Facts

The action involved a dispute between plaintiff Imagenetix Inc. and defendant TriPharma, LLC over the scope of an exclusive license granted to TriPharma through its 2007 Exclusive Marketing and Supply Agreement concerning certain fat and weight loss products covered under U.S. Patent No. 6,899,892 ('892 Patent). The primary issue in this action was the scope of the exclusive sublicense Imagenetix granted to TriPharma. Imagenetix contended the sublicense was limited to the one precise, specific formula of a weight loss product ("Product") clinically studied at the University of Connecticut. TriPharma claimed the sublicense broadly encompassed all products under the '892 Patent.

RESPONDENT/COUNTER-CLAIMANT'S CONTENTIONS:
TriPharma asserted that Imagenetix granted to TriPharma by contract an exclusive sublicense to advertise, market and sell all products under the '892 Patent, that Imagenetix and its principal William Spencer breached the contractual covenant to enforce TriPharma's exclusive patent rights, and also directly sold product to third parties in breach of the agreement, eventually wrongfully terminating the agreement and attempting to poach TriPharma's customers and reap the benefits of TriPharma's efforts to sell the patented product, to which TriPharma had the exclusive right to sell.

TriPharma contended that Imagenetix violated federal patent and trademark law and common law unfair competition laws. TriPharma claimed the sublicense broadly encompassed all products under the 892 Uminn patent. TriPharma asserted that its failure to maintain minimum orders of the product did not constitute a breach of the Amended and Restated Agreement because its inability to maintain such minimum orders was caused by Imagenetix's breaches.

TriPharma asserted that the agreement was wrongfully terminated, and should be reinstated as a result. TriPharma claimed that Imagenetix and Spencer engaged in promissory fraud by not disclosing to TriPharma his true intent to distribute the product to other companies despite TriPharma's exclusive license.

TriPharma also claimed that Spencer knowingly and intentionally misrepresented the true facts, and that Spencer never intended to perform the agreements with TriPharma when he entered them, but instead made promises to grant TriPharma an exclusive license in order to induce TriPharma to enter those agreements.

TriPharma asserted that TriPharma and Dameshek were justified in relying on Spencer's promises. Nevertheless, despite Spencer's repeated and ongoing breaches, Dameshek justifiably relied on Spencer's further representations that the product was so unique and desirable that both companies likely would reap substantial profits from their entering further exclusive distribution agreements. Moreover, when Dameshek and McPartland confronted Spencer in late 2007 about Imagenetix's sales to other companies in violation of the Marketing and Supply Agreement, Spencer promised to changes his ways. This "gentlemen's' agreement" was a separate instance of Spencer's promissory fraud. As a consequence of Spencer's misrepresentations and fraud, TriPharma suffered significant financial losses. TriPharma contended that is was entitled to recover Imagenetix's net profits on the sales of the product to TriPharma's competitors.

TriPharma also contended that both Imagenetix and Spencer committed promissory fraud and that they both liable to TriPharma for compensatory damages, attorney fees and all costs, as well as punitive damages.

TriPharma further claimed that it was entitled to recover its attorney fees expended to sue Solstice International and Max International, LLC.

CLAIMANT/COUNTER-RESPONDENT'S CONTENTIONS:
Imagenetix contended that sublicense was limited to the one precise, specific formula of weight loss product clinically studied at UConn and that it could sell different formulas of the product to TriPharma's competitors.

Imagenetix asserted that TriPharma was in breach of the Amended and Restated Agreement, and that the agreement was properly terminated. Imagenetix further contended that it was entitled to unspecified damages, including attorney fees. Imagenetix denied that it had any liability to TriPharma on any of its claims.

Damages

TriPharma sought monetary damages based on Imagenetix's breaches of the agreement, as well as for promissory fraud. TriPharma also sought a declaration from the arbitrator regarding the rights and obligations as follows: The agreement grants to TriPharma an exclusive sublicense to advertise, market and sell all products that fall and are covered under the '892 Patent. Imagenetix's contractual duty to use its best efforts to protect TriPharma's rights under the '892 Patent is a concurrent covenant, and breach thereof relieving TriPharma of its obligations to meet the contractual minimums (i.e. royalties) and enjoying Imagenetix from terminating the contract.

Result

TriPharma prevailed on the majority of its claims, including breach of contract, breach of the duty of good faith and fair dealing and promissory fraud, and was awarded significant monetary, declaratory, and injunctive relief, as well as pre- and post-judgment interest and attorney fees and costs. Dameshek also prevailed in the defense of all claims asserted against him, individually. Imagenetix and Spencer jointly and severally pay to TriPharma $2,101,985 (breach of contract damages); $250,000 (punitive damages); $957,793 (attorney fees); $65,289 (costs). Prejudgment and post-judgment interest at the legal rate of 10 percent - $559,357. The arbitrator found that Imagenetix and Spencer breached the Amended and Restated Agreement and the preceding Exclusive Marketing and Supply Agreements; that Imagenetix and Spencer breached the covenant of good faith and fair dealing; that Imagenetix and Spencer committed promissory fraud; that Imagenetix and Spencer are not liable for false marking, counterfeiting or unlawful competition. The arbitrator also found that the Amended and Restated Agreement and the preceding Exclusive Marketing and Supply Agreements grant to TriPharma an exclusive sublicense to market, sell and distribute any and all products covered by the 892 Patent and to exclusively market and sell the product by referencing the 892 Patent and the UConn clinical study, to the exclusion of all others. Imagenetix did not properly terminate the Amended and Restated Agreement. Based on these findings, the arbitrator ordered that a permanent injunction issue to reinstate the amended and restated agreement, as amended; extend the term of the Amended and Restated Agreement by two years until Oct. 1, 2014; delay imposition of TriPharma's minimum unit order obligations pursuant to Section 1.1 of the Agreement by six months from issuance of the final award; and to enjoin Imagenetix from selling or distributing any weight loss product based on the 892 Patent to anyone other than TriPharma.