August 26, 2011
On August 24, 2011, the Federal Circuit decided that under the Administrative Procedure Act (APA), federal agencies can be sued for a declaration of patent invalidity and for other non-monetary relief. The case, Delano Farms Company v. California Table Grape Commission, is significant for those companies and federal agencies that may become involved in patent litigation.
In Delano, the United States Department of Agriculture (USDA) owned patents relating to three special varieties of table grapes. The USDA licensed the patents to the California Table Grape Commission (“the Commission”), which in turn sublicensed the patents to three grape nurseries who were to serve as exclusive distributors of the patented varieties. Grape growers who purchased the patented vines from those nurseries were to sign a license agreement that required the growers to pay a royalty and prohibited them from propagating the plants.
The plaintiffs, collectively referred to here as Delano, are all California grape growers who purchased grapevines covered by the patents, signed the license agreement, and paid the licensing fee. In 2007, they filed a declaratory judgment action alleging that the USDA’s patents were invalid and unenforceable, and challenging the licensing activities of the Commission and the USDA.
The Commission claimed that the lawsuit could not proceed because the USDA, an indispensable party, was immune from suit under the doctrine of sovereign immunity. Although the APA expressly provides for court actions against government agencies that seek relief “other than monetary damages,” the Commission argued that this provision only allowed for judicial review of actions taken by a federal agency. The Commission argued that the APA, therefore, did not allow for declaratory judgment actions or other types of claims against an agency. The district court agreed and dismissed the case.
On appeal, the Federal Circuit reversed, holding that the APA “waives sovereign immunity for non-monetary claims against federal agencies.” After extensive analysis of the APA, the court held that the waiver of sovereign immunity is not limited to judicial review of agency actions. Accordingly, the court concluded that the plaintiffs could pursue their declaratory judgment claims against the Commission and the USDA.
As federal agencies become more active in securing and licensing patents, the Delano case is expected to take on greater significance. For more information, please contact Fitch Even attorney Eric L. Broxterman, the author of this alert.