Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 1 of 24 PageID #:1 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS

Transcription

1 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 1 of 24 PageID #:1 PBN PHARMA, LLC, AHNAL PUROHIT, and HARRY C. BOGHIGIAN IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS Plaintiff, v. Civil Action No.: SARFARAZ K. NIAZI, Defendant. JURY TRIAL DEMANDED COMPLAINT Plaintiffs, PBN Pharma, LLC, Dr. Ahnal Purohit and Harry C. Boghigian (collectively Plaintiffs ) by their attorneys, as and for their Complaint against Defendant, Dr. Sarfaraz K. Niazi, alleges as follows: Nature of Action 1. This case involves the actions of one of PBN Pharma s partner, Dr. Sarfaraz Niazi, ( Niazi ) in failing to properly assign his patents, and patent applications to PBN Pharma, which he was required to do under the agreement that formed PBN Pharma. Moreover, Niazi failed to prosecute the patent applications so that they matured into enforceable patents. Niazi s actions have placed PBN Pharma in fear of being accused of patent infringement by the current assignee of Niazi s patents. Niazi s actions in this regard also constitute breach of contract, breach of his fiduciary duty as a partner to PBN Pharma, fraud in his dealings concerning the failed assignments and fraud in his failure to prosecute the patent applications

2 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 2 of 24 PageID #:2 The Parties 2. Plaintiff PBN Pharma, LLC, whose principal place of business at 111 South Wacker Drive, Chicago IL, was established in 2003, as a research and development company for new and unique therapeutic applications including, skin care, pain management, and weight management to name just a few. 3. Plaintiff Dr. Ahnal Purohit ( Purohit ) is an individual domiciled in the State of Illinois with a residency at 111 South Wacker Dr., Chicago, Illinois. 4. Plaintiff Harry C. Boghigian ( Boghigian ) is an individual domiciled in the State of Florida at Via Italia Circle, Bonita Springs, Florida. 5. Defendant Dr. Sarfaraz K. Niazi is an individual, and on information and belief, domiciled in the State of Illinois at 20 Riverside Drive, Deerfield, Illinois. 6. According to the electronic records of the U.S. Patent and Trademark Office ( PTO ) Niazi is the named inventor of at least twenty (20) patents, and on information and belief, the named inventor on at least twelve (12) patent applications which have never issued. 7. According to the electronic records of the PTO, Niazi is a registered patent agent, having received his registration on or about August 5, Niazi is also the author of the book, Filing Patents Online: A Professional Guide, which describes how to electronically file patent applications with the PTO. Jurisdiction and Venue 8. This action arises, at least in part, under the Patent Laws of the United States, Title 35 U.S.C. 1, et seq. and under the Federal Declaratory Judgment Act, 28 U.S.C. 201 and In particular, this Court has jurisdiction over the subject matter of this case under 28 U.S.C (federal question); 1332(a) (a suit between citizens of different states, and the - 2 -

3 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 3 of 24 PageID #:3 amount in controversy exceeds $75,000, exclusive of interest and costs); 1338 (patent infringement); 1367 (supplemental jurisdiction); and 2201, 2202 (declaratory judgment). 9. This Court has personal jurisdiction over Niazi as a resident of this judicial district. 10. Venue is proper in this judicial district pursuant to 28 U.S.C PERTINENT FACTS 11. PBN Pharma has established itself as a developer of patient friendly medical treatments that has worked on bringing a number of patented inventions to the market. These pharmacological applications are based on existing patents and patent applications. In this regard, PBN Pharma has expended a considerable amount of resources to develop and commercialize its products and, in particular, developing commercial applications for existing patents and patent applications. Formation Of PBN Pharma 12. PBN Pharma was formed as a partnership between Plaintiffs Ahnal Purohit ( Purohit ), Harry Boghigian ( Boghigian ), and Defendant Niazi (collectively the Partners ). 13. The Partners each had areas of expertise based on their past experiences that they contributed to the partnership. This allowed PBN Pharma the potential to bring a number of new products to market; Purohit ran, and still runs a marketing firm directed to the pharmaceutical industry; Boghigian had been an executive of one of the world s top ten pharmaceutical companies for thirty years, and continues in a number of business ventures, and Niazi had the technical expertise for the pharmaceutical products. 14. Upon the formation of PBN Pharma, Purohit contributed her creative and marketing expertise along with all administrative support and office space. Boghigian - 3 -

4 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 4 of 24 PageID #:4 contributed his marketing expertise and sales skills towards selling PBN Pharma s products, but also attempted to sell the patents and patent applications which PBN Pharma did not intend to commercialize. Niazi contributed his technical background in pharmaceutical formulation and manufacturing, as well as his patent expertise as a registered patent agent. 15. Each partner continues to pursue their own personal interests in addition to their responsibilities as partners of PBN Pharma. 16. PBN Pharma was formed on June 27, 2003 when the Partners signed the Operating Agreement of PBN Pharma LLC ( the Operating Agreement ) (attached hereto as Exhibit A), which created the partnership and PBN Pharma. 17. As set forth in the Operating agreement, the Partners were not required to make any Capital Contributions to PBN Pharma, except that Niazi was required to assign thirteen (13) patents and twelve (12) patent applications to PBN Pharma. In addition, Niazi was to assign additional patents and patent applications to PBN Pharma (Exhibit A at 3.3). 18. Niazi was to receive no compensation for the assignment of his patents and patent applications, except to the extent PBN Pharma subsequently sold any of the patents or patent applications, Niazi would receive up to $50,000 for each such patent or patent application. 19. The Partners agreed that they would attempt to sell and/or license most of the patents and patent applications and maintain the dermatologic related patents and patent applications for PBN Pharma to commercialize. This way, PBN Pharma could raise capital through the sale and/or licensing of the unwanted patents and patent applications in order to commercialize the dermatologic patents and patent applications. 20. Under the belief that PBN Pharma had the entire right, title and interest in the patents and patent applications, Plaintiffs Purohit and Boghigian contacted many other - 4 -

5 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 5 of 24 PageID #:5 companies with the intent of selling and/or licensing those patents and patent applications which PBN Pharma did intend to commercialize. Potential partnerships with large dermatology companies were also evaluated specifically for acne-related products. Among the many companies approached were GlaxoSmithKline, Roche, 3M, Taro Pharmaceuticals, Ferndale Pharmaceuticals, Hyperion Therapeutics, Medicis Pharmaceutical and Steifel Laboratories to name just a few. In so doing, Plaintiffs Purohit and Boghigian expended a great amount of time and resources to attempt to sell and/or license these patents and patent applications at their own expense. For example, all out of pocket expenses, including travel expenses, were paid by Purohit and Boghigian, and not reimbursed by PBN Pharma. 21. Under the belief that PBN Pharma had the entire right, title and interest in the patents and patent applications, PBN Pharma proceeded to commercialize the dermatologic patents and patent applications. 22. One product in particular, NapiNol, is an over the counter skin treatment for diaper dermatitis in infants (i.e. diaper rash) and plan to develop a general emollient for adults. NapiNol is the commercial embodiment of one of the patents Niazi was to have been assigned to PBN Pharma, U.S. Patent No. 6,419,963 ( the 963 Patent ) (attached hereto as Exhibit B). PBN also researched and developed a topical preparation for minor scrapes and bruises based on the 963 patent called Boo Boos Be Gone. PBN Pharma also invested in a new marketing campaign around this product introduction and displayed it for the first time to retailers in the fall of The NapiNol line of products is currently being marketed by PBN Pharma. 23. PBN Pharma also intended to commercialize, and continues to review the process for developing products based on at least U.S. Patent Nos. 6,235,314, 6,235,796, 6,447,820, 6,555,118 and U.S. Patent Application Nos. 09/681,518, 09/949,445 and 10/604,

6 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 6 of 24 PageID #:6 24. Until recently, Niazi worked with other PBN Pharma employees to develop products for PBN Pharma based on his patents and patent applications. 25. In addition to his responsibilities developing commercial products for PBN Pharma, Niazi, who is a registered patent agent, took responsibility for prosecuting the remaining patent applications, as well as filing trademark applications for PBN Pharma products. 26. On information and belief, Niazi filed at least three trademark applications on behalf of PBN Pharma, and at least nine other trademark applications. In addition, on information and belief, Niazi is listed as a patent agent on at least thirty-three (33) patent applications of which, at least two were to have been assigned to PBN Pharma. Patent and Patent Application Assignments to PBN Pharma 27. Under 3.3 of the Operating Agreement, no later than April 6, 2004, Niazi was to assign his entire right, title and interest in and to the patents, patent applications and patent disclosures awaiting final determination. 28. On or about April 6, 2004, Niazi signed a document entitled Assignment of Patents, and a document entitled Memorandum of Assignment (collectively Patent Assignments ). These documents purport to assign the thirteen (13) patents from Niazi to PBN Pharma. 29. In addition, on or about April 6, 2004, for each of the twelve (12) patent applications, Niazi signed a document entitled Assignment of Patent Application, and a document entitled Memorandum of Assignment (collectively Patent Application Assignments ). Each of these documents purport to assign each of the patent applications from Niazi to PBN Pharma

7 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 7 of 24 PageID #:7 30. The Patent Assignments and Patent Application Assignments (collectively PBN Pharma Assignments ) (attached hereto as Exhibit C) were never recorded with the PTO. 31. The PBN Pharma Assignments confirm that Niazi is the sole owner of the patents and patent applications, and assigns all rights titles and interest in the patents and patent applications. 32. In addition, the PBN Pharma Assignments provide that PBN Pharma may request Niazi to furnish all necessary documentation with [Niazi s] possession or control relating to or supporting chain of title and to confirm [PBN Pharma s] ownership of all right, title and interest in and to the [patents and patent applications]. Under the PBN Pharma Assignments, Niazi agrees to provide testimony and take any appropriate action in connection with the ownership rights of the patents or patent applications. Niazi s Separation from the Partnership 33. On information and belief, Niazi is also the founding chairman and CEO of Therapeutic Proteins Inc., also known as TheraProteins ( TPI ). According to the records of the Illinois Secretary of State s office, Niazi is president of TPI. 34. On information and belief, TPI was recently acquired by Amneal Pharmaceuticals. 35. On or about November 3, 2013 Niazi informed the Partners that he would like to withdraw as a partner to PBN Pharma. Under the terms of the Operating Agreement, the patents and patent applications which were to be assigned to PBN Pharma, remain with PBN Pharma upon Niazi s separation from PBN Pharma. However, as a gesture of good faith, the partners of PBN Pharma were willing to continue paying Niazi up to $50,000 for each patent and patent application sold by PBN Pharma

8 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 8 of 24 PageID #:8 Niazi s Prior Assignments of the Subject Patents and Patent Applications Novel Pharma Inc. Assignments 36. Unbeknownst to PBN Pharma, Purohit or Boghigian, on or about April 24, 2002, Niazi assigned a number of patents and patent applications to Novel Pharma Inc. ( Novel ). 37. According to the records of the Delaware Secretary of State s office, Novel was formed on January 10, On information and belief, at the time of the assignment to Novel, Novel had is principle place of business in Deerfield Illinois. 38. On information and belief, Niazi is the sole owner of Novel. 39. All but three patent applications and all of the patents which were to have been assigned to PBN Pharma were previously assigned to Novel ( Novel Assignments ) (attached hereto as Exhibit D). The Novel Assignments do not include any patents or patent applications which were not to have been assigned to PBN Pharma. 40. According to the Novel Assignments, Niazi received $100,000 for each patent and patent application, or $2.2 million in total. 41. On or about August 8, 2002, the Novel Assignments were recorded with the PTO. 42. The Novel Assignments took place over one year prior to the formation of PBN Pharma under the Operating Agreement, and two years prior to the PBN Assignments. 43. On information and belief, Niazi knew when he made the PBN assignments that he no longer had any rights in the subject patents and patent applications. 44. On information and belief, Niazi purposely withheld from Plaintiffs the fact that the patents and patent applications had been previously assigned to Novel, and the existence of the Novel Assignments

9 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 9 of 24 PageID #:9 The 936 Patent Assignments 45. According to the electronic records of the PTO, on or about July 8, 1983, the patent application that matured into U.S. Patent No. 4,530,936 ( the 936 patent ) was assigned from Niazi to Farmacon Research Corporation ( Farmacon ). On or about March 3, 1986, by order of the Supreme Court of New York, the 936 patent was assigned from Farmacom to the Sheriff of Suffolk County, then on or about August 22, 1990, by order of the U.S. Bankruptcy Court of the Northern District of Illinois, from Farmacom to Mohommed Kahn ( Kahn ). On or about May 1, 1991, the 936 patent was then assigned from Kahn to Dana Research Group, Inc. ( Dana ). 46. On or about April 24, 2002, Niazi assigned his rights to the 936 patent to Novel, notwithstanding that Niazi had no rights in the 936 patent by this time. 47. Each of the assignments concerning the 936 patent were recorded with the PTO. 48. The 936 patent was one of the patents Niazi was to have assigned to PBN Pharma pursuant to the Operating Agreement. 49. On information and belief, Niazi knew when he agreed to assign the 936 patent to PBN Pharma that he no longer had any rights in the 936 patent. 50. On information and belief, Niazi purposely withheld from Plaintiffs the fact that the 936 patent had been previously assigned. The 368 Patent Assignments 51. According to the electronic records of the PTO, on or about May 6, 1986, the patent application that matured into U.S. Patent No. 4,639,368 ( the 368 patent ) was assigned from Niazi and his co-inventor, Alvin Shemesh to Farmacon. On or about August 22, 1990, by order of the U.S. Bankruptcy Court of the Northern District of Illinois, the 368 patent was - 9 -

10 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 10 of 24 PageID #:10 assigned from Farmacom to Kahn. On or about May 1, 1991, the 368 patent was assigned from Kahn to Dana. 52. On or about April 24, 2002, Niazi assigned his rights to the 368 patent to Novel, notwithstanding that Niazi had no rights in the 368 patent by this time. 53. Each of the assignments concerning the 368 patent were recorded with the PTO. 54. The 368 patent was one of the patents Niazi was to have assigned to PBN Pharma pursuant to the Operating Agreement. 55. On information and belief, Niazi knew when he agreed to assign the 368 patent to PBN Pharma that he no longer had any rights in the 368 patent. 56. On information and belief, Niazi purposely withheld from Plaintiffs the fact that the 368 patent had been previously assigned. The 773 Application Assignment 57. U.S. Patent Application No. 09/957,773 ( the 773 application ) was one of the patent applications Niazi was to assign to PBN Pharma pursuant to the Operating Agreement. 58. According to the electronic records of the PTO, on or about May 16, 2003, the 773 application was abandoned for failure to respond to an office action. 59. Niazi was already a registered patent agent at the time the 773 application was allowed to go abandoned. 60. At the time Niazi entered into the Operating Agreement, the 773 application was already abandoned. 61. At the time Niazi signed the PBN Assignments, conveying the 773 application to PBN Pharma, the 773 application was already abandoned

11 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 11 of 24 PageID #: On information and belief, Niazi knew when he agreed to assign the 773 application to PBN Pharma pursuant to the Operating Agreement, that the 773 application was already abandoned. 63. On information and belief, Niazi knew when he assigned the 773 application pursuant to the PBN Assignments, that application had already gone abandoned. 64. On information and belief, Niazi purposely withheld from Plaintiffs the fact that the 773 application was abandoned. The 445 Application Assignment 65. U.S. Patent Application No. 09/949,445 ( the 445 application ) was one of the patent applications Niazi was to assign to PBN Pharma pursuant to the Operating Agreement. 66. According to the electronic records of the PTO, on or about August 28, 2003, the 445 application was abandoned for failure to respond to an office action. 67. Niazi was already a registered patent agent at the time the 445 application was allowed to go abandoned. 68. At the time Niazi entered into the Operating Agreement, the 445 application was already abandoned. 69. At the time Niazi signed the PBN Assignments, conveying the 445 application to PBN Pharma, the 445 application was already abandoned. 70. On information and belief, Niazi knew when he agreed to assign the 445 application to PBN Pharma pursuant to the Operating Agreement, that the 445 application was already abandoned. 71. On information and belief, Niazi knew when he assigned the 445 patent pursuant to the PBN Assignments, that application had already gone abandoned

12 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 12 of 24 PageID #: On information and belief, Niazi purposely withheld from Plaintiffs the fact that the 445 application was abandoned. The 2010 Assignment 73. On or about April 13, 2010, Niazi, in his capacity as patent agent, signed an assignment agreement purporting to assign the 963 patent from himself to PBN Pharma ( 2010 Assignment ), notwithstanding that Novel, not Niazi, held all rights in the 963 patent. 74. On or about April 28, 2010, Niazi recorded with the PTO the 2010 Assignment. 75. On information and belief, Niazi attempted to make the 2010 assignment since PBN Pharma was practicing the patent in its manufacturing of NapiNol. 76. On information and belief, Niazi knew that the 2010 Assignment was invalid since he had no rights to the 963 patent at the time he made the 2010 Assignment. 77. On information and belief, Niazi knowingly recorded an invalid patent assignment with the PTO. 78. On information and belief, Niazi purposely withheld from Plaintiffs that he attempted to assign the 963 patent from himself to PBN Pharma. The Faulty PBN Assignments 79. At the time PBN Pharma was formed under the Operating agreement, and at the time the PBN Assignments were made, Niazi had no rights to the patents and patent applications. 80. On information and belief, Niazi knew he had already assigned all rights to the patents and applications at the time he entered into the Operating Agreement. 81. On information and belief, Niazi purposely withheld from Plaintiffs the fact that he had assigned all rights to the patents and patent applications at the time he entered into the Operating Agreement

13 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 13 of 24 PageID #: On information and belief, Niazi entered into the Operating Agreement knowing that he could not satisfy his requirements under the agreement to assign his rights to the patents and patent applications. 83. On information and belief, Niazi purposely withheld from Plaintiffs the fact that he entered into the Operating Agreement knowing that he could not satisfy his requirements under the agreement to assign his rights to the patents and patent applications. 84. On information and belief, Niazi knew he had already assigned all rights to the patents and applications at the time he entered into the PBN Assignments. 85. On information and belief, Niazi purposely withheld from Plaintiffs the fact that he had already assigned all rights to the patents and applications at the time he entered into the PBN Assignments. 86. On information and belief, Niazi signed the PBN Assignments knowing that the PBN Assignments were invalid. 87. On information and belief, knowing that the patents were not properly assigned to PBN Pharma, Niazi continued to pay the patent renewal fees himself for all issued patents rather than seek payment from PBN Pharma. 88. As a direct result of Niazi s failure to properly assign the patents and patent applications, Plaintiffs are in apprehension of being accused of patent infringement by Niazi and/or Novel as the current owner and/or assignee of the 963 patent. Plaintiffs have also suffered and will continue to suffer serious and irreparable economic and business injury. Niazi s actions also eliminates any advantage PBN Pharma may have had over its competitors. In addition, Niazi s actions threatens the ability for PBN Pharma to bring products to market which rely on the patents and patent applications, and for which PBN Pharma has invested

14 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 14 of 24 PageID #:14 considerable resources. Moreover, Niazi s actions have jeopardized PBN Pharma s ability to raise capital by selling and/or leasing patents and patent applications which it does not intend to commercialize. Niazi s Failure to Continue Prosecuting the Patent Applications 89. Prior to entering into the Operating Agreement, Niazi became a registered patent agent with the PTO on August 5, As a registered patent agent, Niazi agreed to prosecute and/or oversee the prosecution of the twelve (12) patent applications that were to have been assigned to PBN Pharma, on behalf of PBN Pharma. 91. On information and belief, Niazi, or the people working under his direction, allowed each patent application to become abandoned. 92. By way of example only, according to the electronic records of the PTO, in his capacity as registered patent agent, on July 20, 2003, Niazi filed U.S. Patent Application No. 10/604,424 ( the 424 application ). On November 17, 2004 the PTO issued a non-final office action rejecting all the claims of the 424 application. Rather than respond to the non-final office action, on February 25, 2005 Niazi sent a personal correspondence to the PTO withdrawing the 424 application, which went abandoned on May 17, On information and belief, Niazi purposely withheld from Plaintiffs his decision to abandon the 424 application, as well as his decision to allow all of the patent applications to go abandoned. 94. As a direct result of Niazi s failure to prosecute the patents, and allow them to go abandoned, Plaintiffs have suffered and will continue to suffer serious and irreparable economic and business injury. Niazi s actions have caused PBN Pharma to lose valuable resources in the

15 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 15 of 24 PageID #:15 form of issued U.S. patents and an advantage over PBN Pharma s competitors. Based on Niazi s valuation of the patents and patent applications at the time he assigned the patents and patent applications to Novel in 2002, Niazi s actions have caused PBN Pharma to have, at least incurred a loss of assets valued at $1.2 million in 2002 dollars. In addition, Niazi s actions threatens PBN Pharma s ability to bring new products to market based on patent applications PBN Pharma expected to mature into issued patents, and for which PBN Pharma has invested considerable resources. COUNT I DECLARATORY JUDGMENT OF NON-INFRINGEMENT OF THE 963 PATENT 95. PBN Pharma incorporates by reference paragraphs 1 through 94 of its Complaint as if set forth herein. 96. Under the belief that PBN Pharma had the entire right, title and interest in the patents and patent applications, PBN Pharma proceeded to commercialize the dermatologic patents and patent applications, resulting in at least two product, NapiNol and Boo Boos Be Gone, which are based on and incorporate the teachings of the 963 patent, because, inter alia, Niazi refuses to clear the air regarding if Plaintiffs can commercialize products as claimed by the 963 patent. 97. Having recently discovered that Niazi had previously assigned the entire right, title and interest in at least the 963 patent to his own company, a present, genuine, and justiciable controversy exists between Plaintiffs and Niazi regarding the non-infringement of the 963 patent. 98. The controversy is such that, pursuant to Federal Rule of Civil Procedure 57, and 28 U.S.C. 2201, et seq., Plaintiffs are entitled to a declaration, in the form of a judgment, that

16 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 16 of 24 PageID #:16 by its activities, Plaintiffs have not infringed, and is not infringing any claim of the 963 patent. Such a determination and declaration is necessary and appropriate at this time. COUNT II BREACH OF CONTRACT 99. PBN Pharma incorporates by reference paragraphs 1 through 98 of its Complaint as if set forth herein On information and belief, upon the formation of PBN Pharma, Niazi agreed to assign his patents and patent applications knowing that he had no right or title to the patents and patent application On information and belief, Niazi knowingly breached his obligation in the Operating Agreement by agreeing to assign his patents and patent applications knowing that he held no rights or title in the patents or patent applications As a direct result of Niazi s breach of contract, Plaintiffs have sustained, and will continue to sustain irreparable harm and damages. COUNT III BREACH OF FIDUCIARY DUTY 103. PBN Pharma incorporates by reference paragraphs 1 through 102 of its Complaint as if set forth herein By reason of Niazi s position and status as one of three partners in PBN Pharma, Niazi owes and continues to owe to PBN Pharma the utmost in loyalty and fair dealing On information and belief, Niazi knowingly breached his agreement to assign his patents and patent applications to PBN Pharma On information and belief, Niazi knowingly caused the patent applications to become abandoned

17 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 17 of 24 PageID #: The aforementioned acts by Niazi constitute clear and blatant examples of his breach of fiduciary duty and a breach of loyalty and trust As a direct result of Niazi s breach of his fiduciary duty, Plaintiffs have sustained, and will continue to sustain irreparable harm and damages. COUNT IV FRAUD IN THE ASSIGNMENT OF NIAZI S PATENTS AND PATENT APPLICATIONS 109. PBN Pharma incorporates by reference paragraphs 1 through 108 of its Complaint as if set forth herein On or about June 27, 2003, Niazi entered into the Operating Agreement which formed PBN Pharma Under the Operating agreement, Niazi was required to assign thirteen (13) patents and twelve (12) patent applications to PBN Pharma Niazi was to receive no compensation for the assignment of his patents and patent applications, except to the extent PBN Pharma subsequently sold any of the patents or patent applications, Niazi would receive up to $50,000 for each such patent or patent application On or about April 6, 2004, Niazi entered into an agreement which assigned his entire right, title and interest in the patents and patent applications By way of the April 6, 2004 assignments, Niazi affirmed that he was the sole owner of the patents and patent applications Based on the belief that Niazi had properly assigned all his rights to the patents and patent applications, PBN Pharma proceeded to commercialize, and did commercialize the patents and patent applications

18 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 18 of 24 PageID #: Until recently, Niazi continued to work with PBN Pharma to commercialize his patents and patent applications assigned to PBN Pharma, giving the distinct impression that the patents and patent applications had been properly assigned to PBN Pharma Unbeknownst to Plaintiffs, on or about April 24, 2002, Niazi had assigned his entire right, title and interest in the patents and all but three of the patent applications that were to be assigned to PBN Pharma, to Novel Pharma, Inc. ( Novel ), receiving $2.2 million for the patents and patent applications On information and belief, Niazi knew that he had previously assigned his rights to the patents and patent applications which were to have been assigned to PBN Pharma On information and belief, Niazi purposely withheld from Plaintiffs the fact that the patents and patent applications had been previously assigned to Novel before the patents and patent applications were assigned to PBN Pharma On or about July 8, 1983, Niazi assigned his rights to the patent application that matured into U.S. Patent No. 4,530,936 ( the 936 patent ) to Farmacom Research Corporation On or about March 3, 1986 the 936 patent was assigned to the Sheriff of Suffolk County On or about August 22, 1990, the 936 patent was assigned to Mohommed Kahn, by order of the U.S. Bankruptcy Court of Northern District of Illinois On or about May 1, 1991, the 936 patent was assigned to Dana Research Group Each of these assignments of the 936 patent occurred prior to Niazi s assignment of the 936 patent to Novel On information and belief, Niazi knew that he had previously assigned his rights to the 936 patent when he agreed to assign the 936 patent to PBN Pharma

19 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 19 of 24 PageID #: On information and belief, Niazi purposely withheld from Plaintiffs the fact that the 936 patent had been previously assigned before it was assigned to PBN Pharma On or about May 6, 1996, Niazi assigned his rights to the patent application that matured into U.S. Patent No. 4,639,368 ( the 368 patent ) to Farmacom Research Corporation On or about August 22, 1990, the 368 patent was assigned to Mohommed Kahn, by order of the U.S. Bankruptcy Court of Northern District of Illinois On or about May 1, 1991, the 368 patent was assigned to Dana Research Group Each of these assignments of the 368 patent occurred prior to Niazi s assignment of the 368 patent to Novel On information and belief, Niazi knew that he had previously assigned his rights to the 368 patent when he agreed to assign the 368 patent to PBN Pharma On information and belief, Niazi purposely withheld from Plaintiffs the fact that the 368 patent had been previously assigned before it was assigned to PBN Pharma On or about May 16, 2003, U.S. Patent Application No. 09/957,773 ( the 773 application ) was abandoned for failure to respond to an office action The 773 application was already abandoned when Niazi agreed to assign the 773 application to PBN Pharma on June 27, On information and belief, Niazi knew that the 773 application was already abandoned when he agreed to assign the 773 application to PBN Pharm on June 27, On information and belief, Niazi purposely withheld from Plaintiffs the fact that the 773 application was already abandoned when he agreed to assign the 773 application to PBN Pharm on June 27,

20 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 20 of 24 PageID #: The 773 application was already abandoned when Niazi attempted to assign the 773 application to PBN Pharma on April 6, On information and belief, Niazi knew that the 773 application was already abandoned when he attempted to assign the 773 application to PBN Pharma on April 6, On information and belief, Niazi purposely withheld from Plaintiffs the fact that the 773 application was already abandoned when he attempted to assign the 773 application to PBN Pharma on April 6, On or about August 28, 2003, U.S. Patent Application No. 09/949,445 ( the 445 application ) was abandoned for failure to respond to an office action The 445 application was already abandoned when Niazi attempted to assign the 445 application to PBN Pharma on April 6, On information and belief, Niazi knew that the 445 application was already abandoned when he attempted to assign the 445 application to PBN Pharma on April 6, On information and belief, Niazi purposely withheld from Plaintiffs the fact that the 445 application was already abandoned when he attempted to assign the 445 application to PBN Pharma on April 6, On or about April 13, 2010, Niazi attempted to assign U.S. Patent No. 6,419,963 from himself to PBN Pharma after PBN Pharma began practicing the patent in the manufacturing of NapiNol On or about April 28, 2010, Niazi recorded the April 13 assignment with the PTO On information and belief, Niazi knew that he had previously assigned his rights to the 963 patent when made the April 13 assignment

21 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 21 of 24 PageID #: On information and belief, Niazi knowingly and purposefully recorded an invalid assignment with the PTO On information and belief, Niazi purposely withheld from Plaintiffs the fact that he attempted to assign and record the 963 assignment On information and belief, knowing that the patents were not properly assigned to PBN Pharma, Niazi continued to pay the patent renewal fees himself for all issued patents rather than seek payment from PBN Pharma During all relevant times, Niazi was a registered as a patent agent to practice before the PTO As a registered patent agent, Niazi knew or should have known that the assignments he made to PBN Pharma were invalid and fraudulent As a direct result of Niazi s fraudulent activities, Plaintiffs have needlessly spent considerable resources to commercialize patents which they do not have the rights to As a direct result of Niazi s fraudulent activities Plaintiffs are endanger of being accused of infringing another parties patents As a direct result of Niazi s fraudulent activities Plaintiffs have sustained, and will continue to sustain irreparable harm and damages. COUNT V FRAUD IN THE PURPOSEFUL FAILURE TO PROSECUTE NIAZI S PATENT APPLICATIONS 155. PBN Pharma incorporates by reference paragraphs 1 through 154 of its Complaint as if set forth herein As a result of being a registered patent agent, upon the formation of PBN Pharma, Niazi agreed to prosecute and/or oversee the prosecution of the twelve (12) patent applications that he was to have assigned to PBN Pharma

22 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 22 of 24 PageID #: On information and belief, Niazi, or the people working under his direction, allowed each patent application that he was to have assigned to PBN Pharma, to become abandoned By way of example only, according to the electronic records of the PTO, in his capacity as registered patent agent, on July 20, 2003, Niazi filed U.S. Patent Application No. 10/604,424. On November 17, 2004 the PTO issued a non-final office action rejecting all the claims of the 424 application. Rather than respond to the non-final office action, on February 25, 2005 Niazi sent a personal correspondence to the PTO withdrawing the 424 application, which went abandoned on May 17, On information and belief, Niazi purposely withheld from Plaintiffs his decision to abandon the 424 application, as well as his decision to allow all of the patent applications to go abandoned On information and belief, and contrary to his duty as a registered patent agent, Niazi purposely failed to respond to outstanding office actions from the PTO On information and belief, Niazi purposely allowed all patent applications to go abandoned On information and belief, Niazi purposely did not consult with others within PBN Pharma as to whether or how to continue prosecuting some or all of the patent applications On information and belief, Niazi purposely withheld from Plaintiffs the fact that he was not pursuing prosecution of any of the patent applications Niazi s actions in purposefully failing to prosecute the patents after agreeing to do so was fraudulent

23 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 23 of 24 PageID #: As a direct result of Niazi s fraudulent actions, Plaintiffs have had a loss of assets valued by Niazi at $1.2 million in 2002 dollars As a direct result of Niazi s fraudulent actions, Plaintiffs have suffered substantial financial losses in lost potential revenue and an advantage over PBN Pharma s competitors 167. As a direct result of Niazi s fraudulent actions, PBN Pharma is limited in its ability to bring new products to market based on the inventions contained in the patent applications and for which Plaintiffs have already expended considerable resources As a direct result of Niazi s fraudulent actions, Plaintiffs have suffered and will continue to suffer serious and irreparable economic and business injury. WHEREFORE, Plaintiffs respectfully requests the following relief: a. A Declaration that Plaintiffs activities and commercial products are not, and do not, infringe the 963 patent. b. The entry of a judgment in favor of Plaintiffs on the claim of Breach of Contract; c. The entry of a judgment in favor of Plaintiffs on the claim of Breach of Fiduciary Duty; d. The entry of a judgment in favor of Plaintiffs on the claim of Fraud in the Assignment Of Niazi s Patents and Patent Applications; e. The entry of a judgment in favor of Plaintiffs on the claim of Fraud in the Purposeful Failure to Prosecute Niazi s Patent Applications; f. A judgment in Plaintiffs favor against Niazi for monetary damages, including but not limited to, all amounts necessary to compensate Plaintiffs for Niazi s wrongful activities including reasonable attorneys fees and costs;

24 Case: 1:14-cv Document #: 1 Filed: 09/05/14 Page 24 of 24 PageID #:24 g. A judgment in Plaintiffs favor and against Niazi for punitive and/or exemplary damages for Niazi s willful and malicious conduct; h. An award of interest on any judgment rendered in this action; i. An award of Plaintiffs attorneys fees and costs in this action; and j. Such other and further relief that Plaintiffs are entitled to under law, and any additional relief that this Court or a jury may deem just and proper. JURY DEMAND Plaintiffs demands a trial by jury on all issues presented in this Complaint. DATED: September 5, 2014 Respectfully submitted, /s/neil A. Benchell Edward L. Bishop ebishop@bdl-iplaw.com Nicholas S. Lee nlee@bdl-iplaw.com Neil A. Benchell nbenchell@bdl-iplaw.com Bishop Diehl & Lee, Ltd E. Golf Road, Suite 390 Schaumburg, IL T: (847) F: (847) Counsel for Plaintiffs PBN Pharma, LLC, Ahnal Purohit, and Harry C. Boghigian