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Phytelligence, Inc. v. Washington State University

United States District Court, W.D. Washington, Seattle

June 14, 2019

PHYTELLIGENCE, INC., Plaintiff,
v.
WASHINGTON STATE UNIVERSITY, Defendant.

          ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

          RICARDO S. MARTINEZ CHIEF UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION

         This matter comes before the Court on Defendant Washington State University's Motion for Summary Judgment. Dkt. #46. Plaintiff Phytelligence, Inc. opposes. Dkt. #64. The Court has determined it can rule on this Motion without oral argument.[1] For the reasons stated below, this Motion is GRANTED.

         II. BACKGROUND

         Phytelligence is an agricultural biotechnology company. Dkt. #66 (“Leyerle Decl.”), ¶¶ 2-3; Dkt. #1-1 (“Complaint”), ¶¶ 4-5. Phytelligence uses a trade secret propagation process to grow food crop plants that are fully-rooted, have genetically confirmed varieties, and are guaranteed virus and disease-free, for eventual sale to food crop growers. Leyerle Decl. at ¶ 3. Phytelligence sells itself as an innovator in the field and a potentially disruptive competitor of traditional nurseries. Id.

         Defendant Washington State University (“WSU”) owns the patent to an apple cultivar known as WA 38, which is sold under the trademark COSMIC CRISP. See Dkt. # 1-2 at 5.

         By the late fall of 2012, WSU had developed WA 38 but had not made a firm decision whether to commercialize it. Leyerle Decl. at ¶ 5. WSU did not have the facilities to grow and maintain a sufficient number of WA 38 plants to distribute them to nurseries and others if commercialization were to occur. Id. WSU and WSURF therefore asked Phytelligence to propagate WA 38 plants for eventual sale and distribution. Id.

         On November 28, 2012, Phytelligence and WSU's predecessor-in-interest Washington State University Research Foundation (“WSURF”)[2] entered into a “Propagation Agreement” with respect to WA 38. See Dkt #1-1 at 10 (“Agreement to Propagate Apple Cultivar Plant Materials for Washington State University”). This contract forms the basis for this legal action. The Propagation Agreement allowed Phytelligence (the “Propagator”) to propagate WA 38 plants, which was apparently of some research benefit to Phytelligence. The Propagation Agreement forbids Phytelligence from selling any WA 38 plants unless it receives “authorization to do so under a separate contract with WSURF, or an agent of WSURF, in accordance with Section 4 of the Agreement.” Id. Unless and until Phytelligence receives such authorization to sell under a separate contract, any WA 38 plants that it propagates “remain the sole and absolute property of WSU and/or WSURF.” Id. at 12.

         Section 4 of the Propagation Agreement states, in full:

4. OPTION TO PARTICIPATE AS A PROVIDER AND/OR SELLER IN WSURF LICENSING PROGRAMS: If Propagator is an authorized provider in good standing under WSDA's Washington State Fruit Tree Certification Program in accordance with Section 5, below, by signing this Agreement, Propagator is hereby granted an option to participate as a provider and/or seller of Plant Materials listed in Exhibit A, if the Cultivar is officially released by WSU and becomes available for licensing by WSURF, or an agent of WSURF. Propagator will need to sign a separate contract with WSURF, or an agent of WSURF, to exercise this option. If any of the WSU Cultivars listed in Exhibit A are not released by WSU, Propagator agrees to destroy all Plant Materials of such Cultivars upon written notification by WSURF that it will not release a specific cultivar. It is anticipated that this Agreement will be amended from time-to-time to include additional Cultivars under Exhibit A.

Id. The parties agreed that Washington law applied to any subsequent interpretations of the Agreement. Id. at 13.

         Prior to signing the Agreement, Chris Leyerle, Phytelligence's CEO, sent an email to Tom Kelly, a licensing associate at WSURF, asking several questions about the option in Section 4. Leyerle Decl. at ¶ 7; Dkt #66-3. The parties wrote back and forth. Mr. Leyerle also reached out to Anson Fatland, the Interim Executive Director of WSURF and Mr. Kelly's boss. Id. at ¶ 10; Dkt #66-7. Phytelligence argues in in briefing:

Mr. Leyerle clearly communicated to both Mr. Kelly and Mr. Fatland that Phytelligence would not enter into an agreement to propagate WA 38 without assurance that it would be offered a license to sell and distribute WA 38 if and when WSU decided to commercialize it. Leyerle Decl., ¶ 11. Mr. Leyerle was told by Mr. Kelly, Mr. Fatland and others that there would be an internal process at WSU to decide whether and how to commercialize WA 38. Id. ¶ 12. If WSU decided to commercialize WA 38, the process would result in a set of standard terms and conditions pursuant to which industry participants could sell and distribute WA 38. Id. Both Mr. Kelly and Mr. Anson assured Mr. Leyerle that by entering into the Propagation Agreement, Phytelligence would have the option to acquire a non-exclusive license on those standard terms if and when a decision was made to commercialize WA 38. Id. Mr. Kelly's and Mr. Fatland's assurances were consistent with then-existing WSU and WSURF custom and practice with respect to licensing. By November 2012, their general practice in connection with the commercialization of any cultivar was to engage in processes and procedures culminating in uniform license terms. [Pappu Dep.] at 60:1-5, 69:9-19. By that time, among other things, WSURF had commercialized another apple variety, WA 2, pursuant to non-exclusive license agreements put in place uniformly. Id. at 55:16-56:08, 59:3-9. Section 4 of the Propagation Agreement, the option clause at issue, contains form language that had been previously used by WSURF six to eight times for various other crops, including WA 2. Id. ...

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