Associated Press

MINNEAPOLIS (AP) -- A judge ordered the University of Minnesota and apple growers fighting for the right to grow a new apple developed at the university into mediation on Friday.

The university developed the SweeTango as the successor to its hugely popular Honeycrisp apple, which earned the school more than $8 million in royalties before the U.S. patent expired. SweeTango, noted for its crisp juicyness and intense sweet-tart flavor with a note of spice, has sold out quickly in both seasons since its official release in 2009.

To ensure a steady revenue stream to support its fruit breeding programs and preserve the quality of SweeTango apples, the university granted an exclusive license to a select cooperative of growers led by Pepin Heights Orchard of Lake City, Minn. Several other apple growers, mostly in Minnesota, sued last summer, saying they were unfairly frozen out of a lucrative deal.

Hennepin County District Judge Lloyd Zimmerman dismissed most of the claims in the lawsuit Friday and ordered all sides to select a mediator within 60 days to help resolve the dispute. In his decision, he took a conciliatory tone.

"The Plaintiffs have raised serious and compelling concerns that they will be put out of business or seriously hurt by the license granted to Pepin. They raise genuine and impassioned questions about why a public university should be allowed to create a monopoly favoring one seller of apples over many other orchards, without a fair chance to compete," Zimmerman wrote.

But the judge also said the university has strong arguments on its side, noting that the school says it's "trying to survive in challenging economic times, when its own funding is imperiled, and that it has made a carefully considered and reasonable decision, reviewed by good stewards of the University at its highest levels."

Zimmerman dismissed all but part of one legal claim against the university and most of the claims against Pepin Heights. Lisa Lamm Bachmann, an attorney for the growers who filed the lawsuit, said enough claims survive to let them move forward if mediation fails to yield a settlement.

"We're optimistic about trying to find a resolution that works for everyone," Bachmann said.

The main issue for her clients -- several mostly smaller orchards and a large fruit packing company -- has been their ability to compete fairly for new apple varieties released by the university, Bachmann said.

"This case is by no means over yet," she said.

But Tim Byrne, vice president of sales at Pepin Heights, said the antitrust claims the judge dismissed "were the meat of their case." He said he's confident Pepin Heights will prevail on the remaining claims too but the lawsuit has been bad for the university's breeding program and for apple lovers.

"As we've seen with Honeycrisp, among other varieties, new, quality apples get people talking about our products. And that excitement creates more demand for other quality apples, pulling consumers away from our real competitors, which are unhealthy snacks," Byrne said.

The university's lawyer, Mark Rotenberg, said the decision "reaffirms the university's right to exclusively license its patented technologies and inventions." He called the remaining claim against the university, which involves whether the plaintiffs were given adequate notice and a chance to be heard, "relatively modest." He said the school will "eagerly try to resolve this one small issue in mediation."

If no settlement is reached, the lawsuit is scheduled to go to trial in November.

Orchards outside of Minnesota that don't join the co-op can't grow the SweeTango at all. Minnesota growers who aren't in the co-op must sign an agreement with Pepin Heights and accept restrictions the plaintiffs consider one-sided because it limits them to selling the apple only at their own orchards or at farmers markets and to local stores. They say it keeps them out of wholesale markets and major grocery chains.

The university says it signs deals with private industry in all sorts of areas to commercialize the fruits of its research, including lifesaving drugs and medical devices, and it needs the money exclusive licensing deals generate to replace declining public research funding.

Copyright 2011 The Associated Press.

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