................................... 6
`DEFENDANTS’ MOTION FOR LEAVE TO AMEND THE ANSWER
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`INTRODUCTION
`I.
`Defendants, Van Well Nursery, Inc. (“Van Well”), Monson Fruit Company,
`Inc. (“Monson”), and Gordon and Sally Goodwin (“Goodwins”) (collectively
`“Defendants”) hereby request leave to amend their respective answers to add
`counterclaims of invalidity, unenforceability, and unlawful restraint of trade against
`the plaintiff, Her Majesty the Queen in Right of Canada as represented by the
`Minister of Agriculture and Agri-Food (“AAFC”) and its exclusive licensee,
`Summerland Varieties Corporation formerly known as the Okanagan Plant
`Improvement Company (“SVC/PICO”). Discovery has revealed that both AAFC
`and SVC/PICO withheld material information from the Patent Office during
`prosecution of the application giving rise to the patent-in-suit, U.S. Patent No.
`PP20,551 (“the ’551 Patent”) which covers a sweet cherry variety known as
`“Staccato” or 13S2009.
`As alleged in the proposed amended counterclaims,1 both AAFC and
`SVC/PICO withheld material information from the Patent Office. Specifically, the
`Examiner requested information pursuant to 37 C.F.R. § 1.105, asking for any
`information indicating that Staccato was “publicly available prior to the filing date
`of the instant application,” including “information available regarding the first sale
`or other public distribution of the claimed plant variety anywhere in the world,
`including the date(s) of any sale or other public distribution.” (See PACC, ¶35.)
`Instead of disclosing what they knew about Staccato, i.e., that it had been widely
`used and sold within the United States at least as early as 2000, and that it had been
`described in printed publications as early as 1999 and 2000, AAFC and SVC/PICO
`
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`1 The proposed amended counterclaims (“PACC”) are attached to the
`Declaration of Mark P. Walters (“Walters Decl.”) as Exhibit A.
`DEFENDANTS’ MOTION FOR LEAVE TO AMEND THE ANSWER
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`withheld this information because they understood that disclosure would eliminate
`any chance at patent protection.
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`Patent protection for Staccato met a critical need for both AAFC and
`SVC/PICO because without it, Canadian growers would lose an important
`competitive edge in the lucrative late-harvest market for sweet cherries. In the
`twenty seasons since Staccato fruit was first sold in the United States, AAFC and its
`exclusive licensee have used the threat of intellectual property litigation to
`systematically reduce competition in service of a program known as “Canada First.”
`(See PACC, ¶8.) These improper enforcement activities protect an unlawful
`monopoly by ensuring that the only sweet cherries sold into the late-harvest market
`are owned or controlled by AAFC and SVC/PICO.
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`Based on these recently discovered facts, which together support claims for
`invalidity, unenforceability, and unlawful restraint of trade, the Court should grant
`Defendants’ motion for leave to amend.
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`II.
`A. The Development and Testing of Staccato
`
`FACTS
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`AAFC and SVC/PICO waited until March 13, 20022 to file a patent
`application in the United States on Staccato, however, the original seedling was
`produced twenty years earlier and the variety was assigned the reference number
`13S-20-09 in 1991. (Dkt. No. 1, the ’551 Patent at 2:19-25.) By 1992, “[t]he resulting
`[Staccato] trees were stable in their horticultural traits and no off-types or variants
`
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`2 As explained infra at §III.B.1, SVC failed to properly identify its March 13,
`2002 provisional application during prosecution and thus, the earliest priority date
`to which the ’551 Patent is entitled is March 6, 2003.
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`occurred during the re-propagation of Staccato.” (Id. at 3:26-28.) Staccato was
`successfully reproduced each season after 1992. (See PACC, ¶13.) By 1999 or
`before, Staccato was ready for patenting. (See id., ¶14.) In fact, on July 27, 1999,
`SVC/PICO said of Staccato “[w]e will seek Plant Patent in the [United] [S]tates for
`the variety. The information has been collected and we just need to submit it.” (Id.
`(emphasis added).)
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`B.
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`Efforts to Commercialize Staccato before the ’551 Patent’s Critical
`Date3
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`Staccato was widely released to growers in the United States and sold by
`nurseries in the United States commercially in large numbers by at least as early as
`2000. (See id., ¶¶15-26.) Discovery has revealed growers who had commercial-size
`blocks of Staccato planted at least as early as 2000. (See id. ¶¶15, 18, 22.) These
`prior-art blocks of Staccato were not planted for experimental purposes because (a)
`they were in quantities far exceeding an amount reasonably necessary for
`experimentation; (b) they were, in whole or in part, in public view and not subject
`to any obligation of confidentiality imposed by the inventor or the inventor’s
`principal; (c) they were, in whole or in part, not the subject of testing to determine
`whether the invention functioned for its intended purpose; and (d) they were not
`under the control of the inventor or the inventor’s principal. (See id. ¶¶17, 20, 22.)
`
`SVC/PICO had so-called “testing agreements” with many growers of Staccato
`prior to 2000, however, these agreements did not facilitate or lead to
`
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`3 The “critical date” is the date one year prior the earliest filing to date to which
`a patent claim is entitled. The date is important because it defines the scope of
`potentially invalidating prior art pursuant to the version of 35 U.S.C. § 102(b) in
`effect prior to the America Invents Act in 2012 (referred to as “pre-AIA”). See Public
`Law No. 112-29 (September 16, 2012).
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`“experimentation” of any kind on the part of the inventor or AAFC. Indeed, neither
`the inventor nor AAFC were parties to the so-called “testing agreements.” (See id.,
`¶23.) Rather, they were offered by Staccato’s commercial licensing agent,
`SVC/PICO, to allow growers an opportunity to try new varieties in their area. (See
`id. ¶23.) Access to new varieties including Staccato was granted to any interested
`grower with the capacity to commercialize the variety. (See id.) This led to dozens
`of acres of Staccato planted in the United States before the critical date and outside
`of the knowledge and control of AAFC or SVC/PICO. (See id.)
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`Public use of Staccato before the critical date was so widespread and
`uncontrolled in the U.S. that SVC/PICO, through its sublicensee, Stemilt Growers,
`Inc. (“Stemilt”), initiated a so-called “Amnesty Program,” the apparent purpose of
`which was to discover growers of Staccato in the United States who were (a)
`growing Staccato trees that were not authorized by SVC/PICO by an existing
`“testing agreement” or (b) growing Staccato trees without an existing “testing
`agreement.” (See id. ¶24.) Through this “Amnesty Program,” SVC/PICO and AAFC
`discovered growers who had planted Staccato before the ’551 Patent’s critical date
`in amounts that were previously unknown by SVC/PICO. (See id.)
`
`Additionally, documents produced by third-parties indicate that SVC/PICO
`and Stemilt used nurseries in the U.S. to produce Staccato trees before 2000 to
`supply both U.S. and Canadian growers. (See id. ¶¶18, 19, 26.) C&O Nursery even
`included Staccato in its 1999 Fall catalog, offering Staccato without restriction to
`would-be buyers. (See id. ¶¶26.)
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`C.
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`Staccato Described in Printed Publications before the ’551 Patent’s
`Critical Date
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`C&O Nursery’s Fall 1999 catalog was widely distributed and as such, it
`qualifies as an invalidating “printed publication” of Staccato before the critical date.
`(See id. ¶32.) A reference qualifies as a “printed publication” within the meaning of
`(pre-AIA) 35 U.S.C. § 102(b) “upon a satisfactory showing that such document has
`been disseminated or otherwise made available to the extent that persons interested
`and ordinarily skilled in the subject matter or art, exercising reasonable diligence,
`can locate it.” In re Wyer, 655 F.2d 221, 227 (CCPA 1981). Additionally, AAFC
`and SVC/PICO published a description of Staccato in their annual “Cherry
`Catalogue” published in the Spring of 2000. (See id. ¶¶27-28.) Staccato was also
`published in April 2001 in the Canadian Plant Varieties Journal. (See id. ¶¶30-31.)4
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`D. Materiality and Intent to Deceive the Patent Office
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`Apart from the April 2001 publication of Staccato in the Canadian Plant
`Varieties Journal, none of the above prior-art publications, uses, sales, and offers for
`sale were disclosed to the Patent Office during prosecution of the ’551 Patent. (See
`PACC, ¶¶33-48.) This was despite the Examiner’s request for “information . . .
`regarding the first sale or other public distribution of the claimed plant variety
`
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`4 This April 2001 publication is prior art pursuant to 35 U.S.C. § 102(b)
`because the provisional application filed by the Inventor and SVC/PICO on March
`13, 2002, was inaccurately referenced during prosecution. (Walters Decl. ¶3.) The
`correct application number is 60/363,574, but it is listed as 60/363,547 on the face
`of the ’551 Patent. (Id.) AAFC is currently pursuing a certificate of correction at the
`Patent Office (Id., Ex. B), however, even if these efforts succeed, AAFC cannot
`claim the benefit of the Provisional’s filing date in this case because certificates of
`correction have prospective application only. See Southwest Software, Inc. v.
`Harlequin, Inc., 226 F.3d 1280, 1294 (Fed. Cir. 2000) (interpreting 35 U.S.C. § 255
`and holding that changes made by certificate of correction apply only to “the trial of
`actions for causes thereafter arising”). See also Adrain v. Hypertech, Inc., No. 2:98-
`CV-37C 2001 U.S. Dist. LEXIS 19182 *; 2001 WL 740542 (D. Utah April 18, 2001)
`(refusing to apply certificate of correction to ongoing case).
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`anywhere in the world, including the date(s) of any sale or other public distribution”
`and the Examiner’s specific request for any “catalogs” that might show whether
`Staccato “was publicly available” prior to the filing date of the application. (See id.
`¶¶35-36.) The Examiner further explained why the Patent Office required full,
`accurate, and honest disclosure from the inventor and SVC/PICO:
`
`[t]he ability of the Office to determine whether the claimed plant was
`publicly available is limited. Search of electronic databases, the Internet
`and the Office’s collection of retail catalogs has not revealed any
`indication that the plant was for sale more than one year prior to the
`U.S. application. However, the Office’s collection of retail catalogs is
`not comprehensive. Furthermore, the claimed plant may have been
`sold at the wholesale level, sold under a different name, or even
`distributed to interested parties free of charge. Since the inventor and
`assignee of the instant application are in a better position to know when,
`if ever, the claimed plant was made publicly available, the Examiner is
`requiring this information in the attached Requirement for Information
`Under 37 CFR 1.105
`
`(Id. ¶37 (emphasis added).) In a communication to the Patent Office sent June 14,
`2004, responding to the Examiner’s request for information, instead of disclosing
`the widespread and uncontrolled use and sale of Staccato in the U.S., including at
`least two pre-critical-date catalogs disclosing Staccato, SVC/PICO and the inventor
`omitted this information. (See id. ¶¶38-48.) These omissions were made knowingly
`and with an intent to deceive the patent office. (See id. ¶¶49-61.)
`
`ARGUMENT
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`III.
`A. Legal Standard
`Federal Rule of Civil Procedure 15(a)(2) directs a court to grant leave to
`amend if justice so requires. “A district court should grant leave to amend ... unless
`it determines that the pleading could not possibly be cured by the allegation of other
`facts.” Lacey v. Maricopa, 693 F.3d 896, 926 (9th Cir. 2012). In other words,
`
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`“requests for leave to amend should be granted with extreme liberality . . . .”
`Mirmehdi v. United States, 689 F.3d 975, 985 (9th Cir. 2012).
`
`For a Rule 15(a) motion, the non-moving party bears the burden of persuading
`the Court that leave should not be granted. Breakdown Services, Ltd. v. Now Casting,
`Inc., 550 F. Supp. 2d 1123, 1132 (C.D. Cal 2007) (citing DCD Programs, Ltd. v.
`Leighton, 833 F.2d 183, 186-87 (9th Cir. 1987)). Courts consider the following five
`factors when leave to amend is requested: (1) bad faith, (2) undue delay, (3)
`prejudice to opposing party, (4) futility of amendment, and (5) whether the pleading
`was previously amended. United States v. Corinthian Colleges, 655 F.3d 984, 995
`(9th Cir. 2011).
`
`B. AAFC Cannot Meet its Burden to Show that Leave to Amend
`should be Denied
`None of the factors support denial of leave to amend. For example, there has
`been no bad faith or undue delay. Defendants’ motion comes more than eight months
`before the deadline to amend the pleadings and more than fifteen months before trial.
`(See Dkt. No. 29.) Further, Defendants have filed this motion reasonably soon after
`discovering supporting evidence during discovery. (Walters Decl. ¶4.) There have
`been no previous amendments and AAFC cannot show prejudice given the relatively
`early stages of this case. This leaves an argument that the proposed amendment
`would be “futile.” But Defendants’ proposed counterclaims sufficiently plead facts
`that, if true, amount to inequitable conduct and unlawful restraint of trade.
`
`1.
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`Defendants Sufficiently Plead Inequitable Conduct
`
`There can be no question that if Staccato was on sale, in public use, or
`described in a printed publication as alleged by Defendants in the proposed amended
`counterclaims, the ’551 Patent is invalid. The Patent Act provides that “a person
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`shall be entitled to a patent unless … (b) the invention was patented or described in
`a printed publication in this or a foreign country or in public use or on sale in this
`country, more than one year prior to the date of the application for patent in the
`United States.” 35 U.S.C. § 102(b) (pre-AIA) (emphasis added). Here, the ’551
`Patent’s effective filing date is March 6, 2003 because the applicant failed to
`properly claim the benefit of an earlier-filed provisional application. (See supra
`§II.C, fn. 4.) Despite efforts by AAFC to correct this error, any certificate of
`correction will not apply to this case. (See id.) But even if AAFC can correct the
`’551 Patent’s priority claim, all of the omitted prior art except for the April 2001
`Publication in the Canadian Plant Varieties Journal occurred or published more than
`one year prior to the provisional application’s filing date. (See PACC, ¶¶15-32.)
`
`Like common law fraud, inequitable conduct must be plead with particularity
`consistent with the requirements of Fed. R. of Civ. P. 9(b). See Exergen Corp. v.
`Wal-Mart Stores, Inc., 575 F.3d 1312, 1328-29 (Fed. Cir. 2009). Defendants
`sufficiently identify the circumstances of the alleged fraud, including the “who,
`what, when, where, and how of the material misrepresentation or omission
`committed before the PTO.” Id. at 1328. (See PACC, ¶¶15-48.) Defendants have
`also alleged “underlying facts from which a court may reasonably infer that a
`specific individual (1) knew of the withheld material information or of the falsity of
`the material misrepresentation, and (2) withheld or misrepresented this information
`with a specific intent to deceive the PTO.” Id. at 1328-29. (See PACC, ¶¶49-61.)
`
`The inequitable conduct allegations in this case are like those found sufficient
`by the Federal Circuit in a case involving a patented grape variety. See Delano Farms
`Co. v. California Table Grape Comm’n, 655 F.3d 1337, 1350 (Fed. Cir. 2011). Like
`the Delano Farms case, Defendants here identify specific individuals at AAFC and
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`SVC/PICO with detailed knowledge about Staccato’s pre-critical-date sales, uses,
`offers for sale, and disclosures in printed publications and sufficient facts to infer
`that these individuals withheld the information with an intent to deceive the Patent
`Office. (See PACC, ¶¶49-61.) Additionally, like the Delano Farms case, the omitted
`prior art in this case involved alleged “testing” of the same plant variety covered by
`the patent. See 655 F.3d at 1340-1341 (referring to pre-critical-date “trials”
`conducted by nine growers of the Sweet Scarlet variety). Remarkably, the Delano
`Farms case even involved an undisclosed “amnesty program” unearthing the
`existence of seventeen unauthorized pre-critical-date growers of the patented
`variety. See Delano Farms Co. v. California Table Grape Comm’n, 623 F. Supp. 2d
`1144, 1150-51 (E.D. Cal. 2009) (explaining “the Commission created a so-called
`‘amnesty program’ designed to hide the fact that valid patents could not be obtained,
`and to extort funds from growers already in possession of the varieties.”).
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`2.
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`Defendants Sufficiently Plead Unlawful Restraint of Trade
`
`Defendants also sufficiently allege the existence of a distinct market for late-
`harvest sweet cherries as well as conduct by AAFC and SVC/PICO violating the
`Sherman Act under the theory of Walker Process Equipment, Inc. v. Food
`Machinery Chemical Corp., 382 U.S. 172, 86 S.Ct. 347, 15 L.Ed.2d 247 (1965). (See
`PACC, ¶¶62-69.) In Delano Farms, the Federal Circuit rejected the grape-growers’
`Sherman Act claim because “Delano failed to point to anything other than the
`issuance of a patent for Sweet Scarlet grapes that would provide a plausible basis for
`finding that Sweet Scarlet grapes form a relevant antitrust market.” 655 F.3d at 1352.
`In this case, by contrast, Defendants allege that “[o]ther than Glory, there are no
`other known substitute sweet-cherry varieties that mature at least seven (7) days after
`the variety Sweetheart that are not also owned or controlled by AAFC and
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`DEFENDANTS’ MOTION FOR LEAVE TO AMEND THE ANSWER
`- 9
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`

`

`Case 2:20-cv-00181-SAB ECF No. 55 filed 03/18/21 PageID.1037 Page 13 of 15
`
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`SVC/PICO.” (PACC, ¶65.) Even AAFC and SVC/PICO agree that the ability to sell
`sweet cherries into the late-harvest market “gives a distinct financial advantage.”
`(Complaint, ¶2.) Defendants also allege that “[b]ecause of the narrow window of
`time within which most sweet cherries come to market in the United States, cherries
`that mature very late in the season command higher prices than those available
`during the peak season.” (PACC, ¶68.) Accordingly, Defendants here allege
`sufficient facts “that, if proved, would define the market or the submarket with
`reference to consumer demand for the product and consumer demand for its
`reasonable substitutes.” Delano Farms, 655 F.3d at 1352.
`
`IV. CONCLUSION
`For all the forgoing reasons, this Court should grant Defendants’ motion for
`leave to amend the answer to add the proposed counterclaims.
`
`
`
`DATED this 18th day of March 2021.
`
` LOWE GRAHAM JONESPLLC
`
`
`
`
`
`
`
`By
`Mark P. Walters, WSBA No. 30819
`walters@lowegrahamjones.com
`701 Fifth Avenue, Suite 4800
`Seattle, WA 98104-7097
`Telephone: (206) 381-3300
`Attorneys for Defendant Monson
`Fruit Company, Inc.
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`DEFENDANTS’ MOTION FOR LEAVE TO AMEND THE ANSWER
`- 10
`
`

`

`Case 2:20-cv-00181-SAB ECF No. 55 filed 03/18/21 PageID.1038 Page 14 of 15
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`/s/ Quentin D. Batjer
`Quentin D. Batjer, WSBA No. 37951
`DAVIS, ARNEIL LAW FIRM, LLP
`617 Washington Street
`Wenatchee, WA 98801
`Tel: (509) 662-3551
`quentin@dadkp.com
`
`
`
`Tim Billick, WSBA No. 46690
`TBILLICK LAW PLLC
`600 1st Ave
`Seattle, WA 98104
`Tel: (206) 494-0020
`tim@tbillicklaw.com
`Attorneys for Defendants Gordan and
`Sally Goodwin
`
`
`/s/Kent N. Doll, Jr. _______
`
`Kent N. Doll. Jr., WSBA 40549
`Feltman Ewing, P.S.
`421 W. Riverside Ave., Suite 1600
`Spokane, WA, 99201
`kentd@feltmanewing.com
`
`
`
`Tim Billick, WSBA No. 46690
`TBILLICK LAW PLLC
`600 1st Ave
`Seattle, WA 98104
`Tel: (206) 494-0020
`tim@tbillicklaw.com
`
`Attorneys for Defendant Van Well
`Nursery, Inc.
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`DEFENDANTS’ MOTION FOR LEAVE TO AMEND THE ANSWER
`- 11
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`

`

`Case 2:20-cv-00181-SAB ECF No. 55 filed 03/18/21 PageID.1039 Page 15 of 15
`
`
`
`CERTIFICATE OF SERVICE
`
`I certify that on March 18, 2021, a copy of this pleading was filed
`
`electronically with the Clerk of the Court using the CM/ECF system. Notice of this
`
`filing will be sent to all counsel of record via the court’s electronic filing system.
`
`
`
`/s/Rischel Voigt
`
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`
`Rischel Voigt, Paralegal
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`DEFENDANTS’ MOTION FOR LEAVE TO AMEND THE ANSWER
`- 12
`
`

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