Business

CBD Company Used Sham Deal to Steal Secrets: Lawsuit

By Willis Jacobson Oct 21, 2020
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Willis Jacobson is an award-winning journalist whose career has spanned both coasts. Now based on the Central Coast of California, he has covered cannabis news and issues since 2015.
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Willis Jacobson is an award-winning journalist whose career has spanned both coasts. Now based on the Central Coast of California, he has covered cannabis news and issues since 2015.
See my articles
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A CBD company is suing a business it had entered into a licensing agreement with, claiming agents of the other company used the deal as a scheme to steal its trade secrets.

South Carolina-based SC Botanicals, a CBD oil extraction and THC remediation company founded in 2018, filed the suit against Intragenix Holdings, two related companies, and three of its employees. The complaint, filed Oct. 16 in U.S. District Court in South Carolina, alleges Intragenix and its employees only agreed to the licensing agreement with SC Botanicals so they could steal the plaintiff’s proprietary information and use it to benefit themselves.

The suit charges the defendants with breach of contract, tortious interference with contract, misappropriation of trade secrets under state and federal law, and fraud. It seeks, among other remedies, actual and consequential damages.

SC Botanicals, according to the suit, went to great lengths to develop its own method of extracting THC from hemp oil, a process known as remediation. The company says that Intragenix, a Kentucky-based hemp processing and THC remediation operation, learned about its progress and agreed, in October 2019, to enter into a licensing agreement with SC Botanicals.

Per that agreement, Intragenix agreed to pay SC Botanicals $200,000, plus the cost of building the remediation machine and a 2% royalty on gross sales. The agreement also stipulated that Intragenix not infringe on any trade secrets and that any improvements or changes to the technology would be proprietary to SC Botanicals, according to the suit.

“Unbeknownst to SC Botanicals, the Licensing Agreement was just a [ruse] — Defendants never intended to abide by its terms,” the suit states.

SC Botanicals alleges that Intragenix never made its final $50,000 payment, which was due in March, nor paid any royalties.

Instead, the suit alleges, Intragenix employees Todd Lewis, Michael Wigrizer and Aaron Pitman, each of whom are listed as defendants, “surreptitiously” took the information they gleaned from SC Botanicals and began licensing machines to other companies that applied the plaintiff’s same proprietary technique. They did this through separate companies Delta-9 Solutions and REM Technologies, also listed as defendants in the suit.

SC Botanicals claims it became aware of the scope of the defendants’ actions in August when, while attempting to license its remediation method to other companies, it learned some of those other companies had already been introduced to the technology by the defendants.

The suit alleges that an apparently unaware REM Technologies salesperson offered to show the process to SC Botanicals “in the hopes of licensing SC Botanicals’ own remediation method back to it.”

“[Defendants] cheated to get a head start after SC Botanicals expended the time and resources to employ a leading plant scientist to research and perfect a previously unknown remediation method,” the suit states. “Where Defendants claimed they had innovated, they had in fact merely stolen.”

The suit alleges that Delta-9 Solutions and REM Technologies are actively marketing their remediation machines, taking opportunities and profit away from SC Botanicals.

“In doing so, they continue to misappropriate SC Botanicals’ trade secrets and compete against SC Botanicals, while avoiding the significant costs and resources expended by SC Botanicals to develop and perfect the technique,” the suit states.

SC Botanicals is represented by attorneys with the Lynn Pinker Hurst & Schwegmann firm. They did not return messages Wednesday seeking comment.

It was not immediately clear who was representing the defendants in the case.

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