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  • Shelly Albaum

Why Is This Blog So Critical of Elysium Health?


Elysium's most recent federal complaint devoting 15 paragraphs to raging against me is a reminder that the people at Elysium do not actually understand why somebody like me would be genuinely upset by their business practices.

Elysium and its attorneys need to understand that not everyone who is critical of Elysium is part of a conspiracy, and that particularly applies to me.

Because this is a lengthy post, I am going to bring a bit of the conclusion up to the top:

Neither Elysium nor anyone else can silence their critics by bullying them in legal pleadings or threatening them.

The way you silence your critics is by ensuring that your conduct is beyond reproach. That takes away the incentive to criticize -- or, if the critics criticize anyway, they will be unconvincing to the public, and the effect will be counterproductive.

So if Elysium's scientific advisors do not really guide the direction of the company, then the people whop DO guide the direction of the company should stop saying otherwise, and challenge the marketers say the thing that is most true, instead of saying the thing that is the most they can get away with.

And if some of Elysium's legal allegations are stabs in the dark, demonstrably false, obvious quibbling, or unlikely to be proved based on the evidence, then withdraw those allegations.

And if Elysium is doing anything to suppress news coverage of their dispute with ChromaDex, then do the opposite, and invite news coverage. Karen Weintraub and I don't have to be, and should not be, virtually the only voices covering these events. Let the wisdom of a crowd judge Elysium's actions as beyond reproach.

And if I were advising Elysium on business strategy, I would say there are a whole galaxy of emerging anti-aging technologies. Reformulate Basis around one that you can own. Combine a host of NAD precursors, including tryptophan and NA and NAM and NMN into a cocktail, and then add a CD-38 inhibitor like Quercetin or Apigenin as the secret sauce, and tell the world that replenishment alone is no longer state-of-the-art because Basis helps you prevent the NAD decline in the first place.

Then settle the dispute with ChromaDex. Abandon the failed strategy of endless litigation, and instead focus all of your energy on beating ChromaDex in the marketplace with a more convincing product and superior marketing of something that you actually own.

Endless litigation to destroy or seize control of someone else's patents isn't just a proven bad strategy -- it's inconsistent with your mission.

________________________________

Why Is This Blog So Critical of Elysium Health?

It is important to remember that when I wrote my first post critical of Elysium I had two active annual subscriptions to Basis. Judging by the empty bottles accumulated, I must have spent more than a thousand dollars with Elysium:

[PICTURED: My desk. My Basis. I bought all those.]

In addition to buying Basis myself, I also had recommended Elysium Basis to at least two friends/relatives who in fact signed up with Elysium.

In November 2016 I actually sent Elysium a "My Story" testimonial.

So I was for a time one of Elysium's very good customers.

Why Did I Used To Advocate For Elysium?

I signed up with Elysium and recommended them to my friends and family because I believed in their mission.

I had just a little prior experience with the supplements industry, and it was enough to cause concern — for example, one firm sold me “pine bark extract” without a clear indication of what or how much was being extracted. And then I read about studies suggesting that a significant portion of the supplement bottles did not actually contain any of the promised ingredient anyway.

So I was a complete sucker when I read that Elysium Health was going to be a new kind of science-based supplement company — because I thought that’s what we really needed.

I knew I could pay less for Nicotinamide Riboside by purchasing from one of a large number of other retailers who were selling ChromaDex Niagen at amazon, but I wanted to support what Elysium was doing — I wanted them to succeed.

Why I Fell In Love with Basis

I originally discovered Elysium when I learned about David Sinclair’s studies in which mice aged backwards. I knew then that mouse studies don’t always translate to humans, but sometimes they do, and I was glad to have a chance to try it out.

I don’t know if I aged backwards, but a couple months later I realized that I hadn’t suffered a night of restless legs syndrome in a couple months.

RLS is a really annoying condition, and I had had it regularly for decades. I’d never gone two months without an episode, and that’s when I got really excited. If NR can help RLS sufferers — and there are millions of us — it could really be worth a lot, even if it didn’t have any other effects. And I had first-hand evidence, that at least in one person, me, NR seems to make a difference. [Since then, others have told me it helped them, too, and I have been two years RLS-free.]

That’s when I bought stock in ChromaDex. I knew that ChromaDex had the patents on NR formulations, and I thought their NR formulations were likely to do well.

The Falling Out

What I didn’t know was that Elysium had already stopped paying their bills to ChromaDex, and was in the process of allegedly trying to “steal ChromaDex’s NR” and maybe even destroy ChromaDex as a company -- which was now MY company, although only in a minuscule way.

Over time I saw that not only that I was wrong about the relationship between Elysium and ChromaDex — the two would not join together in a distributor/retailer match made in heaven — but that I was wrong about Elysium entirely.

And I was wrong because I believed what they said.

I certainly was not the first or last to criticize Elysium and its business practices. The Dean of Harvard Medical School, no less, Jeffrey Flier, among others, was harshly critical of Elysium’s scientific advisory board. And more recently the Better Business Bureau has given Elysium an “F” for the way it handles some customer interactions.

But my concerns were both broader and more pointed than what those critics saw.

My Relationship to the Legal System

After I graduated from law school, I practiced a year in-house for a big oil company doing employment law, and then I joined West Publishing — the world’s largest legal publishing company — as a legal editor. The reason I left law practice to become an editor, as I explained here, is because I wanted to write more than I wanted to practice. And so I wrote about the law.

Over the next few years I read and summarized thousands of cases on all kinds of topics. My next assignment was to design online legal research tools, and I have been doing that for the past 20+ years.

In other words, my entire professional career has been devoted to trying to make the legal system work better and help lawyers find the law.

And if you do something for twenty years, you tend to find ways to justify it to yourself. I certainly did. I thought that the legal system was a good thing, that its proper functioning mattered, and that efficiently and effectively determining the requirements of the law would help those with public disputes to resolve them more quickly and more justly.

During that time, I also managed to win a patent for myself (now expired), and I am also an inventor on another patent application that is pending.

Although I strongly disapprove of the way that copyright law is used to create perpetual monopolies at the cost of the public commons, you can see that I have no quarrel with the idea that inventors can have a 20-year exclusivity period on inventions they can patent.

So What Are My Complaints?

As a result of my experience with Elysium, the legal system, and this litigation, there are three concerns that animate my blog's coverage of this dispute, in addition to my obvious direct interest as a ChromaDex shareholder in not having Elysium attacking ChromaDex.

First, I think Elysium's marketing practices are deceptive, and I believe I was a victim of those practices.

Second, I think Elysium's approach to the law and litigation is cavalier, and dangerous to a civil society because it improperly exploits weaknesses in our civil justice system in ways that deprive justice to all but the wealthy.

Third, the corporate press is absolutely silent about this dispute -- eerily silent -- and the story needs to be told. If somebody without a patent were selling millions of dollars worth of unlicensed iPhones to the American public, would there be some news coverage? Especially if there were ferocious lawsuits in three federal courts? I think so. But until that happens, there are just a few bloggers and some small industry newsletters getting the word out.

1. Elysium's Deceptive Marketing Practices

As I described in my ill-fated article that started all this, Elysium claimed that it was "a provider of a new category of scientifically validated dietary supplements," that there was an "upcoming line of dietary supplements," and that Basis "sets the stage for the expansion in 2015 of its dietary supplements pipeline."

Well that was February 3, 2015, more than 3.5 years ago, and there is still no category, no product line -- just a single product.

And while Elysium provided the marketing for that product, the science behind the product came from somewhere else, because the ingredients in Basis were researched and patented before Elysium Health was born.

I won't rehearse all of my complaints with their marketing -- because I've said plenty -- but the core of it for me comes down to this: Elysium suggests with its star-studded, Nobel-Prize-Winning advisory board that the company's science orientation is central to Elysium's identity, and that these scientists "guide the direction of our company." They actually say that:

This is their website today: "Our Scientific Advisory Board is a network of more than 25 world-renowned researchers and clinicians, including eight Nobel Prize-winning scientists, who guide the direction of our company." (emphasis added)

On February 3, 2015, the Boston Globe attributed to one Elysium Nobel Laureate advisor, Joe Szostak, the statement that his job for Elysium "was to scour scientific literature for new natural compounds that are shown to improve health and bring them to the company’s attention as potential ingredients in new products." That's not guiding the direction of the company.

On January 9, 2017, Longevity and the MIT Technology Review both quoted another Elysium Nobel Laureate advisor, Thomas Sudhof, as saying that Elysium's Scientific Advisory Board "does NOT endorse the products of Elysium. Its sole role is to advise Elysium on the development and testing of its compounds.” That's REALLY not guiding the direction of the company.

And if there were any doubt whatsoever about the disingenuousness of Elysium's marketing face, one needs only to observe that three-plus years later there are no new compounds, no new products -- and the Nobel Laureates could have had no role in scouring the literature for NR and pterostilbene, or on the development and testing of NR and pterostilbene, because Elysium got those from ChromaDex, and according to Elysium's amended pleadings in California, Elysium seems to have relied on ChromaDex, not its scientific advisory board, to do the product testing on Basis.

Since the total observable output from the Nobel Advisors over three-plus years has been nothing, it is not unreasonable to conclude that they are just a marketing gimmick, and that Dr. Flier was right when he said in the MIT Technology Review almost two years ago, “Some of these people may think that they’re being asked to do this because of their deep insights...That’s the part that’s a joke. They're not. They are part of a marketing scheme where their names and reputations are being used.”

2. Elysium's Approach to the Law and Litigation

Elysium has for almost four years been singularly focused on selling the patented ingredients it originally obtained from ChromaDex, and which, more recently, it has been making for itself allegedly using ChromaDex's trade secrets. And since Elysium lost its license from ChromaDex, it has been aggressively focused on using the legal system to attack the patents that they used to license.

Having spent nearly all of my professional life trying to make the legal system work better, I am perhaps oversensitive when I see the legal system abused.

But I really believed what they taught us in law school, that a just dispute resolution system was a necessary precondition to civil society, and that our independent judiciary, our rules of law, our rules of civil procedure, and our appellate processes, were optimally balanced to ensure fair outcomes. My dad was a lawyer, too, and I grew up with this understanding.

The kind of systemic abuse I was aware of were vexatious pro se litigants, and I understood that the justice system was both tolerant and merciful in dispensing with that kind of thing.

Lawyers, by contrast, have professional duties not to bring before the Court anything false, deceptive, or asserted in bad faith -- not even inadvertently -- and Courts and State Bars have multiple ways of sanctioning misbehavior.

I had not much been involved in any litigation personally, so it looked from a distance like the system was functioning okay, albeit slowly.

But what I have seen with the ChromaDex-Elysium litigation is nothing like that fair, orderly, well-reasoned process.

What originally looked like a simple commercial law dispute -- ChromaDex claims Elysium didn't pay their bill, and Elysium claims that they were overcharged -- rapidly spun out of control into a wild series of allegations with active federal proceedings in California, New York, Washington DC, and Delaware.

I won't use this space to recount the lurid details, but I will summarize my primary objection to the way Elysium has proceeded, which involves dubious claims.

Rule 12(b)(6) pleading standards are indulgent to plaintiffs, as I think they should be. If you can plead a set of facts that WOULD be illegal if they were true, then you get a chance to prove them, which means evidence, discovery, and significant legal expense.

That's okay, if the parties are acting in good faith and are honest and sincere -- the truth of the matter will come out, and a court can resolve it.

But it's not okay if the parties assert claims that are not true, or if their primary goal is to use the judicial system not as a dispute resolution mechanism, but as a weapon to wield against an opponent, to oppress their opponent with intolerable legal expenses, and thereby win concessions through force that could not be gotten through negotiation.

That looks more like what I am seeing with Elysium.

First, Elysium's pleadings are trumped up. For example, the most recent pleadings complain that a ChromaDex ad said that Dr. Brenner discovered NR instead of saying that Dr. Brenner discovered NR's properties, and Elysium calls that false advertising. I can't see how that distinction would be highly material to any consumer. If anything, it's substantially true.

Second, Elysium would rather fight than quit. ChromaDex went to great lengths in the California litigation to moot Elysium's Patent Misuse claim by abandoning the practices and financial claims Elysium challenged. I will argue in a moment that the Patent Misuse claim itself is entirely illegitimate, but when ChromaDex waved the white flag -- just because it would cost more to fight it than the value of the claim -- Elysium fought hard for and won its right to keep shooting.

Third, about that Patent Misuse claim: I don't think the underlying facts alleged by Elysium ever occurred.

The allegation is that ChromaDex charged Elysium money to use ChromaDex's trademarks, and the evidence is a document called "Trademark License and Royalty Agreement," which Elysium's attorneys artfully characterize as a "royalty bearing trademark license."

But if you read the actual document, the payments due are quite obviously for the sale of ingredients, not for the use of the trademarks. Common sense tells us that ChromaDex was entitled to structure the payments due for Niagen as up front payments or deferred commissions or however they want. There would be no reason for ChromaDex to charge for the use of its trademarks.

And familiarity with common commercial practices allows us to recognize that the "Trademark" portion of the "Trademark License and Royalty Agreement" is just the most typical kind of trademark use restrictions that accompany the license of any product protected by intellectual property law. In essence, it said, "You don't have to use our trademarks, but if you do use them, you may not misuse them."

You can get a good flavor of the type of the trademark licensing provision we are dealing with by reading it -- it's very straight-forward. You have a right to use our marks if you want, but you may not mis-use them:

Elysium does not offer any reason why ChromaDex would have offered such an unprecedented and unnecessary arrangement as to charge for the use of the trademarks-that-Elysium-did-not-have-to-use, rather than for the sale of the product, nor does Elysium explain why the agreement itself -- which contains an integration clause -- does not seem to reflect these terms. They simply alleged that it occurred, and that was enough to get past a motion to dismiss, even if it turns out that the claim was "fictional," as ChromaDex called it.

It might be different if a watch company were licensing Mickey Mouse's trademarked image to put on an otherwise generic watch, so the thing being sold WAS the trademark, and the sales corresponded to the value of the trademark, but that is nothing like our facts.

So it does seem to me farfetched, or fictional, to suggest that ChromaDex was charging a separate fee in exchange for the right to use its trademarks.

Similarly -- or I should say suspiciously -- in the FDA proceeding Elysium alleged that new tests had shown that the toluene was removed from Mystery Basis, but Elysium failed to attach the alleged results to their supplemental letter. This is the same administrative filing in which Elysium's first bold heading reads, "Toluene Has Been Removed from Elysium's Basis," and Elysium's second bold heading reads, "The NR in Elysium's Basis Never Contained Toluene" -- an apparent contradiction.

I am not the only one to worry that Elysium is spinning fictions in court. Chief Judge McMahon wrote in her decision last month,

Elysium asserts in its Complaint that Certificates of Analysis ("COAs") sent by CMDX to its customers show the presence of toluene in its product. (Compl. ~ 65.) One ordinarily assumes the well-pleaded factual allegations of a complaint to be true for purposes of a motion to dismiss. Iqbal, 556 U.S. at 679. However, no copy of such a certificate is appended to the Complaint. (emphasis added)

I don't know the truth of these matters, because I am not privy to discovery materials, status conferences, discussions among counsel, or much anything else that isn't docketed and loaded up to PACER. But I will be very surprised to learn that anybody in fact understood that ChromaDex was charging for the optional use of its trademarks, with the payments due for the trademark use to be measured based strictly on the sale of product. You'd swear that the payments were commissions on sale of products, except that Elysium swore, in court papers, the opposite.

3. News Coverage of the Products and the Lawsuits

There is another reason that I am critical of Elysium in this blog, and it is the reason I write anything at all, which is that the corporate press is not saying a word about this dispute.

My coverage started because I know how to access PACER, and so I can easily retrieve federal court documents. I was curious myself to understand what was going on, and I correctly assumed that other ChromaDex retail investors would be interested in reading the court documents, so I started by posting the pleadings, and then providing some commentary to help non-lawyers understand what they were reading.

Over time, that collection of court documents has grown to almost a hundred documents -- you can see it here -- and I believe it represents the best kind of journalism in the public interest.

I am sure it is used heavily by the investment community -- although because of the way Wix hosts its documents, I can't actually see the usage statistics for direct media downloads.

But what I had hoped is that it would serve as a resource that would allow the corporate press to cover the dispute, and that has not happened.

After ChromaDex filed its $200M lawsuit against Elysium, I was sure that some major newspapers would report on the dispute, but that did not happen, either.

At one point I actually reached out to a reporter at the Boston Globe who had written about Elysium Health on December 16, 2016, on the eve of the first lawsuit. I had sent him a minor factual correction to his article, and so the following year when the big lawsuit was filed, I sent him a link and suggested the story was newsworthy. He replied, "Def on my radar to cover soon," but the Boston Globe hasn't said much about the dispute.

Nor has the Orange County Register or the Los Angeles Times, which would be in ChromaDex's home town, nor the New York Times, nor hardly anyone.

It surprises me that a huge complex dispute involving hundreds of millions of dollars and a public company and a "sexy" product like an anti-aging supplement, and tens of millions of dollars in consumer product sales, and legal action in three federal courts and before the PTO, wouldn't attract more media attention than it has.

Time Magazine mentioned Elysium's product earlier this year, and was sure to say that Basis was "available now to purchase," but did not mention any of the legal controversy, or even that ChromaDex and Niagen -- another manufacturer and another source -- existed, too. So that felt more like a product placement than investigative journalism in the public interest.

Besides Right-of-Assembly's coverage of the litigation, I think all have seen in the past year is:

Chemical and Engineering News Firms Feud Over Purported Age Defying Molecule

https://cen.acs.org/business/consumer-products/Firms-feud-over-Niagen-purported/96/i33

Nutra-Ingredients USA

ChromaDex Revenue Higher, But Losses Rise Steeply, Too

https://www.nutraingredients-usa.com/Article/2018/02/15/Finished-product-sales-push-ChromaDex-s-revenue-higher-but-losses-rise-steeply-too

Science Blogger Karen Weintraub

Life Extension Death Match

https://medium.com/neodotlife/elysium-and-basis-vs-chromadex-and-tru-niagen-10264fca0bdb

More on the Supposed Youth Pill

https://medium.com/neodotlife/nr-chromadex-niagen-elysium-basis-blood-pressure-study-cd1b383ccea

And...I don't see anything else that isn't a placed article, regurgitating one of the companies' press releases, or very high level summary coverage that merely mentions the fact of litigation without describing it.

In the meantime, the underlying litigation documents are all easily available, along with my commentary as a ChromaDex shareholder and as a former Elysium customer.

Implications

I don't recognize myself in the 15 paragraphs that Elysium spent attacking me and my blog in their latest New York pleadings.

They seem to be convinced -- wrongly -- that I am an agent of ChromaDex, and not merely a journalistically oriented lawyer-shareholder and former Elysium customer with all my own reasons to dislike Elysium's business model, and all my own reasons to attempt to shine a light on their business practices.

That shining a light on Elysium's business practices is what I assume they do not like, and I absolutely view their false allegations and insults before the federal court as harassment and an attempt to chill my free speech.

This is especially so since an anonymous attack-troll who calls himself "Geoff," whom I have long-assumed for multiple reasons is some kind of Elysium agent, employee, consultant, or affiliate, took to the Yahoo Finance message boards this week to threaten me (he calls me "MilaMarpa") that I should be lawyering up and that I won't be able to afford to own my used car much longer:

This kind of irresponsible amplification of Elysium's false and derogatory assertions about me is, like the pleadings themselves, intended to silence my criticism. It won't stop me from writing, but it certainly is unsettling, given that I have described above why I believe that Elysium uses the legal system as a weapon to exhaust their enemies, and why I believe that Elysium does not mind making false assertions in pleadings in order to get into discovery.

To me, it's more evidence that I am on the right track with analysis, and that the people who in fact guide the direction of the company are bullies, and not the good faith actors that they sometimes purport to be in their court pleadings.

Conclusion

Neither Elysium nor anyone else can silence their critics by bullying them in legal pleadings or by threatening them.

The way you silence your critics is by ensuring that your conduct is beyond reproach. That takes away the incentive to criticize, or, if the critics criticize anyway, they will be unconvincing to the public, and the effect will be counterproductive.

So if Elysium's scientific advisors do not really guide the direction of the company, the people whop DO guide the direction of the company should stop saying otherwise, and challenge the marketers to say the thing that is most true, instead of saying the thing that is the most they can get away with.

And if some of Elysium's legal allegations are stabs in the dark, demonstrably false, obvious quibbling, or unlikely to be proved based on the evidence, then withdraw those allegations.

And if Elysium is doing anything to suppress news coverage of their dispute with ChromaDex, then do the opposite, and invite news coverage. Karen Weintraub and I don't have to be, and should not be, virtually the only voices covering these events. Let the wisdom of a crowd judge Elysium's actions as beyond reproach.

And if I were advising Elysium on business strategy, I would say there are a whole galaxy of emerging anti-aging technologies, including alternate NAD precursors, CD-38 inhibitors, compounds aimed at telomeres or cellular senescence.

Wouldn't it be smarter and less expensive to reformulate Basis into something that Elysium can own? Why not combine a host of NAD precursors, including tryptophan, NA, NAM, and NMN into a cocktail, and then add a CD-38 inhibitor like Quercetin or Apigenin as your secret sauce, and tell the world that NAD replenishment alone is no longer state-of-the-art because Basis also helps you prevent the NAD decline in the first place?

Then settle the dispute with ChromaDex. Abandon the failed strategy of endless litigation, and instead focus all of your energy on beating ChromaDex in the marketplace with a more convincing product and superior marketing of something that you actually own.

Endless litigation to destroy or seize control of someone else's patents isn't just a proven bad strategy -- it's inconsistent with your mission.

#CDXC #ChromaDex #ElysiumHealth #ElysiumBasis #Litigation

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