Javo Beverage Co., Inc. v. Stephen Corey

Breach Of Contract And Confidentiality And Invention Assignment Agreement

Southern District

Magistrate Judge Jay C. Gandhi (Ret., Jams)

$50 Million

Plaintiffs Attorneys: Cooley Llp, Steven M. Strauss, Erin C. Trenda, Jeffrey S. Karr, Alexander R. Miller, Dane R. Voris

Defense Attorneys: Sheppard, Mullin, Richter & Hampton Llp, John A. Yacovelle, Marisa B. Miller, Kristin P. Housh, Jesse A. Salen, Kevin K. Chang; Garcia Rainey Blank & Bowerbank Llp, John E. Bowerbank, Maya Kapadia

Steven M. Strauss

The question before the arbitrator was whether the co-founder of Javo Beverage Co. invented a new and improved method to produce coffee extract before or after he left the company to launch a competitor, and which company had the rights to his patents.

Proving he had breached his contracts with Javo and made off with trade secrets depended in large part on circumstantial evidence, according to Steven M. Strauss, the company's lead attorney. Success arrived in October, when a retired federal magistrate judge awarded Javo $50 million and the patents. Javo Beverage Co. Inc. v. Corey, 01-19-0003-2445 (AAA, final award Oct. 28, 2021).

The coffee extract at issue is a sort of cold-brew, industrial-strength, liquid instant coffee used as a flavoring for ice cream and candy, to make the coffee at mini-marts, for cold-brew coffee in a can and many other uses. Stephen Corey founded the company that would become Javo in the early 1990s, and by about 2000 he had developed and refined an extracting process that made the company an industry leader, Strauss said.

In 2011, he left to start a competitor. A few years after that, he applied for patents that, according to Javo, described exactly the process he had created earlier, which Javo had been guarding as trade secrets. The company sued him after a potential purchaser turned up the patents during due diligence. Javo Beverage Co. Inc. v. Corey, 3:19-cv-01859 (S.D. Cal., filed Sept. 26, 2019).

The litigation revolved around employment, confidentiality and invention assignment agreements Corey had signed. First, Strauss and his team used those contracts to move the case to arbitration.

Then, the goal was to show he breached those agreements, including ones saying he assigned to Javo any inventions he created at Javo. "We took the position... that he hadn't created anything after Javo on his own," Strauss said.

The evidence included statements he had made years before in SEC filings and to potential Javo investors touting the proprietary process he had invented. When during the litigation he claimed he never invented anything at Javo, "those statements really came back to haunt him," Strauss said. "They were all in the pub domain."

The plaintiff also produced emails Corey sent to suppliers requesting the precise specifications of the process Javo used, indicating that he was trying to recreate it.

"As the arbitrator said... it was about credibility, and Mr. Corey's credibility just wasn't there," Strauss said. "[His] wasn't a credible story."

In addition to awarding substantial damages, arbitrator Jay Gandhi determined that Corey's patents belonged to Javo based on the invention assignment agreement he had with his former company.

"That's the big win," Strauss said.

Defense attorneys John E. Bowerbank, John A. Yacovelle and Marisa B. Miller did not respond to a request to comment on the verdict. But on January 24, the parties filed a joint motion to dismiss the federal lawsuit with prejudice.

The parties are now in settlement talks.

- Don DeBenedictis