DC grant of SJ affirmed due to “an unenforceable agreement to agree”

Phytelligence, Inc. v. Washington State University
Docket No. 2019-2216
PROST, REYNA, STOLL
August 27, 2020

Brief Summary: DC grant of SJ to WSU affirmed since option agreement was “an unenforceable agreement to agree”, not an “agreement with open terms” that could be deciphered by the court.

Summary: Phytelligence (“PT”; in receivership) appealed DC grant of summary judgment (SJ) in favor of WSU regarding sale and delivery of a specific type of apple tree (WA 38) and infringement of its COSMIC CRISP trademark. In 2012, PT and WSU entered into a Propagation Agreement that “forbid [PT] from selling WA 38 trees ‘unless [PT] ha[d] authorization to do so under a separate contract with [WSU], or an agent of [WSU], in accordance with Section 4 of this Agreement.” Section 4 describes an “option to participate as a provider and/or seller in [WSU] licensing programs” including the provision that “if the Cultivar is officially released by WSU and becomes available for licensing…[PT] will need to sign a separate contract with [WSU], or an agent of [WSU], to exercise this option.” In 2013, “WSU issued an ‘Announcement of Opportunity’…to companies interested in commercializing WA38”, including PT which did not submit a proposal. In 2014, WSU accepted Proprietary Variety Management’s (PVM’s) proposal and granted PVM and exclusive license that required any industry participant to be a member of the Northwest Nursery Improvement Institute (“NNII”). In 2017, PT notified WSU of its desire to “exercise its option under the Propagation Agreement”. WSU directed PT to contact PVM for a license, which it did, but then “rejected PVM’s requirement to become a NNII member.” WSU then offered PT three new options for exercising its option, including two that did not require NNII membership, which PT rejected. WSU then revoked its offer to PT. WSU was granted SJ after the DC agreed with it “that Section 4 was an unenforceable ‘agreement to agree’ pursuant to Washington state law” (“it required ‘a further meeting of the minds of the parties before a complete and enforceable agreement’” exists) and not “an enforceable ‘agreement with open terms’” as PT argued. The FC panel agreed with the DC that “the plain terms of the agreement provide that [PT’s] options turns on a future contract between the parties” which “renders Section 4 an unenforceable agreement to agree”. The FC panel also explained that Section 4 is not an “agreement with open terms” as in P.E. Systems (Wash. 2012) since the court has “no objective method for determining the terms of the ‘separate contract’”. The FC panel also disagreed that PT’s extrinsic evidence supports its “open terms” argument since, e.g., “the email communications…indisputably indicate that that the time the parties executed the Propagation Agreement, WSU did not commit to any definite terms of a future license” or that there was any agreement as to a “Form License”. Thus, the DC’s grant to SJ to WSU was affirmed.

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