JERSEY ASPARAGUS FARMS INC. v. RUTGERS UNIVERSITY
Filing
40
OPINION filed. Signed by Judge Freda L. Wolfson on 5/31/2011. (eaj)
**FOR PUBLICATION**
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
__________________________________________
:
JERSEY ASPARAGUS FARMS, INC.,
:
:
Plaintiff,
:
:
v.
:
:
RUTGERS UNIVERSITY,
:
:
Defendant.
:
__________________________________________:
Civil No. 10-2849 (FLW)
OPINION
WOLFSON, United States District Judge:
This matter arises out of a now-terminated, exclusive license agreement through
which Plaintiff Jersey Asparagus Farms, Inc. (“JAFI”) was authorized by Defendant
Rutgers University (“Rutgers”) to sell the latter’s patented varieties of asparagus. Presently
before the Court is Plaintiff’s motion to amend the Amended Complaint and to file its
Proposed Second Amended Complaint (“SAC”). Also before the Court is Defendant’s
motion to dismiss the Amended Complaint for lack of statutory standing pursuant to
Federal Rule of Civil Procedure 12(b)(1) or, in the alternative, for failure to state a claim
pursuant to Federal Rule of Civil Procedure 12(b)(6).
At oral argument, the parties agreed with the Court that, in the interest of judicial
1
economy, the Court should focus its inquiry on the SAC in ruling on both parties’ motions.
For the reasons that follow, the Court grants Defendant’s motion to dismiss with prejudice
with respect to Plaintiff’s federal and state RICO claims.
Plaintiff’s antitrust and
Declaratory Judgment Act, 28 U.S.C. § 2201, et seq. (“DJA”), claims are dismissed without
prejudice. The Court denies Plaintiff’s motion to amend and file its Second Amended
Complaint, yet grants Plaintiff leave to file a Third Amended Complaint in the manner
described herein.
I.
BACKGROUND
On both motions to dismiss for statutory standing (Rule 12(b)(1)) and motions to
dismiss for failure to state a claim (Rule 12(b)(6)), I must accept as true the plaintiff’s
material allegations and construe them in the light most favorable to the plaintiff. Baldwin
v. Univ. of Pittsburgh Med. Ctr., 636 F.3d 69, 73-4 (3d Cir. 2011) (citing Alston v.
Countrywide Fin. Corp., 585 F.3d 753, 758 (3d Cir. 2009)). Thus, the following facts are
taken from Plaintiff’s SAC.
A.
Facts
While JAFI served as Rutgers’ exclusive distributor for over twenty years, their
relationship soured once JAFI allegedly discovered that some of the patents underlying the
parties’ license agreement had expired or were otherwise invalid. Generally, Plaintiff
brings antitrust monopolization, RICO, and DJA claims against Rutgers for its actions in
2
allegedly fraudulently obtaining the patents and entering into the exclusive license
agreement premised on those patents, as well as for seeking return of plants provided to
JAFI and the payment of royalties under the license agreement. As explained in more
detail below, Plaintiff’s Second Amended Complaint alleges that the exclusive license
agreement authorized Plaintiff to cross-breed Rutgers patented asparagus parent plants,
harvest all-male hybrid seed from those plants, and sell that seed to farmers with a license
restriction prohibiting both Plaintiff and the purchasing farmers from asexually
reproducing new hybrid plants by dividing the crowns of the plants grown from the
purchased seed.
1.
Asparagus Reproduction
As background for the ensuing discussion, I include a brief primer on asparagus
reproduction. Asparagus may be reproduced sexually or asexually. Sexual reproduction
is typically referred to as natural “propagation,” and describes the process by which two
parent plants are bred to produce seed. The seed produced is hybrid if the parent plants
were from two different varieties.
Additionally, the crown (i.e., the root system of a one-year old asparagus plant) of
an asparagus plant may be divided in such a manner as to produce new plants. This is
referred to as asexual reproduction or crown division. The process of crown division
effectively clones the plant, keeping intact its hybrid or non-hybrid nature.
3
2.
Fraud on the PTO Allegations
According to the Proposed Second Amended Complaint, Rutgers began developing
an all-male, hybrid asparagus seed in the late 1970's. PSAC, ¶ 20. Rutgers ultimately
obtained patents for ten varieties of such all-male, hybrid asparagus (“Rutgers’ varieties”).
Id. These varieties are Greenwich, Jersey Giant, Jersey Knight, Jersey General, Jersey Titan,
Jersey Gem, Jersey Jewel, NJ854, NJ953, and NJ977. Id. at 22. Rutgers, further, produced
three additional varieties for which it has not obtained patents—Jersey King, Jersey Prince,
and Jersey Supreme. Id. at ¶ 23. Plaintiff alleges that, despite not having obtained patents
for these latter three varieties, Rutgers attempts to control the use and sale of these varieties
through the patents for the varieties’ parent plants. Moreover, Rutgers obtained patents
over several parent plants from which the hybrid varieties were cross-bred. See id. at ¶¶
22 -24. In Plaintiff’s view, Rutgers fraudulently obtained almost all of its patents by
asserting on its patent applications that each asparagus variety had not been described in
a publication, and/or been in public use, or on sale, or both, in the United States for more
than one year prior to the date upon which the respective applications were filed.1 Id. at
¶¶ 9, 27.
Plaintiff specifically alleges that in each of the patent applications, the inventors
(who worked for Rutgers) filed declarations stating
1
Plaintiff alleges that all patents, except that for the “Jersey General” variety,
were obtained by this sort of fraud. Id. at ¶ 27.
4
. . . that we do not know and do not believe that this invention
or discovery thereof was ever known or used before our
invention or discovery thereof, or has been . . . described in any
printed publication in the country before our invention or
discovery thereof, or more than one year prior to this
application, or in public use or on sale in the United States for
more than one year prior to this application.
Id. at ¶ 7.2 By way of example, Plaintiff describes the patent application for the Greenwich
variety, which application was filed in 1983. Plaintiff alleges that this variety was in public
use as early as 1978 at Oklahoma State University and Michigan State University, id. at ¶
29, and that a Michigan-based research farm sold harvested Greenwich spears more than
one year prior to the filing of the Greenwich patent application. Plaintiff alleges that
similar examples of prior publication, use, or sale (collectively, “prior use”) occurred in
connection with the Jersey Giant, Jersey Knight, Jersey Titan, Jersey Gem, Jersey Jewel,
Jersey Deluxe and NJ977, NJ44P, and NJ22-34 (the male parent plants for the Jersey Deluxe
variety) applications. Id. at ¶¶ 30-42. Plaintiff alleges that the inventor misrepresentations
are material because, without the declaration that no publication, use, or sale had occurred
more than one year prior to the filing of the applications, no patent would have been issued
and “the public would be free to use [Rutgers’] invention[s].” Id. at ¶ 28.
3.
Antitrust Allegations
2
This quote is taken directly from Plaintiff’s SAC. As noted infra, copies of the
patents have been provided by Rutgers to the Court; however, no copy of these
declarations was provided in connection with Rutgers’ motion to dismiss.
5
Plaintiff alleges that Rutgers used its fraudulently obtained patents to “dominate
and control the nationwide market for asparagus crowns and seed that produce ‘all-male
plants’ and to expand its domination over the entire market for asparagus crowns and
seeds in the colder, wet climate market.” Id. at ¶ 45. Specifically, Plaintiff alleges, Rutgers
engages in anti-competitive activities by establishing an exclusive licensing program that,
in conjunction with Rutgers’ patents, prevents JAFI and other competitors from “selling
asparagus crowns and seeds that produce ‘all-male’ plants ....” Id. at ¶ 46. By virtue of
this licensing program, farmers may purchase Rutgers’ patented varieties only through
selected licensees. The farmers are, further, prevented from asexually reproducing new
plants through crown-division. Id.
Plaintiff categorizes Rutgers’ anticompetitive conduct or scheme into what it
contends are four distinct steps:
(1)
Rutgers uses fraudulently obtained patents to limit asexual reproduction of
its patented all-male hybrid varieties.
(2)
Rutgers exclusively licenses the right to grow the seed and sell the seed to a
distributor.
(3)
As a result of the licensing program, the only source of the seed is the
through the distributor.
(4)
“Because Rutgers controls asexual reproduction of the fraudulently patented
plant, it’s [sic] exclusive licensing of seed production also effectively controls
the market for asparagus crowns: the only way that either a distributor or a
farmer can acquire asparagus crowns in the fraudulently patented plant is to
either buy seed and grow the crowns or buy the crowns from an
6
intermediary who has grown the crowns — from seed acquired from the
exclusive distributor. Thus, it is impossible (without the threat of patent
infringement claims) for anyone to grow the fraudulently patented asparagus
variety unless the plants ultimately passed through the exclusive seed
distributor.”
Id. at ¶ 47.
For the unpatented hybrid varieties, JAFI alleges that Rutgers utilized similar tactics
by claiming that it owned and controlled all right, title and interest in the varieties’ parent
plants. See id. at ¶ 55. Furthermore, through the exclusive licencing practice, JAFI alleges
that Rutgers created, and maintains, a monopoly with respect to the sale of these varieties.
In addition, JAFI alleges that Rutgers continued to behave as if had active patents on the
parent plants even after those patents expired. Id.
Thus, other than by purchasing seeds, the only means by which a new crop may be
had from the Rutgers’ varieties is if a farmer practices crown division. Id. at ¶¶ 58-65.
Through crown-division, 2 to 5 new plants may yield from the original crown. However,
because Rutgers prohibits farmers from practicing crown-division, farmers who wish to use
Rutgers’ varieties must repurchase those varieties every year. The prohibition against
crown-division, in Plaintiff’s view, decreases competition by increasing farmers’ costs. Id.
at ¶ 65 (“As a result of [Rutgers’] unfair competitive advantage, Rutgers is able to
artificially increase the cost of crowns.”).3
3
In addition, Plaintiff alleges in the SAC that Rutgers made it a condition of
the exclusive licenses issued in 2001 that JAFI “could not breed its own varieties of
7
In terms of antitrust injury, JAFI alleges that it has sustained injury to itself and,
further, that others sustained injury as a result of Rutgers’ anticompetitive conduct as well.
With regard to those injuries it sustained, JAFI alleges the following types of injuries:
a.
paying licensing and royalty fees that it would not otherwise have
paid;
b.
incurring higher expenses (and thus making less profit) because it was
not permitted to asexually reproduce and sell “all-male” hybrid
plants and was instead only allowed to sell seed or crowns grown
from seed;
c.
lost sales because the costs illegally imposed by Rutgers resulted in
higher pricing of the seed and crowns sold by JAFI and the resulting
economic factors caused potential purchasers to not buy the seed or
crowns.
Id. at ¶ 126.
In JAFI’s view, but for the fraudulently-obtained patents, Rutgers could not have
legally retained control over the market beyond the first generation of planted hybrid seed
because JAFI, farmers and/or distributors could then bypass
Rutgers and asexually reproduce the plants. This in turn
would have forced market prices for seed down, as Rutgers
would have had to reduce the royalty it charged for seed sales
in order to allow the price of seed to compete with the price of
asexually reproduced crowns.
asparagus and that JAFI could not market or sell any varieties of asparagus (other than
Rutgers’s varieties) that competed with the Rutgers’s varieties without giving Rutgers 9
months prior written notice of intent to do so.” Id. at ¶ 57. While the SAC includes these
exclusive dealing allegations, at oral argument, Plaintiff clarified that it is not bringing an
exclusive dealing or restraint of trade claim under § 1 of the Sherman Act. It only brings
a monopolization claim under § 2 of the Sherman Act.
8
Id. at ¶ 84. Moreover, JAFI alleges that “[h]ad Rutgers not prevented JAFI from doing so,
JAFI could have, and would have, asexually reproduced the male hybrid asparagus plants
and thus competed directly with Rutgers (and without the need to pay Rutgers any
royalties or licensing fees).” Id. at ¶ 83. JAFI alleges that it cannot currently sell plants in
its possession to end-using farmers for crown division because such farmers are fearful that
Rutgers will sue them under the fraudulently obtained and expired patents. Id. at ¶¶ 90-91.
With regard to injuries sustained by others, JAFI alleges that: (1) farmers paid higher
prices for asparagus seed and crown and that they were forced to re-purchase seed each
year because they were not permitted to practice crown-division; (2) the public paid higher
prices for asparagus; and (3) companies that sell seed and crowns incurred higher costs to
produce the crowns by being forced to purchase seeds solely through Rutgers’ exclusive
licensee, here, JAFI.
4.
The License Agreement
The licensing agreement required that JAFI pay an up-front licensing fee of $250,000,
and agree to pay Rutgers royalty fees ranging from 25% to 50% of JAFI’s gross sales of the
Rutgers’ varieties hybrid seeds. Id. at ¶ 67. The licensing agreement permitted JAFI to
sexually reproduce the Rutgers’ varieties through male and female parent plants in order
to make the hybrid seeds to be sold.4 Id.
4
Plaintiff obtained the tissue culture of the parent plants from Rutgers and
contracted with a third party to grow the plants and cultivate the seeds. Id. at ¶¶ 88-90.
9
As with the restrictions placed on end-using farmers, the license agreement
prohibited JAFI from asexually reproducing through cross-division of the crowns. Id. at
¶ 68. It is important to note that the license agreement specifically references the Rutgers
plant variety patents. For example, the Jersey Giant hybrid asparagus agreement states
that Rutgers “owns and controls all right, title and interest in and to [sic] two asexually
reproduced asparagus parent plants registered under the designations Donna and Scott
Howard,” Buckingham Decl., Exh. B (“License Agmt.”) at 1, and that these licensed plants
are the Donna and Scott Howard “claimed by United States Plant Patents PP 5,652 and PP
5,549, respectively ....” Id. at Art. I, b.5 Moreover, the agreement states that “[t]he term
Jersey Giant as used in this Agreement shall mean the F-1 hybrid seed produced by
crossing the Licensed Plant Materials, Donna and Scott Howard, as identified in U.S. Plant
Patent PP 5,551.” Id. at Art. I, d. The license agreement grants JAFI “an exclusive license
to use said parent plants in combination to produce Jersey Giant hybrid seed, and an
exclusive license to use and sell said seed.” Id. at Art., Ia. It imposes upon JAFI an
JAFI’s use of this third party has no relevance to its claims here, thus, additional allegations
relating to this party are omitted from discussion.
5
The Court may consider the sample license agreement in conjunction with the
motion to dismiss because it is integral to Plaintiff’s complaint. See Lum v. Bank of Am.,
361 F.3d 217, 222 n. 3 (3d Cir. 2004); In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410,
1426 (3d Cir. 1997). Furthermore, the parties agreed at oral argument that this license is
representative of the type of licenses entered into by the parties for other varieties although
each license incorporates different dates of expiration and some licenses are for the parent
plants while others are for the hybrid variety itself.
10
obligation to “print in all catalogues, price lists and other advertising” a notice stating “This
variety is protected by U.S. Plant Patent No. PP 5,551, and is produced and sold by Jersey
Asparagus Farms under license. Asexual reproduction is prohibited by law,” and requires
that JAFI imprint a similar marking on all packages of seed sold. Id at Art. XVII, a-b. In
terms of expiration date, the agreement provides that it “shall continue in full force and
effect . . . to the end of the last expiring patents identified by this Agreement ....” Id. at Art.
XV.
By transferring the parent plants to JAFI, the agreement also provides that a
bailment is created. Id. at Art. Ie. In the words of the agreement,
[t]he transfer of [the plants and their asexually reproduced
progeny and derivatives] to Jersey Asparagus Farms, Inc. by
Rutgers . . . is to be considered a bailment for purposes of this
Agreement and not as a conditional or unconditional sale, and
any and all such materials in [JAFI’s] possession at any time
shall be considered to be possessed by [JAFI] by way of a
bailment.
Id. This bailment clause does not reference the hybrid seed propagated from the parent
plants; rather, it references only the parent plants themselves. The agreement, further,
provides that, upon cancellation by either party, all plants and hybrid seed must be
returned to Rutgers, transferred to another exclusive licensee, or destroyed. Id. at Art. IX.
5.
Post-patent Expiration Royalty Payments
After JAFI and Rutgers maintained their license relationship for some time, JAFI
11
became aware that some of the Rutgers patents and the parties’ license agreements had
expired. Id. at ¶ 92. Once JAFI became aware of the expirations, JAFI ceased paying
Rutgers royalties on the sale of the Rutgers’ varieties seeds. Id. at ¶ 93. Rutgers then
demanded that JAFI either destroy or return all the Rutgers’ varieties plants “as though the
patents were still in effect.” Id. In addition, Plaintiff alleges, Rutgers demanded royalty
payments for the Jersey Supreme variety even though Rutgers did not procure a patent for
that variety and there was no formal license agreement relating to that variety. Id. at 95.
6.
RICO Allegations
Plaintiff, generally, alleges that Rutgers, the former-employee inventors of Rutgers’
patents, and owners of farms that grew Rutgers’ plants on Rutgers’ behalf, comprised a
“patent enterprise.” See id. at ¶¶ 130-153. JAFI alleges that the enterprise obtained the
patents though the mails and/or wire, and that the predicate RICO acts are the same patentapplication misrepresentations alleged in connection with Plaintiff’s antitrust claim. Id. at
¶¶ 154-165. With respect to the injuries suffered, Plaintiff alleges that it paid royalties “that
it would not have had to pay but for the patents,” that the amount of royalties was too
high, and that Rutgers’ assertions that JAFI may no longer sell the plants has “created
doubt as to the right of JAFI to sell asexually reproduced plants or seed from such plants.”
Id. at ¶ 187.
With respect to the New Jersey RICO claim only, Plaintiff further alleges that
12
Defendant “used the fraudulently obtained patents in bad faith by attempting to extend the
patent monopolies (exclusive control over asexual reproduction) into the production of
seed and crowns produced from seed,” Id. at ¶ 175, and that Rutgers intentionally
staggered its patent applications for the various varieties so that it would always have
active patents, id. at ¶ 178, as well as other patent-misuse transgressions.
7.
Declaratory Judgment Act Allegations
In connection with its DJA claim, Plaintiff alleges that Rutgers has attempted to
enforce several currently active, non-expired patents against it. Id. at ¶¶ 188-89. Plaintiff,
further, asserts that Defendant relied upon these fraudulently-obtained patents “and the
license agreements employed thereto” to force “Plaintiff to destroy or return parent plants
sold to JAFI under the various licensing agreements, and also destroy or turn over plants
asexually reproduced from those parent plants in an effort to prevent JAFI from asexually
reproducing the plants.” Id. at ¶ 192. In JAFI’s view, Rutgers “has no right to prevent JAFI
from asexually reproducing a plant that is the subject of an invalid plant patent.” Id. at ¶
193. Accordingly, JAFI asserts, it is entitled to a declaration that the patents are invalid,
that it need not pay royalties if it produces seed from plants that were the subject of the
patents, that it can asexually reproduce the plants, and that it must not return or destroy
the plants. Id. at ¶¶ 196-97. Importantly, the Court notes that the allegations limit the DJA
claim to active patents in paragraphs 188 and 189, but then seek a declaration as to expired
13
patents in paragraphs 196 and 197.
B.
Procedural History
Based on these alleged facts, JAFI filed its initial complaint on June 3, 2010. The
Amended Complaint was filed a month later, in July of 2010. Thereafter, Defendant
Rutgers filed its motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1)
and 12(b)(6). While the motion to dismiss was pending, JAFI filed a motion to amend the
Amended Complaint, attaching a copy of a proposed Second Amended Complaint.6 As
noted, this complaint asserts an antitrust monopolization claim under section 2 of the
Sherman Act, federal and state RICO claims, and a Declaratory Judgment Act claim. The
Court held oral argument on the parties’ motions on May 4, 2011, and reserved decision.
The Court now rules upon the parties’ motions to amend and to dismiss, focusing upon the
allegations of the SAC, as agreed by the parties.
II.
STANDARD OF REVIEW
Defendant has moved to dismiss the complaint for lack of statutory standing and
for failure to state a claim. According to the Third Circuit, “[a] dismissal for lack of
statutory standing is effectively the same as a dismissal for failure to state a claim.”
Baldwin, 636 F.3d at 73. Likewise, with respect to Plaintiff’s motion to amend, leave to
6
JAFI could not file the Second Amended Complaint as of right because JAFI
did not file it within 21 days of Rutgers’ motion to dismiss. See Fed. R. Civ. P. 15(a)(1)(B).
In addition, following its motion to amend, Plaintiff then filed a motion for recusal, which
the Court denied in a prior opinion.
14
amend should be denied where “the proposed claim would be subject to dismissal under
Rule 12(b)(6).” Travelers Indem. Co. v. Dammann & Co., Inc., 594 F.3d 238, 265 n.4 (3d Cir.
2010). Thus, the following discussion of the Rule 12(b)(6) standard is equally applicable to
both Defendant’s and Plaintiff’s motions.
The Federal Rules of Civil Procedure provide that a complaint “shall contain (1) a
short and plain statement of the grounds upon which the court's jurisdiction depends ... (2)
a short and plain statement of the claim showing that the pleader is entitled to relief, and
(3) a demand for judgment for the relief the pleader seeks.” Fed.R.Civ.P. 8(a). The purpose
of a complaint is “to inform the opposing party and the court of the nature of the claims
and defenses being asserted by the pleader and, in the case of an affirmative pleading, the
relief being demanded.” 5 Charles Alan Wright & Arthur R. Miller, FEDERAL PRACTICE AND
PROCEDURE § 1182 (3d ed. 2004).
In reviewing a motion to dismiss for failure to state a claim under 12(b)(6), a court
must take all allegations in the complaint as true, viewed in the light most favorable to the
plaintiff “and determine whether, under any reasonable reading of the complaint, the
plaintiff may be entitled to relief.” Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d
Cir. 2008) (citation and quotations omitted). In Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), the Supreme Court “retired” the language in
Conley v. Gibson, 355 U.S. 41, 45–46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), that “a complaint
15
should not be dismissed for failure to state a claim unless it appears beyond doubt that the
plaintiff can prove no set of facts in support of his claim which would entitle him to relief.”
Twombly, 550 U.S. at 561 (quoting Conley, 355 U.S. at 45–46). Rather, the factual
allegations in a complaint “must be enough to raise a right to relief above the speculative
level.” Id. at 555. The Third Circuit summarized the pleading requirement post- Twombly:
The Supreme Court’s Twombly formulation of the pleading
standard can be summed up thus: ‘stating ... a claim requires
a complaint with enough factual matter (taken as true) to
suggest’ the required element. This ‘does not impose a
probability requirement at the pleading stage,’ but instead
‘simply calls for enough facts to raise a reasonable expectation
that discovery will reveal evidence of ‘the necessary element.’
Phillips, 515 F.3d at 234 (quoting Twombly, 550 U.S. at 556).
In affirming that the Twombly standard applies to all motions to dismiss, the
Supreme Court recently further clarified the 12(b) (6) standard. “First, the tenet that a court
must accept as true all of the allegations contained in a complaint is inapplicable to legal
conclusions.” Ashcroft v. Iqbal, ––– U.S. ––––, ––––, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868
(2009). “Second, only a complaint that states a plausible claim for relief survives a motion
to dismiss.” Iqbal, 129 S.Ct. at 1950. Accordingly, “a court considering a motion to dismiss
can choose to begin by identifying pleadings that, because they are no more than
conclusions, are not entitled to the assumption of truth.” Id. In short, “a complaint must
do more than allege the plaintiff's entitlement to relief. A complaint has to ‘show’ such an
16
entitlement with its facts.” Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir. 2009).
The Third Circuit recently reiterated that “judging the sufficiency of a pleading is
a context-dependent exercise” and “[s]ome claims require more factual explication than
others to state a plausible claim for relief.” West Penn Allegheny Health System, Inc. v.
UPMC, 627 F.3d 85, 98 (3d Cir. 2010). This means that, “[f]or example, it generally takes
fewer factual allegations to state a claim for simple battery than to state a claim for antitrust
conspiracy.” Id. That said, the Rule 8 pleading standard is to be applied “with the same
level of rigor in all civil actions.” Id. (quoting Iqbal, 129 S.Ct. at 1953).
III.
DISCUSSION
A.
Motion to Dismiss
Defendant moves to dismiss Plaintiff’s claims for lack of statutory standing and,
alternatively, on substantive grounds. I address each claim in turn, turning first to the
antitrust claim.
1.
Antitrust Monopolization/Walker Process Claim
Under section 2 of the Sherman Act, persons “who . . . monopolize, or attempt to
monopolize, or combine or conspire with any other person or persons, to monopolize any
part of ... trade or commerce,” may be subjected to civil liability for their actions. 15 U.S.C.
§ 2. To state a claim for monopolization, a plaintiff must plead two elements: “(1) the
possession of monopoly power in the relevant market and (2) the willful acquisition or
17
maintenance of that power as distinguished from growth or development as a consequence
of a superior product, business acumen, or historic accident.” Race Tires America, Inc. v.
Hoosier Racing Tire Corp., 614 F.3d 57, 75 (3d Cir. 2010) (quoting Eastman Kodak Co. v.
Image Tech. Svcs., Inc., 504 U.S. 451, 481 (1992)). Here, Plaintiffs’ monopolization claim
hinges on its allegation that Defendant committed a fraud on the PTO by failing to disclose
certain prior uses in its patent applications.
While the SAC does not refer to Plaintiff’s antitrust claim as such, it is essentially a
“Walker-Process” claim.7 In Walker Process Equipment Inc. v. Food Machinery and
Chemical Corp., 382 U.S. 172 (1965), the Supreme Court specifically addressed monopoly
allegations linked to allegedly-fraudulently procured patents. In that case, Plaintiff Food
Machinery & Chemical Corp. (“Food Machinery”) brought a patent infringement suit
against Defendant Walker Process Equip., Inc. (“Walker Process”). After realizing that its
patent had expired, Food Machinery moved to dismiss its own complaint. In response,
Walker Process added a monopolization counterclaim against Food Machinery, alleging
that it monopolized by “fraudulently and in bad faith obtaining and maintaining . . . its
7
In some cases, court have analyzed a claim by a licensee seeking to escape
payment of future royalties, or disgorgement of previously-paid royalties, as a breach of
contract claim premised on fraudulent procurement of a patent. See e.g., Transitron
Electronic Corp. v. Hughes Aircraft Co., 649 F.2d 871 (1st Cir. 1981) cited in Phillip E.
Areeda, et al., FUNDAMENTALS OF ANTITRUST LAW § 701.a n.22. Here, Plaintiff’s claim is
more properly characterized as a Walker Process claim because it is brought under the
rubric of antitrust law.
18
patent.” Id. at 174.
Walker Process, specifically, alleged that Food Machinery misrepresented to the
PTO that it was unaware of its invention being in public use in the Unites States for more
than a year prior to filing for a patent.8 Ruling in favor of Walker Process, the Court held
that proof that a patent holder knowingly and willfully misrepresented facts indicating
invalidity to the PTO would deny the patent holder its exemption from the antitrust laws
provided by that patent.
Id. at 176-80.
Walker Process, therefore, stands for the
proposition that “enforcement of a patent obtained by fraud constitutes [an] unlawful
exclusionary act” under section 2 of the Sherman Act.
Phillip E. Areeda, et al.,
FUNDAMENTALS OF ANTITRUST LAW § 701.f (“ANTITRUST LAW ”). Claims based on this theory
have been asserted based on a monopolist’s use of licensing to increase a rival’s costs, a
monopolist’s attempted enforcement of its fraudulently-procured and invalid patent
against would-be competitors, and communications to customers threatening infringement.
Id.
“Walker Process fraud is a variant of common law fraud, and . . . the elements of
common law fraud include: (1) a representation of a material fact, (2) the falsity of that
representation, and (3) the intent to deceive or, at least, a state of mind so reckless as to the
8
“The Patent Act bars issuance of a patent if the application is filed more than
one year after (1) the product was sold or offered for sale and (2) the invention is ready for
patenting. “ However, “[a] sale for experimental use negates the on-sale bar.” In re
Ceccarelli, 401 Fed.Appx. 553, 554 (Fed.Cir. 2010) (internal citations omitted).
19
consequences that it is held to be the equivalent of intent (scienter).” Hydril Co. LP v.
Grant Prideco LP, 474 F.3d 1344 (Fed.Cir. 2007). Under a Walker Process theory, it is not
sufficient to allege that a patent was obtained fraudulently—such an allegation would state
a claim for patent misuse or inequitable conduct that may only be asserted as a defense to
a patent enforcement action. Rather, a plaintiff must allege that the fraudulently-obtained
patent “threatens to perpetuate, reinforce, or create a monopoly in a properly defined
market.” ANTITRUST LAW at § 701.a. Hence, in addition to alleging that the patent-holder
obtained the patent through an actual fraud perpetrated on the PTO, the sufficiency of
which is tested under the law of the Federal Circuit, a Walker Process plaintiff “must also
[allege] the basic elements of an antitrust violation defined by the regional circuit’s law ....”
Dippin' Dots, Inc. v. Mosey, 476 F.3d 1337,1346-48 (Fed. Cir. 2007).9
a.
9
Fraud on the PTO Allegations
Some courts state the Walker Process elements as:
(1) the patent at issue was procured by knowing or willful
fraud on the USPTO; (2) the defendant was aware of the fraud
when enforcing the patent; (3) there is independent evidence
of a clear intent to deceive the examiner; (4) there is
unambiguous evidence of reliance, i.e., that the patent would
not have issued but for the misrepresentation or omission; and
(5) the necessary additional elements of an underlying
violation of the antitrust laws are present.
Nobelpharma AB v. Implant Innov., Inc., 141 F.3d 1059 (Fed.Cir. 1998); In re Netflix
Antitrust Litig., 506 F.Supp.2d 308, 314 (N.D.Cal. 2007).
20
Defendant challenges Plaintiff’s fraud on the PTO allegations, arguing that they fail
to satisfy Federal Rule of Civil Procedure 9(b)’s heightened pleading standard. To
sufficiently allege that an inventor committed fraud before the PTO, a plaintiff must assert
that the inventor possessed fraudulent intent and that the inventor’s misrepresentations
or omissions were material. Defendant’s challenge to Plaintiff’s allegations here centers on
a failure to properly plead intent.
As noted, Plaintiff’s key allegation is that there were several prior uses of the
patented asparagus varieties that were not disclosed to the PTO. For example, the SAC
states that the Jersey Giant variety was planted by Oklahoma State University and
Michigan State University more than two years prior to Defendant’s filing of the Jersey
Giant patent application in 1983, and was sold to Walker Brothers Farm in April 1981. SAC
at ¶ 30. Another example is the Jersey Knight variety, about which the SAC alleges that
“J. Howard Ellison, the principal patent applicant . . . distributed between 150,000 and
200,000 Jersey Knight seeds to more than 60 different recipients, most of which were United
States farmers, commercial organizations, county agents, or research organizations. Such
distribution constitutes ‘public use ....” Id. at ¶ 31. In addition, the SAC generally avers
that the varieties were described in publications more than one year prior to each patent
application. Id. at ¶ 27.10
10
One specific example alleged by Plaintiff is a 1995 newspaper article carrying
the banner “Ready to Plant in 1996,” in which article Dr. Stephen Garrison of Rutgers was
21
The SAC alleges that the inventors identified in the patent applications signed
declarations stating, inter alia, that
we do not know and do not believe that this invention or
discovery thereof was ever known or used before our
invention or discovery thereof . . . more than one year prior to
this application, or in public use or on sale in the United States
for more than one year prior to this application.
Id. at ¶ 7. Further, Plaintiff asserts, “the party seeking the patent has an affirmative duty
to disclose all information that is material to the Patent Office’s decision to grant or deny
the patent.” Id. at ¶ 8. Thus, by signing the aforesaid declarations without disclosing each
pre-application planting, sale, or inclusion in a publication, the SAC alleges that Defendant
filed a false declaration and failed to disclose all material information to the patent office.
In Defendant’s view, these assertions fail to allege scienter, i.e., that Rutgers was
aware of the false statements or that it intentionally submitted the statements with the
intent to deceive the PTO. Defendant relies, principally, on Exergen Corp. v. Wal-Mart
Stores, Inc., 575 F.3d 1312 (Fed. Cir. 2009), an inequitable conduct case, in support of this
argument. Moreover, Defendant argues, by looking at the face of the patents themselves,
one can discern that the alleged undisclosed prior uses were, in fact, disclosed to the PTO.
Indeed, as noted supra, the Court may consider the patents in ruling on a motion to dismiss
photographed with Sam Walker, one of the owners of JAFI, and the manager of Michigan
Asparagus Industry Research Farm. Id. at ¶ 38d. The article announced the potential
release of a new variety whose female parent plant was NJ44P. Id. The patent application
for NJ44P was not filed until ten years later, in 2006. Id. at ¶ 38.
22
pursuant to Federal Rule of Civil Procedure 12(b)(6)because the patents are documents
integral to the SAC.
Defendant is correct in that the patents indicate that some of the prior uses were
disclosed to the PTO. For example, the Jersey Giant patent explains that “actual results of
growing our new variety in substantially different geographical locations, and in soil virgin
to asparagus as well, follows hereafter and indicates the superiority we have developed in
‘Jersey Giant.” Buckingham Decl., Ex. 2, Col. 2, Table 4. Thereafter, the patent references
“Bixby, Oklahoma” in a table along with results from growing the variety in 1979 and
1980— more than two years prior to the 1983 patent application. In addition, Michigan is
referenced in another table and yields from 1981 and 1982 are disclosed. Id. at Col. 2, Table
5. However, there is no reference in the patent of a sale to Walker Brothers Farm in 1981.
Similarly, while the Jersey Knight patent indicates that variety had been subjected to “a
very extensive research program which has been carried on for years . . . “ Id., Ex. 3, Col.
1, 6-7, there is no specific reference to the alleged distribution of “150,000 and 200,000 Jersey
Knight seeds to more than 60 different recipients ....” Therefore, it appears that only some
of the alleged undisclosed prior uses are refuted by the patent applications themselves. For
those allegations not clearly refuted by the face of the applications, the Court must accept
the allegations as true on a motion to dismiss and may not resolve factual disputes.
In connection with those prior uses not refuted by the patents themselves,
23
Defendant argues that Plaintiff’s allegations do not foreclose the possibility that the
undisclosed uses constitute experimental uses, which need not be disclosed to the PTO.
Indeed, a sale that is experimental would not constitute a “prior sale.” Del. Valley, 597 F.3d
at 1379. Defendant’s argument fails, however, because the Court may not determine on a
motion to dismiss whether an undisclosed use is an experimental one; the Court must
accept the Plaintiff’s allegations of prior use as true. And, the determination whether the
experimental use exception applies involves factual proofs typically resolved on summary
judgment. See Minton v. National Ass'n. of Securities Dealers, Inc., 336 F.3d 1373 (Fed. Cir.
2003).11 While Defendant also argues that Plaintiff must allege that the prior uses were not
experimental, there are no cases requiring a plaintiff to plead the “magic words” that all
uses were not experimental uses. Rather, the question of experimental use is subsumed in
the heightened 9(b) pleading standard of intent and materiality, which standard is
11
For example, the experimental use exception to the prior sale doctrine
includes both legal and factual determinations. As explained by the Minton Court,
An assessment of the validity of a patent claim in light of an
alleged sale involves, first, determining whether a sale is truly
a “sale” within the meaning of 35 U.S.C. § 102(b), a question of
law based on underlying facts . . . “[A] patent is presumed to
be valid, 35 U.S.C. § 282, and this presumption can only be
overcome by clear and convincing evidence of facts to the
contrary,” ....
Id. at 1376 (internal citations omitted).
24
explained in more detail below.12
Exergen holds that allegations of fraud on the PTO must include facts that “give rise
to a reasonable inference of scienter, including both (1) knowledge of the withheld material
information or of the falsity of the material misrepresentation, and (2) specific intent to
deceive the PTO.” 575 F.3d at 1330. In this regard, the allegations must plausibly suggest
a “deliberate decision to withhold a known material reference or to make a knowingly false
misrepresentation—a necessary predicate for inferring deceptive intent.” Id. at 1331
(internal quotation marks omitted) (quoting Molins PLC v. Textron, Inc., 48 F.3d 1172 (Fed.
Cir. 1995)).
Further underscoring the high pleading standard to which allegations
regarding fraud on the PTO must ascribe, the Exergen Court pronounced that “[t]o allow
plaintiffs and their attorneys to subject companies to wasteful litigation based on the
detection of a few negligently made errors . . . would be contrary to the goals of Rule 9(b),
which include the deterrence of frivolous litigation based on accusations that could hurt
the reputations of those being attacked.” Id.
It is important to note, at the outset, that Exergen does not address the pleading
12
Defendant further argues that Plaintiff’s failure to disclose theory is
implausible and, accordingly, fails to satisfy Twombly’s and Iqbal’s requirement that a
pleading be “plausible on its face.” See Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S.
at 570). In Defendant’s view, that the patents disclose the types of prior uses that JAFI
contends were omitted, renders Plaintiff’s allegations that Rutgers intended to deceive the
PTO implausible. While the disclosed uses call into question some of plaintiff’s allegations,
other allegations of non-disclosure are not refuted by the patents.
25
standard applicable on a motion to dismiss under Rule 12(b)(6).13 Unlike the instant suit,
which is still in the nascent stages of litigation, Exergen involved a motion to amend after
a full trial on the merits. Here, though the complaint has been amended, discovery has not
yet commenced. In addition, many of Exergen’s qualms with the fraud allegations in that
case related to a failure to specify which individual inventors made the omissions and
which claim limitations within the numerous patent claims were affected by those
omissions. See 575 F.3d at 1328-29. Here, by contrast, the plant patents include only one
claim, and Plaintiff has named specific individuals.
In my view, the Federal Circuit decision in Hydril, which addressed the sufficiency
of Walker Process allegations on a motion to dismiss at the early stages of litigation, is more
instructive here. That case involved allegations that a defendant monopolized drill pipe
product markets by enforcing a fraudulently-obtained patent. Hydril, 474 F.3d at 1345.
The patent holder-defendant, Grant Prideco LP (“Grant”) procured a patent for a
combination of drill pipe “with specified diameters and connections that fit such pipe.” Id.
13
Exergen is not a Walker Process case, but an inequitable conduct case. Id. at
1318. Inequitable conduct is an equitable defense to patent infringement that, if proved,
bars enforcement of a patent. This judge-made doctrine evolved from a trio of Supreme
Court cases that applied the doctrine of unclean hands to dismiss patent cases involving
egregious misconduct.” Therasense v. Becton, Dickinson and Co., --- F.3d ----, 2011 WL
2028255 at *4 (Fed.Cir., May 25, 2011). Over time, the doctrine has been expanded to render
a patent unenforceable. Id. Walker Process cases, which include antitrust elements as well,
require “higher threshold showings of both materiality and intent than are required to
show inequitable conduct.” Dippin’ Dots, 476 F.3d at 1346.
26
at 1346. The plaintiff, Hydril Company LP and Hydril U.K. Ltd. (collectively, “Hydril”),
manufactured threaded connections for drill pipe and sold those connection through
licensees. In addition, Hydril sometimes sold finished drill pipe that included its threaded
connections and pipe manufactured by another company.
One of Hydril’s licensees received a threatening letter from Grant, in which Grant
asserted that the licensee’s sales of a particular threaded connection violated Grant’s patent.
Hydril brought suit against Grant alleging that it had previously entered into a shared
licensing agreement with Grant through which both parties granted licenses to each other
for the use of certain connections. Hydril alleged in its complaint that Grant violated the
terms of the parties’ licensing agreement and, relevant here, engaged in monopolization
in violation of § 2 of the Sherman Act.
Analyzing Hydril’s antitrust claim under the Walker Process line of authority, the
Federal Circuit held that Hydril sufficiently alleged fraud. In reaching that conclusion, the
court found it sufficient that Hydril alleged that Grant had fraudulently obtained its patent
by “fail[ing] to disclose to the USPTO material prior art of which [it] was aware” (which
the complaint described) and that “[t]he [p]atent as issued would not have been granted
to Grant . . .had Grant . . . not omitted from its disclosures such known information on the
prior art.” Id. at 1350. In its view, these allegations assert that “Grant . . . obtained its
patent by knowingly and deliberately concealing from the Patent Office prior art that it
27
knew would have resulted in a denial of its application,” and such allegations “go far
beyond a simple failure to disclose to the Patent Office prior art that the examiner would
have deemed material.” Id.
Notably absent from Plaintiff’s allegations here is the assertion that any of the
inventors of the Rutgers patents knew that the prior uses not included in the patent
applications constituted material prior uses that should have been disclosed to the PTO.14
The plaintiff in Hydril alleged that Grant obtained its patents by “knowingly and deliberately
concealing” material prior art “of which [it] was aware” from the PTO in order to obtain a
patent it knew it would not otherwise be entitled to procure. Id. (emphasis added). Here,
Plaintiff has merely alleged that the inventors committed a fraud by signing a declaration
that they “did not know and do not believe that” there were any prior uses or sales that
needed to be disclosed. See SAC, ¶ 7. Plaintiff’s remaining fraud allegations point to
uses/sales not included in the patent applications as “examples of the falsity of the
[inventors’] declaration[s].” See e.g., SAC, ¶ 36. While Plaintiff has given a detailed
description of the alleged prior uses/sales in the SAC, absent an allegation that Defendant
14
Moreover, the Hyland Court emphasized that it did not have a copy of the
patent application or the prosecution history before it such that it could “tell whether it is
contended that in obtaining the patent Grant . . . made affirmative misstatements to the
Patent Office about the prior art.” Id. This qualification by the court further distinguishes
Hyland from the case here where Defendant has provided copies of the patents for the
Court to review, which patents make clear that some of the alleged prior uses were
disclosed in the patent applications.
28
intentionally omitted reference to these uses/sales in order to defraud the PTO, the Court
must conclude that Plaintiff’s claim fails to allege the requisite scienter. Moreover, as
explained supra, certain references were actually disclosed in the patent application.
An example of allegations determined to have sufficiently alleged scienter in a
manner consistent with Hydril can be found in Ritz Camera & Image, LLC v. SanDisk
Corp., – F.Supp.2d --, 2011 WL 741227, *4 -*5 (N.D. Cal. 2011). In that case, the Northern
District of California found sufficient, allegations that the law firm responsible for
prosecuting the disputed patents began keeping records of prior invalidating art several
months before the patents were reexamined, yet failed to disclose its record-keeping to the
PTO. Furthermore, the challenger asserted, that if the PTO had been aware of the prior art,
it would not have survived reexamination nor would it have issued in the first instance.
Id. at *4. Similarly, the court in Correct Craft IP Holdings, LLC v. Malibu Boats, LLC, No.
09-cv-813, 2010 WL 598693, *7 (M.D. Fla. 2010), held, allegations that two inventors
“knowingly submitted false declarations of joint inventorship in order to resolve an
inventorship dispute and permit the . . . patent to claim priority to the [a previously-issued]
design patent [along with] clear, independent evidence of both [inventors’] intent to
deceive in the form of deposition and court testimony,” sufficiently alleged scienter under
Rule 9(b)).15
15
The court, however, dismissed the claim for failure to adequately allege
materiality.
29
The SAC’s allegations here read, instead, as if they assert a claim of negligent
misrepresentation. Areeda and Hovenkamp explain in their noteworthy antitrust treatise
how an inventor could negligently make a false misrepresentation, which falsity would
have barred issuance of the patent:
The “inventor” might have misread records, or “forgotten”
some experiment or result, or failed to view a particular
experiment with reasonable care, or poorly informed those
who prepared the patent application and otherwise responded
to the patent examiner.
ANTITRUST LAW at § 701h1.
Negligent misrepresentations, however, are not actionable under Walker Process.
As stated by the Federal Circuit in Eli Lilly and Co. v. Zenith Goldline Pharmaceuticals,
Inc., 471 F.3d 1369 (Fed.Cir. 2006),
[Even] [g]ross negligence . . . is insufficient to justify an
inference of intent to deceive the PTO. In a case involving an
omission of a material reference to the PTO, the record must
contain clear and convincing evidence that the applicant made
a deliberate decision to withhold a known material reference. Beyond
that, the applicant must have withheld the material subject
matter with the intent to deceive. Intent to deceive cannot be
inferred simply from the decision to withhold the reference
where the reasons given for the withholding are plausible.
Id. at 1382 (internal citations and quotation marks omitted) (emphasis added).16
Furthermore, where the alleged misrepresentation is one of omission, e.g., that an
16
While Eli Lilly is an inequitable conduct case, the Court nonetheless finds its
analysis instructive here on the question of fraudulent intent.
30
inventor failed to disclose material prior sales, as opposed to one of commission, e.g., that
an inventor made an affirmative misrepresentation about a prior sale, a plaintiff must not
only allege that the inventor knew of the prior sale but also that he knew the relevance of
that prior sale to the application. ANTITRUST LAW at § 701i. Pleading such allegations
becomes even more difficult where, like here, review of the patents reveals that some prior
uses were disclosed while others were not. In that instance, a plaintiff must allege that the
few non-disclosed prior uses were deliberately omitted and were sufficiently material on
their own to have rendered the patent application invalid.17 No such allegations are
present in the SAC.
The Federal Circuit’s recent en banc decision in Therasense v. Becton, Dickinson and
Co., --- F.3d ----, 2011 WL 2028255 (Fed.Cir., May 25, 2011), provides additional support for
my ruling.18 Just like Exergen, Therasense involved a motion to amend after a full trial on
the merits and is an inequitable conduct case, as opposed to a Walker Process, case. And,
unlike the allegations here, Therasense involved an omission of prior art as opposed to a
17
See generally Therasense, 2011 WL 2028255 at *11 (describing the materiality
requirement of inequitable conduct cases as a “but-for” causation standard). Defense
counsel made the Court aware of this recently-decided decision in a short supplemental
letter memorandum filed May 26, 2011. However, the Court has not found it necessary to
consider that supplemental memorandum or any further briefing on the issue and instead
relies upon its own reading of the case in this Opinion.
18
My discussion of Therasense focuses on the majority decision to the exclusion
of the partial concurrence and dissenting opinions. Eleven judges are represented in the
decision, with six joining the majority opinion.
31
prior public use or sale. This distinction is important for policy reasons. There is an
argument that prior art is publically available and “as accessible to the Patent Office . . . as
it is to the applicant,” and, therefore, that “it is unwise [for the antitrust laws] to impose
upon patent applicants any duty of general disclosure about the prior art.” ANTITRUST LAW
at § 701j. The same cannot be said for an applicant’s failure to disclose a prior public use
or sale because that knowledge is not publically available. See id. Nonetheless, while
Therasense is not “on all fours” with the claims and procedural posture of the case before
this Court, as explained infra, the language of Therasense is emblematic of the increasingly
strict approach the Federal Circuit is taking toward fraud-on-the-PTO allegations.
In Therasense, the owner of a patent for diabetic blood glucose test strips failed to
disclose prior art that it had previously disclosed before the European Patent Office (the
European counterpart to the U.S. PTO) in connection with a similar patent application
before that office. Id. at *4. In clarifying the standard applicable to claims of inequitable
conduct, the court took pains to express how the doctrine has been “overplayed, is
appearing in nearly every patent suit, and is cluttering up the patent system.” Id. at *8
(quoting Kimberly–Clark Corp. v. Johnson & Johnson, 745 F.2d 1437, 1454 (Fed.Cir. 1984)).
The court reiterated that
[T]he habit of charging inequitable conduct in almost every
major patent case has become an absolute plague. Reputable
lawyers seem to feel compelled to make the charge against
other reputable lawyers on the slenderest grounds, to
32
represent their client’s interests adequately, perhaps.
Id. (citations omitted). Hence, the court commented, “[w]hile honesty at the PTO is
essential, low standards for intent and materiality have inadvertently led to many
unintended consequences, among them, increased adjudication costs and complexity,
reduced likelihood of settlement, burdened courts, strained PTO resources, increased PTO
backlog, and impaired patent quality. “ Id. at *9. Accordingly, the court took the
opportunity in Therasense to “tighten[ ] the standards for finding both intent and
materiality in order to redirect a doctrine that has been overused to the detriment of the
public.” Id.
Having expressed its displeasure with how the inequitable conduct doctrine has
been overused, the court, thereafter, reaffirmed that “[b]ecause direct evidence of deceptive
intent is rare, a district court may infer intent from indirect and circumstantial evidence”
on a motion for summary judgment or after a trial. Id. at *10. However, the evidence must
strongly suggest that the “single most reasonable inference able to be drawn [is a] finding
of deceitful intent in the light of all the circumstances.” Id. (internal citations omitted).
Thus, “[w]henever evidence proffered to show either materiality or intent is susceptible of
multiple reasonable inferences, a district court clearly errs in overlooking one inference in
favor of another equally reasonable inference.” Id. Moreover, “[t]he absence of a good
faith explanation for withholding a material reference does not, by itself, prove intent to
33
deceive.” Id.
Further, while the Therasense opinion impacts the analysis of Plaintiff’s Walker
Process claim, it does not necessarily close the coffin on Plaintiff’s claim. As noted,
Therasense does not address the initial pleading stage nor does it suggest that a challenger
could never plead a claim of inequitable conduct.19 Its focus is to sharpen the inquiry in
order to weed out frivolous inequitable conduct-based claims, and to redirect the doctrine
to its equitable roots. In this connection, the court noted that “[b]ecause inequitable
conduct renders an entire patent (or even a patent family) unenforceable, as a general rule,
this doctrine should only be applied in instances where the patentee’s misconduct resulted
in the unfair benefit of receiving an unwarranted claim.” Id. at *12. The same holds true
for Walker Process claims, where the effect of a favorable ruling for the plaintiff would
strip the patent holder of its exemption from the antitrust laws. That determination should
not be made lightly; “[j]ust as it is inequitable to permit a patentee who obtained his patent
through deliberate misrepresentations or omissions of material information to enforce the
patent against others, it is also inequitable to strike down an entire patent where the
patentee committed only minor missteps or acted with minimal culpability.” Id. (citation
omitted).
19
To the contrary, the court remanded the case to the district court to determine
if the challenger could satisfy the clarified intent and materiality standard set forth in the
court’s decision. Id. at *16.
34
In sum, based on my reading of the Federal Circuit’s decision in Hydril, and
considering the recent narrowing of the inequitable conduct doctrine by Therasense, I
conclude that the SAC fails to sufficiently allege scienter. Since Plaintiff has requested
leave to further amend, the Court grants that request. I note, in this regard, that although
my ruling focuses primarily on scienter, in granting Plaintiff the opportunity to amend one
last time, Plaintiff must carefully craft its allegations to satisfy the Federal Circuit’s dictates
regarding both scienter and materiality.
b.
Remaining Antitrust Elements
In light of the foregoing analysis, the Court need not reach Defendant’s other
arguments for dismissal under Third Circuit law, such as challenges to the Plaintiff’s
definition of the relevant market. The Court notes, however, that there appear to be
additional deficiencies with the SAC and, thus, I do not anticipate Plaintiff being granted
another opportunity for leave to amend if, after its Third Amended Complaint is filed, its
allegations fail to satisfy the strictures of Third Circuit antitrust law.
Indeed, the Court queries whether Plaintiff will be able to surmount the substantial
challenges to bringing the type of antitrust claim Plaintiff seeks to bring here. One such
challenge is that of defining the relevant market. In the SAC, Plaintiff does not plead crosselasticity of demand—a critical allegation needed to define the relevant market for antitrust
purposes. A plaintiff must allege cross-elasticity of consumer demand because “the outer
35
boundaries of a relevant market are determined by reasonable interchangeability of use.”
Queen City Pizza, Inc. v. Domino's Pizza, Inc., 124 F.3d 430, 438 (3d Cir. 1997). That is,
“products in a relevant market [are] characterized by a cross-elasticity of demand, in other
words, the rise in the price of a good within a relevant product market would tend to create
a greater demand for other like goods in that market.” U.S. Horticultural Supply v. Scotts
Co., 367 Fed.Appx. 305, 309 (3d Cir. 2010) (discussing Queen City Pizza, 124 F.3d at 438
n.6).
The SAC alleges only that there is a stark price differential between the Rutgers
varieties and non-Rutgers’ varieties. Third Circuit case law holds, however, that a plaintiff
must allege “selling price, uses, and physical characteristics.” Scotts, 367 Fed.Appx. at 310
(citing Am. Bearing Co., Inc. v. Litton Indus., Inc., 729 F.2d 943, 949 (3d Cir. 1984)).
Plaintiff argues that price allegations are sufficient, citing to AD/SAT, Div. of Skylight, Inc.
v. Associated Press,181 F.3d 216 (2d Cir. 1999), but even that case acknowledges that
“significant price differences do not always indicate distinct markets.” Id. at 228.
Admittedly, it is difficult to follow SAC’s alternative relevant market theories: one being
a nationwide market limited to Rutgers’ patented varieties and the other including nonRutgers varieties but limited regionally to “wet climates.” See SAC, ¶¶ 100-20. Here,
under either definition of the relevant market, the SAC fails to adequately plead crosselasticity of demand.
36
Antitrust standing poses another formidable hurdle for Plaintiff.20 Allegations of
antitrust standing must encompass several elements, most notably, antitrust injury.
See 2660 Woodley Road Joint Venture v. ITT Sheraton Corp., 369 F.3d 732, 740-41 (3d Cir.
2004) (describing antitrust injury as “a necessary . . . condition” and “an important part of
antitrust standing”).
The Third Circuit recently summarized the doctrine of antitrust injury, flowing from
the Supreme Court’s decision in Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477
(1977), as follows:
In Brunswick Corp. [ ], the Supreme Court held that an
antitrust plaintiff must do more than show that it would have
been better off absent the violation; the plaintiff must establish
that it suffered an antitrust injury. An antitrust injury is an
“injury of the type the antitrust laws were intended to prevent
and that flows from that which makes [the] defendants' acts
unlawful.” “The injury should reflect the anticompetitive
effect either of the violation or of anticompetitive acts made
possible by the violation.” Id.; see also Atl. Richfield Co. v.
USA Petroleum Co., 495 U.S. 328, 334, 344, 110 S.Ct. 1884, 109
L.Ed.2d 333 (1990) ("[An] injury, although causally related to
an antitrust violation, nevertheless will not qualify as an
‘antitrust injury' unless it is attributable to ... a competition20
Although some courts first consider antitrust standing before reaching the
merits of an antitrust claim, the Supreme Court has made clear that the merits may be
reached first. See Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, L.L.P., 540
U.S. 398, 416 n. 5 (2004). Moreover, the antitrust standing doctrine includes prudential
elements and is, therefore, not coterminous with Article III standing, which standing must
be first confirmed before a federal court can reach the merits of a dispute. See 2660
Woodley Road Joint Venture v. ITT Sheraton Corp., 369 F.3d 732, 741 n.10 (3d Cir. 2004).
37
reducing aspect or effect of the defendant's behavior.").
West Penn Allegheny Health System, Inc. v. UPMC, 627 F.3d 85, 101 (3d. Cir. 2010). The
goal of the antitrust-injury requirement is “that the harm claimed by the plaintiff
corresponds to the rationale for finding a violation of the antitrust laws in the first place,
and it prevents losses that stem from competition from supporting suits by private
plaintiffs for ... damages.” Id. (quoting Atl. Richfield, 495 U.S. at 342). Hence “the class of
plaintiffs capable of satisfying the antitrust-injury requirement is limited to consumers and
competitors in the restrained market.” Id. at 102.
The remaining elements of the antitrust standing inquiry find their genesis in the
Supreme Court’s decision in Associated General Contractors of California, Inc. v. California
State Council of Carpenters, 459 U.S. 519 (1983). Under Associated General, courts are
directed to consider:
(1) the causal connection between the antitrust violation and
the harm to the plaintiff and the intent by the defendant to
cause that harm, with neither factor alone conferring standing;
(2) whether the plaintiff's alleged injury is of the type for which
the antitrust laws were intended to provide redress; (3) the
directness of the injury, which addressed the concerns that
liberal application of standing principles might produce
speculative claims; (4) the existence of more direct victims of
the alleged antitrust violations; and (5) the potential for
duplicative recovery or complex apportionment of damages.
2660 Woodley Road, 369 F.3d at 740-41. See also McCullough v. Zimmer, Inc., 382
Fed.Appx. 225, 228 n.2 (3d Cir. 2010).
38
Here, JAFI alleges that Rutgers engaged in anti-competitive conduct by utilizing its
exclusive licensing program. These allegations are reminiscent of those in McCullough,
where the Third Circuit held that a commission-based sales representative, who was
neither a competitor nor a consumer, failed to allege antitrust injury. 382 Fed.Appx. at 227.
According to that court, “mere intermediaries in the supply chain . . . suffer[ ] no cognizable
antitrust injury as a result of [a manufacturer’s] alleged anticompetitive conduct.” Id. The
same appears to hold true for JAFI, who merely served as an intermediary to bring
Rutgers’ plant varieties to the end-using farmers.21
There are a few cases that have found antitrust injury sufficiently alleged by a
distributor against a manufacturer. In U.S. Horticultural Supply, Inc. v. Scotts Co., No.A03-773, 2004 WL 1529185 (E.D.Pa. 2004), for example, the court held that a distributor, who
had been denied the opportunity to distribute the defendant-manufacturer’s fertilizer
products because it refused to cease selling a competitor’s fertilizer products, sufficiently
alleged antitrust injury. In that case, the plaintiff alleged that it was restrained in its ability
to compete based upon the manufacturer’s actions. Id. at *3. There, “the plaintiff’s injury
was not incidental to the harm intended for [the manufacturer’s competitor]; rather, it was
21
Although the SAC alleges that JAFI would be a competitor of Rutgers but for
Rutgers patents, the court in McCullough rejected a similar characterization, noting that
“the balance of [plaintiff’s] allegations established [it] only as [broker] who did business
with competitors and consumers . . . not as competitors or consumers themselves.” 382
Fed.Appx. at 229.
39
the very means by which the defendant sought to restrain or destroy competition.” Id. at
*4. Importantly, McCullough acknowledges this line of cases and distinguishes them from
cases where the alleged injury was not an “integral aspect” of the alleged anticompetitive
conduct. 382 Fed.Appx. at 229-30. Thus, in order to withstand a subsequent motion to
dismiss, Plaintiff would have to allege facts from which the Court could conclude that its
harms were an integral aspect of Rutgers’ conduct.
For the foregoing reasons, Defendant’s motion to dismiss is granted with respect to
the antitrust claim. Plaintiff, however, is granted one last opportunity to amend its
complaint to comply with the dictates of this opinion. While the Court has pointed out
some of the perceived deficiencies with Plaintiff’s antitrust claim, the aforesaid discussion
is not exhaustive. It is Plaintiff’s obligation to ensure that its newly amended complaint
fully satisfies Federal Circuit and Third Circuit law.
2.
RICO
Plaintiff brings both state and federal RICO claims, with the federal claim being
asserted under 18 U.S.C. § 1962(c).22 To state a federal RICO claim, a plaintiff must allege
22
Section (c) provides:
It shall be unlawful for any person employed by or associated
with any enterprise engaged in, or the activities of which affect,
interstate or foreign commerce, to conduct or participate,
directly or indirectly, in the conduct of such enterprise's affairs
through a pattern of racketeering activity or collection of
unlawful debt.
40
four elements:
(1) the existence of an enterprise affecting interstate commerce;
(2) that the defendant was employed by or associated with the
enterprise; (3) that the defendant participated, either directly
or indirectly, in the conduct or the affairs of the enterprise; and
(4) that the defendant participated through a pattern of
racketeering activity that included at least two racketeering
acts.
Annulli v. Panikkar, 200 F.3d 189, 198 (3d Cir. 1999) overruled on other grounds by Rotella
v. Wood, 528 U.S. 549 (2000); Andela v. American Ass'n For Cancer Research, 389
Fed.Appx. 137, 142 n.6 (3d Cir. 2010) (citing Annuli). As an initial matter, Plaintiff
conceded at oral argument that this claim, as plead in the SAC, is defective because, as
held by the Federal Circuit, “inequitable conduct before the PTO cannot qualify as an act
of mail fraud or wire fraud for purposes of the predicate act requirement.” University of
West Virginia Board of Trustees v. VanVoorhies, 278 F.3d 1288, 1303 (Fed. Cir. 2002)
(quoting Semiconductor Energy Laboratory Co. v. Samsung Electronics Co., 204 F.3d 1368,
1380 (Fed. Cir. 2000)). Accordingly, the SAC fails to properly allege that Defendant utilized
the mails in connection with the alleged scheme to defraud the patent office.23 After
conceding this deficiency, which candor the Court appreciates, Plaintiff requested leave to
23
The Court is aware of the alternative use of mails allegations made in
connection with the state RICO claim. See e.g., SAC, ¶ 181 (stating that exclusive license
agreements were “negotiated and consummated in writings that were transmitted either
by mail or electronically.”). However, as explained infra, the state RICO claim fails for lack
of standing.
41
amend to cure this deficiency. For the reasons explained herein, Plaintiff’s request is
denied because Plaintiff’s inability to plead RICO standing would render amendment of
its RICO claim futile.
Defendant correctly argues that Plaintiff has not alleged (and can not sufficiently
allege) RICO standing because Plaintiff does not assert the type of financial loss redressable
by RICO. “Apart from the Article III constitutional and prudential standing requirements
. . ., plaintiffs seeking recovery under RICO must satisfy additional standing criterion set
forth in section 1964(c) of the statute.” Maio v. Aetna, Inc., 221 F.3d 472, 482 (3d Cir. 2000).
According to 18 U.S.C. § 1964(c), a RICO plaintiff must show: “(1) that the plaintiff suffered
an injury to business or property; and (2) that the plaintiff’s injury was proximately caused
by the defendant's violation of 18 U.S.C. § 1962.” Id. at 483.
Defendant argues, first, that the Plaintiff fails to allege standing because its injuries
are to an intangible property interest, and such injuries are insufficient to allege an injuryin-fact. Defendant cites to Maio in support of its argument. Maio held that the reduction
in value of an intangible property interest created by contract, without more, does not
constitute RICO injury. 221 F.3d at 490. See also Anderson v. Ayling, 396 F.3d 265, 271 (3d
Cir. 2005). To show RICO harm when contractual rights are at stake, a plaintiff must allege
that the defendant failed to perform under the parties’ agreement such as by providing an
inferior product or service. Id.
42
While JAFI alleges that Rutgers misrepresented that it had valid patents to support
the large fees and royalties it charged, JAFI does not allege that Rutgers provided inferior
parent plants or support services in connection with the exclusive licensing arrangement.
As stated by the Third Circuit, “[c]ase law does indicate that a plaintiff who is fraudulently
induced to enter into a transaction does not suffer injury within the meaning of § 1964(c)
until the defendant fails to perform—that is, until it becomes clear that the plaintiff will not
get the benefit of the bargain.” Id. (citation omitted). Here, JAFI received the benefit of its
bargain though, allegedly, at an inflated price. This is not the sort of harm RICO redresses.
Accordingly, Defendant’s motion to dismiss is granted with respect to Plaintiff’s federal
RICO claim.24
24
Moreover, to the extent Plaintiff’s injury allegations are interpreted to be
consistent with those alleged in McCullough, discussed supra in connection with my
antitrust standing analysis, that case confirms that dismissal of Plaintiff’s RICO claim is
appropriate. The court reasoned:
The McCulloughs’ lack of standing to bring an antitrust action
likewise prevents them from pursuing their RICO claims. The
Supreme Court has extended much of the Associated General
analysis for antitrust standing to RICO cases. A plaintiff lacks
standing to sue under RICO where, as here, he suffers injury
that is only indirectly related to a defendant's alleged
misconduct. Accordingly, even if the McCulloughs had
properly alleged the essential elements of a RICO claim, they
would lack standing to sue under RICO for the same reasons
they lack standing to sue under the [antitrust laws].
382 Fed.Appx. at 231 n.7 (internal citations omitted).
43
Because the same analysis applies to Plaintiff’s state RICO claim, that claim is also
dismissed. See State v. Ball, 268 N.J.Super. 72, 98 (App.Div.1993), aff'd, 141 N.J. 142 (1995).
(stating that New Jersey’s RICO statute “borrows its structure, purpose and remedies from
Federal RICO” and heeds federal case law in construing its statute); Newman-Steele v.
Mayor and Council of Borough of Tinton Falls, Docket No. L-1444-05, 2010 WL 3257935,
*4 n.3 (N.J. App. Div. Aug. 17, 2010) (noting that state RICO statute, like its federal
counterpart, also requires a plaintiff to allege “an injury to its business or property”).25
3.
Declaratory Judgment Act
In the Declaratory Judgment Act claim, Plaintiff seeks a ruling on the validity of
Defendant’s asparagus variety patents. While Plaintiff contends that its factual allegations
present a justiciable controversy, Defendant argues that there is no actual case or
controversy presented. Citing to MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007),
and Federal Circuit decisions interpreting that decision, Defendant argues, specifically, that
a justiciable controversy exists only “where the patentee takes a position . . . that puts the
25
Because New Jersey does not treat unreported decisions as precedential, any
unreported state decision cited in this opinion is cited as persuasive authority. The Court,
further, acknowledges that New Jersey has “historically taken a much more liberal
approach on the issue of standing than have the federal cases.” In re Six Month Extension
of N.J.A.C. 5:91-1 et seq., 372 N.J.Super. 61, 86 (App. Div. 2004) (quoting Crescent Park
Tenants Ass'n v. Realty Equities Corp. of N.Y., 58 N.J. 98, 101)). Nonetheless, New Jersey
courts apply federal decisional law in interpreting the RICO standing requirement.
Interchange State Bank v. Veglia, 286 N.J.Super. 164, 180 (App. Div. 1995) (discussing U.S.
Supreme Court precedent).
44
declaratory judgment plaintiff in the position of either pursuing arguably illegal behavior
or abandoning that which he claims a right to do.” Def. Open. Br. at 27.
The Declaratory Judgment Act provides:
In a case of actual controversy within its jurisdiction . . . any
court of the United States, upon the filing of an appropriate
pleading, may declare the rights and other legal relations of
any interested party seeking such declaration, whether or not
further relief is or could be sought.
28 U.S.C. § 2201. The Act itself does not provide an independent basis for jurisdiction, but
“as long as the suit meets the case or controversy requirement of Article III, a district court
may have jurisdiction over a declaratory judgment action.”26 Prasco, LLC v. Medicis
Pharmaceutical Corp., 537 F.3d 1329, 1335 (Fed Cir. 2008). And, “[s]ubject matter
jurisdiction over actions for a declaratory judgment of patent non-infringement comes from
28 U.S.C. § 1338.” Id. at 1335 n.3. The burden of establishing jurisdiction falls on the
plaintiff. Benitec Australia, Ltd. v. Nucleonics, Inc., 495 F.3d 1340, 1344 (Fed. Cir. 2007).
MedImmune “reaffirmed that the proper test for subject matter jurisdiction in
declaratory judgment actions is ‘whether the facts alleged, under all the circumstances,
show that there is a substantial controversy, between the parties having adverse legal
interests, of sufficient immediacy and reality to warrant the issuance of a declaratory
26
It is clear that district courts have original jurisdiction over civil actions
arising under any federal law relating to patents and plant variety protection. 28 U.S.C. §
1338(a).
45
judgment.” Prasco, 537 F.3d at 1335. There is no bright-line rule for determining whether
jurisdiction exists. Rather, courts must engage in an analysis “calibrated to the particular
facts of each case.” Id. at 1336 (citation omitted).
Although there is no bright-line jurisdictional test, Federal Circuit decisions
interpreting MedImmune have held that “the existence of a patent is not sufficient to
establish declaratory judgment jurisdiction.” Prasco, 537 F.3d at 1338. Even where there
is an adversely held patent, a potential competitor is free to market its product and,
therefore, faces no imminent threat of injury. Id. Where, however, the patent holder has
asserted its rights against the potential competitor, the Federal Circuit has found that
imminent harm has been alleged and a definite and concrete dispute exists.
See
Hewlett-Packard Co. v. Acceleron LLC, 587 F.3d 1358, 1364 (Fed.Cir. 2009).
Here, Plaintiff conceded at oral argument that the SAC does not sufficiently allege
that Rutgers attempted to enforce its patents against JAFI. To the extent the SAC makes
such an allegation, it does so only conclusorily. Moreover, while the SAC alleges that
Rutgers “has no right to prevent JAFI from asexually reproducing a plant that is the subject
of an invalid plant patent,” id. at ¶ 193, “the tenet that a court must accept as true all of the
allegations contained in a complaint is inapplicable to legal conclusions.” Iqbal, 129 S.Ct.
at 1949. Plaintiff asserted at oral argument that, if granted leave to amend, it would add
a more specific allegation that Rutgers attempted to enforce its patents as late as August
46
2010. However, JAFI did not provide any further detail as to the exact date of the alleged
attempt to enforce, nor detail as to the substance of the proposed amended allegations.
There remain substantial questions whether JAFI can sufficiently plead a viable DJA
claim. To the extent that JAFI bases its assertion-of-patent-rights allegation on Rutgers’
attempt to retrieve the parent plants, the license agreement language suggests that Rutgers
could seek recovery of those plants through the bailment relationship. Bailment (or
consignment) relationships have long been used in agricultural contracts to define growing
and selling relationships. See Neil D. Hamilton, Why Own the Farm If You Can Own the
Farmer (and the Crop?): Contract Production and Intellectual Property Protection of Grain
Crops, 73 Neb. L. Rev. 48, 70 (1994); cf. Wilson v. Burch Farms, Inc., 176 N.C.App. 629
(2006) (provision of sweet potatoes to another party for sale to third parties constituted a
bailment/consignment).27 Moreover, were JAFI to rely on Rutgers’ attempt to collect past27
A consignment exists where an consignor leaves his property with a
consignee who is “substantially engaged in selling the goods of others,” and will work to
sell the goods on behalf of the consignor. After selling the goods, the consignee must
account to the consignor with the proceeds from the sale. See Nasco Equipment Co. v.
Mason, 291 N.C. 145, 154, 229 S.E.2d 278, 285 (1976). While the consignee may or may not
receive the specific property of the consignment back, depending on if it is sold, this Court
has recognized that a consignment creates a bailment between the parties. See Strang v.
Hollowell, 97 N.C.App. 316, 387 S.E.2d 664 (1990); see also, 642 8 C.J.S. Bailments § 11, at
384 (2005) (“The rule that where a person receiving property is not bound to return the
identical thing received, but may account therefor in money or other property, or thing of
value, the transaction is a sale, is not applicable to bailments or consignments for sale.... A
consignment is a type of bailment where the goods are entrusted for sale....”); BLACK 'S LAW
DICTIONARY 152 (8th ed.2004) (definition of bailment for sale is “[a] bailment in which the
bailee agrees to sell the goods on behalf of the bailor; a consignment.”). Thus, where a
47
due royalties, such an allegation may be insufficient to suggest that Rutgers relied on its
patent rights to collect royalties after the expiration of a patent. While Rutgers was entitled
to grant a patent-based license for the use of its patented plants, it is not clear from the face
of the license agreement that Rutgers relied upon its patent rights, as opposed to merely
referring to them, in granting JAFI the license to sell the hybrid seeds.28 However, a
demand for royalty payments based on a patent can create a justiciable controversy as to
the validity of a patent. Prasco, 537 F.3d at 1339. In short, in order for Plaintiff to properly
state a DJA claim, an amended complaint must allege more than that Rutgers attempted
to retrieve its plants; it must allege that Rutgers otherwise enforced or threatened to enforce
consignment relationship may have existed between plaintiff and defendant, the
relationship was also that of a bailment.
Moreover, New Jersey law also treats consignments as a type of bailment
(bailment for sale). However, New Jersey law suggests that such agreements may fall
within, and should be interpreted under, the UCC. See Charles Bloom & Co. v. Echo
Jewelers, 279 N.J.Super. 372, 382 (App. Div. 1995) (stating in case involving consignment
of diamonds for sale to third parties after being placed into setting that “[w]hile
consignment of the diamonds to Echo Jewelers might previously have been considered a
bailment, and indeed is a type of bailment, the rights of contracting parties have since been
refined and explained in the Uniform Commercial Code, N.J.S.A. 12A:1-101 et seq.”)
(internal citations omitted).
28
“In many cases, licensed uses or licensed subject matter is defined by
reference to products that may embody intellectual property rights, but the product, not
the rights, defines the scope of the license.” Raymond T. Nimmer, et al., MODERN
LICENSING LAW § 6:13 (2010). So, too, may a license refer to patent rights without actually
relying upon those rights.
48
its patent rights against JAFI.29 Plaintiff is, therefore, granted leave to amend if it can do so
consistent with this dictate.
B.
Motion to Amend
In light of the Court’s rulings, the Court denies Plaintiff’s motion to amend and file
its proposed SAC and dismisses the claims in the Amended Complaint. However, the
Court grants Plaintiff leave to file a Third Amended Complaint within twenty (20) days
regarding the antitrust and DJA claims, and that is otherwise consistent with this Opinion.
III.
CONCLUSION
For the foregoing reasons, the Court grants Defendant’s motion to dismiss with
respect to the federal and state RICO claims with prejudice. With respect to the antitrust
and DJA claims, those claims are dismissed without prejudice. Plaintiff’s motion to amend
to file its proposed Second Amended Complaint is denied; however, Plaintiff is granted
leave to file a Third Amended Complaint within 20 days of the date of the Order
accompanying this Opinion. An appropriate Order will follow.
29
The Court reiterates that any allegation that Rutgers attempted to enforce its
patents must include specific facts to support that assertion, and not merely conclusory
statements. For example, the SAC states in paragraph 196 that “Rutgers continues to
assert: (a) that JAFI must pay royalties if JAFI produces seed from plants . . .; (b) that JAFI
cannot asexually reproduce such plants ....” This sort of allegation does not contain
sufficient factual matter under Twombly because it does not specify how or when Rutgers
asserted patent-based rights against JAFI.
49
Dated: May 31, 2011
/s/ Freda Wolfson
Honorable Freda L. Wolfson
United States District Judge
50
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