(Nov. 1) WENATCHEE, Wash. — Claims by nurseries over the royalty fees for the varieties of apple trees they sell to growers have begun to congeal into a force that may push some growing operations out of business.
Through litigation, the claims also could force the destruction of as many as 30% of the trees in the apple industry — the percentage of trees that, say the nurseries’ attorneys, may violate patent and trademark protection laws.
Two attorneys are heading investigations for the Nursery Licensing Association, which the nursery industry organized in March, ostensibly to combat patent and trademark infringement.
Opponents dismiss it as little more than a get-rich-quick scheme for lawyers.
The attorneys, Pat Ballew and Rex Stratton, are managing members of the nursery association and represent the U.S. nursery industry in claims involving plant patent and trademark infringement related to commercial fruit trees and other permanent crops.
It’s a concept that is long overdue, Ballew said.
“The reason the NLA was formed is that nurseries had been watching sales decline steadily over several years,” he said. “They had not noticed, however, a decrease in plantings. They’re driving to and from work and watching old red delicious trees being chopped down and new trees grafted.”
That process, known as topworking, had gotten out of hand, Ballew said.
“There were lots of old obsolete orchards being burned or chipped, and a lot of this acreage was replanted,” he said. “Topworking was dramatically extensive, and nursery sales were in the tank. And none of the nurseries believed that any of those new trees planted recently were old, obsolete varieties that weren’t protected (by patent).”
The Seattle-based nursery association already has sued one company, Selah, Wash.-based Rainier Fruit Co.
“I think they’re using our name to get at the forefront,” said Mark Zirkle, Rainier’s vice president. “They’re not going after nurseries that are bootlegging the trees that we all know about. Instead, they’re going after the proceeds.”
Grower outrage is spreading.
“The last thing we need is a lawsuit-happy attorney out slapping suits against nurseries’ customers,” said one, who requested anonymity out of fear of being targeted. “I respect their concern with patent rights, but I feel the way they’ve done it is wrong.”
A representative of another operation, who also requested anonymity for the same reason, said the nursery association is asking the impossible.
“I used to do field work. It’ll never happen,” the grower said. “There’s too much wood floating around. It’s too easy to do. I don’t think you’re going to regulate down to the tree what’s going to be done.”
Others question the timing.
“What they’re talking about is numbers that are way more than the royalty,” said Martin Verbreugge, owner of Yakima-based Valley Fruit. “It used to be 50 cents was the most royalty. Now, all of sudden, they’re talking about $3. I just kind of felt what they’re asking is exorbitant.”
Infringement can occur in numerous ways, Ballew said.
- A grower might buy patented or trademark-protected trees from a nursery that is not licensed to sell them.
- A grower buys patented trees from a licensed nursery and then, without permission, grafts additional trees using scion wood from the original legal trees.
- An individual or firm that offers for sale, sells, mortgages, obtains crop insurance or solicits an investment interest in an orchard planted with infringing trees may infringe either plant patent rights or trademark rights, or both.
“I’ve been doing plant patent enforcement work for about a decade, and, over that time, about 30% of all the commercial fruit trees in the ground are infringing on either a plant patent, a trademark or both,” said Ballew, who added that he had 10 years’ experience investigating trademark infringements on the pink lady apple variety. “In the investigations I’ve done since the NLA started this year, my observations are consistent with what I’ve seen in pink ladies.”
To combat the problem, the nursery association has adopted procedures to resolve infringement claims. According to the rules, a $3 fee per tree will be assessed if the infringement is disclosed voluntarily.
The fees escalate from there.
It goes to $4 per tree if the nursery association notifies a party of infringement before voluntary acknowledgment by that party, then $6.50 per tree, plus attorneys fees and costs, when NLA sues.
Once suit is filed, there are several options. For those trees identified in the complaint, the association offer of settling for $6.50 (plus fees and costs) per tree remains open only until the Federal Civil Rule 26(f) conference, in which attorneys hold preliminary meetings. Until that takes place, the defendant may still resolve all other infringing trees under their care, custody or control at $4 per tree plus the association’s attorney’s fees and costs to resolve the case.
PUSH FOR COMPENSATION
If a suit is not resolved before the conference, the nursery association will push for full compensation and injunctive relief, including destruction of the infringing trees, treble damages and attorney fees.
With the prospect of having to pay royalties under the threat of litigation, the association might seem to be a threat to small- or medium-scale producers.
“It well could put them out of business,” said Dean Taplett, president of Taplett Fruit Packing Inc., Wenatchee. “After the economic losses that the apple industry has incurred over the last four or five years, it doesn’t take much to push it over the edge.”
Not so, Ballew said.
“I’ve gotten a lot of phone calls, mostly from small-scale growers, saying, ‘I’m so glad that you’re doing this. I’ve got big growers on all sides, and I know they’re not buying all of their trees. This levels the playing field,’” Ballew said. “Then, they promptly tell me about their neighbors. I have a lot of informant activity.”
Andy Gale, field services manager for Stemilt Growers Inc., a Wenatchee-based shipper that represents 15,000 acres of tree fruit in Oregon and Washington, said the large-scale growers likely would attract much of the nursery association’s attention.
The nursery association has commercial sales records that, in some cases, date back 50 years, Ballew said, adding that it represents 90% — soon to be 100% — of the fruit tree volume in the U.S.It isn’t just a Washington — or even a U.S. — issue, however. The nursery association is going global, Ballew said.
“We’re going to be expanding into Canada in the near future, and we’re building databases in Chile, Australia, Europe and other growing regions,” he said.