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No Bite on Parties’ Unenforceable Agreement to Agree to Sell Apple Trees

The US Court of Appeals for the Federal Circuit affirmed a grant of summary judgment, finding that the option provision in the parties’ contract was an unenforceable agreement to agree. Phytelligence, Inc. v. Wash. State Univ., Case No. 2019-2216 (Fed. Cir. Aug. 27, 2020) (Reyna, J.).

Phytelligence is an agricultural biotechnology company that used tissue culture to grow trees for sale to nurseries and growers. In 2012, Phytelligence and Washington State University (WSU) began discussing an arrangement to grow WA 38 apple trees, a new apple cultivar that WSU developed and patented. The parties executed a propagation agreement, which included a provision that granted Phytelligence an option to participate as a provider and/or seller. If WSU’s cultivar became available for licensing, Phytelligence would need to sign a separate contract with WSU or WSU’s agent to exercise the option to become a provider and/or seller.

WSU eventually began requesting proposals from companies interested in commercializing WA 38. Phytelligence did not submit a proposal. In 2014, WSU accepted a proposal from Proprietary Variety Management (PVM) and entered into a management contract granting PVM an exclusive license to propagate and sell WA 38. Three years after WSU entered into this management contract, Phytelligence notified WSU that it wanted to exercise its option to participate as a provider and/or seller under the propagation agreement. WSU responded that under the propagation agreement, Phytelligence had to sign a separate contract with WSU to exercise the option and directed Phytelligence to PVM. Phytelligence rejected all of PVM and WSU’s options for selling WA 38, and the agreement between the parties was terminated.

Phytelligence sued WSU, alleging breach of the propagation agreement and seeking damages and specific performance. WSU moved for summary judgment, arguing that the option provision of the propagation agreement was an unenforceable “agreement to agree.” The district court agreed and granted WSU’s motion. Phytelligence appealed.

The Federal Circuit affirmed the dismissal. The Court stated that an agreement to agree was an agreement to do something that requires a further meeting of the minds, and without such a meeting, the agreement would not be complete. The Court found that an agreement to agree is unenforceable because courts are unable to fix the liability of parties based on agreements that are too indefinite and uncertain. Turning to the agreement between Phytelligence and WSU, the Court explained that the plain language of the propagation agreement required the parties to sign a separate contract to exercise the option, thus rendering the provision an unenforceable agreement to agree. The Court also rejected Phytelligence’s argument that the extrinsic evidence supported its theory that the option was an enforceable contract with open terms. The Court instead found that the communications between the parties revealed that WSU did not commit to any definite terms for a future license with Phytelligence.

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Trademark Claim for Profit Damages Means No Jury Trial

The US Court of Appeals for the Ninth Circuit affirmed a denial of a jury trial demand in a trademark infringement lawsuit where only a claim of disgorgement of profits was at issue. JL Beverage Company, LLC v. Jim Beam Brands Co., Beam Inc., Case No. 18-16597 (9th Cir. May 27, 2020) (Wallace, J.) (Friedland, J., concurring).

JL sued Jim Beam for trademark infringement. JL manufactured and sold vodka in bottles featuring stylized depictions of lips. Jim Beam also sells vodka in bottles featuring stylized depictions of lips. JL alleged that consumers would confuse its “Johnny Love Vodka” lip mark with Jim Beam’s Pucker line of flavored vodka products.

After JL failed to provide a computation of actual damages during discovery, Jim Beam sought to limit the damages JL could seek at trial. The district court found that JL’s failure prevented Jim Beam from preparing a responsive case and granted Jim Beam’s motion to exclude JL’s claims for actual damages. Jim Beam further argued that JL may not recover a royalty because 1) it is not appropriate in situations, like this one, where the parties did not have a previous royalty agreement and 2) as with actual damages, JL never identified a means of calculating a reasonable royalty or produced evidence upon which a fact finder could determine such a royalty. Again, the court agreed, and limited JL’s damage claims to equitable disgorgement of Jim Beam’s profits, as provided under the Lanham Act.

Without claims for actual damages or royalties, Jim Beam moved to strike JL’s demand for a jury trial. Since the Lanham Act does not afford the right to a jury trial, the district court considered whether the Seventh Amendment affords such a right in a trademark dispute. The Seventh Amendment provides that “[i]n Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved.” The district court found controlling law in Ninth Circuit precedent Fifty-Six Hope Road Music, which held that that the Seventh Amendment does not afford the right to a jury calculation of profits for two reasons: disgorgement is an equitable remedy, and the specific issue of profit determination cannot be said to be traditionally tried by a jury. The district court denied JL’s demand for a jury trial, held a two-day bench trial and ultimately determined that Jim Beam did not infringe JL’s marks. JL appealed the district court’s order granting Jim Beam’s motion to strike its jury trial demand and the district court’s judgment.

The Ninth Circuit affirmed the district court’s order and judgment, finding no error in the court’s likelihood of confusion analysis on any of the factors, nor in its denial of the jury trial.

In a concurring opinion, Judge Friedland wrote separately to address the tension between the Court’s holdings in Fifty-Six Hope Road Music (a trademark case) and Sid & Marty Krofft (a copyright case). In Krofft, the Ninth Circuit found a right to a jury trial in a copyright case where there was only a claim [...]

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