The December 2015 letter from Annesser, Andrea Rossi’s attorney, to IH counsel Jones Day, I find of high interest. Instead of attempting to negotiate a settlement of a rapidly-escalating dispute, Annesser fanned the flames.
He was, it’s true, advocating Rossi’s positions, but including Rossi’s gross misunderstandings and errors, and apparently not doing his own due diligence.
It appears that Annesser either did not understand the issues or was unwilling to distinguish between fact and interpretation. He treats the Rossi opinions and claims as established fact, and the IH opinions and claims as “disengenuous.” He pretends that matters are completely clear but, when it comes time to establish fact with sworn testimony and documentary evidence, are thin to non-existent.
It was always a puzzle, as soon as we saw the Complaint, why there was no allegation of the Second Amendment required written acceptance of the start date of the GPT, but only vague and indirect evidence, such as participation of Darden in reviewing the test plans of Penon. We did not learn until recently that Ampenergo never signed the undated Second Amendment, something that was obvious from the document included with the Annesser letter.
I had wondered if Annesser had noticed the problem. I also wondered if Annesser had accidentally included the Johnson OFAC document with the License Agreement, which revealed the customer identity. The lawsuit, and Annesser responses to the IH Motion to Dismiss, showed me that this was not a sophisticated attorney; rather, he was more like a hired thug, whose job was to attempt to intimidate the opposition.
So, anyway, here is a paragraph by paragraph analysis of that letter.
Page 1, paragraph 1, terms the IH claims “misstatements.” The difference is one of interpretation, and the fact here is that IH’s interpretation of facts differed from Rossi’s. Calling them misstatements rather than variant intepretations was slighly pugnacious; I personally wonder if Annesser understood the issues, or if he was merely proceeding based on Rossi’s rants. (We get to see Rossi Rant in some of his depositions.)
Paragraph 2 “There is no merit whatsoever” simply denies the IH position, ostensibly about the ERV and the GPT, confusing the use of Penon as an Engineer Responsible for Validation, who could be engaged for such entirely distinct from a “Guaranteed Performance Test.” A case may be made, it’s reasonable, that IH either directly supported or allowed Penon to be “engaged.” The legal question, what we used to call ages ago the $64,000 Question — it is now more than $64 million — is whether or not the power installation is a GPT. In all the documents asserted by Annesser, now, there is no evidence that Darden or IH ever accepted Doral as a “GPT,” and certainly they did not do so as a written consent. The strongest comment I have seen so far, dug up from an email to a Texas Instruments engineer, was a reference to the upcoming plant move as being a long-term test, required of Rossi. Required for what, though, was unclear. There are reasons for an agreement to specific written agreement, it is precisely to avoid controversies like this.
Page 2, Paragraph 3. Contrary to Annesser’s assertion, there is no assumption that the ERV is the same for both tests. The way the Agreement was written, there is the possibility of a continuation, it seems to be a default; however, the Second Amendment, allowing postponing the GPT, covered this with the requirement for written agreement on the start date. Any party could decline to sign, thus requiring further negotiation — and that withholding of agreement could potentially be for any reason. Because of this, many on Planet Rossi have claimed that the Agreement was unfair to Rossi; however, if IH, as an example, had unfairly defeated the purpose of the Agreement by unreasonably withholding consent, the matter could have been arbitrated or adjudicated before starting a “GPT” without a clear agreement.
It is common for business agreements to be unclear in ways that can lead to difficulties later, if the parties cease cooperation. What is apparent is that Rossi, before the December letter, had ceased cooperation, and Annesser apparently does not recognize this; at the same time, Annesser was supporting the refusal of access to the Doral Plant by IH as specifically requested, as allowed per the Term Sheet that Rossi and Johnson had signed. By refusing access, Rossi was effectively guaranteeing that IH would not accept the “ERV Report.”
It appears from documents that, while IH considered that the time had passed for the agreed GPT, they were still willing to pay for performance, but this would clearly mean “performance satisfactory to them.” Rossi did not seem to understand the importance of that, but was attempting to force IH to pay even if the conditions created by Rossi behavior made it impossible for them to raise the funds to pay. A good attorney would have explained this to Rossi and would have negotiated with Jones Day, especially in determining the basis for the Jones Day positions.
Paragraph 4. Annesser quotes the “agreed to in writing between the parties” clause, but, remarkably, does not point to or claim any written agreement on the start date. And he refers to the attached Second Amendment, which is not “agreed to in writing between the parties.” Did he notice what was missing?
Paragraph 5 has it that agreement was “unambiguous and clear that the current testing is, and always has been, being conducted as the Guaranteed Performance validation. Any claim to the contrary by your clients is disengenuous.”
For something allegedly unambiguous and clear, hard evidence has been elusive. By taking a pugnacious stance, with this mail, Annesser was sealing the rupture between Industrial Heat and Rossi. It may have been inevitable, if Rossi has been a fraud from the beginning, but if Rossi was not a fraud, the Annesser intervention probably guaranteed that Rossi would never again be able to raise substantial funding. No sane investor would risk it. And if Rossi really had something, a good attorney would have encouraged and facilitated finding ways to show that, to enable IH to raise the funding needed to pay Rossi and continue development. It’s obvious: if Rossi could not or would not show IH how to actually make devices that pass fully-independent testing (no compromises with Rossi’s paranoia), Rossi was doomed to business failure.
Paragraph 6 was Annesser’s joining Rossi in his patent paranoia. The position taken was completely incorrect. That patent was filed, I’ve understood, because the Lugano report was about to come out, and would have taken the IP into the public domain. Rossi did not write the patent, it was filed by IH, as something the Agreement allowed them to do, to protect the IP. The Dameron co-inventor issue was a choice made by IH, as IH made the Lugano reactor and Dameron may have made some contribution, even if very small, and that was merely a necessary legal precaution. Nothing was taken away from Rossi’s property; but it injured his fantasies. As a result, Rossi refused to assign the patent as required, thus violating the Licence Agreement. Way to go, Annesser, encouraging your client to violate an agreement, creating one more prior breach.
(Rossi has often claimed that IH only objected when it was time to pay. That was just another lie by Rossi, one of a stream of them. IH, in fact, objected many times, in many ways. By December, 2015, still two months before the end of the test, and over three months before the alleged “time to pay,” IH was formally objecting, and clearly because the Rossi claim to “GPT” had also become explicit. When that happened, exactly, is not yet clear to me. But the first action by Rossi that began the clear rupture was the refusal to admit Murray to the Plant in July, 2015. At that point, I imagine that IH was scratching its collective head, wondering how to deal with this bridge too far.)
Page 3, paragraph 7 continues to call “clear” what is not. The aspects of the lawsuit that covered this “Dameron co-inventor” issue were dismissed as part of the IH MTD (dismissing four out of eight counts in an MTD prior to discovery was a remarkable success rate), so we have not seen evidence on that. However, just as that patent was precautionary, so too the co-inventor issue was precautionary. Annesser, however, goes further to deny any right to “underlying IP” or “further developments,” which appears directly contradictory to the License Agreement.
Paragraph 8 goes into the issue of patent applications outside of the “territory.” This was, again, legally incorrect. Patent applications are never patent infringement, and all those applications, if I am correct, listed Rossi as inventor. Again, IH whacked that claim with their MTD. This was all fueling the fire, helping convince Rossi that he was right, that IH was attempting to screw him over.
Paragraph 9 deals with an alleged restriction, based on the language of the License Agreement, section 1, but … Annesser has missed the next words in that section, providing for the right to grant sublicenses, and also, the Right of First Offer, providing contingent rights in other territories, thus giving IH an interest in proper patenting outside of the licensed territory, and, as well, the Agreement granted rights with respect to any future developments.
Paragraph 10 is an argument over language. What is clear is that the License was granted upon the payment of $1.5 million and then $10 million. The GPT set up a conditional additional payment, but because it was possible that the GPT would not occur, that cannot be said to be truly the “price.” Rather, it was one of the considerations of the Agreement. Yes, the IH communication could be considered an “anticipatory breach,” so the legal concern is obvious. However, it would be rare, in good-faith business dealings, that a letter like Annesser’s would be appropriate. Rather, what would be crucial would be to open up communications, to seek common ground and mutual benefit. Annesser did the opposite.
Page 4. Annesser proposes a meeting with between his clients and Jones Day and their client. That would likely have been a waste of time. However, Annesser and Jones Day meeting could have been a great idea. On the other hand, by encouraging Rossi to authorize him to file the lawsuit, he created a huge pile of billable hours. It may have seemed like a great career move. Even if his client ends up being totally effed.
Who made the decision to include as defendants Cherokee, and Darden and Vaughn personally? That almost fell to the MTD, but Altonaga took as fact the Rossi claim that Cherokee was owner of IH. That decision guaranteed that Cherokee funding would be available for defense, and it also probably guaranteed that even if Rossi somehow won the suit, no corporate money (or money from those involved with major corporations) would ever again touch him. Maybe he could crowd-fund his future projects.