gemex systems inc et al v. andrus sceales starke & sawall llp et al complaint

8/7/2019 GEMEX SYSTEMS INC et al v. ANDRUS SCEALES STARKE & SAWALL LLP et al Complaint

1/31Case 2:11-cv-00148-CNC Filed 02/07/11 Page 1 of 31 Document 1-1

STATE OF WISCONSINGEMEX SYSTEMS, INC.6040A W. Executive DriveMequon, WI 53092, andUGTS,INC.6040A W. Executive DriveMequon, WI 53092,

Plaintiffs,v.ANDRUS, SCEALES, STARKE& SA WALL, LLP100 East Wisconsin AvenueSuite 2600Milwaukee, WI 53202,COOK & FRANKE, S.c.660 E. Mason StreetMilwaukee, WI 53202,JEFFREY S. SOKOL9947 S. Austin StreetOak Creek, WI 53154,WESTCHESTER FIREINSURANCE COMPANY436 Walnut St.PO Box 1000Philadelphia, P A 19106,ST. PAUL FIRE & MARINEINSURANCE COMPANY385 Washington St.St. Paul, MN 55102, and

Defendants.

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MILWAUKEE COUNTY

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Case No.:Case Code: 30703SUMMONS

flLfOA&\IlJ '-AlJTHFNTrrATffiJAN 07 201/JUH''tIBARRfJT_OfOrcuftCoutL

EXHIBIT,i - '-...



SUMMONS

THE STATE OF WISCONSIN, to each person named above as a Defendant:You are hereby notified that the Plaintiffs, Gemex Systems, Inc. and UGTS, Inc., have filed a lawsuit orother legal action against you. The Complaint, which is attached, states the nature and basis of the legalaction.Within forty-five (45) days of receiving this Summons, you must respond with a written answer, as thatterm is used in Chapter 802 of the Wisconsin Statutes, to the Complaint. The court may reject ordisregard an answer that does not follow the requirements of the statutes. The answer must be sent ordelivered to the Clerk of Court for Milwaukee County, whose address is Milwaukee County Courthouse,Room 104,901 N. Ninth Street, Milwaukee, WI 53233, and to Plaintiffs' attorneys:Robert L. GegiosWilliam E. FischerKOHNER, MANN & KAILAS, S.c.Washington Building-2nd FloorBarnabas Business Center4650 North Port Washington RoadMilwaukee, Wisconsin 53212-1059You may have an attorney help or represent you.

Ari B. LukoffFAEGRE & BENSON LLP2200 Wells Fargo Cente r90 South Seventh StreetMinneapolis, MN 55402-3901

If you do not provide a proper answer within forty-five (45) days, the court may grant judgment againstyou for the award of money or other legal action requested in the Complaint, and you may lose your rightto object to anything that is or may be incorrect in the Complaint. A judgment ma y be enforced asprovided by law. A judgment awarding money may become a lien against any real estate you own now orin the future, and may also be enforced by garnishment or seizure of property.

Dated this 7th day of January, 2011.

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p hac vice to be pendingMichael F. Cocks onpro hac vice to be pending

Ari B. LukoffState Bar No. 1061330Faegre & Benson LL P2200 Wells Fargo Center90 South Seventh StreetMinneapolis, MN 55402-3901Telephone: (612)766-7000



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fax: (612)[email protected]@[email protected] L. GegiosState Bar. No. 1002906William E. FischerState Bar. No. 1045725Kohner Mann & Kailas, S.C.Washington BuildingBarnabas Building Center4650 N. Port Washington RoadMilwaukee, WI 53213-1059Telephone: (414)962-5110fax: (414)[email protected]@kmksc.comATTORNEYS FOR PLAINTIFFSGEMEXSYSTEMS, INC. AND UGTS, INC.



STATE OF WISCONSINGEMEX SYSTEMS, INC.6040A W. Executive DriveMequon, WI 53092, andUGTS, INC.6040A W. Executive DriveMequon, WI 53092,

Plaintiffs,v.ANDRUS, SCEALES, STARKE& SA WALL, LLP100 East Wisconsin AvenueSuite 2600Milwaukee, WI 53202,COOK & FRANKE, S.C.660 E. Mason StreetMilwaukee, WI 53202,JEFFREY S. SOKOL9947 S. Austin StreetOak Creek, WI 53154,WESTCHESTER FIREINSURANCE COMPANY436 Walnut st .PO Box 1000Philadelphia, P A 19106, andST. PAUL FIRE & MARINEINSURANCE COMPANY385 Washington St.St. Paul,:MN 55102,

Defendants.

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MIL WAUKEE COUNTY

Case No.:Case Code: 30703COMPLAINT

f.u.coAND-AUTHtNl'rrATR')JAN 07 2011



COMPLAINT

The plaintiffs, GemEx Systems, Inc. and UGTS, Inc., through their attorneys,allege as fo1lows:

THE PARTIES1. Plaintiff GemEx Systems, Inc. ("GemEx") is a Wisconsin

corporation with its principal place of business located at 6040A W. Executive Drive,Mequon, Wisconsin, 53092.

2. Plaintiff UGTS, Inc. ("UGTS") is a Wisconsin corporation with itsprincipal place of business located at 6040A W. Executive Drive, Mequon, Wisconsin,53092.

3. Defendant Andrus Sceales, Starke & Sawall, LLP ("AndrusSceales") is on information and belief a Wisconsin limited liability partnership with itsprincipal place of business located at 100 East Wisconsin Avenue, Suite 2600,Milwaukee, Wisconsin, 53202.

4. Defendant Cook & Franke, S.C. ("Cooke & Franke") is oninformation and belief a Wisconsin service corporation with its principal place ofbusiness located at 660 E. Mason Street, Milwaukee, WI 53202.

5. Defendant Jeffrey N. Sokol is on information and belief an adultresident of the State of Wisconsin residing at 9947 S. Austin Street, Oak Creek,Wisconsin, 53154. Sokol is an attorney and, on information and belief, until recently was

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a shareholder in Cooke & Franke. Until November, 2005 Sokol was a partner in AndrusSceales.

6. Defendant Westchester Fire Insurance Co. is on information andbelief an insurance corporation organized under the laws of the state of New York withits principal place of business in Philadelphia, Pennsylvania. Defendant Westchester FireInsurance Co. is an insurer ofDefendant Andrus Sceales.

7. Defendant st. Paul Fire & Marine Insurance Co. is on informationand belief an insurance corporation organized under the laws of the state of Minnesotawith its principal place of business in St. Paul, Minnesota. Defendant St. Paul Fire &Marine Insurance Co. is an insurer ofDefendant Cook & Franke.

JURISDICTION AND VENUE8. The Court has personal jurisdiction over the Defendants pursuant to

Wis. Stat. 801.05.9. Venue for this action is proper in Milwaukee County pursuant to

Wis. Stat. 801.50.BACKGROUND

A. GEMEX AND UGTS.10. GemEx was founded in 1998 to develop and commercialize

technology based on analytical instruments and related services for the gem and jewelryindustry. GemEx's patented spectrophotometry system scientifically measures andrecords the interplay of light reflecting and refracting within gemstones. Using GemEx'spatented and unique scanning technology, diamonds and other gemstones can for the first

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time be evaluated and compared on the basis of their objectively measurable visualattributes.

11. GemEx's proprietary technology, known as GemEx LightPerformance Analysis, produces a "light measurement" rating that measures the threefundamental characteristics of the visual beauty of a cut diamond: white light, color light,and scintillation. In addition to providing an objective tool for measurement, the GemExsystem permits a gemstone's appearance and its visual characteristics to be transmitted asa digital image over the Internet so it can be viewed using conventional PC technology.This permits gemstones to be evaluated and compared without the need for physicalinspection and without the subjectivity that may come into play in connection with theconventional "4-C" grading of color, clarity, carat weight and cut.

12. VaTS initially developed the and patented (in U.S. Patent No.5,615,005 ("the '005 patent")) the original concept and technology that forms the basisfor the GemEx method of Light Performance analysis. The UGTS system for accuratelymeasuring the color of gemstones, later known as its GemSpec System, was introducedto the gemstone industry in 1995. LambdaSpec Instruments was formed in 1995 tofurther develop, manufacture, and market the UGTS system. LambdaSpec, an affiliate ofUGTS by way of common ownership, was granted a worldwide license for the UGTSproprietary technology.

13. In 1997, the owners of UGTS and LambdaSpec, Dr. James andCynthia Stoll, decided that they could no longer provide adequate capital for continuingoperations and projected growth. They offered to sell the businesses to their employees.

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In response, GemEx was formed by Randy Wagner, the President of LambdaSpec, andby Kurt Schoeckert, a LamdaSpec engineer and technical expert. GemEx acquired theassets of LambdaSpec in 1998 and at the same time signed an exclusive worldwidelicense with UGTS for all of its patents, technology and copyrights. Pursuant to theterms of the license agreement, GemEx paid UGTS more than $1 million in royaltiesover the next ten years for the use of the '005 patent.

14. GemEx became the operating company responsible for furtherdeveloping and marketing UGTS's proprietary technology on a worldwide basis,

technology now known as the GemEx System. GemEx and UGTS acted in concert toretain and extend patent, copyright, and other intellectual property protection for UGTStechnology and the GemEx system. GemEx acquired DOTS in 2009 and DOTS is now awholly-owned subsidiary ofOemEx.B. THE DEVELOPMENT OF THE GEMEX SYSTEM.

15. GemEx directed its efforts to the development and use of the UGTStechnology for the analysis and comparison of cut diamonds. It designed a productknown as the BrillianceScope to meet the specific requirements of measuring andcreating a digital record and report of a given diamond's "Light Performance analysis."The BrillianceScopewas introduced to the industry at major trade shows in 1998.

16. The OemEx System produces a GemEx certified LightPerformance report that uses light science and spectrometry to measure the brilliance ofa particular stone. Certified Light Performance reports provide professional diamondbuyers and the ultimate consumer with information that can be used to make objective

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comparisons between stones and to verify the quality of a diamond before purchasing.The GemEx System represents a paradigm-shifting improvement over the traditionalmethods of evaluating cut diamonds, which for the most part was dependent upon theadvice of a jeweler using the subjective "4-C" method. GemEx's technology givesscientific and objective information to the diamond buying public so that they need nolonger depend on the expert-driven " 4 ~ C " method as the basis for comparing and buyingdiamonds.

17. The GemEx business model is focused on the use of Certified LightPerformance reports and digital light images produced by the BrillianceScope in alllevels of the diamond distribution chain from the manufacturers to the retail jewelrystore, and ultimately to the consumer. GemEx makes its BrillianceScope technologyavailable to manufacturers, wholesalers and retailers, who use the technology to measurethe light performance of cut diamonds and transmit the reSUlting report to GemEx usingits proprietary digital imaging and internet transmission protocols. GemEx conducts adetailed review of the diamond scan data and, assuming the scan meets its rigorousquality control tests, issues a certified LightPerformance report that is available todiamond buyers, including the ultimate consumer.

18. GemEx does not sell or license its technology, but instead charges anauthorized user for each GemEx certified report. Retailers who obtain their own certifiedLightPerformance reports or who purchase cut diamonds from manufacturers orwholesalers who have themselves obtained certified LightPerformance@ reports, enjoy asubstantial and increasing competitive advantage.

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19. GemEx has enjoyed a significant market advantage as the providerof this new and objective method of diamond evaluation and certification. The marketfor its services is worldwide and has grown rapidly as its LightPerformance reports havebecome accepted by the industry. Until recently GemEx had no competitors in themarket for the testing of cut diamonds using scientific spectrophotometry, because itscontrolling, patent-protected position prevented competitors from using its proprietarytechnology .C. THE PATENT.

20. UGTS obtained a patent covering the design and application ofimaging spectrophotometry for the scanning of cut gemstones light performance andcolor. U.S. Patent No. 5,615,005 (Gemstone Evaluation System) ("the '005 Patent") wasissued on March 25, 1997. GemEx uses the patented inventions offered as theBrillianceScope technology and the GemEx system under a worldwide exclusivelicensing agreement with UGTS.

21. The '005 patent is valid and enforceable. Its claims are broad anddifficult to circumvent. No competitor or prospective competitor could commerciallydisplay or market a device that is comparable to the GemSpec or BrillianceScopewithout infringing the '005 Patent. No competitor or prospective GemEx competitorcould commercially display or develop light measurement reports for cut gemstonesusing photospectometry without infringing the '005 Patent. In the normal course, the'005 Patent would not have expired until 2014.

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22. GemEx should have been able to use its patent protection to excludecompetitors using its technologies from the market until the '005 Patent expired. As adirect and proximate result of the negligence of the patent counsel retained by UGTS andGemEx to protect their intellectual property, as more fully set forth below, the 7Yz yearmaintenance fee for the '005 Patent was not paid, and the '005 Patent expired in 2005.

23. Until recently, UGTS and GemEx had never been challenged on the'005 Patent and GemEx had never been faced with competition attempting to usetechnology covered by the '005 Patent. Although a few firms had attempted to emulate

the business of GemEx without using the patented technology, they had not beensuccessful.

24. As a direct and proximate result of the patent expiration, GemEx'scompetitors and prospective competitors are already using its patented technology tocompete with GemEx, and the competitive and business advantages conferred on UGTSand GemEx by the '005 Patent have been lost.D. PATENT COUNSEL FOR GEMEX AND UGTS.

25. Andrus Sceales served as patent and intellectual property counsel forGemEx and UGTS for many years. According to its website, Andrus Sceales "is thelongest operating intellectual property law firm in the State of Wisconsin." It claims theexpertise to provide its clients with "experienced intellectual property counsel" and withthe "latest methodologies regarding the procurement, management and protection ofintellectual property rights." Andrus Sceales prosecuted and procured the '005 Patent forUGTS.

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26. Cook & Franke has served as patent counsel for Gemex and UGTSsince November 2005. According to the firm's website, its "intellectual propertypractice" group has experience in "counseling clients in all aspects of patent acquisitionand enforcement." The firm claims to provide its clients with both "counseling" and"transactional services" relating to their patents.

27. Jeffrey S. Sokol is an attorney licensed to practice in the State ofWisconsin. He holds himself out as an expert in patent and intellectual property law andis admitted to practice before the United States Patent and Trademark Office ("USPTO").

Until November 2005, Sokol was a partner in Andrus Sceales. He thereafter became ashareholder in Cook & Franke. While at Andrus Sceales, Sokol was the partner in chargeof that firm's representation of GemEx and UGTS. Similarly, at Cook & Franke, Sokolwas the shareholder in charge of that firm's representation of GemEx and UOTS. Oninformation and belief, Sokol recently left Cook & Franke.E. THE EXPIRATION OF THE '005 PATENT.

28. Andrus Sceales represented UGTS and acted as patent counsel inconnection with the '005 Patent. After OemEx was formed in 1997, Andrus Scealesrepresented UOTS and GemEx in connection with patent and intellectual propertymatters. Among other things, the firm undertook to represent UOTS and OemEx inconnection with seeking patents involving inventions covered by the '005 Patent invarious foreign jurisdictions.

29. Andrus Sceales also specifically represented UGTS and OemEx inconnection with continuing matters relating to the '005 Patent. At the time the '005

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Patent issued, the firm correctly advised UOTS that maintenance fees would be payablein order to preserve the patent. In a March 17, 1997 letter from Eugene R. Sawall ofAndrus Sceales to Randy Wagner ofVOTS, Mr. Sawall advised: "[T]his patent will besubject to the requirement of maintenance fees payable during the third, seventh andeleventh years. We have docketed the patent according/y." (emphasis added).Docketing of maintenance fee payment dates is a common service offered by patentcounsel to their clients. There are established protocols for the effective managementofa patent docketing system. One purpose of such a system is to assure that maintenancefees will be paid on a timely basis.

30. Andrus Sceales correctly determined the dates on which themaintenance fees would be due: September 25 of 2000, 2004 and 2008. Andrus Scealeswas patent counsel of record for the '005 Patent and it was the firm's address that was onrecord at the USPTO for maintenance fee reminders and other official notices.

31. Andrus Sceales arranged for and paid the first maintenance fee forthe '005 Patent, due on September 25,2000, in a timely manner. By letter dated July 31,2000 the firm advised OemEx and UOTS that the "first maintenance fee will be due onthe above patent on or before September 25, 2000 to keep the patent alive." The firmasked GernEx and UOTS to advance the legal fees for its services in making themaintenance fee payment, which included the amount of the maintenance fee itself. Inthe July 31, 2000 letter from Mr. Sawall to Mr. Wagner, Andrus Sceales stated: "Ourcharges for attending to payment of the fee and including the fee itself will be $540.00for a small entity and $995.00 for a large entity, payable in advance." (emphasis in

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original.) GemEx and UGTS advanced the fees requested. Andrus Sceales then madethe maintenance fee payment in a timely fashion.

32. Sawall, who had been Andrus Sceales partner in charge of the of theGemEx and UGTS account, retired before the second maintenance fee payment on the'005 Patent was due. Sokol, with the permission ofGemEx and UGTS, took his place asthe Andrus Sceales partner in charge of their intellectual property matters.

33. Despite its March 1997 statement that it had "docketed" all three ofthe maintenance fees for the '005 Patent, Andrus Sceales failed to advise GemEx andVGTS that the second maintenance fee was due in advance of the September 25, 2004due date. Andrus Sceales did not arrange for or make the second maintenance feepayment by the due date.

34. On October 14, 2004 the VSPTO sent Andrus Sceales, as patentcounsel of record, a "maintenance fee reminder" notice for the '005 Patent. The Noticestates that late payment would be accepted within the six month grace period provided bystatute, but emphasized that unless payment was received "THE PATENT WILLEXPIRE AS OF THE END OF THE GRACE PERlOD." (emphasis in original).

35. Several weeks after receiving the reminder notice, Andrus Sceales,through Sokol, advised GemEx and VGTS by letter dated November 15, 2004 that thesecond maintenance fee payment was "due on or before December 25, 2004." Sokol'sletter did not accurately reflect either the facts or the law. In fact, the secondmaintenance fee payment was not "due" on December 25, but was already overdue. Thesixth month grace period (which the letter does not even mention) was not "due" to

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expire on December 25, 2004 but on March 25, 2005. Sokol's letter did request thatOemEx and VOTS advise the firm whether they want to pay the fee and, if so, requestedadvance payment of their legal fees in the amount of $1,265.00, including the secondmaintenance fee itself.

36. On December 3, 2004 GemEx and UOTS responded by directingAndrus Sceales to pay the second maintenance fee. Included with the written instructionswas OemEx Check No. 5053 in the amount of $1265.00, the amount Andrus Sceales hadrequested. This payment included the amount necessary to pay the maintenance fee, aswell as the amount charged by Andrus Sceales for its services in making the payment.Andrus Sceales received the instructions, cashed the check, and credited the firm'saccount for its legal work relating to the '005 Patent. It did not, however, actually paythe second maintenance fee. Sometime later, Andrus Sceales revised its accountingrecords, and moved the credit for the $1265.00 payment on the '005 Patent to anotherGemEx account, this one involving Sokol's work on a provisional application involving adifferent patent. The policies and procedures of Andrus Sceales require an accountingchange of this kind to be approved by the partner in charge of the accounts, in this caseMr. Sokol.

37. Andrus Sceales failed to pay the second maintenance fee by theDecember 25 "due date" set forth in Sokol's November 15 letter. And it failed to pay themaintenance fee by March 25, 200S-the end of the sixth month grace period set forth inthe USPTO reminder notice. As a result of the failure of Andrus Sceales to pay thesecond maintenance fee, the '005 Patent expired. At the time, GemEx and UGTS were

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not aware that Andrus Sceales had failed to carry out their written instructions to pay themaintenance fee. As a result of its failure to do so, the '005 Patent expired.

38. The USPTO mailed a Notice of Expiration dated April 27, 2005 toAndrus Sceales as patent counsel of record for the '005 Patent. Andrus Sceales receivedthe Notice of Expiration on May 13,2005. It did not forward a copy of the notice to itsclients GemEx and UGTS. It did not otherwise advise its clients that it had receivedofficial notice from the USPTO that the '005 Patent had expired. As of April 2005, the'005 Patent could have been reinstated by promptly taking corrective action and payingthe overdue maintenance fee. Andrus Sceales took no action to protect its clients' rightsor to preserve the patent.

39. In November 2005 Sokol resigned his position as a partner inAndrus Sceales and joined Cook & Franke as a shareholder. Sokol had been the AndrusSceales partner in charge of GemEx and UGTS matters before his departure, and hesought the permission of his clients to take their patent and intellectual property matterswith him to Cook & Franke. They agreed. On December 5, 2005, UGTS and GemExadvised Andrus Sceales by letter that they had decided "to transfer all of its matters toJeffrey S. Sokol at his new law firm Cook & Franke S.C." Gemex and UGTS understoodthat Sokol and his new firm would thereafter be the attorneys responsible for all of thepatent and intellectual property matters that had been the responsibility of AndrusSceales, including all matters relating to the '005 Patent and the underlying GemExtechnology.

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40. In his December 5, 2005 letter, Mr. Cassens of UGTS and GemExinstructed Andrus Sceales to "immediately make available all of our files, together withall of the electronically stored files, documents, docketing information and any otherinformation relating to our client matters to Mr. Sokol." UGTS and GemEx understoodthat the referenced materials would be transferred from Andrus Sceales to the Cook &Franke firm, as Mr. Sokol and Cook & Franke were taking responsibility for "all" of theGemEx and UGTS "client matters."

41. On December 8, 2005, Andrus Sceales sent Sokol and Cook &Franke a letter confirming the transfer of its files relating to the Sokol clients who weremoving their business to the new firm, including "UGTS (Gemex)." A checklist attachedto the letter lists the specific files that are being transferred: it includes Andrus Scealesfile relating to the '005 Patent (Andrus Sceales Matter No. 3016-00003). The cover letterstates that only those hard copy files with a "check" against them on the checklist arebeing "enclosed with this pick up." The hard copy file relating to the '005 Patent is notchecked. On information and belief, the '005 Patent file was not included in theDecember 8 "pick-up" of hard copy files because it had been listed by Andrus Sceales as"inactive" and stored off site.

42. Although Sokol and Cook & Franke were later provided with someelectronically stored information relating to the '005 Patent, neither ever inquired as towhy Andrus Sceales had failed to include the hard copy file relating to the '005 Patentwith Cook & Franke's December 8 "pick-up" of the "UGTS (Gemex)" files.

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43. Sokol, Andrus Sceales, and Cook & Franke knew or should have. known that GemEx expected them to see to the orderly transfer of pertinent files relating

to "all of its matters" to Sokol and his new firm, including the file on the '005 Patent, thekey patent for the GemEx and UGTS proprietary technology. Indeed, at the time Sokolleft to join Cook & Franke, there was still legal work to be done on the '005 Patent,namely the ongoing payment of maintenance fees.

44. Sokol, Andrus Sceales, and Cook & Franke knew that the '005Patent and the protection that it conferred on the GemEx business model was vitally

important to GemEx and UGTS. The '005 Patent provides UGTS and GemEx withbroad protection for the proprietary technology that is central to the GemEx System.Sokol, while at Andrus Sceales, was representing UGTS and GemEx in their efforts toobtain patent protection worldwide for their technology by prosecuting foreign patents onthe same inventions that were covered by the '005 Patent. He continued hisrepresentation of GemEx and UGTS on these foreign patent applications at Cook &Franke. Given the importance of the '005 Patent to these ongoing efforts, Sokol andCook & Franke should have been aware of the status of the '005 Patent.

45. Cook & Franke never inquired why the '005 Patent file was not"checked" on the December 8 checklist and why the hard copy of the key Gemex patentfile was never transferred to Cook & Franke. Had it done so, it would have discoveredthat Andrus Sceales had mistakenly let the patent expire and thereafter mistakenly listedthe file as "inactive." Had it exercised appropriate care in its representation of GemExand UGTS in connection with their efforts to secure foreign patents, it would have known

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that the '005 patent has mistakenly been allowed to expire. Had it discovered these factsat the time of the file transfer in 2005 or later in its ongoing representation, GemEx andUGTS would have had ample time to petition the USPTO to reinstate the '005 Patentwithin the two year window for "unintentional abandonment." No one inquired. Nothingwas done. Cooke & Franke continued its representation of GemEx and UGTS on relatedpatent matters without discovering that the basic U.S. patent on the subject inventionshad been allowed to expire.

46. GemEx and UGTS did not learn of the '005 Patent's expiration untilNovember 2008 when GemEx's business attorney undertook a review of GemEx'sintellectual property in relation to a pending business dispute with a third party. Theypromptly obtained the services of new patent counsel and filed a petition for thereinstatement of the patent. The new patent counsel sought the cooperation of Sokol,Andrus Sceales and Cooke & Franke in connection with its effort to prepare the petition.Sokol and the two firms failed to timely cooperate with the new patent counsel, and as aresult of the delays, the petition was not filed until September 29, 2009.

47. On September 14, 2010, the USPTO granted GemEx's petition forreinstatement. The reinstatement, however, fails to restore GemEx to the position itwould have been in had the '005 Patent not lapsed prematurely. While no competitor tothe GemEx System had attempted to enter the market before the premature expiration,businesses with knowledge of the lapse began to market competitive machines andservices during the lapse period. These competitors may have acquired intervening rightsto practice the '005 Patent as a result of the untimely lapse. Indeed, during the lapse

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period, when charged with infringing the '005 Patent, one of OemEx's competitorsresponded by stating that there could be no infringement because the '005 Patent hadlapsed. The competitor never disputed that its product was covered by the '005 Patent.

48. In light of the competitor's comments, upon the '005 Patent'sreinstatement, GemEx notified others in the industry in an attempt to reinforce whatremained of the '005 Patent. To date, no response has been received from GemEx'scompetitors indicating that they would respect GemEx's rights in the nowdamaged '005Patent. Consequently, GemEx's ability to enforce and enjoy the full scope of the '005Patent has been compromised at a critical time in the marketplace, and the value ofGemEx's investment in its patented technology has been significantly reduced.

CLAIMS FOR RELIEFFirst Claim For Relief(Negligence Against Defendant Sokol)

49. Plaintiffs incorporate by reference, as though set forth in full, theallegations contained in paragraphs 1 through 48.

50. Sokol acted as patent counsel for GemEx and UGTS and (afterEugene Sawall's retirement) was the partner in charge and manager of their account atAndrus Sceales. It was Sokol's responsibility to monitor and supervise the conduct ofAndrus Sceales and its legal and nonlegal personnel in connection with and infurtherance of that firm's representation of GemEx and UOTS. Sokol was also theshareholder in charge and manager of their account at Cook & Franke. It was Sokol'sresponsibility to monitor and supervise the conduct of the Cook & Franke firm and its

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legal and non-legal personnel in connection with arid in furtherance of that firm'srepresentation ofGemEx and UGTS.

51. Sokol owed plaintiffs a duty of reasonable care as their attorney andas the lawyer in charge of their representation by Andrus Sceales and Cook & Franke. Inconnection with discharging his duty of reasonable care, Sokol was required to exercisethe degree of professional care, skill, ability and judgment usually exercised by attorneyswho hold themselves out as experts in patent law.

52. Sokol breached and failed to discharge his duty of reasonable careby virtue of his negligent acts and omissions, including, among other things:

a. his failure to adequately monitor and advise his client as to the statusof the patent that was central to their business and crucial to thesuccess of their business plan;

b. his failure to assure that Andrus Sceales had a docketing system thatwould protect its clients, including GemEx and UGTS, from thepossibility of inadvertent failure to pay the required maintenancefees for their patents;

c. his failure to assure that Andrus Sceales maintained a docketingsystem that would provide for timely notice to its clients that it hadreceived a notice of expiration with respect to their patents;

d. his failure to assure that Andrus Sceales would pay the secondmaintenance fee on the '005 Patent when specifically directed to do

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,' "

so by its clients, thereby allowing the '005 Patent to expireprematurely;

e. his failure to discover that the second maintenance fee had not beenpaid in a timely fashion;

f. his failure to respond in a timely and appropriate manner to thenotice of expiration of the '005 Patent received by Andrus Sceales;

g. his failure to correct the untimely '005 Patent expiration;h. his failure to arrange for an orderly transfer of the Gemex and UGTS

files from Andrus Sceales to Cook & Franke;1. his failure to investigate the reasons why Andrus Sceales did not

immediately transfer its hard copy file on the '005 Patent to Cook &Franke;

J. his failure to discover that Andrus Sceales had placed its file for thekey patent owned by his clients GemEx and UGTS on inactive statusbecause their patent had been allowed to expire; and

k. his failure to confirm the status of the '005 Patent after he arrangedfor the transfer of all matters relating to GemEx and UGTS fromAndrus Sceales to Cook & Franke.

53. As a direct and proximate result of Sokol's negligence and thebreach of his duty to exercise reasonable care in the representation of his clients, theplaintiffs have suffered damages.

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Second Claim For Relief(Negligence Against Defendant Andrus Sceales)54. Plaintiffs incorporate by reference, as though set forth in full, the

allegations contained in paragraphs 1 through 53.55. Andrus Sceales acted as patent and intellectual property counsel for

GemEx and UGTS. It was Andrus Sceales' responsibility to monitor and supervise theconduct of its legal and non-legal personnel in connection with and in furtherance of thatfirm's representation of GemEx and UGTS.

56. Andrus Sceales owed plaintiffs a duty of reasonable care as theirpatent and intellectual property counsel. In connection with discharging its duty ofreasonable care, Andrus Sceales was required to exercise the degree of professional care,skill, ability and judgment usually exercised by attorneys who hold themselves out asexperts in patent law.

57. As part of the duty of reasonable care, Andrus Sceales owed itsclients a duty to carry out their instructions with respect to the payment of the secondmaintenance fee on the '005 Patent and to keep them informed of the status of the '005patent and any changes in that status.

58. Andrus Sceales breached and failed to discharge its duty ofreasonable care by virtue of its negligent acts and omissions, including, among otherthings:

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a. its failure to adequately monitor and advise its clients as to the statusof the patent that was central to their business and crucial to thesuccess of their business plan;

b. its failure to assure that it had a docketing system that would protectits clients, including GemEx and UGTS, from the possibility ofinadvertent failure to pay the required maintenance fees for theirpatents;

c. its failure to assure that it maintained a docketing system that wouldprovide for timely notice to its clients, including GemEx and UGTS,that it had received a notice of expiration with respect to theirpatents;

d. its failure to pay the second maintenance fee on the '005 Patentwhen specifically directed to do so by its clients, thereby allowingthe '005 Patent to expire prematurely;

e. its failure to respond in a timely and appropriate manner to thenotice of expiration of the '005 Patent;

f. its failure to correct the untimely '005 Patent expiration;g. its failure to arrange for an orderly transfer of its GemEx and UGTS

files to Cook & Franke; andh. its failure to discover that it had mistakenly placed the file for the

key patent owned by its clients GemEx and UGTS on inactive statusbecause their patent had been mistakenly allowed to expire.

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59. As a direct result ofAndrus Sceales' negligence and the breach of itsduty to exercise reasonable care in the representation of its clients, the plaintiffs havesuffered damages.

Third Claim For Relief(Negligence Against Defendant Cooke & Franke)60. Plaintiffs incorporate by reference, as though set forth in full, the

allegations contained in paragraphs 1 through 59.61. Cook & Franke acted as patent and intellectual counsel for GemEx

and UGTS. It was Cook & Franke's responsibility to monitor and supervise the conductof its legal and non-legal personnel in connection with and in furtherance of itsrepresentation of GemEx and DGTS.

62. Cook & Franke owed plaintiffs a duty of reasonable care as theirpatent and intellectual property counsel. In connection with discharging its duty ofreasonable care, Cook & Franke was required to exercise the degree of professional care,skill, ability and judgment usually exercised by attorneys who hold themselves out asexperts in patent law.

63. Cook & Franke breached and failed to discharge its duty ofreasonable care by virtue of its negligent acts and omissions, including, among otherthings:

a. its failure to adequately monitor and advise its clients as to the statusof the patent that was central to their business and crucial to thesuccess of their business plan;

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b. its failure to discover that the second maintenance fee on the '005Patent had not been paid in a timely fashion;

c. its failure to discover that Andrus Sceales had received a notice ofexpiration of the '005 Patent;

d. its failure to arrange for an orderly transfer of the GemEx and VGTSfiles from Andrus Sceales to Cook & Franke;

e. its failure to investigate the reasons why Andrus Sceales did notimmediately transfer its hard copy file on the '005 Patent to Cook &Franke;

f. its failure to discover that Andrus Sceales had placed the file for thekey patent owned by its clients GemEx and VOTS on inactive statusbecause their patent had been mistakenly allowed to expire; and

g. its failure to confirm the status of the '005 Patent after it arranged forthe transfer of all matters relating to GemEx and VGTS from AndrusSceales to Cook & Franke; and

h. its failure to correct the untimely '005 Patent expiration.64. As a direct result of Cook & Franke's negligence and the breach of

its duty to exercise reasonable care in the representation of its clients, the plaintiffs havesuffered damages.

Fourth Claim For Relief(Breach ofContract Against Defendant Andrus Sceales)

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65. Plaintiffs incorporate by reference, as though set forth in full, theallegations contained in paragraphs I through 64.

66. Andrus Sceales on the one hand and GemEx and VGTS on the otherhand entered into a contract through which Andrus Sceales agreed, in return for payment,to act as patent and intellectual property counsel for GemEx and UGTS.

67. Pursuant to the contract, Andrus Sceales and its partner Sokol wererequired to act with reasonable care in their representation of the Plaintiffs. Indischarging their responsibilities under the contract, they were obliged to exercise thedegree of professional care, skill, ability, and judgment expected of them as attorneysholding themselves out as experts in patent law. The contract obliged them to carry outthe instructions of their clients with respect to matters entrusted to them.

68. Andrus Sceales and its partner Sokol breached the contract withPlaintiffs by virtue of their negligent conduct, by failing to provide Plaintiffs withadequate and appropriate legal services, and by failing to carry out Plaintiffs' instructionswith respect to matters for which they were responsible.

69. All conditions precedent to Plaintiffs' recovery for breach ofcontract have been performed or otherwise have been satisfied.

70. As a direct result of the Defendant's breach of their contract withPlaintiffs, the Plaintiffs have suffered damages.

Fifth Claim For Relief(Breach ofContract Against Defendant Cook & Franke)

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71. Plaintiffs incorporate by reference, as though set forth in full, the': ' allegations contained in paragraphs 1 through 70.

72. Cook & Franke on the one hand and OemEx and UOTS on the otherhand entered into a contract through which Cook & Franke agreed, in return for payment,to act as patent and intellectual property counsel for GemEx and UGTS.

73. Pursuant to their contract, Cook & Franke and its shareholder Sokolwere required to act with reasonable care in their representation of the Plaintiffs. Indischarging their responsibilities under the contract, they were obliged to exercise thedegree of professional care, skill, ability and judgment expected of them as attorneysholding themselves out as experts in patent law. The contract obliged them to carry outthe instructions of their clients with respect to matters entrusted to them

74. Cook & Franke and its shareholder Sokol breached their contractwith OemEx and DOTS by virtue of their negligent conduct and by failing to provide thePlaintiffs with adequate and appropriate legal services.

75. All conditions precedent to the Plaintiffs' recovery for breach ofcontract have been performed or otherwise have been satisfied.

76. As a direct result of the Defendant's breach of their contract withPlaintiffs, the Plaintiffs have suffered damages.

Sixth Claim For Relief(Direct Action Against Defendant Westchester Fire Insurance Company)


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78. On information and belief, Defendant Westchester Fire InsuranceCompany issued a policy of liability insurance to Defendant Andrus Sceales. Theinsurance policy provided coverage for the acts and omissions of Defendant AndrusSceales, its partners and employees made in the course of providing of professionalservices. Under the terms of the insurance policy, Westchester Fire Insurance Companyagreed to indemnify its insureds for the acts and omissions that caused UGTS and Gemexto suffer damages.

79. Pursuant to secs. 632.24 and 803.04(2), Wis. Stats., DefendantWestchester Fire Insurance Company is liable, up to the amounts stated in the policy, toPlaintiffs for any damages Plaintiffs are entitled to recover against its insureds.

Seventh Claim For Relief(Direct Action Against Defendant St. Paul Fire & Marine Insurance Company)


81. On information and belief, Defendant St. Paul Fire & MarineInsurance Company issued a policy of liability insurance to Defendant Cook & Franke.The insurance policy provided coverage for the acts and omissions of Defendant Cook &Franke, its partners and employees made in the course of providing of professionalservices, including coverage for the acts and omissions of Cook & Franke partners beforethey became partners .. Under the terms of the policy, S1. Paul Fire & Marine InsuranceCompany agreed to indemnify its insureds for the acts and omissions that caused UGTSand Gemex to suffer damages.

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82. Pursuant to secs. 632.24 and 803.04(2), Wis. Stats., Defendant St.Paul Fire & Marine Insurance Company is liable, up to the amounts stated in the policy,to Plaintiffs for any damages Plaintiffs are entitled to recover against its insureds.

PRAYER FOR RELIEFWherefore, GemEx and UGTS, Inc. respectfully request that this Court:A. Award Plaintiffs damages in an amount to be determined at trial;B. Award Plaintiffs the attorney fees and expenses paid to Defendants

during their representation of Plaintiffs and any attorneys fees and expenses incurred as aresult of the Defendant's wrongful conduct;

C. Award Plaintiffs pre-verdict, post-verdict, and post-judgmentinterest and costs as allowed by law;

D. Award Plaintiffs their costs, disbursements, and attorneys fees asallowed by law; and

proper.E. Award Plaintiffs such other relief as the Court deems just and

JURY TRIAL DEMANDPlaintiffs demand a jury trial on any issues so triable.

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31/31

D a r e d : ~ . . 7 WI/I

tb.us.S248539.11

pro hac vice to be pendingAri B. LukoffState Bar No. 1061330Faegre & Benson LLP2200 Wells Fargo Center90 South Seventh StreetMinneapolis, MN 5 5 4 0 2 ~ 3 9 0 1 Telephone: ( 6 1 2 ) 7 6 6 ~ 7 0 0 0 fax: ( 6 1 2 ) 7 6 6 ~ 1 6 0 0 [email protected]@[email protected]

Robert L. GegiosState Bar. No.1 002906William E. FischerState Bar. No.1 045725Kohner Mann & Kailas, S.C.Washington BuildingBarnabas Building Center4650 N. Port Washington RoadMilwaukee, WI 53213-1059Telephone: (414)962-5110fax: ( 4 1 4 ) 9 6 2 ~ 8 7 2 5 [email protected]@kmksc.comATTORNEYS FOR PLAINTIFFS GEMEXSYSTEMS, INC. AND UGTS, INC.

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gemex systems inc et al v. andrus sceales starke & sawall llp et al complaint

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