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  • Writer's pictureShelly Albaum

Elysium Moves to Dismiss 4th Amended Complaint

SO now comes Skadden with a fresh barf-bag full of obfuscation. You can read it yourself here:

Most of Elysium's argument revolves around technical legal distinctions that are unlikely to make much difference in the end.

For example, Elysium argues that ChromaDex's conversion claims are preempted by the Copyright Act and the Trade Secrets Act. That's the same as Elysium saying, "I committed Larceny or Grand Theft, not Burglary."

Possibly so, and lawyers and courts spend a lot of energy ensuring that claims are asserted under the proper legal framework.

But in terms of the Big Narrative of the litigation, Elysium suddenly finds itself chest deep in quicksand.

If you want proof of that, check out the DRAMATIC changes in Elysium's story, as previously presented to the court. Elysium's original story amounted to this: Elysium was an exemplary customer, horrified by ChromaDex's behavior, and tried for months in good faith to negotiate a resolution to the pricing dispute, but ChromaDex insisted on litigation. You can read it yourself; these are from Elysium's court filings:

While Elysium had sought over several months to work in good faith with ChromaDex to restore the parties' relationship and allow ChromaDex to remediate its breaches by awarding Elysium the credit or refund to which it was entitled for ChromaDex's violations of the NR Supply Agreement, ChromaDex refused to provide Elysium with the information required to calculate the amount of the credit or refund...

[Elysium's New York Complaint, Paragraph 25]

Elysium expended significant effort attempting to resolve this dispute amicably.

[Elysium's Third Amended Counterclaims, paragraph 114]

Despite Elysium’s several attempts to resolve these issues with ChromaDex, in December 2016, ChromaDex filed this lawsuit

[Elysium's Opposition to ChromaDex's Motion to Dismiss the CA Complaint]

Elysium had been an exemplary customer, even “self-policing” its contracts with ChromaDex to ensure that it had been paying all that it had agreed to pay under the Agreements.

[Elysium's Third Amended Counterclaims, paragraph 81]

[In December 2016,] Elysium told Jaksch it would be pleased to continue discussions with ChromaDex management...ChromaDex responded with this lawsuit.

[Elysium's Third Amended Counterclaims, paragraph 119]

Now compare that original story with the one that Elysium is now telling in this week's Motion to Dismiss:

Resolution and a refund from ChromaDex not forthcoming, Elysium grew concerned about continued access to a source of NR and, in mid-July 2016, elected to begin exploring development of a new supply chain for the ingredient that would not depend on its untrustworthy contractual partner but would instead be entirely within Elysium's control. Elysium hired Mark Morris, its relationship manager at ChromaDex, to assist with this project. After locating a potential manufacturer, Morris prepared for it a packet of information relating to the manufacture of NR...Unaware of these efforts, ChromaDex continued to refuse to award Elysium the refund to which it was entitled throughout 2016...

[Elysium's Motion to Dismiss Fourth Amended Complaint Pages 3-4]

That "new supply chain" is for a patented product that Elysium does not believe it will be able license, which sounds an awful lot like willful patent infringement.

So Elysium's story relies heavily on Elysium's somehow believing that it had a legal right to set up a new supply chain for somebody else's patented product. Like, "Apple wouldn't license me their iPhone technology, so I was forced to set up a new supply chain in which I built my own iPhones to sell..."

That kind of argument is legal suicide without some plausible reason to doubt the patent's validity, and the PTAB slam-dunked RIGHT into the trash can Elysium's challenge to the '807 Patent, which is the very patent that governs Niagen and Basis: NR formulated as a supplement to increase NAD.

So even if we believed Elysium's account above, we would detect massive legal peril.

But I don't believe Elysium's account above.

There is a reek of disingenuineness in this version of the tale, because Elysium says it first learned of the pricing error from the spreadsheet it received on June 13, 2016, (Third Amended Counterclaims paragraph 73], and that Elysium then "grew concerned about continued access to a source of NR" at some unspecified time, and by mid-July 2016 it had hired Mark Morris away from ChromaDex to set up an alternate supply.

That is an AWFULLY FAST escalation. In just a matter of weeks Elysium claims it went from being an exemplary partner to ordering a year's supply of ingredients and hiring a a ChromaDex executive to set up a competing supply chain. And since Elysium did in fact receive a year's supply of ingredients, why was it concerned about future supply?

And even if you believe the story of the sudden escalation, it is even harder to square the story of the sudden escalation with Elysium's prior allegations that it was subsequently working in good faith during this period to resolve the pricing problem between July and December.

In other words, this motion to dismiss, which precedes Elysium's Answer to the Fourth Amended Complaint, substantially concedes ChromaDex's factual allegations.

It will now be very difficult to for Elysium to establish at trial (I predict) that it was not planning this alternate supply chain maneuver for quite a while. And if it was planning to set up an alternate supply chain since before it learned of the pricing issue, then it looks like the pricing dispute was a pretext for misbehavior, not an actual commercial dispute, which is exactly what ChromaDex is claiming.

So then, having conceded these key facts, the rest of Elysium's motion to dismiss argues that these key facts are legally insignificant for all kinds of unconvincing reasons, like Elysium had a right to SOME pricing information, and therefore nothing in the pricing spreadsheet could be a trade secret. And SOME parts of the documents that Elysium stole were publicly known and therefore the document as a whole could not be a trade secret.

I will let Cooley and Skadden and Judge Carney sort out which parts were secret and which were known, and whether Elysium should be sued for theft of trade secrets, copyright violation, theft of copyrighted documents containing trade secrets, or all of the above.

The key point is that Elysium has now admitted in court that within weeks of discovering a disputed contractual term involving pricing, it had ordered a year's supply of NR and hired away Mark Morris to set up a competing supply chain.

That doesn't sound to me like an exemplary customer in good faith working to resolve a dispute. That sounds to me like a nefarious plan to undermine ChromaDex and steal its business.

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