SEC Charges Company with Fraudulently Lying about its Patents

Securities & Exchange Commission v. Christopher Plummer, Lex Cowsert, and CytoGenix, SEC Litigation Release No. 23047 (July 2014)

In a new lawsuit, the SEC has charged Plummer, Cowsert, and CytoGenix with fraud on investors by issuing false press releases associated with influenza vaccine development when the company was actually a complete failure and had “lost all of its patents” in a prior lawsuit. The lawsuit charges Plummer as a “serial con artist” who is already serving jail time for an unrelated fraud. [Read the Complaint]

At one time, CytoGenix did appear to have an interesting idea. However, a March 2010 Texas decision (default judgment) awarded all of CytoGenix’s assets to two of its former employees (Frank Vasquez and Lawrence Wunderlich) as compensation for $300,000 owed to them under their employment contracts as adjudged by an arbitrator. Thus, rather than receiving an assignment from CytoGenix, the parties received a court ordered transfer of rights:

Accordingly, it is ordered that all of Cytogenix Inc.’s right, title and interest and to the identified Applications listed in Schedule A to this order, including all foreign patents and patent applications … is hereby assigned … to Frank Vazquez and Lawrence Wunderlich.

The employees, have now assigned their patent rights to a new company known as Star Biologics. See U.S. Patent No. 7,419,964. Star appears to be merely a holding company.

The SEC lawsuit here does not appear to include any criminal charges. However, those may be separately filed by the DOJ.

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As the SEC charges move forward, I wonder whether the spurned investors will make any attempt to recover the patent rights as compensation for their loss. The answer to that question likely depends upon whether the patents end up having any real value.

5 thoughts on “SEC Charges Company with Fraudulently Lying about its Patents

  1. I don’t have the foggiest as to why this might be relevant except if the new owner failed to record their title and the original owner granted licenses or conveyances to BFPs.

  2. DC: I wonder whether the spurned investors will make any attempt to recover the patent rights as compensation for their loss.

    That depends on how much time and money the investors have to waste.

    Here’s claim 1 from the ‘964:

    1. A topical composition for the treatment of HSV-related pathologies comprising:

    (a) a single-stranded DNA (ssDNA) expression vector, other than plasmids pssXE and pssXV, having a gene encoding for a reverse transcriptase (RT) and a ssDNA expression cassette comprising in 5′ to 3′ order:

    (i) a cytomegalovirus (CMV) or Rous Sarcoma virus (RSV) promoter sequence,

    (ii) an inverted tandem repeat (IR) sequence,

    (iii) a sequence of interest comprising SEQ ID NO: 4, and

    (iv) a mammalian reverse transcriptase primer binding site (PBS) sequence; and

    (b) a topical ointment or cream;

    wherein the ssDNA so produced has minimal flanking sequence.

    The disclaimer in part (a) (“expression vector, other than plasmids pssXE and pssXV”) leaps out immediately as a potentially very serious problem. I haven’t gone through the file history but I’m guessing that the disclaimer wasn’t in the claims as filed. I found no written description support for the disclaimer in the specification; on the contrary, the specification refers repeatedly to pssXE/pssXV as embodiments of the invention!

    It’s not surprising, really, to find a claim like this associated with a fraudulent SEC filing, or vice versa.

    1. i have not interest in going through a patent for giggles, but will point out that positively recited elements in the specification may be excluded in claims. in re johnson; mpep 2173.05(i)

      1. will, I’d be very careful with that. The very MPEP section you reference says:

        Any negative limitation or exclusionary proviso must have basis in the original disclosure. If alternative elements are positively recited in the specification, they may be explicitly excluded in the claims. See In re Johnson…

        If you have to exclude key embodiments from your claims to get around the prior art, then by all means do it. But you just might end up with a written description problem.

        1. If you have to exclude key embodiments from your claims to get around the prior art, then by all means do it. But you just might end up with a written description problem.

          Presumably when one writes an application describing A+B+C+D+E+F repeatedly as “an embodiment of the invention” one doesn’t do so with the intention of expressly disclaiming that combination from the independent claim. In addition to the written description issues, considerations like obviousness also loom large.

          This is one of the many reasons grown-ups try to understand the prior art and their improvement to that art before drafting their applications and claims, rather than shoving a collection of ga rbage at the PTO in the expectation that an Examiner will do all the additional “innovating” (=wordsmithing) necessary to turn the pig’s ear into … a purse made out of a pig’s ear.

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