Bayer CropScience AG et al v. Dow Agrosciences LLC
OPINION re 126 . Signed by Judge Renee Marie Bumb on 10/7/2013. (bkb)
NOT FOR PUBLICATION
[Docket No. 126]
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
BAYER CROPSCIENCE AG and BAYER
Civil No. 12-256 RMB/JS
DOW AGROSCIENCES LLC,
Frederick L. Cottrell, III
Jeffrey L. Moyer
Travis Steven Hunter
Richards, Layton & Finger, P.A.
One Rodney Square
920 North King Street
Wilmington, DE 19801
Robert J. Koch
Stephanie R. Amoroso
Edwards J. Mayle
Milbank, Tweed, Hadley & McCoy LLP
1850 K Street NW, Suite 1100
Washington, D.C. 20006
Jennifer L. Dering
Archer & Greiner, P.C.
300 Delaware Avenue, Suite 1370
Wilmington, DE 19801
Anne Shea Gaza
Young, Conaway, Stargatt & Taylor LLP
1000 North King Street
Wilmington, DE 19801
Attorneys for Plaintiffs
Steven J. Balick
Lauren E. Maguire
Andrew C. Mayo
Ashby & Geddes, P.A.
500 Delaware Avenue, 8th Floor
P.O. Box 1150
Wilmington, Delaware 19899
Peter A. Bicks
Alex V. Chachkes
Joseph A. Sherinsky
James L. Stengel
Orrick, Herrington & Sutcliffe LLP
51 West 52nd Street
New York, New York 10019
Attorneys for Defendant Dow AgroSciences LLC
BUMB, United States District Judge (sitting by designation):
Plaintiffs Bayer CropScience AG and Bayer S.A.S.
(“Plaintiffs” or “Bayer”) have sued Defendant Dow AgroSciences
LLC (“Defendant” or “Dow”) for patent infringement based on
Defendant's Enlist E3 (“E3”) product.
Defendant has moved for
summary judgment, arguing that it does not infringe because it
obtained a valid sublicense to develop and sell E3.
this Court agrees that Defendant has a valid sublicense to
develop and sell E3, Defendant's motion for summary judgment is
In 2003, Bayer made the decision to divest itself of certain
[Docket No. 127 at Ex. A, Transcript of
Deposition of David G. Morgan (“Morgan Dep.”) at 33:22-35:24].
Consistent with that decision, in 2004, Bayer entered into a
series of agreements with two companies - Stine Seed Farm, Inc.
(“Stine”) and MS Technologies, LLC (“MS Tech”) - under which
Stine and MS Tech obtained certain assets and licenses for
soybean technology. Two of those agreements are central to the
First, Bayer entered into an agreement with Stine (the
“Stine Agreement”), under which Stine was granted a nonexclusive
license to “increase, market, distribute for sale, sell and
offer for sale” soybean seeds containing “events” already made
by Bayer, or new events made by or for MS Tech. [Docket No. 161
at Ex. B].
An “event” is a plant cell that has had a new gene
introduced into it.
[Docket No. 127, Defendant’s Brief in
Support of Summary Judgment at 3 (citing to record)].
introduction of a new gene can confer new features on the plant.
The introduction of multiple genes is referred to as a
Under Article 2.1.3 of the Stine Agreement, MS
Tech gave its consent to this arrangement.
[Docket No. 161 at
On the same day, Bayer and MS Tech entered into an agreement
titled the “Acquisition Agreement of Certain Soybean Assets of
Bayer CropScience S.A. and License Agreement” (the “Agreement”).
[Docket No. 127 at Ex. C].
There are a number of relevant
provisions in the Agreement, which this Court sets forth below
(the most relevant section of the Agreement, Article 3.1.2, is
set out in bold):
the Agreement's preamble indicates that Bayer had
“decided to divest” itself of certain soybean assets
and license them (Agreement at 3);
the Agreement's preamble indicates that “some rights .
. . will be granted to Stine and will . . . be carved
out from” the Agreement (Agreement at 4);
the Agreement defines “ASSET” as “the BAYER SOYBEAN
EVENTS, LEGAL ASSETS and MATERIAL” (Id.);
the Agreement defines “EXPOLIT” or “EXPLOITATION” as
“to make, breed, produce, condition, market, offer,
sell, import, export, stock, use, or otherwise dispose
of (or offer to do or have done any or all of the
foregoing)” (Agreement at 5);
the Agreement defines “BAYER SOYBEAN EVENT” as certain
soybean events already made by Bayer (Agreement at 4);
the Agreement defines “M.S. SOYBEAN EVENT” as certain
soybean events made, by or for, MS Tech (Agreement at
Article 2.1.1 of the Agreement provides that:
“Subject to the terms and conditions set forth in
this AGREEMENT, the Seller hereby sells, transfers
and/or assigns the ASSET to [MS TECH], who
purchases the ASSET as of the CLOSING with all
rights to EXPLOIT the ASSET that the SELLER owns
or controls and can sell, transfer or assign.”
Article 3.1.1 of the Agreement provides that:
“[Bayer] hereby grants to [MS Tech] solely with
regard to SOYBEAN a worldwide, fully paid-up,
exclusive license – with the right to grant
sublicenses solely as set out in Article 3.1.3
and with the sole exception of the rights to
increase, market, distribute for sale, sell and
offer for sale, granted to STINE – under the
LICENSED PATENTS solely to EXPLOIT the BAYER
Article 3.1.2 of the Agreement provides that:
[Bayer] hereby grants to [MS Tech] solely with
regard to SOYBEAN a worldwide, fully paid-up,
exclusive license – with the right to grant
sublicenses solely as set out in Article 3.1.3
and with the exception of the rights to increase,
market, distribute for sale, sell and offer for
sale, granted to STINE by separate agreement –
under the LICENSED PATENTS in the field of
GLYPHOSATE TOLERANT SOYBEAN solely to EXPLOIT
GLYPHOSATE TOLERANCE GENES in M.S. SOYBEAN
(10) Article 3.1.3 of the Agreement provides that:
The license described in Article 3.1.1. and
Article 3.1.2. shall include the rights to
sublicense the BAYER SOYBEAN EVENTS and the M.S.
SOYBEAN EVENTS, excluding however any right to
grant bare sublicenses to any of the LICENSED
PATENTS or to the OTP, DMMG, HISTONE PROMOTER,
HISTONE INTRON, HISTONE TERMINATOR or the
GLYPHOSATE TOLERANCE GENES. For the avoidance of
doubt, no license is granted with respect to OTP,
HISTONE PROMOTER, HISTONE INTRON, HISTONE
TERMINATOR when not used in GLYPHOSATE TOLERANCE
(11) Articles 9.1.2 of the Agreement provides for MS Tech
to indemnify Bayer for any exploitation by MS Tech,
its affiliates, or authorized sublicensees;
(12) Article 11.3 of the Agreement allows MS Tech to
disclose confidential business information as
necessary to exploit the assets at issue;
(13) Under Article 12.1 of the Agreement, the Agreement is
to be interpreted under English law; and
(14) Exhibit 3.1.5 of the Agreement provides for certain
fees to be paid by MS Tech to Bayer in the event MS
Tech, or its affiliates, subsidiaries, or successors,
either directly or indirectly commercializes Bayer
Soybean Events (Agreement at Ex. 3.1.5 at 2).
In addition to the plain language of the Agreement, material
to this Court’s holding is the following undisputed record
evidence: (1) the “carve out” of rights in the MS Tech Agreement
was done at Stine’s and MS Tech's insistence because Stine could
not take on the rights to certain underlying assets without
triggering undesired obligations to a third party — the Monsanto
Company1; (2) with respect to Stine and MS Tech, the purpose of
the carve out was to limit Stine's rights, not the rights of MS
Tech2; (3) it was immaterial to Bayer how any assets were divided
[Docket No. 127 at Ex. B, Transcript of Deposition of Harry Stine
(“Stine Dep.”) at 36:12-36:16 (Harry Stine, an officer of Stine
and manager of MS Tech, testifying that the split of rights was
done at Stine’s direction); Docket No. 127 at Ex. F, Transcript
of Deposition of Joseph Saluri (“Saluri Dep.”) at 57:12-58:10 (MS
Tech's corporate counsel testifying that the rights split was
made at his suggestion); Docket No. 127 at Ex. I, Transcript of
Deposition of Justice Edward Mansfield (“Mansfield Dep.”) at
26:16-27:3 (MS Tech’s then outside counsel testifying that it was
important that certain soybean assets went to MS Tech and not
Stine because of contractual obligations Stine had); Mansfield
Dep. at 66:11-67:4)(testifying as to Monsanto issue)].
Stine Dep. at 30:3-33:7 (testifying that the business model of MS
Tech included direct commercialization and neither Stine, nor MS
Tech, contemplated MS Tech being limited to doing business with
Stine); Stine Dep. at 36:12-37:17)(testifying that the split of
rights was to limit Stine's rights, not to limit MS Tech's);
between Stine and MS Tech because Bayer intended to divest
itself of the assets at issue.3
Beginning in 2007, MS Tech and Dow entered into a series of
agreements to cooperatively develop and sell E3 – a triple stack
soybean event that confers tolerance in soybeans to three
[Docket No. 127 at Exs. Q, R, S].
part of those agreements, Dow was granted a sublicense under the
As discussed in more detail below, the
undisputed facts demonstrate that MS Tech retains ownership of
[Docket No. 129, Declaration of Juan Carlos Rojas ¶ 3].
Similarly, the factual record demonstrates that because MS Tech
retains ownership of E3, E3 is made “for” MS Tech. [Docket No.
127 at Ex. N, Transcript of Deposition of Thomas Schulte, Ph.D.
Mansfield Dep. at 45:15-46:23 (testifying that MS Tech was to
receive full bundle of rights and Stine would receive more
limited bundle); Saluri Dep. at 41:22-43:3 (testifying that it
was “ridiculous” to view the Agreement as a limitation on MS
Morgan Dep. at 75:7-76:16 (David G. Morgan, a senior official at
Bayer, testifying that he told Harry Stine that Bayer wished to
divest itself of its soybean assets); Stine Dep. at 15:6-15:19
(testifying that Bayer informed him that it intended to “divest
all corn and soybean assets and get out of those crops.”); Stine
Dep. at 49:18-20 (testifying that he understood Bayer was getting
out of the Soybean business); Mansfield Dep. at 143:21-145:19
(Mansfield testifying that Bayer “did not care what we did on our
side as between Stine and MS Tech”); Saluri Dep. at 51:1052:3)(testifying that it was immaterial to Bayer what MS Tech did
with its assets because Bayer was exiting the business); [Docket
No. 127 at Ex. G, Transcript of Deposition of Margaret Keating at
97:7-24 (Bayer’s in-house counsel testifying that Bayer did not
care as to how assets were divided up between MS Tech and Stine).
(Bayer’s 30(b)(6) witness) at 140:9-15; Keating Dep. at 131:10132:14; Stine Dep. at 40:14-42:4; Saluri Dep. at 48:7-49:2].
Defendant has moved for summary judgment, arguing that it is
operating under a valid sublicense from MS Tech.
On June 13,
2013 and June 14, 2013, this Court heard oral argument on
Defendant’s motion and also heard live testimony on English law,
the law governing the Agreement, from English law experts –
Professor Edwin Peel and Lord Collins of Mapesbury.
Plaintiffs maintain that, notwithstanding Dow’s purported
license, Dow’s work with E3 is infringing their intellectual
They make two arguments:
First, they argue that MS
Tech was not granted the right to commercialize under the
Agreement and, therefore, MS Tech could not have sublicensed
commercialization rights to Dow.
Second, they argue that MS
Tech only has the right to sublicense M.S. Soybean Events and
that E3 is not an M.S. Soybean Event and, thus, Dow does not
have a valid sublicense.
Summary judgment shall be granted if “the movant shows that
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
Civ. P. 56(a).
A fact is “material” if it will “affect the
outcome of the suit under the governing law . . . .” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
A dispute is
“genuine” if it could lead a “reasonable jury [to] return a
verdict for the nonmoving party.”
When deciding the
existence of a genuine dispute of material fact, a court’s role
is not to weigh the evidence: all reasonable “inferences,
doubts, and issues of credibility should be resolved against the
Meyer v. Riegel Prods. Corp., 720 F.2d 303, 307
n.2 (3d Cir. 1983).
However, a mere “scintilla of evidence,”
without more, will not give rise to a genuine dispute for trial.
Anderson, 477 U.S. at 252.
Further, a court does not have to
adopt the version of facts asserted by the nonmoving party if
those facts are “utterly discredited by the record [so] that no
reasonable jury” could believe them.
373, 380 (2007).
Scott v. Harris, 550 U.S.
In the face of such evidence, summary judgment
is still appropriate “where the record . . . could not lead a
rational trier of fact to find for the nonmoving party . . . .”
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
The movant “always bears the initial responsibility of
informing the district court of the basis for its motion, and
identifying those portions of ‘the pleadings, depositions,
answers to interrogatories, and admissions on file, together
with the affidavits, if any,’ which it believes demonstrate the
absence of a genuine issue of material fact.”
Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986)(quoting Fed. R. Civ. P.
Then, “when a properly supported motion for summary
judgment [has been] made, the adverse party ‘must set forth
specific facts showing that there is a genuine issue for
Anderson, 477 U.S. at 250 (quoting Fed. R. Civ. P.
The non-movant’s burden is rigorous: it “must point to
concrete evidence in the record”; mere allegations, conclusions,
conjecture, and speculation will not defeat summary judgment.
Orsatte v. N.J. State Police, 71 F.3d 480, 484 (3d Cir. 1995);
Jackson v. Danberg, 594 F.3d 210, 227 (3d Cir. 2010)(citing
Acumed LLC v. Advanced Surgical Servs., Inc., 561 F.3d 199, 228
(3d Cir. 2009)) (“[S]peculation and conjecture may not defeat
The parties agree that, if Dow is operating under a valid
sublicense, then Dow is entitled to summary judgment.
Indus., Inc. v. Cleveland Die & Mfg. Co., 424 F. App’x 931, 933
(Fed. Cir. 2011)(recognizing that a license is a defense to
For the reasons that follow, this Court
finds that: (1) the Agreement grants MS Tech the right to
commercialize; and (2) MS Tech appropriately sublicensed that
right to Dow to develop and sell E3.
The Agreement Grants MS Tech Commercialization Rights
English Law Applies
While the parties dispute the scope of MS Tech's rights
under the Agreement, they agree that English law governs
interpretation of the Agreement.
Under English law,4 contractual
disputes are tried by the court.
In re McMahon, 236 B.R. 295,
306 n.4 (S.D.N.Y. 1999).
Courts interpreting contracts
consider, from the outset, both the natural and ordinary meaning
of the language of the contract and the background or
surrounding circumstances of the contract.
[Docket No. 128,
Declaration of Edwin Peel (“Peel Dec.”) ¶ 14; Docket No. 162,
Declaration of Lord Collins of Mapesbury (“Collins Dec.”) ¶ 29].
This background, known as the “factual matrix,” includes
anything which a reasonable man would have regarded as relevant.
(Peel Dec. ¶ 11; Collins Dec. ¶ 29).
However, courts may
neither consider evidence of subsequent conduct, evidence as to
the subjective intent of the parties nor evidence of precontractual negotiations.
Dec. ¶¶ 28, 32, 36).
(Peel Dec. ¶¶ 13, 18, 23; Collins
As an exception to the bar on pre-
In setting forth the principles of English law, this Court
relies, as is permitted under the Federal Rules of Civil
Procedure, on both live testimony (see generally Transcript of
June 13, 2013 Hearing) and declarations from English law experts
– Professor Edwin Peel and Lord Collins of Mapesbury. Federal
Rule of Civil Procedure 44.1 (“In determining foreign law, the
court may consider any relevant material or source, including
testimony, whether or not submitted by a party or admissible
under the Federal Rules of Evidence.”).
contractual negotiations, courts may consider documents that
evidence the “genesis” of a transaction.
(Peel Dec. ¶ 22;
Collins, 6/13/13 Hearing Tr. 146:15-20).
Applying these principles, courts assess, objectively (Peel
Dec. ¶ 13), what the contract would convey to a reasonable
person having all the background knowledge which would
reasonably have been available to the parties in the situation
in which they were at the time of the contract.
In re Am. Home
Mortg. Holdings, Inc., 386 F. App’x 209, 212-13 (3d Cir.
2010)(applying English law to interpret the language of a
In doing so, courts follow a number of
rules of construction:
where there are two possible constructions of an
agreement, a court may take into account the
“commercial purpose of the agreement”;
clauses should not be considered in isolation but must
be assessed in the full context of a contract;
contracts should be read to avoid rendering portions
contractual recitals may be an aid to interpretation;
courts may consider other contemporaneous contracts,
where the contract at issue is one of a series of
contracts between the parties.
(Peel Dec. ¶¶ 23, 27, 32; Collins Dec. ¶¶ 30, 52).
under English law, the court may resolve any ambiguities by
looking at the agreement’s commercial purpose and factual
In re McMahon, 236 B.R. at 306 n.4 (“In construing
the document, the court may resolve an ambiguity by looking at
its commercial purpose and the factual background against which
it was made.”(quoting English contracts treatise)); In re
HomeBanc Mortg. Corp., No. 07-51740, 2013 WL 211180, at *14
(Bankr. D. Del. Jan. 18, 2013); Crown Cork & Seal Tech. Corp. v.
Continental Pet Tech. Inc., 232 F. Supp. 2d 294, 298 (D. Del.
English Law Allows For Construction Of The
Contract At Summary Judgment
Because the parties agree that English law applies to
interpretation of the Agreement, this Court will apply it in
considering Defendant’s summary judgment motion.
Ferreos de Venezeula II CA v. NKK Corp., 239 F.3d 555, 560 (3d
Cir. 2001)(applying New Jersey law where there was no dispute as
to its application).
This Court finds two other courts’ discussions of the
interplay between English contract law and the American summary
judgment standard particularly helpful.
In the first case, In
re McMahon, the court held that it could resolve an issue of
English contractual interpretation as a matter of law, so long
as there were no disputed facts in the underlying factual
In re McMahon, 236 B.R. at 306 n.4 (“In England,
contract disputes are tried to the court. In deciding this
motion, I shall look to the ‘factual matrix’ as PCE has
presented it. If this examination raises any questions of fact,
the interpretation of the contract will be for the jury to
In the second case, Pannell Kerr Forster Intern.
Ass’n Ltd. V. Quek, the Ninth Circuit found that the district
court erred in granting summary judgment because the contract
was, on its face, ambiguous and the district court had failed to
consider the factual matrix, as required.
574, 577 (9th Cir. 2001).
Pannell, 5 F. App’x
That decision did not address,
however, whether it would be permissible to grant summary
judgment in reliance upon an undisputed factual matrix, as is
the case here.
This Court agrees with, and adopts, the approach taken by
the court in In re McMahon. That approach best reconciles
English and American law because it: (1) preserves the court’s
role under English law in deciding contract cases; (2) maintains
the English law rule that courts may, to the extent ambiguity
arises, resolve that ambiguity through evidence of commercial
purpose and other background evidence; and (3) is in accord with
the American summary judgment standard because the jury retains
control over genuine disputes of fact as to the underlying
While the Third Circuit recently held that ambiguous contracts
must be resolved by a jury, Jang v. Boston Scientific Scimend,
Inc., No. 12-3434, 2013 U.S. Dist. LEXIS 18549, at *10 (3d Cir.
Sept. 5, 2013)(analyzing a contract under Massachusetts law and
holding that “the interpretation of a contract is, in the first
instance, a matter of law, but the meaning of an ambiguous
provision is a question of fact”) and Mylan Inc. v. SmithKline
Beecham Corp., 723 F.3d 413 (3d Cir. 2013), the Jang and Mylan
cases are in the context of interpreting state law of
Massachusetts and New Jersey law, respectively. There does not
appear to be any inherent conflict with the procedure this Court
has adopted and the Federal Rules of Civil Procedure. The
ability of a court to enter summary judgment on a contractual
dispute, where there are no underlying facts in dispute, instead
appears to be an issue driven by the applicable state contractual
law. Nadherny v. Roseland Prop. Co., Inc., 390 F.3d 44, 49, 49
n.2 (1st Cir. 2004)(recognizing that interplay is driven both by
underlying state law of contracts and summary judgment procedure
and noting that, under both Massachusetts and Illinois law,
“there is some suggestion . . . that if the extrinsic facts are
not in dispute, a judge should decide the issue even if the
outcome may be debatable.”); see and compare Shepley v. New
Coleman Holdings, Inc., 174 F.3d 65, 72 n.5 (2d Cir. 1999)(citing
Nycal Corp. v. Inoco PLC, 988 F. Supp. 296, 299 (S.D.N.Y.
1997)(finding summary judgment appropriate, under New York law,
“when the language is ambiguous and there is relevant extrinsic
evidence, but the extrinsic evidence creates no genuine issue of
material fact and permits interpretation of the agreement as a
matter of law.”)); Continental Cas. Co. v. Northwestern Nat. Ins.
Co., 427 F.3d 1038, 1041 (7th Cir. 2005)(holding, under Illinois
law, that “if a contract is ambiguous, its interpretation is a
question of law for the court as long as the extrinsic evidence
bearing on the interpretation is undisputed, and summary judgment
is therefore appropriate in such cases.”); Mid-Continent Casualty
Co. v. Titan Construction Corp., 281 F. App’x 766, 2008 WL
2340493, at *1 (9th Cir. 2008)(applying Washington law and
holding that “[i]nterpretation of an insurance contract is a
matter of law reviewed de novo, if there are no relevant facts in
dispute.”); Valley Realty Co. v. United States, 96 Fed. Cl. 16,
22 (Fed. Cl. 2010)(“Contract interpretation is a question of law,
which poses an appropriate question for summary judgment
resolution.”); Dew Seven, L.L.C. v. Big Lots Stores, Inc., 354 F.
App’x 415, 416 (11th Cir. 2009)(applying Florida law and holding
that “[i]n a case involving contract interpretation, summary
judgment is appropriate when any ambiguity may be resolved by
applying the rules of construction to situations in which the
parol evidence of the parties' intentions is undisputed or
nonexistent.”); Penford Corp. v. Nat’l Union Fire Ins. Co. of
Pittsburgh, Pa., 662 F.3d 497, 505 (8th Cir. 2011)(holding, under
Iowa law, that summary judgment was appropriate on contract claim
where extrinsic evidence was undisputed and interpretation did
not depend upon credibility of extrinsic evidence or a choice
among reasonable inferences); Lomree, Inc. v. Pan Gas Storage,
LLC, 499 F. App’x 417, 421 (6th Cir. 2012)(“Summary judgment
Here, because there are no material facts in dispute within
the relevant “factual matrix” that this Court must assess, this
Court may resolve this dispute as a matter of law.6
of clarity, the Court deems the following as the relevant facts
within the undisputed factual matrix per Plaintiffs’ (the nonmovant) factual presentation7 and the undisputed factual record:
the plain language of the agreements at issue: the Stine
Agreement, the MS Tech Agreement, particularly the
provisions set forth on pages 4-6 supra, and the 2008
agreement between MS Tech and Dow;
that in 2003 Bayer decided to sell certain assets including
genetically modified corn and soybeans [6/13/13 Hearing Tr.
that Stine Seed could not acquire certain soybean events
without triggering obligations to Monsanto [Id. at 90:2391:1];
that the “carve out” of rights was done at Stine and MS
Tech’s insistence to avoid triggering undesired obligations
to Monsanto Company [Plaintiffs’ SJ Opp. Br. At 2];
interpreting an ambiguous contract would be appropriate if the
relevant extrinsic evidence is uncontested and sufficient on its
own to establish intent, or if the extrinsic evidence is so onesided as to make one party's interpretation unreasonable.”).
Even if this ruling is error, it would not alter the result here.
Under the Third Circuit’s recent Mylan decision interpreting New
Jersey law, which similarly allows for consideration of extrinsic
evidence at the outset, summary judgment is still appropriate
when, considering the relevant evidence, a court determines that
the contract is “unambiguous- i.e., subject to only one
reasonable interpretation.” Mylan, 723 F. 3d at 418-19. And,
here, this Court would conclude that the Agreement is subject to
only one reasonable interpretation.
Gleaned in large part from Plaintiffs’ brief and oral argument
6/13/13 Tr. 89:7-95:5.
that Bayer intended to divest itself of assets and that it
was immaterial to Bayer how any assets were divided between
Stine and MS Tech. [Docket No. 127 at Ex. G, Transcript of
Deposition of Margaret Keating at 97:7-24]; and
that MS Tech paid $1 million pursuant to the Agreement and
Stine Seed paid $4.6 million pursuant to the Stine
Agreement [6/13/13 Hearing Tr.94:24-95:5].8
Plaintiffs assert that disputes related to the exact
contours of the relationship between MS Tech and Stine are
material issues of fact that would preclude summary judgment.
(See 6/13/13 Hearing Tr. 78:18-22).
As stated above, however,
what is relevant in the factual matrix is the undisputed fact
that the carve out was done at the behest of Stine and MS Tech;
Bayer did not care how the assets were divided between those
See [Docket No. 127 at Ex.G, Keating Dep. Tr. 97: (“I
don’t believe that – that we cared as between those companies
[Stine and MS Tech] how it [meaning the glyphosate soybean
events and the IP that came associated with it] was divided
This Court went to great lengths to have the Plaintiffs
provide it with record evidence demonstrating that Stine cared
what MS Tech could do with respect to commercialization rights.
[6/13/13 Hearing Tr. 249:21 - 251:12 & 252:2-6].
evidence has been presented.
No such record
Instead, Plaintiffs ask this Court
This Court has not considered inadmissible evidence of precontractual negotiations nor has it considered evidence of
subsequent conduct such as the material contained in the 2007 BayerMS Tech contract or the Heads of Agreement as part of the factual
matrix. See (Peel Dec. ¶¶ 13, 18, 23; Collins Dec. ¶¶ 28, 32, 36).
to infer that it mattered to Harry Stine whether or not MS Tech
commercialized because: “Harry Stine only gets 19 percent versus
if MS Tech doesn’t sell the seed and only Stine sells the seed,
then Harry Stine gets 100 percent, so the inference is Harry
Stine does care about MS Tech.”
[6/14/13 Hearing Tr. 323:15-
This requested inference, however, directly contradicts
the undisputed record evidence contained in Mr. Stine’s
deposition testimony: Mr. Stine testified that the business
model of MS Tech included direct commercialization and neither
Stine, nor MS Tech, contemplated MS Tech being limited to doing
business with Stine [Stine Dep. at 30:3-33:7].9
undisputed facts in the factual matrix do not include the
inference requested by Plaintiffs.10
Inferences based on mere speculation or conjecture cannot create
a fact dispute sufficient to defeat summary judgment. Robertson
B. Allied Signal, Inc., 914 F.2d 360, 383 n.12 (3d Cir. 1990).
It is evidence, not mere argument, that controls at the summary
judgment stage. While argument is of valuable assistance to the
Court in understanding the evidence, argument unsupported by the
factual record or argument pertaining to a non-material matter is
not relevant to this Court’s analysis. See Mylan, 723 F.3d at
420 (discussing the need to take into account both the
alternative meaning of the contractual language suggested by the
plaintiff in conjunction with “the nature of the objective
evidence offered in support of its suggested meaning” to
determine whether extrinsic evidence demonstrated the existence
of latent ambiguity)(emphasis added). Mindful that this Court
should not be tempted by bare argument in deciding a summary
judgment motion, this Court has pored over the record searching
for objective evidence to support Plaintiffs’ arguments; as
discussed at length throughout this Opinion, it has found none.
The Agreement Allows For Commercialization By MS
The parties dispute the construction of Article 3.1.2 of the
Again, the provision reads:
“[Bayer] hereby grants to [MS Tech] solely with regard to
SOYBEAN a worldwide, fully paid-up exclusive license – with
the right to grant sublicenses solely as set out in Article
3.1.3 and with the exception of the rights to increase,
market, distribute for sale, sell and offer for sale,
granted to STINE by separate agreement – under the LICENSED
PATENTS in the field of GLYPHOSATE TOLERANTE SOYBEAN solely
to EXPLOIT GLYPHOSATE TOLERANCE GENES in M.S. SOYBEAN
Plaintiffs contend that the “with the exception” language
strips MS Tech of any commercialization rights that would be
granted by the broadly defined right to “exploit” and that those
rights were solely granted to Stine.
Plaintiffs further contend
that MS Tech only has development rights and the right to
sublicense such rights.
Dow argues that MS Tech has full
commercialization rights and the right to sublicense such
It contends that the exception language is merely an
exception to MS Tech's exclusivity with respect to the listed
rights and that it and Stine share the rights granted to Stine.
Plaintiffs do not dispute that if Dow’s construction is
accepted, MS Tech has the right to commercialize and the right
to sublicense that right.
This Court agrees with Dow’s interpretation for seven
First, Dow's construction is consistent with the plain
and ordinary language of Article 3.1.2.
As a matter of syntax,
the “with the exception” language more naturally modifies the
exclusivity of MS Tech's license than its right to exploit.
the parties had intended to qualify the right to “exploit,” the
“with the exception of” language would have followed the word
Second, Plaintiffs’ construction is inconsistent with the
full context of the Agreement because:
it makes little sense to define “exploit” broadly at
the outset and use that term in Article 3.1.2, if the
parties' intent for 3.1.2 was for MS Tech to have much
more limited rights;
Articles 9.1.2 and 11.3 contemplate full exploitation
rights by MS Tech11; and
the Agreement contemplates direct12 commercialization
by MS Tech of Bayer Soybean Events and, while
exploitation of Bayer Soybean Events is covered under
Article 3.1.1, Bayer does not dispute that its
construction of Article 3.1.1 necessitates a
In response, Bayer has essentially argued that the term “exploit”
is simply being used as a boilerplate catch-all here and truly
only refers to MS Tech’s more limited bundle of rights. That
does not explain, however, why exploit was defined in such broad
terms at the outset to include, inter alia, the rights to
“market, offer, [or] sell” if its meaning was to be limited
throughout the Agreement.
While Plaintiffs have advanced a contorted theory to harmonize
its construction of the contract with the “directly” language,
the point here is simple: if Stine were the only entity that
could commercialize the products at issue, then the Agreement
would say just that.
construction of Article 3.1.2's parallel language that
would bar such direct commercialization.
Third, Dow’s construction is more consistent with the need,
in the Stine Agreement, for MS Tech to specifically consent to
that agreement, since there would be no need to consent to nonoverlapping rights.
Dow’s construction is similarly in line
with the language in the Stine-Bayer agreement, which refers to
Stine’s commercialization rights as non-exclusive – i.e.,
overlapping with the commericalization rights granted on that
same day to MS Tech.
Fourth, Plaintiffs’ construction would render the barelicense prohibition in Article 3.1.3 superfluous.
grants MS Tech sublicense rights, but prohibits bare licenses,
meaning sublicenses without restrictions.
construction this provision would be superfluous because MS Tech
was already limited to developmental rights and developmental
Fifth, Plaintiffs’ interpretation is contrary to the plain
language contained in Exhibit 3.1.5 of the Agreement which
explicitly refers to “direct” commercialization by MS Tech.
Sixth, Plaintiffs’ interpretation is inconsistent with the
recital provision that indicates that Bayer was divesting itself
of the assets at issue.
Under Plaintiffs’ interpretation,
because Stine was the only entity that had commercialization
rights, and because those rights were non-exclusive, Bayer would
still have certain commercialization rights.
inconsistent with divestment and the “genesis” of the agreement
i.e., that Bayer wanted to divest itself of the assets.
[Morgan Dep. at 52:9-14: “[W]e took a decision that if we were
not prepared to make further investments in the corn and soybean
business, then the best thing to do was to liquidate the value
that we currently had in our hands through the divestment
process to other parties.”].
In addition, Plaintiffs’ expert
Lord Collins agreed that divestiture does not include the
retention of rights by Bayer:
What is your understanding of the term divest?
It’s a strong term meaning do away with or whatever.
To entirely –
-- give up rights, isn’t that so?
Yes. . . .
But you read divestiture to include the retention of
significant rights on the part of Bayer?
[6/13/13 Hearing Tr. 197:19-24 & 199:16-18].
Seventh, Dow's construction is consistent with the factual
matrix13 and business purpose of the Agreement, considering that:
At oral argument and in briefing, Plaintiffs heavily focused on:
(1) the fact that MS Tech paid a smaller amount than Stine but,
under Dow’s theory received broader rights; and (2) purported
close ties between Stine and MS Tech. For its part, Dow argued
that: (1) MS Tech’s smaller payment was based on the fact that MS
Tech would be required to undertake large investments before
selling any products; and (2) it defied commercial sense for MS
the “carve out” of rights was done at Stine's
insistence because Stine could not take on the rights
to certain underlying assets without triggering
obligations to Monsanto Company;
with respect to Stine and MS Tech, the purpose of the
carve out was to limit Stine's rights, not MS Tech's;
it was immaterial to Bayer how any assets were divided
between Stine and MS Tech; and
under Dow's interpretation, unlike Bayer's, Bayer does
not retain rights to the assets at issue, which is
consistent with the parties' understanding that
Bayer's goal was to divest itself of the assets.
While, Bayer places great emphasis on the “carve out”
language in the Agreement's recital, that language is not
inconsistent with this Court's analysis, given that there is a
“carve out” of MS Tech's exclusivity.
the ‘factual matrix’ and commercial circumstances surrounding
these agreements does not give rise to any ambiguity of the
Tech to agree to a deal, as under Plaintiffs’ construction, in
which it would face a substantial investment cost but was limited
to commercializing through Stine. While the Court has considered
Plaintiffs’ arguments, they largely amount to distraction in the
factual matrix. With respect to Bayer’s arguments, inferences
based on the structuring of the deal and close ties between Stine
and MS Tech amount to little when: (1) the only evidence is that
such structuring was immaterial to Bayer; (2) MS Tech and Stine
have offered a rationale for the structuring and, more
importantly, there is no record evidence that either party
contemplated limiting MS Tech’s rights; and (3) the suggestion of
close ties between Stine and MS Tech, if anything, bolster Dow’s
case that Stine would not want to limit MS Tech’s rights. With
respect to Dow’s argument as to commercial sense, it seems
apparent, from the very Agreement at issue, that parties may find
it appropriate to limit themselves in this manner. Under both
parties’ construction of the agreements at issue, Stine had large
up-front costs as part of the transaction, but was obligated to
obtain approval from MS Tech before it could sell anything.
(6/13/2013 Hearing Tr. at 49:16-52:22 and 118:12-118:22)(Dow and
Bayer stating their respective positions).
plain meaning of the agreements,” In re McMahon, 236 B.R. at
307, and it is clear that the language contained in Section
3.1.2 of the Agreement gives MS Tech commercialization rights.
MS Tech Appropriately Sublicensed Its Rights To Dow To
Develop And Sell E3
Having concluded that MS Tech had commercialization rights,
the only remaining question is whether Dow had a valid
Pursuant to the 2004 Bayer-MS Tech Agreement, MS
Tech can “EXPLOIT” an “M.S. Soybean Event” and can sublicense
Plaintiffs contend that Dow did not have a valid
sublicense because E3 is not an “M.S. Soybean Event” product
under the 2004 Bayer-MS Tech Agreement, as it was not made “by
or for” MS Tech.14
There is no dispute that E3 was not made “by”
MS Tech; instead, the dispute centers around whether E3 was made
“for” MS Tech.
To the extent this is purely a factual issue, the record
evidence is undisputed that ownership by MS Tech is sufficient
to demonstrate that E3 was made “for” MS Tech.
30(b)(6) witness agreed that ownership of the event means that
something was made “for” MS Tech.
[Docket No. 127 at Ex. N,
Transcript of Deposition of Thomas Schulte, Ph.D. (Bayer’s
30(b)(6) witness) at 140:9-15].
There is no dispute that MS
The parties agree that an M.S. Soybean Event is one “made by or
for” MS Tech. [Def.’s Br. At 29 & Pls.’ Opp. Br. At 24].
Tech owns E3.
[Docket No. 127 at Ex. N, Transcript of
Deposition of Thomas Schulte, Ph.D. (Bayer’s 30(b)(6) witness)
at 140:9-15; Keating Dep. at 131:10-132:14; Stine Dep. at 40:1442:4; Saluri Dep. at 48:7-49:2].
While the parties to the agreement, MS Tech and Dow, agree
that E3 was made “for” MS Tech, Plaintiffs nevertheless set
forth several fact-based arguments in an attempt to undercut
First, Plaintiffs argue that Dow does not have
a valid sublicense based on an email sent by Justice Mansfield,
counsel for MS Tech during negotiations for the 2008 MS Tech-Dow
During those negotiations, Justice Mansfield sent an
email stating that E3, then referred to as the “Molecular
Stack,” is not an “MS Tech Event” as defined in the 2008
agreement between Dow and MS Tech.
The language in the 2008
agreement defines an “MS Tech Event” as any Event or Stack which
is made “by or for” and is controlled by MS Tech; this language
is parallel to the 2004 Agreement language, which, as discussed
above, defines an M.S. Soybean Event as one made “by or for” MS
Thus, if E3 is not an “MS Tech Event,” Plaintiffs aver
that it cannot be an “M.S. Soybean Event.”
This argument falls
flat, however, because it utilizes extrinsic evidence to the
2008 contract where the parties to that very contract agree on
the unambiguous meaning of the “by or for” language at issue.
Westchester Surplus Lines Ins. Co. v. Stonitsch Constr., Inc.,
572 F. Supp. 2d 946, 949 (N.D. Ill. 2008)(applying Illinois law,
which “bars consideration of extrinsic evidence when the
contract is facially unambiguous and fully integrated.”)15
Moreover, even if this Court were to consider the evidence, it
is undermined by Justice Mansfield’s clarification in his
deposition that it was “crystal clear” that “AAD-12 [one of the
genes included in the E3 triple stack] was coming in to MS Tech
and that the event was going to be made for MS Tech.”
[Mansfield Dep. 95:21-96:4 (emphasis added)].
Next, the Plaintiffs assert that Dow’s control of two of the
three genes making up the triple stack and the fact that E3 was
created with joint assets, joint funding, and that costs,
profits and losses are shared all indicate that E3 was not made
“for” MS Tech. [Pls.’ Opp. Br. at 36].
conclusions from such facts, however, do not trump the reality
of the clear understanding between the parties to the MS Tech
and Dow contract that, ultimately, E3 was made “for” MS Tech.
Finally, while even Plaintiffs have had to admit that, on
its face, the 2008 contract between MS Tech and Dow “arguably
reflects that MS Tech granted [Dow] a license to E3 ‘for
purposes of development’ ‘on behalf of MS Tech,’” [Pls.’ Opp.
Br. At 27-28], they nevertheless argue that this language was a
It is undisputed that Illinois law applies to the 2008 MS Tech –
“pretense” and that Dow also received the future right to
commericalize in the 2008 contract, which is indicative that E3
was not made “for” MS Tech.
Again, the parties to the 2008
agreement, MS Tech and Dow, agree that E3 was made “for” MS
Once the E3 is made “for” MS Tech, MS Tech can, pursuant
to the broad sublicense rights contained in Section 3.1.3 of the
Agreement, sublicense its commercialization rights.
In the event that the issue of whether E3 is made “for” MS
Tech is instead viewed as an issue of law, the outcome is the
This Court finds, as a matter of English law16, without
fully defining the ambit of “for MS Tech,” that “for MS Tech” is
consistent with mere ownership for three reasons.
factual matrix and commercial purpose described above indicate
that the parties intended to afford MS Tech extremely broad
rights under the Agreement to utilize the assets it acquired as
it saw fit, with the only meaningful limitation being the bare
Second, in light of that, and the plain
meaning of “for,” this Court construes the term to include any
actions taken that inure to the benefit of MS Tech, regardless
of whether another party also benefits.
Third, with MS Tech
retaining ownership, the license does not run afoul of the
Agreement’s prohibition on bare licenses.
This Court may do so because, as discussed above, questions of
English law are appropriately resolved by the Court when there is
no dispute as to the factual matrix.
Plaintiffs have cited cases suggesting that Dow’s
participation in the E3 product is inconsistent with “for” MS
Tech, because, as Plaintiffs assert, the language “by or for”
indicates that MS Tech can only exercise “have made” rights to
hire contractors to make products for them and that those
contractors cannot themselves sell the product.
The cases cited
by Plaintiffs are inapposite, however, because they arose in
contracts that lacked sublicense rights, unlike the Agreement
CoreBrace LLC v. Star Seismic LLC, 566 F.3d 1069, 1073
(Fed. Cir. 2009); E.I. du Pont de Nemours & Co. v. Shell Oil
Co., 498 A.2d 1108, 1114-15 (Del. 1985); Intel Corp. v. U.S.
Int’l Trade Comm’n, 946 F.2d 821, 828 (Fed. Cir. 1991).
MS Tech can, pursuant to the broad sublicense rights contained
in Section 3.1.3 of the Agreement, sublicense its
For the reasons discussed in detail above, Defendant’s
motion for summary judgment is GRANTED.
s/Renée Marie Bumb
RENÉE MARIE BUMB
United States District Judge
October 7, 2013
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