Allied Bioscience Inc. Alleges Breach of Fiduciary Duty, Misappropriation of Trade Secrets Against Founder

In the United States District Court for the Western District of Washington, Seattle Division, Nevada corporation Allied Bioscience Inc. (ABS) filed a complaint against former ABS founder and consultant Craig Grossman regarding the disputed ownership of certain inventions by Grossman while he was employed by ABS. The complaint alleged Grossman breached his duty as a company fiduciary and misappropriated ABS trade secrets.

The defendant was a founder of ABS and an employee from 2005 to mid-2018. According to ABS, Grossman acted as founder, president and CEO from 2005-14 and as chairman of the Board of Directors and chief technology officer from 2014-18, making him a fiduciary of ABS from 2005-18.

ABS terminated Grossman’s employment April 30, 2018, but hired him back as an independent consultant May 1, 2018, to “consult on ‘future patent filings and product development and design,’ ” the complaint said. Grossman stepped down from the board in June 2018, and the terms of his consulting agreement expired in May 2020.

During his time at ABS, both as an employee and consultant, Grossman “helped to invent certain technology related to ABS’s business and portions of the ABS Technology,” the complaint said. These “Grossman inventions” have sometimes been “described or claimed” in ABS patents and patent applications, the complaint said.

The plaintiff claimed that Grossman continues to affiliate himself with ABS and tries to conduct business on behalf of the company despite both his employment and consultancy being terminated. The plaintiff also claimed he has used “an ABS-like email signature block in a deceptive and misleading way, and apparently he claims some continuing ownership of the Grossman Inventions.” As a fiduciary of the company, Grossman was obligated to assign rights to ABS for all of his inventions when he was both a full employee and a consultant, the complaint said. The consulting agreement also contained provisions to prevent him from doing business through ABS during his consulting period without the consent of the company, according to the complaint.

Because of this, ABS sent a cease and desist letter to Grossman to demand that he stop this conduct as well as drafted a Confirmatory Assignment Agreement to affirm that ABS owns the Grossman Inventions. Grossman’s counsel, in response, affirmed that the Grossman Inventions belong to ABS — but Grossman refused to sign the agreement and continues to refuse. Instead, the defendant requested extra compensation “commensurate with ‘other recently-resigned directors’ ” and the ability to sell up to 10% of his holdings in ABS in exchange for his signing of the agreement.

The plaintiff called the defendant’s requests to sell his holdings in ABS “unconscionable” in that granting them would contradict the Confirmatory Assignment Agreement itself and called the request for compensation an “attempt to somehow hold the Grossman Inventions hostage,” also claiming that the compensation other ABS directors received was “highly confidential” and that Grossman not only shared it with his counsel but that he “acquired [it] improperly.”

The plaintiff alleged further that Grossman also has “secretly and improperly obtained critical ABS trade secrets from an ABS insider, including information related to ABS’s patent and innovation strategies.”

ABS presented four claims for relief. The first requested that the court enter an order to officially declare that ABS owns the Grossman Inventions. The second and third claimed entitlement to preliminary and permanent injunctive relief and damages related to the defendant’s alleged “misappropriation of ABS’s trade secrets” under the Defend Trade Secrets Act and the Uniform Trade Secrets Act, respectively. The fourth claimed damages as a result of the alleged breach of fiduciary duty by the defendant.

The plaintiff is represented by Snell & Wilmer LLP.