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Daniel M. Cislo, Esq., No. 125,378
Donald M. Cislo, Esq., No. 49,203
David L. Hoffman, Esq., No. 143,474
CISLO & THOMAS, LLP
233 Wilshire Boulevard, Suite 900
Santa Monica, California 90401
Telephone: (310) 451-0647
Telefax: (310) 394-4477

Attorneys for Plaintiffs,

NIKKEN USA, INC. aka NIKKEN, INC. and
NU-MAGNETICS, INC.

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

NIKKEN USA, INC. aka NIKKEN, INC., a California corporation; and

NU-MAGNETICS, INC., a New York corporation,

Plaintiffs

vs.

AMWAY, INC., a Michigan corporation; and

HOLCOMB HEALTHCARE SERVICES LLC, a Tennessee limited liability corporation

Defendants

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COMPLAINT FOR

(1) DECLARATORY JUDGMENT; (2) TORTIOUS INTERFERENCE; AND (3) UNFAIR COMPETITION UNDER CAL. BUS. & PROF. CODE 17200.

JURY TRIAL DEMAND

Plaintiffs by and through undersigned counsel for their complaint allege as follows:

THE PARTIES

1. Plaintiff NIKKEN USA, INC. aka NIKKEN, INC. ("NIKKEN") is a corporation organized and existing under the laws of the State of California, having offices in Irvine, California. NIKKEN markets and sells health and wellness products including magnetic devices known as "ELASTOMAG™", "FLEX PADS™," and other advanced magnetic technology products ("advanced magnetic technology products").

2. Plaintiff NU-MAGNETICS, INC. ("NU-MAGNETICS"), is a corporation organized and existing under the laws of the State of New York, having offices in Port Jefferson, New York. NU-MAGNETICS researches, develops and manufactures magnetic technology and holds several patents on magnetic patterns which it exclusively sells to NIKKEN.

3. Defendant, AMWAY, INC., ("AMWAY") is a Michigan corporation having its principal place of business at 7575 Fulton Street East, Ada, Michigan 49355.

4. Defendant, HOLCOMB HEALTHCARE SERVICES LLC ("HHCS") is a Tennessee limited liability corporation having a place of business at Suite 1516, 1500-21st Avenue South, Nashville, Tennessee 37212.

 

JURISDICTION AND VENUE

5. The jurisdiction of this court is based on 28 U.S.C. 1338(a), and 28 U.S.C. 1331, 1332, and 1337. The amount in controversy exceeds $75,000, exclusive of interest and costs.

6. Venue is proper in this court pursuant to 28 U.S.C. 1391(a)(2), as a substantial part of the events giving rise to the claim occurred in this judicial district. Venue is also proper pursuant to 28 U.S.C. 1391(c), since the corporate Defendants are subject to personal jurisdiction in this judicial district.

 

STATEMENT OF FACTS

7. NIKKEN is a leader in health and wellness products. NIKKEN is part of a group of NIKKEN companies around the world, together having sales of around $1 billion on an annual basis. There are over 30 million customers of the group’s various products, which include therapeutic magnetic articles. NIKKEN’s products also include vitamins, mattress and seat pads, and other wellness products.

8. NIKKEN’s business is founded upon and driven by direct marketing concepts. NIKKEN has a network that now has over 200,000 direct marketers in the U.S. for distributing its products.

9. NU-MAGNETICS is a leader in research and development of magnetic products including magnetic patterns for therapeutic use. NU-MAGNETICS has developed a unique checkerboard pattern and also has developed a unique triangular pattern which was an improvement over the checkerboard pattern. NU-MAGNETICS has several patents on these magnetic patterns, including U.S. Patent No. 5,871,438 issued February 16, 1999 to Vincent Ardizzone ("the ‘438 patent"). A copy of the ‘438 patent is attached as Exhibit A. The checkerboard product had been sold by NIKKEN beginning in the Fall of 1992. Thereafter, NIKKEN switched to its more advanced triangular pattern.

10. The ‘438 patent is part of a chain of patents and applications dating back to January 21, 1992. NIKKEN’s advanced magnetic technology products incorporate this triangular pattern as shown below:

11. NU-MAGNETICS is the exclusive supplier of magnetic pattern products to NIKKEN, including products covered by NU-MAGNETICS’ ‘438 patent.

12. NIKKEN has been selling its magnetic products in the United States since 1992. Attached as Exhibit B are three selected pages from a recent catalogue showing NIKKEN’s flexible magnetic products.

13. On information and belief, AMWAY’s business is based upon direct marketers and is in substantial decline in the U.S., losing direct marketers, while NIKKEN’s business and direct marketing network have been growing rapidly. In the last few months, AMWAY adopted a magnetic product line to compete with NIKKEN and maintain its own sales force. AMWAY’s magnetic products use an older technology described in U.S. Patent No. 5,312,321 issued May 17, 1994 to Robert R. Holcomb ("the ‘321 patent"). A copy of the Holcomb patent is attached as Exhibit C. The ‘321 patent is based upon a design using four (4) circular magnets fixed in a planar orientation which has long been in the public domain. The ‘321 patent also requires an exterior housing to hold the four (4) circular magnets. AMWAY and HHCS have asserted that NIKKEN infringes the ‘321 patent, and have just filed a complaint in district court in Nashville, Tennessee, but have yet to formally serve the complaint. A copy of the Tennessee complaint is attached as Exhibit D.

14. NIKKEN regards the Tennessee complaint based upon the Holcomb patent as frivolous and baseless. The Holcomb ‘321 patent claims each require "circular magnetic poles" and require "a housing" to hold the circular magnetic poles in a fixed planar orientation, as shown in Fig. 2 of the patent reproduced below:

15. NIKKEN’s product, by contrast, uses a triangular pattern of the Ardizzone ‘438 patent, as shown, using a special magnetic viewing film, for example, below, on the left is AMWAY’s circular poles, while on the right is Nikken’s triangular poles:

16. As can be seen from the above comparison, the NIKKEN advanced technology magnetic products are vastly different from those disclosed and claimed in the ‘321 patent having neither circular magnetic poles or a housing to maintain a fixed orientation.

17. NIKKEN believes AMWAY’s and HHCS’ claim of infringement and their Tennessee complaint to be groundless and brought in bad faith and will be moving for sanctions under F.R.C.P. 11 and to stay, dismiss or transfer the Tennessee case to California.

18. On information and belief, AMWAY is bringing its Tennessee suit and allegations of infringement as part of a public relations or marketing attack to stifle NIKKEN’s continued success and growth.

19. The Holcomb ‘321 patent has only two independent claims, Claims 1 and 6. Both of these claims require "two positive circular magnetic poles and two negative circular magnetic poles…in a first plane," and a "housing" to keep the magnets fixed in their orientation in the housing. (Exh. C: Claims 1 and 6) (Emphasis added). In the patent specification, there are four (4) circular magnets 18 shown in the drawings, and in particular in Figs. 2 and 3. Among other things, the magnets, which are referred to as "magnetic bodies," are disclosed as circular or cylindrical. (Exh. C: ‘321 patent at Col. 3, lines 45-50) The housing 20 shown, e.g., in Figs. 2 and 4, holds the magnets in their critical orientation. As specifically stated in the abstract on the cover page of the patent, the "housing is provided to hold the magnetic bodies in a fixed relative position, and thus maintain the quadrilateral orientation of the poles." (Exh. C: cover page)

20. The NIKKEN advanced technology magnetic products cannot infringe because they do not have a housing which holds magnetic bodies in a fixed plane. Rather, the NIKKEN products are flexible, which is for the purpose of conforming to the body of the user, as shown, e.g., in Exhibit B. Furthermore, certain representations and/or amendments were made to the Patent Office during the tortuous eight (8) years the ‘321 patent was prosecuted severely restricting the scope of any patent rights.

21. The NIKKEN magnetic products also cannot infringe because they do not have any circular magnetic poles. NIKKEN’s magnetic poles are triangular, as shown in, e.g., Exhibits B and E.

22. The ‘321 patent is also invalid under 35 U.S.C. 102 and/or 103, particularly if stretched in meaning in an attempt to cover NIKKEN’s products. French patent publication No. 2,371,916 (and a certified translation) of a patent application of Van Den Bulke, published June 23, 1978, more than eight years earlier than the earliest Holcomb application is attached hereto as Exhibit F. It shows a four-magnet alternating pattern held on a plate 2 and discloses that "as to the plate 2, it is subdivided in four identical rectangular zones 7 to 10." Thus, there are four alternating magnets fixed in a planar orientation by the plate 2 as shown below:

 

If the ‘321 patent were read to read the circular requirement out of the claims, then it would be invalid in view of the Van Den Bulke patent.

23. On information and belief, Mr. Holcomb failed to cite the Van Den Bulke patent during prosecution of the Holcomb ‘321 patent so the U.S. Patent Office could not consider the reference.

24. Also, French Patent No. 1,215,110 to Tanaka published April 14, 1960 also invalidates the ‘321 patent. It discloses alternating magnetic circular-shaped elements 5, 6 fixed on a support body which can be flexible, such as polyvinyl, or rigid as disclosed at the bottom of page 3 to the top of page 4 of the certified translation attached to the French patent publication attached hereto as Exhibit G, and shown below:

If the ‘321 patent claims are not limited to only four magnetic bodies, as stated in those claims, then they are invalid over Tanaka disclosing a rigid support for four or more magnetic bodies of alternating polarity which are held in the planar orientation shown therein. On information and belief, Mr. Holcomb did not cite the Tanaka patent during the prosecution of the Holcomb ‘321 patent.

25. That the Holcomb patent claims are limited to four magnets is also evident from the specification which at several points states that four magnets in isolation are much different from the effects of four magnets in a larger array:

Thus the effects of four magnetic bodies in isolation are different from the effects of four magnetic bodies that are part of a much larger array.
(Exh. C: ‘321 patent, Col. 19, lines 30-32.)

26. In addition, European patent publication No. 81109 to Latzke published June 15, 1983 (Exh. H) discloses circular magnets in an alternating pattern fixed to a band, web or belt as shown below:

If the ‘321 patent claims are not limited to an array of four magnets held in a housing, as AMWAY and HHCS are trying to assert, then the claims are invalid.

27. In addition, if the ‘321 patent claims are not limited to four (4) poles located in a housing and no more, they are invalid under 35 U.S.C. 112 as being indefinite. The claims would be broader than the patent specification, which teaches that four (4) magnets fixed in the housing is the invention, and not the addition of more than four (4) poles.

28. AMWAY and HHCS should be estopped from enforcing the PATENT against NIKKEN and NU-MAGNETICS, as NIKKEN has been openly and notoriously selling its product in accordance with NU-MAGNETICS’ designs since 1992, and AMWAY and HHCS have done nothing since their ‘321 patent issued in 1994.

 

COUNT I

DECLARATORY JUDGMENT OF

PATENT NON-INFRINGEMENT AND INVALIDITY

29. Plaintiff repeats and reasserts the allegations of paragraphs 1 through 28 as though fully set forth herein.

30. On information, Defendants have informed Plaintiffs NIKKEN and NU-MAGNETICS and numerous third parties that NIKKEN’S advanced magnetic technology products infringe the ‘321 patent, creating an actual controversy within the jurisdiction of this court pursuant to 28 U.S.C. 2201-02.

31. NIKKEN and NU-MAGNETICS categorically deny that the advanced magnetic technology products infringe the ‘321 patent, and contend that the ‘321 patent is invalid.

32. Defendants’ assertions that NIKKEN and NU-MAGNETICS are infringing the ‘321 patent irreparably harms and injures NIKKEN and NU-MAGNETICS, and will continue to do so unless prevented by this court. To resolve the legal and factual questions raised by Defendants and to afford relief from the uncertainty which has precipitated, NIKKEN and NU-MAGNETICS are entitled to an order stating their rights under 28 U.S.C. 2201-02, that NIKKEN’s advanced technology magnetic products do not infringe the ‘312 patent and/or that the ‘321 patent is invalid.

COUNT II

TORTIOUS INTERFERENCE

WITH PROSPECTIVE ECONOMIC ADVANTAGE

33. Plaintiff repeats and reasserts the allegations of paragraphs 1 through 32 as though fully set forth herein.

34. Nikken has existing agreements and/or relationships with its over 200,000 distributors and consumers to manufacture and sell the advanced magnetic technology products. NIKKEN has a reasonable expectation that it will enter into future agreements and/or relationships with such existing third parties and others as well as consumers for the magnetic products.

35. Defendants are aware of NIKKEN’s and NU-MAGNETICS’ existing and prospective economic relationships with third parties concerning the advanced magnetic technology products.

36. On information and belief, Defendants have interfered with NIKKEN’s and NU-MAGNETICS’ prospective economic advantage by communicating with third parties concerning the advanced magnetic technology products by, among other things, communicating with third parties doing business with or who will potentially do business with NIKKEN and NU-MAGNETICS concerning advanced magnetic technology products, with the intent to interfere with NIKKEN’s and NU-MAGNETICS’ economic relations with such third parties.

37. Defendants’ interfering conduct is wrongful in that Defendants have, in these communications, asserted that the advanced magnetic technology products infringe the ‘321 patent when they do not and have not attempted to enforce an invalid patent.

38. Defendants’ actions have actually interfered with NIKKEN’s and NU-MAGNETICS’ prospective economic relations with third parties.

39. Defendants’ actions have caused NIKKEN and NU-MAGNETICS damages in an amount to be proven at trial.

40. The aforementioned acts of Defendants have been willful, oppressive, fraudulent and malicious, in that Defendants acted in conscious disregard of NIKKEN’s and NU-MAGNETICS’ existing and prospective economic relations, entitling NIKKEN and NU-MAGNETICS to punitive damages.

 

COUNT III

UNFAIR COMPETITION UNDER

CALIFORNIA BUSINESS & PROFESSIONS CODE 17200

41. Plaintiffs respect and reassert the allegations of paragraphs 1 through 40 above as though fully set forth herein.

42. Defendants have engaged in unfair competition by committing the acts alleged herein including one or more of unlawful, unfair, deceptive, untrue or misleading advertising and acts prohibited by and under Chapter 1 of the California Business and Professions Code causing Plaintiffs damage.

43. The above constitutes unfair competition under California Business and Professions Code 17200.

WHEREFORE, Plaintiffs NIKKEN and NU-MAGNETICS pray the following relief and judgment be granted against Defendants, as follows:

A. an order of the court stating that NIKKEN’s ELASTOMAG™, FLEXPADS™ and all other advanced magnetic technology products do not infringe Defendants’ PATENT;

B. an order of the court stating that NU-MAGNETICS’ magnetic articles do not infringe Defendants’ PATENT;

C. an order of the court that Defendants’ PATENT is invalid;

D. an order of the court that Defendants’ PATENT is not enforceable against NIKKEN and NU-MAGNETICS and/or damages can not be collected by Defendants due to equitable estoppel and/or acquiescence and/or laches;

E. an award of damages, attorney fees and costs to the Plaintiffs including punitive damages; and

F. such other relief as the court deems appropriate.

Respectfully submitted,

CISLO & THOMAS llp

Dated: June ___, 1999 By:

Daniel M. Cislo, Esq.
David L. Hoffman, Esq.
CISLO & THOMAS LLP
233 Wilshire Boulevard, Suite 900
Santa Monica, California 90401

Attorneys for Plaintiffs,

NIKKEN USA, INC. aka
NIKKEN, INC. and

NU-MAGNETICS, INC.

 

PROOF OF SERVICE

I am over the age of eighteen (18) years, employed in the County of Los Angeles, and not a party to the above-entitled action. My business address is 233 Wilshire Boulevard, Suite 900, Santa Monica, California 90401-1211.

On Wednesday, June 30, 1999, I served:

 

COMPLAINT FOR DECLARATORY JUDGMENT AND TORTIOUS INTERFERENCE; JURY TRIAL DEMAND

by placing true copies thereof in a sealed envelope, addressed as follows to:

 

BY MAIL: I am readily familiar with the Firm's practice of collecting and processing correspondence for mailing. Under that practice, it would be deposited with the United States Postal Service on the same day with a postage thereon fully prepaid at Santa Monica, California, in the ordinary course of business. I am aware that, on the motion of the party served, service is presumed invalid if the postal cancellation date or postage meter date is more than one (1) day after the date of deposit for mailing shown on this proof of service.

BY FACSIMILE: I caused a copy of such document to be sent via facsimile machine to the office(s) of the addressee(s) at the phone number(s) shown above.

BY PERSONAL SERVICE

FEDERAL COURT: I caused such envelope to be delivered by hand to the offices of the addressee(s).

STATE COURT: I caused such envelope to be delivered by hand to the offices of the addressee(s).

FEDERAL: I declare, under penalty of perjury under the laws of the United States that the foregoing is true and that I am employed in the office of a member of the Bar of this Court at whose direction the service was made.

Executed on Wednesday, June 30, 1999, at Santa Monica, California.

Michael Steele

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