Proceeding
`Party
`
`Correspondence
`Address
`
`Submission
`Filer's Name
`Filer's e-mail
`Signature
`Date
`Attachments
`
`Trademark Trial and Appeal Board Electronic Filing System. http://estta.uspto.gov
`ESTTA454961
`ESTTA Tracking number:
`02/06/2012
`
`Filing date:
`IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
`BEFORE THE TRADEMARK TRIAL AND APPEAL BOARD
`92054976
`Plaintiff
`Sandwich Isles Trading Co., Inc.
`MARTIN E HSIA
`CADES SCHUTTE LLP
`1000 BISHOP STREET, 12TH FLOOR
`HONOLULU, HI 96813
`UNITED STATES
`mhsia@cades.com, cmiwa@cades.com, bhairston@cades.com
`Motion to Suspend for Civil Action
`Martin E. Hsia, Reg. No. 32,471
`mhsia@cades.com, cmiwa@cades.com, bhairston@cades.com
`/Martin E. Hsia/
`02/06/2012
`Motion to Suspend Pending Civil Action.pdf ( 5 pages )(22602 bytes )
`Exhibit A - Amended Counterclaim.pdf ( 45 pages )(122241 bytes )
`Exhibit 1 to Amended Counterclaim.pdf ( 9 pages )(609503 bytes )
`Exhibit 2 to Amended Counterclaim.pdf ( 3 pages )(60241 bytes )
`Exhibit 3 to Amended Counterclaim.pdf ( 3 pages )(73539 bytes )
`Exhibit 4 to Amended Counterclaim.pdf ( 3 pages )(163794 bytes )
`Exhibit 5 to Amended Counterclaim.pdf ( 11 pages )(392995 bytes )
`Exhibit 6 to Amended Counterclaim.pdf ( 11 pages )(487023 bytes )
`Exhibit 7 to Amended Counterclaim.pdf ( 4 pages )(191257 bytes )
`Exhibit 8 to Amended Counterclaim.pdf ( 3 pages )(64579 bytes )
`Exhibit 9 to Amended Counterclaim.pdf ( 20 pages )(872899 bytes )
`Exhibit 10 to Amended Counterclaim.pdf ( 8 pages )(207603 bytes )
`Exhibit 11 to Amended Counterclaim.pdf ( 9 pages )(258619 bytes )
`Exhibit 12 to Amended Counterclaim.pdf ( 7 pages )(244402 bytes )
`Exhibit 13 to Amended Counterclaim.pdf ( 13 pages )(436608 bytes )
`Exhibit 14 to Amended Counterclaim.pdf ( 16 pages )(611732 bytes )
`Exhibit 15 to Amended Counterclaim.pdf ( 14 pages )(520368 bytes )
`Exhibit 16 to Amended Counterclaim.pdf ( 15 pages )(558794 bytes )
`Exhibit 17 to Amended Counterclaim.pdf ( 14 pages )(510600 bytes )
`Exhibit 18 to Amended Counterclaim.pdf ( 15 pages )(551099 bytes )
`Exhibit 19 to Amended Counterclaim.pdf ( 14 pages )(525362 bytes )
`Exhibit 20 Part 1 to Amended Counterclaim.pdf ( 28 pages )(1070841 bytes )
`Exhibit 20 Part 2 to Amended Counterclaim.pdf ( 30 pages )(1323205 bytes )
`Certificate of Service to Counterclaim.pdf ( 2 pages )(16494 bytes )
`Certificate of Service.pdf ( 1 page )(13269 bytes )
`
`

`
`IN THE UNITED STATES PATENT & TRADEMARK OFFICE
`
`BEFORE THE TRADEMARK TRIAL AND APPEAL BOARD
`
`SANDWICH ISLES TRADING CO., INC.,
`
`
`
`Petitioner,
`
`
`v.
`
`
`
`VDF FUTURECEUTICALS, INC.,
`
`
`
`Respondent.
`
`
`
`)
`)
`)
`) Cancellation No. 92054976
`) Registration Nos. 3,163,412, 3,165,945,
`) 3,155,230, 3,155,231, 3,155,232, 3,420,510,
`) 3,643,304, 3,646,701, 3,160,267
`)
`)
`)
`
`MOTION TO SUSPEND PENDING CIVIL ACTION
`
`Pursuant to 37 CFR § 2.117(a), Petitioner SANDWICH ISLES TRADING CO.,
`
`INC. (“Petitioner” or “SITC”), a Hawaii corporation, respectfully submits this motion
`
`requesting suspension of this cancellation proceeding pending the outcome of a civil action
`
`between the same parties in the United States District Court for the District of Hawaii. That
`
`action, captioned VDF FutureCeuticals, Inc. v. Sandwich Isles Trading Co. Inc., CV 11-00288
`
`ACK/RLP (USDC, District of Hawaii) (the “Hawaii Civil Action”), commenced with the filing
`
`of a Complaint by VDF FutureCeuticals, Inc., an Illinois corporation (“Respondent” or “VDF”),
`
`on April 29, 2011. As set forth more fully below, although VDF’s Complaint in the Civil Action
`
`asserts claims for patent infringement, SITC filed a Counterclaim and an Amended Counterclaim
`
`asserting counterclaims for, among other things, cancellation of the same U.S. Trademark
`
`Registrations that Petitioner seeks to cancel in this proceeding: U.S. Trademark Registrations
`
`3,160,267; 3,163,412; 3,165,945; 3,155,230; 3,155,231; 3,155,232; 3,420,510; 3,643,304; and
`
`3,646,701 (collectively, the “Registrations”), all for marks containing “COFFEEBERRY”
`
`(“Respondent’s Mark”).
`
`
`
`

`
`
`
`I.
`
`
`
`Cancellation No. 92054976
`
`OVERVIEW OF HAWAII CIVIL ACTION.
`
`On April 29, 2011, VDF filed a civil complaint in the United States District Court
`
`for the District of Hawaii, alleging that SITC has been infringing three patents held by VDF:
`
`U.S. Patent No. 7,754,263 ( “‘263 Patent”) entitled “Methods for Coffee Cherry Products”
`
`issued 6/13/10; U.S. Patent No. 7,807,205 (“‘205 Patent”) entitled “Methods for Coffee Cherry
`
`Products” issued 10/5/10; and U.S. Patent No. 7,815,959 (“‘959 Patent”) entitled “Low-
`
`Mycotoxin Coffee Cherry Products” issued 10/19/10.
`
`On June 13, 2011, SITC filed an answer to VDF’s complaint and a counterclaim
`
`against VDF (the “Counterclaim”). SITC asserted that no product made, used, offered for sale,
`
`sold and/or imported into the U.S. by SITC was or is manufactured by SITC using methods
`
`falling within the scope of the independent claims of the three VDF patents, and therefore, a
`
`declaratory judgment of non-infringement and an order dismissing the VDF claims should be
`
`entered.
`
`SITC’s Counterclaim further asserted that VDF had improperly sent threatening
`
`letters to SITC and SITC customers claiming certain provisional patent rights based on pending
`
`patent applications, that VDF had obtained the ‘205 Patent by means of inequitable conduct and
`
`deception of the U.S. Patent and Trademark Office (“USPTO”), and had engaged in patent
`
`misuse, thus invalidating the ‘205 Patent and justifying an award of SITC’s attorneys’ fees and
`
`costs.
`
`SITC also asserted that VDF had improperly sent letters to SITC and SITC
`
`customers threatening claims for trademark infringement, based on SITC’s use of the term
`
`“COFFEE CHERRY” which VDF alleged violated its various U.S. trademark registrations for
`
`the term “COFFEEBERRY,” including the same Registrations at issue in this cancellation
`
`proceeding. The Counterclaim requested that VDF’s Trademark Registrations for
`
`
`
`2
`
`

`
`
`
`
`
`Cancellation No. 92054976
`
`“COFFEEBERRY” be cancelled on the grounds that the term is descriptive and lacking in
`
`acquired descriptiveness, and also sought a judgment for damages incurred by SITC as a result of
`
`VDF’s wrongful conduct under Hawaii state law and an order enjoining VDF from further
`
`abusive conduct.
`
`On July 19, 2011, VDF filed a Partial Motion to Dismiss certain of the
`
`Counterclaims. On December 27, 2011, the Court granted in part and denied in part VDF’s
`
`motion, but even as to the counterclaims that it dismissed, the Court allowed SITC to amend
`
`them in order to more clearly state the alleged factual basis and to re-file them as amended.
`
`Accordingly, on January 26, 2012, SITC filed its First Amended Counterclaim against VDF
`
`(“Amended Counterclaim”), reasserting most of the claims alleged in the original Counterclaim
`
`– including the counterclaim for cancellation of VDF’s Trademark Registrations – and clarifying
`
`the factual basis for invalidation of the ‘205 Patent for inequitable conduct. A copy of the
`
`Amended Counterclaim is attached hereto as Exhibit “A.”
`
`On November 3, 2011, SITC filed a Motion to Stay the Hawaii Civil Action
`
`pending the outcome of requests filed by SITC with the USPTO for re-examination of three
`
`patents-in-suit. On December 27, 2011, the Court granted SITC’s motion, ordered that the patent
`
`lawsuit would be stayed pending the re-examinations, prohibited any further action in the
`
`litigation until the re-examinations are resolved, except for the filing of SITC’s Amended
`
`Counterclaim and VDF’s response to the Amended Counterclaim, and further ordered that the
`
`Court would not enter any decision on such filings until the stay is lifted.
`
`On January 11, 2012, the USPTO issued orders granting SITC’s requests for ex
`
`parte re-examination of all claims of all three VDF patents, having found substantial new
`
`questions of patentability. The USPTO also issued Office Actions rejecting (non-final) all of the
`
`
`
`3
`
`

`
`
`
`
`
`Cancellation No. 92054976
`
`claims of all three patents on the grounds of lack of novelty and/or obviousness, in light of prior
`
`art.
`
`II.
`
`ARGUMENT.
`
`The Board has the inherent power to schedule disposition of matters pending
`
`before it, and as a result, has the discretion to stay proceedings. See TBMP § 510.01 (3rd ed.
`
`May 2011), 500-60. Accordingly, “[w]henever it comes to the attention of the Board that a party
`
`or parties to a case pending before it are involved in a civil action which may have a bearing on
`
`the Board case, proceedings before the Board may be suspended until final determination of the
`
`civil action.” See id. See also 37 CFR § 2.117(a).
`
`As is evident from a review of the Amended Counterclaim, a copy of which is
`
`attached hereto as Exhibit “A,” SITC, at Counts IV and V, asserts in the Hawaii Civil Action that
`
`the “COFFEEBERRY” mark of VDF’s Trademark Registrations is either generic or descriptive
`
`(and lacking in acquired distinctiveness) as to some or all of the goods offered for sale by or
`
`through VDF. As noted in the Trademark Registrations themselves (e.g. Registration No.
`
`3,155,232), VDF’s goods include “food and beverage ingredients, namely, whole processed
`
`coffee fruit.” See Exhibit “11” to Amended Counterclaim, attached hereto as Exhibit “A.”
`
`However, numerous sources, including dictionaries and encyclopedias, define “coffee berry” as
`
`the “fruit of the coffee.” In the Hawaii Civil Action, at Count V of the Amended Counterclaim,
`
`pursuant to 15 U.S.C. § 1119, SITC seeks an order from the Court cancelling the VDF
`
`Registrations on these grounds – just as SITC asserts in this cancellation proceeding. In both the
`
`Hawaii Civil Action and this Board proceeding, SITC contends that Respondent’s
`
`“COFFEEBERRY” Mark is at least descriptive as to Respondent’s goods and, therefore, the
`
`Registrations must be cancelled. Thus, it is apparent that litigation of the Hawaii Civil Action
`
`with regard to SITC’s amended counterclaims may have a bearing on this proceeding. Petitioner
`
`
`
`4
`
`

`
`
`
`
`
`Cancellation No. 92054976
`
`submits that suspension of this proceeding is appropriate. See TBMP § 510.02(a) (3rd ed. May
`
`2011), 500-60 (“To the extent that a civil action in a Federal district court involves issues in
`
`common with those in a proceeding before the Board, the decision of the Federal district court is
`
`often binding upon the Board, while the decision of the Board is not binding upon the court.”).
`
`III. CONCLUSION.
`
`For the reasons set forth above, Petitioner SITC requests that this motion be
`
`granted, and that this proceeding be suspended pending the outcome of the trademark
`
`counterclaims in the Hawaii Civil Action.
`
`DATED: Honolulu, Hawaii, February 6, 2012.
`
`
`
`/s/ Martin E. Hsia
`Martin E. Hsia, Reg. No. 32,471
`CADES SCHUTTE
`A Limited Liability Law Partnership LLP
`1000 Bishop Street, Suite 1200
`Honolulu, HI 96813
`Tel: (808) 521-9200
`
`Attorneys for Petitioner
`SANDWICH ISLES TRADING CO., INC.
`
`
`
`
`
`5
`
`

`
`EXHIBIT “A”
`“A99
`
`
`
`

`
`Case 1:11-cv-00288-ACK-RLP Document 49 Filed 01/26/12 Page 1 of 44 PageID #:
` 1572
`
`CADES SCHUTTE
`A Limited Liability Law Partnership LLP
`
`
`
`2954-0
`2997-0
`7619-0
`8272-0
`
`MARTIN E. HSIA
`COLIN O. MIWA
`ALLISON MIZUO LEE
`MEGAN S. JOHNSON
`1000 Bishop Street, Suite 1200
`Honolulu, HI 96813-4216
`Telephone: (808) 521-9200
`Facsimile: (808) 540-5011
`E-mail: mhsia@cades.com
`E-mail: cmiwa@cades.com
`E-mail: alee@cades.com
`E-mail: mjohnson@cades.com
`
`Attorneys for Defendant and Counterclaimant
`SANDWICH ISLES TRADING COMPANY INC.
`d/b/a KONA RED, INC.
`
`IN THE UNITED STATES DISTRICT COURT
`
`FOR THE DISTRICT OF HAWAII
`
`VDF FUTURECEUTICALS, INC.,
`
`Plaintiff and
`Counterclaim Defendant,
`
`
`
`v.
`
`SANDWICH ISLES TRADING CO.
`INC., D/B/A KONA RED, INC. AND
`JOHN DOES 1-10,
`
`Defendants and
`Counterclaimant.
`
`
`
`CIVIL NO. CV11-00288 ACK/RLP
`
`DEFENDANT SANDWICH ISLES
`TRADING CO., INC.’S FIRST
`AMENDED COUNTERCLAIM
`AGAINST PLAINTIFF VDF
`FUTURECEUTICALS, INC.;
`EXHIBITS “1” – “20”;
`
`CERTIFICATE OF SERVICE
`
`
`

`
`Case 1:11-cv-00288-ACK-RLP Document 49 Filed 01/26/12 Page 2 of 44 PageID #:
` 1573
`
`DEFENDANT SANDWICH ISLES TRADING CO.,
`INC.’S FIRST AMENDED COUNTERCLAIM
`AGAINST PLAINTIFF VDF FUTURECEUTICALS, INC.
`
`Defendant and Counterclaimant SANDWICH ISLES TRADING CO.,
`
`INC., a Hawaii corporation, for its First Amended Counterclaim against Plaintiff
`
`and Counterclaim Defendant VDF FUTURECEUTICALS, INC., an Illinois
`
`corporation, states and alleges as follows:
`
`I.
`
`THE PARTIES
`
`1.
`
`Defendant and Counterclaimant SANDWICH ISLES
`
`TRADING CO., INC. (“Counterclaimant” or “SITC”) is, and at all times
`
`relevant herein was, a Hawaii corporation, with its principal place of business
`
`located at Kalaheo, Hawaii.
`
`2.
`
`On information and belief, Plaintiff and Counterclaim
`
`Defendant VDF FUTURECEUTICALS, INC. (“Counterclaim Defendant” or
`
`“VDF”) is, and at all times relevant herein was, an Illinois corporation, with its
`
`principal place of business located at 300 West Sixth Street, Momence, Illinois
`
`60954.
`
`II.
`
`JURISDICTION AND VENUE
`
`3.
`
`This Court has original jurisdiction over the subject matter of
`
`this action pursuant to 28 U.S.C. §§ 1331 and 1338(a), because Counterclaimant
`
`has asserted counterclaims under the Patent Act and the Lanham Act.
`
`2
`
`

`
`Case 1:11-cv-00288-ACK-RLP Document 49 Filed 01/26/12 Page 3 of 44 PageID #:
` 1574
`
`4.
`
`This Court has supplemental jurisdiction over the related state
`
`law claims for tortious interference with contractual and prospective business
`
`advantage, pursuant to 28 U.S.C. § 1367, because the state law claims are so
`
`related to the claims in the action within the Court’s original jurisdiction as to form
`
`part of the same case or controversy under Article III of the United States
`
`Constitution.
`
`5.
`
`This Court has personal jurisdiction over VDF as VDF filed a
`
`Complaint with this Court on April 29, 2011 (the “Complaint”).
`
`6.
`
`On information and belief, venue in this Court is proper
`
`pursuant to 28 U.S.C. § 1391, because all or a substantial part of the events or
`
`omissions giving rise to this action occurred within this judicial district.
`
`III. NATURE OF THE CASE
`
`7.
`
`SITC is a Hawaii company that, either directly or through its
`
`affiliates, purchases the pulp of the coffee fruit (i.e. without the coffee bean) from
`
`Hawaii coffee growers and processes it into liquid concentrate or other forms,
`
`primarily to be used as a high-antioxidant ingredient for dietary supplements,
`
`beverages, and personal care products manufactured by SITC or by others. VDF’s
`
`Complaint claims that SITC’s processing of this ingredient infringes three U.S.
`
`patents. This counterclaim seeks a declaratory judgment of non-infringement and
`
`unenforceability with respect to VDF’s three patents-in-suit, and a determination
`
`3
`
`

`
`Case 1:11-cv-00288-ACK-RLP Document 49 Filed 01/26/12 Page 4 of 44 PageID #:
` 1575
`
`that VDF’s ‘205 Patent, in particular, is invalid for lack of novelty and/or for
`
`obviousness, and also due to VDF’s inequitable conduct in the course of its
`
`prosecution of the ‘205 Patent Application. This counterclaim further seeks a
`
`judgment enjoining VDF from interfering with SITC’s contractual relationships
`
`with distributors and customers and for recovery of the monetary damages it has
`
`suffered due to VDF’s inequitable conduct, interference and other wrongful
`
`conduct, as well as SITC’s attorneys’ fees and costs.
`
`8.
`
`In addition, VDF has demanded improperly that SITC and
`
`SITC’s distributors and other customers cease using the terms “COFFEEBERRY”
`
`and “COFFEE CHERRY” in their advertising, marketing, and sale of products
`
`containing SITC’s coffee fruit ingredient, based on VDF’s alleged exclusive rights
`
`to those terms under U.S. Trademark Registrations for “COFFEEBERRY” that it
`
`purports to own. Accordingly, in view of SITC’s intent to use the term “coffee
`
`cherry” in connection with its advertising, marketing and sale of products
`
`containing SITC’s coffee fruit products, this counterclaim seeks a declaratory
`
`judgment and an order cancelling VDF’s U.S. Trademark Registration Nos.
`
`3,160,267; 3,163,412; 3,165,945; 3,155,230; 3,155,231; 3,155,232; 3,420,510;
`
`3,643,304; and 3,646,701, all for marks containing “COFFEEBERRY,” on the
`
`grounds that the marks are generic, or descriptive and lacking in distinctiveness.
`
`4
`
`

`
`Case 1:11-cv-00288-ACK-RLP Document 49 Filed 01/26/12 Page 5 of 44 PageID #:
` 1576
`
`IV. FACTS COMMON TO ALL ALLEGATIONS
`
`9.
`
`Resembling cranberries in appearance, coffee berries are the
`
`fruit of the coffee plant – the fruit surrounding each coffee bean as well as the bean
`
`itself – and are reputed to be rich in natural, healthful antioxidants.
`
`10. Kona coffee, grown in the Kona district of west Hawaii, is
`
`grown in a particular environment in terms of volcanic soil, sunshine, rainfall, and
`
`location, contributing to consumer demand for coffee, as well as coffee berries,
`
`grown in the Kona district.
`
`SITC’s Expansion Into the Coffee Berry Market
`
`11. Since at least as early as 2008, SITC, directly or through its
`
`affiliates, has been marketing and/or selling in interstate commerce coffee berry
`
`products derived from coffee plants to be used as ingredients for dietary
`
`supplements, beverages, and other food products, and also for personal care
`
`products such as cosmetics.
`
`12.
`
`In or about October of 2008, for instance, SITC entered into an
`
`agreement with Greenwell Farms, Inc. (“Greenwell”), a producer of Kona coffee
`
`located on the island of Hawaii. Pursuant to the agreement, Greenwell agreed to
`
`sell exclusively to SITC all waste material typically discarded by Greenwell during
`
`the coffee harvesting process (e.g. pulp) after the coffee bean has been removed
`
`(“Waste Material”).
`
`5
`
`

`
`Case 1:11-cv-00288-ACK-RLP Document 49 Filed 01/26/12 Page 6 of 44 PageID #:
` 1577
`
`13. SITC receives and processes the Waste Material into liquid
`
`concentrate or other forms, primarily to be used as a high-antioxidant ingredient
`
`for dietary supplements, beverages, and personal care products manufactured by
`
`SITC or by others.
`
`14. On or about February 28, 2009, SITC entered into a Distributor
`
`Agreement with B&D Nutritional Ingredients, Inc., a California corporation and a
`
`national distributor of ingredients for dietary supplements, food products, and
`
`personal care goods.
`
`15. On or about October 6, 2009, SITC entered into an Exclusive
`
`Supply Agreement with XOWII, LLC (“XOWII”), a California limited liability
`
`company and a national network distributor of ready-to-drink and other nutritional
`
`products, pursuant to which SITC agreed to supply and XOWII agreed to use in
`
`XOWII-designed and produced ready made beverages, for certain territories
`
`specified in the agreement.
`
`16. On or about October 28, 2009, SITC entered into a License
`
`Agreement with Fruitology, Inc. (“Fruitology”), a Nevada corporation and a
`
`national marketer of food and related products distributed through big box
`
`retailers, pursuant to which SITC agreed to supply and Fruitology agreed to
`
`purchase SITC’s coffee fruit products for use as a dietary ingredient in its Coffee
`
`Fruit Energy Shot product, for certain territories specified in the agreement.
`
`6
`
`

`
`Case 1:11-cv-00288-ACK-RLP Document 49 Filed 01/26/12 Page 7 of 44 PageID #:
` 1578
`
`VDF’s Attempts to Secure a Supply of Kona-Grown Coffee
`Waste Material and Its Baseless Claims to Provisional Patent Rights
`
`17. On information and belief, VDF sells various nutritional
`
`supplements and ingredients. A printout of a portion of VDF’s website
`
`downloaded in 2009, is attached hereto as Exhibit “1.”
`
`18. On information and belief, VDF does not grow coffee plants or
`
`sell coffee berries, nor does VDF itself process or manufacture products containing
`
`or derived from coffee berries.
`
`19. On information and belief, VDF licenses its patent rights and
`
`trademark rights to others who produce products made or derived from coffee fruit
`
`and markets such products under the “COFFEEBERRY” mark.
`
`20. VDF touts its “COFFEEBERRY” brand whole coffee berry
`
`products as a “brand-new, patent-pending coffee category . . . the world’s ONLY
`
`whole coffee fruit . . .”. Id.
`
`21. On information and belief, at least as early as April 2009, VDF,
`
`through representatives including but not limited to Brad Duell (identified as a
`
`co-inventor and assignor to VDF of the patent rights under the Patents-in-Suit),
`
`contacted various Kona coffee plant growers, including but not limited to Thomas
`
`Greenwell, principal of Greenwell Farms, Inc.
`
`7
`
`

`
`Case 1:11-cv-00288-ACK-RLP Document 49 Filed 01/26/12 Page 8 of 44 PageID #:
` 1579
`
`22. On information and belief, in or about the early part of 2009,
`
`VDF attempted to enter into agreements with Greenwell and other Kona coffee
`
`producers to supply VDF with coffee plant Waste Material, but was rebuffed.
`
`23. On information and belief, in or about the early part of 2009,
`
`VDF stated to representatives of Kona coffee plant growers, including but not
`
`limited to Greenwell, that VDF held exclusive rights relating to coffee berry
`
`processing, but the Kona coffee growers still did not agree to enter into agreements
`
`to supply coffee plant Waste Material to VDF and/or to enter into other business
`
`combinations that included VDF.
`
`24. Since 2009 and SITC’s successful entry into the coffee berry
`
`market, VDF has, on information and belief, contacted SITC and SITC’s
`
`customers, claiming exclusive rights relating to coffee berry processing and use of
`
`the term “COFFEEBERRY” or allegedly similar terms.
`
`25. On or about March 19, 2009, VDF, through its counsel, mailed
`
`a letter to SITC, a copy of which is attached hereto as Exhibit “2” without
`
`referenced enclosures (the “March 2009 Letter”). Pursuant to the March 2009
`
`Letter, VDF claimed to be “the owner of several U.S. and foreign patent
`
`applications that directly relate to various nutritional and cosmetic compositions
`
`comprising whole coffee fruit, whole coffee fruit extracts, and methods of
`
`production thereof.” Id. (emphasis added).
`
`8
`
`

`
`Case 1:11-cv-00288-ACK-RLP Document 49 Filed 01/26/12 Page 9 of 44 PageID #:
` 1580
`
`26. The March 2009 Letter further purported to enclose
`
`publications of VDF’s pending U.S. patent applications, and stated that
`
`“reasonable royalties may be recovered from the date of publication of the
`
`applications” pursuant to the provisional rights afforded patent applications under
`
`35 U.S.C. § 154(d).
`
`27. On or about November 3, 2009, VDF, through its counsel,
`
`mailed a letter to XOWII, a copy of which is attached hereto as Exhibit “3”
`
`without referenced enclosures (the “November 2009 Letter”). Pursuant to the
`
`November 2009 Letter, VDF claimed to be the owner of U.S. Patent No. 6,572,915
`
`(the “‘915 Patent”) and several pending U.S. patent applications that “directly
`
`relate to various nutritional compositions comprising whole coffee fruit, whole
`
`coffee fruit extracts, and methods for production thereof.” Id. (emphasis added).
`
`28. The November 2009 Letter further purported to enclose copies
`
`of VDF’s published U.S. patent applications.
`
`29. The claims of the ‘915 Patent, however, generally state a
`
`method for enriching food products by extracting antioxidants from waste
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`agricultural food product and blending the extract with the product, and therefore
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`do not cover SITC’s processing methods because SITC does not blend its product
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`with a food product.
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`30. On information and belief, the November 2009 Letter enclosed
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`the text of U.S. Patent Application No. 10/599,663, which was then the national
`
`stage of international patent application PCT/US2004/036630, entitled “Coffee
`
`Cherry Cosmetic Composition and Methods.”
`
`31. On information and belief, U.S. Patent Application No.
`
`10/599,663 (which claims priority to U.S. Provisional Patent Application No.
`
`60/560,865 filed on April 8, 2004, by Dusan Miljkovic, and U.S. Provisional
`
`Patent Application No. 60/618,900 filed on October 12, 2004, by Dusan
`
`Miljkovic), was published in the United States on December 6, 2007, but was
`
`finally rejected by the United States Patent and Trademark Office (the “USPTO”).
`
`32. The November 2009 Letter advises XOWII of VDF’s
`
`provisional rights based on U.S. Patent Application Nos. 10/552,944, 10/552,945,
`
`and 10/599,663, pursuant to 15 U.S.C. § 154(d), and states that “reasonable
`
`royalties may be recovered from the date of publication of the applications.”
`
`33. On information and belief, as a result of having received the
`
`November 2009 Letter, XOWII became concerned that it would be liable to VDF
`
`for royalties if XOWII distributed SITC’s coffee fruit product based on the
`
`statements in the November 2009 Letter, and has deemphasized SITC’s coffee fruit
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`product as an ingredient in XOWII’s products.
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`34. On information and belief, other potential distributors and
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`manufacturers were contacted by VDF, and in response to VDF’s false and/or
`
`misleading statements regarding the alleged provisional rights and as direct result
`
`of VDF’s statements, these distributors and manufacturers declined to purchase
`
`and/or withdrew advertising of SITC’s product.
`
`35. The provisional right to obtain a reasonable royalty is not
`
`available, however, unless the invention as claimed in the patent is substantially
`
`identical to the invention as claimed in the published patent application. 35 U.S.C.
`
`§ 154(d)(2).
`
`36. On information and belief, as of the mailing of the November
`
`2009 Letter, VDF did not have the right to obtain a reasonable royalty based on
`
`U.S. Patent Application Nos. 10/552,994, 10/552,945, and 10/599,663, because the
`
`claims in the published patent applications were amended after publication such
`
`that the amended claims were not substantially identical to claims in the published
`
`patent applications, or because the claims of the ‘915 Patent referenced in the letter
`
`did not cover SITC’s processing methods.
`
`37. For instance, on or about March 10, 2009, on information and
`
`belief, VDF’s counsel filed in the USPTO amendments to the claims published in
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`U.S. Patent Application No. 10/552,944.
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`38. On information and belief, on or about September 23, 2009,
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`VDF’s counsel filed a “Response to Office Action” making further amendments to
`
`the claims published in U.S. Patent Application No. 10/552,944.
`
`39. The statements of VDF in its counsel’s November 2009 Letter,
`
`regarding VDF’s provisional rights to obtain reasonable royalties under U.S. Patent
`
`Application Nos. 10/552,944, 10/552,945, and 10/599,663, were objectively false
`
`and baseless.
`
`40. Because the claims had previously been amended after
`
`publication so that they were no longer substantially identical to the published
`
`claims, the statements of VDF in its counsel’s November 2009 Letter, regarding
`
`VDF’s provisional rights to obtain reasonable royalties under U.S. Patent
`
`Application Nos. 10/552,944, 10/552,945, and 10/599,663, were made in bad faith
`
`and/or in reckless disregard of SITC’s existing and prospective business
`
`relationships with distributors and customers.
`
`VDF’s Prosecution of the Patents-in-Suit
`and the Patent Infringement Action
`
`41. On information and belief, having failed in its attempts to
`
`secure a source of coffee plant Waste Material from Greenwell and others, VDF
`
`sought, and intentionally embarked upon a plan, to displace SITC as the exclusive
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`purchaser of Hawaii-grown coffee plant Waste Material by means of threatened
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`patent infringement claims and/or litigation against SITC, a necessary precondition
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`to which was VDF’s obtaining of a patent for the processing of “portions” of the
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`coffee cherry.
`
`42. VDF, having attempted unsuccessfully to obtain coffee plant
`
`Waste Material from Greenwell and other Kona coffee growers, was well aware of
`
`the fact that SITC did not, and does not, process whole coffee fruit or whole coffee
`
`cherry – viz. that the Waste Material sold to SITC for SITC’s processing did not,
`
`and does not, include the coffee beans.
`
`43.
`
`In order to assert patent infringement claims against SITC,
`
`VDF realized that it must obtain patents covering the processing of the coffee plant
`
`Waste Material, not only the whole coffee cherry, because the whole coffee cherry
`
`includes the coffee bean and SITC’s processing methods did not, and do not,
`
`include the coffee beans.
`
`44. As of 2008, VDF’s assignors had filed the applications for the
`
`‘205 Patent (Application No. 10/522,944 for “Low-Mycotoxin Coffee Cherry
`
`Products”) and the ‘959 Patent (Application No. 10/522,945 for “Low-Mycotoxin
`
`Coffee Cherry Products”) which, as initially drafted, both claimed a method and
`
`product involving a “coffee cherry.” See Exhibits “B” and “C” to Complaint.
`
`45. The specifications of the ‘205 Patent and the ‘959 Patent
`
`included the following definition of the term “coffee cherry”:
`
`The term “coffee cherry” refers to the fruit of the coffee
`tree . . . in which exocarp and outer mesocarp (i.e., the pulp)
`
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`surround the inner mesocarp (i.e., the mucilage) and endocarp
`(i.e., the hull), which in turn surround the seeds (i.e., the
`beans). Thus, the term coffee cherry specifically refers to a
`whole coffee cherry, which may or may not include the stem
`of the cherry.
`
`See Exhibits “B” and “C” to Complaint.
`
`46. The applications encountered significant resistance from the
`
`USPTO, primarily on the grounds that the alleged invention was obvious in view
`
`of the prior art.
`
`47. VDF’s patent prosecution counsel at the Fish & Associates law
`
`firm, Mr. Martin Fessenmaier, purportedly “focuses his practice on educating
`
`current and prospective clients to identify patentable subject matter from an
`
`invention – and market – oriented perspective, and working with his clients to
`
`maintain alignment of claims coverage with the often fluid market demands and
`
`new product developments.” See excerpt from Fish & Associates website attached
`
`hereto as Exhibit “4.”
`
`48. On information and belief, in conjunction with the prosecution
`
`of the applications for the ‘205 Patent and the ‘959 Patent, Mr. Fessenmaier
`
`initially went to great lengths to persuade the USPTO, in particular Examiner Hong
`
`Mehta (“Examiner Mehta”) who was assigned to both patent applications, that the
`
`novel aspect of the inventions embodied in the applications taught use of a “whole
`
`coffee cherry,” i.e. the pulp, mucilage, hull and bean, as distinguished from what
`
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`Mr. Fessenmaier argued was the prior art’s teaching of processing only portions of
`
`the whole coffee cherry, i.e. use of the beans in ordinary coffee processing, or use
`
`of the pulp, husks and mucilage surrounding the coffee bean (generally regarded as
`
`by-products of coffee processing). See, e.g., Ex. “5” attached hereto (3/10/09
`
`Response to Office Action dated 12/10/08 re application for ‘205 Patent) at 5-6
`
`(“the term ‘whole coffee cherry’ is unambiguously the entire and intact fruit of the
`
`coffee tree, which is further supported in applicant’s definition of that term …
`
`[prior art reference] Boniello et al. fail to make any reference to the whole fruit.
`
`Indeed, Boniello et al. only teach use of ground green coffee beans and/or by
`
`products (pulp, husks, and mucilage) as part of a fermentation broth for
`
`microorganisms.”), id. at 8 (“Indeed, [prior art reference] Sivetz teaches processing
`
`of coffee fruit to obtain coffee beans, and the [USPTO] failed to provide any
`
`passage in Sivetz that would teach inclusion of the whole coffee cherry or extract
`
`thereof in a product.”), id. at 9 (“Most significantly, [prior art reference] Van
`
`Drunen does not teach use of a whole coffee cherry, but use of agricultural waste
`
`products in coffee production