Delano v. California Table Grape Commission and US Dep't of Agriculture (USDA) (Fed. Cir. 2011)
[This summary has been temporally edited while I think about this decision a bit more - DC]
The USDA is title holder of the three patents being litigated here. Each patent relates to a separate variety of grape: Sweet Scarlet (U.S. Patent No. PP15,891), Scarlet Royal (U.S. Patent No. PP16,229), and Autumn King (U.S. Patent No. PP16,284). The California Table Grape Commission is a branch of the California state government that operates with the mission of promoting the California table grape industry and is funded by a tax on grape production. The USDA granted the Grape Commission an exclusive license to practice and sublicense the varieties. The Grape Commission then began selling plants, but only to nurseries that contractually agreed to (1) pay ongoing royalties and (2) not propagate the plants.
In 2007, a collection of nursery-licensees filed a declaratory judgment lawsuit challenging the validity of the patents and arguing that the Grape Commission's licensing activities were illegal under antitrust law.
The DJ plaintiffs quickly ran into trouble based on federal sovereign immunity claims: The USDA claimed sovereign immunity from suit in the district court. The district court dismissed the lawsuit after concluded that the USDA was immune and (as patent holder) was also an indispensable party.
On appeal, the Federal Circuit agreed that the USDA was an indispensable party but held that the agency's sovereign immunity to a DJ invalidity and unenforceability action was waived by the Administrative Procedures Act.
Patent-Holder as Necessary Party: Normally, a patent holder is a necessary and indispensable party to a declaratory judgment lawsuit arguing that patents are invalid or unenforceable. There is, however, a narrow exception that occurs when the patent holder has transferred “all substantial rights” to an exclusive licensee. Here, the appellate court found that the USDA retained substantial rights because the exclusive license did not give the Grape Commission unilateral rights to enforce the patents and the USDA retained a right to practice the invention.
US Government is Not Immune from a Declaratory Judgment Patent Invalidity Lawsuit in Federal Court: As a general background rule, US government agencies are immune from suit unless that immunity has been waived. Here, the plaintiffs found such a waiver in Section 10(a) of the Administrative Procedures Act as codified in 5 U.S.C. § 702 (“Right of Review”). That section indicates that “a person suffering legal wrong because of agency action … is entitled to judicial review thereof.” The statute particularly authorizes a lawsuit to remedy the wrong in Federal Courts — so long as the remedy being sought is something “other than money damages.” As interpreted by the Federal Circuit, this provision (as amended in 1976) “consists of a broad waiver of sovereign immunity for actions seeking relief other than money damages against federal agencies, officers, or employees.”
Here, because the DJ plaintiffs are only seeking non-monetary equitable relief — a holding that the PVPA patents are invalid and unenforceable – their claim is wholly within the APA Section 10(a) waiver and wholly outside the jurisdiction of the Court of Federal Claims.
On remand, the government will now be forced to defend the validity of its patent.
Note – Based upon assignment records, a US Government entity holds title to about 0.4% of patents issued 2005–2011.