Princeton Power Systems v. Varentec et. al by patentbl

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									                            UNITED STATES DISTR ICT COURT
                                 D IS TR IC T O F N E W J E R S E Y


PRINCETON POWER SYSTEMS, INC.,
      a Delaware corporation,                            CIVIL ACTION NO. ______________

                               Plaintiff,
v.

VARENTEC, INC.,

       a California corporation,

RUDOLF LIMPAECHER

       an individual, and

ERIK LIMPAECHER

       an individual,

                               Defendants.




                                            C O M PL A I N T


       Plaintiff, Princeton Power Systems, Inc. (“PPS”), by its attorneys, Drinker Biddle &

Reath LLP, by way of Complaint against defendants Varentec, Inc. (“Varentec”), Rudolf

Limpaecher (“Rudy”), and Erik Limpaecher (“Erik”) (collectively, “Defendants”), alleges as

follows:

                                   STATEMENT       OF T HE     CASE

       1.     This action seeks injunctive relief, declaratory relief, and damages, arising out of

Defendants’ misappropriation and unauthorized use of PPS’ confidential information and trade

secrets, Rudy and Erik’s breach of their fiduciary duties and contractual duties by disclosing
PPS’ confidential information, trade secrets and corporate opportunities to Varentec, and

Varentec’s patent infringement by selling and/or offering to sell and taking concrete steps to

manufacture and sell products that do or will infringe on PPS’ exclusive patent rights under U.S.

Patent No. 6,118,678.

       2.       As a result of Defendants’ wrongful actions, PPS faces immediate and irreparable

harm for which there is no adequate remedy at law.

                                         T HE P A R T I E S

       3.       Plaintiff PPS is a corporation duly incorporated and existing under the laws of the

State of Delaware, with its principal place of business at 3490 US 1, Building 19, Princeton, New

Jersey 08540.

       4.       Upon information and belief, defendant Varentec is a corporation duly

incorporated and existing under the laws of the State of California, with its principal place of

business at 24303 Elise Court, Los Altos, California 94024 and is the successor-in-interest to

Varentec, LLC, a Delaware limited liability company.

       5.       Erik was the Chief Technical Officer and is a shareholder of PPS and resides at 3

Orchard Ave., Pennington, New Jersey 08543.

       6.       Rudy is a member of PPS’ Board of Directors and has worked, from time to time,

as a paid consultant for PPS at its offices at 501 Forrestal Road, Princeton, New Jersey 08540

and 201 Washington Road, Building 2, Princeton, New Jersey 08540. Upon information and

belief, Rudy resides at 45 Parsonage Lane, Topsfield, Massachusetts 01983.




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                                    JURISDICTION      AND   VENUE

          7.    This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C.

§§ 1331, 1338(a) because Count VIII seeking a declaratory judgment arises under the Patent

Laws of the United States, 35 U.S.C. § 101, et seq.

          8.    This Court has supplemental jurisdiction pursuant to 28 U.S.C. § 1367 over the

remaining claims because they are so related to the patent claim that they form part of the same

case or controversy.

          9.    This Court has personal jurisdiction over Varentec because, inter alia, it has

purposefully engaged in tortious conduct in this judicial district by misappropriating PPS’ trade

secrets and by contacting and encouraging Rudy and Erik, at times when they were present in

New Jersey, to divulge PPS’ trade secrets and to breach their fiduciary duties to PPS. PPS has

been damaged by Varentec’s tortious acts in New Jersey.             Varentec has also purposefully

committed acts of infringement in this judicial district by obtaining information on technology

covered by PPS’ exclusive patent rights and using that information to obtain a government grant

and to further Varentec’s corporate strategies.

          10.   This Court has personal jurisdiction over Erik because, inter alia, he lives and

works in New Jersey and breached his contractual and fiduciary duties to PPS while in New

Jersey.

          11.   This Court has personal jurisdiction over Rudy because, inter alia, he sometimes

worked as a paid consultant for PPS at its Princeton, New Jersey offices during the time period

relevant to the issues in this litigation.

          12.   This Court has personal jurisdiction over the defendants because, inter alia, they

have purposely availed themselves of the benefits and protections of New Jersey’s laws such that


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they should reasonably anticipate being haled into court here.               The defendants have had

persistent, continuous, and systematic contacts with this judicial district.

        13.     Venue is proper in this district pursuant to 28 U.S.C. § 1391(a)(2) because a

substantial part of the events or omissions giving rise to the claims occurred, or a substantial part

of the property that is the subject of the action is situated, in this District.

                                            B A C K GR O U N D

                                    Princeton Power Systems

        14.     PPS is a small and growing company founded in 2001 by four Princeton

University students and graduates.        PPS is a manufacturer of advanced power conversion

products and alternative energy systems, manufacturing patented electronics that provide a

reliable, eco-friendly, and cost-effective means of converting electric power. The company

provides solutions for renewable energy, distributed power generation, and military applications.

PPS products reduce energy consumption, lower peak electric usage, and provide clean,

renewable energy sources with superior performance.

        15.     PPS has been very successful since its inception and has been awarded numerous

grants and contracts from federal and state government agencies. For example, in 2003, PPS

received a $588,834 grant from the Department of Energy (“DOE”) to design and develop a

power converter for small wind turbines.

        16.     In 2004, PPS secured a $250,000 grant from the New Jersey Economic

Development Authority to adapt its prototype AC-link™ Clean Power Variable Speed Drive

(VSD) into a production prototype for industrial and commercial use.

        17.     In 2007, PPS secured a grant from the Goddard Flight Center of the National

Aeronautics and Space Administration (“NASA”) to deliver a small, lightweight power converter


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for space-based applications. The project entailed developing detailed designs for three different

configurations, and delivering three functional prototypes.

       18.     In 2008, PPS announced the award of a contract from the DOE to develop

advanced power conversion technologies under the Solar Energy Grid Integration Systems

(“SEGIS”) program. Initiated in 2008, the SEGIS activity is a partnership that includes DOE,

Sandia National Laboratories, industry, utilities, and universities and emphasizes complete

system development. This research and development grant enabled a complete design for a 100-

kW demand response inverter based on PPS’ proprietary inverter technology.

       19.     In 2009, PPS announced the award of a $2.8M Stage II contract under the SEGIS

program. This contract was a continuation of the Stage I SEGIS contract PPS secured in 2008

for development of an advanced prototype Demand Response Inverter (“DRI”) that will lower

the cost of solar energy through higher efficiency, higher reliability, and lower capital cost, while

providing value added ancillary services to the utility, including energy storage.

       20.     In 2010, PPS announced the award of a $2.7M SEGIS Stage III contract. The

contract was the result of a competitive solicitation for the SEGIS program. The Stage III

contract for system commercialization and demonstration is a continuation of Stage II, which

focused on prototype development of an advanced DRI system.

       21.     In addition to these projects, PPS has been awarded numerous other contracts

with private businesses and government agencies since its inception in 2001.

                                Rudy and Erik Limpaecher

       22.     Rudy is a member of the PPS Board of Directors and has also worked as a paid

consultant for PPS, designing products and marketing PPS to potential customers.              While




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continuing to serve as a board member of PPS, Rudy accepted a position as Chief Scientist at

Varentec.

       23.     Erik is the son of Rudy and is a co-founder of PPS. Until April 28, 2011, Erik

was the Chief Technical Officer of PPS and he participated in every stage of the product cycle

including securing customers, designing products, selling those products, and marketing PPS.

Erik is also a shareholder in PPS.

       24.     Rudy and Erik, in their capacities as a member of the Board of Directors of PPS

and the Chief Technical Officer of PPS, respectively, have been privy to PPS’ confidential

information and trade secrets.

       25.     Erik and his brother Alex Limpaecher (“Alex”) are substantial shareholders of

PPS. Together they hold in excess of 24% of the outstanding capital stock of PPS. Upon

information and belief, Erik and Alex act in concert with their father Rudy in exercising their

voting rights as shareholders.

       26.     Rudy and Erik are the named co-inventors on U.S. Patent No. 6,118,678 and

counterpart patents around the world.

       27.     Upon information and belief, Erik and Alex own shares of stock in Varentec.

                                          Varentec

       28.     Upon information and belief, Varentec is in the business of designing,

manufacturing, and selling advanced power equipment for electrical grids.

       29.     On its website, Varentec states that it “provides innovative, compact, and high

performance power electronics and total systems for grid applications.” A true and correct copy

of a page from Varentec’s website, www.varentec.com, is attached hereto as Exhibit “A”.




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        30.    Varentec is an actual or potential competitor of PPS. Varentec and PPS operate in

the same marketplace, have overlapping corporate goals, and share the same potential customer

base.

                                        The ’678 Patent

        31.    On September 12, 2000, United States Patent No. 6,118,678 (the ’678 Patent)

entitled “Charge Transfer Apparatus and Method of Employing the Same” was duly and legally

issued by the United States Patent and Trademark office to Rudy and Erik. PPS is the exclusive

owner, by assignment, of certain rights, titles, and interests to the ’678 Patent. A true and correct

copy of the ’678 Patent is attached hereto as Exhibit “B”.

                           The Technology in the ’678 Patent

        32.    The ’678 Patent relates to the field of electric power conversion. The invention

involves a “charge-transfer apparatus and method for alternating-current to alternating-current

(AC-to-AC) power conversion, alternating-current to direct-current (AC-to-DC) rectification,

DC-to-AC inversion, DC-DC power conversion, and volt-ampere-reactive (VAR) control.

Although the application is subject to a wide range of applications, it is especially suited for use

in power distribution and transmission systems in electric utility, industrial, commercial, and

marine applications.” Exh. “B”, ’678 Patent, at 1. The invention addresses, among other things,

the need to reduce “distortion of the waveform of the AC power supply.” Id.

        33.    On December 30, 1999, Rudy assigned all of his right, title, and interest in the

’678 Patent to his son, Alex.      A true and correct copy of the General Assignment dated

December 30, 1999 is attached hereto as Exhibit “C”. As of the date of this Complaint, the

patent is jointly owned by Erik and Alex.




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        PPS is Granted Certain Exclusive Rights under the ’678 Patent

       34.     On March 25, 2003, Erik and Alex licensed the ’678 Patent, in part, to PPS,

including granting certain exclusive patent license rights. The exclusive rights include the right

to exclude others from developing, making, having made, using, selling, or offering to sell

systems within the “FIELD” defined by the license to encompass “any circuits or systems that

are covered by one or more unexpired claims of the LICENSED PATENTS, and are used in the

fields of motor/generator control and distributed power generation interconnection, provided,

however, that ‘FIELD’ shall exclude (i) all circuits or systems for use with both input and output

power-carrying terminals operating above 10kV and (ii) all military applications.” The March

25, 2003 Patent License Agreement superseded a previous License Agreement between PPS,

Erik and Rudy dated June 29, 2001 and a subsequent Letter Agreement between PPS, Erik and

Rudy dated July 13, 2001. A true and correct copy of the March 25, 2003 Patent License

Agreement is attached hereto as Exhibit “D”.

       35.     The March 25, 2003 Patent License Agreement was amended effective March 8,

2005 by a Patent License Addendum. The definition of “FIELD” in the March 25, 2003 Patent

License Agreement was revised to encompass “any circuits or systems that are covered by one

or more unexpired claims of the LICENSED PATENTS, and are used in the fields of

motor/generator control and distributed power generation interconnection, provided, however,

that ‘FIELD’ shall exclude (i) all circuits or systems for use with both input and output power-

carrying terminals operating above 10kV and (ii) all contracts with the United States Department

of Defense.” The “INCLUDED CONTRACTS License” was amended to exclude, inter alia,

“all devices, circuits or systems with a single power-carrying terminal that, at any voltage or

power level, meet the specific design, functionality and operating parameters described in the


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‘VIII. VAR Compensator’ Description of Preferred Embodiment section of United States patent

#6,118,678 and depicted in Figure 7 of the same . . . .” A true and correct copy of the March 8,

2005 Patent License Addendum is attached hereto as Exhibit “E”.

       36.     The phrase “distributed power generation” is widely known to refer to the

“distribution” side of the power grid as opposed to the “transmission” side. The “distribution”

and “transmission” portions of a grid are generally separated by a “step-down” transmission sub-

station with the “distribution” side generally (but not necessarily) operating at voltage levels

below 100kV. If a power source is connected to the grid on the “distribution” side, it is

considered “distributed power generation.”     “Distributed power generation interconnection”

refers to any technology that supports the interconnection of distributed power generators to the

grid or to each other.

       37.     Distributed power generation employs small-scale technologies to produce

electrical power at distribution-level voltages.     Technologies typically consist of modular

(including renewable energy) generators. These distributed generators often provide lower-cost

electricity and better reliability and security with less environmental impacts than large power

generators.    See “Introduction to Distributed Generation,” 2007 Consortium on Energy

Restructuring, Virginia Tech University. A true and correct copy of relevant pages from this

report is attached hereto as Exhibit “F”. The use of renewable energy sources in a distributed

power generation system helps to mitigate the harmful environmental effects of centralized

power plants which contribute to greenhouse gas emissions, the production of nuclear waste,

inefficiencies through transmission of power over long distances, and environmental effects

where power lines are constructed. See id. However, distributed power generators are often




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intermittent sources of electricity, and are more difficult to interconnect to the electric grid due to

this intermittency.

       38.     Distributed power generation often contains the following characteristics: small

generators and storage power systems; ranges between 1kW to 50MW or higher; and power

sources scattered throughout the power grid and connected primarily to the distribution system.

See P.K. Sen, Ph.D., P.E., “Renewable Energy and Distributed Power Generation.” A true and

correct copy of relevant pages from this report is attached hereto as Exhibit “G”.

     Varentec is Granted Certain Exclusive Rights under the ’678 Patent

       39.     On June 8, 2010, Erik and Alex licensed the ’678 Patent, in part, to Varentec.

The Varentec license includes certain exclusive rights, including: “any circuits or systems that

(a) are covered by one or more unexpired claims of the LICENSED PATENTS, and are sold or

otherwise made commercially available for uses in which all input and output power-carrying

terminals operate above 10kV. Provided, however, that “EXCLUSIVE FIELD” shall exclude

(i) all contracts for the United States Department of Defense, and Department of Homeland

Security and (ii) all circuits or systems for uses in which any input or any output power-carrying

terminal operates below 10kV. The ‘EXCLUSIVE FIELD’ shall not include the ‘ROMERO

CARVE-OUT’ OR THE ‘NONEXCLUSIVE FIELD’.”                        The June 8, 2010 Patent License

Agreement supersedes the Original Patent License Agreement between Varentec, Erik and Alex

dated January 2, 2008 and the First Amendment of the Original Patent License Agreement

between Varentec, Erik and Alex dated August 1, 2009. A true and correct copy of the June 8,

2010 Patent License Agreement is attached hereto as Exhibit “H”.




                                               - 10 -
     Rudy and Erik’s Confidentiality and Non-Compete Agreements with PPS

         40.   On July 13, 2001, Rudy entered into a “Consultant Non-Disclosure, Assignment

of     Developments,     Non-Solicitation   and     Non-Competition     Agreement”    (“Consultant’s

Agreement”) with PPS. A true and correct copy of the Consultant’s Agreement is attached

hereto as Exhibit “I”.

         41.   On July 13, 2001, Erik entered into an “Employee Non-Disclosure, Assignment of

Developments, Non-Solicitation and Non-Competition Agreement” (“Employment Agreement”)

with PPS. A true and correct copy of the Employment Agreement is attached hereto as Exhibit

“J”.

         42.   The Consultant’s Agreement and the Employment Agreement each contain

provisions prohibiting the disclosure of PPS’ confidential information and trade secrets and the

Employment Agreement contains a non-compete provision. See Exhs. “I”, “J”.

         43.   The confidentiality provisions prohibit Rudy and Erik from disclosing “any of the

trade secrets or confidential information of [PPS]. . . (including but not limited to trade secrets or

confidential information respecting inventions, products, designs, methods, know-how,

techniques, systems, processes, software programs, works of authorship, customer lists, projects,

plans and proposals) . . . .”    They also prohibit Rudy and Erik from “tak[ing], us[ing], or

permit[ting] to be used any notes, memoranda, reports, lists, records, drawings, sketches,

specifications, software programs, data, documentation, or other materials of any nature relating

to any matter within the scope of the business of [PPS] or concerning any of its dealings or

affairs otherwise than for the benefit of [PPS].” See Exhs. “I”, “J”.

         44.    The non-competition provision prohibits Erik—during his term as an employee

and for a period of one year after termination—from “directly or indirectly engag[ing] in any


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business or other activity anywhere in the world that is or may be competitive with, or

render[ing] services to any firm or business organization that competes with [PPS]’s actual or

planned business activities . . . .” See Exh. “J”.

           Rudy and Erik Divulge Proprietary Information to Varentec

         45.     Upon information and belief, in late 2007, Rudy and Erik became members of

Varentec’s Board of Managers.          PPS has recently discovered that in early 2008, Rudy

(rlimpaecher@gmail.com) and Erik (elimpaecher@gmail.com, elimpaecher.pps@gmail.com,

and elimpaecher@princetonpower.com) began surreptitiously communicating with Andrew

Dillon    (adillon@mail.bga.com),      the    President   of   Varentec,   and   David    Romero

(dromero@serport.com), a former member of Varentec, LLC, about confidential and proprietary

PPS matters, including PPS trade secrets.

         46.     As detailed in the following paragraphs, Rudy and Erik disclosed trade secrets

without authority from PPS and in violation of their respective contracts and their fiduciary

duties to PPS.

         47.     In a January 7, 2008 email to Erik, contrary to his fiduciary duties to PPS, Rudy

declared that his primary loyalty going forward would be to Varentec, not PPS. In that email,

Rudy wrote: “If Varentec comes on line, my first future priority will be to Varentec projects.” A

true and correct copy of this email is attached hereto as Exhibit “K”.

         48.     Approximately two weeks later, on January 23, 2008, contrary to his fiduciary

duties to PPS, Erik shared PPS’ confidential product datasheet template ‘0510AC-link 480V

VSD specification r4.doc’ and competitive comparison template ‘0611 100kW Solar GTI

competitive comparison.doc’ to various members of Varentec, which he said they “can use for




                                               - 12 -
technical marketing of the VAR Compensator.” A true and correct copy of the email is attached

hereto as Exhibit “L”.

       49.     On January 27, 2008, Erik, again in breach of his fiduciary duties to PPS,

divulged confidential proprietary information about PPS’ commercial VSD component designs

to Rudy in another email. In the email, Erik acknowledged that the information is “highly

proprietary” to PPS. A true and correct copy of this email is attached hereto as Exhibit “M”.

       50.     The next day, on January 28, 2008, again in breach of his fiduciary duties to PPS,

Erik disclosed proprietary information in an email to Andrew Dillon about PPS’ market research,

including a directly quoted paragraph from notes of a PPS Board of Directors meeting. Erik’s

January 28, 2008 email attached a proprietary market pricing analysis created by PPS entitled

‘2001 VSD pricing research.pdf.’ Erik wrote “this is the best I could find in the archives during

a quick search.” A true and correct copy of this email is attached hereto as Exhibit “N”.

       51.     Several days later, on February 3, 2008, in an email to various members of

Varentec discussing the design of Varentec’s VAR Compensator product, Erik inquired of Rudy

the similarities of this design to the “Alaska” design that Rudy had been working on under

contract to PPS and Erik had been working on as an employee of PPS. In the February 3, 2008

email, Rudy acknowledged that the Varentec product used some of the same designs and

components as the “Alaska” project. A true and correct copy of this email is attached hereto as

Exhibit “O”.

       52.     On March 7, 2008, in further breach of his fiduciary duties to PPS, Erik emailed

proprietary information about PPS’ “Alaska” project to David Romero, Andrew Dillon, and

Rudy. This proprietary information included system specifications including costs and detailed

power information regarding PPS’ products. Notably, the document attached to the email (with


                                             - 13 -
“Track Changes” turned on) shows that “Princeton Power” was deleted from the warning in the

footer, changing “Princeton Power Proprietary Information – Do Not Disclose,” to “Proprietary

Information – Do Not Disclose.” A true and correct copy of the email is attached hereto as

Exhibit “P”.

       53.     Rudy and Erik had no authority to disclose PPS’ confidential information and

trade secrets to its competitor, Varentec.    By disclosing such information, Rudy and Erik

breached their fiduciary duties and violated the confidentiality provisions in their respective

contracts with PPS and Erik violated the non-compete provision in his Employment Agreement.

               Varentec’s Grant from the U.S. Department of Energy
                      Violates PPS’ Exclusive Patent Rights

       54.     On November 17, 2010, the U.S. Department of Energy (“DOE”) issued a Press

Release announcing a grant to Varentec as follows:

               Varentec, Inc. (North Andover, Massachusetts) will conduct
               research and development on a wide range of next-generation
               power electronics devices to better integrate renewable resources.
               Using an innovative circuit design with an integrated battery
               energy storage system, the project's goal is to deliver a fast
               response to rapid voltage changes arising from grid-connected
               renewable resources. The prototype and full-scale solution will be
               tested at North Carolina State University's FREEDM System
               Center. DOE funding: $2,287,502; Total Project Value:
               $2,859,363.

       A true and correct copy of the DOE Press Release is attached hereto as Exhibit “Q”.

       55.     In a letter dated March 28, 2011, Alexander Morris, of the United States

Department of Energy, advised PPS’ counsel that the “grant was actually issued on March 25,

2011.” A true and correct copy of the March 28, 2011 letter is attached hereto as Exhibit “R”.




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       56.     As set forth herein above, PPS’ exclusive patent license rights include, with some

restrictions, the “FIELD” of “motor/generator control” and “distributed power generation

interconnection.”

       57.     The DOE’s description of the project as involving “a wide range of next-

generation power electronics devices to better integrate renewable resources” and “to deliver a

fast response to rapid voltage changes arising from grid-connected renewable resources”

indicates that, if the completed system would be covered by one or more claims of the ’678

patent, then the system will infringe on PPS’ exclusive patent license rights which include the

“FIELD” of “distributed power generation interconnection.” See Exh. “Q” (emphasis added).

              Varentec’s Use of Technology from the ’678 Patent in
           Inverters/Converters Violates PPS’ Exclusive Patent Rights

       58.     CleanTechBase is a user-generated database that contains listings about people,

companies and investors in the cleantech industry.           Varentec lists its business in the

CleanTechBase database in the category of “Energy Efficiency and Distribution.” Varentec

describes itself in the CleanTechBase database as follows: “Varentec provides energy efficiency

and cost savings to the electric grid infrastructure, via the first solid state transformer, highly

efficient and ten times smaller in size than a conventional transformer. Thanks to the compact

size, the company’s solid state transformer can be integrated inside any power inverter or

converter. This offers a breakthrough in connecting renewable energy systems to the grid, by

offering a high power integrated inverter/transformer that reduces the amount of equipment [sic],

lowers cost, reduces space requirements and improves efficiency.” A true and correct copy of

relevant pages from the Varentec listing in the CleanTechBase website is attached hereto as “S”.




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       59.     Varentec’s solid state transformer is based on technology in the ’678 Patent that

has been exclusively licensed to PPS. Varentec is infringing on PPS’ exclusive patent rights by

making, selling and/or offering to sell its solid state transformer in the field of “distributed power

generation interconnection.”

   Varentec’s Use of Technology from the ’678 Patent in Power Converters
        for a DC Power Grid Violates PPS’ Exclusive Patent Rights

       60.     In 2009, Andrew Dillon, of Varentec gave a presentation at the “Clean

Technology Conference & Expo 2009” in Houston, Texas. Among other things, the presentation

discussed Varentec’s power converters for a DC power grid. Varentec’s product is essentially a

clone of PPS’ “Alaska” project, which is designed to interconnect off-grid diesel generators in

remote Alaskan villages (i.e., “distributed power generation”) with a high-voltage DC

transmission line (i.e., “interconnection”). A true and correct copy of the abstract to Varentec’s

presentation is attached hereto as Exhibit “T”.

       61.     Erik worked on PPS’ Alaska project and Rudy was a paid consultant on the

project. Erik transmitted PPS’ proprietary information on this project to Varentec.

       62.     Varentec’s power converters for a DC power grid are based on technology in the

’678 Patent that has been exclusively licensed to PPS. Varentec is infringing on PPS’ exclusive

patent rights by making, selling and/or offering to sell its power converters for a DC power grid

in the field of “distributed power generation interconnection.”

   Varentec’s Use of Technology from the ’678 Patent in Power Converters
    for a Variable Frequency Drive Violates PPS’ Exclusive Patent Rights

       63.     In 2009, representatives of Varentec gave a presentation at the “Electric Ship

Technologies Symposium” in Baltimore, Maryland.             Among other things, the presentation

discussed Varentec’s power converters for motor controllers and distributed power generation


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interconnection for “warships and commercial vessels.” Varentec’s product is derivative of PPS’

motor controller product, which is designed to operate motors (i.e., “motor/generator control”).

       64.     The abstract to Varentec’s presentation discusses motor/generator control and

power distribution products in detail. A true and correct copy of the abstract to this presentation

is attached hereto as Exhibit “U”.

       65.     Varentec’s power converters for motor control and marine power distribution are

based on technology in the ’678 patent that has been exclusively licensed to PPS. Varentec is

infringing on PPS’ exclusive patent rights by making, selling and/or offering to sell its power

converters in the field of “distributed power generation interconnection” or “motor/generator

control.”

                   C O U N T I: M I S A P P R O PR I A T I ON OF T R A D E S E C R E T S
                                ( A G A I N S T A L L D E FE N D A N T S )

       66.     PPS incorporates and realleges each and every allegation contained in paragraphs

1 through 65 hereof, as if fully set forth herein.

       67.     PPS has created and maintains trade secrets in its product designs and strategies.

       68.     PPS has taken reasonable precautions to maintain the secrecy of its trade secrets.

       69.     PPS has communicated one or more of these trade secrets to Rudy and Erik.

       70.     Rudy and Erik, without authority, subsequently disclosed one or more of these

trade secrets to Varentec, in breach of PPS’ confidence.

       71.     Varentec encouraged and knew of this breach of confidence, and Varentec is a

competitor of PPS.

       72.     Varentec used the information disclosed to it by Rudy and Erik to the detriment of

PPS.



                                                 - 17 -
        73.      PPS has been damaged as a result of the defendants’ misappropriation of PPS’

trade secrets.

                                C O U N T II: C I V I L C ON S P I R A C Y
                                 ( A G A I N S T A L L D E FE N D A N T S )

        74.      PPS incorporates and realleges each and every allegation contained in paragraphs

1 through 73 hereof, as if fully set forth herein.

        75.      Varentec, Rudy, and Erik acted in concert by usurping corporate opportunities

from PPS and funneling those opportunities to Varentec.

        76.      Varentec, Rudy, and Erik engaged in an unlawful conspiracy by acting in concert

to misappropriate PPS’ trade secrets and other proprietary information.

        77.      Varentec, Rudy, and Erik committed overt acts that resulted in damage to PPS

including misappropriating PPS’ trade secrets.

        78.      PPS has been damaged as a result of the defendants’ civil conspiracy to

misappropriate PPS’ trade secrets and proprietary information.

                         C O U N T III: B R E A C H O F F I D U C I A R Y D U T Y
                                 ( A G A I N S T R U D Y L I M PA E C HE R )

        79.      PPS incorporates and realleges each and every allegation contained in paragraphs

1 through 78.

        80.      Rudy, as a director of PPS, owed PPS a fiduciary duty of loyalty and care.

        81.      Rudy breached his duties of loyalty and care to PPS, by, among other things,

disclosing trade secrets and corporate opportunities to Varentec.

        82.      Rudy breached his duties of loyalty and care to PPS by, among other things,

putting his own personal financial interests ahead of PPS’ interests because, as a member of




                                                 - 18 -
Varentec’s Board of Managers, he stood to benefit personally from Varentec’s use of PPS’ trade

secrets.

           83.   PPS has been damaged as a result of Rudy’s breach of his fiduciary duties.

                         C O U N T IV: B R E A C H O F F I D U C I A R Y D U T Y
                                 ( A G A I N S T E R I K L I M P A E C HE R )

           84.   PPS incorporates and realleges each and every allegation contained in paragraphs

1 through 83.

           85.   Erik, as an officer of PPS, owed PPS a fiduciary duty of loyalty and care.

           86.   Erik breached his duties of loyalty and care to PPS by, among other things,

disclosing trade secrets and corporate opportunities to Varentec.

           87.   Erik breached his duties of loyalty and care to PPS by, among other things,

putting his own personal financial interests ahead of PPS’ interests because, as an owner of

Varentec stock, he stands to benefit personally from Varentec’s use of PPS’ trade secrets.

           88.   PPS has been damaged as a result of Erik’s breach of his fiduciary duty to PPS.

                              C O U N T V: B R E A C H O F C O N T R A C T
                                ( A G A I N S T R U D Y L I M PA E C HE R )

           89.   PPS incorporates and realleges each and every allegation contained in paragraphs

1 through 88 hereof, as if fully set forth herein.

           90.   The Consultant’s Agreement between Rudy and PPS prohibits Rudy from, inter

alia, disclosing “any of the trade secrets or confidential information of [PPS]. . . .” See Exh. “I”.

           91.   PPS has performed all of its obligations under the Consultant’s Agreement.

           92.   Rudy breached the Consultant’s Agreement by disclosing PPS’ confidential

information and trade secrets to Varentec.




                                                - 19 -
       93.     PPS has been damaged as a result of Rudy’s breach of the Consultant’s

Agreement.

                             C O U N T VI: B R E A C H O F C O N T R A C T
                                ( A G A I N S T E R I K L I M P A E C HE R )

       94.     PPS incorporates and realleges each and every allegation contained in paragraphs

1 through 93 hereof, as if fully set forth herein.

       95.     The Employment Agreement between Erik and PPS prohibits Erik from, inter

alia, disclosing “any of the trade secrets or confidential information of [PPS]. . . .” See Exh. “J”.

       96.     The Employment Agreement also prohibits Erik—during the term of his

employment and for one year after termination—from “directly or indirectly engag[ing] in any

business or other activity anywhere in the world that is or may be competitive with, or

render[ing] services to any firm or business organization that competes with [PPS]’s actual or

planned business activities . . . .” See Exh. “J”.

       97.     PPS has performed all of its obligations under the Employment Agreement.

       98.     Erik Limpaecher breached the Employment Agreement by disclosing PPS’

confidential information and trade secrets to Varentec and by assisting Varentec in competing

against PPS.

       99.     PPS has been damaged as a result of Erik’s breach of the Employment

Agreement.

               C O U N T VII: T OR T I OU S I N T E R FE R E N C E   WITH   CONTRACT
                                   (AGAINST VARENTEC)

       100. PPS incorporates and realleges each and every allegation contained in paragraphs

1 through 99 hereof, as if fully set forth herein.




                                                - 20 -
       101. PPS has contractual relationships with Rudy and Erik, as set forth in the

Consultant’s Agreement and the Employment Agreement.

       102. Varentec has knowledge of PPS’ contractual relationships with Rudy and Erik.

       103. Varentec, by misappropriating PPS’ confidential information and trade secrets,

and by encouraging Rudy and Erik to disclose PPS’ confidential information and trade secrets

for the use and benefit of Varentec, without justification or excuse, has directly, intentionally,

and maliciously interfered with PPS’ contractual relationships with Rudy and Erik, as set forth in

the Consultant’s Agreement and the Employment Agreement.

       104. As a result of Varentec’s wrongful actions in interfering with PPS’ contractual

relationships, PPS has been damaged.

               C O U N T VIII: D E C L A R A T OR Y J U D GM E N T O F T HE P A R T I E S ’
                    R E S PE C T I V E E X C L U S I V E P A T E N T L I C E N S E R I G HT S
                                        (AGAINST VARENTEC)

       105. PPS incorporates and realleges each and every allegation contained in paragraphs

1 through 104 hereof, as if fully set forth herein.

       106. PPS seeks a declaratory judgment that Varentec has infringed by making, selling

and/or offering to sell products, including transformers and power converters, covered by PPS’

exclusive rights to the ’678 Patent and by commencing a project under a DOE grant and taking

concrete steps toward a result that will be infringing on PPS’ exclusive rights to the ’678 Patent.

       107. The proposed system to be built by Varentec under its Department of Energy

grant would infringe on PPS’ exclusive patent license rights if the system is as described by the

Department of Energy Press Release and also falls within the scope of at least one claim of the

’678 patent.




                                                  - 21 -
       108. There is a case or controversy ripe for declaratory judgment because a substantial

controversy of sufficient immediacy and reality exists between the adverse parties. The parties

dispute the scope of their exclusive patent license rights. The Department of Energy grant has

been awarded to Varentec and work presumably has begun on the project.

       109. A declaratory judgment that Varentec’s project would infringe on PPS’ exclusive

patent license rights would provide redress to PPS because Varentec would be obligated to cease

work on the project.



       WHEREFORE, Plaintiff Princeton Power Systems, Inc., prays that this Court find that

Varentec, Inc., Rudy Limpaecher, and Erik Limpaecher committed the foregoing acts and enter

judgment for PPS awarding:

       (a)    damages in an amount to be determined;

       (b)    preliminary and permanent injunctive relief barring Varentec, Inc. from using any

       PPS trade secret;

       (c)    preliminary and permanent injunctive relief barring Rudy and Erik Limpaecher

       from using any PPS trade secret or disclosing the same;

       (d)    declaratory judgment that Varentec’s project with the U.S. Department of Energy

       infringes on PPS’ exclusive patent license rights;

       (e)    declaratory judgment that Varentec is infringing on PPS’ exclusive patent license

       rights by making, selling, or offering to sell its solid state transformer in the field of

       “distributed power generation interconnection";




                                             - 22 -
        (f)    declaratory judgment that Varentec is infringing on PPS’ exclusive patent license

       rights by making, selling, or offering to sell its power converters for a DC power grid in

       the field of “distributed power generation interconnection";

       (g)     declaratory judgment that Varentec is infringing on PPS’ exclusive patent license

       rights by making, selling, or offering to sell its power converters for a variable frequency

       drive in the fields of “distributed power generation interconnection" or “motor/generator

       control”;

       (h)     costs of suit; and

       (i)     such other relief as the Court deems just.


                                                       PRINCETON POWER SYSTEMS, INC.


Dated: April 28, 2011                                                s/Brian J. Waters

                                                                                    Jonathan I. Epstein
                                                                                        Brian J. Waters
                                                              D R I N KE R B I D D L E & R E A T H L L P
                                                                          105 College Rd. East # 300
                                                                           Princeton, NJ 08542-0627
                                                                                         609.716.6500
                                                                          jonathan.epstein@dbr.com
                                                                               brian.waters@dbr.com

                                                            Attorneys for Princeton Power Systems,
                                                                                               Inc.
PR01/ 1112953.12




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