Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_05-cv-03091/USCOURTS-cand-5_05-cv-03091-4/pdf.json

Nature of Suit Code: 891
Nature of Suit: Agricultural Acts
Cause of Action: 15:1125 Trademark Infringement (Lanham Act)

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United States District Court

For the Northern District of California

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NOT FOR CITATION

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

Progeny Advanced Genetics, Inc.,

Plaintiff,

 v.

Paragon Seed, Inc.,

Defendant. /

NO. CV 05-03091 JW 

ORDER GRANTING DEFENDANT’S

MOTION TO DISMISS 

I. INTRODUCTION

Plaintiff, Progeny Advanced Genetics, Inc. (“Plaintiff”), initiated this action against

Defendant, Paragon Seed, Inc. (“Defendant”), alleging the following causes of action: (1)

Infringement under the Plant Variety Protection Act (“PVPA”); (2) False Designation of Origin and

False Representation; (3) Unfair Competition; and (4) a petition for Declaratory Judgment with

regard to the arbitration issues. Presently before the Court is Defendant’s Motion to Dismiss the

Complaint and all causes of action stated therein on the basis that Plaintiff’s complaint fails to state a

claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). (Mot.

at 1: 27.) This Motion was heard before the Court on February 27, 2006. For the reasons set forth

below, the Court GRANTS Defendant’s Motion to Dismiss.

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II. BACKGROUND

In September of 2003, Plaintiff filed suit against Defendant alleging, inter alia, that a variety

of lettuce seed sold by Defendant – the “King Louie/TG” romaine lettuce variety – infringed on a

Plant Variety Protection Act (“PVPA”) certificate issued to Plaintiff for a similar romaine lettuce

variety known as “King Henry.” On May 11, 2004, after participating in an Early Neutral

Evaluation (“ENE”) session, the parties entered into a Settlement Agreement disposing of all claims

and counterclaims regarding Defendant’s alleged infringement. (Defendant’s Motion to Dismiss,

hereinafter “Mot.,” Docket Item No. 7, 7-8.) Specifically, in the parties’ attempt to dispose of all

pending claims, counterclaims, and future claims, the Settlement Agreement contained several

provisions regarding Defendant’s development and sale of its TG (“Tall Guzmaine”) variety in

relation to the King Henry dispute. The pertinent terms of the Settlement Agreement are as follows:

4. Future Development and Sales by Paragon:

a. Progeny agrees that Paragon has the right to produce for commercial

sale and sell the public Tall Guzmaine variety under the name Tall

Guzmaine.

b. Progeny agrees that Paragon has the right to use the Tall Guzmaine

variety in its breeding program and to develop new and distinct

varieties from King Henry using selections from Tall Guzmaine. 

c. Progeny agrees that Paragon has the right to produce for commercial

sale and sell newly developed different varieties derived from Tall

Guzmaine which are marketed under a new name, provided that

Paragon has first applied for a Plant Variety Protection Certificate to

the PVP Office priorto selling any such newly developed varieties, and

provided that Paragon does not use the name “King” coupled with any

other word or words as the variety name for any Florida type romaine

lettuce variety. Progeny recognizes and agrees that Paragon is currently

marketing a spring mix lettuce variety named “King Kong” and a dark

romaine lettuce variety named “Kingpin,” and that those variety names

do not infringe upon any rights of Progeny.

d. Progeny agrees that during the time period that any application is

pending for a Plant Variety ProtectionCertificate to the PVP Office by

Paragon for a different variety derived from Tall Guzmaine,

Progeny will not make any claims that such variety infringes any

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of its rights by challenge of the variety by litigation in court or file

any Protest Petition with the PVP office. Notwithstanding the

foregoing, in the event that Progeny has a good faith belief that its

rights are infringed by such variety derived from Tall Guzmaine,

then Progeny shall have the right to request that Paragon and Progeny

mediate the dispute....In the event that the parties are unable to

mediate their dispute, then they agree to submit their disputes to

binding arbitration before the Judge selected for the mediation. 

(Request for Judicial Notice, Exhibit “C,” Docket Item No. 9, 2-3.) (emphasis added.)

Following execution of the Settlement Agreement, Plaintiff filed the instant action. Plaintiff

contends that Defendant’s Rubicon lettuce variety, which is the subject of a pending PVPA

Certificate and derived from Tall Guzmaine, infringes on Plaintiff’s King Henry lettuce variety.

Plaintiff further contends that any dispute concerning whether or not the Rubicon variety infringes

on Plaintiff’s rights under the PVPA is not subject to adjudication through private mediation and

arbitration as outlined in the Settlement Agreement. (Mot. at 8:24-28.) Defendant moves to dismiss,

contending that, under the terms of the Settlement Agreement, Plaintiff is precluded from filing any

claims in court challenging a lettuce variety derived from Tall Guzmaine during the time an

application is pending for a PVPA Certificate by Defendants. (Mot. at 9:11-13.) Based on the

arguments advanced by counsel at the hearing and in their briefs, the Court GRANTS Defendant’s

Motion to Dismiss.

III. STANDARDS

Motion to Dismiss under Rule 12(b)(6)

The strict standard for granting a motion to dismiss under Rule 12(b)(6) is set forth in Conley

v. Gibson, 355 U.S. 41 (1957). A motion to dismiss under Rule 12(b)(6) must not be granted

"unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim

which would entitle him to relief." Id. at 45-46. As the Ninth Circuit observed, a "motion to dismiss

for failure to state a claim is viewed with disfavor and is rarely granted." Gilligan v. Jamco Develop.

Corp., 108 F.3d 246, 249 (9th Cir. 1997).

In ruling on a motion to dismiss, the Court must accept as true all material allegations in the

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complaint, as well as reasonable inferences to be drawn from them. Leatherman v. Tarrant County

Narcotics Intelligence and Coordination Unit, 507 U.S. 163, 164 (1993); Pareto v. FDIC, 139 F.3d

696, 699 (9th Cir. 1998). However, the court need not accept as true conclusory allegations or legal

characterizations. Pareto, 139 F.3d at 699. Also, the court need not accept unreasonable inferences

or unwarranted deductions of fact. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir.

2001).

IV. DISCUSSION

The primary issue at hand is the question of whether the Settlement Agreement, by its terms,

prohibits legal proceedings in favor of the mandatory arbitration/mediation scheme set forth in the

Settlement Agreement. Courts have inherent power to enforce settlement agreements between

parties in pending cases. Metronet Services Corp. v. U.S. West Communications, 329 F.3d 1013-

1014 (9th Cir. 2003). In this instance both parties acknowledge the existence of a Settlement

Agreement, but dispute the applicability of its terms here. The posture of this motion is appropriate

to test whether Plaintiff’s complaint is barred by the parties’ settlement agreement. Motions pursuant

to Federal Rule 12(b)(6) have been used in similar instances to determine applicability of arbitration

agreements. See Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (2002). 

A. Request for Judicial Notice

As a threshold matter, Defendant requested judicial notice of six documents with its motion

to dismiss: (1) the complaint in the prior action; (2) Defendant’s counterclaim in the prior action;

(3) the Settlement Agreement entered into on May 11, 2004 by the parties as a result of the prior

action and which had been previously entered into the Court’s records; (4) the complaint in the

current action; (5) the PVPA application filed with the PVP Office on December 22, 2003 for which

Defendant seeks a Certificate pursuant to the PVPA; and (6) the record of the pending application

for “Rubicon” from the PVP Office website. Plaintiffs do not dispute that judicial notice is

appropriate with regard to these documents, other than Plaintiff’s statement that the use of judicial

notice for the PVPA application may not be proper since the application is not publicly available. 

The Court need not address that issue at this time because the content of the PVPA application itself

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is irrelevant to the interpretation of the Settlement Agreement. Accordingly, Defendant’s request for

judicial notice of all six documents is granted, except as to the PVPA application.

B. Express Language of the Settlement Agreement

Plaintiff contends that the intent and meaning of the Settlement Agreement should be

construed to limit its application to instances involving “newly developed” lettuce varieties derived

from Tall Guzmaine. Plaintiff further contends that only lettuce varieties developed after the

Settlement Agreement should be limited by its terms, with respect to the requirement of arbitration

and mediation. Defendant contends that the Settlement Agreement applies to any infringement

claims involving King Henry lettuce, for which PVP applications are pending, and that express

exclusion of varieties developed prior to the Agreement would be necessary to render the Agreement

inapplicable to Rubicon. 

The parties agree that the “Rubicon” variety was developed before the Settlement Agreement

was reached, although its existence was not known publicly and no attempts to market it had yet

been made. The crux of Plaintiff’s argument is that the phrase “newly developed,” which appears in

a portion of the Settlement Agreement, should be construed as a limiting term that removes Rubicon

from the scope of its application.

The Court must examine and interpret the terms of the parties’ contract to determine whether

a particular dispute is subject to the parties’ arbitration agreement. Mediterranean Enterprises, Inc.

v. Ssangyong Corp., 708 F.2d 1458, 1463 (9th Cir. 1983). 

The terms of the Agreement are very specific with respect to its application here, in that all

disputes between the parties will be subject to arbitration, provided that the subject in question

involves a “different variety derived from Tall Guzmaine...while an application is pending for a

Plant Variety Protection certificate to the PVP office.” (Request for Judicial Notice, Exhibit “C,”

Docket Item No. 9, ¶ 4.) 

Portions of the agreement do make reference to Defendant’s right to pursue “newly

developed” varieties on the part of Defendant. However, what constitutes a “newly developed”

variety is not defined in the Settlement Agreement. The phrase arguably could refer to varieties

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under development, but not yet made public. The terms of art referred to by Plaintiff (“newly

developed” and “new and distinct”) are, at best, indications of the intent of the parties. However,

reference to those passages is not necessary to construe the clear terms of the agreement, especially

with respect to the arbitration clause. Paragraphs (b) and (c) use the phrases “new and distinct” and

“newly developed” in reciting the rights of Defendant. These words are tellingly absent from the

language of paragraph (d) regarding arbitration, thus indicating the parties’ intent to apply the

arbitration provision broadly.

Plaintiff assumes that the above language applies a temporal context with reference to the

date the Settlement Agreement was executed. This simply is not the case. The phrase “newly

developed” is not a critical nor limiting element with respect to the Court’s interpretation of the

Settlement Agreement. 

Contracts must be interpreted so as to give effect to the “mutual intention of the parties as it

existed at the time of the contracting.” Victoria. v. Superior Court (Kaiser Foundation Hospital), 40

Cal.3d 734 (1985). In this case, the paramount intention of the parties is clearly stated within the

Settlement Agreement. Both Plaintiff and Defendant recognized a likelihood of further disputes

involving additional lettuce varieties developed by Defendant that originated from Tall Guzmaine. 

The current controversy represents precisely what was foreseen within the Settlement Agreement. 

Whether or not Rubicon was developed on a particular date does not affect the application of

binding arbitration or mediation to this dispute. Indeed, all of the conditions stated within the

Settlement Agreement apply. 

At the time the parties penned their compromise, Plaintiff and Defendant intended to resolve

what had become a lengthy and contentious dispute while also seeking to avert similar claims with

arbitration and mediation. The Court finds that the terms of the Settlement Agreement expressly

apply to the very claim at issue here, proscribing a judicial remedy for the alleged infringement.

Plaintiff’s dissatisfaction with the wording of the Settlement Agreement is unavailing in this forum.

C. Policy of Interpretation Favoring Arbitration

Plaintiff and Defendant each contend that the other party’s interpretation of the Settlement

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Agreement’s scope is inconsistent with the policy of interpreting agreements in favor of arbitration. 

The courts have made clear their policy of interpreting agreements in favor of arbitration. In 1983,

the Supreme Court stated, “the [Federal] Arbitration Act establishes that, as a matter of federal law,

any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.”

Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74

L.Ed.2d 763 (1983); Victoria, 40 Cal.3d 734 (1985). Additionally, the Supreme Court recognized

that “ambiguities as to the scope of the arbitration clause itself [must be] resolved in favor of

arbitration.” Mastrobono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62 (1995), citing Volt

Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 476

(1989). Furthermore, the California Supreme Court recognized that broad contractual provisions for

arbitration are to be “liberally construed,” and that “[d]oubts as to whether an arbitration clause

applies to a particular dispute are to be resolved in favor of sending the parties to arbitration. The

court should order [the parties] to arbitrate unless it is clear that the arbitration clause cannot be

interpreted to cover the dispute.” Poster v. Grunwald-Marx, Inc., 56 Cal.2d 169, 183 (1961); United

Transportation Union v. Southern Cal. Rapid Transit Dist., 7 Cal. App. 4th 804, 808 (1992). 

Federal and California state law limit the reach of this policy to the intended scope of the

arbitration clause, providing that Congress did not enact the Federal Arbitration Act (“FAA”) to

“operate without regard to the wishes of the contracting parties.” Mastrobuomo v. Shearson

Lehman Hutton, 514 U.S. 52, 57, 115 S.Ct. 927, 74 L.Ed.2d 763 (1983). However, the party

opposing arbitration has the burden of showing that the agreement to arbitrate cannot be interpreted

to apply to the dispute in question. Buckhorn v. St. Jude Heritage Medical Group, 121 Cal. App. 4th

1401, 1406 (2004), citing Coast Plaza Doctors Hosp. v. Blue Cross of California, 83 Cal. App. 4th

677, 686-687 (2000). As discussed above, the express language of the arbitration provision here

demonstrates an intent that all disputes between the parties will be subject to arbitration, provided

that the subject of contention involves a variety derived from Tall Guzmaine. Accordingly, the

Court finds that Plaintiff has not met its burden of showing that the express terms of the Settlement

Agreement cannot be interpreted to apply to this dispute. 

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D. Attorneys Fees and Costs

Defendants are entitled to attorneys fees and costs pursuant to California Civil Code

§1717(a), which states: “In any action on a contract, where the contract specifically provides that

attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one

of the parties or to the prevailing party, then the party who is determined to be the prevailing party

on the contract...shall be entitled to reasonable attorney’s fees in addition to other costs.” The

Settlement Agreement in this matter specifically provides for payment of reasonable attorneys’ fees

and costs to the prevailing party in an action to enforce the agreement. Defendant’s motion to

dismiss is, in essence, an action to enforce the Settlement Agreement. As the prevailing party in the

motion to dismiss, Defendant is entitled to its reasonable attorneys’ fees and costs.

V. CONCLUSION

The Court finds that the terms of the Settlement Agreement expressly apply to the

controversy pending between the parties in the instant action, and that this forum is not available to

Plaintiff for its claim that the Rubicon variety infringes upon the PVP certificate at issue. 

Accordingly, the Court GRANTS Defendant’s Motion to Dismiss, with prejudice. Further,

Defendant is entitled to reasonable attorneys fees and costs, and shall file and serve with the Court

an itemization of fees and costs, supported by declaration, no later than March 13, 2006.

Dated: March 1, 2006

05cv3091dismiss

/s/James Ware 

JAMES WARE

United States District Judge

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THIS IS TO CERTIFY THAT COPIES OF THIS ORDER HAVE BEEN DELIVERED TO:

Effie F. Anastassiou effieesq@juno.com

Rachel Krevans rkrevans@mofo.com

Dated: March 2, 2006 Richard W. Wieking, Clerk

By:_/s/JW Chambers____________

Melissa Peralta

Courtroom Deputy

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