Delano Farms – The Circuit affirms a judgment that two plant patents are not invalid based on the plants being in "public use" more than one year prior to the filing date. Two individuals obtained samples of patented plant varieties in an unauthorized manner and planted them in their fields. The district court found, and the panel agreed, that there were sufficient confidentiality assurances that the uses could not be considered "public” uses under 35 USC §102(b).
Delano Farms Company, et al. v. The California Table Grape Commission, et al.,
Fed. Cir. Case No. 2014-1030 (January 9, 2014)
The patented table grape varieties at issue in this case are known as Scarlet Royal and Autumn King. Jim Ludy cultivated table grapes at J&J Ludy Farms with his brother Jack Ludy from 1976 to 2003. Larry Ludy, Jim Ludy's first cousin, also cultivated table grapes. On August 22, 2001, almost three years prior to the filing date, the USDA held an open house and displayed the patented table grape varieties. Visiting growers were not permitted to take any plant material relating to the unreleased varieties or even view the plants in the field.
Jim Ludy and Larry Ludy attended the open house. While they were there, the Ludys spoke with a USDA employee Rodney Klassen. Jim Ludy asked Klassen if Klassen could give him some Scarlet Royal and Autumn King plant material. Klassen was not authorized to provide Ludy with unreleased plant material but despite his lack of authority, he told Jim Ludy that he would "take care" of him. In early 2002, Klassen met with Jim Ludy and gave him plant material for Scarlet Royal and Autumn King, instructing Ludy not to let the material "get away from him" and not to "put them in a box," which Ludy understood to mean that he should not sell the resulting grapes until the varieties were commercially released.
Shortly after receiving the plant material from Klassen, and still well prior to the critical date, Jim Ludy grafted fewer than 50 vines of each of the Scarlet Royal and Autumn King varieties. Jim Ludy also provided "a few buds" of Scarlet Royal and Autumn King to his cousin, Larry Ludy, who knew that the material had not yet been released. He admitted that Jim Ludy told him that they should "keep it to ourselves." It was understood between the two of them that their possession of the Scarlet Royal and Autumn King varieties "was supposed to be a secret" and that Larry Ludy would keep his possession of the plant material confidential.
Larry Ludy subsequently grew eight plants of Scarlet Royal and 25 plants of Autumn King. In 2003, Larry Ludy grew additional plants by grafting wood from the original group of plants, producing a total of 108 vines of Scarlet Royal and 650 vines of Autumn King. Most of the plantings by both Ludys prior to the patents' critical date bore no usable fruit, and the Ludys sold no grapes from those plantings prior to the critical date. Neither of the Ludys provided plant material to any other persons until after the critical date. Although the various plantings were visible from publicly accessible roads, none of the vines were marked or labeled in any way, and the particular variety of the grapes could not be readily ascertained from simply viewing the vines.
The only other person who was informed of the Ludys' possession of the unreleased plant material was Richard Sandrini, who had long served as a table grape marketer for Jim and Larry Ludy. Larry Ludy showed Sandrini vines of the unreleased varieties at least twice prior to the patents' critical date.
The Legal Tests to be Applied
Following a bench trial, as in this case, the district court's conclusion on public use under § 102(b) is subject to review as a question of law while the facts underlying the conclusion on public use are subject to the clearly erroneous standard of review. The proper test for the public use prong of the §102(b) statutory bar is whether the purported use was accessible to the public or was commercially exploited.
The principal policy underlying the statutory bar is to prevent the removal, from the public domain, of inventions that the public reasonably has come to believe are freely available. The question in a case such as this one is thus whether the actions taken by the inventor (or, as in this case, a third party) create a reasonable belief as to the invention's public availability.
Factors that we have previously identified as being helpful in analyzing that question include the nature of the activity that occurred in public; the public access to and knowledge of the public use; and whether there was any confidentiality obligation imposed on persons who observed the use. The last factor captures the common sense notion that whether an invention is "accessible to the public" depends, at least in part, on the degree of confidentiality surrounding its use. An agreement of confidentiality, or circumstances creating a similar expectation of secrecy, may negate a public use where there is not commercial exploitation.
The analysis is similar when the allegedly public use is performed by an unaffiliated third party rather than the inventor. In order to be invalidating, such use must still be publicly accessible; secret or confidential third-party uses do not invalidate later-filed patents. The adequacy of any confidentiality guarantees are measured in relation to the party in control of the allegedly invalidating prior use. The actions of an unaffiliated third party acting in secret are evaluated as if he stood in the place of the inventor.
Application of the Law to the Facts as Established in the District Court
The appellants argue that the cultivation of the unreleased varieties by Jim Ludy and Larry Ludy constituted public use because they made no attempt to maintain confidentiality and made no discernible effort to maintain the invention as confidential. As evidence of the Ludys' lack of effort to maintain secrecy regarding their possession of the patented plant varieties, appellants point to Jim Ludy's provision of plants to Larry Ludy, Larry Ludy's sharing of information with Sandrini, and the lack of concealment of the vines at either of the Ludys' farms. In support, they rely on Egbert v. Lippmann, 104 U.S. 333 (1881), where the Court ruled that the inventor of a type of corset steel who gave two of the corset steels to a friend for use 11 years before applying for a patent had put the invention into public use. The Court held that "if an inventor, having made his device, gives or sells it to another, to be used by the donee or vendee, without limitation or restriction, or injunction of secrecy, and it is so used, such use is public, even though the use and knowledge of the use may be confined to one person."
The problem with the appellants' argument is that it is squarely contrary to the district court's findings of fact. Larry Ludy was present during Jim Ludy's conversation with Klassen, and knew Klassen did not have the authority to provide the Ludys with unreleased varieties. When Jim Ludy gave Larry Ludy the plants, Jim Ludy told his cousin to "keep knowledge of the plants to ourselves" and expected the fact of their possession of the plants to remain private. After the critical date, Larry Ludy allowed Sandrini to sell the fruit of the unreleased vines under a different name to avoid detection. Moreover, during a deposition, Larry Ludy refused to identify Klassen as the source of the Ludys' unreleased plants. The findings of the district court clearly establish, therefore, that both Ludys knew that they were not authorized to have the plants and that they needed to conceal their possession of the plants.
Egbert turned on the inventor's lack of any effort to maintain control over the use of his invention. The facts of this case, by contrast, show that Jim Ludy sought to maintain control of the plants he obtained from Klassen. Although Jim Ludy shared the plants with his cousin, the evidence showed that Larry Ludy was aware of the need to keep the plants secret, and at Jim Ludy's urging, Larry Ludy continued to treat his possession of the plants as confidential and non-public.
The appellants' second argument is that the Ludys' disclosure of the unreleased plants to Mr. Sandrini constituted public use. Unlike the Ludys, however, Sandrini could not practice the inventions because he did not possess plant material until after the critical date. Instead, the appellants argue that the disclosure of the plants' existence to Sandrini demonstrates the lack of confidentiality with which the Ludys treated the unreleased varieties. But the district court found that Sandrini was a friend, business partner, and mentor of the Ludys. The court also found that each of the Ludys and Sandrini had incentives to keep the Ludys' possession secret, creating an environment of confidentiality, and each maintained tight control over who knew about the vines and their use. We have no reason to overturn these findings.
Finally, the appellants argue that the lack of secrecy with which the Ludys cultivated the unreleased varieties mandates a finding of public use. The appellants are correct that the Ludys grew the plants in locations that were visible from public roads. However, the appellants ignore the district court's finding that grape varieties cannot be reliably identified simply by viewing the growing vines alone. The plantings of the unreleased varieties were extremely limited in comparison to the total cultivation of the Ludys' farms. The unreleased varieties were not labeled in any way, and the appellants introduced no evidence that any person other than the Ludys and Sandrini had ever recognized the unreleased varieties. A reasonable jury could conclude that if members of the public are not informed of, and cannot readily discern, the claimed features of the invention in the allegedly invalidating prior art, the public has not been put in possession of those features. In this case, the district court, sitting as the trier of fact, came to exactly that conclusion, and the evidence supports the court's conclusion.