Delano Farms Company et al v. The California Table Grape Commission, No. 1:2007cv01610 - Document 84 (E.D. Cal. 2009)

Court Description: MEMORANDUM DECISION AND ORDER granting in part and denying in part 66 68 Federal Defendants' and Commission's Motions to Dismiss. Plaintiff shall file an amended complaint within twenty (20) days. Signed by Judge Oliver W. Wanger on 10/27/09. (Coffman, Lisa)

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1 2 3 UNITED STATES DISTRICT CO URT 4 FOR THE EASTER N DISTRICT OF C ALIFORNIA 5 6 7 DELANO F ARMS C OMPANY , FOU R STAR FRU IT, IN C., an d GERAWAN FARMIN G, INC ., 8 MEMORAND UM DEC ISION AND ORDER RE FEDER AL DEFENDANTS (DOC. 69) AND CALIFO RNIA TABLE GR APE CO MMISSION S (DOC. 67 ) MOTI ONS TO DISMISS. Plai ntiff s, 9 10 1:07-CV- 1610 OWW SMS v. 15 THE CALI FORNIA TABLE GRAP E COMMISSI ON, UN ITED S TATES OF AMERICA, UNITE D STAT ES DEPARTME NT OF AGRICU LTURE , TOM VILS ACK, S ECRETA RY OF THE UNIT ED STA TES DE PARTM ENT OF AGRIC ULGURE (IN H IS OFFICIAL CAPAC ITY), 16 Def endan ts. 11 12 13 14 17 18 19 20 21 22 23 24 I. INTRODUCTION The Unit ed Sta tes, et al., ( Federal Defendants ) and the Cali fornia Table Grap e Commission ( Commissio n ), separate ly mov e to d ismis s Plaintiffs , Delano Fa rms C ompany ( Delano ), Fo ur Sta r Fru it, Inc. ( Four Star ), and G erawan Farming, Inc. ( Gera wan ) , entire First Amended C ompla int 25 ( FAC ) pursua nt to Feder al Rules of Civil Proced ure 1 2(b)(1) 26 and 12(b )(6), and 19 . 27 court la cks su bject matte r jurisdiction over Plai ntiff s Fe deral Defendants argue ( 1) th at the 28 1 1 claims b ecause the f edera l government has not wai ved i ts 2 sovereig n immu nity; and, (2) alternatively, that Plain tiffs 3 have not state d vali d cla ims against Federal Defe ndant s under 4 5 6 7 the Admi nistra tive P roced ure Act ( AP A ). Doc. 69. The Commissi on s m otion, whic h substantially overlaps that of the Federal Defend ants, argue s (1) the United States is a 8 necessar y and indisp ensab le party that is immune from suit; 9 and (2) Plaint iffs remai ning claims fail as a ma tter of l aw. 10 Doc. 67. 11 Defendan ts re plies, Docs . 72 & 73, the Commissio n s n otice 12 13 14 15 16 Plai ntiffs oppo se both motions. of suppl ementa l auth ority , Doc. 76, as well as Pl ainti ffs notice o f supp lement al au thority, Doc. 79, and re lated response s and replie s, Do cs. 80-83, h ave al so been consider ed. 17 18 19 20 21 22 Docs. 70 & 71. II. FACTUAL BACKGR OUND A. Parties. Plaintif f Dela no is a cor poration duly organized and existing under the l aws o f the State of Washingto n, wi th its principa l plac e of b usine ss in Hoquiam, Washingto n. F AC ¶4. 23 Plaintif f Four Star is a corporation duly organiz ed an d 24 existing under the l aws o f the State of Californi a, wi th its 25 principa l plac e of b usine ss in Delano, California . 26 Plaintif f Gera wan is a co rporation duly organized and 27 28 FA C ¶5. existing under the l aws of the State of Cal ifornia, wi th its 2 1 principa l plac e of b usine ss in Sanger, California . 2 Plaintif fs are engag ed in the business of growing , har vesting 3 and sell ing ta ble gr apes. 4 5 6 7 FA C ¶6. FAC ¶7. The Comm ission is a corpo ration of the State of Californ ia, es tablished by the 1967 Ketchum Act. Agric. C ode §§ 65550 -6555 1. Cal. Food & The Commission s principa l place 8 of busin ess is Fresn o, Ca lifornia. 9 purpose of the Commi ssion is to expand and mainta in th e 10 market f or Cal iforni a tab le grapes for the benefi t of the 11 State of Calif ornia as we ll as the State s more t han f ive 12 13 14 15 16 hundred table grape growe rs. FAC ¶8. The state d The Commission is f unded primaril y by a ssessm ents levied on each shipment of Californ ia tab le gra pes. fund the Commi ssion. No general revenues of the S tate FAC ¶9. The Unit ed Sta tes De partm ent of Agriculture ( USD A ), of 17 18 which To m Vils ack is the Secretary, is an Executi ve Ag ency of 19 the Unit ed Sta tes. 20 agricult ural r esearc h pro grams to develop new var ietie s of 21 22 23 24 25 26 27 28 Among other things, USDA spon sors agricult ural c ommodi ties, and sometimes patents t hose varietie s and/ or iss ues l icenses to utilize those vari eties. See FAC ¶¶ 15- 16. B. USDA Res earch Progra m. Californ ia tab le gra pe gr owers and shippers have funde d a USDA r esearc h prog ram t o develop new table grape var ieties 3 1 through assess ment i mpose d by the Commission on e ach b ox of 2 table gr apes s hipped in C alifornia. 3 the USDA provi ded th e new varieties under develop ment to area 4 5 6 7 FAC ¶15. Pr ior t o 2002, growers for ev aluati on of growing potential and c ommer cial marketab ility. Id. Once new varieties app eared comme rcially viable, the US DA re lease d the variety, and dist ribut ed 8 plant ma terial of th e var iety to area growers fre e of charge. 9 Id. 10 growers for th e new varie ties because Calif ornia growe rs and 11 shippers alrea dy pai d for a large portion of the devel opment. 12 It is all eged t hat USDA did not charge California Id. 13 14 15 C. Patentin g of G rape V ariet ies. In the l ate 19 90s, a t the urging of the Commissio n, th e 16 USDA agr eed to begin pate nting new table grape va rieti es. 17 FAC ¶16. 18 19 20 21 The first three varieties the Commissio n ref erred to the U SDA fo r pate nting , Sweet Scarlet, Autumn King, and Scarlet Royal, had b een u nder development for yea rs. It is alleged that a t leas t one of the varieties, Sweet Scar let, 22 had been distr ibuted to g rowers for wide-scale commerc ial 23 evaluati on and sale. 24 Sweet Sc arlet, Autum n Kin g, and Scarlet Royal, we re fi led 25 with the Unite d Stat es Pa tent and Trademark Offic e ( U SPTO ) 26 27 28 FAC ¶¶ 19, 59. Patent appl icati ons for on Febru ary 20 , 2003 (App lica tion No. 371,512), Septem ber 28, 2004 (Ap plicat ion No . 953 ,387), and September 28, 2004 , 4 1 (Applica tion N o. 953 ,124) , respectively. 2 on July 26, 20 05 (Pa tent No. PP15,891 ( 891 Paten t )), 3 February 21, 2 006 (P atent No. PP16,284 ( 284 Patent )), and 4 January 31, 20 06 (Pa tent No. PP16,229 ( 229 Paten t )). 5 The USDA agree d to g ive t he Commission an exclusi ve 6 7 Patents were issued license to all newly Pate nted Varieties, and to a llow the 8 Commissi on to charge roya lties when growers wishe d to obtain 9 the new variet ies. 10 Commissi on exc lusive enfo rcement powers over its new p atent 11 rights. 12 13 14 15 Id. The USDA also agreed to give the FAC ¶ 16. The Comm ission then selec ted three nurseries to exclusiv ely se ll all new patented table grape var ietie s ( Licens ed Nur series ). FAC ¶17. Unlike the prior fr ee 16 distribu tion, the nu rseri es would be allowed to s ell n ew 17 varietie s to g rowers . 18 between the Co mmissi on an d the USDA, the Commissi on ch arges 19 nurserie s who distri bute Patented Varieties a $50 00.00 20 particip ation fee pe r pat ented variety and an add ition al 21 22 23 24 Id. In accordance with the agr eement $1.00 pe r prod uction unit royalty. FAC ¶45. The Lice nsed Nurserie s are respon sible for paying the royalty, but the Licensed Nurse ries a re al lowed to pass the royalt y amo unt on 25 to the p urchas ing gr owers , wh ich they do and have done . 26 ¶17. 27 28 When a g rower seeks to ob tain a new variety from a 5 FAC 1 nursery, it is requi red t o enter into a Domestic Grow er 2 License Agreem ent ( Lice nse Agreement ) with the Comm ission. 3 Under th e term s of t he Li cense Agreement, t he grower c annot 4 5 6 7 8 9 propagat e the variet y bey ond the plant purchased. FAC ¶18. If the C ommiss ion be lieve s the grower has violate d the License Agreem ent, i t can void the License Agreem ent a nd order th at all purch ased plants be destroyed. Id. Recogniz ing th at at least one of the new varieties 10 identifi ed for paten ting (and perhaps all three) had b een 11 previous ly in public use and/or sold commercially , the 12 13 14 15 Commissi on cre ated a so-calle d amnesty program, alle gedly designed to hi de the fact that valid patent s coul d not be obtained , and to ex tort funds from growers alre ady i n 16 possessi on of the va rieti es. 17 program, the C ommiss ion w idely disseminated notic es to 18 growers and sh ippers stat ing that they were in vi olati on of 19 the law if the y poss essed the varieties int ended for 20 patentin g. 21 22 23 24 25 FAC ¶20. Under the amne sty Th e noti ces a lso offered confidential settlem ents to any grow ers who, within a narrow wind ow, agreed t o lice nse th e var ieties, pay a penalty to th e Commissi on, an d acce pt th e Commission s license r estri ctions on furth er pro pagati on. Id. 26 Under it s so-c alled amne sty program, a grower with 27 Sweet Sc arlet could keep the vines reproduced, so long as the 28 6 1 grower ( i) adm itted to po ssession prior to July 2 004, (ii) 2 paid $2 per vi ne rep roduc ed, (iii) paid $2 per box of Sweet 3 Scarlet grapes previ ously shipped, and (iv) agree d to no 4 5 6 7 further propag ation of th e Sweet Scarlet variety from the plants p ossess ed. F AC ¶ 65. In July 2004, the C ommis sion sent ano ther n otice to al l California table grape grow ers and 8 shippers exten ding t he a mnesty time period for one m onth, 9 and exte nding the a mnest y to include Autumn Kin g and 10 Scarlet Royal variet ies. 11 12 13 14 15 FAC ¶66. In both notice s, the Comm ission threatened to sue growers who di d not come forward, and to seek money da mage s and inju nction s. Ye t, it is alleged that at the time of the second n otice, the U SDA p atent application on Swe et Sc arlet 16 not only remai ned un -issu ed, but had been r ejected by the 17 USPTO. 18 on eithe r Autu mn Kin g or Scar let Roya l. 19 patent r ights, and t he Co mmission lacked any enfo rceme nt 20 rights. Moreov er, th e USD A had not even applied f or a patent The USDA had no FAC ¶ ¶ 66-6 7. 21 22 23 D. Prior Us e. Plaintif fs all ege th at US DA knew that plant mater ial f or 24 varietie s unde r deve lopme nt frequently entered th e pub lic 25 domain p rior t o rele ase a nd/or patenting. 26 27 28 See FA C ¶50 -56. The vari eties underw ent s everal growing cycles be fore 2002, at which time the Co mmiss ion recommended the rele ase o f Sweet 7 1 Scarlet. 2 displaye d and discus sed t he varieties at public m eetin gs and 3 kept two fully devel oped varieties at an unsecure d, an d 4 5 6 More over, prior to seeking patent prote ction , USDA easily a ccessi ble fa cilit y at California State Un ivers ity at Fresno. FAC ¶ 56. In early 2002, more than two years before any pat ent 7 8 applicat ions f or Aut umn K ing or Scarlet Roy al, a growe r in 9 Delano, J&J Fa rms, o wned by Jim and Jack Ludy, ob taine d 10 sticks of th e new varie ties. 11 some of the pl ant ma teria l to their cousin, Lawre nce L udy, 12 13 14 15 This grower in tu rn pr ovided who owne d and operat ed an adjacent farm. With these s ticks, both J&J Farms and L awren ce Ludy produced Autumn King and Scarlet Royal on the ir fa rms in 2002. FAC ¶¶ 61- 62. In 16 addition , in r espons e to the amnesty program, sev entee n 17 growers confir med po ssess ion of the varieties and agre ed to 18 pay the penalt ies de mande d by the Commission. 19 20 21 Plaintif fs mai ntain that under patent law, public use or sale of an inv ention more than one year prior to filin g a patent a pplica tion b ars p atentability. FAC ¶64. 22 23 24 25 26 27 28 E. Plaintif fs Li cense Agree ments Plaintif fs are in possession of the Autumn King, Sweet Scarlet and Sc arlet Royal varieties, which they p urcha sed through Licens ed Nur serie s. FAC ¶35. Plaintiffs paid the royaltie s impo sed by the Commission on each purch ased plant. 8 1 Id. 2 the Comm ission for e ach o f the Patented Varieties . 3 36-37. 4 5 6 7 Pla intiff s have ente red into a License Agreement with FA C ¶¶ In con sideration for this limited, nonexclusiv e license, Plain tiffs have paid a license fee to a Licen sed Nursery. Id. Under the term s of this agre ement, Plai ntiffs have a l imited , none xclus ive license to grow the Paten ted 8 Varietie s and sell t he fr uit produced. 9 cannot p ropaga te the grap evines or distribute the vine s to 10 third pa rties. 11 destroy all Pa tented Vari etie s plant mater ial upon 12 Id. Id. Plai ntiff s Further, Plaintiffs ar e obligated to terminat ion of the a greem ent. Id. 13 14 F. Original Compl aint a nd Fe bruary 20, 2009 Decision . 15 Plaintif fs or iginal comp laint named only the Com missi on 16 as a def endant , alle ging (at claims 1-3) th e patents for all 17 three va rietie s shou ld be dec lared invalid, Doc. 1 at ¶¶ 66- 18 19 20 21 86; (at claim 4) the pate nt for the Sweet Scarlet vari ety should b e decl ared u nenfo rceable because neither the Commissi on nor USDA discl osed to the USPTO that t he th ree 22 varietie s had been i n pub lic use prior to Februar y 2002, id. 23 at ¶¶ 87 -85; ( at cla im 5) the Commission violated the Sherman 24 and Clay ton Ac ts by illeg ally monopolizing the ma rket for 25 table gr apes, id. at ¶¶ 9 6-103; (at claim 6 ) the Commi ssion 26 27 28 misused the pa tents in v iolation of antitrust la ws an d in a manner t hat at tempts to e xtend [the] patents beyo nd th eir 9 1 lawful s cope, id. at ¶¶ 1 04-109; (at claim 7) unfair 2 competit ion, i d. at ¶¶ 11 0-114; (at claim 8 ) unju st 3 enrichme nt, id . at ¶ ¶ 115 -117 ; and (at claim 9) constr uctive 4 5 6 7 8 trust, i d. at ¶¶ 118 -121. Th e Commis sion m oved to dis miss, arguing the Un ited S tates is a necessary and indi spens able party th at is immune from suit and that all of th e cla ims in the case were withou t leg al foundation. As to th e issu e of j oinde r, the February 20, 2009 9 10 Decision empha sized that because Plaintiffs substantive 11 causes o f acti on sou ght t o invalidate patents hel d by the 12 13 14 15 United S tates, the U nited States is a necessary p arty under Federal Rule o f Civi l Pro cedure Rule 19(a). 34. Doc. 42 a t 22- Onc e it h as bee n det ermined that an absent party to the 16 suit is neces sary under Rule 19(a), the inquiry is w hether 17 that par ty, th e Unit ed St ates, can be joined in t he ac tion. 18 Dawavend ewa v. Salt River Project Agr. Imp. and P ower Dist., 19 276 F.3d 1150, 1159 (9th Cir. 2002). 20 sovereig n immu nity s hield s the Federal government and its 21 22 23 24 agencies from suit. (1994). Absent a w aiver, F.D .I.C . v. Meyer, 510 U.S. 471, 475 A wai ver of sove reign immunity must be u nequi vocally expresse d. De partme nt of Arm y v. Blue Fox, Inc., 525 U.S. 25 255, 261 (1999 ). 26 this fra mework to th e cla ims in the original comp laint : 27 28 Th e Feb ruar y 20, 2009 Decision then applied A declar atory judgme nt seeking invalidity of a U. S.owned pa tent squarel y implicates sovereign immuni ty. Further, property ow ners are generally necessary 10 1 2 parties to actions t hat could affect their proper ty interest s adversely. The United States, as owner of the Pate nted Varieti es, is no exception.... 3 *** 4 18 Under th e only paten t-rel ated waiver of sov ereign immunity , 28 U.S.C. § 149 8 pe rmits private parties to bring patent infr ingement suits in United Stat es Federal Claims Court to seek money damages only. 28 U.S.C. § 1498. In waivi ng its own immunity from patent i nfringement actions in 28 U.S.C. § 1498(a) (1994) e d. and Supp. III), the United States did not cons ent to trebl e damages nor injunctive reli ef, and perm itted reason able attorney s fees in a nar row class of specified i nstances. Florida Prep aid Postseco ndary Educ. Expense Bd. v. College Sav. Bank, 52 7 U.S. 627, 648, n.11 (1999). This suit must be brought in Federal Claims Court aga inst t he United S tates and by its plain terms 28 U.S.C. § 1498 does no t cove r dec lara tory judgments seeki ng to inval idate a pate nt. Further, the federal statute covering dec laratory relief actions, the Declarat ory Judgment Act, 28 U.S.C. §2201, standing alone, d oes not waiv e sovereign immunity. Wyoming v. Unite d States, 279 F.3 d 12 14, 1225 (10th Cir. 2002) (t he declarato ry judgment statute, 28 U.S.C . §2201, i tself does n ot confer jurisdiction on a federal court where none otherwise exists). It is well set tled, howeve r, that said Act [Declaratory Act] doe s not of its elf create jurisdiction; it merely a dds an addit ional remedy where the distri ct court al ready has ju risdiction to entertain the suit. Wells v. Uni ted State s, 280 F .2d 275, 277 (9th Cir . 1960). 19 *** 5 6 7 8 9 10 11 12 13 14 15 16 17 20 21 22 23 24 25 26 27 28 The Unit ed States ca nnot be joined absent a clear waiver o f sovereign immunity. Plaintiffs have no t shown su ch a waiver exists. The United States cannot b e joined. Doc. 42 at 35- 38. Plaintif fs arg ued that AP A section 702, 5 U .S.C. § 702 , constitu tes a suffic ient waiver of sovereign immu nity. discussi ng the APA s waiv er of sovereign immunity and relevant Ninth Circu it au thority, the February 20 , 200 9 11 After 1 2 3 4 5 6 7 8 9 10 11 decision concl uded: Plaintif fs have cite d no case where the APA § 702 was invo ked as an as serted waiver of sovereign immunity for purpose s of bringing a patent invalidi ty case agai nst the United States. Howev er, if Plain tiff can ame nd the Complaint to adequatel y state a § 702 APA cl aim a gainst the United States, it may. Doc. 42 at 41. Because the Un ited S tates was a necessary party t hat could no t be j oined, the February 20, 2009 Decisi on consider ed whe ther t he Un ited States was indispe nsabl e. See Fed. R. Ci v. P. 19(b) . A party is ind ispensable if in 12 equity and go od con scien ce, the court should no t all ow the 13 action t o proc eed in its absence. 14 1161, qu oting Fed. R . Civ . P. 19(b). 15 four fac tors t o dete rmine whether a case must be dismi ssed: 16 17 18 (1) Dawaven dewa, 276 F .3d at Rule 19(b) sets out prejudic e to any party or to the absent party; (2) whether relief can b e shaped to lessen prejudic e; 20 (3) whether an adequate remedy, even if not complete , can be awa rded without the absent party ; and 21 (4) 19 whether there exists an alternative forum. 22 Kescoli v. Bab bitt, 101 F.3d 1304, 1310-11 (9th Cir. 1996). 23 However, where the a bsent party cannot be joined in li ght of 24 sovereig n immu nity, ther e may be very little nee d for 25 balancin g ... becaus e imm unity itself may be view ed as the 26 27 28 compelli ng fac tor. Id. at 1311. These fa ctors were a pplie d as follows: 12 1 2 3 4 5 6 The firs t factor wei ghs in favor of dismissa l....Plainti ffs seek to invalidate and declare unenforceabl e patents owned by the United States. The validit y of the USDA s patent has be en challeng ed. If invalidat ed ... the Patents , woul d be destr oyed, Patent ed Varieties would be freely marketed , and the US DA would lose royalties. The patents would be dec lared invalid under claims on e through three of the Complaint and unenforceable under cl aim four for inequita ble conduct and claim six for patent misus e. 7 *** 8 19 The seco nd factor, w hether prejudice can be lesse ned by shapi ng the relie f provided, also weighs in fa vor of dismi ssal. No de claratory, injunctive or compensa tory relief would be granted under the Complain t if the patent s validity were not challeng ed. Any me asures to lessen these prejudic es would nec essarily dilute the efficacy of the judg ment sought. Messerschmitt-Boelkow-Blohm GmgH v. Hughes Aircr aft, 483 F. Supp. 49, 5 3 (S.D.N.Y . 1979). Al though the Complaint is broug ht against the Commissi on alone, granting declarator y relief r equires find ing that the Commission had n o authorit y to enforce an invalid patent, that the patent i s invalid an d unenforceable, a patent whi ch is owned by the USDA , a branc h of the United States. Here, an y judgment c annot be tailored to eliminat e the prej udice to the United States. A finding fo r Plaintif fs would dec lare invalid patents owned by the Unit ed States, a brogating the United States interest in the pate nts, not only depriving the United S tates of roy alties under the patents, but ending t he United St ates ability to license the patents. 20 *** 21 The thir d factor, ad equacy of remedy, also favors dismissa l. [A]deq uacy ref ers not to sat isfaction of [Plai ntiffs ] claims, but to the public stake in settling disputes by wholes, whenever possible. Republic of Philippi nes, 128 S.Ct. at 2183, citing Providen t Tradesmens Bank & Trust Co. v. Patterso n, 390 U.S. 102, 111 (1 968). As in Republic o f Phillipp ines, [g]oi ng forward with t he act ion in the abse nce of the United States, would not further this public interest because they could n ot be bound by a judgme nt to which they were not parties. Id. The Court held the University had not waiv ed its Eleve nth Amendment immunity. 9 10 11 12 13 14 15 16 17 18 22 23 24 25 26 27 28 The four th factor is whether there is an availabl e 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 alternat ive forum. First is the Court of Federal Claims, expressly au thorized by statute. Plainti ffs have an opportunity to raise the defense of paten t invalidi ty and unenf orceability in an action brought against them for pat ent infringement brought by t he United S tates or the Commission. See 35 U.S.C. § 282. [Fo otnote ] However, t o require Plaintiffs t o violate the license and wait to see whether the patent o wner sues fo r infringement creates an unfavora ble situatio n as damages could be exacerba ted. Where no alternative forum exists, the dist rict court s hould be extra cautious bef ore dismissi ng an action . Kesco li v. Babbitt, 101 F.3d 1304, 13 11 (9th Cir. 1996). But just as the cour ts have hel d in actions involving tribal immunity an d state im munity, sovereign immunity of the United States c an justify d ismissal for inability to joi n an indis pensable par ty, despite the fact that no alternat ive forum is available. If the necessar y party is immune from suit, there may be ver y litt le need for balancing R ule 19(b) factors because immunity itself may be viewed as the compelling factor. Id. at 131 1 (in tern al citations and quotatio ns omitted). The latest Supreme Court ca se, Republic of Philippines v . Pi mentel, 128 S. Ct. 2180 (2008), to address R ule 19, held as to immunity barring an action fr om proceeding without the sovereig n party: The anal ysis of the joinder issue in those cases wa s somewhat p erfunctory, but the holdings were clear: A case m ay not proceed when a r equired-entity so vere ign is n ot amenable to suit. T hese cases instruct us that where so vereign immu nity is asserted, and the claims o f the sovere ign are not frivolous, dismissa l of the act ion must be ordered where there is a potential for inju ry to the interest s of the abs ent sovereign. 128 S.Ct. at 2190-91. In this context, dismissal is appropri ate even if Plaintiffs have no alternat ive forum fo r their claim. See Dawavend ewa, 2 76 F.3 d at 1162 . Because the proceedi ngs in this case threat en bot h the prop erty and sov ereign immunity of the United States, the United S tates failure to waive its immunity from suit s trongly supports dismissing t his litigati on in its ab sence. 26 Doc. 42 at 42- 47. 27 invalidi ty, in equitable c onduct, and patent misuse wer e 28 A ll of the claims relati ng to paten t 14 1 dismisse d on t he gro und t hat the United States is a ne cessary 2 and indi spensa ble pa rty. 3 4 5 6 7 The Comm ission s sep arate motion to dismiss the a ntitrust cl aim wa s gran ted w ith leave to amend becau se Plaintif fs did not a dequately allege each of the Patented Varietie s cons titute s its own relevant market. 8 The misu se cla im was like wise dismissed. 9 misuse c laim r ested in pa rt on allegations that t he 10 Commissi on ill egally mono polized interstate and foreig n 11 commerce in ba d fait h by enforcing alleged patent righ ts, as 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Id. Id. at 62. Pl ainti ffs the excl usive licens ee of the patents, and collec ting royalty fees on the Pa tented Vari eties under its amnesty pro gram. The amne sty pr ogram was r ejected as a basis for a misuse claim: As to th e first theo ry, there is no viable claim for the amn esty program as the Commission could not have mis used patents that did not exist and at mo st were inv entions in t he pre-issuance stage. Licen se agreemen ts entered i nto after a patent appl icatio n has been filed but b efore the patent issues are n ot necessar ily unenforc eable. Aronson v. Quick Point Pencil C o., 44 0 U.S. 257, 264-65 (197 9). The key inquiry is whether, by imposing conditions that derive t heir force f rom the patent, the patentee has impermis sibly broade ned the scope of the patent grant wi th anticompe titive effect. C.R. Bard, Inc. v. M3 Sy s., Inc., 157 F.3 d 13 40, 1372 (Fed. Cir. 1998). Pre-is suance , the re i s no patent ri ght to impermis sibly broade n. The doctrine of patent misuse c ould not be brought into play in Aronson, which co ncerned a li cense agreement entered into before i ssuance of t he patent, but after patent applicat ion submitte d. 440 U.S. at 264-65; see also Technolo gy Licensing Corp. v. Gennum Corp., No. 0104204, 2 007 WL 13195 28, at *23 (N.D. Cal. May 4, 2007) ( As to Gennum s argument that TLC s interact ions with Ro ss Video constituted misuse o f 15 1 the 250 patent, it is a peculiar notion that a party co uld misuse a patent that is not in existenc e. While it has been called patent misus e where a patentee see ks to collect royalties after the expi ration of th e patent term, it appears tha t in such cases the pa tentee and licensor have typicall y entered in to the royalty agreement at a time whe n the patent is in force. Ag ain, t o the extent a party deman ds royalties or demands that another cease using a product where no patent has yet issu ed, the othe r party is not put to the typ e of choic e that paten t misuse doctrine normally guards a gainst. The other party is free to ignore the dema nds. ) 2 3 4 5 6 7 8 9 Doc. 42 at 65- 66. The Comm ission s motion t o dismiss th e unfa ir 10 11 competit ion cl aim wa s den ied to the extent that t he 12 allegati ons ex tended beyo nd the dismissed anti-trust 13 allegati ons. 14 claim su rvived , the claim s for unjust enrichment and 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Id. at 67-71. Because the unfair compet ition construc tive t rust, which are purely derivative o f oth er claims i n the case, survi ved as well. G. Id. at 71. Claims i n the FAC. The firs t caus e of a ction , arising under the APA, 5 U.S.C. § 702 , alle ges Feder al Defendants acted arbit rarily, capricio usly, and ot herwi se not in accordance wit h app licable laws and regul ations by u ndertaking the following dis crete and fina l agen cy act ion[s ] : ¢ [D]ecid ing and agre eing to engage in a patentin g program wi th the Commission with respec t to the P atented Vari eties and ... cooperating wit h the Comm ission in co nnection with that patenting program, FAC ¶74; 16 1 ¢ [D]ecid ing, approvi ng and cooperating in the filing a nd prosecuti on of patent applications for the Pate nted V arieti es, FAC ¶75; 2 3 ¢ [E]ngag ing in inequ itable conduct before the USPTO wi th respect t o the application for the 89 1 patent, FAC ¶76; 4 5 ¢ [P]rocu ring, accept ing the issuance, and maintain ing the 284 , 891 and 229 patents, FAC ¶77; 6 7 ¢ [G]rant ing th e Comm issio n an exclusive lic ense in the 284, 891 an d 229 patents, FAC ¶78; 8 ¢ [A]ppro ving, allowi ng and cooperating with the Commissi on s amnesty program, licensing program a nd enforcem ent program with respect to the Patented Varietie s, FAC ¶79; 9 10 11 ¢ [A]llow ing the Comm ission to collect royalties for the Patented Var ieties from farmers who had funded t he USDA s re search program that led to th e developm ent of the P atented Varieties, where prio r USDA pol icy was to a llow such farmers to benefit from the USDA s research free of charge, FAC ¶80; and 12 13 14 15 ¢ [C]oope rating, enco uraging and acting in concert with the Com mission in the collection of royaltie s for the Pa tented Varieties and by receivin g a portion of those royalties from the Commissi on, id. 16 17 18 The seco nd, th ird, and fo urth causes of act ion, brough t 19 against all de fendan ts, s eek to have the patents decla red 20 invalid. 21 22 23 24 FAC ¶¶ 103 -138. Th e fifth cause of action a gainst all defe ndants , seek s a d eclaration that the 891 Paten t is unenforc eable due to Defendants ineq uitabl e conduct. 139-152. FAC ¶¶ The sixth cause of action a lleges that the 25 Commissi on vio lated the S herman and Clayton acts by 26 monopoli zing t he nat ional market for grapevine pl ant 27 material . 28 FAC ¶¶ 15 3-165 . T he seventh cau se of actio n seeks 17 1 to have the ex clusiv e lic ense agreements between the U nited 2 States a nd the Commi ssion invalidated under the p atent laws 3 of the U nited States and the APA. 4 5 6 7 FAC ¶¶ 166-176. The eighth c laim s eeks t o hav e the exclusive licenses decl ared void und er sta te law . FA C ¶¶ 177-185 . The ninth clai m, against the Co mmissi on on ly, is for unfair compet ition in 8 violatio n of C alifor nia B usiness and Professions Code § 17200 9 and Cali fornia commo n law . 10 tenth an d elev enth c laims are against the C ommission alone 11 for unju st enr ichmen t, FA C ¶¶ 191-93, and c onstructive trust, 12 FAC ¶¶ 186-190. Finally, the FAC ¶¶ 1 94-97. 13 III. STANDARD S OF DECISION 14 15 16 A. Rule 12( b)(1). Rule 12( b)(1) of the Fede ral Rules of Civil Procedure 17 allows a motion to d ismiss for lack of subject ma tter 18 jurisdic tion. 19 20 21 22 It is a fundamental precept that f ederal courts a re courts of limited jurisdiction. Limit s upon federal jurisdiction must not be disregarded or e vaded. Owen Equ ipment & Ere ction Co. v. Kroger, 43 7 U.S. 365, 374 23 (1978). 24 subject matter juris diction is proper. 25 Life Ins . Co., 511 U.S. 375, 377 (1994). 26 the plea ding stage, must be met by pleading suffi cient 27 28 The plainti ff has the burden to establish that Kok konen v. Gu ardi an This burden, at allegati ons to show a proper basis for the court to assert 18 1 subject matter juris diction over the action. 2 General Motors Accep tance Corp., 298 U.S. 178, 189 (1936); 3 Fed. R. Civ. P. 8(a) (1). 4 5 6 7 McN utt v . When a defendant challe nges jurisdic tion f acially, al l ma terial allegat ions in the complain t are assume d true, and the questio n for the c ourt is wheth er the lack of federal jurisdiction appea rs from the 8 face of the pleading itself. 9 1066, 10 73 (9th Cir. 2009). 10 11 12 B. Doe v. Holy See, 557 F.3d Rule 12( b)(6). A motion to di smiss broug ht under Federal Rule of Civi l 13 Procedur e 12(b )(6) tests the legal suffici ency of a claim . 14 Navarro v. Blo ck, 25 0 F.3 d 729, 732 (9th Ci r. 2001). 15 survive a moti on to dismi ss, a complaint must co ntain 16 sufficie nt fac tual m atter , accepted as true, to state a 17 claim to relie f that is p lausible on its face. 18 19 20 21 22 23 24 25 26 27 28 To Ashc roft v. Iqbal, 1 29 S. Ct. 19 37, 1949 (May 18, 2009) (quoting Bell Atl. Cor p v. T wombly , 550 U.S . 544, 570 (20 07)). A claim has facial p lausibility when the plaintif f pleads f actual conte nt that allows the court to d raw the reas onable infer ence that the defendant is liable f or the misco nduct alleged. The plausibili ty standard is not akin to a probability requiremen t, but it a sks for more than a sheer possibility tha t defendan t has acted unlawfully. Where a complaint pleads f acts that ar e merely consist ent wi th a defendan t s liabilit y, it stops short of the lin e between possibility and plausibility of entitlem ent to relie f. Id. (cit ing Tw ombly, 550 U.S. 556-57) . 19 Dis missal also can be 1 based on the l ack of a co gnizable legal theory. 2 v. Pacif ica Po lice D ep t, 901 F.2d 696, 699 (9th Cir. 1990). 3 4 5 6 7 Balis treri In decid ing wh ether to gr ant a motion to dismiss, the court a ccept[ s] all fact ual allegations of the c ompla int as true and draw[ s] all reas onable inferences in th e lig ht most favorabl e to t he non movin g pa rty. Rodriguez v. Panayi otou, 8 314 F.3d 979, 983 (9 th Ci r. 2002). 9 require d to a ccept as tr ue allegations that are merel y 10 concluso ry, un warran ted d eductions of fact, or un reaso nable 11 inferenc es. M anufac tured Hom e Cmtys. Inc. v. City of San 12 13 14 Jose, 42 0 F.3d 1022, 1035 (9t h Cir. 2005) ( quotin g Sprewell v. Golde n Stat e Warr iors, 266 F.3d 979, 988 (9th Cir. 2001)). 15 16 17 18 A court is no t, ho wever, IV. ANALYSIS . A. MedImmun e Does Not O verco me the Need to Identify a Waiver o f the United Stat es Sovereign Immunity. The Febr uary 2 0, 200 9 Dec ision dismissed the orig inal 19 complain t on t he gro und t hat the United States is a ne cessary 20 and indi spensa ble pa rty t hat is immune from suit. 21 FAC, Pla intiff s sugg est t hat a recent Supreme Cou rt ca se, 22 MedImmun e, Inc . v. G enent ech, Inc., 5 49 U.S . 118 (2007 ), 23 stands f or the propo sitio n that the United States imm unity 24 25 26 27 28 In the does not bar d eclara tory relief claims against it for patent invalidi ty. F ederal dist rict courts have original jurisdic tion [ over] any c ivil action arising under any Act of Congress relat ing to pate nts, plant variety prote ction , 20 1 copyrigh ts and trade marks . 2 suits br ought by pat ent h olders against alleged p atent 3 infringe rs und er 35 U.S.C . § 281. 4 5 6 7 28 U.S.C. § 1338. T his i ncludes In response to such a suit, an alleg ed inf ringe r ma y raise patent invalidity as a defense. § 28 2. Under ce rtain circum stanc es, when faced with an i mmine nt 8 threat t hat a patent holde r may sue for patent inf ringe ment, 9 the alle ged in fringe r may preemptively seek a dec larat ory 10 judgment of pa tent i nvalidity. 11 MedImmun e ente red in to a license agreement with G enent ech, 12 13 14 15 In MedImmune, for exam ple, which pe rmitte d MedI mmune s use of a particular, paten ted drug man ufactu ring p roces s in exchange for the pa yment of royaltie s to G enente ch. 549 U.S. at 121. Several years 16 later, G enente ch sen t Med Immune a letter expressi ng it s 17 belief t hat on e of M edImm une s products was cover ed by the 18 licensed paten t and that MedImmune owed royalties on t hat 19 product under the li censi ng agreement. 20 conside red th e lett er to be a clear threat to en force the [] 21 22 23 24 25 26 27 28 Id. MedI mmune patent, termin ate th e [] license agreement, and s ue fo r patent i nfring ement if [M edImmune] did not make r oyalt y payments as de manded . Id. a t 122. If respo ndents were to prevail in a patent infringe ment a ction, peti tion er could be or dered to pay treb le damages a nd attorney s fees, and could be enjoined from sellin g [the product, which] has accounte d for more t han 80 percent of its revenue from sal es since 199 9. Unwilling to risk such 21 1 2 3 4 5 6 7 serious consequences, pet itioner paid the d emande d royaltie s under prot est and with reservation of a ll of its r ights. Id. (int ernal citations a nd q uotations omit ted). Acknowle dging that [t]he re is no dispute that exercisi ng jur isdict ion u nder the declaratory jud gment act would be appro priate if M edImmune had taken the final step 8 of refus ing to make royal ty payments under the [] lice nse 9 agreemen ts, t he Sup reme Court inquired whether M edImm une s 10 own acts , in d ecidin g to continue making royalty payme nts, 11 causes the di spute no longer to be a case or controversy 12 13 14 15 within t he mea ning o f Art icle III? Id. at 128. The Supreme Court co nclude d that , so long as the facts allege that there is a sub stanti al con trove rsy between the parties of 16 suffici ent im mediac y and reality, judicial review ov er the 17 declarat ory ju dgment clai m is permissible. 18 Id. a t 127 -28. Plaintif fs arg ue tha t, ju st as the plaintiffs in 19 MedImmun e coul d brin g a p reemptive declaratory re lief action 20 for pate nt inv alidit y aga inst a priva te patent holder where 21 22 23 24 there is a suf ficien tly i mmed iate and real contro versy between the pa rties, so t oo can Plaintiffs bring a declarat ory re lief a ction for patent invalidity a gains t the 25 United S tates. 26 immunity affor ded th e Uni ted States as a sovereign. 27 MedImmun e expa nds th e cir cumstances in which an A rticl e III 28 But, this ignores the legal effect of the 22 1 case or contr oversy is deemed to exist, but it says nothing 2 about th e Unit ed Sta tes immunity or suscep tibility to suit 3 over a U .S. ow ned pa tent. 4 5 6 7 Sovereig n immu nity shield s the United State s from pate nt infringe ment l awsuit s bro ught under § 281. Abse nt a waiver, sovereig n immu nity s hield s the Federal government and its 8 agencies from suit. 9 904 (9th Cir. 2009) (citi ng Dep t of Army v. Blue Fox, Inc., 10 525 U.S. 255, 260 (1 999)) . 11 must be unequi vocall y exp ressed ... and will not be im plied. 12 13 14 15 16 A waiver of sovereig n imm unity Id. (cit ing La ne v. Pena, 518 U.S. 187, 192 (1996)). Further , a wa iver o f imm unity will be strictly c onstr ued, in terms of its s cope, in favor of the sovereign. Id. (interna l quot ation omitt ed). A limite d waiv er of sover eign immunity is found i n 28 17 18 Har gen v. Dept. of La bor, 5 69 F.3d 898, U.S.C. § 1498, 1 which permits private parties to bring patent 19 1 20 21 22 23 24 25 26 27 28 28 U. S. C. § 1 49 8 pr ov ide s, i n pe rt i nen t pa rt : Whe ne ve r an i nv en ti on de sc ri be d in and c ov er ed b y a pa te nt of t he Uni te d St at es i s us ed or m an uf ac tu r ed by o r fo r th e Un it ed St at es wit ho ut l ic en se o f th e o wn er t he re o f o r la wf ul r ig ht t o use o r man uf ac tu re t he s am e, th e ow ne r s r eme dy s ha ll b e by a ct ion a ga in st the U ni te d St at es i n the U ni te d St a tes C ou rt o f Fe de ra l Cla im s fo r the r ec ov er y of h is r eas on ab le a nd ent ir e co mp en sa ti on f or su ch u se and m an uf ac tu re . Re as ona bl e an d en t ire c om pe ns at io n sh al l i nc lu de the o wn er s r ea so na bl e c os ts , in cl u din g re as on ab le f ee s for e xp er t wit ne ss es a nd a tt or ne ys, i n pu rs ui n g t he a ct io n if t he o wne r is a n ind ep en de nt i nv en to r, a no np ro fi t o rga ni za ti on , or a n en tit y th at had n o mo re t ha n 50 0 emp lo ye es a t a ny ti me d ur in g th e 5- yea r pe ri od pre ce di ng t he u se o r man uf ac tu re o f th e pa te nt ed i nv en ti on by o r fo r the U ni te d St at es . No thw it hs ta nd in g th e pr ec ed in g se nt en ces , un le ss the a ct io n ha s be en p end in g fo r mo r e t ha n 10 y ea rs f ro m the t im e of fil in g to t he t im e th at th e ow ne r a ppl ie s fo r su ch c os ts an d fe es , rea so na bl e an d en ti re co mp en sa ti on sha ll n ot i nc lu de s uc h c os ts a nd fee s if t he c ou rt f in ds th at t he p o sit io n of t he U ni te d Sta te s wa s 23 1 infringe ment s uits a gains t the United States for money 2 damages in the Unite d Sta tes Court of Feder al Cla ims. 3 prior or der in this case held that § 1498 did not operate as 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 A a waiver : In waiv ing its own immunity from patent infringe ment actions in 28 U.S.C. § 1498(a) (1994 ) ed. and Supp. III), the Unit ed States did not consent to treble da mages nor injunctive relief, and permitte d reasonable attorney s fees in a narrow class of specified i nstances. Florida Prep aid Postseco ndary Educ. Expense Bd. v. College Sav. Bank, 52 7 U.S. 627, 648, n.11 (1999). This suit must be brought in F ederal Claims Court against t he United S tates and by its plain terms 28 U.S.C. § 1498 doe s not cover declaratory judgments seeking to invalida te a patent. Further, the federal statut e covering declaratory relief actions, the De clarat ory Judgment Act, 28 U.S .C. §2201, standing alone, do es not waiv e sovereign immunity. Wyoming v. U nited States, 279 F.3d 121 4, 1225 (10th Cir. 2002) (the declarat ory judgment statute, 28 U.S.C. §2201, itself d oes not conf er jurisdiction on a fe deral court wh ere none oth erwise exists). It is well settled, however, th at said Act [Declaratory Act] does not of itself c reate jurisdiction; it merely adds an additional r emedy where the district cour t already has jurisdic tion to entertain the suit. Wells v. United Stat es, 2 80 F .2d 275, 277 ( 9th Cir. 1960). Doc. 42 at 36- 37. Alternat ively, the U nited States can waive its im munit y 21 through affirm ative actio n, by invoking the juris dicti on of a 22 particul ar cou rt in a par ticular lawsuit. 23 United S tates, as th e hol der of a patent, could s ue a private 24 party fo r pate nt inf ringe ment under 35 U.S.C. § 2 81, t o which 25 26 27 28 For ex ample, the the alle ged in fringe r may raise patent invalidity as a defense under § 282. How ever, such a waiver is l imite d in sub st an ti al ly j us ti fi ed or t ha t sp e cia l ci rc um st an ce s ma ke an a wa rd unj us t. 24 1 nature. 2 of Univ. of Te xas Sy s., 4 58 F .3d 1335, 1342-43 (9 th Ci r. 3 2006)(St ate s filing of s uit in district court wa ives 4 5 6 7 8 9 See T egic C ommun icat ions Corp. v. Board of Re gents Eleventh Amend ment i mmuni ty as to that suit in th at co urt as well as to any compu lsory counterclaims filed by consu mer defendan ts, bu t not as to suit in another distric t cou rt by manufact urer). Here, Pl aintif fs cor rectl y point out that as part of i ts 10 amnesty progr am, t he Co mmission sent out notice s in which 11 it threa tened to sue grow ers who did not come forward to 12 13 14 15 acknowle dge po ssessi on of the Patented Varieties and p ay royaltie s. Bu t, the Comm issi on s issuance of this not ice is far from an un equivo cal w aiver of sovereign immun ity b y the 16 United S tates. 17 sovereig n immu nity m ust be unequivocally expressed ... and 18 will not be im plied. ). 19 for exam ple, w aiver is ge nerally found either wh en th e state 20 makes a clear decla ratio n that it intends to wa ive 21 22 23 24 Harg en, 569 F .3d at 904 ( A waiver of In the Eleventh Amendmen t con text, immunity , such as by stat ute, or wh en the state volu ntarily invokes federa l juri sdict ion by becoming party t o a s uit. Tegic, 4 58 F.3 d at 1 341. Her e, the United States has not 25 made a c lear d eclara tion that it intends to waive immu nity, 26 nor did it vol untari ly in voke federal juris dictio n. 27 not sue any gr ower, nor h as it invoked the jurisd ictio n of 28 25 I t di d 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 any cour t to e nforce any patent in dispute. Plaintif fs emp hasize the following passage, and c ases cited, f rom Me dImmun e: Our anal ysis must be gin with the recognition that , where th reaten ed act ion b y government is co ncerned, we do no t require a plaintiff to expose himself t o liabilit y before bri nging suit to challenge the basis fo r the threat-for example, the constitu tionality of a law threatened to be enforced . The plaint iff s own action (or in action) in faili ng to violat e the law eliminates the imminent threat of p rosecution, but nonetheless d oes not elim inate Articl e III jurisdiction. For examp le, in Terra ce v. Thompson, 2 63 U .S. 197 (1923) , the State th reatened the plaintiff with forfeit ure of his farm , fines, and penalties if he entered into a lease wi th an alien in violation of the State s anti-ali en land law. Given this genuine thr eat of enforcem ent, we did not require, as a prerequisit e to testi ng the valid ity of the law in a suit for injuncti on, that the plaintiff bet the farm, so t o speak, b y taking the violative action. Id., at 216. See also, e.g., Village o f Eu clid v. Ambler Realty Co., 272 U.S. 365 (1926); Ex parte Young, 2 09 U.S. 123 (190 8). Likewise , in Steffel v. Thompson, 415 U.S. 452 (1974), we did not require the plaintiff to proceed to distribut e handbills and risk actual prosecut ion before h e could seek a declaratory judgment regarding t he constitutionality of a sta te statute prohibiting such distribution. Id., at 45 8460. As then-Justice Rehn quis t put it in his concurre nce, the de claratory judgment procedure is an alter native to pu rsuit of the arguably illegal activity . Id., at 4 80. I n ea ch of these cases, the plaintif f had elimin ated the imminent threat of h arm by simpl y not doing what he claimed the right to do (enter i nto a lease, or distribute handbills at t he shopping center). Th at did not preclude subjectmatter j urisdiction because the threat-eliminating behavior was effecti vely coerced. See Terra ce, supra, a t 215- 216, 44 S.Ct. 15; Steff el, su pra, at 459. The dilemma pos ed by that coercion-put ting the challeng er to the ch oice between abandoning his rights o r risking pr osecution-is a d ilemma that it was the very purpose of the Declaratory Judgment Act 26 1 to ameli orate. Abbott La bora tories v . Gardner, 387 U.S. 136 , 152 (1967) . 2 3 Id. at 1 29 (pa rallel cita tion s omitted). Despite the se emingl y hel pful holding that where 4 5 threaten ed act ion by gove rnment is concerned, a plain tiff is 6 not requ ired to exp ose h imself to liability before br inging 7 suit to challe nge th e bas is for the threat..., t his p assage 8 9 10 11 has no b earing whats oever on the issue of soverei gn im munity, as sover eign i mmunit y was not an issue in any of the c ited cases. Ex Par te You ng carved out an except ion to a St ate s 12 Eleventh Amend ment i mmuni ty for suits against off icial s 13 acting u nconst itutio nally on behalf of a state. 14 123. 15 an antic ipator y suit for injunctive relief agains t a s tate 16 17 18 19 20 209 U .S. Te rrace applie d the Ex Parte Young do ctrine to permit official who t hreate ned t o ap ply an allegedly unconsti tution al sta tute. 263 U.S. 197. Village of E uclid, 272 U.S. 365, and St effel , 415 U.S. 452, follow Terrac e, permitti ng ant icipat ory s uits for injunctive reli ef to 21 challeng e the threat ened application of allegedly 22 unconsti tution al sta te an d local laws. 23 Young, s overei gn imm unity was not an issue in eit her Village 24 of Eucli d or S teffel . 25 26 27 28 Because o f Ex Parte In sum, while MedImm une might support a pre emptive declarat ory ju dgment laws uit here if the patent h older was a private party, it do es no t provide jurisdic tion t o ove rcome 27 1 the Unit ed Sta tes s overe ign immunity. 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 B. APA Clai ms. 1. Section 701 s Limita tion on Section 702 s Waiver of Sovereig n Immunity. Plaintif fs adv ance t he AP A as an alternative sour ce fo r a waiver of so vereig n imm unit y. APA section 702 provi des, in pertinen t part : A person suffering l egal wrong because of agency action, or adversely affected or aggrieved by age ncy action w ithin the me aning of a relevant statute, is entitled to judicial review thereof. An action in a court of the United States seeking relief o ther t han money da mages and st ating a c laim that an agency or an offic er or employ ee thereof acted or failed to act in a n official c apacity or under color of leg al authorit y shall not be dismissed nor relief there in be denie d on the gro und that it is against the United S tates or tha t the United States is an indispen sable party. 5 U.S.C. § 702 . Congress waiv er of the f ederal government s sove reign immunity under APA § 702 is limited by § 701(a), which provides : (a) This chapter app lies, according to the provisio ns thereof, except to the extent that-(1) stat utes preclud e judicial review; or (2) agen cy action is committed to agency discreti on by law. 24 5 U.S.C. § 701 (a). 25 (1985) ( before bring ing a claim under § 702, a p arty must 26 Heckl er v. Chaney, 470 U.S. 8 21, 828 first cl ear th e hurd le of § 701(a) ). 27 28 28 1 a. 2 APA § 70 2 s wa iver o f sov ereign immunity does not appl y 3 4 The Pate nt Act Precl udes Judicial Review of Plaintif fs Patent-Related APA Claims . where a partic ular s tatut e precludes judic ial re view. 5 § 701(a) (1) 2 ; Heckler , 470 U.S . at 828. 6 extent a parti cular statu te precludes judicial re view is 7 determin ed not only from its express language, bu t als o from 8 the stru cture of the stat utory scheme, its object ives, its 9 10 11 12 Whether and to what legislat ive hi story, and the nature of the admini strat ive action i nvolve d. 340, 345 (1984 ). B lock v. C omty. Nutritio n Inst., 46 7 U. S. Wh ile [a]ccess to judicial rev iew s hould 13 be limit ed onl y upon a sh owing of clear and convincing 14 evidence of a contra ry le gislative intent, Eisin ger v . Fed. 15 Lab. Rel . Auth ., 218 F.3d 109 7, 1103 (9th Cir. 2000), this 16 standard is no t appl ied i n a strict evidentiary sense , so 17 long as congr ession al in tent to preclude judicia l rev iew is 18 19 20 fairly d iscern ible in the sta tutory scheme, Block, 46 7 at 351 (int ernal quotat ion o mitted). In a com plex s tatuto ry sc heme, the provision of j udici al 21 22 review f or a p articu lar c lass of plaintiffs may e viden ce 23 Congress ional intent to f oreclose others from par ticip ating. 24 Block, 4 67 U.S . at 3 47-49 ( [W]hen a statut e prov ides a 25 detailed mecha nism f or ju dicial consideration of parti cular 26 2 27 28 Re la te dl y, 5 U .S .C . § 7 02 (2 ) pr ov i des t ha t no th in g in t he AP A c on fe r s aut ho ri ty t o gr an t re lie f if a ny o t her s ta tu te t ha t gr an ts co ns en t to sui t ex pr es sl y or i mp lie dl y fo rb id s th e re li ef w hi ch i s sou gh t. 29 1 issues a t the behest of p articular persons, judic ial r eview 2 of those issue s at t he be hest of other persons ma y be found 3 to be im pliedl y prec luded . ). 4 5 6 7 This is the case even w here the stat ute ge nerall y all udes to the excluded cla ss interest s. Id . at 3 47. Whet her judicial r eview is pr eclu ded for cert ain cl asses of pl aintiffs turns ultimate ly on 8 whether Congre ss int ended for that cl ass to be relied upon to 9 challeng e agen cy dis regar d of the law. 10 such sui ts doe s not pose any threat to realizatio n of the 11 statutor y obje ctives ; it means only that those ob jecti ves 12 13 14 15 16 Id. Preclus ion of must be realiz ed thr ough the specific remedies pr ovided by Congress and a t the behes t of the parties directl y aff ected by the s tatuto ry sch eme. Id. at 352 -53. The Pate nt Act reve als C ongress s intent to prec lude 17 judicial revie w of U SPTO examination decisions at the behest 18 of third parti es pro testi ng the issue or reissue of a 19 patent. 20 (D.D.C. 1991). 21 22 23 24 25 26 27 28 Hita chi Me tals, Ltd. v. Quigg, 776 F. Supp. 3, 7 The distr ict court in Hitac hi succinctly summariz ed the opera tion of the Patent Act and it s jud icial review p rovisi ons: The Pate nt Statute i s addressed to patent owners and patent a pplicants. T he patent examination process is an ex pa rte proceeding, not an adversarial one, a nd the Pate nt Statute s judicial review provisions contain no gaps requ iring the Court to exercise i ts power. [FN8] [FN8] Co ngress has explic itly designated ot her PTO proc eedings as inter partes, including 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 patent i nterferences , 35 U.S.C. § 135(a), and trademar k opposition s and cancellations, 15 U.S.C. § § 1063, 1064 , 1067. In contrast, the provisio ns governing the patent application and examinat ion process prescribe an ex parte proceedi ng. 35 U.S.C . §§ 131, 132, 133, 134, 141, and 145. See also Williams Mfg. Co. v. United S hoe Machiner y Corp., 121 F.2d 273, 277 (6th Cir .1941) ( [T ]he granting of a patent is not, exc ept when an interference is declare d, the resu lt of an adv ersary proceeding. ); Godtfred sen v. Banne r, 503 F. Supp. 6 42, 64 6 (D.D.C. 1980) ( It m ay well be desirable as a matter o f policy to permit an individual to protest the grant of a patent other than by an infringe ment action, ... that is a de cision for the Cong ress. ). The Pate nt Statute e xplicitly authorizes patent owners t o apply for reissue of a patent, 35 U.S.C . § 251, and confers on those applicants the right to seek adm inistrative and judicial review of PTO examinat ion decisions. See 35 U.S.C. § 131 (adminis trative appe al of examiner s decision to the Board of Patent Appe als and Interferences); 35 U.S.C. § 134 (direct appeal of Board decisions to the Fede ral Circuit) ; 35 U.S.C. § 145 (judicial review b y civil acti on in thi s court); 35 U.S.C. § 251 (the provisions governing original patent applican ts also gove rn reissue applicants). In contrast , Title 35 c ontains no provision expressl y authoriz ing administ rative or judicial review of a PTO deci sion at the behest of a third-party protesto r. Hitachi, 776 F . Supp . at *8. Hitachi rejected plainti ff s argument that its su it on ly challenged the proced ure u sed by 21 the USPT O, and was n ot an action to review the va lidit y or 22 enforcea bility of th e pat ent: 23 24 25 26 27 28 [P]laint iff s distin ction is a superficial one. Plaintif f s suit is precluded by the Patent Statu te, because plaintiff s action, a suit brought by a third-pa rty protesto r, seeks to overturn the PTO s decision to grant a reissue patent to [defendant] . Although plaintiff s tates that plain tiff d oes not here see k a determin ation of the validity or enforcea bility of th e patent, in the same memorand um plaintiff also requests an injunction 31 1 2 3 4 5 6 7 requirin g [defendant ] to surrender its reissue patent.. . Furthermor e, the ultimate source of Hitachi s alle ged in jurie s is not the alleged procedur al violation by the Commissioner, but the existenc e of [defend ant s] reissue patent. Id. at * 9. Se e also Synt ex v . U.S. Patent and Tradema rk Office, 882 F. 2d 157 0, 1573-74 (Fed. Cir. 1989) (affir ming dismissa l of c omplai nt, including APA claim, for lack of 8 jurisdic tion b ecause thir d-party requester of ree xamin ation 9 could no t coll ateral ly at tack the USPTO s reexami ned d ecision 10 in favor of pa tent o wner, as the Patent Act does not p rovide 11 for such a cha llenge ); Hallmark Cards Inc., v. Lehman, 959 F. 12 13 14 15 Supp 539 , 542- 43 (D. D.C. 1997 )(rejecting th ird party s attempt to dir ectly chall enge the USPTO s decisio n to issue a certific ate of corre ction because the Patent Act precl udes 16 judicial revie w of s uch a n action unless is sue is raised as 17 defense to an infrin gemen t suit). 18 Plaintif fs att empt t o dis tinguish these cases on the 19 ground t hat th ey inv olved causes of action agains t the USPTO, 20 and not direct ly aga inst the patent owner. 21 22 23 24 But, wheth er a cause of actio n oper ates as a collateral attack does n ot turn upon the parti es nam ed to the lawsuit. For examp le, Heck v. Humphrey , 512 U.S. 4 77, 486 (1994), bars civil rights claims 25 for dama ges th at wou ld op erate to collaterally at tack an 26 underlyi ng cri minal convi ction, even though the partie s to 27 the unde rlying crimi nal c ase may not be the same as th ose 28 32 1 involved in th e civi l rig hts action. 2 Smith, 2 009 WL 21393 11 (E .D. Cal. Jul. 10, 2009). 3 4 5 6 7 See, e.g., Anderson v. Plaintif fs ass ert th at th e USDA s reliance on Hit achi and its assert ion th at Pl aintiffs claims ar e collatera l attacks defie s logi c be cause if the USDA s def initi on of a collate ral at tack were accepted, all invalidity clai ms 8 would co nstitu te co llate ral attacks on the PTO s deci sion to 9 grant th e pate nts, even those betwee n priv ate parties or 10 those ra ised a s coun tercl aims in an infringement suit brought 11 by the g overnm ent. 12 13 14 15 Doc. 70 at 8. But, the law permi ts patents to be attack ed in certain suits between p rivat e parties and in count ercla ims brought against infr ingem ent suits in itiate d by t he go vernment. Such attacks, wher e 16 permitte d by l aw, ar e, by their very nature, not 17 impermis sible colla teral attacks. 18 the Unit ed Sta tes a rgume nt that the APA cannot b e use d to 19 create n ew way s to a ttack a patent where su ch mec hanis ms are 20 not othe rwise permitted b y la w. 21 22 23 24 This does no t add ress That is th e purpose o f section 701(a) (1) an d Blo ck s prohibi tion a gainst using the APA to c arve o ut new aven ues for judicial review where a comprehe nsive statut ory s cheme already exists. 3 25 26 27 28 3 Pl ai nt if fs a rg ue t ha t t he ir c la im s ar e no t c ol la te ra l att ac ks , b ut , ins te ad , am ou nt t o d ire ct a ct io n a gai ns t th e pa te nt o wn er un de r th e A PA for a ct in g co nt ra ry t o l aw i n ob ta i nin g, m ai nt ai ni ng , li cen si ng , an d enf or ci ng t he g ra pe vi ne pa te nt s. Doc . 70 a t 8. T he re is l it tl e pra ct ic al d if fe re nc e bet we en a c ol l ate ra l at ta ck o n th e pat en t it se lf and a c la im t ha t th e pa te nt wa s ob ta in e d u nl aw fu ll y 33 1 Here, ma ny of Plaintiffs allegations are direct attack s 2 on the v alidit y of t he pa tents themselves. 3 allege t hat th e USDA acte d unlawfully by: decidi ng an d 4 5 6 7 Plain tiffs agreeing to en gage i n a p atenting program with th e Com mission with res pect t o the Paten ted Varieties and ... co opera ting with the Commi ssion in co nnection with that paten ting 8 program, FAC ¶74; decid ing, approving and coope ratin g in 9 the fili ng and prose cutio n of patent applications for the 10 Patented Varie ties, FAC ¶75; engaging in inequi table 11 conduct before the U SPTO with respect to the appl icati on for 12 13 14 15 16 17 the 891 paten t, FA C ¶76 ; and procuring, accept ing t he issuance , and mainta ining the 284, 891 and 229 pate nts, FAC ¶77. Thes e APA claim s are barred under § 701 beca use the Patent A ct pre cludes judi cial review of suc h claims. Plaintif fs als o alle ge th at USDA acted unlawfully by: 18 grantin g the Commis sion an exclusive license in the 284, 19 891 and 229 patent s, F AC ¶78; approving, allo wing and 20 cooperat ing wi th the Comm ission s amnesty program , lic ensing 21 22 23 24 program and en forcem ent p rogram with respect to t he Pa tented Varietie s, FA C ¶79; all owing the Commission to colle ct royaltie s for the Pa tente d Varieties from farmers who had 25 funded t he USD A s re searc h program that led to th e 26 developm ent of the P atent ed V arieties, wher e prior USD A 27 policy w as to allow such farmers to benefit from the U SDA s 28 34 1 research free of cha rge, FAC ¶80; and cooperati ng, 2 encourag ing an d acti ng in concert with the Commis sion in the 3 collecti on of royalt ies f or the Patented Va rieties and by 4 5 6 7 receivin g a po rtion of th ose royalties from the C ommis sion, id. In part, these licen se-related claims depend on Plaintif fs as sertio n tha t the patents are unenfo rceab le, 8 see, e.g ., FAC ¶91 ( USDA s action in grant ing the Com mission 9 an exclu sive l icense to t he 891 patent is arbitr ary, 10 capricio us, an d othe rwise not in accordance with laws and 11 regulati ons, b ecause the patent is unenforceable. ). 12 13 14 15 Any APA claims in the FAC bas ed upon the in validity of the pate nts mu st be dismi ssed because the A PA doe s not waive sovereig n immu nity w here a particular statute, in this case 16 the Pate nt Act , prec ludes judicial review. 4 17 motion t o dism iss al l pat ent-related claims (e.g., those that Defen dants 18 4 19 20 21 22 23 24 25 26 27 28 To t he e xt en t th at P lai nt if fs ch a lle ng e th e Un it ed S ta tes ti tl e to th e pa te nt s, t he Q uie t Ti tl e Ac t al so i mp li ed ly f or bi ds Pl ai nt if fs Cla im s. 5 U. S. C. § 7 02( 2) p ro vi de s th at n ot hi ng i n th e APA co nf er s aut ho ri ty t o gr an t re lie f if a ny o t her s ta tu te t ha t gr an ts co ns en t to sui t ex pr es sl y or i mp lie dl y fo rb id s th e re li ef w hi ch i s sou gh t. Pla in ti ff s c la im s, w hic h ch al le ng e th e Un it ed S ta te s i nte re st i n pro pe rt y, i mp li ca te t he Qu ie t Ti tl e Ac t, 2 8 U. S. C. § 2 40 9a( a) , wh ic h wai ve s so ve re ig n im mu nit y fo r cl ai m s d is pu ti ng t he U ni te d S ta te s t it l e to re al p ro pe rt y. A rel at ed w ai ve r ap pl ie s to c er ta in c lai ms i nv ol vi n g re al o r pe rs on al p ro per ty o n wh ic h th e Un it ed S ta te s ha s o r cl ai ms a mor tg ag e or l ie n. 2 8 U .S .C . § 24 1 0(a ). Pa te nt s, h ow ev er, ha ve t he att ri bu te s of p er so na l p ro pe rt y. 35 U. S. C. § 2 61 . T he Un it ed S ta te s has n ot w ai ve d it s so ver ei gn i mm un i ty wi th r es pe ct t o pe rso na l pr op er t y in wh ic h th e Un it ed S tat es c la im s a ti tl e in te re st , as o ppo se d to a l i en int er es t. Du nn & B la ck, P .S . v. U n ite d St at es , 49 2 F. 2d 29 1, 2 92 ( 9t h Cir . 19 73 ). Th e ab se nce o f an y wa i ver o f so ve re ig n im mu nit y wi th r es p ect to ch al le ng es t o a fe der al a ge nc y s ri gh ts t o pe rs on al p rop er ty i mp li e dly for bi ds s im il ar r el ie f u nd er t he A P A. T o th e ex te nt t ha t P la in ti ff s APA cla im s ch al le ng e th e Uni te d St at es ri gh t to p os se ss , ma nag e, a nd d is p ose of th e pa te nt s, s uc h cha ll en ge s ar e ba rr ed . 35 1 challeng e the validi ty of the patent and/or the m ethod s by 2 which th e pate nt was obta ined) is GRANTED WITHOUT LEAV E TO 3 AMEND. 4 b. 5 6 7 8 9 The Bayh-Dole Act Does not Commit Action With Respect to Licensing to Agency Discretion. In addit ion to chall engin g the validity of the Pa tents themselv es, Pl aintif fs al lege that the USDA s licensing activiti es vio late p rovis ions of the Bayh-Dole Ac t, 35 U.S.C. 10 § 200 et seq. 11 are barr ed by Sectio n 701 (a)(2) of the APA, which prec ludes 12 applicat ion of the A PA to any agency action [tha t] is 13 committe d to a gency discr etion by law . 14 15 16 701(a)(2 ). Defen dants arg ue that these licensing c laim s 5 U.S.C. § De fendan ts ma intain that the Bayh-Dol e act commits the ac ts of licen sing to agency discretio n. Agency a ction is com mitte d to agency discretion b y law 17 18 when the statu te whi ch au thorizes the agency s action is 19 drawn i n such broad term s that in a given case t here is no 20 law to a pply. 21 401 U.S. 402, 410 (1 971), overruled on other grou nds, see 22 Califano v. Sa nders, 430 U.S. 99 (1977); see also Webs ter v. 23 24 25 26 27 28 Citi zens to Preserve Overto n Park v. V olpe, Doe, 486 U.S. 592, 600 (1 988) . Applying § 701(a)(2) require s care ful ex amina tion of the statute on w hich the claim of agenc y ille galit y is based. Webster, 4 86 U.S. at 600. In Heckl er v. Chaney, 470 U.S. 821, 8 28 (19 85), the Fo od 36 1 and Drug Admin istrat ion s ( F DA ) decision not to unde rtake 2 an enfor cement proce eding against the use of cert ain d rugs in 3 administ ering the de ath p enalty was not subject t o jud icial 4 5 6 7 review u nder t he APA beca use the statute conferri ng po wer on the FDA to pro hibit the u nlawful misbranding or misuse of drugs pr ovided no su bstan tive standards on which a cou rt 8 could ba se a r eview of th e challenged conduct. 9 enforcem ent pr ovisio ns th us commit complete discr etion to the 10 [FDA] to decid e how and w hen they should be exerc ised. 11 at 835. 12 13 14 15 The A ct s Id. In contr ast, i n Overton Park, APA § 701(a)(2) did not bar judi cial r eview of th e Department of Transpor tatio n s ( DOT ) releas e of f edera l funds to complete a se gment of 16 expressw ay tha t ran throu gh ha city park. 17 14. 18 not appr ove an y prog ram o r project that requires the u se of 19 any publ ic par kland unles s (1) there is no feasib le an d 20 prudent altern ative to th e use of such land, and (2) s uch 21 22 23 24 401 U. S. at 413- The relev ant st atute s, w hich provided that DOT s hall program includ es all poss ible planning to minimize har m to such par k ..., prov ided clear and specific dire ctive s. Id. 25 In gener al, th e Bayh -Dole Act authori zes fe deral 26 agencies to ap ply fo r, ob tain, and maintain paten ts: 27 28 Each Fed eral agency is authorized to apply for, obtain, and maintain patents ... in the Uni ted States . . . on inve ntions in which the Federal 37 1 2 Governme nt owns a ri ght, title, or interest. 35 U.S.C . § 20 7(a)(1 ). 3 4 5 6 7 8 Many of Plain tiffs APA allegations directly imp licat e the auth orizat ion gr anted by the Bayh-Dole Act. Plain tiff s allege t hat th e USDA acte d unlawfully by decidin g and agreeing to en gage i n a paten ting program with the Commissi on..., FAC ¶74; filing and prosecut[ing ] of patent 9 applicat ions f or the Pate nted Varieties, FAC ¶75 ; en gaging 10 in inequ itable condu ct be fore the USPTO..., FAC ¶76; and 11 procuri ng, ac ceptin g the issuance, and maintaini ng th e 284, 12 891 and 229 patent s, F AC ¶77. 13 14 15 16 Other allegatio ns indirect ly imp licate the Bayh Dole Act s authoriz ation , such as those invol ving U SDA s granting the Com mission an exclusiv e lice nse in the 284, 891 and 229 pate nts, FAC 17 ¶78; ap provin g, all owing and cooperating with th e 18 Commissi on s a mnesty prog ram, licensing program a nd 19 enforcem ent pr ogram with respect to the Patented Varie ties, 20 FAC ¶79; allo wing t he Co mmission to collec t royalties for 21 the Pate nted V arieti es... , FAC ¶80; and coopera ting, 22 23 24 25 26 27 28 encourag ing an d acti ng in concert with the Commis sion in the collecti on of royalt ies f or the Patented Varietie s and by receivin g a po rtion of th ose royalties from the Commission, id. As to al l thes e pate nting activities, Plain tiffs 38 1 identify no c lear a nd sp ecific directives conta ined in the 2 Bayh-Dol e Act (or an y oth er s tatute or regu lation ) aga inst 3 which US DA s c onduct can be measured. 4 5 6 7 Plaintiffs assert that the Bayh -Dole act in fact contains a comprehensi ve st atutory scheme f or gov ernmen t age ncies to follow when see king to patent i nventi ons, g rant exclusive licenses, and colle ct 8 royaltie s and leav es vi rtually nothing in these area s to 9 agency d iscret ion. 10 assertio n, Pla intiff s not e only that the Bayh-Dol e Act 11 expressl y limi ts the gove rnment s ability to seek pate nt 12 13 14 15 Doc. 70 at 11. To sup port this protecti on to inven tions in which the Federal Go vernm ent owns a r ight, title, or i nterest. 35 U.S.C. § 2 07(a)(1). Inventi ons i s defi ned a s any invention or disc overy which 16 is or ma y be p atenta ble. 17 Bayh-Dol e Act expres sly l imit s a government agenc y s 18 discreti on to seek p atent protection to subject m atter that 19 meets th e cond itions of p aten tability set forth elsewh ere in 20 the Pate nt Act . 21 22 23 24 25 § 201(d). Do c. 70 at 11. Plaintiffs argue the The Paten t Act is th e source o f subs tantiv e law that underpins any such Bayh-Dole act clai m, but the l atter contains no substantive stan dards to aid j udicia l revi ew of the dispute d pate nting activ ities. Plaintif fs not e that UDSA s licensing activ ities are 26 subject to cl ear an d spe cific directives contai ned i n 27 section 209(a) , whic h pro vides: 28 39 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Authorit y.--A Federa l age ncy may grant an e xclusive or parti ally exclusi ve license on a f ederal ly owned inventio n under sect ion 207(a)(2) only if-(1) Gran ting the lic ense is a reasonable and necessar y incentive to-(A) call forth the i nvestment capital and expendit ures needed to bring the invention to practica l applicatio n; or (B) othe rwise promote the invention s utilizat ion by the p ublic; (2) the Federal agen cy finds that the public will be served b y the granti ng of the license, as indicat ed by the a pplicant s i ntentions, plans, and ability to bring th e invention to practical application or otherwis e promote th e invention s utilization by the public, and that the proposed scope of exclusivit y is not g reater than reasonably necessary to provi de the ince ntive for br inging the invention to practica l applicatio n, as proposed by the applicant, or other wise to prom ote the invention s utilizati on by the p ublic; (3) the applicant ma kes a commitment to achieve practica l applicatio n of the invention within a reasonab le time, whi ch time may be extended by th e agency u pon the appl icant s request and the applican t s demonstr ation that the refusal of suc h extensio n would be u nreasonable; (4) gran ting the lic ense will not tend to substant ially lessen competition or create or maintain a violation of the Federal antitrust law s; and (5) in t he case of a n patent a pplication o r Federal Government o r foreign commerce wil l inv enti on covered by a foreign patent, the interests of th e United States industry in be enhanced. 35 U.S.C . § 20 9(a). The FAC specif ically invo kes § 209(a)(4), allegin g tha t USDA s action in gr antin g th e Commission a n excl usive 40 1 license to [th e Pate nted Varieties violates the A PA] 2 because. .. the exclu sive license is in violation of .. . [35 3 U.S.C.] § 209( a)(4), in t hat the exclusive licens e 4 5 6 7 substant ially lessen s com petition in the distribu tion, producti on, an d repr oduct ion of the Patented Vari eties and either c reates or ma intai ns a violation of the Fe deral 8 Antitrus t laws as al leged in the Sixth and Ninth Claim s for 9 Relief. 10 exclusiv e or p artial ly ex clusive license must no t ten d to 11 substant ially lessen comp etition or create or mai ntain a 12 13 14 15 FAC ¶90. Secti on 209(a)(4) s requireme nt th at an violatio n of t he Fed eral antitrust laws, is a c lear and specific direc tive that may be enforced by way o f the APA s judicial revie w prov ision s. 16 In addit ion, a lthoug h no such violation is allege d in 17 the FAC, at or al arg ument Plaintiffs invoked § 20 9(a)( 1), 18 arguing that g rantin g the license was not a reas onabl e and 19 necessar y ince ntive to e ither call forth the investm ent 20 capital and ex pendit ures need ed to bring the invention to 21 22 23 24 practica l appl icatio n ; o r otherwise promote the inve ntion s utilizat ion by the p ublic . This too is a clear and specific direc tive that may be enforced by a cou rt. 25 Defenda nts m otion to di smiss Plaintiffs licens e- 26 related APA cl aims pursua nt to sectio n 701( a)(2) s lim itation 27 on secti on 702 s wai ver o f sovereign immunity is DENIE D. 28 41 As 1 to these remai ning l icens ing claims brought under sect ion 2 209(a) o f the Bayh-D ole A ct, Defendants adv ance a numb er of 3 alternat ive ar gument s for dismissal. 4 5 2. Standing . 6 Defendan ts arg ue tha t Pla intiffs do not have stan ding to 7 bring AP A lice nsing claim s against the Federal De fenda nts. 8 To maint ain an actio n in federal court, Plaintiff s mus t have 9 10 11 12 Article III st anding . See Lujan v. N at l W ildlif e Fed n, 497 U.S. 871 , 872 (1990) . [ T]o satisfy Article III s sta nding requirem ents, a plai ntiff must show (1)[he] has s uffer ed an 13 injury in fac t tha t is (a) concrete and particu lariz ed and 14 (b) actu al or immine nt, n ot conjectural or hypoth etica l; (2) 15 the inju ry is fairly trac eable to the challenged actio n of 16 the defe ndant; and ( 3) it is likely, as opposed t o mer ely 17 speculat ive, t hat th e inj ury will be redressed by a fa vorable 18 19 20 21 decision . Fr iends of th e Ea rth v. Laidlaw Envtl. Ser vs. (TOC), I nc., 5 28 U.S . 167 , 180-81 (2000). In add ition to the Article III re quirem ents, plaintiffs bringing sui t und er the 22 APA, 5 U .S.C. § 706, must est ablish that th ey fall wit hin the 23 zone of inter est o f the statute under which the y bri ng 24 their la wsuit. 25 1186, at 1199 (9th C ir.20 04). 26 27 28 See City of Sausalito v. O Neill, 386 F.3d The burd en of establ ishin g the elements of standi ng falls up on the party asse rting federal jurisdicti on. 42 Lujan 1 v. Defen ders o f Wild life, 504 U.S. 555, 561 (1992). 2 element of Art icle I II standi ng must be supported in the 3 same way as an y othe r mat ter on which the plainti ff be ars the 4 5 6 7 8 9 10 11 12 [E]ach burden o f proo f, i.e ., wi th the manner and degree of e vidence required at th e succ essiv e stages of the litigati on. Bennett v. Spe ar, 52 0 U.S. 154, 167 (1997) (quoti ng Lu jan, 504 U.S. at 56 1). a. Injury i n Fact; Caus ation; Redressibility. To satis fy the inju ry in fact requirement, Plai ntiff s must pro vide e videnc e of either actual or threate ned i njury. 13 See Unit ed Sta tes v. Ensi gn, 491 F.3d 1109, 1116- 17 (9 th Cir. 14 2007). C ausati on req uires that the injury be fai rly 15 traceabl e to the ch allen ged action of the defend ant, and not 16 be the result of th e ind ependent action of some third party 17 not befo re the court . 18 19 20 21 (9th Cir . 2000 ). Tyler v. Cuomo, 236 F.3d 1124, 1132 Th e causation element is lackin g whe re an injury caused by a third party is too tenuously conne cted to the acts of th e defe ndant . Citizens for B etter Forestry v. 22 U.S. Dep t. of Agric. , 341 F.3d 961, 975 (9t h Cir. 2003 ). 23 Finally, redre ssibil ity r equires that plain tiff s how i t is 24 likely that a favor able court decision will redr ess t he 25 injury t o the plaint iff. 26 27 28 Lujan, 504 U.S. at 560. Redress ibilit y requ ires an analysis of whether t he co urt has the powe r to r ight o r to prevent the claimed inju ry. 43 1 2 3 4 5 6 7 Gonzales v. Go rsuch, 688 F.2d 1263, 1267 (9 th Cir. 198 2). The Unit ed Sta tes do es no t challenge plaintiffs abili ty to satis fy the Artic le II I requirements. However , the Commissi on mai ntains that , with respect to the al legat ions that the licen ses gr anted to the Commission by the USD A should b e decl ared v oid, Plaintiffs have not, an d can not 8 allege, any in jury f airly traceable to the challe nged action 9 of the U SDA. 10 Specific ally, the Co mmiss ion asserts that [f]ar from 11 injuring plain tiffs, the USDA s decision to licen se th e use 12 13 14 15 Doc. 67 at 20 (internal quotation omitt ed). of its p atente d grap e var ieties presents an oppor tunit y to plaintif fs tha t woul d not otherwise exist. Indee d, if the Court we re to invali date the licenses, which prov ide t he 16 authorit y for plaint iffs sub-license s, then plaintiff s would 17 have no way to use t he Pa tented Varieties short o f inf ringing 18 the USDA s pat ents. 19 argument . 20 21 22 23 24 Id. Pl aintiffs do not respond t o this The Comm ission s vie w of caus ation and redr ess is too narrow. If, f or exa mple, the entire licens ing program was declared inval id bec ause the USDA failed to satis fy th e terms of secti on 209 (a) of the Bayh-Dole Ac t, the licensing program 25 would li kely b e rema nded to USDA and the Commissi on fo r 26 further consid eratio n and /or findings. 27 order to compl y with 209( a), the licensing progra m mig ht have 28 44 In that event, in 1 to be re design ed in ways that would benefit Plain tiffs . 2 3 4 Plaintif fs hav e sati sfied the Article III standin g requirem ents w ith re spect to their licensing-related APA claims. 5 6 b. 7 8 9 10 11 12 Zone of Interest. For a p lainti ff to have prudential standing unde r the APA, the inter est so ught to be protected by the c ompla inant must be arguab ly wit hin t he zone of interests to be pr otected or regul ated b y the statu te in question. Nat l Credi t Union Admin. v . Firs t Nat l Ban k & Trust Co., 522 U.S. 479, 488 13 (1998) ( citati on omi tted) . 14 plaintif f has assert ed an interest within the zo ne of 15 interest s pro tected by a statute, the relevant p rovis ion is 16 the sta tutory provi sion whose violation forms th e legal 17 basis fo r [the plain tiffs ] complaint. 18 19 20 21 883. In determining whethe r a Lujan, 497 U.S. at A court is per mitte d to look beyond the ind ividu al statutor y prov ision on wh ich the complaint is bas ed an d may focus on the o bjecti ve of the entire statute in order to 22 better u nderst and it s pur pose. 23 Indus. A ss n, 479 U. S. 38 8, 4 01 (1987) (sta ting that a cou rt 24 is not limite d to c onsid ering the statute under which 25 responde nts su ed, bu t may consider any provision that helps 26 27 28 See Clarke v. Sec uriti es us to un dersta nd Con gress s o verall purposes behind t he relevant statu te); A ir Co urie r Conference v . Am. Posta l 45 1 Workers Union, 498 U .S. 5 17, 528 (1991) (citing Clarke ); 2 Westland s Wate r Dist . v. U.S. Dep t of Interior, 850 F. Supp. 3 1388, 14 25 (E. D. Cal . 199 4) (same). 4 5 6 7 Plaintif fs rem aining APA claims arise under the B ayhDole Act . In Servic e Eng inee ring Corporati on v. U.S. Dep t of Agric ulture , 1999 U.S. Dis t. LEXIS 21952 (D. Md. Ma rch 30, 8 1999), c orpora te pla intif fs were denied a patent licen se 9 because the fe deral government issued an ex clusive lic ense to 10 another corpor ation. 11 plaintif fs lac ked pr udent ial standing under the B ayh-Dole 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The district court conclude d tha t Act, bec ause Congre ss s primary policy and objec tive in adopting the A ct was to p romote the utilization o f inventions arising from f ederal ly su pported research and dev elopm ent. Id. at * 13-14 (quoting 35 U.S.C. § 200). The cour t does not a gree with Plaintiffs positio n that the Act was int ended to protect individuals, includin g corporatio ns, from the anticompetitive effects of governmen t licensing policies. Indeed , the Act clearly anti cipates, even encourages, suc h anticomp etitive effe cts since it permits the exclusiv e licensing of patented government inventio ns. While i t is true that Congress direc ted federal agencies not to grant exclusive or partia lly exclusiv e licenses w here doing so would be inconsis tent with th e antitrust laws, nothing in the Act indi cates that C ongress intended to protect t he specific economic in terests of parties in competit ion wi th gov ernme nt l icensees. Id. at * 14-15 (cita tions omi tted). The Service Engin eering plaintif fs had no pr udent ial standing to challeng e the USDA s grant of an ex clusiv e lic ense to another entity b ecaus e their interes ts [fe ll] ou tside the zone of interests protec ted by 46 1 2 3 4 5 6 7 the Bayh -Dole Act. Id. at *16. The reas oning of Service Engineering on the issue of t he anticomp etitiv e effe cts o f licensing is not persu asive . Section 209(a) (4) s prohibition of granting exclusive or partiall y excl usive licen ses that wil l ten d to substa ntially lessen c ompeti tion o r cre ate or maintain a violat ion o f the 8 Federal antitr ust la ws... is a direct expression of 9 Congress ional intent to c ontrol the anticompetiti ve ef fects 10 of exclu sive l icensi ng pr ograms. 11 competit ion wi th gov ernme nt licensees would have the 12 13 14 15 Who else but pa rties in incentiv e to e nsure that this provision is enforc ed? The connecti on bet ween P laint iffs alleged inju ry -- that they are rest ricted from freel y growing, selling, dist ribut ing, 16 reproduc ing, p ropaga ting or otherwise freel y using pla nt 17 material and t he fru it fr om the Patented Varietie s wit hout 18 acquirin g a li cense and p aying royalties to the C ommis sion -- 19 and this prote ction again st anticompetitive licen sing 20 programs is le ss cle ar. 21 22 23 24 Plaintiffs allege that some growers lawfully acqui red th e Pat ented Varieties before t hey w ere patented . If an inv entio n is known or used by th e pub lic before i t was patent ed, t he patent may be void, 35 U.S .C § 25 102(b), but Pl aintif fs ca nnot challenge the paten t in this 26 lawsuit. 27 Plaintif fs can frame a ca use of action under the Bayh- Dole 28 It i s not clear whether and to what extent 47 1 Act base d on a nticom petit ive effect of the licens ing p rogram 2 without challe nging the u nderlying Patent. 3 be affor ded an oppor tunit y to amend their c omplai nt, t o state 4 5 6 7 Plain tiffs will such a c laim, althou gh it see ms doubtful an amendment can be made con sisten t with Rule 11. Plaintif fs al so inv oke 3 5 U.S.C. § 209(a)(1), wh ich 8 requires that any ex clusi ve or partially exclusiv e lic ense be 9 a reaso nable and ne cessary incentive to-- (A) ca ll fo rth the 10 investme nt cap ital a nd ex penditures needed to bri ng th e 11 inventio n to p ractic al ap plication; or (B) otherw ise p romote 12 13 14 15 the inve ntion s util izati on by the public. Agai n, it is not clear ho w Plai ntiffs have been harmed in an y way that implicat es thi s prov ision . Do Plaintiffs assert that the 16 licensin g prog ram wa s a n ot reasonable and neces sary 17 incentiv e to c all fo rth i nvestment capital and/or othe rwise 18 promote the in ventio n s u tilization by the public beca use 19 growers were a lready cont ribu ting to research and deve lopment 20 programs witho ut the exis tence of the licensing p rogra m? 21 22 23 24 It is not p ossibl e to f ully evaluate Plaintiffs cla im un der the zone of intere st tes t bec ause Plaintiffs complai nt do es not include suffic ient a llega tion s. 25 Defendan ts mo tion t o dis miss the licensing-related 26 claims f or lac k of s tandi ng is GRANTED WITH LEAVE TO A MEND. 27 28 48 1 3. 2 Alternat ively, Defen dants assert that Plaintiffs APA 3 claims f ail to satis fy th e final agency ac tion requi rement. 4 The Supr eme Co urt he ld th at agency a ction is a prere quisite 5 6 7 8 9 10 11 12 13 Section 704 s Final Agency Action Requirement. to bring ing a claim under § 702: This pro vision conta ins two separate requirements . First, t he person cl aing a right to sue must identify some agenc y act ion that affects him in the spec ified fashio n; it is judicial review thereof to which h e is entitled. The meaning of agency action for purposes of § 702 is set fort h in 5 U.S .C. § 551(13 ), see 5 U.S.C. § 701(b )(2) ( For th e purpose of this chapter ... agen cy action ha[s] the me anin[g] given ... by section 551 of this title ), whi ch defines the term as the whole or a part of a n agency rule, order, license , sanction , relief, or the equivalent or denial thereof, or failure to act, 5 U.S.C. § 551(13). 14 15 Lujan, 4 97 U.S . at 8 82. 16 pursuant to sp ecific auth orization in the substan tive 17 18 19 20 21 Whe n, as here, review is sou ght not statute, but o nly un der t he general review provis ions of the APA, the agen cy act ion in question must be fin al ag ency action. Id. (citi ng 5 U.S.C. § 704 ( Age ncy action made reviewab le by statut e and final agency action for whic h there 22 is no ot her ad equate reme dy in a court are subjec t to 23 judicial revie w. )). 24 25 26 27 28 Plaintif fs cit e a nu mber of cases, including Jaffe v. United S tates, 592 F .2d 7 12 (3d Cir. 1979) and Guerrero v. Stone, 9 70 F.2 d 626, 627- 28 (9th Cir. 1992), for the proposit ion th at APA § 70 2 waives sovereign immun ity f or any 49 1 equitabl e civi l acti on in voking a district court s fed eral 2 question juris dictio n. 3 Lujan, 4 97 U.S . at 8 82, a nd Heckler v. Chaney, 470 U.S. at 4 5 6 828, mak e it c lear t hat § 702 s waiver is conditi oned upon overcomi ng § 7 01 and 704 s requirements. 5 7 a. 8 9 B ut, Supreme Court preced ent, such as Agency A ction. The APA offers a rig ht of judicial review for equ itabl e relief f or [a ] pers on suffering legal wrong because of 10 5 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Th e Ni nt h Ci rc ui t st ill r ec og ni ze s th e ex is te nc e of a n int ra -c ir cu it spl it c on ce rn in g th e rel at io ns hi p o f § 7 04 t o § 70 2 s wa ive r of s ov er e ign imm un it y. Fo r ex am pl e, Th e Pr es by t eri an C hu rc h (U .S .A .) v. U .S ., 8 70 F.2 d 51 8, 5 25 ( 9t h Ci r. 19 89 ), h el d th at C on gr es s di d no t l im it § 7 02 s sov er ei gn i mm un it y wa ive r to t ho se act s li st ed i n § 55 1( 13) , wh ic h def in es a ge nc y ac ti on to in cl ud e[ ] th e wh ol e or a p ar t of an a ge nc y rul e, o rd er , li ce ns e, sa nc ti on , re l ief , or t he e qu iv al en t o r de ni al the re of , or f ai lu re t o a ct . How ev er , sh or tl y af te r T he P re sb yt e ria n Ch ur ch w as d ec id ed, L uj an , 497 U .S . at 8 82 , he ld th at ag en cy act io n i s a re qu ir em ent o f § 70 2; see als o Ra tt le sn ak e Co al iti on v . EP A, 509 F .3 d 10 95 , 11 03 ( 9th C ir . 20 07 ) ; Gal lo C at tl e Co . v. U .S. D ep t. o f A gri cu lt ur e, 1 59 F .3 d 119 4 (9 th C ir . 199 8) . I t is n ot a t all c le ar h ow any a sp ec t of T he P re sby te ri an Chu rc h s a ge nc y ac ti on h ol di ng s u rvi ve s Lu ja n an d re la ted N in th C ir c uit pre ce de nt . S ee V et er ans f or C om mo n Se ns e v Pe ak e, 5 63 F . S up p. 2 d 10 4 9, 105 8 (N .D . Ca l. 2 00 8) (n ot in g th at Luj an ma de c le ar t ha t w ai ve r of sov er ei gn i mm un it y un der § 7 02 i s c ons tr ai ne d by t he p ro vis io ns c on ta i ned in § 70 4 ). Nev er th el es s, t he N in th Ci rc ui t co n tin ue s to r ec og ni ze a n in tr acir cu it sp li t. Gr os Ve nt re T ri be v. Un it ed S ta te s, 4 69 F. 3d 8 01 , 80 8 809 ( 9t h Ci r. 2 00 6) , not ed w it ho ut res ol vi ng t he c on fl ic t b et we en G al l o Cat tl e, 1 59 F .3 d at 1 198 , wh ic h sp e cif ic al ly s ta te d th at t he A PA s wai ve r of s ov er ei gn i mmu ni ty c on ta i ns se ve ra l li mi ta ti on s, i nc lu di ng § 704 s fi na l ag en cy a cti on re qu ir e men t, a nd T he P re sb yt eri an C hu rc h, whi ch h el d th at § 7 02 s wa iv er i s n ot co nd it io ne d on t he AP A s a ge nc y act io n r eq ui re me nt . Se e al so S is k iyo u Re gi on al E du c. P roj ec t v. U .S . For es t Se rv ., 5 65 F .3 d 5 45 , 55 4 n. 8 (2 00 9) ( I n li gh t of ou r det er mi na ti on t ha t [p lai nt if f] c ha l len ge s fi na l ag en cy a cti on , we n ee d not a dd re ss t he in tr a-c ir cu it s pl i t th at w e ha ve r ec og niz ed e xi st s o n the q ue st io n wh et he r the fi na l ag e ncy a ct io n r eq ui re me nt of t he A PA is jur is di ct io na l. ). Sis ki yo u su gg es ts t ha t o ne w ay t o r eco nc il e Th e Pr es by te ria n Ch ur ch and L uj an m ay b e to r eco gn iz e th at the re i s an i nt ra -c ir cui t sp li t as to whe th er o r no t th e a gen cy a ct io n req ui re me nt i s ju ri sd ict io na l, o r mer el y an e le me nt o f an AP A cl ai m. In t hi s ca se , th is i s a d is ti nc ti o n wit ho ut a d if fe re nc e. A ft er L uj an it ca nn ot s er io us ly b e a rg ue d th at an APA c la im c an s ur vi ve un le ss ag en c y a ct io n, as t ha t te rm is d ef in ed in 5 U .S .C . 55 1( 13 ), i s all eg ed . 50 1 agency a ction, or ad verse ly affected or aggrieved by a gency 2 action w ithin the me aning of a relevant statute.. .. 3 5 U.S.C. § 702 . 4 5 6 7 APA § 55 1(13) defines agen cy action to include [] the whole or a part of an agency rule, orde r, license, sanct ion, r elief , or the equivalent or d enial thereof, or fa ilure to ac t. 5 U.S.C. § 551(13)(empha sis 8 added). 9 discrete agenc y acti ons, as their definitions mak e cle ar: an 10 agency s tateme nt of futur e ef fect designed to imp lemen t, 11 interpre t, or prescr ibe l aw or policy (rule); a fina l 12 13 14 15 All of tho se categories involve circumscribed, disposit ion in a mat ter o ther than rule making ( order ); a permit or oth er for m of permission (license); a prohibi tion o r taki ng of other compulsory or res trict 16 action (sanct ion); or a grant of money, assista nce, 17 license, autho rity, etc. , or recognition of a c laim, right, 18 immunity , etc ., or taki ng of other action on th e 19 applicat ion or petit ion o f, and beneficial to a p erson 20 (relief) . 21 22 23 24 Norton v. S. U tah Wilderness All iance, 542 U.S. 55, 62 ( 2004)( citing 5 U. S.C. §§ 551(4), (6), (8) , (10 ), (11)). USDA s d ecisio n to g rant exclusive licenses to th e 25 Commissi on is the on ly ac tion about which plainti ffs c omplain 26 that eve n argu ably f alls with the definitio n of agenc y 27 action. USDA s deci sions to engage in or coopera te in a 28 51 1 patentin g prog ram wi th th e Commission, to file an d pro secute 2 patent a pplica tions, and to procure, accept, and maint ain 3 issued p atents do no t qua lify. 4 5 b. Final Ag ency Action. 6 By its t erms, the APA per mits review only of agency 7 action m ade re viewab le by statute and final agenc y act ion for 8 which th ere is no ot her a dequate remedy in a cour t.... 9 10 11 12 5 U.S.C. § 704 . Whe re, a s here, no specific stat utory judicial revie w prov ision exists, the APA only applies to final a gency action . Id.; Lujan, 497 U.S . at 8 82. An 13 agency a ction is dee med final for purposes of A PA wh en it 14 meets th e foll owing two c riteria: 15 16 17 18 19 20 21 (1) The acti on must mark the consummation of the agen cy s decisio nmaking process it must not b e of a mer ely tentativ e or interlocutory nature; an d (2) The acti on must be o ne by which rights or obligati ons have bee n determined, or from which legal c onsequences will flow. Bennett v. Spe ar, 52 0 U.S. 154, 177-78 (199 7). The USDA s act s of pursui ng patent pr otecti on for the 22 Patented Varie ties, as we ll as its efforts to coo perat e with 23 the Comm ission in a paten ting program, do not con stitu te 24 final agency actio n. 25 applicat ion fo r the patent an d its prosecution no not 26 27 28 U ntil the USPTO grants a paten t, the determin e any rights or o bligations from which le gal conseque nces w ill fl ow. Ther e appears to be no disput e that 52 1 the USDA s dec ision to en gage in the licensing pr ogram was a 2 final a gency action . 3 4 5 6 7 With the excep tion o f the issuance of exclu sive l icens es to the C ommiss ion, a ll of Plaintiffs APA allegat ions fail to state a claim under the A PA because they are not fina l agency a ctions . De fendants motion to dis miss the APA 8 claims b ecause an ad equat e alternative remedy exi sts i s 9 DENIED a s to t he exc lusiv e license claims and GRA NTED as to 10 all othe r clai ms. 11 12 13 14 15 16 17 18 19 4. Section 704 s No Ade quate Alternative Remedy Requirem ent. Addition ally, [s]ec tion 704 of the Administrativ e Procedur e Act bars r eview of agency action by the dist rict court wh en the re is an ad equa te remedy in a nother foru m. Marshall Leasi ng, In c. v. United States, 893 F.2d 1096 , 1100 (9th Cir . 1990 ). Defendan ts ass ert th at Pl aintiffs have an adequat e 20 alternat ive fo rum fo r rev iew of the validity and 21 enforcea bility of th e gov ernm ent s patents in response to any 22 infringe ment s uit br ought by the government or au thori zed to 23 24 25 26 be broug ht by the Co mmiss ion against the Plaintif fs. See Hallmark , 959 F. Sup p. at 543 (finding the Congressional framewor k [of the Pa tent Act] precludes the right of third 27 parties to fil e a ci vil a ction in the case of the issu ance of 28 a Certif icate of Cor recti on; the third party s re cours e for 53 1 the alle ged er rors m ade b y the PTO is to raise th e iss ue as a 2 defense in an infrin gemen t suit. ); Hitachi, 776 F. Supp. at 3 10 ( Ins tead o f prov iding third-party prote stors with the 4 5 6 7 8 right to judic ial re view of examination proceedin gs, C ongress authoriz ed the m to r aise allegations of patent in valid ity as a defens e to a n infr ingem ent action. ). In respo nse, P lainti ffs a gain invoke MedImmune, which 9 arguably recog nizes that the remedy of a counterc laim to an 10 infringe ment s uit is not always adequate, holding that where 11 a plaint iff is threa tened with government action, Plai ntiff 12 13 14 15 is not r equire d to expos e himself to liability before bringing suit to cha lleng e the basis for the thre at... . U.S. at 128-29 . 549 Bec ause MedImmune do es not , of its own 16 accord, permit antic ipatory suit by Plaintiffs against the 17 United S tates, Plain tiffs lack an adequate altern ative remedy 18 with res pect t o the paten t re lated claims, but th ese h ave 19 been dis missed on ot her g rounds. 20 21 22 23 24 25 26 27 28 As to th e lice nse-related claims, Defendant s poin t to no alternat ive re medy. Defe ndants motion to dismis s the licensin g-rela ted cl aims because an adequat e alternati ve remedy e xists is DEN IED. 5. Exhausti on of Admini strative Remedies. Defendan ts arg ue tha t the APA allegations should be dismisse d beca use Pl ainti ffs failed to raise the m bef ore the 54 1 agency d uring admini strat ive proceedings. 2 imposed either by st atute or the courts: 3 4 5 6 7 8 9 10 11 12 13 14 15 Exhaus tion may be Of param ount importa nce to any exhaustion inquiry is congress ional intent . McCar thy v. Madigan, 503 U.S. 140 , 144 (1992) (citing Patsy v. Board of Regents of Florida, 457 U .S. 496 (1982) (in ternal quotatio n marks omit ted)), superceded by st atute as stated i n Boot h v. C hurne r, 5 32 U.S. 731, 732 (2001).[ ] Where Co ngress specifically mandates, exhausti on is requir ed. Id. (citing Coit Independ ence Joint V enture v. FSLIC, 489 U.S. 561, 579 (198 9); Patsy, 4 57 U.S. at 502 n. 4). But where Co ngress has n ot clearly required exhaustio n, sound ju dicial discr etion governs. McCarthy, 503 U.S. at 144 (citing McGee v. United States, 402 U.S. 479, 483 n. 6 (1971) ). To discern the intent of Congress , [w]e loo k first to the plain language of the stat ute, constru ing the provisions of the ent ire law, inc luding its o bject and policy. United States v . $493,850.0 0 in U.S. Currency, 518 F.3d 1159, 11 67 (9th Cir. 2008) (quoting Carson Harbor Vill., L td. v. Unoca l Corp., 270 F.3d 863, 877 (9 th Cir. 200 1)). 16 Cassirer v. Ki ngdom of Sp ain, 580 F.3d 1048, 1059 -60 ( 9th 17 Cir. 200 9). 18 Here, al though the B ayh-Dole Act does not explicitly 19 impose a n exha ustion requirement, it does p rovide for a 20 notice a nd com ment p eriod : 21 22 23 24 25 26 27 28 Public n otice.--No exclus ive or parti ally exclusive license may be grant ed under section 207(a)(2) unless p ublic notice of the intention to grant an exclusiv e or partial ly exclusive license on a federall y owned inve ntion has been provided in an appropri ate manner a t least 15 days before the license is granted, and the Federal agency has consider ed all comme nts received before the end o f the comm ent period i n response to that public notice. This subsect ion shall not apply to the licensin g of inventi ons made under a cooperative research and d evelop ment agreement entered into under se ction 12 of the Stevenson-Wyd ler Te chnology Innovati on Act of 19 80 (15 U.S.C. 3710a). 55 1 2 3 35 U.S.C . § 20 9(e). The Elev enth C ircuit has read an exhaustion requi remen t 4 into thi s noti ce and comm ent period. 5 v. Griff in Cor p., 93 8 F.2d 1249, 1252-53 (1 1th Cir. 1991). 6 In South ern Re search, a c ompany challenged the go vernm ent s 7 grant of an ex clusiv e pat ent license to another e ntity . 8 9 10 11 South ern Research Inst. The Eleventh Circu it aff irmed dismissal of the action , hol ding that by failin g to raise objections d uring the prescri bed comment period , the compa ny had waived its right to ch allenge 12 the lice nsing decisi on. 13 that bec ause [t]he licen sing scheme under 35 U.S .C. § § 207 14 and 209 and th e appl icabl e re gulations provided an ave nue of 15 administ rative appea l of which [the plaintiff] fa iled to 16 avail it self, judic ial r eview of the licensing decisi on was 17 18 19 20 21 22 preclude d. Id . at 1 253. Id. at 1252-53. The court ex plained Pla intiff offers no persuasi ve argument why t he rea sonin g of Southern Research should not apply he re to impose an exhaustion requirement on plaintiffs challeng ing li censin g dec isions under the Bayh-Dole Act. Here, in accor dance with 35 U.S.C. § 209(e), the USDA 23 issued a notic e in t he Fe deral Register on April 29, 2 003, 24 explaini ng the agenc y s i ntent to grant an exclus ive l icense 25 26 to the C ommiss ion fo r the Sweet Scarlet var iety. Reg. 226 71 (Ap ril 29 , 200 3). 6 68 Fed. On December 23, 2004, th e USDA 27 28 6 P la in ti ff s ar gu e th at th e US DA i m pro pe rl y of fe rs e vi de nce 56 1 issued t wo not ices i n the Federal Register of its inte nt to 2 grant ex clusiv e lice nses for the Scarlet Ro yal and Aut umn 3 King var ieties to th e Com mission. 4 5 6 7 23, 2004 ). 69 Fed. Reg. 7 6902 (Dec. Al l thre e not ices informed the public that the proposed licen ses wo uld b e granted within ninety days unless the USDA recei ved w ritte n evidence a nd arg ument which 8 establis hes th at the gran t of the license would n ot be 9 consiste nt wi th the Bayh -Dol e Act and applicable 10 regulati ons. 11 argument durin g the presc ribed comment period. 12 13 14 15 Plaint iffs failed to present any ev idenc e or The Nint h Circ uit recognizes a number of ex ceptions to judicial ly imp osed e xhaus tion requirements. For examp le, a court m ay dec ide an issu e not raised in an agenc y act ion if 16 the agen cy lac ked ei ther the power or the jurisdi ction to 17 decide i t. 18 1985) (i nterna l cita tions and quotations om itted) . 19 exceptio n perm its a court to decide issues over which an 20 agency h as pow er and juri sdiction when exceptiona l 21 22 23 24 25 26 27 28 R eid v. Enge n, 7 65 F.2d 1457, 1461 (9th C ir. An othe r circumst ances warran t suc h review, notwithstandin g the petition er s f ailure to p resent them to the agency. Id. at 1461-62. reg ar di ng i ts c om pl ia nce w it h th e n oti ce a nd c om me nt r eq uir em en ts . T h ese not ic es , pu bl is he d in th e Fe de ra l R egi st er , ar e pr op er ly th e su bj ec t o f jud ic ia l no ti ce . S ee 44 U .S .C . § 1 507 ( co nt en ts o f th e Fed er al R eg is t er sha ll b e ju di ci al ly n oti ce d) . M or e ove r, 4 4 U. S. C. § 1 50 7 p ro vi de s th a t, unl es s ot he rw is e pr oh ibi te d by s ta t ute , pu bl ic at io n of n oti ce i n th e Fed er al R eg is te r cr ea tes a r eb ut ta b le pr es um pt io n th at p rop er n ot ic e w as iss ue d. 57 1 Plaintif fs arg ue for the application of one or mo re of 2 these ex ceptio ns, as serti ng that they could not h ave b een 3 aware of certa in fac ts ne cessary to object to the USDA s 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Federal Regist er not ices. Specifically, Pl aintif fs ar gue: At the t ime of the n otice and comment periods, Plaintif fs could not have known that (1) the USDA obtained a patent on Sweet Scarlet through inequita ble conduct; (2) the Patented Varieties h ad already been in publ ic use and on sale more than a year pri or to the fi ling of the patent applicatio ns; (3) the USDA and the Commission would seek to enforce, license, an d collect royalties on invali d and unen forceable pa tents, and (4) the USDA would allow th e Commission to limit distribution to a small nu mber of nurs eries, including nurseries wi th family t ies to Commi ssion board members. Indeed, nothing in the notic es regarding the USDA s inten t to exclu sively licen se the Patented Varieties to the Commissi on provided the details regarding the planned royalty prog ram. Doc. 70 at 19- 20. The firs t thre e purp orted ly unknown facts all con cern the vali dity o f the paten ts. Although these argu ably implicat e the except ion f or matters outside of th e age ncy s power or juris dictio n, th ese patent-related arguments cannot 21 be adjud icated here becau se of sovereign immunity . 22 fourth p urport edly u nknow n fact -- th at the USDA would allow 23 the Comm ission to li mit d istribution to a small n umber of 24 nurserie s, inc luding nurs eries with family ties t o Com mission 25 26 27 28 Th e board me mbers -- is arguably relevant to a claim that the Commissi on fai led to comp ly with 35 U.S.C. § 209( a), b ut it is not c lear w hy thi s fac t alone, in light of all othe r known 58 1 facts, w ould h ave ca used Plaintiffs to comment on the 2 licensin g proc eeding . 3 exhausti on sho uld be excu sed in this case. 4 5 6 7 8 9 Plaintiffs have not demonstrated th at Defen dants motion t o dism iss fo r fai lure to exhaust is GRANT ED WI TH LEAVE TO AMEND . Pla intif fs shall be afforded the oppo rtunity to amend on th is iss ue an d shall allege the ir excuse-fromexhausti on the ory in any amended complaint. 10 C. Patent I nvalid ity Cl aims (Second, Third, & Fourth Clai ms for Reli ef). 11 The Seco nd, Th ird, a nd Fo urth Claims For Relief a gains t 12 all Defe ndants reque st de clarations that the thre e pat ents 13 are unla wful a nd inv alid under the Declaratory Judgment Act 14 15 16 17 18 and the APA. These claim s fail for the same reas ons t hat the APA clai ms fai l. Th e Uni ted States is an indispe nsabl e party to these claim s that cann ot be joined. D. 19 Declarat ion of Unenf orcea bility for Inequit able C onduc t Regardin g the 891 P atent (Fifth Claim For Relief ). 20 The Fift h Clai m for Relie f against all Defendants 21 requests a dec larati on th at the 891 patent is un enfor ceable 22 because Defend ants f ailed to fully disclose to th e USP TO that 23 the Swee t Scar let va riety was in the public domain pri or to 24 the fili ng of the pa tent application. 25 26 27 28 Because th is cl aim concerns the e nforce abili ty of a patent held by t he Un ited States, this c laim m ust b e DISMISSED WITH P REJUDI CE be caus e the Unit ed Sta tes ca nnot be joined as a par ty. 59 1 2 E. Antitrus t Clai m (Six th Cl aim For Relief). Plaintif fs all ege that the Commission violated fe deral 3 antitrus t laws by e nforc ing patent rights ... an d col lecting 4 royaltie s ... while knowi ng that the patent on Sw eet S carlet 5 6 7 8 could no t be e nforce d due to prior public use and ineq uitable conduct. FAC ¶155. Thi s claim would require pl ainti ffs to demonstr ate th e unen force ability of the Sweet Sca rlet patent. 9 Accordin gly, t he ant itrus t claim must be dismisse d und er Rule 10 19 as we ll. 11 do[es] not re quest that the Court enter any judg ment 12 regardin g the validi ty or enforceability of any g overn ment 13 14 15 16 17 18 P lainti ffs argument tha t thei r antitrust claim property , Doc . 71 a t 9, is unpersuasive, as the claim explicit ly dep ends o n the allegation that the pa tent on Sweet Sc arlet could not b e enforced due to prior publi c use and ineq uitabl e cond uct. FAC ¶155. Moreover , to e stabli sh th e type of monopoly Plain tiffs 19 allege, a Wal ker Process vi olation, it is necessary to 20 appraise the e xclusi onary power of the illegal patent claim 21 in terms of th e rele vant market for the product i nvolv ed. 22 23 24 25 See Walk er Pro cess, 382 U.S. at 177-78. It has p revio usly been rec ognize d that it i s dubious whether each of t he Patented Varie ties c ould constitute its own relev ant m arket, 26 Doc. 42 at 61, but p laint iffs were afforded leave to a mend to 27 attempt to ade quatel y all ege that no other subst itute s for 28 60 1 each Pat ented Variet y exi st, id. at 61-62. 2 no such allega tions; inst ead it asserts the relev ant m arkets 3 can be d efined by th e att ributes for each patente d var iety 4 5 6 7 describe d in t he rel evant patent. The FAC contains The FAC also a llege s that each pat ented variet y has unique characteristics and other varietie s are not r eason ably interchangeable wi th an d do 8 not prov ide e ffecti ve substitutes to the Patented 9 Varietie s. 10 11 12 13 14 15 FA C ¶¶ 1 59-61. The Comm ission argue s tha t Plaintiffs allegation s are inadequa te to satisf y evo lving pleading standards . T o survive a moti on to dismi ss, a complaint must con tain sufficie nt fac tual m atter , accepted a s true , to state a claim to relie f that is p lausible on its face. Iqba l, 129 16 S. Ct. a t 1949 (quot ing Twomb ly, 550 U.S. a t 570) . 17 define m arkets based on interchangeability of us e or the 18 cross-el astici ty of demand. 19 191, 200 (2d C ir. 20 01); Newcal Indus., Inc. v. I kon Office 20 Solution , 513 F.3d 1 038, 1045 (9th Cir. 2008). 21 22 23 24 Co urts Todd v. Exxon Corp. , 275 F.3d The relevant inquiry is whe ther g rower s -- the con sumers of grapevines -regard o ther v arieti es (o r other crops) as reason able economic subst itutes for the Patented Varieties. Newc al, 513 25 F.3d at 1045; Apple, Inc. v. Psystar Corp., 586 F. Sup p. 2d 26 1190, 11 96 (N. D. Cal . 200 8). 27 28 Plaintif fs all ege no plau sible basis to conclude that 61 1 growers regard the P atent ed Varieties as irreplac eable , nor 2 do they allege that growe rs w ould not substitute other crops 3 for the Patent ed Var ietie s. 4 5 6 7 8 See, e.g ., Uni ted States v. E.I. DuPont d e Nemo urs, I nc., 351 U.S. 377, 394 (1956) (rejecting argument cello phane was i n different market from other wrapping mater ials e ven t houg h each of the se wrapping material s is d isting uisha ble ). Plaintif fs hav e twic e bee n granted leave to amend this 9 10 claim. 11 claim is GRANT ED WIT H PRE JUDICE. The Co mmissi on s motion to dismiss the an titru st 12 13 14 15 16 17 F. Exclusiv e Lice nse Cl aims (Seventh & Eighth Claims For Relief). The Seve nth Cl aim fo r Rel ief seeks a declaration that the Comm ission s exc lusiv e license agreements for the Patented Varie ties a re vo id and unlawful under fe deral law on 18 the grou nd tha t the paten ts are invalid and/or we re ob tained 19 through inequi table condu ct. 20 pursuant to Ru le 19, as i t challenges the validit y of a 21 patent h eld by the U nited States, which cannot be join ed to 22 the laws uit. 23 24 25 26 This cl aim must be dismi ssed The Eigh th Cla im for Reli ef against the Commissio n see ks a declar ation that t he ex clus ive license ag reements fo r th e Patented Varie ties a re vo id and unlawful under state law on 27 the grou nds th at the pate nts are invalid and/or w ere o btained 28 through inequi table condu ct. The Commission argu es th at this 62 1 state la w chal lenge to the li cense agreements between the 2 Commissi on and the U SDA i s preempted by federal l aw. 3 unnecess ary to engag e in a preemption analysis be cause , state 4 5 6 7 It is law cann ot be used t o cha llenge a contract entere d int o pursuant to fe deral law w here the government is a part y. See O Neill v. Uni ted St ates, 50 F.3d 677, 682 (9th Cir. 1 995) 8 ( Federa l law govern s the interpretation of contr acts entered 9 into pur suant to fed eral law where the government is a 10 party. ) . 11 12 Defendan ts mo tions to di smiss the Seventh and Eighth Claims f or Rel ief ar e GRA NTED WITHOUT LEAVE TO AM END. 13 14 15 G. Unfair C ompeti tion C laim. The Comm ission initi ally sought dismissal of Plai ntiff s 16 § 17200 claim in lig ht of plaintiffs inability t o sta te a 17 predicat e anti trust claim . 18 19 20 21 Doc. 20 at 27-28. Th e Feb ruar y 20, 2009 Decis ion re jecte d this argument, conclud ing t hat the unfair c ompeti tion c laim also encompassed the all egati on that the Comm ission coll ect[e d] patent royalties from grow ers who 22 paid for the r esearc h and development of the Pate nted 23 Varietie s thro ugh as sessment fees. 24 25 26 27 28 Doc. 42 at 69-71. As a thr eshold matte r, th e portion of the Unfair Competit ion cl aim th at re lies upon the Commission s enforcem ent of an al leged ly fraudulently procur ed pa tent must be dismis sed un der R ule 19. 63 1 The Comm ission also argues that Plaintiffs alter native, 2 double paymen t the ory f inds no support in the l aw, a s there 3 is no au thorit y for the p roposition that it is un lawfu l or 4 5 6 7 unfair u nder § 17200 for an entity created under state law to require grower s to b oth f und research into the de velop ment of new grap evine variet ies, and then force those sam e gro wers to 8 pay agai n for their use. 9 Competit ion la w is m eant to permit judicial revie w of a 10 broad and s weepin g ra nge of business activiti es. 11 v. Wash. Mut. Inc., 142 C al. App. 4th 1457, 1471 (2006 ); Cal- 12 13 14 15 But, California s Unfai r McKell Tech Com mc n, Inc. v . Los Angeles Cellular Tel. C o, 20 Cal . 4th 163, 180 ( 1999). The unlawful criteria enc ompas ses the violatio n of any la w, ci vil or criminal, statuto ry or 16 judicial ly mad e, fed eral, state or local. 17 App. 4th at 14 74. 18 not spec ifical ly pro scrib ed by some other law so long as it 19 offends an es tablis hed p ublic policy or ... is i mmora l, 20 unethica l, opp ressiv e, un scru pulus or substantially in jurious 21 22 23 24 to consu mers. McKel l, 14 2 Ca l. T he u nfair prong is satisfie d ev en if Kore a Supply Co v. Lockheed Marti n Cor p., 29 Cal. 4th 1134, 1143 (2003 ); Heighly v. J.C. Penny Life Ins. Co., 257 F. Su pp. 2d 1241 , 12 59 (C.D. Cal. 2003). 25 Plaintif fs al legati ons c oncerning the double payment 26 requirem ent ar guably meet the definition of unfa ir, at 27 least fo r plea ding p urpos es. 28 64 1 The Comm ission sugge sts, in the alternative, that the 2 Unfair C ompeti tion c laim is preempted by federal law, as it 3 would ta ke awa y the Commi ssion s and USDA s federal right to 4 5 6 7 8 assert p atents again st an y California table grape grow er. Doc. 67 at 25. argument or ad dress any o f the requirements for f edera l preempti on. The Comm ission s mot ion t o dismiss the Unfair 9 10 But, the Commission does not deve lop t his Competit ion cl aim is DENIED WITHOUT PREJUDICE. 11 12 H. Unjust E nrichm ent & Const ructive Trust Claims. Plaintif fs un just e nrich ment and constructive tr ust 13 14 claims a re de penden t upo n Plaintiffs substantiv e ... 15 antitrus t clai ms and unfa ir competition claims. 16 71; see also M cBride v. B ough ton, 123 Cal. App. 4th 37 9, 387 17 (2004); PCO In c. v. Christensen, Miller, Fink, Jacobs, 18 19 20 21 22 Doc 42 at Glaser, Weil & Shapi ro, L LP, 150 Cal. App. 4th 38 4, 39 8 (2007). If ei ther s urviv es, so do the unjust enr ichme nt and construc tive t rust c laims. I. 23 Reconsid eratio n of D eterm ination that United Stat es is an Indis pensab le Par ty Un der Rule 19. 24 Plaintif fs als o seek reco nsideration of the 25 determin ation that t he Un ited States is an indisp ensab le 26 party un der Ru le 19( b). 27 decision from the No rther n District of Illinois, Sourc eOne 28 Plaintiffs cite a recent unpu blished 65 1 Global P artner s, LLC v. K GK Synergize, Inc., 2009 WL 1 346250 2 (N.D. Il l. May 13, 2 009). 7 3 plaintif fs cou ld cha lleng e the validity of a gove rnmen t-owned 4 5 6 7 SourceOne consid ered w hethe r patent i n a de clarat ory r elie f suit against the patent s coowner an d excl usive licen see without joining the Unite d States. The c ourt c onclu ded that it had subject matte r 8 jurisdic tion o ver pl ainti ffs declaratory relief claim under 9 MedImmun e, bec ause t he na med defendant sent plaintiff a cease 10 and desi st let ter cl aiming that plaintiff s product infrin ged 11 on the p atent held j ointl y by the named defendant and the 12 13 14 15 United S tates. Id. at *3 -4. The parties agreed that the governme nt had not w aived its sovereign immunity and therefor e that joind er wa s not feasible. Id. at *4. 16 district court then turne d to the question of whe ther 17 The dismissa l was requir ed un der Rule 19(b). 18 Examinin g the first Rule 19(b ) factor, the extent to 19 which a judgme nt ren dered in the party s absence might 20 prejudic e that perso n or the existing parties, Source One 21 22 23 24 25 consider ed wh ether the i nterests of the absent p arty are adequat ely pr otecte d by those who are present. Id. at *6. SourceOn e reli ed hea vily on Dainippon Screen Mfg. Co. v. CFMT, In c., 14 2 F.3d 1266 , 1272 (Fed. Cir. 1998): In Daini ppon, plaint iff s ued CFMT and CFM f or a declarat ory judgment of noninfringement and 26 27 7 28 A di st ri ct c ou rt d ec isi on f ro m an o the r ci rc ui t ha s no b ind in g ef fe ct on ano th er d is tr ic t co ur t. 66 1 2 3 4 5 6 7 8 9 10 11 12 13 invalidi ty of a pate nt that CFMT owned and licens ed on an ex clusive basi s to its parent, CFM. That license reserved to CFMT the exclusive right to further sublicense t he patent, and to take legal action i n the event of infringement. The trial co urt dismisse d CFMT for l ack of personal jurisdiction, and then dismissed t he claim against CFM on the ground t hat under Ru le 19 the case could no t proceed in the a bsence of CF MT. On appea l, the Feder al Circuit reversed. The appe als court he ld that the trial court erred in concludi ng that it lacked juris diction over CFMT, and furthe r held tha t even if CF MT could not be sued, the tri al court ab used its discretion in concluding t hat CF MT was an i ndispensable party. The Federal Circuit found th at CFMT s ow ners[h]ip interest would be adequate ly protected by CFM, a party that owns C FMT in its e ntirety ... and that has manifested its obvious concer n over the maintenance of CFM T s patents. Dainippon, 142 F.3d at 1272. The court reasoned that even i n its absence, CFMT s interes ts would be protected b ecause CFMT and CFM share th e common g oal of assur ing that the [ ] patent not b e held inv alid or be i nfrin ged by Dainippon .... Id. 14 2009 WL 134625 0 at * 6 (footnote omitted)(em phasis added). 15 The Sour ceOne court then reas oned, [a]s in Daini ppon, the 16 Rule 19( b)(1) factor weig hs strongly in favor of allow ing the 17 18 19 20 21 22 23 24 25 26 27 28 claims o n the ²125 P atent to proceed in the absence of the Governme nt : The Gove rnment argue s that it will suffer prejudi ce if its r ights under the ²125 Patent are adjudicat ed in its a bsence becau se if the patent is declared invalid, the Governm ent will have lost substanti ve rights w ithout an op portunity to defend its rights to t h e claimed inv entions of the patent (Gov t Stmt. at 4-5). However, we have been offered no evidence that KGK an d the Government have any conflict ing interest s with respect to the ²125 Patent, and no reaso n to believe that KGK i s unab le to vigor ously assert and protect its mutual inter est with the Government in asserting the validity of the ²125 Pat ent and chal lenging any alleged infringem ent of it. T o the contra ry, KGK has demonstrated its willingn ess to champ ion the validity of the ²125 Patent a nd to attack any alleged infringement of it, as shown by the ceas e and desist letters it sent to 67 1 2 3 4 5 6 7 8 9 10 11 12 SourceOn e and its cu stomers and associates. The Governme nt has not a sserted any dissatisfaction w ith SourceOn e s actions in doing so. KGK s defense of its comm ercial inter ests based in the ²125 Patent will ade quately prot ect the Government s interest s as well. We also consider thi s factor to be of special importan ce in this c ase, due to the fact that the absent p arty is the Government. In Pimental , the Supreme Court stated that under Rule 19, dismiss al of the a ction must b e ordered where there is a potentia l for injury to the interests of the abse nt sovereig n. 128 S.Ct . at 2191. Conversely, the absence of prejudice to the Government in t his ca se, due to t he ability o f KGK to protect the Governme nt s interes ts, weighs strongly in favor of allowing the case to proceed. Id. (foo tnote omitted). The prin cipal case r elied upon in Sou rceOne , Dainippon 13 Screen M anufac turing Co. v. CMFT, Inc., 142 F.3d 1266 (Fed. 14 Cir. 199 8), wa s exte nsive ly discussed and disting uishe d by 15 the Febr uary 2 0, 200 9 Dec ision. 16 17 18 19 20 21 22 23 24 25 26 27 28 Plaintif fs cite Dainippon Scr een Mfg. Co., Ltd. v. CFMT, 14 2 F.3d 1266 (Fed. Cir. 1998), to support their ar gument that in an action challengin g the validity of a patent , the action can proceed with out the pate nt owner. Here, h owever, unlike in Dainippo n, the re is no un ity of ownership or interest between the patent owner and licensee. The facts of Daini ppon are in structive. The pat ent ow ner in the s uit wa s not an in dispensable party because the suit was brought by a competitor against the parent c ompany, who held an exclusive license fro m its whol ly-owned subsidiary. Dainippon found no indispen sability in part because the patent holde r was the parent compa ny s holding company for pate nts and held an identity of interest and ownership wi th the subs idiary. Id. at 1273. As to the first 19(b ) factor, there was an adequacy of protection of th e subsidia ry s interes ts, the patent owner, by the parent c ompany , the licen see. Further, the patent owner co uld interven e at any time. Id. at 1272. Doc. 42 at 43- 44. A s in Dainippon, w here t here was un ity of ownershi p betw een th e pat ent owner and licensee, the n amed 68 1 defendan t in S ourceO ne wa s a co-owner of the pate nt wi th the 2 United S tates. 3 ownershi p, and no gu arant ee that the Commission w ould fully 4 5 6 7 Here , in contrast, there is no su ch un ity of protect the go vernme nt s interests. There is no way t o assure t hat th e gove rnmen t and the Commission s i ntere sts and objectiv es coi ncide in im plementing and continuin g the 8 licensin g prog ram an d rel ated uses of the patents . 9 On the s econd factor , Sou rceO ne reasoned: 10 11 12 13 14 15 16 17 18 19 20 Turning to the secon d consideration set forth in Rule 19( b), the Cour t does not see how it would b e able to lessen any a lleged prejudice to the Governme nt through p rotective provisions in the judgment , shaping re lief, or other measures. However, that factor carries little weight in thi s case for two reasons . First, as we have explained , the pote ntial prejud ice to the Govern ment i s already adequate ly addressed by the ability of KGK to ful ly advocate and protect the Government s interests. Second, the Federal Circuit has held that the court s ability to s hape relief to avoid prejudic e[ ] is of little relev ance in t he context of a patent declarat ory judgment suit because the relief soug ht in such a suit does not depend on the patentee s presence in court. Dainippon, 142 F.3d at 1272-73. 2009 WL 134625 0 at * 7. This reasoning depe nds on the abil ity of the p resent defen dant to r epresent the a bsent defen dant s 21 interest s. 22 guarante e that the p otent ial prejudice to the gov ernme nt 23 would be adequ ately addre ssed by the Commission s abil ity to 24 advocate and p rotect the government s inter ests. 25 26 In the a bsenc e of unity of ownership, ther e is no SourceOn e dete rmined that the third factor favored maintain ing th e suit : 27 28 69 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The thir d factor set forth in Rule 19(b), whether a judgment rendered in the absence of the missing party wo uld be adequ ate, refers to the public st ake in settl ing disputes by wholes, whenever possible. Pimentel , 128 S.Ct. at 2193 (internal quotations and citation s omitted)....[T] he F ederal Circuit noted, the thir d factor may favor maintenance of a declarat ory judgment suit because it does not require an affirmative ac t by the abs ent party. Dainippo n, 142 F.3d at 12 73. A declaration of invalidi ty or noninf ringement would resolve the c ase as a who le as to SourceOn e and the ²125 Pat ent. I d. 2009 WL 134625 0 at * 7 (emphasis added). Pl aintiffs do not explain why th is rea sonin g, which relies on Daini ppon, a case already consid ered b y the February 20, 2009 Decis ion, justifie s reco nsider ation : The thir d factor, adequac y of remedy, also favors dismissa l. [A]deq uacy ref ers not to sat isfaction of [Plai ntiffs ] cla ims, but to the public stake in settling disputes by wholes, whenever possible. Republic of Philippi nes, 128 S.Ct. at 2183, citing Providen t Tradesmens Bank & T rust Co. v. Pa tterson, 390 U.S. 102, 111 (1 968). As in Republic o f Phillipp ines, [g]oi ng fo rwar d with the act ion in the abse nce of the United States, would not further this public interest because they could n ot be bound by a judgme nt to which they were not parties. Id. The Court held the University had not waiv ed its Eleve nth Amendment immunity. Doc. 42 at 45. SourceOn e diff ers fr om the Fe bruary 2 0,2009 Decision s evaluati on of the alternative forum factor: ... Rule 19(b)(4) .. . requires us to consid er whether the plaintif f would have an adequate reme dy if the a ction were d ismissed for nonjoinder. This factor f avors dismis sal if there exists another forum in which all p arties could be joined in the suit. Da inippon, 142 F.3d at 1273. Here, KG K s only suggesti on for an al ternative forum is the Court of Federal Claims (KGK Mem. at 3). However, 28 U.S.C . § 1498(a) permits priv ate parties to bring patent 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 infringe ment suits a gainst the United States in t he Court of Federal Cla ims for certain m oney d amages only, an d thus it wo uld not provide an adequate forum fo r SourceOne s dec laratory judgment claims . Thus, KG K and the Go vernment are unable to point to any adeq uate remedy that SourceOne would have, if Counts V and VI are dismissed, to receive j udicia l guidance on whether the ²125 Patent blocks its efforts to market an d sell Cholesstrinol. That factor w eighs heavil y in favor of allowing Counts V and VI t o proceed. KGK and the Governme nt are therefore reduced to arguing, at bottom, that those are the brea ks for SourceOn e: that this absence of any other remedy for SourceOn e is simply the inevitable effect of th e United S tates ability to assert sovereign immuni ty (KGK Mem . at 6; Gov t Stm t. at 8). Apparent ly, KG K and the Government s ee no unf airness in requiring SourceOn e to wait un til they together decide to s ue SourceOn e for infrin gement before SourceOne can raise it s invalidity and noninfringement defenses (KGK Mem . at 6), whi le KGK is left free to contin ue threaten ing SourceOn e or its business associates and customer s with suit for infringement of the ²125 Patent. We do no t share KGK s and the Government s comfort with tha t approach. We view the Rule 19(b) factor s through the prism of equity and good conscience. In so do ing, we cann ot di smis s as lightly a s do KGK and the Government t he prejudice that SourceOne would su ffer if its declaratory judgment claims against KGK were dis missed. The approach urged by KGK (and the Governm ent) would allow KGK to threa ten legal ac tion against SourceOne (or others) with impunity . For those who gave into those threats, KGK would re ceive the be nefit of the patent (a cessat ion of the a lleged infri nging conduct and perhaps compensa tion) withou t the need to do anything mor e. For thos e who might rear up and seek a judi cial resoluti on, KGK coul d retreat behind the Governme nt s cloak of immunity and prevent the infringe ment or vali dity of the ²125 Patent from ever bei ng tested in court. That result not only would cr eate prejudi ce to SourceOne in this case, but also would disserve the broader public. We fa il 71 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 to see h ow the publi c interest is advanced by allowing a private p atentee such as KGK that kind of unreview able sway in exercising its patent rights . WL 13462 50 at *7-8. In contr ast, t he Feb ruary 20, 2009 De cision relied on Ninth Ci rcuit and Su preme Court authority suggest ing t hat immunity alone may b e vie wed as a compelling fact or in the Rule 19 balanc e: The four th factor is whether there is an availabl e alternat ive forum. First is the Court of Federal Claims, expressly au thorized by statute. Plainti ffs have an opportunity to raise the defense of paten t invalidi ty and unenf orceability in an action brou ght against them for pat ent infringement brought by t he United S tates or the Commission. See 35 U.S.C. § 282. [Fo otnote ] However, t o require Plaintiffs t o violate the license and wait to see whether the patent o wner sues fo r infringement creates an unfavora ble situatio n as damages could be exacerba ted. Where no alternative forum exists, the dist rict court should be extra c autious before dismissi ng an action . Kesco li v. Babbitt, 101 F.3d 1304, 13 11 (9th Cir. 1996). But just as the cour ts have hel d in actions involving tribal immunity an d state im munity, sove reign immunity of the Untied States c an justify dismissal for inability to joi n an indis pensable par ty, despite the fact that no alternat ive forum is available. If the necessar y party is immune from suit, there may be very litt le need for balancing R ule 19(b) factors because immunity itself may be viewed as the compel ling factor. Id. at 131 1 (in tern al citations and quotatio ns omitted). The latest Supreme Court ca se, Republic of Philippi nes v. Pimentel, 128 S.Ct. 2180 (2008), to address R ule 19, held as to immunity barring an action fr om proceeding wit hout the sovereig n party: The anal ysis of the joinder issue in those cases wa s somewhat p erfunctory, but the holdings were clear: A case may not proceed when a r equired-entity so vere ign is n ot amenable to suit. T hese cases instruct us that where so vereig n immu nity is asserted, and t he claims o f the sovere ign are not frivolous, dismissa l of the act ion must be ordered where 72 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 there is a potential for injury to the interest s of the abs ent sovereign.128 S.Ct. at 2190-91. In this context, dismissal is appropriate ev en if Plain tiff s have no alternat ive forum fo r their claim. See Dawavend ewa, 2 76 F.3 d at 1162 . Because the proceedi ngs in this case threaten bot h the prop erty and sov ereign immunity of the United States, the United S tates fa ilure to waive its immunity from suit s trongly supports dismissing t his litigati on in its ab sence. Doc. 42 at 42- 47. SourceOn e dist inguis hed Pimen tel: We disag ree with KGK and the Government that Pimentel requires a different result. In that case, Merrill Lynch filed an interpleader a ction to determin e the owners hip of some $35 million in fu nds stemming from proper ty allegedly stolen by Ferdin and Marcos w hen he was P resident of the Republic of t he Philippi nes. Among t he parties named in the interple ader action were the Republic of th e Philippi nes and the Philippine Presidential Commissi on on Good G overnance. Both the Republic of the Phil ippines and the Commission were dismissed from the case based on their assertion of foreign sovereig n immunity. The trial court held, and the appeals court agreed , that the case could proceed in their ab sence. The t rial court ultimately awarded the fund s to the Pim ental class, and the appeals court af firmed. Empl oying a Rule 19(b) analysis, the Supreme Court revers ed. 128 S.Ct. at 2191-94. However, there are i mportant factors that distingu ish this cas e from the situation that the Supreme Court addres sed in Pimental. First, t he Supreme C ourt found that the Republic of the Phil ippines and the Commission would suffer r eal prejudic e from the adjudi cation in their ab sence. 128 S.Ct . at 2191-92. How ever , in that case , no other pa rty was alig ned with the interests of the Republic of the Phil ippines and the Commission, a nd thus no other party had the ability or incentive to protect their intere sts. Indeed, the intere sts of the fore ign sovereig ns and the other claimants we re antagoni stic: they a ll asserted competing claims to the fund s. By contra st, in th is case, KGK has a 73 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 common i nterest with the Government in protecting the ²125 Patent and has the a bility and incentive to fully pr otect their mutual interest. Second, in Pimental, the Supreme Court expl ained that the fourth fact or of Rule 19(b), whether the plaintif f would have an adequate remedy if the ca se were dis missed, weig hed in favor of dismiss al, In reaching that conclu sion, the Supreme Court held that the plaintiff t o consider under that factor was Merrill Lynch, the s takeholder which had initiate d the acti on, and not the claimants to the funds. 1 28 S.Ct. at 2193. The S upreme Court stated that dismissa l would not cause prejudice to Merrill Lynch, b ut in fact w ould serve some of the goals of interple ader and wou ld protect Merrill Lynch in some res pects. Id. By contrast, the prejud ice in this cas e to SourceO ne if Counts V and VI are dismissed is real, a nd is significant. Third, t he Supreme C ourt found significant the interest s of the for eign sovereigns in comity an d dignity, which in t hat case took the form of allowin g a foreign state to use its own courts f or a disput e if it has a right to do so. The dignity of a foreig n state is n ot enhanced if other nations bypass i ts courts wi thout right or good cause. 1 28 S. Ct. a t 2190. Those considerations are no t pres ent in this case. 18 2009 WL 134625 0 at * 8-9 ( emph asis added). 19 persuasi ve her e, because ther e is no unity of own ershi p 20 between the Co mmissi on an d the United States, and , alt hough 21 22 23 24 SourceOne i s no t the two partie s poss ess o verlapping interests, th e Uni ted States intere sts wi ll no t be sufficiently protec ted b y the Commissi on, wh ich ha s parochi al interests in its overs ight of 25 the Cali fornia table grap e industry implicating a myri ad of 26 interest s not of con cern to the United States. 27 28 74 1 SourceOn e does not w arran t reconsideration of the 2 February 20, 2 009 ru ling on the indispensability of th e 3 United S tates. 4 5 6 7 8 9 J. Rule 19 Indisp ensabi lity Must Be Evaluated on a C laimby-Claim Basis . Plaintif fs re ly on E.E.O .C. v. Peabody Wes tern C oal Co., 400 F.3d 774, 7 81-82 (9th Cir. 2 005), to argue a district court may d eclar e patents held by the Un ited States 10 to be in valid without imp lica ting sovereign immun ity so long 11 as Plain tiffs have p roper ly joined the United Sta tes t o this 12 case in any ma nner. 13 Plaintif fs as sertio n. 14 15 16 17 Doc . 70 at 6. Peabody does not support T here, the Ninth Ci rcuit held the Navajo N ation was a neces sary party, properly joi ned because its trib al sov ereign immunity did not apply in an suit brought by the EEOC. 400 F.3d at 780-81. Even if the 18 governme nt had no di rect cause of action against the N avajo 19 Nation a nd was seeki ng no relief from the N avajo Nation, the 20 Nation m ay sti ll be joine d under Rule 19 because the 21 effectiv eness of the reli ef would be impaired in its a bsence. 22 Id. at 7 83-84. 23 24 25 26 27 28 Here, by contrast, the government has not waived i ts sov ereign immu nity as to the patent cl aims, and plaintif fs see k reli ef th at w ould directly impair gove rnment property inter ests. Question s of j oinder unde r Rule 19 must be decide d on a claim by claim basis . See Bassett v. Masha ntucket Peq uot 75 1 Tribe, 2 04 F.3 d 343, 358- 59 (2d Cir. 2000)(evalua ting Rule 19 2 indispen sabili ty on a cla im-by-claim basis) ; Makah Indian 3 Tribe v. Verit y, 910 F.2d 555 (9th Cir. 1990)(finding absent 4 5 6 party ne cessar y to s ome c laims but not others). The m otion to recon sider the jo inder decision on this ground is D ENIED. 7 V. CONCLUSI ON 8 9 10 For the reasons set forth abo ve, Defendants Moti ons to Dismiss: 11 (1) the patent -relat ed AP A cl aims is GRANTED WITHOUT 12 LEAVE TO AMEND on so verei gn immunity grounds; 13 (2) the licens e-related APA claims is GRANT ED WIT H LEA VE 14 15 16 17 TO AMEND ; (3) the Third, Fourt h, an d Fifth Claims For Relie f (patent invali dity) is GRANTED WITHOU T LEAV E TO AMEND, 18 because the Un ited S tates is an indispensable par ty to 19 these cl aims a nd cannot b e joined due to its sovereign 20 immunity ; 21 (4) the Fifth Claim for R elief (unenforceability and 22 23 24 25 inequita ble co nduct) is G RANTED WITHOUT LEAVE TO AMEND , because the Un ited S tates is an indispensable par ty to these cl aims a nd cannot b e joined due to so vereign 26 immunity ; 27 (5) the Sixth Claim for R elief under the Antitrust laws 28 against the Co mmissi on, is GR ANTED WITHOUT LEAVE TO 76 1 AMEND fo r fail ure to state a claim; 2 (6) the Sevent h Clai m for Relief (exclusive licen se 3 agreemen ts voi d unde r fed eral law) is GRANTED WIT HOUT 4 5 6 7 LEAVE TO AMEND becau se th e United States is an indispen sable party to th ese claims and cannot be join ed due to s overei gn imm unity ; 8 (7) the Eighth Claim for Relief (exclusive licens e 9 agreemen ts voi d unde r sta te law) is GRANTED WITHO UT 10 LEAVE TO AMEND becau se th e licenses between the 11 Commissi on and the U nited States are not subject to 12 13 14 15 state la w regu lation ; (8) the Unfair Compe titio n Claim is DENIED; and (9) the Unjust Enric hment and Constructive Trust claim s 16 is DENIE D. 17 In addit ion, P lainti ffs, motion for reconsiderati on of 18 the dist rict c ourt s prio r determination that the Unit ed 19 States i s an i ndispe nsabl e pa rty under Rule 19 with re spec t 20 to the p atent- relate d cla ims is DENIED. 21 22 23 24 25 26 Plaintif fs sha ll hav e twe nty (20) days from elect ronic service of thi s orde r to amend their complaint in conformity with thi s memo randum deci sion and Rule 11. SO ORDER ED Dated: Octobe r 27, 2009 /s/ O liver W. Wanger Oliver W. Wang er United States Distri ct Judge 27 28 77

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