Frederick L. Cottrell, III, Jeffrey L. Moyer, Travis Steven Hunter, Richards, Layton & Finger, P.A., Wilmington, DE, Robert J. Koch, Christopher Gaspar, Stephanie R. Amoroso, Edwards J. Mayle, Ronald Sigworth, Milbank, Tweed, Hadley & McCoy LLP, Washington, D.C., Jennifer L. Dering, Archer & Greiner, P.C., Wilmington, DE, Anne Shea Gaza, Young, Conaway, Stargatt & Taylor LLP, Wilmington, DE, Attorneys for Plaintiffs.
Steven J. Balick, Lauren E. Maguire, Andrew C. Mayo, Ashby & Geddes, P.A., Wilmington, Delaware, Peter A. Bicks, Alex V. Chachkes, Joseph A. Sherinsky, James L. Stengel, Ilene Abala, Orrick, Herrington & Sutcliffe LLP, New York, New York, Attorneys for Defendant Dow AgroSciences LLC.
RENÉE MARIE BUMB, District Judge.
Plaintiffs Bayer CropScience AG and Bayer S.A.S. ("Plaintiffs" or "Bayer") have sued Defendant Dow AgroSciences LLC ("Defendant" or "Dow") for patent infringement based on Defendant's Enlist E3 ("E3") product. Defendant has moved for summary judgment, arguing that it does not infringe because it obtained a valid sublicense to develop and sell E3. Because this Court agrees that Defendant has a valid sublicense to develop and sell E3, Defendant's motion for summary judgment is GRANTED.
In 2003, Bayer made the decision to divest itself of certain soybean assets. [Docket No. 127 at Ex. A, Transcript of Deposition of David G. Morgan ("Morgan Dep.") at 33:22-35:24]. Consistent with that decision, in 2004, Bayer entered into a series of agreements with two companies - Stine Seed Farm, Inc. ("Stine") and MS Technologies, LLC ("MS Tech") - under which Stine and MS Tech obtained certain assets and licenses for soybean technology. Two of those agreements are central to the instant dispute.
First, Bayer entered into an agreement with Stine (the "Stine Agreement"), under which Stine was granted a nonexclusive license to "increase, market, distribute for sale, sell and offer for sale" soybean seeds containing "events" already made by Bayer, or new events made by or for MS Tech. [Docket No. 161 at Ex. B]. An "event" is a plant cell that has had a new gene introduced into it. [Docket No. 127, Defendant's Brief in Support of Summary Judgment at 3 (citing to record)]. The introduction of a new gene can confer new features on the plant. [Id.]. The introduction of multiple genes is referred to as a "stack." [Id.]. Under Article 2.1.3 of the Stine Agreement, MS Tech gave its consent to this arrangement. [Docket No. 161 at Ex. B].
On the same day, Bayer and MS Tech entered into an agreement titled the "Acquisition Agreement of Certain Soybean Assets of Bayer CropScience S.A. and License Agreement" (the "Agreement"). [Docket No. 127 at Ex. C]. There are a number of relevant provisions in the Agreement, which this Court sets forth below (the most relevant section of the Agreement, Article 3.1.2, is set out in bold):
(1) the Agreement's preamble indicates that Bayer had "decided to divest" itself of certain soybean assets and license them (Agreement at 3);
(2) the Agreement's preamble indicates that "some rights... will be granted to Stine and will... be carved out from" the Agreement (Agreement at 4);
(3) the Agreement defines "ASSET" as "the BAYER SOYBEAN EVENTS, LEGAL ASSETS and MATERIAL" (Id.);
(4) the Agreement defines "EXPOLIT" or "EXPLOITATION" as "to make, breed, produce, condition, market, offer, sell, import, export, stock, use, or otherwise dispose of (or offer to do or have done any or all of the foregoing)" (Agreement at 5);
(5) the Agreement defines "BAYER SOYBEAN EVENT" as certain soybean events already made by Bayer (Agreement at 4);
(6) the Agreement defines "M.S. SOYBEAN EVENT" as certain soybean events made, by or for, MS Tech (Agreement at 7);
(7) Article 2.1.1 of the Agreement provides that:
"Subject to the terms and conditions set forth in this AGREEMENT, the Seller hereby sells, transfers and/or assigns the ASSET to [MS TECH], who purchases the ASSET as of the CLOSING with all rights to EXPLOIT the ASSET that the SELLER owns or controls and can sell, transfer or assign."
(8) Article 3.1.1 of the Agreement provides that:
"[Bayer] hereby grants to [MS Tech] solely with regard to SOYBEAN a worldwide, fully paid-up, exclusive license - with the right to grant sublicenses solely as set out in Article 3.1.3 and with the sole exception of the rights to increase, market, distribute for sale, sell and offer for sale, granted to STINE - under the LICENSED PATENTS solely to EXPLOIT the BAYER SOYBEAN EVENTS;
(9) Article 3.1.2 of the Agreement provides that:
[Bayer] hereby grants to [MS Tech] solely with regard to SOYBEAN a worldwide, fully paid-up, exclusive license - with the right to grant sublicenses solely as set out in Article 3.1.3 and with the exception of the rights to increase, market, distribute for sale, sell and offer for sale, granted to STINE by separate agreement - under the LICENSED PATENTS in the field of GLYPHOSATE TOLERANT SOYBEAN solely to EXPLOIT GLYPHOSATE TOLERANCE GENES in M.S. SOYBEAN EVENTS;
(10) Article 3.1.3 of the Agreement provides that:
The license described in Article 3.1.1. and Article 3.1.2. shall include the rights to sublicense the BAYER SOYBEAN EVENTS and the M.S. SOYBEAN EVENTS, excluding however any right to grant bare sublicenses to any of the LICENSED PATENTS or to the OTP, DMMG, HISTONE PROMOTER, HISTONE INTRON, HISTONE TERMINATOR or the GLYPHOSATE TOLERANCE GENES. For the avoidance of doubt, no license is granted with respect to OTP, HISTONE PROMOTER, HISTONE INTRON, HISTONE TERMINATOR when not used in GLYPHOSATE TOLERANCE GENES.
(11) Articles 9.1.2 of the Agreement provides for MS Tech to indemnify Bayer for any exploitation by MS Tech, its affiliates, or authorized sublicensees;
(12) Article 11.3 of the Agreement allows MS Tech to disclose confidential business information as necessary to exploit the assets at issue;
(13) Under Article 12.1 of the Agreement, the Agreement is to be interpreted under English law; and
(14) Exhibit 3.1.5 of the Agreement provides for certain fees to be paid by MS Tech to Bayer in the event MS Tech, or its affiliates, subsidiaries, or successors, either directly or indirectly commercializes Bayer Soybean Events (Agreement at Ex. 3.1.5 at 2).
In addition to the plain language of the Agreement, material to this Court's holding is the following undisputed record evidence: (1) the "carve out" of rights in the MS Tech Agreement was done at Stine's and MS Tech's insistence because Stine could not take on the rights to certain underlying assets without triggering undesired obligations to a third party - the Monsanto Company; (2) with respect to Stine and MS Tech, the purpose of the carve out was to limit Stine's rights, not the rights of MS Tech; (3) it was immaterial to Bayer how any assets were divided between Stine and MS Tech because Bayer intended to divest itself of the assets at issue.
Beginning in 2007, MS Tech and Dow entered into a series of agreements to cooperatively develop and sell E3 - a triple stack soybean event that confers tolerance in soybeans to three different herbicides. [Docket No. 127 at Exs. Q, R, S]. As part of those agreements, Dow was granted a sublicense under the Agreement. [Id.]. As discussed in more detail below, the undisputed facts demonstrate that MS Tech retains ownership of E3. [Docket No. 129, Declaration of Juan Carlos Rojas ¶ 3]. Similarly, the factual record demonstrates that because MS Tech retains ownership of E3, E3 is made "for" MS Tech. [Docket No. 127 at Ex. N, Transcript ...