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Clean Conversion Technologies, Inc v. Cleantech Biofuels

August 20, 2012

CLEAN CONVERSION TECHNOLOGIES, INC., PLAINTIFF,
v.
CLEANTECH BIOFUELS, INC., ET AL.,
DEFENDANT.



The opinion of the court was delivered by: M. James Lorenz United States District Court Judge

ORDER DENYING DEFENDANT'S MOTION TO DISMISS [DOC. 14]

On January 30, 2012, Plaintiff Clean Conversion Technologies, Inc. ("CCT") commenced this action seeking injunctive relief and damages for alleged violations of the Sherman Act (15 U.S.C. §§ 1-2), the Clayton Act (15 U.S.C. § 18), the California Cartwright Act (Cal. Bus. & Prof. Code § 16720, et seq.), and California's Unfair Competition Law ("UCL") (Cal. Bus. & Prof. Code § 17200, et seq.). Defendant CleanTech Biofuels, Inc. ("CleanTech") now moves to dismiss the complaint.*fn1 CCT opposes.

The Court found this motion suitable for determination on the papers submitted and without oral argument. See Civ. L.R. 7.1(d.1). (Doc. 17.) For the following reasons, the Court DENIES CleanTech's motion.

BACKGROUND

A. Pressurized Steam Classification ("PSC") Conversion

CleanTech is a Delaware corporation engaged in the business of producing cellusitic biomass from municipal solid waste. (Compl. ¶ 85.) CCT is a Washington corporation and CleanTech competitor in the PSC conversion market. (Id. ¶¶ 1, 102--05.)

"PSC conversion is used to convert solid, contaminated municipal waste . . . into certain kinds of usable commercial materials-specifically, various kinds and types of ferrous metals, non-ferrous metals, plastics, glass, and usable biomass." (Compl. ¶ 14.) "Usable biomass in turn can be transformed into various commercial materials and other kinds of materials." (Id.) Without PSC conversion, a very substantial portion of contaminated municipal waste must be buried in landfills, incinerated, or only partially treated by other methods. (Id. ¶ 46.)

B. Antitrust Allegations

Beginning in 2008, CleanTech set out to obtain all of the patented PSC conversion technology in existence at the time. (See Compl. ¶¶ 87--95.) In September 2008, CleanTech acquired Biomass North America Licensing, Inc. ("Biomass"), the owner of several important patent applications relating to PSC technology-the "Noll Patents"-at that time. (Id. ¶ 93.) This transaction gave CleanTech the rights to practice PSC technology described by several patents and patent applications, most importantly the technology described in several U.S. Patent Applications and their related Canadian Patent Applications. (Id.) In October 2008, CleanTech purchased another set of PSC patents-the "Eley Patents"-from World Waste Technologies, Inc. ("World Waste"). (Id. ¶ 94.) In both instances, CleanTech structured the transactions so that Biomass and World Waste would derive substantial profits by cooperating with CleanTech's attempted monopolization of the PSC conversion market. (Id. ¶ 97.) Furthermore, CleanTech's purchase of the Eley Patents from World Waste did not reflect the market value of the patents.

. ¶ 101.) Rather, CleanTech paid a huge premium in order to accomplish its goal of consolidating the PSC technology in one entity. (Id.)

After acquiring the Eley Patents, CleanTech allegedly put into motion a scheme to terminate the Master License Agreement for those patents so that it could corner the market for PSC conversion. (Compl. ¶¶ 96, 100.) However, the Eley Patents had already been exclusively licensed to one of CleanTech's competitors, Clean Earth Solutions. (Id. ¶¶ 98--99, 104.) Clean Earth Solutions and its exclusive license of the Eley Patents was one of the final impediments to CleanTech cornering of the PSC market. (Id.) Thus, immediately after CleanTech purchased the Eley Patents from World Waste, it set in motion a scheme to terminate Clean Earth Solution's exclusive license. (Id. ¶ 100.) Working with Vande Vegte, CleanTech allegedly conspired to have litigation initiated against Clean Earth Solutions to pressure it into giving up its rights to the PSC technology in the Eley Patents ("SVV litigation"). (Id. ¶ 103.) As a result the debt load caused by the SVV litigation, Clean Earth Solutions sold its license under the Patents to CCT. (Id. ¶¶ 1, 102--05.) Vande Vegte then used this transfer as a basis of another lawsuit filed against Clean Earth Solutions and CCT for fraudulent transfer.*fn2

CleanTech seized the license transfer as an opportunity to attempt to terminate the license itself. (Compl. ¶ 106.) In March 2011, CleanTech's President, Ed Hennessey, approached CCT and stated that he "had talked with Steve Vande Vegte and can make this [State Court] lawsuit go away if you cooperate with me" in working together to market the PSC conversion technology. (Id. ¶¶ 106--07.) Based on the allegations in the complaint, it is unclear which state-court lawsuit Mr. Hennessey was referring to.

In September 2011, Mr. Hennessey and Vande Vegte contacted the original inventor of the PSC technology in the Eley Patents, Dr. Michael Eley, in an effort to convince him that he should participate in their attempt to monopolize the PSC market. (Compl. ¶¶ 100, 109.) Then, on November 10, 2011, Mr. Hennessey put in CleanTech's 10-Q filing that it was the company's "intention to 'consolidate the ownership' of the intellectual property rights to PSC technology to corner the PSC market by excluding all other market participants." (Id. ¶ 108.)

CCT commenced this action on January 20, 2012, alleging claims against CleanTech for various antitrust violations. Specifically, CCT alleges CleanTech's "overall scheme" to monopolize the PSC market violated Sections 1 and 2 of the Sherman Act as well as conspiracy to monopolize under the same statute. (Compl. ΒΆΒΆ 114, 124.) Additionally, CCT brings suit under ...


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