Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 1 of 24 1 2 3 4 5 6 7 8 9 10 FRANK F. SOMMERS, SBN 109012 SOMMERS & SCHWARTZ LLP One Embarcadero Ctr, Ste. 800 San Francisco, CA 94111 Telephone: (415) 955-0925 ffs@SommersSchwartz.com DUYEN T. NGUYEN, SBN 225368 DTN LAW GROUP 355 1st St., Unit S2006 San Francisco, California 94105 Telephone: (415) 310-6979 Facsimile: (415) 707-2171 duyen@dtnlawgroup.com Attorneys for Plaintiffs THOMAS T. AOKI, M.D., and AOKI DIABETES RESEARCH INSTITUTE 11 UNITED STATES DISTRICT COURT 12 EASTERN DISTRICT OF CALIFORNIA 13 14 15 16 17 18 19 THOMAS T. AOKI, M.D., an individual, and AOKI DIABETES RESEARCH INSTIUTE, a California Non-Profit Corporation, Case No.: 2:11-cv-02797-TLN-CKD PLAINTIFFS’ TRIAL BRIEF Plaintiffs Trial Date: 03/25/2019 vs. Courtroom: 2, 15th Floor GREGORY FORD GILBERT, an individual; et al. Before United States District Judge Troy L. Nunley Defendants 20 21 22 23 24 25 26 27 28 PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 2 of 24 1 TABLE OF CONTENTS 2 3 I. INTRODUCTION ………………………………………………………………………….1 4 II. STATEMENT OF FACTS………………………………………………………………….1 5 a. Education and University Positions and Affiliations……………………………………..1 6 7 b. Dr. Aoki’s Research And Patenting Of Metabolic Activation Therapy (“MAT®”)………………………………………………………………………………..2 8 c. Dr. Aoki Receives At Least Eight Patents………………………………………………..3 9 d. Dr. Aoki Meets Gilbert………………………………………………………………...…3 10 e. Gilbert As Counsel For Dr. Aoki And ADRI…………………………………………….4 11 f. A Brief History Of The Relevant Mergers/Creations/Licenses And Dissolutions……….5 12 13 g. The Bionica Pump………………………………………………………………………..6 14 h. Metabolic Industries And The 2003 Nevada Dispute……………………………………6 15 i. Plaintiffs’ Copyright Claims - Dr. Aoki’s Copyrighted Slides…………………………..8 16 j. Defendants’ Misrepresentations………………………………………………………….8 17 k. Plaintiffs Seek Damages, Injunctive Relief, Punitive Damages, Costs And Attorneys’ Fees……………………………………………………………………………………….9 18 19 20 21 22 23 III. DISCUSSION………………………………………………………………………………..9 a. Patent Infringement – As To All Defendants…………………………………………...10 i. Remedies (Patent Infringement)………………………………………………...11 ii. Defendants Are Precluded From Claiming Patent Invalidity Based On Prior Art……………………………………………………………………………….12 24 25 iii. The Physicians’ Immunity Doctrine Does Not Apply………………………….13 26 b. Copyright Infringement – As To All Defendants……………………………………….15 27 c. False And Misleading Advertising (15 USC §1125 (a)(1), Lanham Act) – Against All Defendants…………………………………………………………………………….15 28 -i- PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 3 of 24 i. Legal Discussion (Lanham Act – False Advertising)………………………..…16 1 d. False And Misleading Advertising (Cal. Bus. & Prof. Code §17500) – Against All Defendants …………………………………………………………………………...…16 2 3 i. Legal Discussion (B&P §17500 – False Advertising)………………………..…16 4 e. Breach of Fiduciary Duty – Against Defendant Gilbert Only…………………………..17 5 i. Legal Analysis (Breach of Fiduciary Duty)……………………………………..17 6 7 f. Breach of Confidential Relationship – Against Defendant Gilbert Only……………….17 8 i. Legal Analysis (Confidential Relationship)…………………………………….17 9 g. Unfair Competition (15 USC §1125(a), Lanham Act) – Against All Defendants……...18 10 i. Legal Analysis (Lanham Act – Unfair Competition)…………………………...18 11 h. Unfair Competition (Cal. Bus. & Prof. Code §17200) – Against All Defendants……...18 12 i. Legal Analysis (§17200)………………………………………………………...18 13 14 IV. CONCLUSION…………………………………………………………………………….19 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -ii- PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 4 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES State California Supreme Court Cases In re Tobacco II Cases, 46 Cal.4th 298 (2009)…………………………………………………………..17 Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Company, 20 Cal.4th 163 (1999)…19 Comm. on Children’s Television, Inc. v. Gen. Foods Corp., 35 Cal.3d 197 (1983)……………………..19 Cox v. Delmas, 99 Cal. 104 (1893)………………………………………………………………………17 Davies v. Krasna, 14 Cal.3d 502 (1975) ………………………………………………………………..17 Kasky v. Nike, Inc., 27 Cal.4th 939 (2002) …………………………………………………………16, 17 Kwikset Corp. v. Superior Court, 51 Cal.4th 310 (2011) ………………………………………………19 Oasis West Realty, LLC v. Goldman, 51 Cal.4th 811 (2011) ……………………………………………17 Wutchumna Water Co. & Bailey, 216 Cal. 564 (1932) …………………………………………………17 Vai v. Bank of America, 56 Cal.2d 329, 337-338 (1961)………………………………………………..17 State Cases Chapman v. Skype, Inc., 220 Cal.App.4th 217 (2013)…………………………………………………...17 Colgan v. Leatherman Tool Group, Inc., 135 Cal.App.4th 663 (2006)…………………………………16 Goldberg v. Goldberg, 217 Cal.App.2d 623 (1963) ……………………………………………………17 People v. Dollar Rent-A-Car Systems, Inc., 211 Cal.App.3d 119 (1989) ………………………………19 Shopoff & Cavallo LLP v. Hyon, 167 Cal.App.4th 1489 (2008)…………………………………………17 South Bay Chevrolet v. General Motors Acceptance Corp., 72 Cal.App. 4th 861 (1999) ………………19 State Statutes California Business and Professions Code §17200…………………………..………………………18, 19 California Business and Professions Code §17500……………………………..……………16, 17, 18, 19 Federal United States Supreme Court Cases Graver Tank & Mfg. Co. v. Linde Air Prods. Co., 339 U.S. 605 (1950)…………………………………10 Halo Electronics, Inc. v. Pulse Electronics, Inc. 136 S.Ct. 1923 (2016) ………………………………..12 Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014)…………………………….12 -iii- PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 5 of 24 1 Federal District And Circuit Court Cases 2 Academy of Motion Picture Arts & Sciences v. Creative House Promotions, Inc., 944 F.2d 1446 (9th Cir. 3 1991) ……………………………………………………………………………………………………18 4 Century 21 Real Estate Corp. v. Sandlin, 846 F.2d 1175 (9th Cir. 1988)……………………………….18 5 Forest Labs, Inc. v. Abbott Labs., 239 F.3d 1305 (Fed. Cir. 2001)………………………………………10 6 Georgia-Pacific Corp. v. United States Plywood Corp., 318 F.Supp. 1116 (S.D.N.Y. 1970)………11, 12 7 Harper House, Inc. v. Thomas Nelson, Inc., 889 F.2d 197 (9th Cir. 1989)……………………………..16 8 In re Century 21 RE/MAX Advert. Claims Litig., 882 F. Supp. 915 (C.D. Cal. 1994)………………….16 9 Liquid Dynamics Corp. v. Vaughan Company, Inc., 449 F.3d 1209 (Fed. Cir. 2006)……………………10 10 Meta-Film Assocs., Inc. v. MCA, Inc., 586 F.Supp.1346 (C.D.Cal. 1984)…………………………….…18 11 Network Commerce, Inc. v. Microsoft Corp., 422 F.3d 1353 (Fed. Cir. 2005)………………………….10 12 Panduit Corp. v. Stahlin Brothers Fibre Works, Inc., 575 F.2d 1152 (6th Cir. 1978)……………………11 13 Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134 (9th Cir. 1997)………………………………16 14 Sun Microsystems v. Microsoft Corp., 188 F.3d 1115 (9th Cir. 1999)…………………………………...10 15 Tex. Instruments, Inc. v. Cypress Semiconductor Corp., 90 F.3d 1558 (Fed. Cir. 1996)………………..10 16 Toro Co. V. Deere & Co., 355 F.3d 1313 (Fed. Cir. 2004)………………………………………………10 17 William H. Morris Co. v. Group W, Inc., 66 F.3d 255 (9th Cir. 1995)………………………………….16 18 Federal Statutes 19 15 U.S.C. §1117(a)….. ………………………………………………………………………………….18 20 15 U.S.C. §1125(a) ….. ……………………………………………………………………………..15, 18 21 17 U.S.C. §504(c)(1), (2) ………………………………………………………………………………..15 22 35 U.S.C. §282(a), (c) ………………………………………………………………………………12, 13 23 35 U.S.C. §284…………………………………………………………………………………,,11, 12, 13 24 35 U.S.C. §285………………………………………………………………………………………12, 13 25 35 U.S.C. §287 (c)(1), (2) …………………………………………………………………………..13, 14 26 Other 27 Restatement, 2d Trusts s 2, com.b………………………………………………………………………17 28 Journal of the Patent and Trademark Office Society, Volume 78 (1996), p. 789, Appendix B…………..15 -iv- PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 6 of 24 1 2 3 4 5 I. INTRODUCTION Plaintiff Dr. Thomas Aoki, M.D. is suing his former attorney and subsequent enemy for seeking to steal Dr. Aoki’s life’s work by misrepresenting Aoki’s work as his own, and lying about nearly every aspect of their former relationship and dealings. Gilbert first swore that he was using Dr. Aoki’s diabetes 6 treatment under license, a position rejected by the Nevada court in 2003 when Gilbert asserted it in a 7 lawsuit. Gilbert then started setting up treatment clinics by asserting to his investors (either or both) that 8 he had invented the treatment, or, more currently, that what he is doing does not infringe on Dr. Aoki’s 9 patents, or that the patents are otherwise invalid. None of these positions is either factually or legally 10 correct, and the Court should award judgement to Dr. Aoki and ADRI. 11 12 13 14 15 16 17 II. STATEMENT OF FACTS For over 30 years Dr. Thomas T. Aoki, M.D., a world-renowned expert in endocrinology, has been conducting research in the areas of diabetes, metabolism, glucose processing, insulin and other diabetes related issues. He has authored well over 100 articles on these issues and these articles have been published in elite medical publications. He has also been issued eight patents on the diabetes treatment in issue here, seven of which are being sued on. 18 19 A. Education And University Positions And Affiliations 20 Dr. Aoki attended the University of California, Berkeley, from 1958 -1961, was honored by 21 early acceptance into Medical School, and graduated from Yale University Medical School in 1965 22 with the Mosby Award for Scholastic Excellence. After completing postgraduate training at the Yale- 23 New Haven Hospital and the Brigham and Women’s Hospital (Harvard Medical School), Dr. Aoki 24 became an Associate Professor of Medicine at Harvard Medical School. 25 During his time at Harvard, he also headed the Metabolism division of the Joslin Diabetes 26 Center in Boston, Massachusetts (“Joslin”). Joslin is an independent non-profit institution affiliated 27 with Harvard Medical School and one of only 11 NIH-designated Diabetes Research Centers in the 28 United States. -1- PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 7 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 B. Dr. Aoki’s Research And Patenting Of Metabolic Activation Therapy (“MAT®”) In the early 1970s and while at Joslin, Dr. Aoki conceived of the idea for the treatment methodology that is at issue in this dispute, now referred to as “Metabolic Activation Therapy” (“MAT®”). He conducted his preliminary research on this method between 1974 and 1984. In 1984, Dr. Aoki was recruited as the Chief of the Division of Endocrinology and Professor of Medicine at the University of California, Davis, where he is a current Professor Emeritus. While still at the Joslin and wanting to continue the research he had started at Harvard and Joslin, Dr. Aoki determined to start a nonprofit organization (Aoki Diabetes Research Institute-“ADRI”) patterned after the Joslin Diabetes Center in Boston Massachusetts. (The idea of a “Joslin West” was part of Dr. Aoki’s formal recruiting package for UC Davis). In 1986, less than two years after Dr. Aoki arrived at U. C. Davis, the ADRI was founded to conduct research and provide clinical care in the area of diabetes and other metabolic disorders. Like the Joslin Diabetes Center, the ADRI is a non-profit organization and was affiliated with U.C. Davis, from 1987 – 2000. MAT® Summary Unlike the state of the art in 1974, when Dr. Aoki started work on this issue (and indeed the “state of the art” now) Dr. Aoki focused, not on blood sugar management, but rather on stimulating a patient’s liver by delivering pulses of insulin during the ingestion of carbohydrates, in order to stimulate the liver to return to a more normal use of insulin than was otherwise permitted by the disease, which would result in the desired result. (Since Dr. Aoki is far better able to explain his work, and will do so at trial, counsel will limit themselves to underscoring the key features of the MAT® treatment (without discussing the physiology that it both deals with and corrects): 1) Deliver 6 pulses of insulin an hour; 2) while the patient is drinking a measured quantity of carbohydrates (in liquid glucose form); 3) measuring the patient’s response; 4) allow for rest periods; and 5) repeat over time. Because this new therapy resulted in the liver processing glucose correctly, Dr. Aoki first called his treatment “hepatic (liver) activation.” To maximize the beneficial effects, Dr. Aoki initially repeated the glucose-plus-insulin treatments for each patient over the course of several days. Later he was able to safely reduce this timeframe to approximately four hours. Initially, treatments were -2- PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 8 of 24 1 2 conducted in hospitals, but Dr. Aoki then adapted the procedure for outpatient clinic use. In contrast, Defendant Gilbert, after first claiming repeatedly that he and his licensees were 3 doing exactly what Aoki patented, because they had a license, now claims that his newly-rebranded 4 Artificial Pancreas Therapy (“APT”) is totally different than Aoki’s treatment, in that it “more naturally 5 mimics the liver’s function.” Again, Mr. Gilbert will be called upon to explain himself at length, so 6 Plaintiffs’ counsel will limit themselves to stating that: 1) to the extent that Mr. Gilbert is contending 7 that his clinics were told to do anything other than MAT®, he is not telling the truth; and 2) if they did 8 what he now contends, it wouldn’t work. 9 10 11 12 13 14 15 16 17 18 19 C. Dr. Aoki Receives At Least Eight Patents While at Harvard and Joslin, Dr. Aoki had already begun the process of obtaining patent rights to his MAT® treatment. In 1987 Dr. Aoki filed for a patent from the USPTO for the basic MAT® treatment – patent number 4,826,810 (hereinafter ‘810 Patent), issued in 1989. Thereafter, he received additional patents related to the use and application of the invention set forth in the ‘810 Patent, for the treatment of different conditions, and for variations in the treatment suggested by his subsequent research. These new patents cover treating gangrene, delayed wound healing, diabetes-related blindness and other diabetes-related conditions and span seven additional patents that are at issue in this action. D. Dr. Aoki Meets Gilbert In 1985, Dr. Aoki was referred to Mr. Gilbert when he was looking for an attorney to set up 20 ADRI. Mr. Gilbert stated that he wanted to work with Dr. Aoki not merely as a lawyer, but because he 21 had a daughter, Trina, who was severely ill with Type 1 diabetes. Mr. Gilbert volunteered to help Dr. 22 Aoki set up ADRI and stated he was doing so because he wanted Dr. Aoki to treat Trina. Dr. Aoki 23 successfully treated Mr. Gilbert’s daughter for more than 25 years, at a value of about $25,000 a year, 24 at no cost to the Gilbert family. Even after Mr. Gilbert was no longer acting as counsel for Dr. Aoki or 25 ADRI in 2003 when the first round of lawsuits started, Dr. Aoki still continued to treat Mr. Gilbert’s 26 daughter up to 2012, well after this lawsuit was initially filed in 2011, at which point Trina chose to 27 sever her relationship with ADRI. 28 Mr. Gilbert now contends that not only did he invent the treatment, but that he has at all times -3PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 9 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 treated Trina, who will testify at trial. E. Gilbert As Counsel For Dr. Aoki And ADRI Mr. Gilbert has functioned as attorney for both Dr. Aoki and ADRI, among others, since he first met Dr. Aoki. Plaintiff will show that Gilbert was heavily involved in negotiating with UC Davis on Dr. Aoki’s behalf to set up the relationship between Dr. Aoki, ADRI and the University. (Indeed, Plaintiff understands that Mr. Gilbert intends to claim at trial that the relationship he negotiated in some way gives UC Davis, not ADRI or Dr. Aoki, control of the patents.) More directly, Mr. Gilbert was Dr. Aoki’s counsel in advising him about how to set up additional entities as well as to grant licenses, so that ADRI could create the network of patients it needed to prove to the US Government that Medicaid and Medicare should pay for these treatments. (Since the majority of diabetic patients are low income, and cannot afford the weekly and then monthly treatments needed to stem their various diabetes-related conditions).1 Gilbert created the various entities described below, and negotiated licenses with a series of companies that in turn promised to fund Dr. Aoki’s research at ADRI. He also created various plans and licenses to use Dr. Aoki’s MAT® treatment for commercial purposes by physicians and organizations that treat patients with severe diabetes. The Court will hear how he has repeatedly tried to claim that, in either setting up or unwinding these transactions, he has attempted to insert himself into them as the owner or licensee of the MAT® treatment or patents. 20 21 22 23 24 25 26 27 28 1 Until 2009, Medicare was highly resistant to paying for MAT® in an outpatient setting, or in some cases, at all. In 2009, however, Medicare issued a ruling refusing to pay for MAT at all. It created a special billing code identifying any form of MAT® and specifying that it would not be reimbursed. The Court will recall Mr. Gilbert’s extended discussion of the problems he encountered in Alabama for trying to “unbundle” the individual charges to evade this restriction (and his attempt to blame Dr. Aoki for those problems). -4- PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 10 of 24 1 F. A Brief History of the Relevant Mergers/Creations/Licenses and Dissolutions 2 3 Plaintiff will provide a more visual comprehension of the facts set out below, which is a brief 4 chart of the entities and transactions upon which Mr. Gilbert advised Dr. Aoki and for which he was 5 heavily involved in drafting the relevant transaction documents. (Here again, Mr. Gilbert will insist that 6 he was not counsel, but rather “Director” or “Advisor.”) 7 1.Jan 1986 ADRI Set up 2. Sept-Nov 1987 Aoki -ADRI AMSys agreement - AMSys agrees to commercialize MAT® and Aoki assigns his rights to AMSys 3. Dec 1987 ADRI grants UC Davis a non-exclusive, non-transferable license for R&D and treatment 12 4. 1992 AMSys enters into a license with CII 13 5. 1999 AMSys sells assets to AMTech -prep for Diabetex transaction 14 6. 1999 Diabetex buys AmTech and promises to generate funds 7. 2001 Diabetex is not performing - Gilbert authorized to unwind Diabetex on Aoki’s behalf 8 9 10 11 15 16 17 a. Licenses MAT® to Pulse Activation Therapy (“PAT”) 18 b. Settles with Diabetex (Gilbert claims he gets license back from Diabetex, not Aoki- this claim is rejected in 2003 suit) 19 20 d. PAT merges into Metabolic Industries (“MI”) 21 22 23 24 8. 2002 MI enters into services agreement with ADTC (Florida) 9. 2005 Gilbert as Bionica claims he gets license from CII (see 4 above) While this is a concentrated list, the Court should be aware that 1) Gilbert formerly claimed that 25 when the Diabetex settlement took -place (item 7b above) Diabetex returned the MAT® license rights 26 to him, not to Aoki. When he raised this in 2003 in the first Nevada suit, the Court rejected it in an 27 injunctive order, later confirmed in the final judgment. In addition, based on the pleadings recently filed 28 -5- PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 11 of 24 1 2 by Gilbert, Plaintiffs understand that he now claims license rights under a 2005 deal that he cut with Connecticut Innovations Inc (“CII”) – a claim which Plaintiffs will show is factually and legally false. 3 G. The Bionica Pump 4 Mr. Gilbert makes much in his pleadings of his contention that he somehow owns or controls 5 the diabetes treatment here by virtue of his ownership of a company called Bionica, which 6 manufactures a pump “cleared” by the FDA to deliver insulin as specified by Dr. Aoki. Dr. Aoki’s 7 MAT® treatment involves delivering six pulse of insulin an hour to a patient. The patents in dispute 8 here do not specify how these pulses are to be delivered, by syringe or mechanically. At the outset, Dr. 9 Aoki used two different pumps, both large and cumbersome, the Biostator (a 600 lb artificial pancreas) 10 and the McGaw AccuPro pump. After ADRI was formed, Mr. Gilbert was tasked with finding a 11 smaller replacement pump. Gilbert found an Australian inventor named Vladimir Feingold. Feingold’s 12 pump company, Bionica, which manufactured a small analgesia pump (a type of personal infusion 13 pump). FDA records reflect that beginning in 1986, Mr. Feingold obtained FDA clearance for this 14 device to be used for infusions. Aoki worked with Feingold to modify the Bionica pump’s program to 15 specifications for administration of the MAT® procedure, and this modified pump received FDA 510 16 approval in 1989. 17 In the early 1990s, AmSys (a predecessor company formed by investors Gilbert lined up) 18 planned to conduct clinical trials and commercialize Aoki’s therapy. AmSys purchased about 80 pumps 19 from Mr. Feingold. Later, Mr. Gilbert started a “pump” company named Hamilton-May. Mr. Gilbert 20 was CEO of both Hamilton-May and another company he formed with Aoki, called Metabolic 21 Industries (“MI”). On or around September 2001, Mr. Gilbert, without MI board and/or investor 22 knowledge or approval, used company funds to purchase the rights to the name of Bionica, Inc. and its 23 pump parts from Mr. Feingold, and claimed them for Hamilton May instead of MI. Thus Hamilton- 24 May became Bionica, Inc. 25 26 27 H. Metabolic Industries And The 2003 Nevada Dispute While Plaintiffs agree with the Court that they do not and cannot relitigate the Nevada action, an understanding of its provenance is necessary to understand the preclusive effect of its ruling on Mr. 28 -6- PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 12 of 24 1 2 Gilbert’s claims here. In 2001, while still working with Aoki to commercialize MAT®, Gilbert formed a new 3 company called Metabolic Industries (“MI”) (originally named Pulse Activation Therapy) to raise funds 4 and commercialize Aoki’s technology with approximately $500k investment from an outside investor, 5 Phil Gurian. Gilbert served as president of the Board and CEO. Dr. Aoki was initially not a board 6 member but eventually joined in April 2002. 7 In 2003, Gilbert began discussions with a company called Metabolic Treatment Centers 8 (“MTC”) that had recently been formed by two individuals, John Duffel and Max McCombs whom 9 Gilbert had just met, specifically to capitalize on Aoki’s technology (in the form of a license agreement 10 to franchise clinics for example). The deal was set forth in a May 11, 2003 Term Sheet. The Term 11 Sheet set out a $10 million investment in MI and a $1 million payment to ADRI. Gilbert, who had 12 resigned as MI’s CEO on October 28, 2002, did not have the authority to bind the MI board to any term 13 deals without their approval, and Gilbert at all times assured the MI board that his discussions with 14 MTC were just that, discussions. 15 The MI Board hired Keith McBride of the Diepenbrock Law Firm, to conduct due diligence for 16 the transaction, including on Mr. Duffel and Mr. McCombs. The due diligence revealed that Mr. Duffel 17 had a felony conviction stemming from his operation of a company that provided illegal tax shelters. 18 Dr. Aoki and the MI Board refused to go forward with the transaction. On October 28, 2002, Gilbert 19 resigned from his position as CEO of MI but remained on the Board. Mr. Gilbert refused to provide the 20 Board with the company financial records for months. MI finally obtained from the bank the 21 checkbook records for the company account and hired an accountant to piece together the records 22 which revealed that Gilbert had impermissibly used some of MI’s investor money to pay for the rights 23 to the Bionica pump and its parts. MI requested Gilbert return the money. He did not. 24 MI’s decision to terminate discussions with MTC resulted first in MTC suing Aoki, ADRI and 25 MI and Gilbert claiming breach of contract based on the Term Sheet. Plaintiffs will demonstrate that 26 Gilbert procured the MTC suit, with MTC dismissing him as a defendant almost immediately. Aoki 27 and MI cross-complained against Gilbert and Bionica, Inc. 28 The essence of the Nevada action was that MTC claimed it had a license to Aoki’s technology -7- PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 13 of 24 1 based on the Term Sheet, while Gilbert and Bionica, Inc., which had a contract with MI to supply 2 pumps for Aoki’s MAT, claimed that this supply contract constituted a license to Aoki’s technology. 3 Ultimately on February 20, 2004, the Nevada Court granted a preliminary injunction in MI and 4 Aoki’s favor and found among other things, that (i) the Term Sheet was not an enforceable contract, (ii) 5 that Bionica/Gilbert never obtained any license to Aoki’s technology and therefore had no such right to 6 grant, and that (iii) any agreements entered into by Aoki and/or MI prior to the 5/11/03 Term Sheet did 7 not alienate Aoki’s control “over the use and marketing of MAT, which he developed throughout his 8 entire career.” 9 On August 4, 2009, the Nevada Court issued a final Judgment and Order adopting the findings 10 of fact and conclusions of law it made in its Order granting the preliminary injunction. (The long delay 11 was a function of various spin-off suits both in Nevada and California, which will be explained to the 12 Court if it determines that it needs to understand those facts as part of the dispute here.) 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I. Plaintiff’s Copyright Claims- Dr. Aoki’s Copyrighted Slides To promote MAT®, Dr. Aoki previously developed a 100+ power-point slide presentation. These slides encapsulate Dr. Aoki’s research on MAT® and include charts as well as photos of treatment outcomes of specific patients whom Dr. Aoki treated. This slide deck is registered with the copyright office. Following a presentation in Florida, Mr. Gilbert requested a copy of these slides from Dr. Aoki purportedly for educational purposes. Dr. Aoki, in the presence of a witness, lent Mr. Gilbert a copy with explicit instructions that the slides not be disseminated and that the slides were only for Mr. Gilbert’s educational use. Plaintiffs will show that since then various of Dr. Aoki’s slides have appeared in Defendants’ promotional materials of its treatment, including investor prospectuses, websites, online videos, et al. Not only were Dr. Aoki’s slides used without permission, but Defendants falsely claim that these slides represent their research on APT and reflect APT treatment outcomes. The reality of course is that Defendants simply co-opted Dr. Aoki’s MAT® work for their own and changed the MAT® label to APT. J. Defendants’ Misrepresentations The evidence will demonstrate Defendants made a number of literally false and/or misleading -8- PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 14 of 24 1 statements to the public, patients, and/or potential investors. Chief among the litany of false and/or 2 misleading claims are (1) the claim that they have the right to use Aoki’s patents and/or have ownership 3 thereof; (2) that the treatment is covered by Medicare; (3) that they have been performing the treatment 4 under the patents for more than 25 years; (4) that research conducted by Dr. Aoki for MAT® is of their 5 own; and (5) that patients who were treated by Dr. Aoki were treated by Defendants using APT. 6 7 K. Plaintiffs Seek Damages, Injunctive Relief, Punitive Damages, Costs And Attorneys’ Fees 8 In his deposition testimony, Defendant Gilbert acknowledged that he has opened over 30 clinics 9 across the United States either directly or by (impermissibly) licensing Dr. Aoki’s MAT® technology to 10 others. Plaintiffs have moved the Court for an order based on Gilbert’s steadfast refusal to produce the 11 investment prospectuses he used, or the license agreements, or the financial results obtained, either from 12 Trina Health or Bionica, which he controls, or of the clinic defendants which he represents. Plaintiffs 13 have nevertheless managed to secure a representative sample. The clinics pay up front licensing and 14 royalty fees, plus other charges, plus ongoing additional royalties. 15 Given Gilbert’s refusal to cooperate with discovery, he should not be permitted to argue that the 16 damage calculations are insufficient. The data presented by Plaintiffs will show damages of between $5- 17 $8 million, depending on the data points the Court chooses to permit for use in extrapolations. 18 19 20 In addition, Plaintiffs will be seeking permanent injunctions against Gilbert, his companies and the clinic defendants from continuing the infringing conduct. Plaintiffs also seek punitive damages for Defendants’ willful conduct, attorneys’ fees and costs. 21 22 III. DISCUSSION 23 Plaintiffs are asserting claims for patent and copyright infringement, federal and state unfair 24 competition and false advertising claims, and claims against Gilbert based on his having acted as a false 25 fiduciary, in both his capacity as Aoki and ADRI’s lawyer, as well as a member of the Board of the 26 entities described above. What follows is a brief discussion of the relevant patent theories and defenses, 27 as well as the elements needed for proof of liability on the other claims. To the extent that remedies only 28 become relevant at the conclusion of the trial, Plaintiffs will not occupy the Court at this juncture with an -9PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 15 of 24 1 extensive discussion of the law supporting the often-overlapping remedies, as that is more appropriate in 2 post-trial briefing. (If the court wishes prior briefing on such issues, Plaintiffs will respond immediately.) 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 a. Patent Infringement – As to All Defendants To prove literal infringement, a patentee “can employ any method of analysis that is probative of infringement.” Forest Labs, Inc. v. Abbott Labs., 239 F.3d 1305, 1312 (Fed. Cir. 2001). A patentee may establish infringement by testimonial or other evidence. Forest Laboratories, Inc. v. Abbott Laboratories, 239 F.3d 1305, 1312 (Fed. Cir. 2001). A patent owner may rely on appropriate inferences, circumstantial evidence, and admissions. Liquid Dynamics Corp. v. Vaughan Company, Inc., 449 F.3d 1209, 1219 (Fed. Cir. 2006). An accused infringer may, expressly or implicitly, admit infringement. E.g., Toro Co. v. Deere & Co., 355 F.3d 1313, 1322 (Fed. Cir. 2004) Plaintiffs here will demonstrate on a claim by claim basis that Defendants are using the MAT® treatment to treat patients using the same methodology described in the patents: (1) oral administration of glucose; (2) administering pulses of insulin using the six minute timing algorithm developed by Dr. Aoki (and taught to Feingold who programmed the original Bionica pump); (3) monitoring liver activation through glucose uptake whether via fingerstick or measuring respiratory quotient; (4) allowing for rest periods; and (5) repeating the process. Plaintiffs will also demonstrate that contrary to Defendants’ claims, Defendants are using the procedure to treat the exact same conditions, including diabetes, retinopathy, heart disease, neuropathy, kidney disease, and wounds, as are set out in the patents under suit. The patentee can also prove infringement pursuant to the doctrine of equivalents, which is designed to prevent infringers from avoiding liability by making insubstantial changes to their products that fall outside the literal scope of the claims while remaining essentially identical to the claimed invention. See, e.g., Graver Tank & Mfg. Co. v. Linde Air Prods. Co., 339 U.S. 605, 608 (1950). To prove infringement under the doctrine of equivalents, the patentee must provide “particularized testimony and linking argument” on a limitation-by-limitation basis showing how the accused infringing device or process is equivalent to the claimed invention.” See, e.g., Network Commerce, Inc. v. Microsoft Corp., 422 F.3d 1353, 1363 (Fed. Cir. 2005) (quoting Tex. Instruments, Inc. v. Cypress Semiconductor Corp., -10- PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 16 of 24 1 90 F.3d 1558, 1567 (Fed. Cir. 1996)). 2 Defendants who have all along admitted in this case that they have been performing Aoki’s 3 treatment pursuant to a license, now attempt to reverse course by claiming that APT is different from 4 MAT®. Such claims are suspect, given the overwhelming evidence but even if taken as true, the 5 distinctions they raise are insubstantial. They claim for example that instead of administering glucose to 6 raise a patient’s blood sugar, they administer oral dextrose. This is a distinction without a difference 7 since dextrose is equivalent to glucose. In other instances, the differences they claim are medically 8 unsupportable. For example, they claim that their treatment doesn’t utilize ever increasing baselines of 9 insulin but this defies the fact that insulin has a half-life existence and if that were the case, no patient 10 would benefit from the treatment. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 i. Remedies (Patent Infringement) “Upon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer, together with interest and costs as fixed by the court.” 35 U.S.C. § 284. This statute effectively provides two types of patent damages for patentees: lost profits and reasonable royalties. To obtain damages for lost profits on sales the patentee would have made absent the infringement pursuant, the patentee must prove: (1) that there is demand for the patented product, (2) the absence of acceptable non-infringing substitutes, (3) the patentee’s manufacturing and marketing capability to exploit the demand, and (4) the amount of the profit the patentee would have made. Panduit Corp. v. Stahlin Brothers Fibre Works, Inc., 575 F.2d 1152, 1156 (6th Cir. 1978). Georgia-Pacific Corp. sets forth a commonly used “comprehensive list of evidentiary facts relevant, in general to the determination of the amount of a reasonable royalty for a patent license”: (1) royalties received by the patentee for licenses to the patent-in-suit; (2) royalty rates paid by the licensee for licenses to comparable patents; (3) the nature and scope of the license, including exclusivity and restrictions on the license; (4) the patentee’s policy either not to license or to place conditions on licenses; (5) the commercial relationship between the licensor and the licensee; (6) the effect of the -11- PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 17 of 24 1 patent on promoting “convoyed sales,” or sales of other products not covered by the patent; (7) the 2 durations of the patent and the license; (8) the commercial success of the patented product; (9) the 3 advantages of the patent over the prior art; (10) the nature of the patented invention and the character of 4 the accused infringing product; (11) the extent and value of the infringing use to the infringer; and (12) 5 the customary royalty rates in the industry for analogous inventions. Georgia-Pacific Corp. v. United 6 States Plywood Corp., 318 F.Supp. 1116, 1120 (S.D.N.Y. 1970). 7 Here Plaintiffs will present the Court with the data that they have accumulated of Gilbert’s own 8 contentions regarding what he demands in fees, royalties and other exactions, and the parties will be 9 able to argue about which of the damage theories that they see best fit. 10 Plaintiffs will also be seeking triple damages for egregious or wilfull conduct under 35 U.S.C. 11 §284. Halo Electronics, Inc. v. Pulse Electronics, Inc. 136 S.Ct. 1923, 1926, (2016). In addition, 12 Plaintiffs are seeking attorneys’ fees under the “exceptional case” standard of 35 U.S.C. §285. An 13 exceptional case is one that “stands out from others with respect to the substantive strength of a party’s 14 litigating position (considering both the governing law and the facts of the case) or the unreasonable 15 manner in which the case was litigated.” Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 16 545 (2014). 17 attorneys’ fees. 18 19 20 21 22 23 24 25 26 27 28 Plaintiffs request that the Court declare this to be an exceptional case and award them ii. Defendants Are Precluded From Claiming Patent Invalidity Based On Prior Art Based on his recent pleadings, it appears that Mr. Gilbert is seeking to invalidate Dr. Aoki’s patents based on the existence of prior art, which they contend Dr. Aoki concealed from the patent examiners, or which they simply missed. Neither contention is valid. Under 35 U.S.C. §282(a), a “patent shall be presumed valid” and the “burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity.” 35 U.S.C.. §282 (a). More importantly, Mr. Gilbert has utterly failed to comply with the disclosure requirements necessary to assert a prior art claim. 35 U.S.C. §282(c) further provides that in an action involving the validity or infringement of a patent: “[T]he party asserting invalidity or noninfringement shall give notice in the pleadings or -12- PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 18 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 otherwise in writing to the adverse party at least thirty days before the trial, of the country, number, date, and name of the patentee of any patent, the title, date, and page numbers of any publication to be relied upon as anticipation of the patent in suit or, except in actions in the United States Court of Federal Claims, as showing the state of the art, and the name and address of any person who may be relied upon as the prior inventor or as having prior knowledge of or as having previously used or offered for sale the invention of the patent in suit. In the absence of such notice proof of the said matters may not be made at the trial except on such terms as the court requires.” 35 U.S.C. §282 (c) (emphasis added). This issue is discussed extensively in Plaintiffs’ motion in limine no. 4 re prior art, and the arguments therein incorporated by reference, if the Court deems it preferable to have a preliminary hearing on this matter at the outset of trial. Defendants have failed to comply with 35 U.S.C. §282(c) and thus should be barred from asserting patent invalidity at trial. Defendants have only recently (and then cursorily) claimed that the patents at issue are invalid because of (i) prior art, (ii) prior use, (iii) failure to disclose prior use, and (iv) obviousness. Defendants, however, have failed to provide any information as to the specific patents to which these claims of invalidity attach, or the other Section 282(c) information described above. iii. The Physicians’ Immunity Doctrine Does Not Apply 16 Mr. Gilbert claims that Dr. Aoki cannot prevail, and in particular cannot secure injunctive relief, 17 because he and “his” licensee clinics are covered by the physicians’ immunity doctrine of 35 U.S.C. 18 §287(c)(1), which precludes a patent from interfering with a doctor or clinician providing “medical 19 activity.” Dr. Aoki’s patented methods for treating diabetes and diabetes-related complications do not 20 constitute medical activity as defined by the physicians’ immunity defense, and is specifically described 21 in the legislative history as exempt from assertion of the defense. 22 Section 287(c)(1) provides in relevant part: 23 24 25 26 27 “(1) With respect to a medical practitioner’s performance of a medical activity that constitutes an infringement under section 271(a) or (b), the provisions of sections 281, 283, 284, and 285 shall not apply against the medical practitioner or against a related health care entity with respect to such medical activity. (2) For the purposes of this subsection: 28 -13- PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 19 of 24 (A) the term “medical activity” means the performance of a medical or surgical procedure on a body, but shall not include (i) the use of a patented machine, manufacture, or composition of matter in violation of such patent, (ii) the practice of a patented use of a composition of matter in violation of such patent, or (iii) the practice of a process in violation of a biotechnology patent. 1 2 3 4 (B) the term “medical practitioner” means any natural person who is licensed by a State to provide the medical activity described in subsection (c)(1) or who is acting under the direction of such person in the performance of the medical activity. 5 6 (C) the term “related health care entity” shall mean an entity with which a medical practitioner has a professional affiliation under which the medical practitioner performs the medical activity, including but not limited to a nursing home, hospital, university, medical school, 12 health maintenance organization, group medical practice, or a medical clinic. (35 USC §287(c)(2) (emphasis added). 7 8 9 10 There are only a handful of cases that have ever addressed 35 USC §287(c), none of which are 11 applicable to the present issues. The legislative history, however, is both definitionally instructive and 12 specifically excludes from the definition of “medical activity” Dr. Aoki’s MAT®, as it states: 13 • of a patented use of a composition of matter." 14 15 • The term "patented use of a composition of matter" as used in subsection (c)(2)(A)(ii) is limited by subsection (c)(2)(F). 16 17 The term "medical activity" as defined in subsection 287(c)(2)(A) does not include "the practice • Subsection (c)(2)(F) provides that the term "patented use of a composition of matter" does not 18 include any claim for performing a medical or surgical procedure on a body that recites the use 19 of the composition of matter where the use of the composition of matter does not directly 20 contribute to the achievement of the objective of the claimed method. 21 • A use of a composition of matter as a step in a claim will direct [sic] contribute to the 22 achievement of the objective of the claimed method if it is itself novel or if it contributes to or is 23 necessary to establish the non-obviousness of the claim as a whole. 24 • For a method claim in which each of the method steps recites a "use of a composition of matter" 25 the claim cannot represent a "medical activity" because the use of a composition of matter 26 must necessarily contribute to the novelty -- and, therefore, to the objective -- of the 27 claimed method. 28 -14- PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 20 of 24 1 • "Uses of compositions of matter" include, without limitation, novel uses of drugs, novel uses of 2 chemical or biological reagents for diagnostic purposes, novel methods of scheduling or timing 3 administration of drugs, novel methods of combining drug therapies, and novel methods for 4 providing genetic or other biological materials to a patient (including gene therapies.) 5 • A particular example would be [sic] claim that recites only the novel use of [sic] drug for 6 the treatment of diabetes that involves the administration of a drug at a particular time of 7 day and/or at a specified dose and/or with a specified concomitant medicinal therapy could 8 not be construed as a "medical activity." See Journal of the Patent and Trademark Office 9 Society, Volume 78 (1996), p. 789-801, Appendix B (emphasis added). 10 The legislative history is directly on point because it specifically exempts from the definition of 11 “medical activity” Aoki’s treatment which involves the novel use of a drug (i.e. insulin) in treating 12 diabetes by administering insulin at a specified dose over a specified period of time. 13 Additionally, Gilbert cannot claim the defense to preclude him or his agents from being 14 enjoined from continuing to license MAT®. He is not a physician, and to claim that the defense, 15 assuming arguendo that it even applied to Aoki’s treatment, invalidates Dr. Aoki’s patents is absurd - if 16 it were true, then the patents for any form of medical device or treatment would never be issued. 17 18 19 b. Copyright Infringement – As to All Defendants As noted above, Plaintiffs’ copyright infringement claims are predicated on Gilbert and his 20 agents using Dr. Aoki’s copyrighted slides to lend an aura of medical respectability to Gilbert’s con. 21 Plaintiffs will demonstrate that the slides are copyrighted, that Gilbert new that when he received a 22 copy, and that he has used them for his profit. 23 The Copyright Act authorizes statutory damages of up to $30,000 per infringed work. 17 U.S.C. 24 §504(c)(1). If the infringement was committed willfully, the Copyright Act authorizes enhanced statutory 25 damages of up to $150,000 per infringed work. 17 U.S.C. §504(c)(2). Plaintiffs are seeking the 26 maximum damages, as well as injunctive relief, plus attorneys’ fees as permitted under the Act. 27 28 c. False and Misleading Advertising (15 USC §1125(a)(1), Lanham Act) – Against All Defendants -15PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 21 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 i. Legal Discussion (Lanham Act – False Advertising) The elements for a false advertising claim under the Lanham Act are: (1) a false statement of fact by the defendant in a commercial advertisement about its own or another’s product; (2) the statement actually deceived or has the tendency to deceive a substantial segment of its audience; (3) the deception is material, in that it is likely to influence the consumer’s purchasing decision; (4) the defendant causes its false statement to enter interstate commerce; and (5) the plaintiff has been or is likely to be injured as a result of the false statement, either by a direct derivation of sales from itself to defendant or by a lessening of the good will associated with its products. Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997). The Lanham Act distinguishes between advertisements that are literally false and those that are literally true, but misleading. When the advertising is literally false, a court may grant relief without reference to the advertisements’ impact on the buying public. In re Century 21 RE/MAX Advert. Claims Litig., 882 F. Supp. 915, 922 (C.D. Cal. 1994). Where a statement is not literally false, but is only misleading in context, proof that the advertising actually conveyed the implied message and thereby deceived a significant portion of the consuming public is required. William H. Morris Co. v. Group W, Inc., 66 F.3d 255, 258 (9th Cir. 1995). The only exception to this proof requirement arises when the plaintiff intentionally deceives consumers. Harper House, Inc. v. Thomas Nelson, Inc., 889 F.2d 197, 209 (9th Cir. 1989). The conduct listed above clearly supports liability under the Lanham Act, and Plaintiffs will seek all available remedies of damages, injunctive relief and attorneys’ fees. d. False and Misleading Advertising (Cal. Bus. & Prof. Code §17500) – Against All Defendants 22 23 i. Legal Discussion (B&P §17500 – False Advertising) 24 California's False Advertising Law (“FAL”) prohibits the dissemination of false or misleading 25 statements in connection with advertising. Cal. Bus. & Prof. §17500. “Section 17500 has been broadly 26 construed to proscribe ‘not only advertising which is false, but also advertising which [,] although true, 27 is either actually misleading or which has a capacity, likelihood or tendency to deceive or confuse the 28 public.’” Colgan v. Leatherman Tool Group, Inc., 135 Cal.App.4th 663, 679 (2006) (quoting Kasky v. -16- PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 22 of 24 1 Nike, Inc., 27 Cal.4th 939, 951 (2002)) (internal quotation marks omitted). Thus, to state a claim under 2 either the UCL or the false advertising law, based on false advertising or promotional practices, “’it is 3 necessary only to show that ‘members of the public are likely to be deceived.’” Ibid. (citation omitted).) 4 A violation of the FAL also constitutes a violation of the UCL. Kasky, supra, 27 Cal.4th at 949–50. 5 “Actual reliance, or causation, is inferred from the misrepresentation of a material fact.” Chapman v. 6 Skype, Inc., 220 Cal.App.4th 217, 229 (citing In re Tobacco II Cases, 46 Cal.4th 298, 327 (2009)) (2013). 7 Proof of Defendants’ materially false and/or misleading statements described above re Medicare’s 8 coverage, Gilbert’s role in developing the treatment, and their rights to use the intellectual property all 9 qualify. Plaintiffs will seek injunctive relief and restitution as permitted under Section 17500. 10 11 12 e. Breach Of Fiduciary Duty – Against Defendant Gilbert Only i. Legal Analysis (Breach of Fiduciary Duty) 13 The elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary 14 relationship, breach of fiduciary duty, and damages. Oasis West Realty, LLC v. Goldman, 51 Cal.4th 15 811, 820 (2011), citing Shopoff & Cavallo LLP v. Hyon, 167 Cal.App.4th 1489, 1509 (2008). As the 16 former attorney for both Dr. Aoki and ADRI, Defendant Gilbert was a “’fiduciary . . . of the very highest 17 character” and bound ‘to most conscientious fidelity . . .’” Id. at 821, citing Cox v. Delmas, 99 Cal. 104, 18 123 (1893). Among those fiduciary obligations are the duties of loyalty and confidentiality, which 19 continue in force even after the representation ends. Id., citing Wutchumna Water Co. & Bailey, 216 Cal. 20 564, 573-574 (1932). Gilbert’s conduct described above supports a finding of liability for breach of 21 fiduciary duty based on his role as either attorney for Plaintiffs or a corporate director. 22 23 24 25 26 27 f. Breach Of Confidential Relationship – Against Defendant Gilbert Only i. Legal Analysis (Confidential Relationship) The California Supreme Court has expressly recognized a cause of action for breach of a confidential relationship. Davies v. Krasna, 14 Cal.3d 502, 510 (1975), citing Rest.2d Trusts s 2, com.b, Vai v. Bank of America, 56 Cal.2d 329, 337-338 (1961) and Goldberg v. Goldberg, 217 Cal.App.2d 623, 28 -17- PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 23 of 24 1 629-630 (1963).) Applying these principals here, it is evident that Defendant Gilbert violated his 2 confidential and fiduciary relationship with Plaintiffs through a consistent course of concealment and 3 misrepresentation. 4 5 g. Unfair Competition (15 USC §1125(a), Lanham Act – Against All Defendants) i. Legal Analysis (Lanham Act – Unfair Competition) 6 7 8 9 10 11 12 13 14 15 16 The Ninth Circuit has consistently held that state common law claims of unfair competition and actions pursuant to California Business and Professions Code §17200 are “substantially congruent” to claims made under the Lanham Act. See Academy of Motion Picture Arts & Sciences v. Creative House Promotions, Inc., 944 F.2d 1446, 1457 (9th Cir. 1991) (citing Century 21 Real Estate Corp. v. Sandlin, 846 F.2d 1175, 1178 (9th Cir. 1988) (holding that under both, the “ultimate test” is whether the public is likely to be deceived or confused by the similarity of the marks”) (internal quotations omitted)); MetaFilm Assocs., Inc. v. MCA, Inc., 586 F.Supp.1346, 1362 (C.D.Cal.1984)(concluding that misappropriation deemed “unfair” under the Lanham Act is also “wrongful” and proscribed under §17200). As such, see analysis herein regarding Defendants’ violation of Business and Professions Code §17200. ii. Remedies (Lanham Act – Unfair Competition) 17 18 19 20 21 22 23 24 25 26 27 28 See discussion of remedies above in the context of false advertising under the Lanham Act which also applies here as well to acts of unfair competition. 15 U.S.C. §1117(a). h. Unfair Competition (Cal. Bus. & Prof. Code §17200) – Against All Defendants i. Legal Analysis (§17200) Business and Professions Code section 17200 defines “unfair competition” to include “any unlawful, unfair or fraudulent business act or practice” and “unfair, deceptive, untrue or misleading advertising” and any act that violates California’s false advertising law, Business and Professions Code section 17500 et seq. Thus, Section 17200 enumerates five potentially distinct theories of liability: (1) unlawful business acts or practices; (2) unfair business acts or practices; (3) fraudulent business acts or practices; (4) unfair, deceptive, untrue or misleading advertising; and (5) false advertising and related -18- PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD Case 2:11-cv-02797-TLN-CKD Document 359 Filed 03/17/19 Page 24 of 24 1 practices covered by Business and Professions Code section 17500 et seq. Cel-Tech Communications, 2 Inc. v. Los Angeles Cellular Telephone Company, 20 Cal.4th 63, 180 (1999). Section 17200 is a strict- 3 liability statute and proof of intent is not required. South Bay Chevrolet v. General Motors Acceptance 4 Corp., 72 Cal.App. 4th 861, 877 (1999). Private plaintiffs must “(1) establish a loss or deprivation of 5 money or property sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that that 6 economic injury was the result of, i.e., caused by, the unfair business practice or false advertising that is 7 the gravamen of the claim.” Kwikset Corp. v. Superior Court, 51 Cal.4th 310, 322 (2011) (emphasis in 8 original). Additionally, by definition, “any violation of the false advertising law necessarily violates the 9 [UCL].” Comm. on Children’s Television, Inc. v. Gen. Foods Corp., 35 Cal.3d 197, 210 (1983). Thus, 10 a false or misleading statement automatically triggers the remedies of both sections 17200 and 17500, 11 including separate civil penalties. See People v. Dollar Rent-A-Car Systems, Inc., 211 Cal.App.3d 119, 12 131-32 (1989) (specifically upholding authority to impose cumulative penalties totaling $5,000 per 13 violation). Here, Plaintiffs suffered economic injury in terms of deprivation of profit resulting from 14 Defendants’ unlawful use of Aoki’s technology. 15 16 17 18 19 20 21 IV. CONCLUSION Based on the foregoing, Plaintiffs will request that the Court find in favor of Plaintiffs on all causes of action and enter judgement as called for by the applicable law. Respectfully submitted, Dated: March 17, 2019 DTN LAW GROUP 22 By /s/ Duyen T. Nguyen Duyen T. Nguyen, Esq. 23 SOMMERS & SCHWARTZ LLP 24 By: s/Frank F Sommers Attorney for Plaintiffs THOMAS T. AOKI and AOKI DIABETES RESEARCH INSTITUTE 25 26 27 28 -19- PLAINTIFFS’ TRIAL BRIEF Case No.: 2:11-cv-02797-TLN-CKD