`
`GOODSILL ANDERSON QUThTN & STIFEL
`A LIMITED LIABILITY LA W PARTNERSHIP LLP
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`1397-0
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`2738-0
`
`9490-0
`
`JOHNR.LACY
`i lacy@goodsill.com
`BRUCE L. LAMON
`blamon@goodsill.com
`BRETT R. TOBIN
`btobin@goodsill.com
`Alii Place, Suite 1800
`1099 Alakea Street
`Honolulu, Hawaii 96813
`Telephone: (808) 547-5600
`Facsimile: (808) 547-5880
`
`Attorneys for Plaintiff
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`IN THE UNITED STATES DISTRlCT COURT
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`FOR THE DISTRlCT OF HA WAIl
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`CIVIL{W~.l 2 00 3 5 2
`COMPLAINT; EXHIBITS "A" AND
`,
`,
`"B'" DEMAND FOR JURY TRlAL'
`SUMMONS
`'
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`CYANOTECH CORPORATION,
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`Plaintiff,
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`vs. ,
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`U.S. NUTRACEUTICALS, LLC, d/b/a
`V ALENSA INTERNATIONAL, and
`the UNIVERSITY of ILLINOIS
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`Defendants.
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`COMPLAINT
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`For its Complaint herein against Defendants U.S. Nutraceuticals,
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`LLC, d/b/a Valensa International and the University of Illinois ("Defendants"),
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`39079943
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`
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`Case 1:12-cv-00352-JMS-RLP Document 1 Filed 06/20/12 Page 2 of 13 PageID #: 2
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`Plaintiff Cyanotech Corporation ("Cyanotech") alleges as follows:
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`PARTIES
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`1.
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`Cyanotech is a Nevada corporation with its principal place of
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`business in Kailua-Kona, Hawaii. Since 1990, Cyanotech has extracted and sold
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`astaxanthin for use in nutritional supplements, including supplements for eye
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`health, from its facility in Kailua-Kona, Hawaii.
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`2.
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`Defendant, U.S. Nutraceuticals, LLC d/b/a Valensa
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`International ("Valensa") is a Florida limited liability company with its principal
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`place of business in Eustis, Florida. Valensa was founded in 1999.
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`3.
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`Defendant the University of Illinois ("U. Illi,nois") is a public
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`entity of the State of Illinois with its principal place of business in Chicago,
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`Illinois.
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`4.
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`Valensa is or may be a necessary party pursuant to Fed. R. Civ.
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`P. Rule 19, as Valensa claims to have the right to sue under US Patent No.
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`5,527,533, issued June 18, 1996, on Application No. 08/330,194 (the "Patent-in(cid:173)
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`Suit") on information and belief deriving such right by ownership of substantially
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`all rights in the Patent-in-Suit. The Patent-in-Suit is attached as Exhibit A.
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`5.
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`U. Illinois is joined as a defendant because it may claim an
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`interest relating to the subject of this action and/or a right to relief is asserted
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`against it herein inasmuch as the United States Patent and Trademark Office lists
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`2
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`Case 1:12-cv-00352-JMS-RLP Document 1 Filed 06/20/12 Page 3 of 13 PageID #: 3
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`U. Illinois as the assignee of the Patent-in-Suit thereby making it the last recorded
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`owner of the Patent-in-Suit.
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`JURISDICTION AND VENUE
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`6.
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`This Court has original jurisdiction over this action pursuant to
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`28 United States Code ("U.S.C.") § 1338(a) because it is an action arising under
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`the patent laws of the United States 35 U.S.C. § 1 et seq.
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`7.
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`This Court has original jurisdiction over this action pursuant to
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`28 U.S.C. § 1338(b) because this action involves a claim for unfair competition
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`joined with a substantially related claim arising under the patent laws of the United
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`States.
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`8.
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`This Court has jurisdiction arising under the Declaratory
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`Judgment Act 28 U.S.C. §§ 2201-2202 as Cyanotech has been expressly threatened
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`by Valensa with a claim of infringement of the Patent-in-Suit; Cyanotech is unsure
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`of its rights and believes that such claim of infringement is invalid due to the scope
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`of the patent claims being narrower than asserted by Valensa (see Exhibit B,
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`attached), or that the Patent-in-Suit, US Patent No. 5,527,533, is invalid for failure
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`to comply with one or more of the following statutory provisions: 35 U.S.C. §§
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`101, 102, 103 and/or 112, to include but not limited to that the claims are not
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`novel, are anticipated by the prior art, and that the specification does not support
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`the claims.
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`3
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`Case 1:12-cv-00352-JMS-RLP Document 1 Filed 06/20/12 Page 4 of 13 PageID #: 4
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`9.
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`In addition to exclusive jurisdiction with regard to patent claims
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`under 28 U.S.C. § 1338(a), this Court has supplemental jurisdiction in a patent case
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`under 28 U.S.C. § 1367(a), over all claims for relief that are so related to the patent
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`claims in the action that they form part of the same case or controversy.
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`10. This Court has jurisdiction under 28 U.S.C. § 1332 as there is
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`complete diversity between Cyanotech and Defendants, and the amount in
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`controversy exceeds Seventy Five Thousand ($75,000.00) Dollars.
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`11. This Court has personal jurisdiction over Valensa under Haw.
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`Rev. Stat. § 634-35 because Valensa has purposefully availed itself of the privilege
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`to do business in the State of Hawaii by regularly transacting business in this
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`forum.
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`12. This Court has personal jurisdiction over U., Illinois, under
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`Haw. Rev. Stat. § 634-35 because U. Illinois has purposefully availed itself of the
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`privilege to do business in the State of Hawaii by regularly coming to Hawaii to
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`solicit and transact business in this forum.
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`13. Valensa has committed intentional acts, including but not
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`limited to, engaging in unfair competition, deceptive and unfair trade practices,
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`patent-abuse, and unlawful competition, by issuing unlawful threats of patent
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`infringement to Cyanotech in Hawaii and attempting to prohibit Cyanotech from
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`engaging in lawful competition regarding the sale and promotion of astaxanthin
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`4
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`
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`Case 1:12-cv-00352-JMS-RLP Document 1 Filed 06/20/12 Page 5 of 13 PageID #: 5
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`products for eye health. Astaxanthin is a natural product long known for its ability
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`to neutralize free radicals, thereby promoting eye health, reducing sunburn, and
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`reducing other types of photic damage.
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`14. At the time that it made such threats, Valensa knew or should
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`have known that its threats were unlawful and that Cyanotech's sale and promotion
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`of astaxanthin products for eye health were lawful and non-infringing competition.
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`15. Valensa's acts were directed and aimed at persons in Hawaii,
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`including Cyanotech.
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`16. Valensa's knew or should have known that its acts would likely
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`cause harm in Hawaii.
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`17. Venue is proper in this Court pursuant to 28 U.S.C. § 1391 and
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`28 U.S.C. § 1400(b) because (a) a substantial part of the events or omissions giving
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`rise to the claims herein occurred in this District, and (b) because Valensa and U.
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`Illinois are subject to personal jurisdiction in this District with respect to the claims
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`asserted and therefore deemed to reside in this judicial District for venue purposes.
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`FIRST CLAIM FOR RELIEF
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`18.
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`Paragraphs 1 to 17 are re-averred and re-alleged as if set forth at
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`length herein.
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`19. This is an action for declaratory judgment of non-infringement
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`of the patent claims in United States Patent No. 5,527,533 and for patent invalidity.
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`5
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`Case 1:12-cv-00352-JMS-RLP Document 1 Filed 06/20/12 Page 6 of 13 PageID #: 6
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`20. Valensa has claimed to have rights of an exclusive licensee with
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`substantially all the rights to United States Patent No. 5,527,533, see Exhibit "A"
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`hereto (the '533 Patent, aka the Patent-in-Suit), and would thereby be the true
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`owner of all the patent rights for the' 533 Patent.
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`21. That as a result of the claims made by Valensa, see Exhibit "B",
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`Cyanotech is unsure of its rights, has been repeatedly threatened by Valensa with
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`having allegedly committed infringing conduct, and engaging in an allegedly
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`infringing activity, causing reasonable apprehension that one or both Defendants
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`will bring suit as Cyanotech's activities continue.
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`22. Cyanotech believes that the' 533 Patent-in-Suit is invalid for
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`failure to comply with one or more of the following sections of the patent act, 35
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`U.S.C. §§101, 102, 103, and/or 112, to include but not limited to, that the claims
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`are not novel, are anticipated by the prior art, and that the specification does not
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`support the claims. Further, the conduct and actions ofCyanotech fall outside the
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`scope of the '533 Patent claims as amended during prosecution of the application
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`and as finally issued by the U.S. Patent and Trademark Office.
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`23. Additionally, Cyanotech does not infringe directly, either
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`literally or under the Doctrine of Equivalents, or indirectly under 35 U.S.C. §
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`271(b) or § 271(c), any of the claims of the '533 Patent.
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`6
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`Case 1:12-cv-00352-JMS-RLP Document 1 Filed 06/20/12 Page 7 of 13 PageID #: 7
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`24. U. Illinois is or may be a necessary party pursuant to Fed. R.
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`Civ. P. Rule 19 as the United States Patent and Trademark Office lists U. Illinois
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`as the assignee of the Patent-in-Suit thereby making it the last recorded owner of
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`the Patent-in-Suit and on information and belief may have retained some
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`ownership rights.
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`25. As a direct consequence of the foregoing, there is an actual and
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`justiciable controversy between Cyanotech and Defendants with respect to
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`infringement and validity of the' 533 Patent. The controversy between the parties
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`has adverse legal interests of such sufficient immediacy and creates a reasonable
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`apprehension of suit against the Cyanotech to warrant a declaratory action.
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`26. This action qualifies as an exceptional case supporting an award
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`to Cyanotech of reasonable attorney fees, costs and expenses against Valensa
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`pursuant to 35 U.S.C. § 285.
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`SECOND CLAIM FOR RELIEF
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`27.
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`Paragraphs 1 to 26 are re-averred and re-alleged as if set forth at
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`length herein.
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`28. Valensa, on information and belief, knows or should have
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`known the patent prosecution history of the '533 Patent.
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`29. When the '533 Patent was initially filed, as application number
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`08/330,194 (the' 194 Application), the' 194 Application comprised very broad
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`7
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`Case 1:12-cv-00352-JMS-RLP Document 1 Filed 06/20/12 Page 8 of 13 PageID #: 8
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`claims directed to benefitting and protecting the brain and central nervous system,
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`including the eye. All claims in the '194 Application were expressly rejected by
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`the Patent Office in view of extensive prior art establishing the :use of astaxanthin
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`for eye health and other protective functions. In response to a final rejection of all
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`claims, including those for eye health and other protective functions, U. Illinois
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`(the applicant in the '194 Application) amended the claims to greatly narrow the
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`scope of the claims to «treating an individual suffering from ... " retinal disease or
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`damage.
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`30. Based upon such narrowing and limiting of the claims through
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`amendment of claims during prosecution of the '194 Application, the Patent Office
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`ultimately issued the' 533 Patent with claims of narrow scope.
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`31.
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`In spite of the clear change to the scope of the patent claims,
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`Valensa, in bad faith, has threatened Cyanotech, and on information and belief has
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`threatened Cyanotech' s distributors and other parties, who supply astaxanthin as an
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`ingredient in nutritional supplement formulations for use in for eye health, with
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`infringement of the '533 Patent notwithstanding that Valensa knew or should have
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`known that the scope of the claims of the '533 patent does not cover the alleged
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`infringing activity.
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`32. As a direct and proximate result of the unlawful activities of
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`Valensa, to include but not limited to the bad faith infringement claims being made
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`8
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`Case 1:12-cv-00352-JMS-RLP Document 1 Filed 06/20/12 Page 9 of 13 PageID #: 9
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`under the '533 Patent by Valensa, Cyanotech has and will continue to suffer
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`damages.
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`THIRD CLAIM FOR RELIEF
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`33.
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`Paragraphs 1 to 32 are re-averred and re-alleged as if set forth at
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`length herein
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`34. This is a claim for money damages and injunctive relief arising
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`from Valensa's unfair methods of competition in violation of Haw. Rev. Stat.
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`§ 480-2.
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`35. Haw. Rev. Stat. § 480-2 makes it unlawful for a person to
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`engage in unfair methods of competition in any trade or commerce.
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`36. As set forth herein, Valensa engaged in unf!;lir methods of
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`competition in violation of Haw. Rev. Stat. § 480-2 by engaging in a systematic
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`pattern and practice of unlawful threats, intimidation and harassment of suppliers
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`and sellers of astaxanthin products in Hawaii and elsewhere, including Cyanotech.
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`37.
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`Specifically, on multiple occasions in the years 2010 and 2011,
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`Valensa's authorized representatives, including its president, Rudi Moerck, made
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`material false statements, both orally and in writing, to Cyanotech's representatives
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`that the use of astaxanthin products as a preventive measure to maintain eye health
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`infringed the claims of the Patent-in-Suit. An example of Val ens a's unlawful
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`9
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`Case 1:12-cv-00352-JMS-RLP Document 1 Filed 06/20/12 Page 10 of 13 PageID #: 10
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`threats and unfair methods of competition is included in the email attached as
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`Exhibit B, sent from Rudi Moerck to Cyanotech's CEO, Brent Bailey.
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`38. Valensa repeatedly threatened to "shut down" Cyanotech's
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`business and to embroil Cyanotech in prohibitively expensive patent litigation if
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`Cyanotech did not capitUlate and agree to purchase a license of,the Patent-in-Suit
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`from Valensa in order to sell, or promote the use of, astaxanthin products for eye
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`health (as distinct from therapeutic treatment of retinal injury or disease).
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`39. Upon information and belief, Valensa made similar false claims
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`and threats to other producers, buyers and sellers of astaxanthin products for the
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`purpose of unlawfully restricting competition and thereby gaining an unfair
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`competitive advantage.
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`40. At the time that Valensa made the foregoing statements
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`regarding the scope and nature of Val ens a's patent, it knew or should have known
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`that those statements were false. Cyanotech repeatedly countered Valensa's threats
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`by asking Valensa to explain Valensa's construction of the claims in the Patent-in(cid:173)
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`Suit, and how Valensa's construction was supported by the specification, to which
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`questions Valensa did not reply. Rather than reply to Cyanotech's questions,
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`Valensa continued to threaten infringement litigation.
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`10
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`Case 1:12-cv-00352-JMS-RLP Document 1 Filed 06/20/12 Page 11 of 13 PageID #: 11
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`41. Valensa made the foregoing statements with the intent to
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`deceive, mislead, harass and intimidate Cyanotech and others in an effort to gain
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`an unlawful and unfair competitive advantage.
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`42. Valensa's conduct and unfair methods of competition was
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`injurious to consumers in this State by, among other things, limiting competition
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`and increasing costs.
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`43. Valensa's conduct has adversely impacted, and continues to
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`adversely impact, Cyanotech and consumers by, among other things: (a)
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`threatening to disrupt Cyanotech's ability to serve its clients; (b) requiring
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`Cyanotech to expend considerable resources to retain patent counsel to investigate
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`and respond to Valensa's fraudulent claims and threats; (c) unjustly and unfairly
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`reducing competition for astaxanthin products; and (d) reducing the pool of
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`potential customers for Cyanotech's astaxanthin products.
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`44. As a direct and proximate result of Val ens a's unfair completion,
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`Cyanotech has suffered economic losses in an amount in excess of$75,000.00.
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`RELIEF REQUESTED
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`Wherefore Cyanotech respectfully requests this Court to enter
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`Judgment in favor of Cyanotech and against Defendants and:
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`1.
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`Enter Judgment declaring the' 533 Patent to be invalid;
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`11
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`Case 1:12-cv-00352-JMS-RLP Document 1 Filed 06/20/12 Page 12 of 13 PageID #: 12
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`2.
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`Enter Judgment declaring that the' 533 Patent is not infringed
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`by the activities of Cyanotech;
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`3.
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`Determine that the case is exceptional pursuant to 35 U.S.C. §
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`285' ,
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`4.
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`Award Plaintiff compensatory damages in an amount in excess
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`of$75,OOO.00;
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`5.
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`Enter an order increasing damages three times pursuant to 35
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`U.S.C. § 284;
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`6.
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`Enter Judgment that Valensa has engaged in unfair competition
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`prohibited by Haw. Rev. Stat. § 480-2;
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`7.
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`Award Plaintiff statutory damages pursuant to Haw. Rev. Stat.
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`§ 480-13;
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`480-13;
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`8.
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`Award Plaintiff treble damages pursuant to Haw. Rev. Stat. §
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`9.
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`Enter injunctive relief enjoining Valensa from engagmg in
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`unlawful methods of competition pursuant to Haw. Rev. Stat. § 480-13;
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`10. Award reasonable attorney fees and costs to Plaintiff pursuant
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`to 35 U.S.C. § 285 and Haw. Rev. Stat. § 480-13 ; and
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`11. Award such further relief as the Court deems just and proper.
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`12
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`Case 1:12-cv-00352-JMS-RLP Document 1 Filed 06/20/12 Page 13 of 13 PageID #: 13
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`DATED: Honolulu, Hawaii, June 20, 2012.
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`Attorneys for Plaintiff
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`13
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