This is a merge of the IH countercomplaint and the Rossi Answer
Rossi Claims are from Case 1:16-cv-21199-CMA Document 1 Entered on FLSD Docket 04/05/2016
IH Answers are from Case 1:16-cv-21199-CMA Document 78 Entered on FLSD Docket 11/23/2016. Answer text in bold.
(Note that there were three prior versions of the IH Answer, the above link is to the 3rd Amended Answer, used here.)
Original Answer, Amended Answer, 2nd Amended Answer.
Links to case documents have been inserted. It is assumed that earlier copies of Exhibits have not changed.
Identified typographical errors have been noted with [sic].
footnotes are moved to immediately below the paragraph to which they refer. The footnote number in that paragraph has been bolded (Rossi) or unbolded (IH).
Where a “Count” was dismissed by D.E. 24, I have used strike-out for the entire text of the Count, and have omitted the formulaic response, as in “82. In light of the Court’s dismissal of Count II of the Complaint (see [D.E. 24]), no response from Defendants is required to Paragraph 82.”
The Rossi Complaint copies very strangely. I was unable to extract text using the simple tool I have, all it gave was the headers added by the court. The document may have been OCR’d with image over text, instead of being provided as a regular document or pdf file. I am not initially correcting all that mess, except where it is not readable.
COMPLAINT
Plaintiffs, ANDREA ROSSI (“ROSSI”) and LEONARDO CORPORATION (“LEONARDO”), a Florida corporation, sue Defendants, THOMAS DARDEN, individually; JOHN T. VAUGHN, individually; INDUSTRIAL HEAT, LLC, a Delaware limited liability company; and IPH INTERNATIONAL B.V., a Netherlands company; and CHEROKEE INVESTMENT PARTNERS, LLC, a Delaware limited liability company; and allege:
For their Answer and Additional Defenses to the complaint (“Complaint”) of Plaintiffs Andrea Rossi (“Rossi”) and Leonardo Corporation (“Leonardo”) (collectively, “Plaintiffs”), Defendants Thomas Darden (“Darden”), John T. Vaughn (“Vaughn”), Industrial Heat, LLC (“Industrial Heat”), IPH International, B.V. (“IPH”), and Cherokee Investment Partners, LLC (“Cherokee”) (collectively, “Defendants”) state the following:
I. NATURE OF ACTION
l. ROSSI is the sole inventor of a revolutionary low energy nuclear reactor, popularly known as the “Energy Catalyzer’ ot “E-Cat” (hereafter “E-Cat”), which through the use of a catalyst, generates a low energy nuclear reaction resulting in an exothermic release of energy at a cost well below more traditional energy sources. LEONARDO, a Florida corporation, is the sole owner of all of the intellectual property related to and underlying the E-Cat technology (hereafter “E-Cat IP”).
1. Defendants deny that the energy catalyzer (“E-Cat”) technology “generates a low energy nuclear reaction resulting in an exothermic release of energy” along the lines claimed by Plaintiffs – which is that a reactor using the E-Cat technology produces more than 50 times the energy it consumes. Compl. ¶ 71. Such claims are not scientifically verifiable or reproducible. See e.g., U.S. Patent and Trademark Office (“USPTO”), “Non-Final Rejection,” dated January 11, 2016 as to Patent App. No. 12/736,193 (attached hereto as Exhibit 1); discussions of third party testing infra. In addition, the procedures and mechanisms which Plaintiffs have used in their experiments and testing of the E-Cat technology are flawed and unreliable in many respects. See e.g. id.; response to Paragraph 72 infra. Lastly, the E-Cat technology has never been independently validated by a scientifically reliable methodology to produce the energy levels Plaintiffs now claim, and has failed to produce any commercially viable product. Indeed, using the E-Cat technology Plaintiffs directly provided them, Industrial Heat and IPH have been unable to produce any measurable excess energy. Defendants deny the remaining allegations in Paragraph 1.
2. Defendants, THOMAS DARDEN (“DARDEN”), JOHN T. VAUGHN (“VAUGHN”), INDUSTRIAL HEAT, LLC (,.IH”), IpH INTERNATIONAL, B.V. (..IpH”) and CHEROKEE INVESTMENT PARTNERS, LLC (“CHEROKEE”) have meticulously and systematically defrauded ROSSI and LEONARDO in an effort to misappropriate Plaintiffs’ intellectual property rights in the E-Cat IP.
2. Defendants deny the allegations in Paragraph 2.
3. DARDEN, VAUGHN, IH, and CHEROKEE induced Plaintiffs to enter into a License Agreement which granted IH a geographically limited license to use the E-Cat IP despite the fact that they had no intention of paying ROSSI andlor LEONARDO the agreed upon price.
3. Defendants deny the allegations in Paragraph 3.
4. Notwithstanding its contractual obligation to do so, IH and its assignee, IPH, refused to pay LEONARDO the agreed upon amount for the license to use the E-Cat IP in furtherance of their fraudulent scheme to wrongfully deprive ROSSI and LEONARDO of their intellectual property. At all times relevant hereto, DARDEN, VAUGHN, IH, IPH and CHEROKEE intentionally and willfully failed to disclose to ROSSI and LEONARDO Their intention to misappropriate the E-Cat IP and deprive the Plaintiffs of the same without compensation.
4. Defendants deny the allegations in Paragraph 4.
5. Moreover, Defendants IH and IPH have misappropriated the E-Cat IP; illegally copied ROSSI’s innovative technology and products, features, designs; and, have wrongfully attempted to obtain a patent for ROSSI and LEONARDO’s intellectual property. Instead of pursuing independent product development, or utilizing the E-Cat IP within the scope of its geographically limited license, IH and IPH slavishly copied ROSSI and LEONARDO’s technology illegally claiming the E-Cat IP as its own in violation of ROSSI and LEONARDO’s valuable intellectual property rights. Furthermore, IH has infringed upon ROSSI and LEONARDO’s intellectual property rights by actively pursuing patents in foreign jurisdiction predicated upon the innovations and technology developed by ROSSI and LEONARDO including the E-Cat IP.
5. Defendants deny the allegations in Paragraph 5.
6. ROSSI and LEONARDO are fIling this suit to enforce the terms of the License Agreement and to put an end to IH and IPH’s continued wrongful infringement upon ROSSI and LEONARDO’s valuable intellectual property.
6. Defendants lack sufficient knowledge or information to admit or deny the allegations in Paragraph 6 as to Plaintiffs’ reasons for bringing this action, and therefore deny them. To the extent that Paragraph 6 alleges that Industrial Heat and IPH have infringed upon Plaintiffs’ intellectual property, Defendants deny that allegation.
II. THB PARTIES
7. Plaintiff ROSSI is a resident of Miami-Dade County, Florida whose principal residence is located in Miami Beach, Florida 33139.
7. Defendants admit the allegations in Paragraph 7.
8. Plaintiff LEONARDO(1) is a Florida corporation having its principal place of business located at 1331 Lincoln Road, Apt. 601, Miami Beach, Florida 33139.
1. LEONARDO CORPORATION, a New Hampshire Corporation, was merged into LEONARDO CORPORATION,
a Florida Corporation, wherein the Florida Corporation was the surviving entity
8. Defendants admit the allegations in Paragraph 8. Defendants also admit that there was a separate corporation named Leonardo Corporation that was incorporated in New Hampshire. Defendants lack sufficient knowledge or information to admit or deny the remaining allegations in Footnote 2 [sic] appended to Paragraph 8, and on that basis deny those remaining allegations. For purposes herein, Defendants use “Leonardo,” as Plaintiffs use “Leonardo” in the Complaint, as encompassing both the Florida corporation named Leonardo Corporation (which is the Plaintiff in this action) and the New Hampshire corporation named Leonardo Corporation. Defendants note, however, that during the time period relevant to the Complaint, the two companies existed as separate corporations, and the Leonardo Corporation that was a party to the License Agreement entered into on October 26, 2012 (the “License Agreement”) was the New Hampshire corporation.
9. Defendant DARDEN is a resident of North Carolina and is, inter alia, the President of Industrial Heat, LLC, the CEO of Cherokee Investment Partners, LLC and is otherwise sui juris.
9. Defendants admit the allegations in Paragraph 9.
10. Defendant VAUGHN is a resident of North Carolina and is, inter alia, the VicePresident of Industrial Heat, LLC, and Manager at Cherokee Investment Partners, LLC and is otherwise sui juris.
10. Defendants deny that Vaughn is a “Manager” at Cherokee, as “Manager” of a LLC is defined in 6 Delaware Code §§ 18-101(10), 18-401, and 18-402. Defendants admit the remaining allegations in Paragraph 10.
11. Defendant INDUSTRIAL HEAT (“IH”) is a Delaware limited liability company having its principal place of business at 1 1 1 East Hargett Street, Suite 300 Raleigh, NC 27601.
11. Defendants admit that Industrial Heat is a Delaware limited liability company. Defendants deny that the address listed in Paragraph 11 is the address of Industrial Heat’s principal place of business.
12. Defendant IPH INTERNATIONAL B.V. (“IPH”) is aNetherlands company having its principal place of business at Kepler 34,II7ICD Badhoevedorp, Netherlands.
12. Defendants admit that IPH is a Besloten vennootschap, a Dutch private limited liability company. Defendants deny that the address listed in Paragraph 12 is the address of IPH’s principal place of business.
13. Defendant CHEROKEE is a Delaware limited liability company having its principal place of business at 1 I I East Hargett Street, Suite 300 Raleigh, NC 27601.
13. Defendants admit the allegations in Paragraph 13.
III. JURISDICTION AND VENUE
14. This Court has subject matter jurisdiction under 28 U.S.C. $1332 (diversity),28U.S.C. $1331 (federal question) and 28 U.S.C. $1338(a) (any act of Congress relating to patents or trademarks).
14. Paragraph 14 states legal conclusions to which no response is required. Defendants admit that this Court had subject matter jurisdiction at the time Plaintiffs filed the Complaint under 28 U.S.C. §§ 1331, 1332, and 1338(a).
15. United States Code $1332 provides original jurisdiction over an action between citizens of different states and in which the amount in controversy exceeds Seventy-Five Thousand Dollars ($75,000.00), exclusive of interests and costs.
15. Paragraph 15 states legal conclusions to which no response is required.
16. The amount in controversy in the instant matter exceeds Eighty-Nine Million Dollars ($89,000,000.00). Moreover, complete diversity exists because the respective Plaintiffs and Defendants are citizens of different states.
16. Paragraph 16 states legal conclusions to which no response is required. Defendants admit that diversity exists under 28 U.S.C. § 1332 because this case is between citizens of different States and in which citizens or subjects of a foreign state are additional parties.
17. This Court has personal jurisdiction over Defendants DARDEN, VAUGHN, IH, IPH and CHEROKEE under Florida’s Long Arm Statute, $48.193, Fla. Stat., in that the Defendants have (a) breached a contract in the state; (b) directed tortious actions into the state causing damage to Plaintiffs within the State of Florida; (c) entered into a contract with a specific forum selection/choice of law provision; (d) engaged in substantial commercial activity within the State of Florida; (e) engaged in solicitation within the state; and (f) conducted and engaged in the operation of a business in the state.
17. Paragraph 17 states legal conclusions to which no response is required. Defendants admit that Industrial Heat entered into a contract with a specific forum selection/choice of law provision. Defendants deny the remaining allegations in Paragraph 17.
18. Moreover, this Court has personal jurisdiction over Defendants DARDEN, VAUGHN and IH under Florida’s Long Arm Statute, S48.193, Fla. Stat., in that such Defendants (a) participated in andlor observed the testing ofthe E-Cat Unit in Miami, Florida; and (b) attended meetings regarding the License Agreement in Miami, Florida in furtherance of their fraudulent scheme.
18. Paragraph 18 states legal conclusions to which no response is required. To the extent any response is required, Defendants deny the allegations in Paragraph 18.
19. By committing tortious acts within the State of Florida and directing their fraudulent scheme into the State of Florida, Defendants DARDEN, VAUGHN, IH, IPH and CHEROKEE have purposefully availed themselves of this Court’s jurisdiction, and have maintained sufficient minimum contacts for this Court to exercise such jurisdiction.
19. Paragraph 19 states legal conclusions to which no response is required. To the extent any response is required, Defendants deny the allegations in Paragraph 19.
20. Moreover, IH and IPH have committed and continue to commit acts of infringement in violation of 35 U.S.C. $271 pursuant to a specific fraudulent scheme both directed to, and perpetrated within this District.
20. In light of the Court’s dismissal of Count VIII of the Complaint (see [D.E. 24]), no response from Defendants is required to Paragraph 20. In addition, Paragraph 20 states legal conclusions to which no response is required. To the extent any response is required regarding Plaintiffs’ allegations of patent infringement, Industrial Heat and IPH deny those allegations.
21. The acts by DARDEN, VAUGHN, IH, IPH and CHEROKEE have caused injury to ROSSI and LEONARDO within this District.
21. Defendants deny the allegations in Paragraph 21.
22. Upon information and belief, Defendants IH and IPH have derived substantial revenue from the operations conducted in Miami, Florida, involving the leasing of the very technology and intellectual property that is at the heart of this Complaint to customer(s) within this District.
22. Defendants deny the allegations in Paragraph 22.
23. At all times material hereto, Defendants expected their actions to have consequences within this District, and anticipated that they would derive substantial revenue from their tortious acts taken in, and directed to, this District.
23. Defendants deny the allegations in Paragraph 23.
24. Venue is proper within this District under 28 U.S.C. $1391(b) and (c) because the Defendants transact business within this District and have offered for lease in this District the device which infringes upon the LEONARDO patents. Moreover, the device derived from the underlying intellectual property which is the subject of this litigation is located within this District.
24. Paragraph 24 states legal conclusions to which no response is required. To the extent any response is required, Defendants deny the allegations in Paragraph 24.
25. Venue is also proper in this District because LEONARDO’s principal place of business is in this District and LEONARDO suffered harm in this District. Additionally, a substantial part of the events giving rise to the claims herein occurred in this District.
25. Paragraph 25 states legal conclusions to which no response is required. Defendants admit that Leonardo’s principal place of business is in this District. Defendants further admit that a substantial part of the events giving rise to the claims alleged in the Complaint occurred in this District. Defendants deny the remaining allegations in Paragraph 25.
IV. PATENTS IN SUIT
26. LEONARDO and ROSSI have filed numerous patent applications, provisional patent applications, PCT applications and trademark applications in order to protect their intellectual property.
26. Defendants admit that Plaintiffs filed numerous patent applications, provisional patent applications, and PCT applications, and at least one trademark application. Defendants deny the remaining allegations in Paragraph 26.
27. On or about December 75, 2010, the European Patent Offrce duly and legally published European Patent No. 2259998 (the “European Patent”) entitled “Method and Apparatus for Carrying Out Nickel and Hydrogen Exothermal Reaction.”
27. Defendants deny that the document referenced in Paragraph 27 was a “European Patent”; the document referenced in Paragraph 27 is simply a patent application filed with the European Patent Office. Defendants admit that the European Patent Office published such application, which was Application No. EP 08873805.9 (the “European Patent Application”), on or about December 15, 2010 and that said application was entitled “Method and Apparatus for Carrying out Nickel and Hydrogen Exothermal Reaction.” Defendants deny that the European Patent Office “duly and legally published” the European Patent Application. Defendants further note that the European Patent Application parallels that U.S. patent application which was rejected by the USPTO as referenced in their response to Paragraph 1 supra; see Ex. 1.
28. On or about April 6, 207I, the Italian Patent and Trademark Office (in Italian “T-lfficio Italiano Brevetti e Marchi”) duly and legally issued Italian Patent No. 0001387256 (the “Italian Patent”) entitled “Processo ed apparecchiatura per ottenere reaxioni esotrmiche, in particolare da nickel ed idrogeno.”
28. Defendants admit that on or about April 6, 2011, the Italian Patent and Trademark Office (Ufficio italiano brevetti e marchi) issued Italian Patent No. 0001387256 (the “Italian Patent”) and that said patent was entitled “Processo ed apparecchiatura per ottenere reazioni esotermiche, in particolare da nickel ed idrogeno.” Defendants lack sufficient knowledge or information to admit or deny that the Italian Patent and Trademark Office “duly and legally issued” the Italian Patent.
29. On Augusf 25,2015, the United States Patent and Trademark Office duly and legally issued U.S. Patent No. 9,1 15,913 Bl (the “US Patent”) entitled “Fluid Heater.” A true and correct copy of the “US Patent” is attached hereto as Exhibit “A.”
29. Defendants admit that on August 25, 2015, the USPTO issued U.S. Patent No.9,115,913 B1 entitled “Fluid Heater” (the “U.S. Patent”). Defendants also admit that a copy of the U.S. Patent is attached to the Complaint as Exhibit A. However, Defendants note that the U.S. Patent is not a patent for a catalyst that generates a low energy nuclear reaction or any other reaction resulting in an exothermic release of energy; such a catalyst is more appropriately described in Rossi’s U.S. Patent application that was rejected by the USPTO as referenced in Defendants’ response to Paragraph 1 supra (see Ex. 1). Defendants lack sufficient knowledge or information to admit or deny that the U.S. Patent was “duly and legally issued,” at least to the extent that such an allegation suggests that the patent is valid and enforceable. More recently, and subsequent to the issuance of the U.S. Patent, the International Searching Authority issued a written opinion in connection with a related Patent Cooperation Treaty (“PCT”) application determining that many claims in that PCT application lacked novelty or inventive step. See International Searching Authority, “Written Opinion,” dated October 19, 2015 as to PCT App. No. PCT/US2015/042353 (attached hereto as Exhibit 2).
30. At all times relevant hereto, DARDEN, VAUGHN, IH, IPH and CHEROKEE had knowledge and notice of the European Patent, the Italian Patent and the US Patent, as well as of IH and IPH’s infringement of such patents.
30. In light of the Court’s dismissal of Counts II and VIII of the Complaint (see [D.E. 24]), no response from Defendants is required to Paragraph 30. In addition, Paragraph 30 states legal conclusions to which no response is required. To the extent any response is required regarding Plaintiffs’ allegations of patent infringement, Industrial Heat and IPH deny that they infringed the purported “European Patent,” the “Italian Patent,” or the “U.S. Patent.”
V. FACTUAL BACKGROUND
31. Over the past twenty (20) years, ROSSI has invented, developed and improved numerous apparatuses and processes used to generate an exothermic reaction, utilizing a proprietary fuel wafer employing both reagents and a catalyst, which produces energy substantially in excess of the amount of energy input into the reaction at a cost substantially below that of more traditional energy sources. This device is popularly known as the “Energy Catalyzer’ or “E-Cat.”
31. Defendants lack sufficient knowledge or information to admit or deny the allegations concerning the number of years Rossi has purportedly spent working, or the nature of the work Rossi has purportedly performed, on the E-Cat. Defendants deny that the E-Cat produces energy substantially in excess of the amount of energy input into the reaction at a cost substantially below that of more traditional energy sources; see Ex. 1.(1) Indeed, using the E-Cat technology Plaintiffs directly provided them, Industrial Heat and IPH have been unable to produce any measurable excess energy.
1. As alleged in the Complaint, Plaintiffs claim that an E-Cat unit produces more than 50 times the energy it consumes. Compl. ¶ 71.
35. Defendants deny the allegations in Paragraph 35.
32. The design and construction of the apparatus, as well as the process by which the device operates, constitutes the intellectual property of ROSSI and LEONARDO. LEONARDO is the sole owner of all rights, title and interest in the underlying E-Cat IP.
32. Defendants lack sufficient knowledge to admit or deny that the design and construction of the E-Cat device, as well as the process by which it operates, constitute the intellectual property of Plaintiffs; see response to Paragraph 1 supra. Defendants deny the remaining allegations in Paragraph 32.
33. LEONARDO and ROSSI have protected their innovative and cutting edge intellectual property through a broad range of intellectual property rights including, but not limited to the US Patent, the Italian Patent, the European Patent, as well as numerous provisional patents, and PCTs.
33. Defendants admit that Plaintiffs have filed a broad array of IP-related applications, including the European Patent Application, the patent applications corresponding to the U.S. Patent and the Italian Patent, and numerous provisional patent applications and PCT applications. Defendants deny the remaining allegations in Paragraph 33.
34. In early 2012, ROSSI and LEONARDO were contacted by Defendants DARDEN, VALfGHN and CHEROKEE, who expressed an interest in licensing the E-Cat IP in the United States of Arnerica.
34. Defendants deny the allegations in Paragraph 34.
35. In pursuit of their stated desire to obtain a license for the E-Cat IP, Defendant DARDEN, and other CHEROKEE representatives, traveled to LEONARDO’s office in Miami, Florida in an effort to convince and induce ROSSI and LEONARDO to grant CHEROKEE a license for the E-Cat IP.
35. Defendants deny the allegations in Paragraph 35.
36. Thereafter, Defendant CHEROKEE sent representatives to LEONARDO’s facility in Bologna,Italy in an effort to further convince ROSSI and LEONARDO to grant CHEROKEE a license for the E-Cat IP.
36. Defendants deny the allegations in Paragraph 36.1 As alleged in the Complaint, Plaintiffs claim that an E-Cat unit produces more than 50 times the energy it consumes. Compl. ¶ 71.
37. Similarly, Defendant VAUHGN arranged to meet with ROSSI and LEONARDO in Zurich, Germany to further discuss CHEROKEE’s interest in obtaining a license for the E-Cat IP and to emphasize CHEROKEE’s ability and willingness to pay for such license.
37. Defendants admit that Vaughn met with Rossi in Zurich, Switzerland to discuss licensing of the E-Cat IP. For purposes of this Answer, Additional Defenses, Counterclaims, and Third-Party Claims, the “E-Cat IP” is defined as in the License Agreement, which states that the “E-Cat IP” consists of: patents, designs, trade secrets, technology, know-how (including all the knowledge necessary to produce thermal energy by means of apparatuses derived from the technology), products and business plans and all other intellectual property related directly or indirectly to energy production and conversion technologies and to the development, manufacture and sale of products using such technologies, including the Energy Catalyzer (“E-Cat”) the catalyzer formula used to fuel the E-Cat, the “Hot-Cat” and the related energy production and conversion technologies. License Agreement at page 1. The E-Cat IP also “include[s] all documents, manuals, technical data, formulae, and other items and materials necessary or useful to enable the Company to (i) operate the 1 MW E-Cat Unit, (ii) make E-Cat Products, and (iii) exploit the E-Cat IP as contemplated by this Agreement.” Id. § 16.1. Defendants deny the remaining allegations in Paragraph 37, including to the extent they claim that Cherokee was interested in or willing to pay for a license of the E-Cat IP.
38. At each of the aforementioned meetings, DARDEN, VAUGHN and CHEROKEE repeatedly stated that “CHEROKEE has billions of dollars at its disposal, and is willing to pay ROSSI and LEONARDO” to license the E-Cat IP.
38. Defendants deny the allegations in Paragraph 38.
39. Moreover, at these meetings, DARDEN, VAUGHN and CHEROKEE fraudulently represented :
a. That if CHEROKEE were granted a license to the E-Cat IP, they would protect the E-Cat IP from dissemination so as to maximizethe value of the intellectual property around the world; and
b. That they were authorizedto use the funds managed by CHEROKEE to pay LEONARDO in excess of One Hundred Million Dollars ($100,000,000.00) for the E-Cat IP license.
39. Defendants deny the allegations in Paragraph 39, including all subparts.
40. In reliance upon such representations. ROSSI and LEONARDO, with the assistance of their Italian attorney, negotiated the terms of a license agreement with CHEROKEE. Once the terms of the license agreement had been negotiated, ROSSI, at the suggestion of Defendants DARDEN and VAUGHN, traveled to Defendant CHEROKEE’s office to execute the license agreement on October 26,2012.
40. Defendants admit that Plaintiffs negotiated the terms of what would become the License Agreement. Defendants also admit that the License Agreement was executed on October 26, 2012 by Plaintiffs. Defendants further admit that Rossi traveled to Cherokee’s office in North Carolina to execute the License Agreement. Defendants deny the remaining allegations in Paragraph 40, including any allegations that the License Agreement was “with Cherokee.” As the License Agreement states, it was with Industrial Heat.
41. Upon arrival at the CHEROKEE office, Defendants DARDEN and VAUGHN informed ROSSI and LEONARDO that they had formed a new business entity named INDUSTRIAL HEAT, LLC, which was a “branch of Cherokee Investment Partners , LLC — to serve as the holding company for the E-Cat license, and that the License Agreement would be signed by the new company.
41. Defendants deny the allegations in Paragraph 41.
42. Unbeknownst to ROSSI and LEONARDO, on October 24,2012, DARDEN and VAUGHN had formed INDUSTRIAL HEAT, LLC as a Delaware limited liability company.
42. Defendants lack sufficient knowledge or information to admit or deny the allegations as to Plaintiffs’ knowledge of the timing of the formation of Industrial Heat. Defendants admit that Industrial Heat was formed on or about October 24, 2012. Defendants deny the remaining allegations in Paragraph 42.
43. Upon expressing concern about the new company, to induce ROSSI and LEONARDO’s execution of the license agreement, DARDEN and VAUGHN, with full knowledge of the falsity of their statements, assured ROSSI and LEONARDO that:
a. “CHEROKEE and INDUSTRIAL HEAT,LLC are the same company”;
b. that IH was “entirely owned and funded by” CHEROKEE; and
c. that “CHEROKEE guaranteed that LEONARDO will be paid in accordance with the License Agreement.”
43. Defendants deny the allegations in Paragraph 43, including all subparts.
44. In justifiable reliance upon the aforementioned representations and assurances of DARDEN, VAUGHN, CHEROKEE and IH, on October 26, 2012, ROSSI and LEONARDO entered into a License Agreement with IH and the then licensee Ampenergo, Inc. for the E-Cat IP (“License Agreement”), a copy of which is attached hereto as Exhibit “B.”
44. Defendants admit that an incomplete copy of the License Agreement is attached as Exhibit B to the Complaint. Defendants also admit that Plaintiffs entered into the License Agreement with Industrial Heat and AmpEnergo, Inc. (“AEG”) on October 26, 2012. Defendants state the License Agreement speaks for itself, and therefore deny any allegations in Paragraph 44 inconsistent therewith. Defendants deny the remaining allegations in Paragraph 44.
45. Pursuant to the License Agreement, ROSSI and LEONARDO granted to IH a license to use the E-Cat IP within the specific limited geographic territories of North America, Central America and Caribbean, South America, China, Russia, Saudi Arabia and Arabian Emirates.
45. Defendants state that the License Agreement speaks for itself, and therefore deny any allegations in Paragraph 45 inconsistent therewith.
46. In exchange for granting the aforementioned license, IH agreed to pay LEONARDO One Hundred Million Five Hundred Thousand Dollars ($100,500,000.00) over three (3) payments. The payment schedule was to be as follows:
a. One Million Five Hundred Thousand Dollars ($1,500,000.00) upon execution of the License Agreement;
b. Ten Million Dollars ($10,000,000.00) after the successful completion of a twenty-four hour test period (hereafter the “validation Test”) performed by an
independent expert responsible for validation (hereafter “ERV”); and
c. Eighty-Nine Million Dollars ($89,000,000.00) after the successful completion of a three hundred fifty (350) day test period (hereafter the “Guaranteed
Performance Test”) performed by the ERV, or another independent expert agreed upon by the parties.
46. Defendants state that the License Agreement speaks for itself, and therefore deny any allegations in Paragraph 46, including all subparts, inconsistent therewith.
47. On or about October 26,2012, upon executing the License Agreement, IH paid to LEONARDO One Million Five Hundred Thousand Dollars ($1,500,000.00).
47. Defendants admit the allegations in Paragraph 47.
48. Upon agreement of the parties, the Validation Test was to take place on April 30, 2013 at LEONARDO’s facility in Fererra, Italy.
48. Defendants lack sufficient knowledge or information to admit or deny that Leonardo owned the facility referenced in Paragraph 48. Defendants admit the remaining allegations in Paragraph 48.
49. On April 28,2013,just prior to the Validation Test, IH informed ROSSI and LEONARDO that they would be required to execute a First Amendment to License Agreement (“First Amendment”) before IH would place the second payment of Ten Million Dollars ($ 10,000,000.00) into escrow.(2)
2. Pursuant to the License Agreement, IH was required to place Ten Million Dollars ($10,000,000.00) in escrow before the commencement of the Validation Test.
49. Defendants deny the allegations in Paragraph 49. As to Footnote 2 appended to Paragraph 49, Defendants state that the License Agreement speaks for itself, and therefore deny any allegations inconsistent therewith.
50. On April 29, 2013, IH provided ROSSI and LEONARDO with a copy of the proposed First Amendment which amended the License Agreement to permit IH to assign the License Agreement under certain circumstances, but without relieving IH of its obligations under the License Agreement. After a brief review of the document, ROSSI and LEONARDO executed the First Amendment, a copy of which is attached hereto as Exhibit “C”.
50. Defendants state that the First Amendment to the License Agreement, entered on April 29, 2013 (“First Amendment”), speaks for itself, and therefore deny any allegations in Paragraph 50 inconsistent therewith. Defendants admit that Plaintiffs executed the First Amendment on April 29, 2013. Defendants further admit that a copy of the First Amendment is attached to the Complaint as Exhibit C. Defendants deny the remaining allegations in Paragraph 50.
51. At the same time, DARDEN, VAUGHN and IH informed ROSSI and LEONARDO that IH had formed a new wholly owned subsidiary, IPH, and that IPH was going to “be the IP holding entity for Industrial Heat.”
51. Defendants deny the allegations in Paragraph 51.
52. In order to convince ROSSI and LEONARDO to agree to such assignment, DARDEN, VAUGHN and IH assured ROSSI and LEONARDO that IPH was a wholly owned subsidiary of IH and that IPH would remain wholly owned by IH until LEONARDO had been paid in full under the License Agreement.
52. Defendants deny the allegations in Paragraph 52.
53. DARDEN, VAUGHN and IH further represented that the assignment would not affect ROSSI or LEONARDO’s rights under the License Agreement.
53. Defendants deny the allegations in Paragraph 53.
54. In reliance upon the aforementioned representations, ROSSI and LEONARDO consented to IH’s assignment of the License Agreement to IPH.
54. Defendants admit that Rossi and Leonardo consented to Industrial Heat’s assignment of the License Agreement to IPH. Defendants deny the remaining allegations in Paragraph 54.
55. Pursuant to the terms of the First Amendment, no assignment under the License Agreement would relieve IH of any of its obligations or performance under the License Agreement.
55. Defendants state that the First Amendment speaks for itself, and therefore deny any allegations in Paragraph 55 inconsistent therewith.
56. In accordance with the License Agreement, and the First Amendment thereto, the parties selected Eng. Fabio Penon as the Expert Responsible for Validation (“ERV”) engaged to perform the Validation Test of the E-Cat Unit in Ferrara, Italy.
56. Defendants admit that Plaintiffs selected Fabio Penon (“Penon”) as the Expert Responsible for Validation (“ERV”) in connection with the Validation test performed in Ferrara, Italy. Defendants state that the License Agreement and First Amendment speak for themselves, and therefore deny any allegations in Paragraph 56 inconsistent therewith. Defendants deny the remaining allegations in Paragraph 56.
57. On or about May 1, 2013, the ERV performed the Validation Test of the E-Cat Unit, following the test protocol which had been agreed upon by the parties.
57. Defendants admit that from April 30 to May 1, 2013, Penon conducted measurements in connection with the Validation test of certain E-Cat reactors operated by Plaintiffs. Defendants deny the remaining allegations in Paragraph 57. The Validation test did not follow the Validation protocol as set forth in the License Agreement and the First Amendment (the “Validation Protocol”). For example, the Validation Protocol required 30 E- Cat reactors to be operated as a unit (“Unit A”) for twenty-four consecutive hours. However, only 18 E-Cat reactors were operated as Unit A during the testing period. In addition, the Validation Protocol required the flow of heated fluid from the E-Cat reactors to be measured during the Validation test. However, these measurements were not taken during the Validation test. Furthermore, the Validation Protocol required that twenty-four consecutive hours of testing be done on Unit A. However, less than twenty-four consecutive hours of testing was done on Unit A. There are various other examples of the Validation Protocol not being followed during the Validation test.
58. Upon conclusion of the Validation Test on or about May 2,2013,the ERV certified that the E-Cat Unit satisfied each of the Validation requirements within the Validation Test period and IH paid to LEONARDO the second payment of Ten Million Dollars ($10,000,000.00) in accordance with the terms of the License Agreement and amendments thereto.
58. Defendants admit that Penon produced a report following the testing of the E-Cat reactors which was done during the Validation test. Defendants further admit that Industrial Heat paid the second payment of $10 million under the License Agreement and the First Amendment. Defendants state that this payment was made to an escrow agent and was subject to the requirement that Plaintiffs transfer “all the E-Cat IP” to Industrial Heat and IPH. See License Agreement § 3.2(b). Defendants deny the remaining allegations in Paragraph 58.
59. In or around August 2013, the E-Cat Unit was delivered from Fererra,Italy to IH at its facility in Raleigh, North Carolina, where preparations began for the final Guaranteed Performance Test.
59. Defendants admit that in August 2013, the E-Cat Unit was delivered to Industrial Heat at its facility in North Carolina. The “E-Cat Unit” is defined in the License Agreement as the “Plant” and is sometimes referred to as the “1 MW E-Cat Unit” or the “1 MW Plant.” The specifications of the E-Cat Unit/Plant are contained in Exhibit C to the License Agreement.Defendants lack sufficient knowledge or information to admit or deny that the E-Cat Unit was delivered from Ferrara, Italy. Defendants deny the remaining allegations in Paragraph 59.
60. As a result of IH’s inability or failure to secure an adequate facility in which the Guaranteed Performance test could be completed, and the failure to obtain the requisite regulatory approval to operate the E-Cat Unit, ROSSI and LEONARDO were prevented from commencing the Guaranteed Performance Test as set forth in the License Agreement.
60. Defendants deny the allegations in Paragraph 60.
61. Acknowledging their failure to secure an adequate location and authorization for the Guaranteed Perforrnance Test, DARDEN, VAUGHN, IH and IPH informed ROSSI and LEONARDO that the time for the commencement of the Guaranteed Performance Test would not begin to toll until an adequate testing facility had been located, the requisite approvals obtained and the E-Cat Unit delivered to the test location.
61. Defendants deny the allegations in Paragraph 61.
62. In October 2013,IH, ROSSI and LEONARDO executed the Second Amendment to License Agreement (“Second Amendment”) which, in relevant part, formally eliminated the requirement that the Guaranteed Performance test period be commenced immediately upon delivery of the plant and instead requiring that the Guaranteed Performance Test period would commence on a date agreed to in writing by the parties. A copy of the Second Amendment is attached hereto as Exhibit “D.”
62. Defendants admit that Industrial Heat and Rossi executed the proposed Second Amendment to the License Agreement (the “Proposed Second Amendment”), which is dated “October , 2013.” However, the Proposed Second Amendment was not executed by Leonardo, IPH, or AEG. Defendants state that the Proposed Second Amendment speaks for itself, and therefore deny any allegations in Paragraph 62 inconsistent therewith. Defendants admit that a copy of the Proposed Second Amendment is attached to the Complaint as Exhibit D. Defendants deny that the Proposed Second Amendment was valid to amend the License Agreement. In any event, the Proposed Second Amendment addressed the testing of “a six cylinder Hot Cat unit” (the “Six Cylinder Unit”), not the E-Cat Unit that was the subject of the License Agreement and the First Amendment. The Six Cylinder Unit in the Proposed Second Amendment is separate and distinct from the E-Cat Unit or Plant as referenced in the License Agreement, the First Amendment, and the Complaint. Photographs accurately depicting the Six Cylinder Unit are attached hereto as Exhibit 3. The Six Cylinder Unit remains in North Carolina.
63. Despite IH’s and IPH’s continued failure to secure an adequate testing facility, ROSSI took it upon himself to loeate and seeure a location in which to conduct the Guaranteed Performance Test, as well as obtain the requisite regulatory approvals for the operation of the ECat Unit.
63. Defendants deny the allegations in Paragraph 63.
64. On or before August 13,2014, ROSSI and LEONARDO located a customer in Miami, Florida, who agreed to allow its facility to be used for the Guaranteed Performance Test and even agreed to pay IH up to One Thousand Dollars ($1,000.00) per day for the energy produced by the E-Cat Unit during the Guaranteed Performance Test.
64. Defendants deny that the “test” referenced in Paragraph 64 – meaning the operation of the Plant in Doral, Florida in 2015 and early 2016 – was the “Guaranteed Performance” to be performed under the License Agreement. Defendants deny the allegations in Paragraph 64 as to Plaintiffs locating a customer in Miami, Florida who agreed to allow its facility to be used for a “Guaranteed Performance” test. The company Plaintiffs “located” for the test referenced in Paragraph 64 was a company closely affiliated with Plaintiffs (J.M. Products, Inc.) that had no actual use for the steam produced by the Plant, and thus was not a “customer” for the steam power to be produced by the Plant. Defendants deny the remaining allegations in Paragraph 64.
65. Accordingly, on January 28,2015, the ERV prepared and submitted to the parties a proposed test protocol for the Guaranteed Performance Test. After suggesting minor changes to the test protocol, and clarifying other points, DARDEN on behalf of IH and/or IPH agreed to the test protocol prior to the commencement of the Guaranteed Performance Test.
65. Defendants deny the allegations in Paragraph 65.
66. Under the supervision of the ERV, the Guaranteed Performance Test was commenced on or about February 19, 2015, after the ERV had performed a thorough inspection of the E-Cat Unit and installed his monitoring equipment therein.
66. Defendants deny that the test referenced in Paragraph 66 was the Guaranteed Performance to be performed under the License Agreement. Defendants lack sufficient knowledge or information to admit or deny that Penon performed a thorough inspection of or installed his monitoring equipment on the Plant on February 19, 2015. Defendants deny the remaining allegations in Paragraph 66.
67. During the Guaranteed Performance Test period, IH and/or IPH engaged and paid two of their representatives, Mr. Barry West and Mr. Fulvio Fabiani, to monitor, maintain, take part in, and report on the operation of the E-Cat Unit being tested.
67. Defendants admit that Industrial Heat and/or IPH engaged Barry West and Fulvio Fabiani (“Fabiani”) as independent contractors to assist Rossi in operation of the Plant in Florida and caused them to be paid for their services. Defendants deny the remaining allegations in Paragraph 67.
68. Throughout the Guaranteed Performance testing period, the results of the test, including measurements and operational status, were routinely reported to DARDEN, VAUGHN, IH and IPH by ROSSI, the ERV and IH/IPH’s agents Mr. Fabiani and Mr. West.
68. Defendants deny the allegations in Paragraph 68.
69. During the Guaranteed Perforrnance Test, IH, DARDEN and VAUGHN each publically claimed, on several occasions, that they had “acquired Rossi’s intellectual property” and upon information and belief, IH. DARDEN and VAUGHN undertook substantial fundraising predicated upon such claims.
69. In light of the Court’s dismissal of Counts II and VIII of the Complaint (see [D.E. 24]), no response from Defendants is required to Paragraph 69. To the extent any response is required, Defendants deny the allegations in Paragraph 69.
70. Upon information and belief, IH, DARDEN and VAUGHN were able to raise substantial sums of money from numerous investors including, but not limited to, approximately Fifty Million Dollars ($50,000,000.00) from the Woodford Funds (including Woodford Patient Capital Trust, PLC and CF Woodford Equity Income Fund), predicated upon their claims that IH and/or IPH had “acquired Rossi’s intellectual property.”
70. In light of the Court’s dismissal of Count VIII of the Complaint (see [D.E. 24]), no response from Defendants is required to Paragraph 70. To the extent that any response is required, Defendants admit that Industrial Heat raised substantial sums of money from numerous investors, including entities affiliated with the Woodford Funds. Defendants deny the remaining allegations in Paragraph 70.
71. On February 15, 2016, the Guaranteed Performance test was successfully concluded. The E-Cat Unit had successfully operated for more than three hundred fifty (350) days out ofa four hundred (a00) day period at a level substantially greater than the level achieved during the Validation Test. By all accounts, the amount of energy produced by the E-Cat Unit during the Guaranteed Performance Test was substantially greater than f,rfty (50) times the amount of energy consumed by the E-Cat Unit during the same period.
71. Defendants admit that the E-Cat Unit was operated in Florida during a period in 2015 and 2016. As reflected in Rossi’s internet blog postings at the time, that Unit was the Plant – i.e., the 1 MW E-Cat – which is described in Exhibit C to the License Agreement. An excerpt from Rossi’s blog posting, as reprinted on e-catworld.com, is attached as Exhibit 4. Defendants deny the remaining allegations in Paragraph 71. Furthermore, Defendants note that there were many flaws in how the purported Guaranteed Performance test referenced in Paragraph 71 was performed. Several, but by no means all, of those flaws were identified in a document provided to Penon on March 25, 2016. A copy of this document is attached hereto as Exhibit 5.
72. On or about March 29, 2016, the ERV published his final report regarding the operation of the E-Cat Unit during the Guaranteed Performance test. In the ERV’s report, the ERV confirmed that the E-Cat Unit had satisfied all of the performance requirements imposed by the License Agreement including, but not limited to, the requirement that the production of energy was at least six (6) times greater than the energy consumed.
72. Defendants deny that the test referenced in Paragraph 72 was the Guaranteed Performance to be performed under the License Agreement. Defendants admit that on March 29, 2016, Penon sent his final report regarding the operation of the Plant to Darden and Rossi. Defendants state that this report speaks for itself, and therefore deny any allegations in Paragraph 72 inconsistent therewith. Defendants deny that the Plant satisfied all of the performance requirements imposed by the License Agreement; see Ex. 5. Defendants also deny Plaintiffs’ allegations in Paragraph 72 regarding the amount of energy produced by the Plant during the testing period; see Ex. 1. Defendants deny the remaining allegations in Paragraph 72.
73. More specifically, the ERV found that over the Guaranteed Performance period, the amount of energy produced by the E-Cat Unit was consistently substantially greater than six (6) times the amount of energy consumed by the unit. In fact, the ERV found that during the testing period, the average energy multiplier (Energy Produced + Energy Consumed) was often greater than sixty (60).
73. Defendants deny that the test referenced in Paragraph 73 was the Guaranteed Performance to be performed under the License Agreement. Defendants state that Penon’s report speaks for itself, and therefore deny any allegations in Paragraph 73 inconsistent therewith. Defendants deny Plaintiffs’ allegations in Paragraph 73 regarding the amount of energy produced by the Plant during the testing period; see Ex. 1. Defendants deny the remaining allegations in Paragraph 73.
74. Pursuant to the Lieense Agreement, on March 29, 2016, LEONARDO demanded payment of the remaining Eighty-Nine Million Dollars ($89,000,000.00) due and owing under the License Agreement, but such demand has been refused and the requisite payment has not been made.
74. Defendants admit that on March 29, 2016, Leonardo demanded payment of $89 million, and that such demand has been refused and the payment has not been made. Defendants deny the remaining allegations in Paragraph 74.
75. ROSSI and LEONARDO have satisfied all conditions precedent before commencing this action.
75. Defendants deny the allegations in Paragraph 75.
COUNT I: BREACH OF CONTRACT (NON-PAYMENT)
(IH & IPH)
76. Plaintiffs reallege and reaver the allegations contained in Paragraphs 1 through 75 above as though fully restated herein.
76. In response to Paragraph 76, Industrial Heat and IPH repeat and reallege their responses to Paragraphs 1-75 above as if fully restated herein.
77 . Pursuant to paragraph 3.2(c) of the License Agreement, and amendments thereto, (Exhibits “B”, “C” & “D”) “within five business days following 350 days of operation of the [E-Cat] Plant during which the Guaranteed Performance has been achieved … [IH] will pay to Leonardo Eighty Nine Million Dollars ($89,000,000).”
77. Industrial Heat and IPH state that the License Agreement speaks for itself, and therefore deny any allegations in Paragraph 77 inconsistent therewith. Industrial Heat and IPH further deny that the Proposed Second Amendment attached to the Complaint as Exhibit D was valid to amend the License Agreement.
78. By virtue of the assignment, IPH is also responsible for the Eighty-Nine Million Dollar ($89,000,000.00) payment.
78. Industrial Heat and IPH deny the allegations in Paragraph 78 to the extent that they are meant to allege that the Guaranteed Performance as defined by the License Agreement was successfully achieved. Industrial Heat and IPH state that the assignment from Industrial Heat to IPH speaks for itself, and therefore deny any allegations in Paragraph 78 inconsistent therewith.
79. As verfied by the ERV, the E-Cat Unit has satisfied and/or exceeded each and every minimum performance criteria set forth in the License Agreement.
79. Industrial Heat and IPH deny the allegations in Paragraph 79.
80. IH and IPH have refused to make the requisite Eighty-Nine Million Dollar ($89,000,000.00) payment to LEONARDO in breach of the License Agreement. As a result of such breach, LEONARDO and ROSSI have been damaged.
80. Industrial Heat and IPH admit that they have not paid $89 million to Leonardo. Defendants deny the remaining allegations in Paragraph 80.
81. ROSSI and LEONARDO have retained the undersigned law firm, and have agreed to pay a reasonable fee for its services in relation to this matter.
81. Industrial Heat and IPH lack sufficient knowledge or information to admit or deny the allegations in Paragraph 81.
COUNT II
COUNT II: BREACH OF CONTRACT (EXCEEDING SCOPE OF LICENSE)
(IH & IPH)
82. Plaintiffs reallege and reaver the allegations contained in Paragraphs I through 75 and ParagraphTS above as though fully restated herein.
83. Pursuant to paragraphs I and 2 of the License Agreement, and amendments thereto, IH or its assignee, was granted “the exclusive right and license under the Patents and other E-Cat IP to develop, manufacture, make, have made, use, have used, offer to sell, have offered for sale, sell, have sold, import, and have imported all the products deriving from the E-Cat IP in the Territory” including North America, Central America, South America, Caribbean, China, Russia, Saudi Arabia and the Arabian Emirates.
84. Notably, the License Agreement did not convey any right, title or interest in the ownership of the underlying E-Cat IP, but rather merely granted IH the right to exclusively use the E-Cat IP in the specihed geographically limited territory.
85. Notwithstanding the above, IH, IPH, DARDEN and VAUGHN have publically announced that IH and/or IPH own the rights to the E-Cat IP, and have attempted to obtain both a United States Patent and a European Patent for the E-Cat IP which has already been patented by ROSSI and LEONARDO.
86. IH and/or IPH have breached the License Agreement by exceeding the scope of their license including, but not limited to:
a. publically claiming an ownership interest in the underlying E-Cat IP;
b. attempting to use the E-Cat IP outside of its limited Licensed Territory including attempting to obtain a European Patent in its name using the E-Cat IP; and
c. wrongfully applying for a United States Patent for the E-Cat IP and falsely asserting that one of its agents, contractors andlor employees, Mr. Thomas Barker Dameron, was a co-inventor of the E-Cat IP so as to enable IH and/or IPH to misappropriate ROSSI and LEONARDO’s intellectual property.
87. As a result of IH and IPH’s breach of the License Agreement, ROSSI and LEONARDO have been damaged.
COUNT III: UNJUST ENRICHMENT
(IH & IPH)
88. Plaintiffs reallege and reaver the allegations contained in Paragraphs 7-2, 5,7-16, 17(a-b), 17(d-Ð, 78-43,48, 5l , 57, 59, 61, 63-73 and 75 above as though fully restated herein.
88. In response to Paragraph 88, Industrial Heat and IPH repeat and reallege their responses to Paragraphs 1-2, 5, 7-16, 17(a-b), 17(d-f), 18-43, 48, 51, 57, 59, 61, 63-73, and 75 above as if fully restated herein.
89. ROSSI and LEONARDO have conferred a benefit upon IH and IPH in that they have granted IH and/or IPH an exclusive license to use the E-Cat IP and related technology within North America, South America, Central America, Caribbean, Russia, China and the Arab Emirates.
89. Paragraph 89 states legal conclusions to which no response is required. To the extent any response is required, Industrial Heat and IPH deny the allegations in Paragraph 89. In fact, assuming the License Agreement is valid, the “exclusive license to use the E-Cat IP and related technology” irrevocably belonged to Industrial Heat and/or IPH after the $10 million payment was made under the License Agreement, meaning Plaintiffs could not have conferred the “benefit” of that license on Industrial Heat or IPH subsequent to the $10 million payment. Alternatively, if somehow (for reasons unstated in the Complaint) the License Agreement were not valid, the “exclusive license to use the E-Cat IP and related technology” would never have been transferred to Industrial Heat or IPH in the first instance, meaning it could not have been a “benefit” that Plaintiffs conferred on Industrial Heat or IPH.
90. At all times relevant hereto, IH and/or IPH have had knowledge of the benefit conferred upon them, and IH and IPH have accepted and retained the license, and all benefits thereof, for the E-Cat IP and related technology including, but not limited to, the E-Cat Unit.
90. Paragraph 90 states legal conclusions to which no response is required. To the extent any response is required, Industrial Heat and IPH deny the allegations in Paragraph 90.
91. IH and IPH have failed to pay ROSSI or LEONARDO the full value of the license granted, and it would be inequitable for IH and/or IPH to retain the benefits of the aforementioned license without paying fair value for it.
91. Paragraph 91 states legal conclusions to which no response is required. To the extent any response is required, Industrial Heat and IPH deny the allegations in Paragraph 91.
92. As a result of IH and IPH’s failure to pay ROSSI or LEONARDO, IH and/or IPH have been unjustly enriched and conversely, ROSSI and LEONARDO have been damaged.
92. Paragraph 92 states legal conclusions to which no response is required. To the extent any response is required, Industrial Heat and IPH deny the allegations in Paragraph 92
COUNT IV: MISAPPROPRIATION OF TRADE SECRETS
(DARDEN, VAUGHN, CHEROKEE,IH & IPH)
93. Plaintiffs reallege and reaver the allegations contained in Paragraphs 1 through 75, and Paragraphs 83 through 86 above as though fully restated herein.
93. In response to Paragraph 93, Defendants repeat and reallege their responses to Paragraphs 1-75 and 83-86 above as if fully restated herein.
94. ROSSI and LEONARDO own all of the right, title and interest in the E-Cat intellectual property including, but not limited to, all patented devices, designs and/or processes related to the E-Cat IP.
94. Defendants deny the allegations in Paragraph 94.
95. The E-Cat IP is comprised of proprietary business and scientific information which, gives economic advantage to ROSSI and LEONARDO. Such information is maintained as a closely held trade secret in order to prevent the unauthorized dissemination of such information.
95. Paragraph 95 states legal conclusions to which no response is required. To the extent any response is required, Defendants deny the allegations in Paragraph 95. Defendants state that significant portions of the E-Cat IP have been disclosed publicly. For example, Rossi has filed a number of publicly available patent applications, provisional patent applications, PCT applications, and applications in foreign countries disclosing the E-Cat IP. A non-exhaustive list of such applications is attached hereto as Exhibit 6. Furthermore, the E-Cat IP was disclosed to Industrial Heat and IPH pursuant to the License Agreement without any restriction on Industrial Heat or IPH’s further disclosure of such. In fact, the License Agreement permitted Industrial Heat and IPH to sublicense the E-Cat IP to anyone they wanted on any terms they desired, without any confidentiality restrictions. See License Agreement §§ 1 & 16.4.
96. The E-Cat IP, which is included in ROSSI and LEONARDO’s trade secrets, is comprised of, inter alia, the formulas, patterns, devices, designs, devices, methods, processes and techniques, in addition to a general compilation of information used in the design, construction and operation of the E-Cat Unit which gives ROSSI and LEONARDO an advantage over their competitors.
96. Paragraph 96 states legal conclusions to which no response is required. To the extent any response is required, Defendants deny the allegations in Paragraph 96. The E-Cat IP is defined in the License Agreement. See response to Paragraph 37 supra. Defendants state that the License Agreement speaks for itself, and therefore deny any allegations in Paragraph 96 inconsistent therewith.
97. DARDEN, VAUGHN, CHEROKEE, IH and IPH, with the intent of stealing ROSSI and LEONARDO intellectual property, have systematically and deceptively taken measures to deprive ROSSI and LEONARDO of their control of their trade secrets. 98. DARDEN, VAUGHN, IH and IPH have, inter alia, intentionally attempted to misappropriate ROSSI and LEONARDO’s trade secrets for their own use by (a) deceptively attempting to patent ROSSI and LEONARDO’s intellectual property as their own, (b) falsely alleging that one of their employees, agents and/or representatives is a co-inventor of the E-Cat technology, (c) conveying ROSSI &, LEONARDO’s intellectual property to third party competitors, and (d) failing to return ROSSI & LEONARDO’s trade secrets after IH and IPH breached the terms of the License Agreement.
97. Defendants deny the allegations in Paragraph 97.
98. DARDEN, VAUGHN, IH and IPH have, inter alia, intentionally attempted to misappropriate ROSSI and LEONARDO’s trade secrets for their own use by (a) deceptively attempting to patent ROSSI and LEONARDO’s intellectual property as their own, (b) falsely alleging that one of their employees, agents and/or representatives is a co-inventor of the E-Cat technology, (c) conveying ROSSI &, LEONARDO’s intellectual property to third party competitors, and (d) failing to return ROSSI & LEONARDO’s trade secrets after IH and IPH breached the terms of the License Agreement.
98. The Court has rejected all but one of Plaintiffs’ theories of misappropriation of trade secrets as alleged in Paragraph 98 (see [D.E. 24]); as a result, no response to such allegations is required. In addition, Paragraph 98 states legal conclusions to which no response is required. To the extent any response is required, Defendants deny the allegations in Paragraph 98, including all subparts.
99. DARDEN, VAUGHN and CHEROKEE have deceptively created numerous foreign and domestic shell companies which they have, on more than one occasion, used to execute a classic “bait and switch” with ROSSI and LEONARDO, all while assuring Plaintiffs that they were actually just wholly owned holding entities and subsidiaries of CHEROKEE, and that CHEROKEE was still the true party in interest.
99. The Court has rejected Plaintiffs’ theory of misappropriation of trade secrets as alleged in Paragraph 99 (see [D.E. 24]); therefore, no response to Paragraph 99 is required. To the extent any response is required, Defendants deny the allegations in Paragraph 99
100. ROSSI and LEONARI)O’s trade secrets which have been misappropriated by the Defendants, including the E-Cat IP, are not generally known to the public or to any other unaffiliated third parties.
100. Defendants deny the allegations in Paragraph 100.
101 . Moreover, IH andlor IPH were engaged in a confidential and fiduciary relationship with ROSSI and LEONARDO in that they were the exclusive licensee of the E-Cat intellectual property in the limited geographic region set forth above. As such, IH and IPH had a duty and responsibility to protect and preserve the confidentiality of the information and trade secrets including the E-Cat IP.
101. The Court has rejected Plaintiffs’ theory of a “confidential and fiduciary relationship” as alleged in Paragraph 101 and has dismissed Count VII (see [D.E. 24]); therefore, no response to Paragraph 101 is required. In addition, Paragraph 101 states legal conclusions to which no response is required. To the extent any response is required, Defendants deny the allegations in Paragraph 101. There are no provisions in the License Agreement requiring Industrial Heat or IPH to keep the E-Cat IP confidential. The only provision of the LicenseAgreement (Section 16.4) requiring a party to keep the E-Cat IP confidential applies to Plaintiffs and AEG alone.
102. Notwithstanding the above, DARDEN, VAUGHN, IH and IPH have disclosed to third parties, and otherwise used ROSSI and LEONARDO’s trade secrets, including the E-Cat Ip, without the express or implied consent of ROSSI andlor LEONARDO.
102. Defendants deny the allegations in Paragraph 102.
103. Among other things, DARDEN, VAUGHN, IH and IPH have (a) disclosed the ECat IP to LEONARDO’s competitors; (b) attempted to utilize ROSSI and LEONARDO’s trade secrets outside of the scope ofthe limited License Agreement; and (c) attempted to misappropriate the trade secrets by requesting a patent for ROSSI and LEONARDO’s intellectual property in their own name.
103. The Court has rejected all but one of Plaintiffs’ theories of misappropriation of trade secrets as alleged in Paragraph 103 (see [D.E. 24]); therefore, no response to such allegations is required. In addition, Paragraph 103 states legal conclusions to which no response is required. To the extent any response is required, Defendants deny the allegations in Paragraph103, including all subparts.
104. ROSSI and LEONARDO have undertaken extensive steps to preserve and maintain the confidential and secret nature of the trade secrets, including the E-Cat IP, and to prevent the unauthorized disclosure of the same. Such precautionary steps include, but are not limited to, requiring individuals to whom the information is disclosed to sign confidentiality agreements andl or non-disclosure agreements.
104. Defendants deny the allegations in Paragraph 104. In fact, the License Agreement permitted Industrial Heat and IPH to sublicense the E-Cat IP to anyone they wanted on any terms they desired, without any confidentiality restrictions. See License Agreement §§ 1 & 16.4. In addition, Rossi has publicly disclosed significant portions of the E-Cat IP; see Ex. 6.
105. As a result of DARDEN, VAUGHN, IH and IPH’s intentional and willful misappropriation of ROSSI and LEONARDO’s trade secrets, ROSSI and LEONARDO have been damaged.
105. Paragraph 105 states a legal conclusion to which no response is required. To the extent any response is required, Defendants deny the allegations of Paragraph 105.
COUNT V: CIVIL CONSPIRACY TO MISAPPROPRIATE TRADE SECRETS
(IH,IPH, CHEROKEE, DARDEN & VAUGHN)
106. Plaintifß reallege and reaver the allegations contained in Paragraphs 1 through 75, 83 through 86 and paragraphs 94 through 104 above as though fully restated herein.
107. DARDEN, VAUGHN, IH and IPH conspired to misappropriate ROSSI and LEONARDO’s trade secrets including, but not limited to, the E-Cat intellectual property.
108. DARDEN, VAUGHN, IH and IPH entered into an agreement to wrongfully deprive ROSSI and LEONARDO of their valuable trade secrets, to wrongfully disseminate the trade secrets to unauthorized third parties, and to wrongfully convert such trade secrets for their own respective benefit without compensating ROSSI and/or LEONARDO.
109. In furtherance of the aforementioned agreement, DARDEN, VAUGHN, IH and IPH undertook overt acts including, but not limited to, wrongfully submitting a patent application to the United States Patent Office in the name of IH andlor IPH for the E-Cat IP, wrongfully pursuing a patent from the European Patent Offlrce in the name of IH and/or IPH, setting up a series of shell companies to individually use and disseminate the trade secrets; and by disclosing ROSSI and LEONARDO’s trade secrets to Plaintiffs’ competitors.
110. As a direct and proximate result of DARDEN, VAUGHN, IH and IPH’s conspiracy to misappropriate ROSSI and LEONARDO’s trade secrets, ROSSI and LEONARDO have been damaged.
COUNT VI: FRAUD AND DECEIT
(IH,IPH, CHEROKEE, DARDEN & VAUGHN)
111. Plaintiffs reallege and reaver the allegations contained in Paragraphs 1 through 75, 83 through 86,94 through 104, and Paragraphs 107 through 109 above as though fully restated herein.
111. In response to Paragraph 111, Industrial Heat and IPH repeat and reallege their responses to Paragraphs 1-75, 83-86, 94-104, and 107-109 above as if fully restated herein.
112. At all times relevant hereto, Defendants DARDEN, VAUGHN, IH and CHEROKEE misrepresented to ROSSI and LEONARDO that:
a. both IH and CHEROKEE had funds in excess of One Hundred Million Dollars ($100,000,000.00) available to pay to ROSSI and LEONARDO for the license for the E-Cat IP;
b. upon the completion of the Guaranteed Performance test, IH (and subsequently IPH) would pay ROSSI and LEONARDO the full amount of the license fee;
c. “IH and CHEROKEE are both the same COMPANY” and that “IH was a wholly owned intellectual property holding entity for CHEROKEE;” and
d. CHEROKEE would guarantee the payment of the License Fee by its “wholly owned subsidiary” IH. Specifically, DARDEN and VAUGHN stated that ROSSI and LEONARDO “had his word that IH was wholly owned and fully funded by CHEROKEE.”
112. Defendants deny the allegations in Paragraph 112, including all subparts.
113. Moreover, in order to induce ROSSI and LEONARDO to consent to an assignment of the License Agreement to IPH, Defendants DARDEN, VAUGHN and IH falsely represented that:
a. IPH was a “wholly owned subsidiary” of IH and that IPH was the “holding entity for Industrial Heat;” and
b. IPH was controlled and managed directly by IH.
113. Defendants deny the allegations in Paragraph 113, including all subparts.
114. At all times relevant hereto, Defendants DARDEN, VAUHGN, IH and CHEROKEE knew that the aforementioned statements were false, that ROSSI and LEONARDO would rely upon such false representations, and that neither IH nor CHEROKEE had any ability and/or intention of paying ROSSI and LEONARDO the License Fee.
114. Defendants deny the allegations in Paragraph 114
115. Defendants DARDEN, VAUGHN, IH, IPH and CHEROKEE knowingly and intentionally failed to disclose the fact that:
a. Defendants DARDEN, VAUGHN, IH, IPH and CHEROKEE intended to misappropriate RoSSI and LEONARDO’s intellectual property including the E-Cat IP;
b. Defendants had absolutely no intention of compensating ROSSI and/or LEONARDO the full amount set forth in the License Agreement; and
c. Defendants intended to disclose ROSSI and LEONARDO’s intellectual property and trade secrets to RoSSI and LEoNARDo’s competitors as part of their plan to misappropriate the same.
115. Defendants deny the allegations in Paragraph 115, including all subparts.
116. Defendants made the foregoing misrepresentations and omissions with the intention that Plaintiffs rely thereon
116. Defendants deny the allegations in Paragraph 116.
117. Plaintiffs ROSSI and LEONARDO justifiably relied to their detriment upon the aforementioned fraudulent misrepresentations and omissions and as a direct result have been damaged.
117. Defendants deny the allegations in Paragraph 117.
COUNT VII: CONSTRUCTIVE & EQUITABLE FRAUD
(IH,IPH, DARDEN & VAUGHN)
118. Plaintiffs reallege and reaver the allegations contained in Paragraphs I through 75, 83 through 86,94 through 104, I07 through 109 and Paragraphs 1 12 through 1 16 above as though fully restated herein.
119. Predicated upon the aforementioned representations made by Defendants DARDEN, VAUGHN, IH and CHEROKEE, ROSSI and LEONARDO granted IH a license for the E-Cat IP in accordance with the parties’ License Agreement.
120. In accordance with the License Agreement, ROSSI, LEONARDO, IH and IPH engaged in a conf,rdential and fiduciary relationship as Licensor and Licensee. At all times hereto, DARDEN and VAUGHN served as officers and/or agents of both IH and IPH in relation to the License Agreement and the aforementioned Licensor/Licensee relationship.
121. As required by the License Agreement, ROSSI and LEONARDO fully disclosed to DARDEN, VAUGHN, IP and IPH their valuable intellectual property and trade secrets including, but not limited to, designs, formulas, operating manuals, and other proprietary information comprising the E-Cat IP with the expectation that the Defendants would protect such information from disclosure to competitors andlor any other third party to the detriment of ROSSI and LEONARDO.
122. Unbeknownstto ROSSI and LEONARDO, the Defendants DARDEN, VAUGHN, IH, IPH began diligently setting up a series of ofÊshore foreign shell companies, holding companies and management companies as part of a scheme to deprive ROSSI and LEONARDO of their intellectual property and trade secrets.
123. Upon information and belief,, after acquiring ROSSI and LEONARDO’s intellectual property and trade secrets, DARDEN, VAUGHN and IH began supporting and investing in companies which are in direct competition with ROSSI and LEONARDO.
124. Upon information and belief, DARDEN, VAUGHN and IH have deliberately and knowingly disclosed some or all of ROSSI and LEONARDO’s intellectual property and trade secrets to the aforementioned competitors in which the Defendants had invested.
125. Moreover, DARDEN, VAUGHN, IH and IPH began attempting to misappropriate ROSSI and LEONARDO’s intellectual property and trade secrets by submitting patent and PCT applications, in the name of IH and IPH, claiming ROSSI and LEONARDO’s intellectual property as their own.
126. DARDEN, VAUGHN, IH and IPH have taken improper advantage of the Licensor/Licensee relationship between IH/IPH and Plaintifß by wrongfully disclosing the subject trade secrets and intellectual property in an attempt to realize an unconscionable advantage at the expense of ROSSI and LEONARDO.
127 – Defendants’ willful and wanton abuse of their confidential and fiduciary relationship with ROSSI and LEONARDO has caused Plaintifß to be damaged.
COUNT VIII: PATENT INFRINGEMENT (U.S. PATENT)
(IH & IPH)
128. Plaintiffs reallege and reaver the allegations contained in Paragraphs I through 75, 83 through 86 and Paragraphs 98, 109 and 125 above as though fully restated herein.
129. ROSSI and LEONARDO’s inventions and intellectual property have been disclosed in U.S. Patent No. 9,115,913 B1, which has been duly registered and published by the United States Patent and Trademark Ofhce.
130. Various embodiments of ROSSI and LEONARDO’s inventions described in the U.S. Patent have been adopted and utilized in, among otherthings, the E-Cat Unit and other similar devices designed and developed by ROSSI and LEONARDO.
131. IH and IPH infringed upon the inventions claimed in the U.S. Patent, at least through their attempts to wrongfully obtain patents and other intellectual property rights for ROSSI and LEONARDO’s patented inventions.
132. Specifically, IH and IPH have submitted patent applications and/or PCT applications to at least the United States Patent and Trademark Office, as well as the Russian Patent Office and the European Patent Office, attempting to patent the exact same claims as set forth in ROSSI and LEONARDO’s tJ.S. Patent.
133. Among other things, on or about November 6,2014,IH hled a patent application with the USPTO, without LEONARDO and/or ROSSI’s consent, naming IH as the applicant, which was titled “Devices and Methods for Heat Generation”. The application was based entirely upon ROSSI and LEONARDO’s E-Cat intellectual property which IH had been provided pursuantto the License Agreement, and which was protected by the aforementioned patents, including the U.S. Patent.
134. Moreover, IH and IPH have solicited millions of dollars in investments predicated upon their claim that they have acquired and now own ROSSI and LEONARDO’s intellectual property rights to the E-Cat IP.
135. Upon information and belief, IH and IPH have had knowledge and notice of the U.S. Patent, as well as of their own infringement of the U.S. Patent.
136. ROSSI and LEONARDO have been and continue to be damaged by IH and IPH’s infringement of the U.S. Patent.
137. The European Patent, Italian Patent and US Patents are all valid and enforceable.
138. IH and IPH’s infringement of the U.S. Patent has been and continues to be willful.
139. IH and IPH’s infringement of the U.S. Patent renders this case exceptional within the meaning of 35 U.S.C. $285.
PRAYER FOR RELIEF
WHEREFORE, Plaintiffs ANDREA ROSSI and LEONARDO CORPORATION pray for judgment as follows:
A. That IH and IPH have breached the License Agreement:
B. That ROSSI and LEONARDO be awarded all damages adequate to compensate them for IH and IPH’s breach of the License Agreement; such damages to be determined by a jury;
C. That IH and IPH have been unjustly enriched by utilizing the E-Cat IP without compensating ROSSI and LEONARDO for use of the same;
D. That ROSSI and LEONARDO be awarded all damages adequate to compensate them for IH and IPH unjust enrichment occasioned by the use of ROSSI and LEONARDO’s intellectual property;
E. That IH, IPH, DARDEN, VAUGHN and CHEROKEE both conspired to misappropriate, and misappropriated ROSSI and LEONARDO’s trade secrets;
F. That ROSSI and LEONARDO be awarded all damages adequate to compensate them for the Defendants’ conspiracy and misappropriation of trade secrets, such damages to be determined by a jury;
G. That IH, IPH, DARDEN, VAUGHN and CHEROKEE engaged in fraud, and that IH, IPH, DARDEN and VAUGHN engaged in constructive fraud with the intent that ROSSI and LEONARDO rely upon their fraudulent statements and/or omissions to their detriment;
H. That ROSSI and LEONARDO be awarded damages adequate to compensate them for the Defendants’ fraud, such damages to be determined by a jury;
I. That IH and IPH have infringed upon ROSSI and LEONARDO’s U.S. Patent;
J. That ROSSI and LEONARDO be awarded all damages adequate to compensate them for IH and IPH’s infringement of the U.S. Patent, such damages to be determined by a jrry;
K. That the damages awarded to ROSSI and LEONARDO for the patent infringement be trebled, pre-judgment and post-judgment interest;
L. That the case be declared an exceptional case within the meaning of 35 U.S.C. $285 and that ROSSI and LEONARDO be awarded their attorneys’ fees, costs and expenses incurred in connection with this case;
M. That this Court enter a permanent injunction enjoining IH and IPH from continuing to infringe upon ROSSI and LEONARDO’s patent; and enjoining IH, IPH, DARDEN, VAUGHN and/or CHEROKEE from further disclosing any of ROSSI and LEONARDO’s trade secrets, including intellectual property, to any other party; and
N. That ROSSI and LEONARDO be awarded such other relief as this Court deems just and proper.
Defendants deny that Plaintiffs are entitled to any relief on the Complaint.