# United States **Court of Appeals**  **for the Federal Circuit**

______________________

DELANO FARMS COMPANY , AND FOUR STAR FRUIT, INC ., Plaintiffs

- Appellants,

AND

GERAWAN FARMING, INC ., Plaintiff,

v.

THE CALIFORNIA TABLE GRAPE COMMISSION, UNITED STATES, DEPARTMENT OF AGRICU LTURE, AND T HOMAS J. VILSACK , Secretary of Agriculture , Defendants

- Appellees.

______________________

2014

- 1030

______________________ Appeal from the United States District Court for the Eastern District of California in No. 1:07

- cv

- 01610

- SEH

JLT, Judge Sam E. Haddon.

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Decided: January 9, 2015

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L AWRENCE M. H ADLEY , McKool Smith Hennigan, P.C., of Los Angeles, California, argued for plaintiffs

-DELANO FARMS COMPANY v. CALIFORNIA TABLE GRAPE COMM

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appellants. Of counsel was Brian C. Leighton, Law Office of Brian C. Leighton, of Clovis, California.

J OHN J. F ARGO , Director, Intellectual Property Staff, Commercial Litigation Branch, Civil Division, United States Depa rtment of Justice, of Washington, DC, argued for defendants

- appellees United States, Department of Agriculture, and Thomas J. Vilsack . With him on the brief was S TUART F. D ELERY , Assistant Attorney General.

T HOMAS G. S AUNDERS , Wilmer Cutler Pickering H ale and Dorr LLP, of Washington, DC, argued for defendant

appellee t he California Table Grape Commission. With him on the brief were S ETH P. W AXMAN , B RIAN M. B OYNTON , and F RANCESCO V ALENTINI

.

______________________

Before P ROST , Chief Judge, B RYSON and H UGHES , Ci r cuit Judges.

B RYSON , Circuit Judge.

This appeal involves a challenge to the validity of two plant patents for varieties of table grapes developed by the U.S. Department of Agriculture (“USDA”) and l icensed to the California Table Grape Commission. The plaintiffs filed suit against the USDA and the California Table Grape Commission, seeking to invalidate the p atents on the ground that the two grape varieties were in public use more than one year before the applications for both plant pat ents were filed , and that the patents are therefore invalid under the public use bar of 35 U.S.C. § 102(b) (2006)

. The United States District Court for the Eastern Di strict of California initially ruled that sovereign immunity barred this action against th e U SDA, and that the case could not go forward without the USDA as a party. On appeal, we reversed the district court’s ruling as to theDELANO FARMS COMPANY v. CALIFORNIA TABLE GRAPE COMM

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sovereign immunity issue, holding that the Administr ative Procedure Act waive s sovereign immunity for purpo ses of an a ction such as this one. Delano Farms Co. v. Cal. Table Grape Comm’n , 655 F.3d 1337 (Fed. Cir. 2011).
On remand, the district court granted partial su mmary judgment for the defendants on matters that are not at issue on appeal. The court held a bench tria l on the remaining question whether the actions of two individuals who obtained samples of the two patented plant varieties in an unauthorized manner and planted them in their own fields constituted an invalidating public use of the plant varieties. The district court found that the actions of those individuals did not constitute a public use of the
two plant varieties and therefore rejected the plaintiffs’ challenge to the patents. We a ffirm.

I
The patented table grape varieties at issue in this

case are known as Scarle t Royal (U.S. Patent No. PP16,229), and Autumn King (U.S. Patent No. PP16,284). The USDA, as owner of the patents, has exclusively licensed the patents to the California Table Grape Co mmission , an agency of the State of California

. The Co mmission sublicenses the patents to grape growers in California and collects royalties that are shared by the Commission and the USDA. The licensing agre ements with the growers require t he growers to pay a royalty on the grapes produced by plants of the patented varieties

, and they prohibit the growers from propagating the plants.

The three plaintiffs are all California grape growers who purchased grapevine s covered by the patents , signe d license agreements with the California Table Grape Commission, and paid the Commission’s licensing fee. They brought this action challenging the validity and enforceability of the plant patents, as well as the conductDELANO FARMS COMPANY v. CALIFORNIA TABLE GRAPE COMM

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of the Commission and the USDA in l icensing and enfor cing the patents.
Following the bench trial, the district court made d etailed findings of fact. The court’s findings, and the evidence at trial that supported those findings, are su mmarized below.
The applications that result ed in the plant patents covering Scarlet Royal and Autumn King were filed on September 28, 2004. The “critical date” for the public use bar of 35 U.S.C. § 102(b) (2006 ) , i.e., the beginning date of the one

- year period before which a public use would invalid ate the patents

, is therefore September 28, 2003. Both varieties were made commercial ly available on July 13, 2005.
Jim Ludy, a California grape grower, cultivated table grapes at J&J Ludy Farms , in Delano, California, with his brother, Jack Ludy, from 19 76 to 2003. Larry Ludy

, Jim Ludy’s first cousin

, also cultivate d table grapes at various properties in the area

. On August 22, 2001, the USDA held an experimental variety open house at the California State University

, Fresno . At the open house , USDA repr esentatives di splayed several unreleased table grape varietie s, including Scarlet Royal and Autumn King

. Only the mature fruit from the varieties was on display , not other plant mater ial such as the vines or wood. Visiting growers were not permitted to take any plant material relating to the unreleased varieties or even view the plants in the field

. Both Jim Ludy and Larry Ludy attended the August open house

. While they were there, the Ludy cousins spoke with Rodney Klassen, who was employed by the USDA at the facility where the Scarlet Royal and Autumn King varieties were being developed. Jim Ludy asked Mr. Klassen if Mr. Klassen could give him some of the plant material for the Scarlet Royal and Autumn King varieties.DELANO FARMS COMPANY v. CALIFORNIA TABLE GRAPE COMM

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Mr. Klassen had previous ly given Jim Ludy plant mater ial for other unreleased table grape varieties. Mr. Klassen was not authorized to provide Jim Ludy with any unr eleased plant material.
Despite his lack of authority, Mr. Klassen informed Jim Ludy that he would “take care” of h im. Subsequen tly, in early 2002, Mr. Klassen met with Jim Ludy and

gave him plant material for multiple, unreleased vari eties, including Scarlet Royal and Autumn King. Mr. Klassen instructed Jim Ludy not to let the material “get away from [ him ]” and not to “put them in a box

, ” which Jim Ludy understood to mean that he should not sell the resulting grapes until the varieties were commercially released. Jim Ludy understood that he was to keep the plant material secret . He did not want other growers to obt ain the same unreleased plant material he had

, and he knew that Mr. Klassen would be in “big trouble ” if his actions were discovered . Jim Ludy subsequently testif ied falsely under oath to protect Mr. Klassen’s identity as the person from whom he had obtained the plant material for the unreleased varieties

. After receiving the plant material from Mr. Klassen, Jim Ludy grafted fewer than 50 vines of each of the Scarlet Royal and Autumn King varieties in early 2002. Jim Ludy also provided “a few buds” of Scarlet Royal and Autumn King to his cousin, Larry Ludy. Larry Ludy knew that the material had originally come from a USDA facility and had not yet been released . He admitted that Jim Ludy told him that they should “ke ep it to ourselves.” Jim Ludy testified that 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 co nfidential.

L arry Ludy subsequently grew eight plants of Scarlet Royal and 25 plants of Autumn King. In 2003, LarryDELANO FARMS COMPANY v. CALIFORNIA TABLE GRAPE COMM

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Ludy grew additional plants by graft ing wood from the original group of plants, producing a total of 108 vines of Scarlet Royal and 650 v ines of Autumn King.

Most of the plantings by both Ludys prior to the p atents’ 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 , n one of the vines were marked or labeled in any

way , and the evidence showed that 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 g rape ma rketer for Jim and Larry Ludy.
Larry Ludy showed Mr. Sandrini vines of the unr eleased varieties at least twice prior to the patents’ critical date

. After the critical date, Mr. Sandrini sold Larry Ludy’s 2004 harvest of Autumn King (the first sal e of either unreleased variety)

, but he label ed the grapes as “Thompson Seedless” to avoid detection. Additionally, after the patents’ critical date Larry Ludy provided Mr. Sandrini with wood from which Mr. Sandrini could graft Autumn King on his own prop erty. Larry Ludy testified that he knew it was a “huge competitive advantage” to have grape s that sold at a significant premium before other growers. Mr. Sandrini likewise recognized the competitive advantage inherent in possessing the unr eleased plants and intended to grow his own Autumn King

grapes.

Based on the findings summarized above, the district
court held that the plaintiffs failed to meet their burden of showing, by clear and convincing evidence

, that the Ludys’ use of the unreleased varieties constituted a publicDELANO FARMS COMPANY v. CALIFORNIA TABLE GRAPE COMM

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use that invalidated the patents under 35 U.S.C. § 102(b) (2006)

. The p laintiffs appeal.

II

A
An applicant may not be granted a patent for an i nvention that was “in public use . . . in this country, more than one year prior to the dat e of the application for patent in the United Sta tes.” 35 U.S.C. § 102(b) (2006 ). Following a bench trial, as in this case, “t he district court’ s conclusion on public use under § 102(b) is subject to review as a question of law while the facts underlying
t he conclusion on public use are subject to the clearly erroneous standard of review.” Moleculon Research Corp. v. CBS, Inc. , 793 F.2d 1261, 1266 (Fed. Cir. 1986). “ The proper test for the public use prong of the section 102(b) statutory bar is whether th e purported use was accessible to the public or was commercially exploited. ” Invitrogen Corp. v. Biocrest Mfg., L.P. , 424 F.3d 1374, 1380 (Fed. Cir. 2005)

. Our case law defines the contours of what it means to be “accessible to the public.” The principal policy underl ying 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.” Tone Bros. v. Sysco Corp. , 28 F.3d 1192, 1198 (Fed. Cir. 1994) . 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 an alyzing th at 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 ob served the use. ” Bernhardt, L.L.C. v. Collezione EuropaDELANO FARMS COMPANY v. CALIFORNIA TABLE GRAPE COMM

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USA, Inc. , 386 F.3d 1371, 1379 (Fed. Cir. 2004) , quoting Allied Colloids Inc. v. Am. Cyanamid Co. , 64 F.3d 1570, 1574 (Fed. Cir. 1995)

. The last factor captures “ the co mmonsense notion that whether an inven tion is ‘ acces sible to the publ ic’ . . . depends, at least in part, on the degree of confidentiality surround ing its use: ‘ [A]n agreement of confidentiality, or circumstances creating a similar expe ct ation of secrecy, may negate a public use where there is not commercial exploitation. ’ ” Dey, L.P. v. Sunovion Pharm., Inc. , 715 F.3d 1351, 1355 (Fed. Cir. 2013)

, quo ting Invitrogen , 424 F.3d at 1382.
The analysis is similar when the allegedly public use is performed by an unaffiliated third party rather than the inven tor. “T hird party prio r use accessible to the public is a section 102(b) bar.” Eolas Techs. Inc. v. Microsoft Corp. , 399 F.3d 1325, 1334 (Fed. Cir. 2005) . In order to be invalidating, such use must still be publicly accessible; “secret or confidential third

- party uses do not invalidate later

- filed patents.” Dey , 715 F.3d at 1355

. The adequacy of any confidentiality guarantees are mea sured in relation “to the party in control of the allegedly invalidating prior use.” Id. at 1358 . The actions of an unaffiliated third party a cting in secret are evaluated as if he stood in the place of the inventor.
With these principles in mind, we turn to the ir appl ication to the facts found by the district court

. B

The a ppellants argue that the cultivation of the unr eleased varieties by Jim Ludy and Larry Ludy constituted public use. T hey point to previous opinion s of this cou r t in which the court has held third

- party uses of an inve ntion to be invalidating when , for example, “the third party ‘made no attempt to maintain confidentiality or t o deli berately evade disclosure’; made no ‘discernible effort to maintain the [invention] as confidential’; or ‘made no efforts to conceal the device or keep anything about itDELANO FARMS COMPANY v. CALIFORNIA TABLE GRAPE COMM

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secret.’” Dey , 715 F.3d at 1355 (citations omitted)

. As evidence of the Ludy s’ lack of effort to maintain secrecy regarding their possession of the Scarlet Royal and A utumn King plant varieties

, the a ppellants point to Jim Ludy’s provision of plants to Larry Ludy, Larry Ludy’s sharing of information with Mr. Sandrini, and the lack o f concealment of the vines at either of the Ludy s ’ farms

. The a ppellants first argue that Jim Ludy’s provision of plant material to his cousin Larry Ludy resulted in public use. This argument relies primarily on the S upreme Court’s nineteenth century dec ision in Egbert v. Lippmann

, 104 U.S. 333 (1881) . In that case, 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 on the device had put the invention int o public use, resulting in the invalidation of the patent. The Court held in that case that “[i]f 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 sec recy, and it is so used, such use is public, even though the use and knowledge of the use may be confined to one person.” Id. at 336.

A lthough the inventor of the plant varieties in this

case did not give or sell the invention to anyone, Jim Ludy obtained control over the unreleased varieties . The appellants argue that for purposes of the public use doctrine, Jim Ludy therefore stands in place of the inve ntor. Th ey contend that if Jim Ludy gave Larry Ludy the unreleased plant material “without li mitation or r estriction, or injunction of secrecy,” Larry Ludy’s subs equent cultivation of the plants would be an invalidating public use of the inventions

. The problem with the a ppellants’ argument is that it is squarely contrary to the district court’s f indings of fact. Larry Ludy was present during and participated in Jim Ludy’s conversation with Mr. Klassen and knew that Mr.DELANO FARMS COMPANY v. CALIFORNIA TABLE GRAPE COMM

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Klassen did not have the authority to provide the Ludys with unreleased varieties. When Jim Ludy gave Larry Ludy the plants, Jim Ludy explicitly told his cousin to “keep [knowledge of the plants] to ourselves” and expected th e fact of their possession of the plants to remain private. After the critical date, Larry Ludy allowed Mr. Sandrini to sell the fruit of the unreleased vines under a different name to avoid detection. Moreover, during a deposition in this case, Larry Ludy refused to identify Mr. Klassen as the source of the Ludy s ’ unreleased plants ; he acknow ledged at that time that the information “should be confidential and not out in the public domain.” The findings of the district court clearly establish, therefore, that both Ludy s knew that the y were not authorized to have the plants and that they needed to conceal their possession of the plants.

To the extent that the a ppellants’ argument as to La rry Ludy is based on the lack of an explicit confidentiality agreement between the cousins, “[w]e have never required a formal confidentiality agreement to show non

- public use.” Dey , 715 F.3d at 1357; see also Moleculon , 793 F.2d at 1266 (“[T] he presence or absence of [an express confidentiality] agreement is not determinative of the public use issue .”) . Instead, we evaluate whether there were “circumstances creating a similar expectation of secrecy.” Invitrogen , 424 F.3d at 1382.
The Supreme Court’s decision in 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 Mr. 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 unreleased varieties as co nfidential and non

- public. This case is therefore wholly different from the Supreme Court’s decision in Egbert v.DELANO FARMS COMPANY v. CALIFORNIA TABLE GRAPE COMM

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Lippmann , where the inventor himself gave the invention to a third party with no understanding or expectation that the third party would maintain secrecy as to the inve ntion.

The a ppellants’ second argument is that the Ludy cousin s ’ disclosure of the unreleased plants to Mr. Sa ndrini constitute d public use. Unlike the Ludy s , however, Mr. Sandrini could not practice the invention s because he did not possess plant material until after the critical date. Instead, the a ppellants argue that the disclosure of the plant s ’ existence to Mr. Sandrini demonstrates the lack of confidentiality with which the Ludys treated the unr eleased varie ties.

The circumstances under which the disclosure to Mr. Sandrini occurred weigh against the application of the public use bar. In similar cases, we have held that the nature of the disclosure did not give rise to a “public use.” For example, in America n Seating Co. v. USSC Group

, Inc.

, 514 F.3d 1262 (Fed. Cir. 2008), we affirmed the district court’s decision that demonstration of a prototype to “friends and colleagues” was not invalidating because the evidence supported the existence of “a general unde rstanding of confidentiality.” Id. at 12 67

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. Similarly, in Bernhardt, L.L.C. v. Collezione Europa USA, Inc.

, we vacated a district court decision finding an invalidating public use where “access was tightly controlled,” “there was an industry

- wide under standing [of confidentiality],”

“ a breach of confidence could have serious consequences for an attendee ,” and “there was no effective means for the attendees to divulge the designs they viewed.” 386 F.3d at 1380

- 81.
In this case, the district court found that Mr. Sandrini

was a friend, business partner, and men tor of the Ludys. The court also found that “[e]ach [of the Ludys and Mr. Sandrini ] had incentives to keep the Ludys’ possession secret, creating an environment of confident i ality

, [and]DELANO FARMS COMPANY v. CALIFORNIA TABLE GRAPE COMM

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[e] ach maintained tight control over who knew about the Scarlet Royal and Autumn King vines and their use.” We have no reason to overturn these finding s. Based on the district court’s findings and our case law , t he Ludys’ disclosure to Mr. Sandrini that they were in possession of the unreleased plants does not qualify as an invalidating public use of the patented plant varieties

. Finally, the a ppellants 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 district court found that both Ludys grafted the plants and grew them 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 a ppellants introduced no evidence that any person other than the Ludys and Mr. Sandrini had ever recognized the unreleased varieties. As this court explained in the Dey case, 715 F.3d at 1359

, “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 inval idating prior art, the p ublic 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.

C
As an alternative ground of decision, the district court found that the plaintiffs failed to satisfy their burden of proof on public use because they failed to corroborate the testimony of the Ludys and Mr. Sandrini. Because we uphold the district court’s determination that the plai ntiffs failed to demo nstrate a public use even after admi t-DELANO FARMS COMPANY v. CALIFORNIA TABLE GRAPE COMM

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ting the testimony of the Ludys and Mr. Sandrini, it is unnecessary for us to address whether that evidence was inadmissible for want of corroboration.
In addition, b ecause the evidence at trial was sufficient to suppor t the district court’s finding that the p atented plant varieties were not in public use prior to the critical date, we need not address the question whether use of invention by one who has misappropriated that invention (or obtained it through other improper means) can ever qualify as an invalidating public use. The di strict court properly ruled that the Ludys ’ use of the plant varieties at issue in this case was not public, even apart from the fact that the Ludys obtained the plant material in an unauthorized manner.
Accordingly, we affirm the district court’s decision r ejecting the a ppellants ’ challenge to the validity of the Scarlet Royal and Autumn King patents.

AFFIRMED