SAN FRANCISCO (CN) — A federal judge expressed frustration Thursday when attorneys for the University of California, Davis, and two of its former researchers turned what he called clear-cut issues over California’s strawberry industry into a three-hour slugfest, though he indicated he would rule for the university.
Research scientists Douglas Shaw and Kirk Larson ran UC-Davis’s strawberry breeding program for 22 years, until they retired in 2014 and formed California Berry Cultivars (CBC) to sell their strawberries commercially.
Their company sued the Regents of the University of California in Alameda County Court last May for access to the strawberry varieties they invented at UC-Davis, and accused the school of neglecting the program, which they say is vital to the state’s strawberry growers.
U.S. District Judge Vince Chhabria called it an “obvious breach of contract” that Shaw and Larson had refused to assign their intellectual property rights in the strawberry plants when they retired, and that they decided to assign them to CBC. He declared that CBC had infringed on the university’s plant patents.
Shaw and Larson developed more than a dozen strawberry varieties at UC-Davis that are grown throughout the world. In 2004, they released the Albion variety, known for its sweetness and high yield. It can be grown as many as nine months out of the year and is the most widely planted strawberry in California today.
CBC, with Shaw and Larson at the helm, expected to continue developing the UC-Davis varieties using the same germplasm — stock strains of valuable genes — Shaw and Larson had developed at UC-Davis, and says the school denied the company access.
So Shaw and Larson assigned their rights in the plants to CBC in February 2016.
However, they had signed employment and patent agreements when they went to work for UC-Davis, agreeing to disclose to the university any plants they developed there that had the potential to be patented, and to assign their rights to the university in any of the plants that it deemed worthy of patenting, according to the UC Regents’ cross-motion for summary judgment.
UC-Davis says that based on those contracts, it owns the varieties Shaw and Larson invented, and that the men knew it. So, the school says, they concocted a scheme while still employees to use its plants to develop new varieties and sell them through CBC, in competition with the university.
The university licenses patented varieties to certain nurseries, which reproduce them for sale to strawberry growers. But it does not license them to private breeders.
Its top-ranked agriculture school has developed 56 varieties of strawberries since 1945, creating strains that are bigger, taste better, stay fresh longer and yield six times more per acre. More than 80 percent of the strawberries grown in North America and more than 60 percent worldwide were developed at UC-Davis. California strawberries rake in $2.5 billion a year, and are the state’s fifth most-valuable crop.
Chhabria seemed to side with UC-Davis at the Thursday hearing, where the parties argued their dueling motions for summary judgment.
Calling Shaw and Larson “very sketchy,” Chhabria laid out the remedy under California law for their contract breach with the university: an order directing CBC to assign its rights to UC-Davis, the same rights that Shaw and Larson were required to assign to it when they retired in 2014.
He indicated that he would deny CBC’s motion for summary judgment: that it did not infringe on UC Davis’s patents by importing strawberry seeds from Spain derived from the school’s patented plants.
According to UC-Davis, in 2010 Shaw and Larson began sending certain varieties from the university’s strawberry program to Spanish company Semillas – one of the founders of CBC and a contractor for the university’s program – for breeding.
Under agreements between UC-Davis and Semillas, the plants can be tested in Spain before going to market, but cannot be used to breed new ones. However, UC-Davis says Semillas harvested the seeds of the mother plants in Spain, and that CBC sent the seeds to the United States for use.
UC-Davis contends that Shaw and Larsen bred the seeds outside the United States because they knew they couldn’t do so in the country without violating U.S. patent laws, and “hoped this plan would evade those laws.”
Chhabria’s proposed breach of contract remedy didn’t sit well with the university’s attorneys Thursday, who said that federal law should determine the remedy, not state law. Instead of having CBC assign its rights to UC-Davis, the school wants Shaw and Larson to void their assignments to CBC and assign them to it themselves.
That did not appeal to Chhabria.
“Why do you seem to be fighting against me when I say … the remedy for that breach of contract is that CBC must assign the rights to the university? Doesn’t that get you exactly the same thing?” Chhabria asked UC-Davis attorney Rachel Krevans.
“It gets us a lot of the same thing,” Krevans replied. But she said having CBC assign the rights in 2017, rather than Shaw and Larsen assign them retroactively to 2014, would create a three-year period during which CBC was the seeming owner of the rights.
“We have a very simple path to remedy we are seeking,” Krevans told the judge. “I think yours is a more complicated path.”
“This discussion is so abstract. I don’t understand what the difference is in practical terms,” the judge said. He said the question of retroactivity would wait until after trial, and signaled that he would not decide the remedy until that time.
Chhabria then asked CBC attorney Jennifer Swize to explain how the company had avoided infringing on UC-Davis’ patents when it imported strawberry seeds from Spain derived from the university’s plants.
CBC contends that importing the seeds is not infringement because seeds are not covered under the U.S. Plant Patent Act.
“Seeds are not the same genetic material [as a strawberry]. They are not a plant part,” Swize said.
“How can seeds not be a plant part if strawberries are a plant part?” Chhabria shot back. “Are seeds part of the strawberry?”
Saying, “It depends,” Swize told the judge that a strawberry carries the same genetic material as a patented parent plant, though a seed does not, so it takes years to determine whether a plant derived from that seed can be patented.
Chhabria responded: “The question is whether seeds are part of the protected plant. Seeds can be very valuable. You talk about how commercially valuable the strawberries are and you seem to be trying to make the argument how seeds are not commercially valuable. We wouldn’t be here if the seeds were not commercially valuable. Your clients wouldn’t be importing them if they weren’t commercially valuable.
“Importing strawberries from that plant would be infringing,” Chhabria concluded. “So your argument about non-infringing has nothing to do with plants copied without university permission. Your argument has nothing.”
Trial is set for May 15.
Krevans is with Morrison & Foerster in San Francisco, Swize with Jones Day in Washington, D.C.