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Emerging Material Technologies, Inc. v. Rubicon Technology

December 14, 2009

EMERGING MATERIAL TECHNOLOGIES, INC. AND RADION MOGILEVSKY, PLAINTIFFS,
v.
RUBICON TECHNOLOGY, INC., DEFENDANT.



The opinion of the court was delivered by: Matthew F. Kennelly, District Judge

MEMORANDUM OPINION AND ORDER

Emerging Material Technologies Inc. (EMT) and Radion Mogilevsky have sued Rubicon Technology Inc., under the Lanham Act and on various state law claims. Mogilevsky also has sued Rubicon under Securities and Exchange Commission (SEC) Rule 10b-5 and for breach of contract. Rubicon has moved to dismiss plaintiffs' claims pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons stated below, the Court grants Rubicon's motion.

Background

The Court takes the following facts from the allegations in plaintiffs' complaint and accompanying exhibits.

Mogilevsky, who has a Ph.D. in solid state physics, describes himself as a "well-recognized and regarded scientist in an international arena of sapphire crystal growers."

Compl. ¶ 6. Sapphire crystals are used in light-emitting diodes (LEDs) and memory storage, among other things.

In 1995, Mogilevsky founded S&R Rubicon Inc. They started out marketing crystals grown in a factory in Russia that S&R owned and operated. In 1998, Mogilevsky began to manufacture sapphire crystals in a Chicago suburb using what plaintiffs refer to as the Kyropoulos method. S&R formed a consortium with two other companies to market sapphire crystals to the LED market.

In June 2000, S&R Rubicon was renamed Rubicon Technology, LLC. Mogilevsky and his family owned eighty percent of the stock of Rubicon. In 2001, after venture capital investments, the name of the company was changed to Rubicon Technology, Inc. Mogilevsky held thirty percent of the stock of Rubicon and, through December 2001, served as the company's chief technology officer and vice chairman of its board of directors.

In February 2002, Mogilevsky and Rubicon entered a separation agreement with an effective date of December 21, 2001. The agreement provided, among other things, that Rubicon "will not make any oral or written statements about Mogilevsky or his financial condition which are intended or reasonably likely to disparage Mogilevsky in the community or among his employers, clients, employees, business partners, or prospects." Compl., Ex. A ¶ 4(b).

In 2002, Mogilevsky founded EMT, and he and the company developed a method "to produce the best starting material (crackles) . . . to grow sapphire crystals." Compl. ¶ 22; see also id. ¶ 28. According to plaintiffs, Rubicon uses crackles produced by a different process. Plaintiffs contend those crackles are inferior to those produced via EMT's process. Id. ¶ 31.

Plaintiffs allege that "EMT and [Rubicon] conduct international business within the same circle of professionals and companies." Id. ¶ 23. They contend that Rubicon and its personnel have "continuously and systematically circulate[d] false information" about its method of growing sapphire crystals, falsely describing that method as superior and falsely describing the method's qualities. Id. ¶ 32. According to plaintiffs, this information damages EMT and Mogilevsky, "in that it is the Plaintiffs whom [sic] possess and market [what is] scientifically proven to be the best raw material." Id. ¶ 33. They contend that the allegedly false information that defendants disseminate "causes EMT's customers and prospective customers to question the quality of the product EMT manufactures and markets" and "disparages Dr. Mogilevsky's professional reputation as a leader of the global community of crystal growers." Id. ¶ 34.

Plaintiffs also allege that Rubicon and its personnel disparage plaintiffs by spreading what they characterize as a "fictional story" about its achievements. Specifically, plaintiffs contend, Rubicon's statements fail to credit Mogilevsky for his role in introducing the Kyropoulos method for growing sapphire crystals; omit the fact that Mogilevsky built the first U.S. facility to grow sapphire crystals; and misrepresent that the first such crystal was grown in 2000, when in fact it was grown in 1999. Id. ¶ 36. This, plaintiffs allege, "effectively strip[s] Dr. Mogilevsky of his accomplishments" and causes him great embarrassment. Id. ¶ 38.

Plaintiffs identify several specific articles that Rubicon personnel authored or to which they contributed, that, according to plaintiffs, contain false and misleading statements about Rubicon and its methodology. One such article, published in 2009, states that in 1995, Elena Dobrovinskaya "emigrated to the United States and in 2000 she helped found Rubicon Technology in Chicago to commercialize the Kyropoulos method to produce high quality sapphire substrates for the solid state lighting industry." Compl., Ex. C at 1. Plaintiffs allege these statements are false in that (among other things) Dobrovinskaya had no role in founding Rubicon or developing its processes and because its method was commercialized in 1999, not 2000. They also allege that the article falsely states that Rubicon's method of growing crystals relies on trade secrets and that it gives erroneous details about Rubicon's early work in growing crystals. Plaintiffs also cite other articles, allegedly published by Rubicon personnel, that contain similar allegedly misleading statements.

Plaintiffs also allege that Rubicon made false statements in an SEC 10-K filing. These statements include claims that Rubicon produces its sapphire crystals through proprietary technology and that it can produce sapphire crystals with "fewer than 100 defects per square centimeter" and "ultra high (99.999%) purity levels." Compl., Ex. B. Plaintiffs allege that these and other statements in the 10-K filing materially misrepresent the truth and "[t]hat such material description, or lack thereof [of Rubicon's methods] is in connection with the purchase or sale of securities, in that it is described within the SEC 10K document." Compl. ΒΆ 132. Plaintiffs allege that ...


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