THOMAS D. SCHROEDER, District Judge.
The North Carolina Farmers' Assistance Fund, Inc. ("NCFAF"), brings this lawsuit as "a qui tam action under the false marking provisions of the Patent Act of 1952, as amended, 35 U.S.C. § 292." (Doc. 1 ¶ 4.)
The pending motions have been fully briefed, and the court held oral argument on August 30, 2010. For the reasons below, the motions to dismiss will be granted without prejudice. The court in its discretion will treat Dow's motion for judgment on the pleadings as a motion to dismiss, which will also be granted without prejudice. Consequently, the constitutional challenge is not reached.
Monsanto has developed a system for weed control employing genetically modified crops that resist its glyphosate herbicide sold under the trademark Roundup®. Monsanto Co. v. McFarling, 488 F.3d 973, 976 (Fed.Cir.2007). Farmers using Monsanto's genetically modified seeds can spray Roundup® to control weeds without fear that it will affect their soybeans. Id. Monsanto's seeds have been sold under the trade name Roundup Ready®. Id.
The technology that allows Roundup Ready® seeds to work is contained in Monsanto Technology's U.S. Patent No. 5,352,605 ("the '605 Patent"). The '605 Patent "is directed toward insertion of a synthetic gene consisting of a 35S cauliflower mosaic virus [CaMV] promoter, a protein sequence of interest, and a stop signal, into plant DNA to create herbicide resistance." Monsanto Co. v. Scruggs, 459 F.3d 1328, 1332 (Fed.Cir.2006). "The '605 Patent claims, inter alia, DNA sequences and plant cells containing the promoter. A promoter sequence is a DNA sequence located in proximity to the DNA sequence that encodes a protein and that, in part, tells the cellular machinery how much of the protein to make." Monsanto Co. v. McFarling, 363 F.3d 1336, 1339 (Fed.Cir.2004).
Other courts have held that the planting of saved seeds from prior years' crops constitutes infringement of the '605 Patent. See, e.g., Monsanto Co. v. David, 516 F.3d 1009, 1014 (Fed.Cir.2008) (finding that the '605 Patent was infringed by the planting of saved seeds containing the gene sequence "because the seed contains the gene"); McFarling, 488 F.3d at 977-78 (finding no patent misuse in the license terms of the '605 Patent because "Monsanto's '605 Patent reads on both purchased and farmer-grown Roundup Ready soybeans"); Monsanto Co. v. Vanderhoof, No. 4:06-CV-134, 2007 WL 1240258, at *5 (E.D.Mo. April 27, 2007) (finding that the planting of saved Roundup Ready® soybean seeds infringed the '605 Patent); Monsanto Co. v. Dawson, No. 4:98CV2004, 2000 WL 33953542 (E.D.Mo. November 24, 2000) (same). As summarized by the district court for the Northern District of Indiana:
Monsanto Co. v. Parr, 545 F.Supp.2d 836, 841 & n. 12 (N.D.Ind.2008) (citing cases in omitted footnote); accord Monsanto Co. v. Strickland, No. 4:05-3062, 2007 WL 3046700, at *6 (D.S.C. Oct. 16, 2007) (holding that "[t]he '605 patent has been found to be valid and infringed in a number of cases") (construing claim and finding infringement).
NCFAF is a North Carolina non-profit allegedly formed for the purpose of "supporting small, independent, family farming operations in North Carolina."
The purpose of a motion pursuant to Federal Rule of Civil Procedure 12(b)(6) is to "test[] the sufficiency of a complaint" and not to "resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir.1992) (citation omitted).
Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Although the complaint need only "give the defendant fair notice of what the ... claim is and the grounds upon which it rests," a plaintiff's obligation "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citations omitted).
Rule 12(b)(6) requires a plaintiff to allege sufficient factual information "to raise a right to relief above the speculative level" so as to "nudge the[] claims across the line from conceivable to plausible." Id. at 555, 570, 127 S.Ct. 1955; see Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937, 1950-51, 173 L.Ed.2d 868 (2009). Under Iqbal, the court is to undertake a two-step analysis. First, the court separates factual allegations from allegations not entitled to the assumption of truth (i.e., conclusory allegations, bare assertions amounting to nothing more than a "formulaic recitation of the elements"). Second, the court determines whether the factual allegations, which are accepted as true, "plausibly suggest an entitlement to relief." 129 S.Ct. at 1950-01.
The statute under which NCFAF's complaint proceeds provides three alternative grounds for imposition of a fine for false marking. NCFAF's claim for false marking is made under the second ground, which provides:
35 U.S.C. § 292(a); see Doc. 1 ¶ 33. "Any person may sue for the penalty, in which
Monsanto argues that the complaint fails to state a claim upon which relief can be granted for two principal reasons: lack of factual allegations that the seeds are an "unpatented article;" and failure to plead facts showing it is plausible that the Defendants lacked a reasonable belief the seeds were covered by the '605 Patent.
Monsanto argues that the complaint contains only conclusory allegations and provides no facts to support its claim that the seeds are an unpatented article. This is particularly problematic, Monsanto argues, in light of the several prior federal decisions that held that saved seeds are covered by the '605 Patent for Roundup Ready® soybean seeds. Dow asserts a similar argument but, couching it as one of stare decisis, argues that this court "is not at liberty to reach a decision at odds with the Federal Circuit's prior findings that RR [Roundup Ready] soybean seed is covered by the '605 patent."
NCFAF claims it has a new "mutation" theory for why the '605 Patent does not apply to the seeds in question. Though not articulated anywhere in the complaint, NCFAF argues in its briefing that the Roundup Ready® seeds have undergone genetic mutations over multiple generations and that "[g]enetic testing will confirm that the disclosed DNA promoter sequence listed in the '605 patent is far different than what is found in the current soybeans." (Doc. 35 at 7.) Counsel projected that they will show that none of the four recognized strains of CaMV exists in current Roundup Ready® soybean seeds. In support of this assertion, NCFAF attaches to its brief a published report on a study of mutations. (Doc. 35 at 7.)
NCFAF dismisses the prior Federal Circuit opinions as being neither controlling nor persuasive. In Scruggs, it contends, the plaintiff never contested the district court's claim construction finding that the '605 Patent read on the seeds. Thus, it argues that the circuit court's statements regarding claim construction are dicta. Although irrelevant to the substantive issues, NCFAF also urges that the farmers in Scruggs and the other cases lacked the resources to defend the cases properly and contends that NCFAF will be the first to challenge the '605 Patent with substantial resources. In any event, it intends through its action to aid farmers "by obtaining a judicial determination of the scope of the '605 Patent." (Doc. 32 at 4.)
The court need not anticipate at this stage factual contentions NCFAF has not alleged in its complaint. The complaint is devoid of any factual allegation as to how the Defendants are alleged to have falsely marked the Roundup Ready® seeds. Those allegations that bear upon the "unpatented article" element of section 292 are wholly conclusory. See, e.g., Doc. 1 ¶ 36 ("Upon information and belief, the contents of the bags of seeds sold commercially by the Defendants under the brand name `Roundup Ready' are not covered by any claim of the '605 [P]atent.") NCFAF's attempt to develop its factual allegations solely in its briefing and during oral argument ignores the requirements of Iqbal and Twombly; it is the complaint that is the focal point of the current inquiry. Apart from the allegation in paragraph 37 that the act of replanting saved seeds does not create a seed covered by the '605 Patent (which is untethered to any other allegation and appears to be swimming against the current of existing Federal Circuit decisions), there is no basis on this record to conclude that NCFAF could show a plausible claim for relief. Whether the prior decisions relating to the '605 Patent will provide a formidable challenge to a false marking claim, as Defendants assert, must be assessed in the context of a complaint that contains sufficient factual allegations to identify a basis for relief. The complaint will be dismissed, therefore, but without prejudice in the event NCFAF chooses to refile it with an articulated factual basis that can be assessed for plausibility.
Monsanto also argues that NCFAF has failed to allege facts supporting an inference that Defendants lacked a reasonable belief that the Roundup Ready® seeds were subject to the '605 Patent, and thus NCFAF cannot satisfy the "intent to deceive" requirement. Given the holdings of the previous litigations, Monsanto argues, Defendants had as a matter of law at least a reasonable belief of such coverage. Without alleging any facts to show that the soybean seeds described in the complaint differ in any way from the saved seeds at issue in the prior litigation, Monsanto argues, NCFAF cannot plausibly show that Defendants lacked a reasonable belief that the seeds were properly marked and thus acted with the necessary intent to deceive. Monsanto also argues that NCFAF's allegation that "each of the Defendants knows or should have known that the contents of the [marked soybean] bags are not covered by any claims of the '605 patent" is insufficient because constructive knowledge claims do not meet the necessary intent to deceive threshold in false marking cases.
NCFAF asserts that Clontech Labs. Inc. v. Invitrogen Corp., 406 F.3d 1347 (Fed.
Section 292(a) requires the entity marking or advertising do so "for the purpose of deceiving the public." As discussed in more detail infra as to the Rule 9(b) motions, the Federal Circuit recently observed that the bar in proving deceptive intent is "particularly high, given that the false marking statute is a criminal one, despite being punishable only with a civil fine." Pequignot v. Solo Cup Co., 608 F.3d 1356, 1363 (Fed.Cir.2010) (citing S.Rep. No. 82-1979, 1952 U.S.C.C.A.N. 2394, 2424 (1952), which stated "This is a criminal provision."); see Clontech, 406 F.3d at 1352 ("The statute supplies a civil fine."). Because the statute requires that the false marker act "for the purpose of deceiving the public," the claimant must show "a purpose of deceit, rather than simply knowledge that a statement is false." See Solo Cup, 608 F.3d at 1363. As explained by the Federal Circuit, "[i]ntent to deceive is a state of mind arising when a party acts with sufficient knowledge that what it is saying is not so and consequently that the recipient of its saying will be misled into thinking that the statement is true." Forest Group, 590 F.3d at 1300 (quoting Clontech, 406 F.3d at 1352).
Under Clontech and Supreme Court precedent, "the combination of a false statement and knowledge that the statement was false creates a rebuttable presumption of intent to deceive the public, rather than irrebuttably proving such intent." Solo Cup, 608 F.3d at 1362-63. "Thus, mere knowledge that a marking is false is insufficient to prove intent if [a defendant] can prove that it did not consciously desire the result that the public be deceived." Id. at 1363. A party's good faith belief is relevant to determining whether that party acted with intent to deceive. Id. at 1364.
Therefore, a complaint under section 292 must contain sufficient factual allegations to support a plausible inference that a Defendant intended to deceive the public.
As noted earlier, the only factual allegation, which is never related to any other allegation of the complaint, is that "the act of replanting seeds from a crop grown from seeds purchased from the Defendants does not create any plant or seed covered by the '605 Patent." (Doc. 1 ¶ 37.) In the absence of any factual allegation as to how the seeds are not covered by the '605 Patent, and in light of the multiple federal decisions holding that the '605 Patent reads on saved seeds, it is difficult to discern how any Defendant plausibly could have known that it was falsely marking an unpatented article or, as articulated by the Federal Circuit in Clontech, acting without a reasonable belief that the Roundup Ready® seeds were covered by the '605 Patent. Indeed, what the complaint alleges is the Defendants' purpose that supports an intent to deceive—that the Defendants acted "for the purpose of deceiving the public, as part of Monsanto's scheme to extract a continuing stream of license revenue from farmers through the intimidatory threat of a patent infringement lawsuit" (id. ¶ 41)—on this complaint can at least equally be read as no more than Monsanto's enforcement of its '605 Patent rights that have been affirmed in prior federal decisions. Thus, the motion to dismiss will be granted on this ground as well, without prejudice.
Dow also moves for judgment on the pleadings. Although distinct from a motion to dismiss, a motion brought under Rule 12(c), at least when essentially asserting a failure to state a claim upon which relief may be granted, is subject to the same standard. See Independence News, Inc. v. City of Charlotte, 568 F.3d 148, 154 (4th Cir.2009); Barbier v. Durham County Bd. of Educ., 225 F.Supp.2d 617, 630 (M.D.N.C.2002). Thus, as in the case of a motion pursuant to Rule 12(b)(6), the facts in the complaint must be taken in the light most favorable to the Plaintiff.
In addition to the arguments made by Monsanto, Dow argues that the complaint premises its claims on a contention that the Defendants are falsely marking replanted seeds saved from prior Roundup Ready® seeds which are not covered by the '605 Patent. (Doc. 1 ¶ 37.) Because the complaint fails to allege that Dow ever purchased or sold to any farmer any saved Roundup Ready® seed, Dow asserts, it could not have marked such seed. (Doc. 31 at 12.) Moreover, Dow concludes, the Federal Circuit resolved in McFarling and David that planting such seeds infringes the '605 Patent, which settles the issue. (Id. at 12-13.)
In light of the fact that the complaint was filed before the Supreme Court's decision in Iqbal, the court in its discretion will treat Dow's motion as one for failure to state a claim and will grant it, without prejudice, on the same grounds and for the same reasons as the Rule 12(b)(6) motions to dismiss. See Amersbach v. City of Cleveland, 598 F.2d 1033, 1038 (6th Cir. 1979) ("mere fact that the motion was couched in terms of Rule 12(c) does not prevent the district court from disposing of the motion by dismissal rather than by judgment"), disapproved of on other grounds by Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528, 105 S.Ct. 1005, 83 L.Ed.2d 1016 (1985); WESI, LLC v. Compass Environmental, Inc., 509 F.Supp.2d 1353, 1359 n. 4 (N.D.Ga.2007); see also 1 Motions in Federal Court § 5:158 (3d ed.) ("The relief granted on a motion for judgment on the pleadings under
Monsanto also asserts that the complaint should be dismissed pursuant to Federal Rule of Civil Procedure 9(b) for failure to plead fraud with the required particularity or, in the alternative, NCFAF should be required to do so.
Monsanto argues that in false marking cases allegations of intent to deceive must be pleaded with specificity because Rule 9(b) reaches claims that are "grounded in fraud" or "sound in fraud." (Doc. 20 at 12-16 (citing Clontech, 406 F.3d at 1351).) Monsanto contends that the complaint rests on allegations based upon "information and belief" and that no facts are pleaded with respect to them to satisfy the threshold for particularity required by Rule 9(b). Monsanto concludes that the complaint lacks any factual basis to support even an inference of deceptive intent. Finally, Monsanto alleges that by lumping all Defendants together, NCFAF has failed to differentiate its fraud allegations as to each Defendant's alleged role and intent. (Doc. 20 at 12-17.)
NCFAF argues that section 292 is not a fraud-based statute and that under Rule 9(b) intent and knowledge may be alleged generally. If fraud were required, NCFAF argues, the Federal Circuit would require proof by clear and convincing evidence, which it has not done. (Doc. 32 at 2, 9.) Monsanto responds that the clear and convincing evidence standard does not operate in lockstep with Rule 9(b), citing Ackerman v. Northwestern Mutual Life Insurance Company, 172 F.3d 467, 470 (7th Cir.1999). (Doc. 42 at 9.)
There is no controlling precedent clearly deciding whether Rule 9(b)'s heightened standards apply to section 292 claims. Courts have split on the issue. Some courts have held that Rule 9(b) does not apply to section 292 cases. See Song v. PIL, L.L.C., No. 08-C-2807, 2010 WL 1541304, at *1 (N.D.Ill. Apr. 14, 2010) (noting split but finding plaintiff failed to plead sufficiently intent to deceive even under Rule 8(a));
More recently, however, several courts have required complaints alleging false
The court concludes that the better reasoned approach is that section 292 is subject to the heightened particularity requirements of Rule 9(b). As noted in Simonian, false marking is only actionable under Forest when there is intent to deceive or, as stated in Solo Cup, "a purpose of deceit." Therefore, a claim brought under section 292 is a fraud-based claim. While intent may be alleged generally, the circumstances constituting intent to deceive must be alleged with particularity. Cf. Cozzarelli v. Inspire Pharmaceuticals, Inc., 549 F.3d 618, 629 (4th Cir.2008) (noting, in securities claim, that a plaintiff cannot escape the requirements of Rule 9(b) when it makes an allegation that has the substance of fraud, and dismissing under Twombly). A primary purpose of Rule 9(b) is to protect a defendant from reputational harm resulting from frivolous allegations, and the court can discern no logical reason it should not apply here. Id.
The sparse facts alleged in the complaint do not meet the requirements of particularity under Rule 9(b). The complaint fails to allege any facts to indicate on what basis each Defendant may have falsely marked its product. The single factual allegation that "the act of replanting seeds from a crop grown from seeds purchased from the Defendants does not create any plant or seed covered by the '605 Patent" is inadequate. (Doc. 1 ¶ 37.) The complaint's allegation that "each of the Defendants marks or has marked its bags for the purpose of deceiving the public" is wholly conclusory. (Id. ¶ 41.) There is simply no other allegation to indicate any factual basis to plausibly conclude that any Defendant acted with an intent to deceive. Indeed, in light of the reported decisions upholding the reading of the '605 Patent on saved seeds, the bare bones complaint fails to provide a plausible claim as to saved seeds.
It is true that "[p]leading on `information and belief' is permitted under Rule 9(b) when essential information lies uniquely within another party's control, but only if the pleading sets forth the specific facts upon which the belief is reasonably based." Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312, 1330 (Fed.Cir.2009). The complaint provides neither the "information" on which NCFAF relies nor any plausible reasons for its "belief." See id. at 1330-31. Nor does the complaint indicate that the facts are uniquely in the possession of Defendants. To the contrary, NCFAF's theory of liability forecast in its briefing and at oral argument makes clear that NCFAF possesses some idea of its basis for alleged liability which is not articulated in its complaint.
The court finds, therefore, that the complaint fails to "state with particularity the circumstances constituting fraud." See Advanced Cartridge, 2010 WL 2640137, at *1 (complaint alleging that the defendant "knows, or reasonably should know, that marking the Cartridge Products with patents that do not cover the Cartridge Products, or patents that are invalid or expired will deceive the public" with sparse factual detail "utterly fails to `state with particularity the circumstances constituting fraud'"); Brinkmeier v. Graco Children's Prods. Inc., 684 F.Supp.2d 548, 553-54 (D.Del.2010) (conclusory statements regarding intent to deceive the public fail to state a claim under section 292). The complaint will be dismissed without prejudice on the independent ground that it fails under Rule 9(b).
For the reasons set out above, the complaint will be dismissed without prejudice to NCFAF refiling it to cure the deficiencies noted.
IT IS THEREFORE ORDERED as follows:
1. The motions to dismiss NCFAF's complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) by Defendants Monsanto Company, Monsanto Technology, LLC, Asgrow Seeds Company LLC, and Delta & Pine Land Company (Doc. 20) are GRANTED WITHOUT PREJUDICE;
2. The motion to dismiss NCFAF's complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) by Pioneer Hi-Bred International, Inc. (Doc. 37) is GRANTED WITHOUT PREJUDICE;
3. The motion to dismiss NCFAF's complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) filed by Crop Production Services, Inc. (Doc. 40) is GRANTED WITHOUT PREJUDICE; and
4. The motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c) filed by Dow AgroSciences, LLC (Doc. 30) is treated as a motion to dismiss and is GRANTED WITHOUT PREJUDICE.
NCFAF is granted thirty (30) days within which to file an amended complaint, should it choose to do so.