The legal wrangling began on May 24 when Valensa filed a complaint against Cyanotech in Florida accusing it of ‘tortious interference with a business relationship’.
Valensa: Cyanotech froze us out
Historically, Cyanotech has supplied astaxanthin biomass to Valensa, which from 2011 onwards, supplied astaxanthin extracts made using this biomass to the Mercola Group, said Valensa.
Later that year, Cyanotech approached the Mercola Group direct and offered to supply it with astaxanthin oleoresin at a discounted price, “freezing out Valensa” alleged Valensa.
“As a direct and proximate result of Cyanotech’s use of Valensa’s confidential information and interference, the Mercola Group has advised Valensa that it no longer wishes to purchase its highest demand item - Valensa’s advanced asta-perilla formulated product - from Valensa.”
Cyanotech: We never said we would not compete with Valensa
Cyanotech immediately sought to dismiss the lawsuit, claiming that its supply agreement with Valensa did “not prevent Cyanotech from obtaining information and does not prohibit Cyanotech from using such information for Cyanotech’s own financial benefit”.
It added: “Nothing in the amended complaint [filed June 6] alleges that Cyanotech and Valensa agreed, either expressly or impliedly, not to compete.”
Cyanotech: Valensa repeatedly threatened to ‘shut down’ our business
Two weeks later, Cyanotech filed its own complaint in Hawaii against Valensa and the University of Illinois accusing Valensa of engaging in unfair competition and deceptive and unfair trade practices by claiming that Cyanotech was infringing US patent # 5,527,533 (of which Valensa is the exclusive licensee)
The patent, awarded to the Board of Trustees of the University of Illinois in 1996, covers the use of astaxanthin to treat eye and central nervous system diseases or injuries, such as age-related macular degeneration, and is based on the work of Dr Mark O. M. Tso et al.
According to Cyanotech, Valensa “repeatedly threatened to shut down Cyanotech’s business” and embroil Cyanotech in expensive patent litigation unless it agreed to purchase a license of the patent in question in order to carry on selling its astaxanthin products for eye health.
As a result of these practices and the threat of litigation, Cyanotech has “suffered economic losses in excess of $75,000” claimed bosses, which have called for the court to declare the ‘533 patent invalid and declare that Cyanotech has not infringed it.
Valensa: Cyanotech infringed our patent
Just over a week later (June 29), Valensa and the Board of trustees of the University of Illinois responded with a lawsuit filed in Florida accusing Cyanotech and its subsidiary Nutrex Hawaii Inc of infringing the patent at issue.
This claimed Cyanotech and Nutrex “expressly exploited and continue to exploit Dr Tso’s patented discoveries in an effort to promote the sale of their own, unlicensed products both to retail and industry customers, knowing that the uses to which they are instructing their customers to put their products infringe the Tso patent".
Cyanotech is expected to respond shortly.
A potent antioxidant
Cyanotech produces its BioAstin astaxanthin from Haematococcus microalgae, which is grown in closed culture systems and then put through a 'reddening' cycle in open culture ponds. This is distributed to nutritional supplement, nutraceutical and cosmeceutical manufacturers across the globe including its own Nutrex Hawaii subsidiary.
A potent antioxidant, astaxanthin is claimed to have a wide range of benefits spanning joint, skin and eye health to healthy immune function, healthy tendons, UV protection for the skin, anti-aging, increased energy, recovery after exercise and a healthy cardiovascular system.
Astaxanthin has primarily been used in the feed industry to make farmed salmon a richer pink color. However, it has recently gained momentum in the dietary supplements market and is also being promoted as a functional food ingredient following several GRAS applications.
Click here to read about astaxanthin and the Dr Oz effect.
Click here to read more about Cyanotech's latest earnings.