Farmers Edge v. Farmobile Update: US Federal Court Rules in Favor of Farmers Edge in Counterclaim Trial

Editor’s Note: This article was updated on August 27, 2018 to include comment from Farmobile CEO and further context.

The legal battle between Farmers Edge and Farmobile over which company owns the right to a technology that gathers data from farm machinery progressed this week when a federal court in Nebraska ruled in favor of Canadian precision agtech company Farmers Edge on a counterclaim filed against the company by US ag data startup Farmobile under the Defend Trade Secrets Act (DTSA).

Farmobile’s counterclaim sought a determination that Farmers Edge had acted in bad faith when it filed its claim alleging a violation of the DTSA (a claim that was denied by the Court in its May 2018 summary judgment ruling).

Ruling on Farmobile’s motion for attorney’s fees, the court found that Farmobile failed to meet its burden to prove that Farmers Edge “actually knew or was reckless in not knowing that its claim for trade secret misappropriation had no merit.” In the order, the judge indicated that there may be grounds to challenge portions of a May 2018 decision from the same court in favor of Farmobile finding that the company did not misappropriate trade secrets.

Evidence from key witnesses presented in the latest trial suggested that Farmobile’s founders filed patent applications and founded Farmobile just a few weeks after they left Crop Ventures, and that the patent applications were similar to work done at Crop Ventures, which was acquired by Farmers Edge in 2014. The court found sufficient support for this evidence and dismissed Farmobile’s claim for the payment of attorney’s fees in the original lawsuit.

“The factual backdrop that led to this lawsuit — the individual defendants left Crop Ventures, formed Farmobile, and then started marketing a product similar to one they had worked on at Crop Ventures — supports the assertion of misappropriation of trade secrets claims. Although FEI was not ultimately successful, that fact alone does not establish that it acted in bad faith or engaged in misconduct in bringing and maintaining its claim,” notes Judge Joseph Bataillon in the counterclaim decision.”

Based on these findings, the court dismissed Farmobile’s claim for the payment of attorneys’ fees in the original lawsuit.

The two companies have been embroiled in an ongoing legal battle since April 29, 2016, when Farmers Edge filed a lawsuit against Farmobile alleging that the startup misappropriated trade secrets under Nebraska law and violated certain contract terms. In May 2018, the court granted summary judgment in favor of defendant Farmobile finding that Farmers Edge provided no evidence showing that the startup used or disclosed the alleged trade secrets. In that ruling, the court stated that “none of the trade secrets identified by FEI (Farmers Edge) are actual trade secrets under Nebraska law because the allegedly protected information was at least readily ascertainable by proper means.”

After the summary judgment ruling, the parties settled certain remaining counterclaims except for Farmobile’s claims seeking payment of attorney’s fees under certain provisions of the DTSA. The May 2018 summary judgment ruling from the court still stands, but the decision states that “this Court’s finding that the allegedly misappropriated information was not secret and was known in the industry will undoubtedly be challenged and could well be reversed.” Ultimately, however, a proper appeal would need to be filed challenging the summary judgment ruling in order for that decision to be revisited.

In a statement following the summary judgment ruling, Farmers Edge indicated that it plans to appeal. Although the recent ruling may provide the company with additional fodder to support an appellate review of the summary judgment ruling, an August 7, 2018 order from the District Court indicates that the parties have reached a settlement.

Technology Comparison

The technologies giving rise to this dispute are Farmers Edge’s CanPlug device and Farmobile’s PUC device. Both pieces of equipment serve similar functions, plugging into farm machinery and aggregating data regarding machine use and function. Crop Ventures claims it started developing the CanPlug in 2012, under the leadership of Ron Osborne, now chief strategy officer at Farmers Edge. Farmobile disputed this claim, advancing facts to support that the original invention was the idea of Farmobile founder Heath Gerlock and his brother, Clarke Gerlock, who is an Iowa farmer. They claim their idea had evolved from other then-available technologies that also plugged into farm equipment and collected data, such as data loggers and products like JDLink.

In July 2013, when the company was experiencing financial difficulty, three Crop Ventures employees who were working on the commercialization of the technology – Jason Tatge, Heath Gerlock, and Randall Nuss – left. They founded Farmobile later that year, while Osborne continued to develop the CanPlug at Farmers Edge after the Canadian startup acquired Crop Ventures in 2014.

“The recent ruling is entirely consistent with the appeal. One of the main points of the appeal will be that the court should have let Farmers Edge claims go to trial,” writes Marina Barnes, director of marketing for the company. “The appeal will be filed after the Court enters a final judgment, which is expected soon.”

Farmers Edge is arguably one of the more established companies in the farm management software, sensing, and IoT field with paid subscriptions to its service reaching a reported 22 million acres worldwide. The service combines the machine data collected by the CanPlug with weather data and satellite imagery.

“Even though the Court denied Farmobile’s request for recovery of attorneys’ fees in a separate ruling, we’re pleased to see the Court reiterated its prior findings in favor of Farmobile in its decision,” Jason Tatge, CEO of Farmobile, told AgFunderNews.

Farmobile Response

Since it was filed, Farmobile has rejected the allegations and described the lawsuit as an attempt to “thwart [its] business model” and to tamp down investors’ potential interest in the company.

“The most recent ruling does not alter the Court’s prior decision granting Summary Judgment in Farmobile’s favor. The Court’s most recent ruling only relates to Farmobile’s counterclaim under the Defend Trade Secrets Act alleging that Farmers Edge acted in bad faith such that Farmobile should be awarded its attorneys’ fees related to the case,” the company stated in a recent press release. Farmobile declined to provide additional comment because of the possibility of an appeal.

Remaining Litigation

The companies are also involved in two additional lawsuits, both filed by Farmobile after it was sued by Farmers Edge.  The first is a claim for patent infringement, filed in Canada. The second includes claims for civil conspiracy and unjust enrichment filed in Nebraska state court.  The latter stems from Farmers Edge’s actions in filing a continuation patent application off of Farmobile’s patent application in an attempt to claim it as its own invention.  Both cases are in their early stages.