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University Comes Out on Top of Apple Variety Lawsuit

By Curt Harler


SweeTango apples are a cross between the Honeycrisp and Zestar! varieties

SweeTango apples are a cross between the Honeycrisp and Zestar! varieties
Photo by Stemilt Growers/Wikimedia Commons.

Apple producers in the upper Midwest will get a nibble of the apple called SweeTango, but they will not enjoy unlimited access to the fruits of the research done at the University of Minnesota (UM).

As part of a court settlement, Pepin Heights Orchards retains its license to commercialize MN 1914 under license from the university's Office for Technology Commercialization.

Two years ago, a group of growers took umbrage at the agreement. They felt it was wrong to limit the benefits of research done with taxpayer money to one producer. Originally, a total of 50 growers were to be allowed licenses to produce the improved fruit. However, those growers were effectively limited to producing 1 acre of SweeTango - hardly enough to keep customers happy throughout a production season, they argued.

Since only 50,000 trees were permitted statewide under the original license agreement, the entire allocation of 50,000 trees would be used up on about 50 acres.

A young Minneiska tree.

A young Minneiska tree.
Photo by Rennhack Orchards/Wikimedia Commons.

A group of growers calling themselves Minnesota Apple Growers for Free Trade sued the university on behalf of the 200 apple farms in the state, and a compromise was reached. The grower group ended up paying a lot of the legal expenses, but it did gain better access to the Minneiska trees that produce fruit under the SweeTango logo.

The case was resolved, and a settlement was reached. "The long and the short of it is that my clients ran out of resources," explains attorney Lisa Bachman.

On the plus side for the growers, the resolution stipulates that more trees be available to more growers. However, none of the other restrictions were lifted, so it would be a stretch to declare victory for the growers; the outcome still favored UM.

What the agreement says

It's likely you've had the experience of starting to hammer out an issue with a significant other, only to have the discussion change into a fight over squeezing the toothpaste from the middle of the tube or some other totally unrelated issue. Something akin to that happened in this lawsuit. The issue in the lawsuit migrated from one area to another.

The agreement between Apple Growers for Free Trade (AGFT) and UM did not so much revolve around apple production or trademarks as it did around a government body being immune from prosecution, Bachman says. The AGFT would have to have been prepared to pursue the case through several levels of appeals. If they won, the university would have appealed. If they lost, appeals may have saved the day. Unfortunately for the AGFT team, the checkbook was not bottomless.

Both sides of the lawsuit agreed to a compromise settlement of all issues relating to the lawsuit. The settlement agreement is not confidential. Attorneys spelled out that the agreement is not to be considered an admission of liability of any kind or nature by any of the parties.

The university and Pepin Heights Orchards agreed to amend the Minnesota Exclusive Plant Material License Agreement in several places. First and foremost, the number of Minneiska trees that a licensed Minnesota grower may lease under the Minnesota Growers' Agreement was increased on a sliding scale, starting with an immediate increase from 1,000 to 2,000 trees in 2012. That old total of 50,000 trees was increased to a total of 100,000 Minneiska trees that will be leased to Minnesota growers.

On January 1, 2014, the number of trees that a licensed Minnesota grower may lease under the Growers' Agreement is to be increased to 2,500 trees, subject to, and limited by, a total of 125,000.

By January 1, 2017, the number of Minneiska trees that a licensed Minnesota grower may lease will be increased to 3,000 trees, subject to, and limited by, a total of 150,000.

The growers' group agreed to release the Pepin Heights defendants from all manner of legal action. Pepin Heights is free of "all manner of action and actions, cause and causes of action, suits, debts, dues, sums of money, accounts, reckonings, covenants, controversies, agreements, premises, damages, judgments, executions, claims and demands whatsoever, of whatever kind, nature or description, legal, equitable or statutory, known or unknown, anticipated or unanticipated, whether actually pled in the lawsuit or not and whether based upon federal, state or local law, statute, ordinance, regulation or rule."

By January 1, 2017, the number
of Minneiska trees that a licensed
Minnesota grower may lease will be
increased to 3,000.

By January 1, 2017, the number of Minneiska trees that a licensed Minnesota grower may lease will be increased to 3,000.
Photo By Stemilt Growers/Wikimedia Commons.

The University of Minnesota got the same release from the plaintiffs.

To top it off, the plaintiffs had to pay Pepin Heights Orchards $25,000 as payment toward attorneys' fees and costs, awarded by the court as sanctions against the plaintiffs relating to the motion to compel discovery and motion for sanctions.

A touch of history

As noted in the February 2011 issue of Growing, the story dates back many years, to the time when researchers at the University of Minnesota set out to develop an improved, sweeter apple variety. They crossed the Honeycrisp and Zestar! varieties and came up with a new variety that they named SweeTango Minneiska.

Roughly 35 percent of the funding for the research project came from taxpayers. Many state and regional orchard owners followed the development of the variety with interest. SweeTango promised to be a popular seller. Then came word from the University of Minnesota that they were going to restrict who could market SweeTango. Because the university saw SweeTango as a "managed variety," it felt it had a right to issue exclusive or restrictive licenses. In fact, Pepin Heights Orchards got exclusive rights to market and sell SweeTango.

An orchard manager sampling
a SweeTango apple.

An orchard manager sampling a SweeTango apple.
Photo by Rennhack Orchards/Wikimedia Commons.

Managed variety concept

The concept of a managed variety is fairly well established in overseas research projects, but it is something many U.S. producers have a hard time wrapping their minds around. Like so much other valuable research done by land-grant colleges and funded by taxpayers, shouldn't the work done on SweeTango be in the public domain and not limited to those who get the inside track? That's the question about a dozen orchards asked.

Those orchards pointed to a University of Minnesota policy that calls for the school "to ensure that the results of university research will have the maximum possible beneficial effect for Minnesotans and the larger public," and "to realize a fair financial return to the university as long as this does not interfere with the first principle."

Traditionally, most university-developed varieties or cultivars, whether turf or soybeans, apples or peanuts, have been made broadly available to any breeder or grower who was willing to pay the going rate for a license to produce it. It is not the idea of paying for an improved cultivar that upset the growers; rather, it was the idea that they could not, at any price, avail themselves of SweeTango in quantities large enough to make it commercially viable.

However, this case ended up hinging neither on the concept of charging for rootstock nor on licensing lines developed by the university. The college's attorneys chose to fight the case over a legal technicality - one available under Minnesota law, but not available in many other states.

How UM won

"One of the primary issues in this case was the issue of immunity for a state institution to make these kinds of decisions," Bachman says. Under Minnesota law, a government agency, even one dealing in a for-profit instance, has the right to make decisions and is immune to prosecution.

"In Minnesota, there is a carve-out for state entities," Bachman says. This is not true in about half of the other 49 states.

Bachman says that federal antitrust laws offer some limited exceptions in cases like this. "There is case law at the federal level," Bachman says, "but the federal documents do not say that it applies to state entities." Federal law would have tended to favor the growers over the university.

"We have mixed feelings about the resolution," Bachman says. "Litigation is a long and expensive process." The growers do not have the huge resources that the university has backing it up. The growers signed the agreement.

This leaves a door open for the University of Minnesota to do similar things with other horticultural or agricultural varieties developed with state funding. The only "out" for growers would be if the state legislators decided to examinew the issue and determine whether state entities should be held to the same restraint of trade laws that regulate for-profit companies.

"For now," Bachman concludes, "the university is immune."

Curt Harler, who has a B.S. in agriculture from Penn State University and an M.S. in ag from The Ohio State University, is a full-time freelance writer.