United States Waived Sovereign Immunity With Respect To DJ Patent Suits

This article previously appeared in Last Month at the Federal Circuit, September, 2011.

In Delano Farms Co. v. California Table Grape Commission, No. 10-1546 (Fed. Cir. Aug. 24, 2011), the Federal Circuit affirmed the district court's decision that the United States Department of Agriculture ("USDA") is a necessary party to a DJ suit, reversed the district court's decision that 5 U.S.C. § 702 does not waive sovereign immunity with respect to DJ suits, reversed the district court's decision that Delano Farms Co. ("Delano Farms") failed to properly plead inequitable conduct, and affirmed the district court's decision that Delano Farms failed to properly plead a violation of the Sherman Act.

The USDA is the owner of three table grape patents issued under the Plant Variety Protection Act: PP15,891 ("the Sweet Scarlet patent"); PP16,229 ("the Scarlet Royal patent"); and PP16,284 ("the Autumn King patent"). The USDA licensed the rights in the three patents to the California Table Grape Commission ("Grape Commission"), which is an agency of the State of California. The Grape Commission pays royalties to the USDA, which are collected from the growers sublicensed by the Grape Commission under a "Domestic Grower License Agreement."

The plaintiffs (collectively "Delano") are all California grape growers who purchased grapevines covered by the patents, signed the Domestic Grower License Agreement, and paid the licensing fee. Delano brought a DJ suit against the Grape Commission and the USDA seeking a ruling that the patents are unenforceable because of prior use, and that the Sweet Scarlet patent is unenforceable due to inequitable conduct during prosecution. Specifically, Delano alleged that one of the coinventors of the three varieties displayed fruit of the patented varieties at public meetings that were held before the critical dates for each patent and had distributed the varieties in advance of the critical dates. Delano also alleged that the USDA unlawfully obtained the patents and that the Grape Commission violated state and federal unfair competition laws through its licensing efforts.

The district court held that the USDA, as a patent owner who had retained substantial rights in the patents, was a necessary party to the DJ suit. The district court also determined that the USDA was an indispensible party and could not be joined because of sovereign immunity. The district court then granted the USDA's motion to dismiss because Delano had not...