1 SHEPPARD, MULLIN, RICHTER & HAMPTON LLP A Limited Liability Partnership Including Professional Corporations 2 LAURA L. CHAPMAN, Cal.

Bar No. 167249 283036 3 AARON KLEVEN, Cal. Bar No. Four Embarcadero Center, 17th Floor 4 San Francisco, California 94111-4109 Telephone: 415.434.9100 5 Facsimile: 415.434.3947
Email: lchapman@sheppardmullin.com

Attorneys for Plaintiff 7 ECONUGENICS, INC. 8 9 10 11 12 13 14 v. ECONUGENICS, INC., Plaintiff, Case No. 13-cv-4104 COMPLAINT FOR PATENT INFRINGEMENT, BREACH OF CONTRACT, BREACH OF FIDUCIARY DUTY, MISAPPROPRIATION OF TRADE SECRETS DEMAND FOR JURY TRIAL UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA, SAN FRANCISCO DIVISION

XY WELLNESS, LLC, YANTAI ANDRE 15 PECTIN CO., LTD., DAVID GUINTHER and GEOVANNI ESPINOSA and DOES 1 16 - 10, 17 18 19 Defendants.

Plaintiff, EcoNugenics, Inc., brings this civil cause of action against XY Wellness,

20 LLC, Yantai Andre Pectin Co., Ltd., David Guinther and Geovanni Espinosa (hereinafter 21 the Defendants). 22 23 1. NATURE OF THE ACTION Plaintiff EcoNugenics, Inc., of Santa Rosa, California seeks injunctive and

24 legal relief for actual, induced and contributory infringement of United States Patents. 25 Defendants individually and collectively were aware of the patents before the filing of this 26 suit. Defendants infringement was willful. 27 2. Plaintiff EcoNugenics, Inc., seeks legal damages as well as injunctive relief

28 from Defendants David Guinther and Geovanni Espinosa for unfair competition and
Case No. 13-cv-4104
SMRH:410038784.2

-1-

COMPLAINT,

1 breach of express contract provisions prohibiting the use or disclosure of EcoNugenics, 2 Inc.s confidential information. 3 3. Plaintiff EcoNugenics, Inc., seeks legal damages for breach of fiduciary

4 obligations under California law by David Guinther and Geovanni Espinosa. 5 6 4. PARTIES Plaintiff EcoNugenics, Inc. (EcoNugenics or "Plaintiff" herein) is a

7 company organized under the laws of the State of California, having a place of business at 8 396 Tesconi Court., Santa Rosa, California, 95401. 9 5. Defendant XY Wellness, LLC (XY herein) is a limited liability

10 corporation organized under the laws of the State of Wisconsin, having a place of business 11 at 3914 Cherokee Drive, Madison, Wisconsin 53718. 12 6. Defendant Yantai Andre Pectin Co., Ltd (Yantai herein) is a corporation

13 incorporated in Yantai, Peoples Republic of China and having a place of business at 6836 14 N. Kenton Ave., Lincolnwood, Illinois 60712. 15 7. Defendant David Guinther (Guinther herein) is a natural person and CEO

16 of XY, and resides at 3914 Cherokee Drive, Madison, Wisconsin, 53718, (XYs place of 17 business). 18 8. Defendant Geovanni Espinosa (Espinosa herein) is a natural person and

19 the Director of the Integrative Urological Center at New York University Langone Medical 20 Center, which is located at 660 First Avenue, New York, New York 10016. On 21 information and belief, Espinosa is a resident of New York. 22 9. Defendants Doe 1 through Doe 10, inclusive, are sued herein under fictitious

23 names. Their true names and capacities are unknown to Plaintiff. When their true names 24 and capacities are ascertained, Plaintiff will amend this complaint by inserting their true 25 names and capacities herein. Plaintiff is informed and believes and thereon alleges, that 26 each of the fictitiously named defendants is responsible in some manner for the 27 occurrences herein alleged, and that Plaintiff's damages as herein alleged were proximately 28 caused by those defendants and is liable to Plaintiffs therefor.
Case No. 13-cv-4104
SMRH:410038784.2

-2-

COMPLAINT,

10.

Plaintiff is informed and believes, and on that basis alleges, that at all times

2 herein mentioned, each Defendant was an agent and/or an employee of each remaining 3 Defendants, and in doing the things hereinafter alleged, was acting within the course and 4 scope of such agency and employment. In addition, each Defendants act, as hereinafter 5 alleged, was engaged in with the full authorization and ratification of each other 6 Defendant. 7 8 11. JURISDICTION AND VENUE This Court has subject matter jurisdiction over Plaintiffs claims for patent

9 infringement pursuant to 28 U.S.C. 1338(a). Venue is proper in this judicial district as 10 Defendants may be found here. 28 U.S.C. 1400(a). 11 12. This Court has both diversity jurisdiction, 28 U.S.C. 1332(a) and

12 jurisdiction pursuant to 28 U.S.C.1338(b) over Plaintiffs claims sounding in unfair trade, 13 including disclosure and misappropriation of confidential information and trade secrets. 14 This Court enjoys supplemental jurisdiction, 28 U.S.C. 1367, over Plaintiff's claims for 15 breach of contract and breach of fiduciary duty. 16 13. There is complete diversity of citizenship between the Plaintiff and the

17 Defendants in this matter. The parties are citizens of different states, as alleged above. 18 The amount in dispute in this action, exclusive of interest and costs, exceeds the sum of 19 $75,000. Therefore, this court has jurisdiction over this dispute by virtue of 28 U.S.C. 20 1332. 21 22 14. PATENTS IN SUIT Plaintiff EcoNugenics is the owner of the entire right, title and interest in and

23 to U.S. Patent No. 8,426,567 issued April 23, 2013. This patent is referred to herein as the 24 567 Patent. 25 15. On information and belief, in light of the publication of the award of the

26 Patent, Defendants were aware of the issuance of the 567 Patent shortly after its issuance 27 on April 23, 2013. 28
Case No. 13-cv-4104
SMRH:410038784.2

-3-

COMPLAINT,

16.

The 567 patent presents thirty-three (33) claims all directed to improving

2 immune response in a mammal such as a human by administering an effective amount of 3 modified citrus pectin of a molecular weight of no more than forty thousand (40,000) 4 Daltons to a mammal in need of improved immune function. The 567 Patent is Exhibit A 5 to this Complaint. 6 17. Plaintiff EcoNugenics is the owner of the entire right, title and interest in and

7 to U.S. Patent No. 6,462,029 issued October 8, 2002. This patent is referred to herein as 8 the 029 Patent. 9 18. Defendants knew of, or should have been aware of, the 029 Patent well

10 prior to the acts complained of herein, and no later than December 31, 2007. 11 19. The 029 Patent presents Claims 813 directed to treating or preventing

12 poisoning in a mammal caused by circulation in the blood of a poison which may be a 13 toxic metal or environmental toxin, and Claims 16 and 17, directed to treatment or 14 prevention of arteriosclerosis, all by administration to a mammal of a modified pectin 15 having a molecular weight of no more than forty thousand Daltons. The 029 Patent is 16 Exhibit B to this Complaint. 17 20. Plaintiff EcoNugenics is the owner of the entire right, title and interest in and

18 to U.S. Patent No. 7,452,871, issued November 18, 2008. This patent is referred to herein 19 as the 871 Patent. 20 21. Defendants knew of, or should have been aware of, the 871 Patent well

21 prior to the acts complained of herein, and no later than December 31, 2008. 22 22. The 871 Patent presents four (4) claims all directed to the treatment of a

23 condition or disease mediated by a poisonous metal, an environmental toxin or calcium 24 circulating in the blood, by administration of modified citrus pectin of molecular weight of 25 no more than forty thousand Daltons. The 871 Patent is Exhibit C to this Complaint. 26 23. Defendants have in the past, and continue, to infringe at least one claim of

27 each of the 567; 029 and 871 Patents by the offer of sale, promotion and sale, 28 distribution and administration of modified citrus pectin having a molecular weight of less
Case No. 13-cv-4104
SMRH:410038784.2

-4-

COMPLAINT,

1 than forty thousand Daltons to stimulate the immune system or treat or prevent metals in 2 blood circulation. 3 4 24. FACTS EcoNugenics has been involved in the fields of nutraceuticals and dietary

5 supplements for nearly twenty (20) years, led by its founder and CEO, Isaac Eliaz (Eliaz 6 herein). In that time, EcoNugenics has developed a wide variety of products to support 7 health and address various specific indications. Much of this research has been published, 8 other details have appeared in the patents of EcoNugenics. Certain information not 9 required for patent disclosures, such as the specific source and character of the 10 EcoNugenics raw materials, manufacturer, a European Company ("EC") identity and 11 location, the identity and names of third party individuals and manufacturers EC 12 employees involved in the manufacturing process, and similar corporate confidential and 13 research information, has been maintained as the private confidential information of 14 EcoNugenics. 15 25. Beginning on or about 1995, EcoNugenics collaborated with a European

16 Company (EC herein) to develop an efficient process to manufacture modified citrus 17 pectin, a product having valuable health benefits to humans and other mammals. 18 Specifications for the modified citrus pectin (or MCP) were developed by Eliaz and 19 EcoNugenics and provided to EC. 20 26. EcoNugenics provided product specifications, including the requirement that

21 the MCP exhibit a molecular weight of no more than forty thousand Daltons and be 22 comprised of partially esterified polymers of galacturonic acid. EcoNugenics provided 23 additional product specifications that do not impact the ability of MCP to stimulate a 24 mammals immune system, or bind toxins like lead or mercury in the bloodstream to 25 prevent blood poisoning and the like, but provide important commercial and consumer 26 advantages. Given those specifications, EC developed a satisfactory process involving 27 enzymatic degradation of pectin, and EcoNugenics and EC negotiated a contract that 28 provided EcoNugenics worldwide exclusivity for ECs MCP production in late 1995 (the
Case No. 13-cv-4104
SMRH:410038784.2

-5-

COMPLAINT,

1 "Agreement"). That contract clearly identified the specific source and character of the 2 EcoNugenics raw materials, the manufacturers EC identity and location, the identity and 3 names of third party individuals and the manufacturers EC employees involved in the 4 manufacturing process, and similar corporate confidential and research information as 5 confidential information of EcoNugenics that EC could neither disclose nor employ for the 6 manufacture of MCP for any other party. 7 27. Subsequent to the development of the method for manufacturing MCP by

8 EcoNugenics and EC, that aspect of the business was sold by EC to other European 9 Companies. With each sale, the non-disclosure agreement ("NDA"), as well as the 10 exclusivity agreement ("Exclusivity Agreement"), was maintained. Well after that 11 development, Ernst Thalmann (Thalmann) became General Manager of EC and its 12 successors. 13 28. In 1999, EcoNugenics filed U.S. Patent Application Serial Number

14 09/255,265, which disclosed, inter alia, an effective method of manufacturing modified 15 citrus pectin. The method disclosed was as effective and reliable as any other method 16 known at the time to provide the desired enzymatically degraded MCP. The patent 17 application did not identify the source or individuals involved in providing commercial 18 MCP or corporate confidential information such as the other product specifications 19 unrelated to the use of MCP to stimulate the immune system or bind toxins in the blood. 20 This patent application eventually issued as U.S. Patent No. 6,274,566. 21 29. In June of 2001, EcoNugenics expanded on the disclosure of the earlier filed

22 application prior to its issuance, and filed U.S. Patent Application Serial number 23 09/883,329. That application ultimately issued as the 029 Patent-in-suit. 24 30. Throughout the period 20012007, Eliaz and EcoNugenics provided EC and

25 Thalmann with research information relevant to MCP which was clearly marked as 26 confidential and proprietary, and subject to the Non-Disclosure Agreement between 27 EcoNugenics and EC. 28
Case No. 13-cv-4104
SMRH:410038784.2

-6-

COMPLAINT,

31.

In 2007, EcoNugenics discovered that Thalmann had, in violation of the

2 exclusivity provisions of the agreement with EcoNugenics, sold MCP to a former head of 3 Research & Development of EC, for distribution in parts of Europe. The dispute created 4 by that breach was resolved by renewing the exclusivity and NDA agreements in place, 5 and providing a territory for the former EC employee to sell EC MCP in a limited territory, 6 on a non-exclusive basis, in Europe. The confidentiality provisions and otherwise 7 exclusivity in favor of EcoNugenics remained features of the Agreement between 8 EcoNugenics and EC. 9 10 32. 33. In November of 2008, the 871 Patent issued. Guinther was hired as President and CEO of EcoNugenics on September 14,

11 2007. He was also a member of the Board of Directors of EcoNugenics. He had no prior 12 experience in the nutraceuticals or dietary supplements fields. He signed an Employment 13 Contract that expressly bound him to maintain the confidentiality of Confidential 14 Information of EcoNugenics. The Employment Contract is Exhibit D to this Complaint. 15 34. In 2008, Guinther negotiated a contract with EC to continue the exclusive

16 sale of MCP to EcoNugenics (with a limited territory in Europe for the former employee of 17 EC). That Agreement extended the exclusivity and non-disclosure provisions of earlier 18 agreements concerning the supply of MCP to EcoNugenics, and included a specific 19 provision that the relationship with EcoNugenics, and the fact that Thalmanns company 20 supplied MCP to EcoNugenics, would not be disclosed without express written approval 21 from EcoNugenics. 22 35. Subsequently, in 2008, Thalmann left EC, and thereafter became Executive

23 President of Defendant Yantai. 24 36. In 2009, Guinther negotiated a consulting relationship between EcoNugenics

25 and Espinosa, who was to serve as a consultant and expert spokesman for EcoNugenics 26 through 2010. Under that contract Espinosa was permitted to buy products to administer 27 to his patients (including those at the New York Universitys Langone Medical Center) at a 28 discount greater than that offered other health practitioners. Additionally, Espinosa was
Case No. 13-cv-4104
SMRH:410038784.2

-7-

COMPLAINT,

1 paid a fee of two thousand dollars ($2,000.00) per month throughout his consulting 2 contract. 3 37. Espinosas contract required him to maintain confidentiality of the

4 EcoNugenics trade secret and confidential information. Espinosa had been specifically 5 retained by EcoNugenics to advise it on EcoNugenics prostate health product. This 6 product, originally named Prostamend, was the result of years of study and research at 7 EcoNugenics. Espinosa was given all of EcoNugenics data on prostate health and its new 8 product, which ultimately was released under the name ProstaCaid. All of the data and 9 information provided Espinosa was clearly marked confidential. EcoNugenics conducted 10 laboratory trials on ProstaCaid at Columbia University, where Espinosa was then 11 employed, and that data was also provided to Espinosa. Without permission from 12 EcoNugenics, Espinosa markets through XY and other channels a prostate health 13 supplement that reflects much of the information and data Espinosa was supplied by 14 EcoNugenics. 15 38. In 2009, Guinthers employment with EcoNugenics was terminated. That

16 termination was accompanied by execution of a Share Redemption Agreement and 17 Release which is Exhibit E to this Complaint. That Agreement expressly incorporated 18 and extended the confidentiality obligations of Guinthers Employment Agreement. 19 Gunther was, inter alia, expressly precluded from contacting EcoNugenics relationships 20 and customers, and that Agreement obliged Guinther to assign to EcoNugenics any 21 improvements, modification or inventions he might have made prior to his termination. 22 39. Guinther and Espinosa agreed to form a company that would compete

23 directly with EcoNugenics, relying on confidential information Guinther and Espinosa 24 acquired during their periods of employment by EcoNugenics. The company, XY, was 25 formed in 2009-2010, with Articles of Incorporation reflecting a date of January 11, 2010, 26 less than a year following Guinthers termination and during Espinosas consulting 27 agreement with EcoNugenics. Espinosa never advised EcoNugenics that he was working 28
Case No. 13-cv-4104
SMRH:410038784.2

-8-

COMPLAINT,

1 with Guinther. Espinosa continued to receive confidential and trade secret information 2 from EcoNugenics throughout the period of Espinosas consultant agreement. 3 40. In 2013, EcoNugenics caused the 567 Patent to issue. Shortly thereafter,

4 XY discontinued buying MCP from EcoNugenics, and acquired MCP based on the 5 confidential specifications that are the subject of the EcoNugenics Agreement with EC 6 which Thalmann had access to. XY acquires its MCP from Thalmann and his company, 7 Yantai. 8 41. In August of 2013, XY wrongfully publicized the source and nature of MCP

9 used by EcoNugenics, in order to compare it with XYs own MCP supplied by Yantai, 10 information that Guinther, Espinosa and Thalmann knew was subject to obligations of 11 confidentiality. The Press Release from XY also extolled the virtues of administering 12 MCP to those in need of stimulating their immune systems, in violation of the claims of 13 the 567 Patent. None of Espinosa, Guinther, Thalmann or their respective companies 14 secured the permission of EcoNugenics before making these public disclosures. The XY 15 Press Release is attached hereto as Exhibit F. 16 42. Throughout the period 20002010, EcoNugenics conducted research into

17 various natural foods for specific therapeutic purposes. One of the food sources identified 18 in formulation of a compound specific for prostate and immune health was Reishi 19 mushrooms. EcoNugenics investigated this together with Espinosa, in his role as 20 consultant, and Guinther, as President and CEO of EcoNugenics. The information 21 developed by EcoNugenics and provided Espinosa and Guinther was clearly indicated to 22 be confidential. The XY Press Release indicates that the XY product sold for stimulating a 23 patients immune system includes MCP and Reishi mushrooms. 24 25 26 27 43. COUNT Count 1 Infringement of U.S. Patent No. 8,426,567. (Against All Defendants). Plaintiff realleges and incorporates by reference the allegations contained in

28 paragraphs 1 through 42 as though fully set forth herein

Case No. 13-cv-4104
SMRH:410038784.2

-9-

COMPLAINT,

44.

Yantai and XY sell compositions comprising an agent effective to stimulate

2 an immune response in a mammal, where the agent consists of MCP having a molecular 3 weight of no more than forty thousand Daltons. 4 45. Both XY and Yantai recommend this product to those in need of stimulation

5 of their immune response. At least Espinosa administers it to his patients in need of 6 immune stimulation. Guinther, on information and belief, administers MCP to patients in 7 need of stimulation of their immune systems for the purpose of stimulating their immune 8 systems. 9 46. All Defendants bear liability for infringement of at least one Claim of the

10 567 Patent, as either literal infringers of that patent or inducing or contributing to that 11 infringement. 12 47. In the absence of injunctive relief Defendants will continue to infringe the

13 567 Patent, at the expense of EcoNugenics market share and reputation, as well as 14 causing EcoNugenics to lose profits on sales it might otherwise have made. 15 16 17 48. Count 2 Infringement of U.S. Patent No. 6,426,029 (Against All Defendants). Plaintiff realleges and incorporates by reference the allegations contained in

18 paragraphs 1 through 47 as though fully set forth herein 19 49. Yantai and XY sell compositions comprising an agent effective to treat or

20 prevent poisoning in a mammal caused by circulation in the blood of a toxic metal. The 21 agent comprises MCP having a molecular weight of no more than forty thousand Daltons 22 obtained by enzymatic degradation of pectin. 23 50. Both XY and Yantai recommend this product to those in need of treatment or

24 prevention of poisoning of the blood by toxic metals like mercury and lead. At least 25 Espinosa administers it to his patients in need of such treatment and protection. Guinther, 26 on information and belief, administers MCP to mammals in need of treatment or 27 prevention of blood poisoning by toxic metals. 28
Case No. 13-cv-4104
SMRH:410038784.2

-10-

COMPLAINT,

51.

All Defendants bear liability for infringement of at least one Claim of the

2 029 Patent, as either literal infringers of that patent or inducing or contributing to that 3 infringement. 4 52. In the absence of injunctive relief Defendants will continue to infringe the

5 029 Patent, at the expense of EcoNugenics market share and reputation, as well as 6 causing EcoNugenics to lose profits on sales it might otherwise have made. 7 8 9 53. Count 3 Infringement of U.S. Patent No. 7,452,871 (Against All Defendants). Plaintiff realleges and incorporates by reference the allegations contained in

10 paragraphs 1 through 52 as though fully set forth herein 11 54. Yantai and XY sell compositions comprising an agent effective to treat blood

12 poisoning in a mammal mediated by a toxic metal. The agent comprises MCP having 13 partially esterified polymers of galacturonic acid and having molecular weight of no more 14 than forty thousand Daltons obtained by enzymatic degradation of pectin. 15 55. Both XY and Yantai recommend this product to those in need of treatment

16 for blood poisoning by toxic metals like mercury and lead. At least Espinosa administers it 17 to his patients in need of such treatment and protection. Guinther, on information and 18 belief, administers MCP to mammals in need of treatment or prevention of blood 19 poisoning by toxic metals. 20 56. All Defendants bear liability for infringement of at least one Claim of the

21 871 Patent, as either literal infringers of that patent or inducing or contributing to that 22 infringement. 23 57. In the absence of injunctive relief Defendants will continue to infringe the

24 871 Patent, at the expense of EcoNugenics market share and reputation, as well as 25 causing EcoNugenics to lose profits on sales it might otherwise have made. 26 27 28
Case No. 13-cv-4104
SMRH:410038784.2

-11-

COMPLAINT,

1 2 3 4

Count 4 Unfair Competition, Misappropriation of Trade Secrets in Violation of California Uniform Trade Secrets Act, Civil Code 3426 et seq. (Against All Defendants). 58. Plaintiff realleges and incorporates by reference the allegations contained in

5 paragraphs 1 through 57 as though fully set forth herein 6 59. Guinther was provided access to EcoNugenics trade secrets, including

7 research on nutraceuticals and health supplements formulation information, treatment 8 information, customer lists and MCP preparation during his employment by EcoNugenics. 9 Prior to being given that access, Guinther had no information or experience with any 10 related technology or business. 11 60. Espinosa was given access to EcoNugenics trade secrets, including research

12 on nutraceuticals and health supplement formulation information, treatment information, 13 customer lists and MCP preparation. As consultant and expert spokesperson for

14 EcoNugenics, Espinosa was given access to EcoNugenics trade secret information on its 15 prostate health product ProstaCaid. Prior to being given that access, Espinosa lacked the 16 information he was provided as to this subject matter. He praised the EcoNugenics product 17 as the best product on the market. 18 61. In planning and forming XY, and assembling and selling and promoting XY

19 products, Guinther and Espinosa misappropriated and made use of EcoNugenics trade 20 secret information, without permission from and to the detriment of the business of, 21 EcoNugenics. Sales made by XY are sales that would in all probability have been made 22 by EcoNugenics but for the misappropriation of EcoNugenics trade secrets and 23 confidential information. 24 62. Each defendant's legal relation with reference to plaintiff made defendants'

25 use or disclosure of the trade secrets to plaintiff's detriment wrongful. 26 63. EcoNugenics seeks damages to compensate for its lost sales opportunities,

27 and an injunction enjoining the activity of Guinther, Espinosa and XY for a period of time 28
Case No. 13-cv-4104
SMRH:410038784.2

-12-

COMPLAINT,

1 appropriate, equal to the time required to develop the products and company without 2 benefit of EcoNugenics confidential information. 3 4 5 64. Count 5 Unfair Competition, Improper Disclosure of Confidential Information. (Against All Defendants). Plaintiff realleges and incorporates by reference the allegations contained in

6 paragraphs 1 through 63 as though fully set forth herein 7 65. Guinther and Espinosa were provided confidential information as to the

8 nature, character and sourcing of EcoNugenics MCP marketed as PectaSol and PectaSol9 C, as well as its properties and manufacture, and the research conducted by EcoNugenics 10 to arrive at that formulation. Guinther and Espinosa were given similar information as to 11 the EcoNugenics product ProstaCaid. 12 66. Guinther and Espinosa were well aware that the information they were

13 provided with respect to MCP was confidential. Guinther, Espinosa and XY deliberately 14 and intentionally released confidential information, and made it public, for the purpose of 15 promoting XY sales to the detriment of EcoNugenics and to otherwise damage 16 EcoNugenics. Examples of the publication of confidential information by Guinther, 17 Espinosa and XY are provided in Exhibits F and G to this Complaint. 18 67. Ernst Thalmann, and Yantai, acquired information on the character,

19 preparation and sales of MCP from EcoNugenics, pursuant to the contracts negotiated with 20 EC during Thalmanns employment there. Thalman and Yantai were well aware that 21 information was confidential in nature, and that EcoNugenics had previously provided 22 substantial consideration to Thalmanns prior employers to acquire the rights to that 23 information, and maintain the exclusivity of the MCP provided to EcoNugenics. 24 68. Yantai, together with XY, agreed and conspired to release and publicize

25 information confidential to EcoNugenics, including trade secrets of significant commercial 26 value to EcoNugenics, to promote sales of product including MCP from Yantai to XY, 27 from XY to third party customers and on information and belief, from Yantai to other 28 customers.
Case No. 13-cv-4104
SMRH:410038784.2

-13-

COMPLAINT,

69.

EcoNugenics seeks recovery for the damage due to the intentional

2 publication of its confidential information, and an injunction on the further use and further 3 release of that confidential information, and the resulting sales of MCP, by Guinther, 4 Espinosa, XY and Yantai. 5 6 7 70. Count 6 Breach of Employment Contract. (Against Defendant Guinther). Plaintiff realleges and incorporates by reference the allegations contained in

8 paragraphs 1 through 69 as though fully set forth herein 9 71. Upon accepting employment from EcoNugenics, Guinther executed an

10 employment contract with EcoNugenics, Exhibit D hereto. Pursuant to that contract, 11 Guinther agreed during the term of my employment and thereafter, to hold in strictest 12 confidence and not to use, except for the benefit of EcoNugenics, or to disclose to anyone 13 without prior written consent, any confidential information of EcoNugenics. Exhibit D, 14 Section 2a. 15 72. As another provision of the employment contract that is Exhibit D, Guinther

16 agreed to assign all right title and interest to any inventions, concepts, improvements or 17 trade secrets and related materials conceived or developed during the course of his 18 employment to EcoNugenics. Exhibit D, Section 3b. 19 73. As part of the negotiated release and termination that is Exhibit E to this

20 Complaint, Guinther reaffirmed the provisions of the employment agreement reviewed 21 above in paragraphs 59 and 60. Exhibit E, Section 6. 22 74. The Employment Agreement that is Exhibit D and incorporated into Exhibit

23 E precludes Guinther from contacting customers or clients of EcoNugenics or soliciting 24 their business, for a period of one year. The same agreement precluded Guinther from 25 inducing any EcoNugenics employee to accept employment with Guinther. 26 75. EcoNugenics has complied with the terms and conditions of the agreements

27 at issue. Less than one year following the execution of Exhibit E, Guinther breached the 28 provisions of Exhibit E in competing with EcoNugenics, soliciting customers and clients
Case No. 13-cv-4104
SMRH:410038784.2

-14-

COMPLAINT,

1 of EcoNugenics, soliciting the employed consultant of EcoNugenics and making public 2 confidential information, to promote and develop XY, its products and its services. 3 76. EcoNugenics seeks damages for Guinthers breach of his employment

4 contract and his Termination Agreement, and an injunction against further violations, 5 including the promotion and sales by XY of products intended to compete with, or offered 6 as an alternative to, products of EcoNugenics. 7 8 9 77. Count 7- Breach of Professional Consultant Agreement. (Against Defendant Espinosa). Plaintiff realleges and incorporates by reference the allegations contained in

10 paragraphs 1 through 76 as though fully set forth herein 11 78. During the course of Guinthers employment as President and CEO of

12 EcoNugenics, in 2009, Guinther retained Espinosa as a consultant for EcoNugenics as well 13 as an expert spokesperson for EcoNugenics. As part of that employment, Espinosa was 14 paid a compensation of two thousand dollars ($2,000.00) per month, made privy to 15 EcoNugenics confidential information, and featured prominently as a spokesperson for 16 EcoNugenics. In addition to his written contract, Espinosa took on responsibilities and 17 obligations in the course of his employment by EcoNugenics. Espinosas contract extended 18 well beyond Guinthers termination. 19 79. During and after the period of his employment as a consultant for

20 EcoNugenics, Espinosa bought MCP from EcoNugenics at a heavily discounted price for 21 the benefit of XY which in turn sold that product to others. Espinosa formed XY, together 22 with Guinther, to compete directly with EcoNugenics, without written permission from or 23 disclosure to EcoNugenics, in violation of his consulting obligations to EcoNugenics and 24 contract with EcoNugenics, causing harm to EcoNugenics. 25 80. EcoNugenics seeks return of the fees it paid Espinosa during his employment

26 with EcoNugenics, and seeks to enjoin Espinosa from acting as a consultant or 27 spokesperson or founder for any company that competes directly with EcoNugenics. 28
Case No. 13-cv-4104
SMRH:410038784.2

-15-

COMPLAINT,

1 2 3 81.

Count 8 Breach of Fiduciary Duty. (Against Defendant Guinther). Plaintiff realleges and incorporates by reference the allegations contained in

4 paragraphs 1 through 80 as though fully set forth herein 5 82. Throughout his tenure at EcoNugenics, Guinther occupied the position of

6 President and Chief Executive Officer. Guinther was also a member of the Board of 7 Directors during that employment. 8 83. As President, CEO and Board Member, Guinther owed EcoNugenics a high

9 level of duty as fiduciary therefor, responsible for the success of EcoNugenics, and 10 protection of its confidential and trade secret information. 11 84. Following the termination of his contract, Guinther continued to owe

12 EcoNugenics that fiduciary duty, as to events occurring and information received and 13 generated during his tenure. 14 85. Guinther repeatedly breached his fiduciary duty to EcoNugenics, both by

15 using EcoNugenics confidential information and trade secrets for his own benefit and that 16 of XY and Yantai, and in publishing that information to the detriment of EcoNugenics, 17 causing EcoNugenics harm. 18 19 20 86. Count 8 Breach of Fiduciary Duty. (Against Defendant Espinosa). Plaintiff realleges and incorporates by reference the allegations contained in

21 paragraphs 1 through 85 as though fully set forth herein 22 87. Throughout his retention by EcoNugenics, Espinosa was a paid consultant

23 and expert spokesperson for EcoNugenics. 24 88. As paid consultant and expert spokesperson, Espinosa owed EcoNugenics a

25 high level of duty as fiduciary therefor, responsible for the success of EcoNugenics, and 26 protection of its confidential and trade secret information. 27 28
Case No. 13-cv-4104
SMRH:410038784.2

-16-

COMPLAINT,

89.

Following the termination of his consulting role, Espinosa continued to owe

2 EcoNugenics that fiduciary duty, as to events occurring and information received and 3 generated during his retention as consultant and expert spokesperson. 4 90. Espinosa repeatedly breached his fiduciary duty to EcoNugenics, both by

5 using EcoNugenics confidential information and trade secrets for his own benefit and that 6 of XY and Yantai, and in publishing that information to the detriment of EcoNugenics, 7 causing harm to EcoNugenics. 8 9 10 PRAYER FOR RELIEF WHEREFORE, EcoNugenics prays this Honorable Court: A. Enjoin, preliminarily and permanently, XY and Yantai from infringing,

11 contributorily infringing or inducing infringement of the Claims of the 567, 029 and 871 12 Patents. 13 B. Award EcoNugenics damages in the form of lost profits by reason of the

14 infringement of the 567, 029 and 871 Patents, from XY, Yantai, Guinther and Espinosa. 15 C. Award EcoNugenics enhanced damages for infringement of the 567, 029

16 and 871 Patents as the infringement was willful and intentional. 17 D. Preliminarily and permanently enjoin Guinther, Espinosa, XY and Yantai,

18 individually and collectively, from disclosing or using confidential or trade secret 19 information of EcoNugenics. 20 E. Award EcoNugenics damages in excess of one million dollars

21 ($1,000,000.00) for the publication and use by XY and Yantai of EcoNugenics 22 confidential and trade secret information. 23 F. Award EcoNugenics damages in excess of one million dollars

24 ($1,000,000.00) by reason of Guinthers breach of his Employment Contract. 25 G. Award EcoNugenics damages in excess of one million dollars

26 ($1,000,000.00) by reason of Espinosas breach of his Employment Contract. 27 H. Award EcoNugenics damages in excess of one million dollars

28 ($1,000,000.00) by reason of Guinthers breach of his fiduciary duty to EcoNugenics.

Case No. 13-cv-4104
SMRH:410038784.2

-17-

COMPLAINT,

I.

Award EcoNugenics damages in excess of one million dollars

2 ($1,000,000.00) by reason of Espinosas breach of his fiduciary duty to EcoNugenics. 3 J. Award EcoNugenics the entire right, title and interest in and to any

4 improvements, inventions or trade secrets conceived by Guinther, or reduced to practice by 5 Guinther, in whole or in part during his employment by EcoNugenics. 6 7 K. L. Award EcoNugenics punitive damages against all Defendants. Award EcoNugenics prejudgment interest, attorneys fees and such other

8 relief as may be determined to be just by this Honorable Court. 9 10 Dated: September 4, 2013 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Case No. 13-cv-4104
SMRH:410038784.2

SHEPPARD, MULLIN, RICHTER & HAMPTON LLP

By

/s/ Laura L. Chapman LAURA L. CHAPMAN Attorneys for Plaintiff ECONUGENICS, INC.

Dated: September 4, 2013 BERENATO & WHITE,

LLC

By

/s/Steven B. Kelber STEVEN B. KELBER Attorneys for Plaintiff ECONUGENICS, INC.

DEMAND FOR JURY TRIAL -18COMPLAINT,

Pursuant to Rule 38 of the Federal Rules of Civil Procedure, Plaintiff demands trial

2 by jury in this action of all issues so triable. 3 4 Dated: September 4, 2013 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Case No. 13-cv-4104
SMRH:410038784.2

SHEPPARD, MULLIN, RICHTER & HAMPTON LLP

By

/s/ Laura L. Chapman LAURA L. CHAPMAN Attorneys for Plaintiff ECONUGENICS, INC.

Dated: September 4, 2013 BERENATO & WHITE,

LLC

By

/s/Steven B. Kelber STEVEN B. KELBER Attorneys for Plaintiff ECONUGENICS, INC.

-19-

COMPLAINT,