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Original - Court 2nd copy - Plaintiff

Approved, SCAO 1st copy - Defendant 3rd copy - Return

STATE OF MICHIGAN CASE NO.


JUDICIAL DISTRICT
JUDICIAL CIRCUIT SUMMONS
COUNTY PROBATE

Court address
Michigan Court of Claims, Hall of Justice, 925 W. Ottawa St., P.O. Box 30185, Lansing, MI 48909
Plaintiffs name(s), address(es), and telephone no(s). Defendant's name(s), address(es), and telephone no(s).
COMPOSITE INNOV AT!ON GROUP, MICHIGAN STATE UNIVERSITY,
LLC, a Michigan limited liability company, a Michigan educational institution,
and ATOMIC COMPOSITES LLC, a V DR. RICHARD CHYLLA, an individual
Michigan limited liability company

Plaintiff's attorney, bar no., address, and telephone no.


Scott T. Seabolt (P55890)
17199 N. Laurel Park Dr., Suite 215
Livonia, Michigan 48152
248-717-1302
sseabolt@seaboltpc.com
l )

Instructions: Check the items below that apply to you and provide any required information. Submit this form to the court clerk alo!1g with ..y,<>µr complaint and,
if necessary, a case inventory addendum (form MC 21 ). The summons section will be completed by the court clerk.

Domestic Relations Case


There are no pending or resolved cases within the jurisdiction of the family division of the circuit court involving the family or
family members of the person(s) who are the subject of the complaint.
There is one or more pending or resolved cases within the jurisdiction of the family division of the circuit court involving
the family or family members of the person(s) who are the subject of the complaint. Attached is a completed case inventory
(form MC 21) listing those cases.
It is unknown if there are pending or resolved cases within the jurisdiction of the family division of the circuit court involving
the family or family members of the person(s) who are the subject of the complaint.

Civil Case .
This is a business case in which all or part of the action includes a business or commercial dispute under MCL 600.8035.
MDHHS and a contracted health plan may have a right to recover expenses in this case. I certify that notice and a copy of
the complaint will be provided to MDHHS and (if applicable) the contracted health plan in accordance with MCL 400.106(4 ).
There is no other pending or resolved civil action arising out of the same transaction or occurrence as alleged in the
complaint.
A civil action between these parties or other parties arising out of the transaction or occurrence alleged in the complaint has

been previously filed in this court, _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Court, where

it was given case number _ _ _ _ _ _ _ _ _ _ and assigned to Judge _ _ _ _ _ _ _ _ _ _ _ _ _ _ __

The action remains is no longer pending.

Summons section completed by court clerk. JSUMMONSI

NOTICE TO THE DEFENDANT: In the name of the people of the State of Michigan you are notified:
1. You are being sued.
2. YOU HAVE 21 DAYS after receiving this summons and a copy of the comp!<:Jint to file a written answer with the court and
serve a copy on the other party or take other lawful action with the; court (28 days if you were served by mail or you were
served outside this state).
3. If you do not answer or take other action within the time allowed, judgment may be entered against you for the relief
demanded in the complaint.
4. If you require special accommodations to use the court because of a disability or if you require a foreign language interpreter
to help you fully participate in court proceedings, please contact the court immediately to make arrangements.
Issue
Courtclerk erome W. Zimmer Jr.

MC 01 (6119) SUMMONS MCR 1.109(0), MCR 2.102(6), MCR 2.103, MCR 2.104, MCR 2.105
IPROOF OF SERVICE I .____c_as_e_N_o_.__:___;___;___;__ _ _....J
TO PROCESS SERVER: You are to serve the summons and complaint not later than 91 days from the date of filing or the date
of expiration on the order for second summons. You must make and file your return with the court clerk. If you are unable to
complete service you must return this original and all copies to the court clerk.

I CERTIFICATE/ AFFIDAVIT OF SERVICE / NONSERVICE]


[] OFFICER CERTIFICATE OR [] AFFIDAVIT OF PROCESS SERVER
I certify that I am a sheriff, deputy sheriff, bailiff, appointed Being first duly sworn, I state that I am a legally competeni
court officer, or attorney for a party (MCR 2.104[A][2]), adult, and I am not a party or an officer of a corporate
and that: (notarization not required) party (MCR 2.103[A]), and that: (notarization required)

I served personally a copy of the summons and complaint,


I served by registered or certified mail (copy of return receipt attached) a copy of the summons and complaint,

together with,...,....,-..,,..-,-----,----:--,,.,.-,-,---------,----,-...,....,..-----------------------
ust all documents served with the summons and complaint
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ on the defendant(s):

Defendant's name Complete address(es) of service Day, date. time

I have personally attempted to serve the summons and complaint, together with any attachments, on the following defendant(s)
and have been unable to complete service.
Defendant's name Complete address(es) of service Day, date, time

()

r,. :,
C:
I declare under the penalties of perjury that this proof of service has been examined by me and that its contents are true to the
best of my information, knowledge, and belief.
Service fee Miles traveled Fee Signature
$ 1$
Incorrect address fee Miles traveled Fee TOTAL FEE Name (type or print)
$ 1$ $
I Title

Subscribed and sworn to before me on _ _ _ _ _ _ _ _ __ _______________ County, Michigan.


Date

My commission expires: _ _ _ _ _ _ _ _ __ Signature: =---,----,---,-...,...,,.~----,-,.,---------------


Date Deputy court clerk/Notary public

Notary public, State of Michigan, County of _ _ _ _ _ _ _ _ _ _ _ _ __

I
ACKNOWLEDGMENT OF SERVICE I
I acknowledge that I have received service of the summons and complaint, together with.,..,.,.---,----,------------
Attachments

__________________ on-=-__,-,--.-----------------------
Day, date, time

-=---,-------------------- on behalf of _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __
Signature
STA TE OF MICHIGAN

IN THE COURT OF CLAIMS

COMPOSITE INNOVATION GROUP,


LLC, a Michigan limited liability company,
and ATOMIC COMPOSITES LLC, a
Michigan limited liability company,

Plaintiff,
Case No.) "
V.
Hon.
MICHIGAN STATE UNIVERSITY,
a Michigan educational institution,
DR. RICHARD CHYLLA, an individual,

Defendants.

Scott T. Seabolt (P55890)


Brooke Booth (P6773 l)
Adam G. Winnie (P82820)
Seabolt Law Firm
17199 N. Laurel Park Dr., Suite 2 l 5
Livonia, Michigan 48152
248-717-1302
sseabolt@seaboltpc.com
bbooth@seaboltpc.com
awinnie@seaboltpc.com
Attorneys for Plaintiffs·

There is no other civil action between these parties arising from the
transactions and occmTences alleged in this Complaint.

COMPLAINT
Composite Innovation Group, LLC ("CIG") and Atomic Composites LLC ("Atomic",

collectively with CIG, "Plaintiffs"), by and through their undersigned counsel, for their Complaint,

state as follows:

l. This is an action for fraud committed by Michigan State University ("MSU"), one

of its executive directors, Dr. Richard Chylla ("Chylla") and possibly others associated with MSU.
2. Beginning in early 2013, MSU and Chylla represented to CIG that MSU held

certain patent rights to certain inventions. The claimed inventions involved the use of nanopaiiicles

in composite materials to help divert energy caused by an impact. The claimed inventions were

intended to reduce the risk of injury for athletes, soldiers, and other hazardous occupations, and

could be applied to helmets, other protective gear, footwear, armor, aircraft, watercraft, land craft,

and constmctions materials, among others.

3. MSU and Chylla represented that MSU had patents and patent applications for the

claimed inventions to induce CIG to enter into an Exclusive License Agreement effective July 1,

2013 ("ELA"). Under the ELA, CIG agreed to develop, commercialize and sell products

incorporating the patent rights purportedly held by MSU. Contrary to the representations in the

ELA, and unbeknownst to CIG at the time, MSU did not have any patents or patent applications

for the claimed inventions when the ELA was executed.

4. MSU claimed that its inventions arose from MSU's work under a cooperative

agreement between MSU and the US Army Research Laboratory ("ARL"). Because the claimed

inventions arose from MSU's work under an agreement with a federal agency, MSU was required

by federal law to make certain disclosures regarding its inventions to the federal agency, and to

meet certain deadlines with the federal agency in order to secure the patent rights it purported to

license to CIG and later Atomic. Unbeknownst to CIG and Atomic, MSU failed to follow federal

law. MSU made untimely, inaccurate and misleading disclosures to ARL regarding MSU's

claimed inventions and generally failed to take the steps necessary to secure the patent rights that

MSU purported to license to CIG and Atomic.

5. CIG and Atomic spent millions of dollars over the next several years meeting and

exceeding their contractual obligations, including causing applications for patents to be filed in

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MSU's name, developing products incorporating MSU's purported patent rights, creating a market

and identifying potential customers for the products, developing innovative marketing campaigns,

preparing to commercialize and launch the products, and raising capital for all of the above

activities.

6. On June 29, 2018, shortly after CIG completed MSU's patent filings and presented

its first commercial embodiment, MSU purpo11ed to terminate the ELA with CIG. MSU's stated

reasons for terminating the ELA were pretextual and the termination was unlawful. The true

motives behind MSU's termination of the ELA included 1) converting for MSU's own use the

applications for patents and other development work performed by CIG and Atomic; 2) preventing

CIG and Atomic from discovering the untimely, inaccurate and misleading disclosures that MSU

made to the federal government; and 3) preventing CIG and Atomic from discovering the fraud

that Chylla and MSU had perpetrated on CIG.

7. CIG and Atomic were able to uncover this fraud by issuing a series of FOIA

requests to the federal government. It was through these efforts that CIG and Atomic were able to

determine that MSU made untimely, inaccurate and misleading disclosures to ARL, that MSU did

not follow federal law, and that MSU did not properly secure the patent rights it purported to

license to CIG and Atomic. CIG and Atomic also discovered that Chylla and MSU took steps to

secure certain patent rights that it had purported to license to CIG under the ELA several months

after terminating the ELA in 2018. This was an attempt to cover up the fraud committed by MSU

and Chylla. When CIG confronted MSU and Chylla with the facts discovered through the FOIA

requests, MSU responded with another series of false representations designed to conceal and

obfuscate their misconduct.

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8. Through this action, CIG and Atomic are seeking to hold MSU and Chylla

accountable for their misconduct and to recover the millions of dollars in damages CIG and Atomic

sustained as a result.

PARTIES, JURISDICTION AND VENUE


9. CIG is a Michigan limited liability company with its principal place of business

located in the County of Oakland, State of Michigan. Mr. Edmund Swain is one of the principals

and the CEO ofCIG.

10. Atomic is a Michigan limited liability company with its principal place of business

located in the County of Oakland, State of Michigan. Mr. Edmund Swain is one of the principals

and the CEO of Atomic.

11. CIG and Atomic are in the business of developing and commercializing

nanotechnology-based solutions to improve personal protection gear, equipment and other m1icles.

These technologies have applications ranging from youth athletics, such as football and hockey

helmets, to military, such as protective gear for soldiers and deck tiles for Navy ships.

12. MSU is a non-profit educational institution formed under the laws of the State of

Michigan with its principal place of business in the County of Ingham, State of Michigan.

13. Chylla is the Executive Director of MSU Technologies, a division or department of

MSU. Upon information and belief, Chylla works and resides in the County of Ingham, State of

Michigan.

14. Jurisdiction and venue in the Court of Claims are proper under §600.6419. The

amount in controversy is in the millions of dollars.

BACKGROUND-THE EXCLUSIVE LICENSE AGREEMENT

15. Effective July 1, 2013, MSU and CIG entered into the ELA, a copy of which is

attached as Exhibit 1.

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16. In the second paragraph of the ELA, MSU represented that "University holds

certain patent rights that it desires to have perfected and exploited for commercial purposes.

Licensee wishes to obtain the exclusive right to exploit such patent rights commercially." (Exhibit

1, p. I). The statement that MSU "holds certain patent rights" was the fundamental inducement for

CIG to enter into the ELA. This statement was repeated by Chylla and others at MSU during the

negotiation of the ELA. These statements from MSU were knowingly false when made or were

made with reckless disregard for the tmth. These false statements were intended to and did induce

CIG into believing that MSU held patent rights to the subject invention, when in fact it did not.

CIG relied on these false statements by entering into the ELA. CIG would not have entered into

the ELA but for these and other similar knowingly false statements.

17. The ELA defined "Patent Rights" to mean: "(a) all of the University's rights in the

patents and patent applications Listed on Schedule I and (b) all of the University's rights in all

divisions, continuations, reissues, renewals, re-examinations, foreign counterparts, substitutions,

or extensions thereof." (Exhibit 1, p. 2). This definition was intended to create the false impression

that MSU had taken timely steps to file patent applications and secure patents, when in fact MSU

had not taken such steps. CIG relied on this false statement by entering into the ELA. CIG would

not have entered into the ELA but for these and other similar knowingly false statements.

18. Schedule l to the ELA identified the patent rights with reference to MSU Reference

No. TEC2013-0085. (Exhibit 1, p. 14). MSU Reference No. TEC2013-0085 referred to an MSU

invention disclosure dated Febmary I, 2013 ("Invention Disclosure Form"). However, contrary to

the explicit statements in the ELA, MSU did not have any patents and had not filed any patent

applications in connection with the Invention Disclosure Form. CIG relied on this false statement

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by entering into the ELA. CIG would not have entered into the ELA but for these and other similar

knowingly false statements.

I 9. The Invention Disclosure Form identified the MSU innovators as Dr. Mahmoodul

Haq and Dr. Lawrence Drzal. The Invention Disclosure Form identified the title of the invention

as "Novel, Multi-Impact, Energy Diverting, Energy Absorbing, Repairable Helmets." The

Invention Disclosure Form states that the "invention is a technique that can be added as an outer

layer to the existing helmets, or to new helmets." The Invention Disclosure Form indicated that

the invention was first conceived on October 19, 2012. The Invention Disclosure Form further

indicated that the invention had been disclosed to Mr. Swain and identified Mr. Swain and CIG as

industry contacts. The Invention Disclosure Form stated that the inventors intended to wait until

the invention disclosure/ patent filing was completed to seek potential defense/industrial investors.

Doctors Haq and Drzal purported to assign all of their rights in the disclosed invention to MSU.

20. MSU made a number of statements in the Invention Disclosure Form that were

knowingly false when made or made· with reckless disregard to the truth. For example, MSU

indicated in the Invention Disclosure Form that no one else could make a claim to the disclosed

invention. This statement was knowingly false when made or made with reckless disregard for the

truth as MSU had not taken timely steps to elect title to the claimed invention when the ELA was

signed. This false statement was intended to and did induce CIG into believing that MSU held the

patent rights for the subject invention, when in fact it did not. CIG relied on this false statement

by entering into the ELA. CIG would not have entered into the ELA but for these and other similar

knowingly false statements.

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21. Under Section 2.1 of the ELA, CIG was granted "the exclusive right to use the

Patent Rights, to identify, develop, make, have made, use, import, export, lease, sell, have sold,

and offer for sale, Products within the Field and within the Territory." (Exhibit 1, p. 3 ).

22. The ELA defined "Products" to include anything that would infringe on the Patent

Rights absent the license. (Exhibit 1, p. 2). The ELA defined "Field" broadly to mean "Aerospace,

Defense, Homeland Security, Marine, and Sports & Recreation." (Exhibit 1, p. 14). The ELA

defined the "Territory" to mean "Worldwide." (Exhibit 1, p. 14).

23. Under Section 4.1 of the ELA, MSU represented that "it has the right, power and

authority to enter into and perform its obligations under this Agreement." (Exhibit 1, p. 6). This

statement was knowingly false when made or made with reckless disregard for the truth. This

knowingly false statement was intended to and did induce CIG into believing that MSU held the

patent rights for the subject invention, when in fact it did not. CIG relied on this false statement

by entering into the ELA. CIG would not have entered into the ELA but for these and other similar

knowingly false statements.

24. Under Section 5.1, MSU was "responsible for preparing, filing, prosecuting and

maintaining the patent applications and patents under the Patent Rights," while CIG agreed under

Section 5.2 to pay for the cost of prosecuting the patents under the Patent Rights. CIG also agreed

to cooperate with MSU in the preparation, filing, prosecution, and maintenance of patents under

the Patent Rights. (Exhibit 1, p. 7).

25. The term of the ELA was from the effective date until "the expiration or termination

of all Patent Rights." (Exhibit 1, p. 9). MSU's right to terminate the ELA prior to its natural

expiration was generally limited to instances where CIG defaulted under the ELA and was given

notice and an opportunity to cure. For example, Section 7.2(a) gave MSU the right to terminate if

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CIG failed to pay amounts due under the ELA or failed to deliver reports as required under the

ELA and failed to cure those defaults within 30 days after written notice from MSU. (Exhibit 1,

p. 9).

26. Under Section 3.12, CIG agreed to meet certain reporting obligations as set forth in

Schedule 2 of the ELA. Schedule 2 then listed reporting obligations and milestones that CIG was

required to meet. (Exhibit 1, p. 16). Schedule 2 also included various minimum payments that CIG

agreed to payMSU. (Exhibit 1, p. 15).

27. By letter dated July 15, 2013, MSU confinned, "I am writing to confirm that

Composite Innovation Group, LLC and Michigan State University entered into the subject

exclusive licensing agreement for MSU technology no. TEC2013-00866, entitled 'Novel, Multi-

Impact, Energy Diverting, Energy Absorbing, Repairable Helmets'. The Agreement conveys

worldwide rights in the fields of Aerospace, Defense, Homeland Security, Marine, and Sp011s &

Recreation." Again, these statements were knowingly false when made or made with reckless

disregard for the truth. MSU did not hold the patent rights it purported to convey. These knowingly

false statements were intended to and did induce CIG into believing that MSU held the patent

rights for the subject invention, when in fact it did not. CIG relied on this false statement by

entering into the ELA. CIG would not have entered into the ELA but for these and other similar

knowingly false statements.

BACKGROUND - BAYH-DOLE ACT

28. The Patent and Trademarks Act of 1980- commonly referred to as the "Bayh-Dole

Act" - is codified at 35 USC §200, et seq, with attendant regulations at 37 CFR §§40 l and 404, et

seq.

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29. The purpose ofBayh-Dole is to standardize certain requirements in federal research

grants and/or cooperative agreements between a federal agency and a grantee, or "contractor."

30. Among the requirements of Bayh-Dole is that a contractor - in this case, MSU - is

required to disclose each subject invention to the funding agency within two months after the

contractor is made aware ofthe invention(s). 37 CFR401.14(c)(l).

31. Another requirement of Bayh-Dole is that the contractor- in this case, MSU - must

elect title to each subject invention within two years after the aforementioned disclosure. Election

includes a notification sent to the funding agency indicating the intent to elect title to the invention.

37 CFR 401.14(c)(2).

32. Yet another requirement of Bayh-Dole is that the contractor - in this case MSU -

must file a U.S. non-provisional patent application within one year after electing title for each

subject invention. 3 7 CFR 401.14( c)(3 ). A provisional patent application or a foreign patent

application did not suffice under the Bayh-Dole regulations as they existed at the time.

33. Failure to comply with any of these requirements subjects the contractor - in this

case, MSU - to the risk that the funding agency will take title to the invention for itself and that

the contractor will lose its right to claim title to the invention.

34. MSU was well acquainted with the requirements of Bayh-Dole. On November 18,

2015, MSU stated to CIG, "Bayh-Dole regulations require that government funded inventions be

reported to the federal agency who made the award. Our records indicate that this invention was

made with government support under W911NF-l l-2-0017 awarded by the U.S. Army Research

Laboratory. As such, MSU has assumed responsibility <ts 'contractor' (as deffoe<l by 37 CFR

401.](b)) and has performed due diligence by reporting the receipt of this technology to the

Army." [emphasis added]. This statement was purposely misleading in that it omitted the material

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facts that MSU had not made a timely or accurate disclosure of each invention, and MSU had not

taken the necessary steps to elect title to each invention. By omitting these material facts, MSU

mislead CIG into believing that MSU was complying with Bayh-Dole regulations, when in fact it

was not. CIG relied on this false and misleading statement by continuing to spend hundreds of

thousands of dollars performing under the ELA.

35. In the same November 18, 2015 communication, MSU stated to CIG, "Attached is

our preferred assignment document template which has been revised with the present application's

filing particulars. Please have CIG's attorneys obtain our inventors' signatures and proceed

to record same with the U.S. Patent and Trademark Office." It is unclear why MSU was asking

CIG to obtain signatures from MSU's own employees. Nevertheless, CIG complied with MSU's

request. In hindsight, it should not have been necessary for CIG to obtain signatures from MSU's

inventors given MSU's previous representations that it already held title to the patent rights in

question.

36. On May 27, 2016, CIG, through its counsel, made the following inquiry: "We still

seek further clarity of the rights retained by the military and presume there is a written agreement

between MSU and the military. We are interested in reviewing the agreement so that we can more

fully understand the scope of rights licensed by CIG from MSU relative to the military carve-out.

It is likely our investor will also want further clarity."

37. Bradley Shaw of MSU responded, "[t]here is no general agreement between MSU

and the military, we follow federal law." Shaw then referred CIG to the Bayh-Dole Act. These

statements from MSU were knowingly false when made or made with reckless disregard for the

tmth. In fact, there was an agreement between MSU and the military which MSU chose to withhold

from CIG. Moreover, MSU had not followed federal law to elect title to the Patent Rights and had

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missed or ignored virtually every deadline for doing so. MSU made these false statements for the

purpose of concealing from CIG the fact that MSU had not followed federal law, MSU had not

made a timely or accurate invention disclosure, MSU had not made a timely election of title, MSU

had not filed a timely application for patent, and MSU had not made a timely request for extending

these dates. CIG relied on this false and misleading statement by continuing to spend hundreds of

thousands of dollars performing under the ELA.

BACKGROUND - FIRST AMENDMENT

38. From July 15, 2013 through the end of 2016, CIG worked diligently to meet its

obligations under the ELA.

39. CIG recruited dozens of high-profile collegiate and professional athletes, owners

of professional sports teams, doctors, schools, and associations to advocate on behalf of CIG,

Atomic and their mission.

40. In 2014, CIG formed Atomic. On November 13, 2014, Atomic entered into a

services agreement with MSU, a copy of which is attached as Exhibit 2 ("Services Agreement").

Under the Services Agreement, MSU agreed to perform testing services on behalf of Atomic in

order to validate the impact behavior of a composite applique bonded to a polycarbonate (PC)

base. Atomic paid $25,000 for these services. Under the Services Agreement, test results and

deliverables were to remain confidential. Moreover, deliverables under the Services Agreement

were considered works for hire that belonged to Atomic. MSU purported to produce the

deliverables required under the Services Agreement on or about January 15, 2015. Upon

information and belief, MSU has used Atomic's confidential information and the deliverables

under the Services Agreement for purposes not allowed under the Services Agreement. Atomic

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would not have entered into the Services Agreement but for the misrepresentations MSU and

Chylla had made to that point as detailed above.

41. CIG and Atomic raised over $1 million in investment capital and secured letters of

intent for millions more at valuations as high as $10 million. CIG and Atomic were in the process

of raising $1.5 million in investment capital when MSU unlawfully terminated the ELA.

42. On April 30, 2015, CIG caused to be filed - with MSU's approval - a U.S.

provisional patent application (Serial No. 16/453,644) in the name of MSU's Board of Trustees

("Provisional Patent Application"). CIG paid the costs and attorney fees associated with the filing.

The filing would not have occurred without CIG's substantial assistance. In doing so, CIG went

above and beyond its obligations under the ELA in an attempt to mitigate the damage caused by

MSU's delays and failures to prepare and file patent applications as required by the ELA. MSU

made no mention in the Provisional Patent Application that the invention was made with

government support under W911NF-l l-2-0017 awarded by the U.S. Army Research Laboratory.

MSU described the invention as generally relating to "a composite a11icle and to a method of

manufacturing the composite article, and more specifically to a helmet comprising the composite

article."

43. In 2015, CIG developed and presented to MSU a 73-page business plan for Atomic,

including a strategic plan, key team members, description of the technology, technology plan,

performance results, intellectual property plan, marketing plan, financial plan, etc. The business

plan indicated that Phase One: Proof of Concept was "complete", Phase Two: Optimization and

Validation was "in progress", and Phase Three: Commercial Launch was "in planning." Notably,

one of the elements of Phase Two was "Completion of Generation l intellectual property filings.

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44. On April 29, 2016, CIG caused to be filed-with MSU's approval- an application

for patent in the name of MSU's Board of Tmstees under the Patent Cooperation Treaty, which

was assigned International Application Number PCT/US2016/030132 ("PCT Application"). CIG

paid the costs and attorney fees associated with the PCT Application. The filing would not have

occurred without CIG's substantial assistance. In doing so, CIG went above and beyond its

obligations under the ELA in an attempt to mitigate the damage caused by MSU's delays and

failures to prepare and file patent applications as required by the ELA.

45. Unlike the Provisional Patent Application, the PCT Application was not limited to

helmets. The Provisional Patent Application distanced itself from uses other than sports helmets:

"As for the aforementioned [prior a11] helmets, many of them are overly complex and directed

toward impacts different from those experienced during football, e.g., impacts experienced during

combat/warfare or vehicular accidents." In contrast, the PCT Application described the Technical

Field as follows: "The embodiments of the present invention generally relates to a composite

article and to a method of deflecting a force translated to an ai1icle through an impact and an a11icle

for deflecting an impact force. More specifically, the embodiments of the present invention relate

to the use of nanoparticles to deflect force translated to anv article subiect to an impact force."

[emphasis added]. The PCT Application also included the following statement:

This disclosure is not limited to a particular configuration of the helmet 22. Further,
other types of helmets 22 are also contemplated, such as helmets 22 used in other
types of sports ( e.g. baseball or hockey), as well as helmets 22 used for tle[e11se
(e.g. by police, fire, security, or military personnel), vehicular applications (e.g.
watercraft, aircraft, or land craft riders/occupants), and for industrial,
ma1111facturing, or construction applications. In some instances, the helmet 22
may be referred to as a hardhat. While the embodiments of the invention are
described in the context of a helmet, it will be understood that the embodiments of
the invention can be used with any type of article that provitles support for or
protection to an obiect, including shoes, impact areas of vehicles, a,ul any article
subiect to forces generated by an impact. While helmets are discussed throughout

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this application, it should be understood that all ofthese articles are within the
scope of the invention. [emphasis added]

46. The PCT Application also stated: "The composite 20 is not limited to helmets, but

may be utilized in a variety of applications in which dissipation of impact energy is desired. Non-

limiting examples of alternative applications include protective body gear for athletic, military,

security, or medical reasons, footwear, vehicle components, and construction elements (e.g.

interior or exterior walls and partitions)." [emphasis added]

47. Also, unlike the Provisional Patent Application, the PCT Application included the

following statement: "This invention was made with government support under Contract No. ARL

CA#W911NF-ll-2-0017 awarded by the U.S. Army Research Lab. The government has certain

rights in the invention."

48. MSU omitted, withheld and concealed from CIG and Atomic, under circumstances

in which it was duty bound to disclose, the fact that the PCT Application described inventions and

asserted claims that had not been disclosed to ARL as required by federal law. These omissions

rendered MSU' s representations to CIG and Atomic materially false and misleading. CIG and

Atomic relied on these misrepresentations by continuing to spend hundreds of thousands of dollars

performing under the ELA.

49. On April 29, 2016, CIG also caused to be filed - with MSU's approval -

applications for patents in the name of MSU's Board of Trnstees in China and Europe. CIG paid

the costs and attorney fees associated with these filings. The filings would not have occurred

without CIG's substantial assistance. In doing so, CIG went above and beyond its obligations

under the ELA in an attempt to mitigate the damage caused by MSU's delays and failures to

prepare and file the patent applications as required by the ELA.

14
50. In addition, CIG met its reporting obligations under the ELA, including preparing

and submitting annual business plans, marketing plans and budgets. MSU accepted these reports

without objection.

51. Despite CIG 's diligent efforts to move forward under the ELA, MSU did not

reciprocate. As noted above, MSU was responsible under the ELA for preparing, filing,

prosecuting and maintaining the patent applications and patents under the Patent Rights. CIG

agreed to pay for the cost of prosecuting the patents and to cooperate with MSU, but MSU was

responsible for pursuing the patents. Despite multiple requests, entreaties and complaints from

CIG and others who were assisting in filing patent applications, MSU failed to fulfill its obligation

to prepare and file patent applications and left CIG to substantially perform MSU's obligations.

MSU failed and/or refused to respond to inquiries in a timely manner and sometimes failed to

respond at all. MSU's malfeasance and non-feasance in this regard caused substantial delays in the

prosecution of patents. Of particular note, as of the end of 2016 - 3 ½ years after the ELA was

executed - MSU still had not filed a non-provisional U.S. patent application. This placed CIG in

the untenable position of trying to commercialize products for which MSU either had not filed

patent applications or had not done so in a timely manner.

52. As a result of the substantial delays caused by MSU, the parties entered into a First

Amendment to Exclusive License Agreement dated December 16, 2016, a copy of which is

attached as Exhibit 3 ("First Amendment"). Among other things, the First Amendment pushed

back certain deadlines in the ELA and introduced some new deadlines. (Exhibit 3, p. 2-3). MSU

acknowledged that CIG had entered into a sublicense with Atomic. (Exhibit 3, p. 3). The First

Amendment ratified the sublicense and created a deadline of March l, 2017 to raise at least

15
$150,000 for Atomic. (Exhibit 3, p. 3). The First Amendment also created a deadline of December

31, 2017 for demonstrating the first commercial embodiment of a Product. (Exhibit 3, p. 3).

53. The definition of "Field" under the First Amendment continued to include

Aerospace, Defense, Homeland Security, Marine, and Sports & Recreation. (Exhibit 3, p. 3). The

definition of "Territory" continued to be Worldwide. (Exhibit 3, p. 3). Patent Rights was defined

to include but not be limited to the PCT Application. (Exhibit 3, p. 3).

54. Except as set forth in the First Amendment, the ELA remained in full force and

effect.

BACKGROUND - MSU's PRETEXTUAL TERMINATION OF THE ELA

55. Even after the First Amendment, MSU continued in its failure and/or refusal to

fulfill its obligation to prepare and file patent applications. MSU failed and/or refused to respond

to inquiries in a timely manner and sometimes failed to respond at all. MSU's malfeasance and

non-feasance continued to cause delays in the filing of patent applications even after the First

Amendment.

56. Despite MSU's failures, CIG continued to work diligently to comply with the

deadlines in the First Amendment and the ELA.

57. In Febmary 2017, CIG made a $50,000 payment to MSU for calendar year 2016 in

accordance with the First Amendment. (Exhibit 3, p. 2, ,rF).

58. On February 15, 2017, CIG submitted another Annual Report and Business Plan in

accordance with the First Amendment. (Exhibit 2, p. 3, ,rI-3.12(ii)). MSU accepted this submission

without objection, question or comment.

16
59. CIG raised several hundred thousand dollars in financing for Atomic by March 1,

2017, far exceeding the $150,000 requirement in the First Amendment. (Exhibit 3, p. 3, ,II-

3.12(iii)).

60. On October 27, 2017, CIG caused to be filed- with MSU's approval- U.S. patent

application 15/569,989 in the name of MSU's Board ofTrnstees ("U.S. Patent Application"). The

U.S. Patent Application later published as US 2018/0304598, a copy of which is attached as

Exhibit 4. CIG also filed a Canadian patent application on or about the same date. CIG paid the

costs and attorney fees associated with these filings. The filings would not have occurred without

CIG's substantial assistance. In doing so, CIG went above and beyond its obligations under the

ELA in an attempt to mitigate the damage caused by MSU's delays and failures to prepare and file

patent applications as required by the ELA.

61. Like the PCT Application, the U.S. Patent Application was not limited to helmets.

The U.S. Patent Application described the Technical Field as follows: "The embodiments of the

present invention generally relates [sic] to a composite article and to a method of deflecting a force

translated to an article through an impact and an article for deflecting an impact force. More

specifically, the embodiments of the present invention relate to the use of nanoparticles to deflect

force translated to any article subiect to an impact force." [emphasis added] In fact, the U.S.

Patent Application specifically states, "[t]he composite is not limited to helmets, but may be

utilized in a variety of applications in which dissipation of impact energy is desired. Non-limiting

examples of alternative applications include protective body gear for athletic, military, security,

or medical reasons, footwear, vehicle components, and construction elements (e.g. interior or

exterior walls and partitions). The U.S. Patent Application further stated:

This disclosure is not limited to a particular configuration of the helmet 22, Further,
other types of helmets 22 are also contemplated, such as helmets 22 used in other

17
types of sports ( e.g. baseball or hockey), as well as helmets 22 used for defense (
e.g. by police, fire, security, or military personnel), vehicular applications ( e.g.
watercraft, aircraft, or land craft riders/occupants), and for industrial,
manufacturing, or construction applications. In some instances, the helmet 22 may
be referred to as a hardhat. While the embodiments of the invention are described
in the context of a helmet, it will be understood that the embodiments of the
invention can be used with any type of aiiicle that provides suppo1i for or protection
to an object, including shoes, impact areas of vehicles, and any article subject to
forces generated by an impact. While helmets are discussed throughout this
application, it should be understood that all of these articles are within the scope of
the invention.

62. Of the 20 claims in the U.S. Patent Application, not one of them is limited to

helmets or any other particular article.

63. Also, like the PCT Application, the U.S. Patent Application included the following

statement: "This invention was made with government suppo11 under Contract No. ARL

CA#W9l1NF-ll-2-0017 awarded by the U.S. Army Research Lab. The government has certain

rights in the invention."

64. MSU omitted, withheld and concealed from CIG and Atomic, under circumstances

in which it was duty bound to disclose, the fact that the U.S. Patent Ap.plication described

inventions and asserted claims that had not been disclosed to ARL as required by federal law.

These omissions rendered MSU's representations to CIG and Atomic materially false and

misleading. CIG and Atomic relied on these misrepresentations by continuing to spending

hundreds of thousands of dollars performing under the ELA.

65. In December 2017, CIG made a submission to MSU demonstrating the first

commercial embodiment as required by the First Amendment. (Exhibit 3, p. 3, ,II-3.12(iv)). The

commercial embodiment was a composite deck tile for use in false-deck shipboard spaces of US

Navy ships. The deck tile fell within the specific Fields defined in the ELA, namely, Defense and

Marine. CIG's submission included pictures depicting the deck tiles, manufacturing drawings, and

performance specifications.
18
66. On March 15, 2018, CIG submitted its 2018 Business Plan in accordance with the

First Amendment. (Exhibit 3, p. 3, ,II-3.l2(ii)). Notably, the 2018 Business Plan utilized the same

format as had been submitted to MSU in previous years and accepted without objection, question

or comment. The 2018 Business Plan highlighted a number of key developments in CIG 's

business:

a. CIG added five new members to its team;

b. In 2017, CIG filed - in MSU' s name - patent applications in the United States
and Canada (this was MSU's, not CIG's, responsibility under the ELA, but
MSU had delayed fulfilling its obligations for too long, and CIG could not
afford to wait any longer);

c. In 2017, CIG formulated a patent rights plan for negotiating MSU' s patents
over an 18-month period (this also was MSU's, not CIG's, responsibility under
the ELA, but MSU had delayed fulfilling its obligations for too long, and CIG
could not afford to wait any longer);

d. CIG created a composite deck tile for use in false-deck shipboard spaces of US
Navy ships;

e. CIG developed contracting opportunities with multiple private corporations, a


major research university, and a helmet manufacturer;

f. CIG, through its affiliate and sublicensee Atomic, began negotiating a license
agreement with an armor company for a military application;

g. CIG, through its affiliate and sublicensee Atomic, raised over $900K in equity,
with valuations beginning a $IM in 2014 and increasing to $!OM at the end of
2017;

h. CIG developed and began implementing a marketing plan focused on military


applications, including discussions with the Department of Defense, Homeland
Security, and the Justice Department;

1. CIG provided a 12-month financial forecast;

J. CIG outlined a plan to meet the June 30, 2018 deadline for the first commercial
sales and 2018 annual sales of$500,000.

67. On or about April 5, 2018 - shortly after CIG filed the U.S. Patent Application and

presented its first commercial embodiment - MSU, through Chylla, purported to issue a notice of

19
default. In the notice, Chylla purpo11ed to cite two defaults: i) CIG's failure to make a payment

required under the First Amendment, and ii) CIG's failure to deliver a 12-month business plan and

report. Chylla acknowledged that CIG had delivered the 2018 Business Plan on March 16, 20 l 8,

but claimed that the report lacked "sufficient detail and specificity in order for us to validate the

achievement of this milestone." Contrary to Chylla's letter, the 2018 Business Plan contained the

same quality and quantity of information as previous reports that had been submitted by CIG and

accepted by MSU without objection.

68. MSU's April 5, 2018 default letter effectively brought CIG's development work to

a halt. As MSU knew at the time, CIG was in active discussions with various investors to raise

additional investment capital, but those discussions came to an abmpt halt when MSU issued its

default letter. As MSU also knew at the time, CIG was in active discussions with potential

customers and other commercial partners, but those discussions also came to an abrupt halt when

MSU issued its default letter. MSU's April 5, 2018 default letter rendered it impossible for CIG to

meet the June 30, 20 l 8 deadline for making its first commercial sale.

69. CIG, through Swain, met with Chylla on May 2, 2018 to discuss the purpo11ed

default notice. CIG came prepared to tender a check in the amount of$5 l ,5 l l .25 to cure the alleged

payment default, but MSU declined to accept the payment. CIG subsequently confirmed in writing

its willingness to tender the requested payment, but MSU again declined to accept it.

70. The parties subsequently agreed to extend the "cure" period until May 31 and then

until June 29. During this period, CIG asked a series of questions regarding MSU's ownership of

the Patent Rights that it purported to license to CIG under the ELA. MSU and Chylla responded

with a series of knowingly false and misleading answers designed to obfuscate and conceal MSU' s

and Chylla's fraudulent behavior.

20
71. By way of example, on June 4, 2018, Chylla made the following statements to CIG:

The university is entitled to claim title (i.e. own) all technology developed by
federal funding including DoD. MSU is the owner of the intellectual property
licensed to CIG. This ownership is codified in federal law known as the Bayh-Dole
act. In our license agreement with CIG, MSU represents and warrants that we
legally entitled to enter in the licensing transaction specified in the agreement.

***
The technology set forth in the disclosure by Drs. Haq and Drzal and subsequently
filed in the patent application belongs to MSU.

Chylla's references to the Bayh-Dole Act were knowingly false or made with reckless disregard

for the trnth. MSU had not made a timely or accurate disclosure of its invention under the Bayh-

Dole Act. MSU had not made a timely election of title under the Bayh-Dole Act. MSU had not

submitted a timely patent application as required under the Bayh-Dole Act. MSU had not made a

timely request to extend any of the Bayh-Dole deadlines. Chylla's statements were designed to

obfuscate and conceal MSU's and Chylla's fraudulent behavior.

72. As another example, in a letter dated June 12, 2018, MSU, though its in-house legal

counsel, made the following statements to CIG: "With respect to your comments regarding the

Bayh-Dole Act, MSU elected title and a patent application was filed in accordance with the law."

This statement was knowingly false or made with reckless disregard for the trnth. MSU had not

made a timely election of title under the Bayh-Dole Act. MSU had not submitted a timely patent

application as required under the Bayh-Dole Act. MSU had not made a timely request to extend

these deadlines. MSU's statements were designed to obfuscate and conceal MSU's and Chylla's

fraudulent behavior.

73. Although MSU agreed to extend CIG's "cure" period, MSU had no intention of

acting in good faith or doing anything other than proceeding with the termination. MSU came to

the June 29 meeting with a termination letter in hand. MSU's stated reasons for terminating the

21
ELA generally followed the April 5 notice. In reality, however, CIG had cured the payment default

by tendering the requested payment on multiple occasions. Moreover, MSU's asserted default

regarding the level of detail in CIG's annual report was not supported by the language of the ELA

or the First Amendment, was contra1y to the parties' practice over the previous six years, and was

an attempt to introduce new requirements that were not contained in the ELA or the First

Amendment. In short, MSU's stated reasons for terminating the ELA were pretextual and were

designed to obfuscate and cover-up MSU's and Chylla's tme motives for terminating the ELA,

namely: l) converting for itself the patents and other development work performed by CIG and

Atomic; 2) preventing CIG and Atomic from discovering the untimely, inaccurate and misleading

disclosures that MSU had made to the federal government; and 3) preventing CIG and Atomic

from discovering the fraud that Chylla and MSU had perpetrated on CIG.

BACKGROUND- CIG's DISCOVERY OF MSU's FRAUD

74. Beginning in June 2018 and continuing for nearly a year thereafter, CIG and

Atomic issued a series of FOIA requests to investigate MSU' s claim that it ·held "Patent Rights"

and that it properly licensed those "Patent Rights" to CIG and Atomic.

75. Through its FOIA requests, CIG and Atomic obtained Cooperative Agreement

W9llNF-11-2-0017 between MSU and ARL, a copy of which is attached as Exhibit 5

("Cooperative Agreement"). The Cooperative Agreement is dated June 20, 2011 and concerns

"Composite Material Technologies for Air and Ground Vehicles."

76. Under the Cooperative Agreement, ARL agreed to pay MSU $3,062,500 to conduct

research concerned with "advancing material technologies associated with the increased use of

composite materials in components and stmctures for high performance vehicles deployed in

hazardous environments." (Exhibit 5, § I .2).

22
77. The Cooperative Agreement stated that, "(a]s a condition of this Agreement, it is

herein understood and agreed that Federal funds are to be used only for costs that: ( l) a reasonable

and prudent person would incur, in can-ying out the research project herein; and (2) are consistent

with the purposes stated in governing Congressional authorizations and appropriations." (Exhibit

5, § 1.3).

78. The Cooperative Agreement similarly provided that, "Government funds provided

under this Agreement must be allocated by the Recipient exclusively for the execution and

operation of the APP or Agreement Scope. Government funds shall not be utilized to support the

Recipient's operations or administration unrelated to this Agreement." (Exhibit 5, §5. l. I).

79. The Cooperative Agreement placed strict limitations on the public release of

infonnation resulting from work under the Cooperative Agreement. In particular, MSU and ARL

agreed as follows, "[p ]rior to submitting a manuscript for publication or before any other public

disclosure, each Party will offer the other Party ample opportunity (not to exceed 60 days) to

review such proposed publication or disclosure, to submit objections, and to file application letters

for patents in a timely manner." (Exhibit 5, §5.l.I). Based on information received in response to

the FOIA requests, MSU did not comply with this requirement before making any of the patent

applications referenced above.

80. The Cooperative Agreement incorporated by reference the regulations under the

Bayh-Dole Act (Exhibit 5, Article 10). MSU failed to comply with the regulations under the Bayh-

Dole Act as it relates to the Cooperative Agreement in numerous respects:

a. MSU did not make a timely or accurate invention disclosure;

b. MSU did not make a timely election of title;

c. MSU did not make a timely patent application;

d. MSU did not make a timely request for extension of any of these dates.

23
8 l. Regarding the accuracy of MSU' s invention disclosure, it appears that MSU

provided a copy of its Invention Disclosure Form to ARL at some undetermined point, though

even by MSU's own admission, it did not provide the Invention Disclosure Form to ARL in a

timely manner. Beyond that, the Invention Disclosure Form that MSU submitted to ARL was

limited to helmets. There is no indication anywhere in the materials received from ARL that MSU

ever disclosed the full and entire scope of the invention(s) that MSU was actually pursuing. As

explained above, the PCT Application and the U.S. Patent Application were decidedly broader

than helmets. Indeed, the PCT Application and the U.S. Patent Application extended to "any

article subiect to <m impact force" [emphasis added], including watercraft, aircraft, land craft,

vehicle components, footwear, protective body gear for athletic, military, security, or medical

personnel, industrial applications, manufacturing applications, and construction materials. By their

terms, the PCT Application and the U.S. Patent Application were broad enough to encompass

"high performance vehicles deployed in hazardous environments", which was the ve1y subject of

the Cooperative Agreement.

82. There is no indication anywhere in the documents produced by ARL in response to

the FOIA requests that MSU ever disclosed the full extent of the invention(s) it was claiming or

that it was seeking to patent the very subject matter of the Cooperative Agreement. These were

material omissions by MSU which rendered fraudulent MSU's statements in the ELA and the First

Amendment that it held "patent rights" or that it had the authority to grant CIG the exclusive right

to exploit such "patent rights" commercially.

83. The Cooperative Agreement imposed additional restrictions on MSU's ability to

elect title. For example, Article 10 of the Cooperative Agreement provided as follows:

In addition to the Intellectual Property Rights contained in 32 CFR 32.36 or 32 CFR


34.25 as applicable, incorporated by reference into this Agreement, the pa1iicipants

24
recognize that this program may result in intellectual property that is generated by
the Recipient or Sub-Recipient personnel and Government personnel. Should this
occur, the parties agree to use their best efforts to mutually agree to an equitable
distribution of property rights mu/ distribution of filing fees or other
administrative costs. Should the parties reach an impasse in determining the
distribution of property rights, the parties shall resort to the Disputes, Claims, and
Appeals Process as set fo1ih at 32 CFR 22.815. [emphasis added]

84. There is no indication in any of the FOIA responses that MSU ever attempted to

mutually agree to an equitable distribution of property rights, filing fees or administrative costs.

85. The Cooperative Agreement expressly preserves ARL's right "to authorize others

to receive, reproduce, publish, or otherwise use such data for government purposes." There is no

indication in any of the FOIA responses that MSU sought ARL's authorization to seek patents or

issue licenses for marine, defense, homeland security, military, or other government purposes, nor

that MSU even notified ARL that it was doing so. This rendered fraudulent MSU's purported grant

of an exclusive license to CIG to commercialize "Products" for marine, defense, homeland

security, military, and other government purposes.

86. MSU omitted, withheld and concealed from CIG and Atomic, under circui11stances

in which it was duty bound to disclose, the limitations imposed on MSU by the Cooperative

Agreement. These omissions rendered MSU's representations to CIG and Atomic materially false

and misleading. CIG and Atomic relied on these misrepresentations by continuing to perform

under the ELA.

BACKGROUND - MSU ADMITS ITS FRAUD

87. On February 13, 2019, CIG, through counsel, submitted a demand letter to MSU

outlining what it had discovered through its FOIA requests. MSU, through its in-house legal

counsel, responded by stating in part, "MSU elected title to the subject invention through

iEdison.gov in April of 2013." This statement was knowingly false when made or made with

25
reckless disregard for the trnth. MSU did not elect title in April 2013. This statement was made in

an effori to cover-up and obfuscate MSU's and Chylla's fraudulent behavior.

88. In response to this statement by MSU, CIG engaged in further investigation through

additional FOIA inquiries. After various follow-up communications, ARL produced some

additional documents and confirmed in writing, "[a]fter a thorough search, it has been determined

that the Army Research Laboratory has no additional records or information to provide in response

to this request." Nowhere in the documents produced by ARL was there any indication that MSU

elected title in April 2013 or at any other time.

89. ARL did produce a memo authored by Chylla dated October 28, 2018 regarding

ARL CA #W911NF-l l-2-0017, in which Chylla purported to request "A 2 YEAR EXTENSION

FOR MSU TO ELECT TITLE TO ITS INVENTION BY APRIL 2, 2017." [capitals in original].

Chylla noted in his memo that the title election had been due by April 2, 2015. ARL did not provide

any documents showing that this or any other extension had been granted. Moreover, there would

have been no reason for Chylla to request an extension to elect title in October 2018 if MSU already

had elected title more than five years earlier in April 2013, as previously claimed by MSU. In

short, Chylla and MSU took steps to secure patent rights that it had purporied to license to CIG

under the ELA several months after terminating the ELA. This was an attempt to cover-up the

fraud committed by MSU and Chylla.

90. In a letter dated May 29, 2019, CIG, through counsel, brought these and other

inconsistences to MSU's attention. MSU responded by letter dated June 7, 2019, in which MSU

attempted to change its story. MSU now claimed that it did not elect title in April 2013, as

previously claimed, but instead claimed to have made an invention disclosure on April 17, 2013.

MSU then claimed for the very first time - to have elected title on November 30, 2016 and

26
further claimed that the patent application that CIG assisted MSU in filing on October 27, 2017

served as the patent application required under the Bayh-Dole Act. There are several problems

with these statements, aside from the fact that they contradict MSU's previous statements.

91. For example, MSU represented to CIG that it held the patent rights on July 1, 2013

when the parties first entered the ELA. Assuming for the sake of argument that the statements in

MSU's June 7, 2019 letter are true (CIG and Atomic do not concede this point), MSU has

effectively admitted that its representations in the ELA were knowingly false when made, that

MSU did not elect title until more than three years after the ELA was entered, and that MSU did

not file the necessary patent application until four years after the ELA was entered. In short, MSU

has admitted that it did not hold the patent rights in July 2013 that formed the fundamental

inducement to CIG entering into the ELA in the first place. MSU has further admitted that the

statements it made in response to direct inquiries from CIG and Atomic were false.

92. As another example, assuming for the sake of argument that the statements in

MSU's June 7, 2019 letter are accurate, the original time to elect title expired on April 2, 2015.

According to MSU' s June 7 letter, MSU did not request to extend this deadline until October 2018,

some three-and-one-half years after the deadline already expired. There is nothing in the Bayh-

Dole Act or corresponding regulations that allows a party to seek a retroactive extension to elect

title. Moreover, granting an extension is left to the discretion of the government agency, and there

is nothing to suggest that ARL ever granted MSU an extension to elect title or any other extension.

93. In short, even accepting the statements in MSU's June 7, 2019 letter as trne (CIG

and Atomic do not accept those statements as true), those statements establish that MSU

fraudulently induced CIG to enter into the ELA in July 2013, and that MSU attempted to cover-

27
up its fraud by seeking a retroactive extension of deadlines years after those deadlines had passed

and several months after MSU had already terminated CIG.

COUNT I - FRAUDULENT MISREPRESENTATION

(CIG and Atomic against Chylla and MSU)

94. Plaintiffs incorporate by reference the allegations in paragraphs 1-93 as though

fully set forth herein.

95. Chylla and MSU made representations of material facts. The representations were

false when made. See, e.g., 1if2-4, 7, 16-18, 20, 23, 27, 34, 36-37, 40, 44-48, 60-64, 70-72, 80-93.

96. Chylla and MSU knew their representations were false, or made them with reckless

disregard for the tmth.

97. Chylla and MSU made the misrepresentations with the intention of inducing CIG

and Atomic to rely on those misrepresentations. See, e.g., 112-4, 7, 16-18, 20, 23, 27, 34, 36-37,

40,44-48, 60-64, 70-72, 80-93.

98. CIG and Atomic did rely on the misrepresentations. See, e.g., 112-4, 7, 16-18, 20,

23,27,34,36-37,40,44-48,60-64, 70-72,86.

99. As a result of MSU's and Chylla's fraudulent misrepresentations, CIG and Atomic

suffered damages in the millions of dollars.

WHEREFORE, CIG and Atomic request a judgment against MSU and Chylla in an amount

to be determined at trial, together with an award of interest, costs and attorney fees.

COUNT II - FRAUD IN THE INDUCEMENT

(CIG and Atomic against Chylla and MSU)

l 00. Plaintiffs incorporate by reference the allegations in paragraphs 1-93 as though

fully set forth herein.

28
101. Chylla and MSU made representations of material facts.

102. The representations were false when made. ,i,i2-4, 7, 16-18, 20, 23, 27.

l 03. Chylla and MSU knew their representations were false, or made them with reckless

disregard for the trnth.

l 04. Chylla and MSU made the misrepresentations with the intention of inducing CIG

and Atomic to enter into the ELA and the Services Agreement. See, e.g., iiii2-4, 7, 16-18, 20, 23,

27.

l 05. CIG and Atomic did rely on the misrepresentations by entering into the ELA and

the Services Agreement. See, e.g., iiii2-4, 7, 16-18, 20, 23, 27.

106. As a result of MSU's and Chylla's fraudulent inducement, CIG and Atomic

suffered damages in the millions of dollars.

WHEREFORE, CIG and Atomic request a judgment against MSU and Chylla in an amount

to be determined at trial, together with an award of interest, costs and attorney fees.

COUNT III - BREACH OF ELA

(CIG against MSU)

l 07. Plaintiffs incorporate by reference the allegations in paragraphs 1-93 as though

fully set forth herein.

l 08. This count is presented by way of alternative pleading.

l 09. MSU and CIG are pa1ties to the ELA.

110. CIG performed its obligations under the ELA.

111. MSU breached its obligations under the ELA in numerous respects, including but

not limited to the following:

a. Failing to prepare and file patent applications in a timely manner;

29
b. Failing to secure Patent Rights in a timely manner;

c. Taking steps in an effort to render CIG's performance under the ELA

impossible;

d. Improperly declaring a default under the ELA; and

e. Improperly terminating the ELA.

112. As a direct and proximate result of MSU's breaches, CIG has suffered damages in

the millions of dollars.

WHEREFORE, CIG requests a judgment against MSU in an amount to be determined at

trial, together with an award of interest, costs and attorney fees.

COUNT IV - BREACH OF SERVICES AGREEMENT

(Atomic against MSU)

113. Plaintiffs incorporate by reference the allegations in paragraphs 1-93 as though

fully set forth herein.

114. This count is presented by way of alternative pleading.

115. MSU and Atomic are parties to the Services Agreement.

116. Atomic performed its obligations under the Services Agreement.

117. MSU breached its obligations under the Services Agreement by, among other

things, improperly using and disclosing Atomic's Confidential Information, intellectual property

and Deliverables.

118. As a direct and proximate result ofMSU's breaches, Atomic has been damaged.

WHEREFORE, Atomic requests a judgment against MSU in an amount to be determined

at trial, together with an award of interest, costs and attorney fees.

30
COUNT V - TORTIOUS INTERFERENCE

(CIG and Atomic against MSU)

119. Plaintiffs incorporate by reference the allegations in paragraphs 1-93 as though

fully set fo1th herein.

120. CIG and Atomic had contracts, business relationships and business expectancies

with various investors, potential customers, and other commercial parties.

121. CIG's and Atomic's contracts, business relationships and business expectancies

with vanous investors, potential customers, and other commercial parties had a reasonable

likelihood of future economic benefit to CIG and Atomic.

122. MSU had knowledge of CIG's and Atomic's contracts, business relationships and

business expectancies with investors, potential customers, and other commercial parties.

123. By its words and conduct, MSU intentionally and improperly interfered with CIG's

and Atomic's contracts, business relationships and business expectancies with investors, potential

customers, and other commercial patties.

124. By its words and conduct, MSU did cause a breach, disruption or termination of

CIG's and Atomic's contracts, business relationships and business expectancies with investors,

potential customers, and other commercial parties.

125. As a direct and proximate cause ofMSU's intention and improper interference, CIG

and Atomic have been damaged.

WHEREFORE, CIG and Atomic request a judgment against MSU in an amount to be

determined at trial, together with an award of interest, costs and attorney fees.

31
COUNT VI - UNJUST ENRICHMENT

(CIG and Atomic against MSU)

126. Plaintiffs incorporate by reference the allegations in paragraphs 1-93 as though

fully set forth herein.

12 7. This count is presented by way of alternative pleading.

128. MSU received benefits from CIG and Atomic, including but not limited to,

applications for patents in MSU's name, development of products incorporating MSU's purported

patent rights, identification of potential customers for the products, development of innovative

marketing campaigns, efforts to commercialize and launch the products, and capital raised for all

of the above activities.

129. It would be inequitable to allow MSU to retain these benefits without compensative

CIG and Atomic for same.

130. To avoid unjust enrichment, CIG and Atomic should be awarded damages.

WHEREFORE, CIG and Atomic request a judgment against MSU in an amount to be

determined at trial, together with an award of interest, costs and attorney fees.

Dated: June 28, 2019 Respectfully submitted,

SEABOLT LAW FIRM

By: Isl Scott T. Seabolt


Scott T. Seabolt (P55890)
Brooke Booth (P6773 l)
Adam G. Winnie (P82820)
17199 N. Laurel Park Dr., Suite 215
Livonia, Michigan 48152
248-717-1302
sseabolt@seaboltpc.com
bbooth@.seaboltµc.com
awinnie@seaboltpc.com
Attorney for Plaintiffs

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