Business & Real Estate

Long-standing marriage goes sour for UC Davis, strawberry industry

It’s been a sweet deal for UC Davis.

The university’s plant breeders have been spinning out new varieties of strawberries for decades, delivering improvements in taste and other characteristics to strawberry lovers around the world. In return, UC Davis has pulled in tens of millions of dollars in royalty payments and research grants from nurseries and growers.

Now this long and fruitful marriage of industry and academia is in trouble.

The imminent departure of UC Davis’ two strawberry breeders, who are forming their own company, has prompted a lawsuit over the future of strawberry research at the university. The fight has put UC Davis on the defensive about one of its core missions: to conduct research for agribusiness.

The California Strawberry Commission, an organization of growers that helped fund research at UC Davis for decades, has filed a lawsuit accusing the university of preparing to abandon its plant-breeding program, in violation of the commission’s contract, once the scientists leave. The suit also says UC Davis is letting the two breeders “privatize” their publicly funded research and walk out the door with vital trade secrets – namely, a priceless collection of strawberry plants that forms the foundation of the breeding program.

UC officials are trying to get the complaint dismissed and insist the commission has it wrong. They say two scientists will be replaced and the breeding program will continue. The plant collection isn’t going anywhere. University officials say they’ve explained this to the Strawberry Commission, over and over.

“I don’t know why they don’t have confidence in us,” said Mary Delany, associate dean at UC Davis’ College of Agricultural and Environmental Science. Even as the two breeders wind down their work, Delany said the university is preparing to release new strawberry varieties later this year.

There’s plenty at stake in this fight. California’s $2 billion-a-year strawberry industry produces 90 percent of the nation’s supply – and the varieties developed at UC Davis account for slightly more than half the state’s crop. If the university’s program were to die, it would create hardship for many growers, said Rick Tomlinson, president of the Strawberry Commission.

Some of the largest growers have their own breeding programs, such as Driscoll Strawberry Associates of Watsonville. But other well-known brands use the UC Davis-bred varieties, including Dole and California Giant, and Tomlinson said many small growers rely on the university.

“It’s for all those mom and pop farmers,” Tomlinson said. “We want the university to have the most successful strawberry breeding program in the world. We’ve been paying for it for the last half century and we want to continue investing.”

Tomlinson said he’s encouraged by the university’s pledge to keep the program going, and both sides say there’s a possibility of patching things up. But for now they have split up. The university stopped taking the commission’s $350,000 in annual research payments after 2012, when the breeders first said they were planning to leave, and the commission says there’s too much riding on the relationship to let the lawsuit slide. In a fresh round of court papers filed Wednesday, the commission charged that UC Davis’ actions will “leave the commission with nothing from its decades-long investment.”

The dispute has spilled beyond the confines of Alameda Superior Court, where the suit is pending. A group of 32 state lawmakers, led by Assemblyman Luis Alejo, D-Watsonville, sent UC Davis Chancellor Linda P.B. Katehi a letter in March demanding answers about the direction of the program.

“These breeding programs … are critical,” Alejo, whose district encompasses the heart of strawberry country, said in an interview. The two university breeders “are trying to privatize a program that has been long established as a public program and has been supported by strawberry growers.”

Alejo, a Davis graduate, said he wasn’t persuaded by Katehi’s written response, in which she said the program will be kept alive. At his request, the state auditor agreed Wednesday to review the breeding program. The university said it would cooperate fully in the audit.

The departing scientists, Douglas Shaw and Kirk Larson, have also publicly questioned the university’s commitment to plant breeding. The two, who have personally earned millions of dollars over the years from the strawberry patents, have told the media that they’re leaving UC Davis because their work no longer fits with the university’s mission. Larson said the breeding program hasn’t been adequately funded.

“We’ve just worked ourselves to the limits,” Larson said. “There’s no support for the work that we’re doing.”

Delany disputed that assertion, saying the program has a $1.5 million annual budget. “I definitely debate the remark that it’s not valued or supported,” she said.

The two breeders, who aren’t defendants in the lawsuit, are expected to leave in December, but the timing isn’t certain.

A library of strawberries

Strawberry growers far beyond California’s borders are watching to see what happens next. “People are paying attention to it,” said Kevin Schooley of the North American Strawberry Growers Association, an organization based in eastern Canada. “California obviously is the giant in the strawberry industry.”

The squabble goes to the heart of UC Davis and its mission. Once known as the University Farm School, the Davis campus opened nearly a century ago with a goal of developing agricultural innovations for the public good.

In the 1950s, UC Davis researchers revolutionized tomato farming by developing a mechanical harvester and a new variety of tomato that could stand up to the machinery. Breeders at Davis continue to perform extensive research for the wine industry, wheat farmers and others, and the university is considering opening a campus in the downtown Sacramento railyard built around food-industry research.

More than half of the 5,300-acre Davis campus remains devoted to cropland, livestock barns, greenhouses and other ag-related facilities.

“It really is a part of the fabric of the college,” Delany said. “It’s the roots of the UC Davis campus; we’re pretty proud of that.”

At the center of the strawberry program is a collection of plants containing 1,500 varieties. Known collectively as “germplasm,” they constitute a genetic library from which new strawberry varieties are bred.

There are three copies of the germplasm. Shaw and Larson have one copy, which the university says they will have to surrender when they leave. The other two are duplicates, made by the university over the winter to rebut charges in the Strawberry Commission’s lawsuit that the school wasn’t safeguarding the plants adequately.

One of the copies is housed in a nondescript greenhouse at the far western edge of the Davis campus. The plants sprout from ordinary plastic pots. Some of the plants are tagged with tiny red and blue flags; they’re the “elite” plants that are actively being bred in the search for new varieties, said greenhouse manager Garry Pearson.

Scientists at Davis have been developing new varieties for the strawberry industry since the 1930s. A formal relationship took root in 1956, when the California Strawberry Advisory Board began funding research on campus. Its successor, the Strawberry Commission, has been shipping money to Davis since 1980; in recent years the funding has totaled $350,000 a year.

Shaw arrived at the university in 1986, from a seed company in Alabama. Larson came five years later. They soon established themselves as stars in strawberry breeding. While Davis is home base, they do much of their work at satellite research facilities in Watsonville and Irvine. In addition, the university contracts with farmers around the state to field-test emerging varieties.

The program has flourished during Shaw and Larson’s tenure. Strawberry nurseries around the world have paid UC Davis around $50 million in royalties in the past nine years alone. California companies get a discount on royalties and a two-year exclusive window on new varieties.

Four of the 25 most lucrative royalty-producing inventions in the entire UC system are strawberry varieties, also known as cultivars. InnovationAccess, the UC Davis department that deals with patents and licenses, has one employee devoted solely to strawberries.

“It’s a mini-industry,” Delany said.

New standard for taste

Until a few years ago, some experts say, the strawberry industry had become overly focused on characteristics like yield and durability, the better to ship mass quantities of fruit across country without spoilage. Taste became something of an afterthought.

Much of that changed in 2004, when Shaw and Larson released a variety they called the Albion. It set a new standard, according to some.

“That raised the bar for taste in strawberries,” said Liz Ponce of Lassen Canyon Nursery in Redding, which licenses the Albion and other varieties from UC Davis.

The arrangement has been very profitable for Shaw and Larson personally. As is typical with UC inventions, the breeders receive a piece of the royalties. Their take came to $2.6 million in 2012-13, the last year for which figures were available. Shaw said he and Larson have “routinely” shared some of their royalties with employees on their staff at the university.

In late 2012, Shaw and Larson gave notice they would be leaving UC Davis. They stopped accepting the Strawberry Commission’s annual research grant and let it be known they were going into business for themselves.

Shaw and Larson have teamed up with A.G. Kawamura, who was former Gov. Arnold Schwarzenegger’s secretary of the California Department of Food and Agriculture, to form a new company: California Berry Cultivars LLC, based in Irvine. Investors include several growers and nurseries, including Ponce’s company.

“These companies and people believe in our work, and that we should continue to work for the good of the strawberry industry,” Larson said in an email.

Kawamura said forming a new company is the best way to keep innovations in the strawberry industry flowing, without interruption. He said the industry doesn’t want to undergo a repeat of what happened in the 1980s, when Shaw and Larson first joined UC Davis. The transition wasn’t smooth and several years went by without any new cultivars appearing, he said.

The breakup between UC Davis and Shaw and Larson has been rocky. The duo asked to license a copy of the germplasm for their new company. After some deliberation, the university refused.

Shaw and Larson are steamed about it, saying they’ve essentially been denied the rights to their life’s work.

“The germplasm belongs to the university but the scientists are the ones who’ve made the germplasm work,” Larson said.

Delany, though, said letting Shaw and Larson license the plants would give them an unfair competitive advantage over others in the strawberry industry. UC Davis also refused the Strawberry Commission’s demands for a copy of the germplasm.

“These are the crown jewels of the breeding program,” she said. “We felt it was not appropriate to license the crown jewels.”

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