RPM Ecosystems Ithaca, LLC v. Lovelace Farms, Inc. et al
MEMORANDUM AND ORDER : IT IS HEREBY ORDERED that the parties cross-motions for summary judgment [Docs. # 80 and # 84 ] are denied. IT IS FURTHER ORDERED that, if plaintiff intends to pursue claims on behalf of RPM Ecosystems Gulf Coast and RPM Ec osystems Southeast, it shall file a motion for leave to amend its complaint not later than June 18, 2015. The defendant's response will be due seven days after the motion is filed. ( Response to Court due by 6/18/2015.). Signed by District Judge Carol E. Jackson on 6/11/15. (KKS)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
RPM ECOSYSTEMS ITHACA, LLC,
LOVELACE FARMS, INC., et al.,
No. 4:09-CV-1512 (CEJ)
MEMORANDUM AND ORDER
Plaintiff RPM Ecosystems, LLC, brings this patent infringement action against
defendants Lovelace Farms, Inc., and Wayne and Judy Lovelace.1 Defendants assert
counterclaims for patent infringement and a declaration of non-infringement. The
parties have filed cross-motions for summary judgment. Defendants included a
challenge to plaintiff’s standing to assert a patent infringement claim. The parties
have provided supplemental briefing on the issue of standing and all issues are fully
Wayne Lovelace is an inventor of a patented method for accelerating the
propagation of hardwood trees, known as the Root Production Method, or “RPM.”2
United States Patent Number 7,208,775, Defs. Ex. A [Doc. #86-1]. In 2006, the
Previously, the plaintiff was granted leave to voluntarily dismiss its specific
In 2002, the inventors assigned the RPM patent to Forrest Keeling Nursery, a
nursery that Lovelace Farms acquired in 2005. In 2008, Forrest Keeling assigned
the patent to Lovelace Farms, which then assigned it to Wayne and Judy Lovelace,
who assigned it to RPM Technologies. In December 2009, after this lawsuit was
filed, RPM Technologies reassigned the patent to Wayne and Judy Lovelace.
Abstract of Title, Pl. Ex. LL, [Doc. #80-2].
Lovelace and Marshall families decided to join forces to promote RPM technology.
To that end, on October 30, 2006, they signed a Memorandum of Agreement (“the
Agreement”), pursuant to which the Lovelaces agreed to contribute the RPM
technology and the Marshalls agreed to contribute capital to a new venture.
Agreement, Comp. Ex. A [Doc. #2-2].
As contemplated by the Agreement, the Lovelaces and Marshalls formed three
limited liability corporations: (1) RPM Technologies, LLC, which was formed to own
and issue licenses for the technology; (2) RPM Holdings, LLC, which was established
to own “special purpose companies;” (3) plaintiff RPM Ecosystems Ithaca, LLC, (the
first of the three special purpose companies) which was formed to develop a nursery
facility in Ithaca, New York.3 RPM Technologies was wholly owned by the Lovelaces;4
equity in RPM Holdings was split equally between the Marshalls and Lovelaces;
Ecosystems was wholly owned by RPM Holdings and thus owned equally by the
Marshalls and Lovelaces. Lovelace Farms, Inc. v. Marvin Marshall, 442 S.W.3d 202,
204 (Mo. Ct. App. 2014).
On October 30, 2007, RPM Technologies issued a license to Forrest Keeling
Nursery, a business owned by Lovelace Farms. Pl. Ex. H [Doc. #80-1 at 46-55].
Broadly speaking, Forrest Keeling was granted exclusive rights to exercise the
technology in 16 states, China, and other unspecified “foreign countries and
territories.” §§ 1.5, 2.1. Forrest Keeling also retained the right to serve its existing
customers in Pennsylvania, and it was given a “terminable” right to develop and
Ecosystems is no longer in operation.
The Agreement provided that the Marshalls would acquire 50% ownership of RPM
Technology upon full payment of a $1 million note. Agreement, “Sale of Units” at
p.3. The Marshalls did not make this payment. Deft’s Stmt. of Uncont. Mat. Facts at
serve new customers everywhere in the United States and Canada, with the
exception of the states in which Ecosystems had exclusive rights. §§ 1.6, 2.3, 2.4.
As new Ecosystem nurseries were established and licensed, Forrest Keeling retained
the right to serve its existing customers but was barred from soliciting new business
in Ecosystem territories. § 3.2.
On November 7, 2007, RPM Technologies issued a Master License to RPM
Holdings. The Master License provides the following:
Exclusive Grant. Master Licensor [RPM Technologies] hereby
grants to Master Licensee [RPM Holdings] the exclusive . . . nontransferable, royalty-free right to make, have made, use, have used,
reproduce, copy, have copied, modify, have modified, create derivative
works from, market, advertise, display, distribute, have distributed,
improve, license, sell, have sold, and import the Root Production
Methodology (including all rights to propagate, grow, operate a nursery
and sell nursery stock) and all other RPM Intellectual Property and
improvements thereof in the Territory.
Master License Agreement at § 2.1, Comp. Ex. B [Doc. #2-3]. The “Territory”
included the United States and Canada but excluded the territory separately granted
to Forrest Keeling. Id. at §§ 1.4, 3.1. RPM Technologies retained title to the RPM
intellectual property and all future improvements or modifications, and granted a
license to RPM Holdings in all future patents and patent applications. Id. at §§ 4.1
and 5. RPM Holdings was granted the right to license the RPM intellectual property
to others within the Territory. Id. at § 9. RPM Technologies agreed to prosecute all
patent applications of the technology and, in the event it decided to abandon any
patent application, give RPM Holdings the opportunity to take over the prosecution
and assume title to the RPM intellectual property. Id. at § 13.
On April 17, 2009, RPM Holdings issued a “Sublicense” to plaintiff Ecosystems.
Pl. Ex. K [Doc. #80-1 at 69-70]. The sublicense granted Ecosystems “the exclusive
right to make, use and sell Licensed Products” in 14 states and Washington, D.C.,
and “the right to exercise all other rights granted to [RPM Holdings] under the
Master License, subject to all obligations, conditions and restrictions set forth in the
Master License, including the rights of Forrest Keeling Nursery as described therein.”
In this action, the opposing parties each allege that the other sold products
based on RPM-technology within its exclusive territory in violation of 35 U.S.C. §
271.5 In addition, plaintiff argues that the defendants made infringing sales in the
exclusive territory of two later-established Ecosystems entities (Ecosystems Gulf
Coast, LLC and Ecosystems Southeast, LLC) and, therefore, plaintiff is entitled to
judgment on this claim as well.
“[B]efore a federal court can consider the merits of a legal claim, the person
seeking to invoke the jurisdiction of the court must establish the requisite standing
to sue.” Whitmore v. Arkansas, 495 U.S. 149, 154 (1990). “[T]o assert standing
for patent infringement, the plaintiff must demonstrate that it held enforceable
title at the inception of the lawsuit.” Tyco Healthcare Grp. LP v. Ethicon EndoSurgery, Inc., 587 F.3d 1375, 1378 (Fed. Cir. 2009) (quoting Paradise Creations,
Inc. v. UV Sales, Inc., 315 F.3d 1304, 1309 (Fed. Cir. 2003)).
Standing to sue for patent infringement derives from the Patent Act, which
provides that a “patentee shall have remedy by civil action for infringement of his
patent.” 35 U.S.C. § 281. The term “patentee” includes “not only the patentee to
As set forth elsewhere, the parties have been engaged in litigation in multiple
venues since at least July 2009. Memorandum and Order at 2-4. [Doc. #72].
whom the patent was issued but also the successors in title to the patentee.”6 35
U.S.C. § 100(d). The right to sue infringers is normally the privilege of the person
that has legal title to the patent. Great Lakes Intellectual Prop. Ltd. v. Sakar Int’l,
Inc., 516 F. Supp. 2d 880, 886 (W.D. Mich. 2007) (citing United States v. General
Elec. Co., 272 U.S. 476, 489 (1926); and Sicom Sys. Ltd. v. Agilent Tech. Inc.,
427 F.3d 971, 976 (Fed. Cir. 2005)).
Courts define two categories of licensees for the purposes of determining
transferees and licensees). Exclusive licensees hold exclusionary rights and
interests created by the patent statutes, but not all substantial rights to the
patent. Id. An exclusive licensee “can be said to suffer legal injury from an act of
infringement,” Propat Int’l Corp. v. Rpost Inc., 473 F.3d 1187, 1193 (Fed. Cir.
2007), but its exclusionary rights “must be enforced through or in the name of the
owner of the patent.” Morrow v. Microsoft Corp., 499 F.3d 1332, 1340 (Fed. Cir.
2007). Thus, the patentee who transferred these exclusionary interests is usually
joined to satisfy prudential standing concerns. Id. (citing Indep. Wireless Tel. Co.
v. Radio Corp. of Am., 269 U.S. 459, 467, 469 (1926)). Joining the patentee
alleviates the risk that an alleged infringer might face multiple suits and multiple
liabilities for a single act of infringement, Int’l Gamco, Inc. v. Multimedia Games,
Inc., 504 F.3d 1273, 1278 (Fed. Cir. 2007), and prevents a party with lesser rights
from bringing a lawsuit that may put the licensed patent at risk of being held
Where a patentee transfers all substantial rights under the patent, the transferee
(or assignee) will be deemed the effective patentee under the statute and has
standing to bring suit in its own name. Ortho Pharm. Corp. v. Genetics Inst. Inc.,
52 F.3d 1026, 1030 (Fed. Cir. 1995). Plaintiff does not assert that the license
agreement transferred all substantial rights under the patent and does not claim to
be a transferee or assignee.
invalid or unenforceable in an action that did not involve the patentee. Aspex
Eyewear, Inc. v. Miracle Optics, Inc., 434 F.3d 1336, 1343 (Fed. Cir. 2006).
However, joinder of the patentee is not necessary when the patentee is the
infringer, or the prudential concerns are not at play in a particular case. Id.
The bare licensee receives no more than the licensor’s “mere waiver of the
right to sue for patent infringement.” Great Lakes, 516 F. Supp. 2d at 886. A bare
licensee has no right to exclude others from making, using, or selling products
embodying the invention of the licensed patent, and thus has no legally recognized
interest that grants the licensee standing to bring an infringement action. Abbott
Labs. v. Diamedix Corp., 47 F.3d 1128, 1131 (Fed. Cir. 1995).
Determining whether a licensee is an exclusive licensee or a bare licensee is
a question of ascertaining the intent of the parties to the license as manifested by
the terms of their agreement and examining the substance of the grant. Textile
Prods., Inc. v. Mead Corp., 134 F.3d 1481, 1484 (Fed. Cir. 1998) (citation
omitted). The use of the word “exclusive” is not controlling; what matters is the
substance of the arrangement. Id. A licensee is an exclusive licensee only if the
patentee has promised, expressly or impliedly, that “others shall be excluded from
practicing the invention” within the field covered by the license. Rite-Hite Corp. v.
Kelley Co., 56 F.3d 1538, 1552 (Fed. Cir. 1995). “Put another way, an exclusive
license is a license to practice the invention . . . accompanied by the patent
owner’s promise that others shall be excluded from practicing it within the field of
use wherein the licensee is given leave.” Textile Prods., Inc., 134 F.3d at 1484
(Fed. Cir. 1998) (internal quotation and citation omitted, alteration in original).
Here, the Ecosystems sublicense granted plaintiff the exclusive right to practice
the invention within a specific territory. See Prima Tek II, L.L.C. v. A-Roo Co., 222
F.3d 1372, 1377 (Fed. Cir. 2000) (discussing standing of holder of “exclusive,
territorial license”). The fact that plaintiff’s rights within it territory were subject to
those of Forrest Keeling does not alter its status as an exclusive licensee. See
WiAV Solutions LLC v. Motorola, Inc., 631 F.3d 1257, 1267 (Fed. Cir. 2010)
(holding that “an exclusive licensee does not lack constitutional standing to assert
its rights under the licensed patent merely because its license is subject . . . to
rights in existence at the time of the license [and] to future licenses that may be
granted only to parties other than the accused.”). Plaintiff is an exclusive, rather
than a bare, licensee for the purposes of standing.
As stated above, an exclusive licensee must enforce its rights through or in
the name of the patent owner. Morrow, 499 F.3d at 1340. Defendant contends
that, to establish standing, plaintiff was required to join the patent owner, RPM
Technologies, from the outset.7 The “doctrine of standing . . . has both
constitutional and prudential components.” Evident Corp. v. Church & Dwight Co.,
399 F.3d 1310, 1313 (Fed. Cir. 2005) (citation omitted). Defendants do not
contest that plaintiff satisfies the requirements of constitutional standing: plaintiff
alleges it suffered an injury in fact, there is a causal connection between the injury
and defendants’ conduct, and the injury is redressable by a favorable court
decision. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)
(requirements for Article III standing).
With respect to the prudential component, the Supreme Court and Federal
Circuit Court of Appeals have stated that “an exclusive licensee that does not have
Defendant concedes that its standing argument applies with equal force to its
all substantial rights does have standing to sue in his own name when ‘necessary
to prevent an absolute failure of justice, as where the patentee is the infringer,
and cannot sue himself.’” Textile Prods., Inc., 134 F.3d at 1484 (quoting
Waterman v. Mackenzie, 138 U.S. 252, 255 (1891)); Littlefield v. Perry, 88 U.S.
(21 Wall.) 205, 223, 22 L. Ed. 577 (1874) (holding that plaintiff was an assignee,
but stating that even if he were an exclusive licensee, he could bring suit in his
own name, because the patentee was the infringer)). Joinder of the patentee is not
necessary when the prudential concerns are not at play in a particular case. Aspex
Eyewear, Inc., 434 F.3d at 1343. The prudential concerns include whether the
plaintiff asserts its own legal interests or rights or rests its claim on the rights and
interest of third parties; whether the issue requires “adjudicating abstract
questions of wide public significance which amount to generalized grievances most
appropriately addressed in the representative branches;” and whether plaintiff’s
complaint falls within “the zone of interests to be protected or regulated by the
statute or constitutional guarantee in question.” Intellectual Prop. Dev., Inc. v. TCI
Cablevision of California, Inc., 248 F.3d 1333, 1348 n.13 (Fed. Cir. 2001) (internal
quotations and citations omitted). Finally, “[t]he Supreme Court has confirmed
that exclusive territorial licensees need not join the licensor to maintain a suit for
patent infringement. Int’l Gamco, Inc., 504 F.3d at 1276 (citing Waterman v.
Mackenzie, 138 U.S. 252, 255 (1891)).
The court concludes that neither side was required to join RPM Technologies
to acquire standing to pursue their claims that the other violated their exclusive
territorial licenses. Throughout the pendency of this action, the patent has been
owned by the Lovelaces or by entities they control — Forrest Keeling, Lovelace
Farms, or RPM Technologies. Thus, the interests of the patent holder are fairly
represented and there is no risk of invalidating the patent without the participation
of the owner. Similarly, there is no risk of subjecting the alleged infringer to
multiple liabilities. Furthermore, as events transpired, the Lovelaces now own the
patent. While the patentee ordinarily is joined as a co-plaintiff, its participation as
a defendant does not defeat the standing of an exclusive licensee to bring an
infringement claim. See Evident Corp. v. Church & Dwight Co., 399 F.3d 1310,
1313-14 (Fed. Cir. 2005) (joinder of patentee as third-party defendant satisfied
prudential standing requirements).
On January 15, 2015, Ecosystems Gulf Coast and Ecosystems Southeast
assigned to plaintiff any claims they may have against Lovelace Farms or the
Lovelaces. Pl. Exs. P and U [Doc. #80-1]. Plaintiff asserts for the first time in its
summary judgment briefs that it is entitled to recover damages for defendants’
alleged sales of RPM products into the new territories. Defendants argue that these
claims are foreclosed by plaintiff’s lack of standing under its original claim.
Because the court finds that standing is established, the court will reject
defendants’ standing challenge to claims under the assignments.
Rule 56(a) of the Federal Rules of Civil Procedure provides that summary
judgment shall be entered if the moving party shows “that there is no genuine
dispute as to any material fact and the movant is entitled to a judgment as a
matter of law.” In ruling on a motion for summary judgment the court is required
to view the facts in the light most favorable to the non-moving party and must
give that party the benefit of all reasonable inferences to be drawn from the
underlying facts. AgriStor Leasing v. Farrow, 826 F.2d 732, 734 (8th Cir. 1987).
The moving party bears the burden of showing both the absence of a genuine
issue of material fact and its entitlement to judgment as a matter of law.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986); Matsushita Electric
Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986).
moving party has met its burden, the non-moving party may not rest on the
allegations of his pleadings but must set forth specific facts, by affidavit or other
evidence, showing that a genuine issue of material fact exists. United of Omaha
Life Ins. Co. v. Honea, 458 F.3d 788, 791 (8th Cir. 2006) (quoting Fed. R. Civ. P.
56(e)). Rule 56 “mandates the entry of summary judgment, after adequate time
for discovery and upon motion, against a party who fails to make a showing
sufficient to establish the existence of an element essential to that party’s case,
and on which that party will bear the burden of proof at trial.” Celotex Corporation
v. Catrett, 477 U.S. 317, 322 (1986).
The court finds that entry of summary judgment is not appropriate at this
time. First, there are a number of factual disputes.
For example, there are
disputes regarding whether defendants’ accused sales involved RPM technology or
fall within exceptions to licenses, when the Southeast and Gulf Coast nurseries
were established, and the location of the sales. Second, the court believes that
the sufficiency of plaintiff’s evidence in support of its claims for lost profits and
reasonable royalties is best evaluated at the close of all evidence.
With respect to plaintiff’s claims for damages pursuant to the January 15,
2015 assignment, defendant objects that the new claims are beyond the scope of
plaintiff’s complaint. Plaintiff asserts that the court should grant leave to amend
the complaint to include new claims under Fed.R.Civ.P. 15(b) (court should freely
permit an amendment if, at trial, a party objects that evidence is not in scope of
pleadings or issue was tried by express or implied consent). The court will direct
plaintiff to file a motion for leave to amend to include the additional claims.
Defendants will be allowed to file an opposition.
Defendants also argue that the assignments were executed after the close
of discovery, thereby preventing defendant from taking discovery or otherwise
defending the claims. On September 23, 2014, plaintiff disclosed its intention to
rely on infringing sales into the Gulf Coast and Southeast territories in its
responses to defendants’ first set of interrogatories. Defs. Ex. E [Doc. #86-5].
Defendants took the deposition of plaintiff’s corporate representative on January
19 and 20, 2015, and questioned him about the assignments. Defendants had
ample notice of plaintiff’s intention and that argument is rejected.
IT IS HEREBY ORDERED that the parties cross-motions for summary
judgment [Docs. #80 and #84] are denied.
IT IS FURTHER ORDERED that, if plaintiff intends to pursue claims on
behalf of RPM Ecosystems Gulf Coast and RPM Ecosystems Southeast, it shall file a
motion for leave to amend its complaint not later than June 18, 2015.
defendant’s response will be due seven days after the motion is filed.
CAROL E. JACKSON
UNITED STATES DISTRICT JUDGE
Dated this 11th day of June, 2015.
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