Summary: Parties tried this case regarding seed plant variety protection to the court. Because defendants had actual knowledge Dandy wheat was a protected variety before defendants sold it, they are liable to plaintiff for damages. Defendants motion for judgment as a matter of law was denied. Plaintiff was awarded damages, including interest, of $26,479.12.

Case Name: North Star Genetics v. Charles Bata, et al.

Case Number: A3-00-57

Docket Number: 63

Date Filed: 8/9/01

Nature of Suit: 890

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NORTH DAKOTA

SOUTHEASTERN DIVISION

MEMORANDUM AND ORDER FOR JUDGMENT

            Plaintiff commenced this action on May 4, 2000. (Doc. #1) Plaintiff asserts defendants violated the provisions of the Plant Variety Protection Act (“PVPA”). See 7 U.S.C. § 2541. This case was tried to the court on June 19-20, 2001. After considering the evidence presented at trial and the parties’ post-trial briefs, the court issues this memorandum as its findings of fact and conclusions of law.

            Also before the court is defendants’ Motion to Amend the Answer to Conform to the Evidence Presented at Trial (Doc. # 53). The court recognizes that this motion is the basis for defendants’ Motion for Judgment as a Matter of Law (Doc. # 55) and denies the same, given that the court rejects the proposed defenses in the discussion of the Motion for Judgment as a Matter of Law and finds in favor of the plaintiff.

I. Background

            Plaintiff is the exclusive licensee of Dandy wheat seed (“Dandy”). Originally, Seed-Link, Inc., filed an application for plant variety protection for “Dandy” wheat on April 14, 1998, with the Plant Variety Protection Office. Seed-Link sold its rights to ProMark Seed (also doing business as Newfield Seeds Co. Ltd./Wheat City Seeds Division). ProMark then granted to plaintiff the exclusive right to handle Dandy in the territory of Minnesota, North Dakota, South Dakota and Montana. The Plant Variety Protection Office approved the certification for Dandy on December 29, 2000, and a certificate was issued February 15, 2001. The certificate provides plant protection from the date of the application (April 14, 1998) for a term of 20 years. See 7 U.S.C. §§ 2401(b) and 2483.

            Charles and Randy Bata are father-son farmers near Langdon, North Dakota. Charles has farmed there for more than 45 years, while Randy has farmed with his father for the last 12 years. In early 1999, the Batas purchased certified Dandy from Douglas Trengen that Trengen had grown during the 1998 farming season. During the 1999 farming season, the Batas planted some of the certified Dandy seed and sold some of the crop as seed to various persons in 2000. In February 2000, the Batas sold 4,020.31 bushels of Dandy wheat that had not been cleaned and conditioned to Greg LaFrenz. The Batas also sold 5,790.29 bushels of Dandy wheat seed to various farmers between mid-February and early April 2000 as shown in the table below.

            Plaintiff brought this litigation in May of 2000 claiming defendants had violated the PVPA. It is undisputed that Dandy wheat is a protected variety under the PVPA. It is also undisputed that defendants offered for sale and sold Dandy for seed purposes without the consent of plaintiff. The key issue in determining whether there was a violation of the PVPA is whether defendants had actual notice Dandy was a protected variety before their sales of Dandy. This issue, however is irrelevant, if defendants’ arguments for judgment as a matter of law have merit. Therefore, these arguments will be analyzed first.

II. Analysis

            Defendants first argue plaintiff has no standing to bring this action because the breeder of Dandy did not consent to ProMark’s transfer of rights to plaintiff. According to defendants, Dr. Franck created Dandy and as such is considered the breeder of the variety. See 7 U.S.C. § 2401(a)(2) (defining breeder as “the person who directs the final breeding creating a variety or who discovers and develops a variety”). Franck made a partial assignment of his rights to Pro-Mark, which contained a “non-assignment provision,” stating Pro-Mark could not assign or transfer all or any part of its rights and obligations under the assignment without first procuring Franck’s written consent. Defendants assert that the record is devoid of any written consent by Dr. Franck to this attempted assignment. Therefore, defendants conclude, plaintiff is not the real party in interest and has no standing to pursue this action.

            This is the first time defendants have attacked plaintiff’s standing. Defendant, under Rule 8 of the Federal Rules of Civil Procedure, must raise the defense of lack of standing or else it is waived. Linc Finance Corp. v. Onwuteaka, 129 F.3d 917, 922 (7^th Cir. 1997). Since this issue has not been raised before, it is considered waived and the court cannot address it.

            Defendants next argue their activity was exempt under 7 U.S.C. § 2542. This section states, “Nothing in this chapter shall abridge the right of any person, or the successor in interest of the person, to reproduce or sell a variety developed and produced by such person more than one year prior to the effective filing date of an adverse application for a certificate of plant variety protection.” 7 U.S.C. § 2542. Defendants apparently argue they were successors in interest to a developer and producer of Dandy and therefore cannot be sued under the PVPA.

            The section appears to refer to a situation where a person has a good-faith claim to the seed variety at issue. For the statute to apply, the Batas must have developed and produced Dandy (or be the successor in interest to the developer and producer of Dandy) “more than one year prior to the effective filing date of an adverse application for a certificate of plant variety protection.” 7 U.S.C. § 2542. The Batas did not develop and produce Dandy more than one year prior to April 18, 1998, the date of Seed Link’s application. There was no evidence offered to demonstrate the Batas were the successors in interest to the developer and producer of Dandy. Merely purchasing seed does not make one a successor in interest. For these reasons, the court concludes 7 U.S.C. § 2542 does not apply to the instant case.

            Defendants finally argue a release given to Greg LaFrenz also releases plaintiff’s claims against the Batas regarding the transaction between the Batas and LaFrenz. On approximately February 15, 2000, the Batas sold 4,020.31 bushels of Dandy wheat that had not been cleaned and conditioned to Greg LaFrenz. In January 2001, LaFrenz and plaintiff entered into a release involving the February 15, 2000 transaction. Defendant argues that this release prevents plaintiff from pursuing claims against the Batas involving this transaction as well.

            The release is between plaintiff, Greg LaFrenz and LaFrenz Seed Company. Defendants are not parties to it. The release is specifically “limited to LaFrenz’s purchase and disposal of the 4,020.31 bushels of Dandy wheat seed from the Batas . . . .” (emphasis added) Nothing in the release can be read as releasing any of plaintiff’s claims against defendants. Therefore, the court concludes the release given to Greg LaFrenz does not apply to defendants.

            After considering defendants’ arguments for judgment as a matter of law, this court must now consider the merits of this case. Under the PVPA, it is an infringement of the rights of the owner of a protected variety to “sell or market the protected variety, or offer it or expose it for sale, deliver it, ship it, consign it, exchange it, or solicit an offer to buy it, or any other transfer of title or possession of it.” 7 U.S.C. § 2541(a)(1). Nonetheless, 7 U.S.C. § 2567 provides that if an infringer receives a protected variety that is not marked with the words “Unauthorized Propagation Prohibited” or “Unauthorized Seed Multiplication,” no damages shall be recovered against the infringer by the owner “unless the infringer has actual notice or knowledge that propagation is prohibited or that the variety is a protected variety . . . .” Apparently no such labels were attached to the seed purchased by the Batas. Therefore, plaintiff must demonstrate defendants had actual notice Dandy was a protected variety.

            On the issue of whether the Batas had actual knowledge or notice, the evidence conflicts. The Batas testified they did not know that Dandy was protected at the time of their infringement. Two other witnesses testified that the Batas did have actual knowledge that Dandy was a protected variety before their sales of Dandy wheat.

            Greg LaFrenz is half owner of LaFrenz Seed Company. LaFrenz admitted he purchased Dandy wheat from the Batas in February 2000 in violation of the PVPA. LaFrenz testified that in January 2000 he and Charles Bata consulted a number of seed publications and discovered Dandy was a protected variety. LaFrenz said that after consulting the publications, Charles Bata told him to keep the sale quiet. When the parties completed the sale, LaFrenz said Charles told him he did not want Dandy written on the scale tickets and he also told LaFrenz to be careful about leaving the Dandy seed sample setting out. Charles Bata denies all of these allegations made by LaFrenz. The Batas claim they had no knowledge Dandy was a protected variety until this lawsuit was filed against them.

            LaFrenz also testified that Randy Bata requested he reproduce certain scale tickets and write the commodity in as “wheat” rather than “D wht,” as originally written. LaFrenz said Randy Bata came to him in the summer of 2000 and told him he needed scale tickets that did not identify the sales as Dandy. LaFrenz testified that Randy said the litigation would “go away” if LaFrenz created the scale tickets. On the original tickets issued to the Batas, the computer-printed dates were incorrect, because the clock on the scales did not work. Randy Bata claimed he got the scale tickets reissued because he needed the tickets with correct dates for his application with the Loan Deficiency Program.

            Roger Weinlaeder testified that he told Charles Bata that Dandy was a protected variety. Weinlaeder is an investment owner and board member of North Star Genetics. Weinlaeder said Charles contacted him in the Spring of 1999 to obtain registered Dandy seed. There were several telephone conversations documented during this time period. Weinlaeder said he informed Charles that Dandy was a protected variety and North Star Genetics owned the exclusive rights to the seed. Charles testified that at no time during his calls to or during his visits with Weinlaeder was the question of plant variety protection discussed.

            Randy Evans’ testimony is also significant. Evans testified that he is the owner of Custom Grain Cleaning and has cleaned grain for the Batas. Evans said he cleaned Dandy for the Batas in February 2000, although at the time he did not realize it was Dandy wheat. Evans testified Charles Bata identified the wheat as a Canadian variety called Quantum. After this litigation had commenced, Evans said Charles came to him and told him the variety he had cleaned was Dandy. Evans said he questioned Charles as to why he had not told him it was Dandy wheat before, but Charles did not respond. Evans testified that had he known it was Dandy he would not have cleaned the grain. Evans knew Dandy was a protected variety and he also sold for plaintiff North Star Genetics, so he would not want to damage North Star.

            Defendants attack the credibility of LaFrenz, stating he has an interest in helping plaintiff because of the release plaintiff gave him. While this may be true, many of the witnesses in this case have an interest in testifying a particular way, as do the Batas. The court found LaFrenz to be forthright in his testimony, detailed in his explanations and willing to admit when he did not know the answer to a question. The court finds LaFrenz to be credible in his explanation of the events leading up to plaintiff giving him a release.

            Regarding the conversations between Weinlaeder and Charles Bata, although there is not a lot of detail about any conversations they had, it is clear from phone records there were contacts between the two. Furthermore, both sides agree Charles Bata was trying to determine the availability of Dandy for planting. The court notes it seems reasonable, if Charles asked Weinlaeder about Dandy seed availability, that Weinlaeder, part owner and board member of North Star Genetics, would inform him Dandy is a protected variety.

            The court also finds Randy Evans’ testimony to be significant. Evans is a disinterested party to this litigation and the court found him to be credible and sincere. Two things of note stand out in Evans’ testimony. First, when Charles Bata had Evans clean some seed for him, Evans only recalls Charles referring to a Canadian seed called Quantum, not specifically to Dandy seed. Secondly, Evans stated Charles had no response when Evans questioned him about why Charles did not tell him the seed was Dandy. These two facts do not prove Charles previously knew Dandy was a protected variety. However, such behavior would be consistent with evasive behavior one uses when trying to cover something up.

            Another problem with the Batas’ story is that they assert in late 1999, early 2000, they referenced all the relevant seed guides, except the most recent and up-to-date one. Ken Bertsch from the North Dakota Seed Department testified the Batas were on the mailing list for the North Dakota Field Inspected Seed Bulletin 92-October 1999, which was mailed on November 12, 1999. This bulletin listed Dandy as a protected variety. Bertsch also testified that the North Dakota Seed Guide 2000 is mailed in January 2000 to all seed growers and producers. This document also listed Dandy as a protected variety. The Batas did not explain to the court’s satisfaction why they consulted all of the relevant seed guides, except the most recent ones.

            This evidence, along with the testimony of Greg LaFrenz, Roger Weinlaeder and Randy Evans, taken together, make the Batas’ denials implausible. The consistency and totality of the evidence points to actual knowledge by the Batas that Dandy was a protected variety before they sold it. Therefore, the court finds that the Batas did have actual knowledge Dandy was a protected variety before they sold Dandy to others. Having determined this, the court concludes defendants have infringed on plaintiff’s rights under the PVPA and plaintiff is entitled to damages.

III. Damages

            According to the PVPA, “[u]pon finding an infringement the court shall award damages adequate to compensate for the infringement but in no event less than a reasonable royalty for the use made of the variety by the infringer together with interest and costs as fixed by the court.” 7 U.S.C. § 2564(a). The court finds plaintiff’s lost profit is the appropriate measure of damages. The alternative measurement based on defendants’ gain is inappropriate unless the cost of growing the seed crop is considered. The court also rejects royalty as the measure of damages because it is inadequate under the circumstances.

            Plaintiff claims it is entitled to lost profit damages of at least $2.25 per bushel of seed sold by the Batas, because at the time the Batas were selling Dandy, North Star could sell Dandy for $10.00 per bushel and its cost per bushel of Dandy was $7.75. However, the $2.25 profit figure per-bushel does not take into account sales commission paid by plaintiff. Plaintiff’s tax returns admitted into evidence indicate sales commission for the years 1997, 1998 and 1999, ranging between 7.5 percent and nearly 12 percent of gross receipts. The court will consider ten percent to be a reasonable figure in determining sales commission amounts. Ten percent of $10.00 is $1.00, so $1.00 will be considered as the per-bushel cost of commissions paid by plaintiff on sales of the Dandy wheat. Plaintiff’s other business costs are not on a per-bushel basis and would not have increased if defendants had not infringed plaintiff’s PVPA rights.

            Adding $1.00 to North Star’s $7.75 cost increases plaintiff’s cost to $8.75 per bushel and reduces North Star’s net profit per bushel to $1.25. According to the evidence presented, the Batas sold 9802.61 bushels of Dandy wheat to others. Thus, 9802.61 should be multiplied by $1.25, as is shown below:

         9,802.61 (bushels)

                    x $1.25 (profit per bushel

$12,253.26

According to the calculation above, North Star sustained damages in the amount of $12,253.26. With six percent interest accruing over the period of 16 months since the last infringement, plaintiff is entitled to an additional $986.30, making plaintiff’s total damages $13,239.56 as of August 6, 2001.

            Plaintiff also requests the damages in this case be trebled and that defendants be ordered to pay plaintiff’s reasonable attorney fees. According to the PVPA, “[w]hen the damages are not determined by the jury, the court shall determine them. In either event the court may increase the damages up to three times the amount determined.” 7 U.S.C. § 2564(b). The court will not award treble damages, but does award twice the compensatory damages to deter defendants and others from infringing on PVPA rights.

            The PVPA also provides that “[t]he court in exceptional cases may award reasonable attorney fees to the prevailing party.” The court finds this is not an exceptional case; consequently no attorney fees will be awarded.

IV. Conclusion

            Upon the court’s finding that defendants had actual knowledge Dandy wheat was a protected variety prior to selling Dandy as seed, the court concludes defendants did infringe on plaintiff’s rights under the PVPA. Based on the quantity of Dandy sold by defendants, the court finds reasonable damages with interest to be calculated at $13,239.56. The court awards twice this amount to plaintiff. The court also concludes defendants Motion for Judgment as a Matter of Law is without merit, as is their Motion to Amend the Answer to Conform to the Evidence Presented at Trial. Therefore, both are DENIED.

            IT IS ORDERED:

That judgment be entered in favor of North Star Genetics and against Charles and Randy Bata, d.b.a. Bata Seed Farms in the amount of $26,479.12.

Dated: August____, 2001

                                                            
Karen K. Klein
United States Magistrate Judge