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Washington State U sues its own spinoff in dispute over lucrative new apple variety

By Jesse Schwartz
Published: March 14th, 2018

Washington State University is getting set to reap a considerable financial harvest from what its new “Cosmic Crisp” apple variety, with orders for 12 million trees already in hand and a supermarket arrival date coming next year after two decades of development. It is the biggest apple launch in history, according to a recent Guardian article, but its pending introduction to consumers is being bruised by a legal dispute between the university and its own spinout company.

Seattle-based start-up Phytelligence claims in its lawsuit that WSU has wrongly blocked the company from commercializing the crispy apple invented at WSU, while the school contends in its suit that Phytelligence improperly sold 135,000 Cosmic Crisp trees to a grower without a license to do so, which the company denies.

Phytelligence was spun out of WSU in 2012 based on technology that allows farmers to more efficiently grow crops. Inventor and WSU professor Amit Dhingra is the chief science officer at the company, which has more than 100 employees and has raised more than $12 million.

The dispute dates back to November 2012, when WSU signed an agreement with Phytelligence to grow Cosmic Crisp trees, also known as “WA 38” trees, on behalf of the university. The battling lawsuits hinge on conflicting interpretations of the agreement’s language.

For its part, Phytelligence says the contract with WSU granted the company “the option to propagate WA 38 for commercial sale, as a provider and/or seller in WSU licensing programs.” But when the company tried to establish a non-exclusive commercial license to sell Cosmic Crisp trees, the suit alleges, it met with “substantial resistance” from WSU. The company also said it tried to deal directly with two WSU commercial distribution partners but could not obtain a license. The company is seeking a court ruling that finds WSU in violation of the propagation agreement.

WSU filed its own lawsuit shortly after Phytelligence  filed its case, citing a clause in the agreement that permits Phytelligence to grow the WA 38 trees but prevents it from transferring or selling the trees to a third party without a separate contract with the university. According to the WSU suit, that’s exactly what Phytelligence did, selling 135,000 Cosmic Crisp trees to Evans Fruit Company in April 2016 without obtaining permission.

Despite the spinout’s claims, WSU says it offered Phytelligence three options to obtain a license: membership via a distributor, a contract with a member’s nursery, or a contract with a grower. “Phytelligence declined to pursue any of these three options,” WSU says in its suit. As a result, the university notified the company that it was terminating the propagation agreement based on the alleged violation and demanded that the company destroy its WA 38 trees. WSU is seeking compensation for patent infringement and attorneys fees.

Source: GeekWire

Posted under: Tech Transfer e-News

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