ForeverGreen’s requested injunction against Pruvit denied
Back in September last year, Pruvit sued ForeverGreen for breach of contract and fraud.
For those unfamiliar with the backstory behind the lawsuit, here’s a brief summary:
In early 2013, Axcess Global approached ForeverGreen to jointly develop a ketosis supplement, KetonX.
Defendants (Axcess Global and ForeverGreen) expended time and money on research, product development, and testing, but were unable to get a product to market at that time.
In early 2014, ForeverGreen’s CEO Ron Williams (“Mr. Williams”) introduced the ketosis supplement to Terry LaCore (“Mr. LaCore”), and the two explored the possibility of Mr. LaCore’s marketing company, bHIP Global, conducting product testing on early versions of KetonX in China.
Mr. Williams, together with Axcess Global and Mr. LaCore, discussed the possibility of bHIP Global licensing the ketosis supplement for distribution in China (and later other countries in Asia), while ForeverGreen would maintain distribution rights in the rest of the world.
Mr. LaCore and ForeverGreen both began testing the ketosis supplement to determine if a palatable product could be achieved; however, this early version of the product was not marketable and caused significant gastrointestinal side effects.
In October 2014, Mr. LaCore introduced Axcess Global to Brian Underwood (“Mr. Underwood”) and Chris Harding (“Mr. Harding”), and they began discussions regarding a potential license agreement for the patented technology.
Mr. LaCore, Mr. Underwood, and Mr. Harding then formed Pruvit Ventures, Inc. with the intention of taking a ketosis supplement to market under this company name.
On December 31, 2014, Axcess Global and Pruvit signed a non-exclusive sub-license agreement (“Pruvit Sub-License”) which included licensing of the `420 USF Patent and related “know-how.”
The Pruvit Sub-License included a provision requiring the University of South Florida’s (“USF”) approval of the contract prior to it becoming effective (as USF is owner of the `420 USF Patent), and a provision requiring Pruvit to obtain liability insurance coverage.
Defendants contend that USF never approved the Pruvit Sub-License – rendering it ineffective – and/or that Pruvit failed to obtain liability insurance in a timely manner – rendering Pruvit in breach of the Sub-License.
In a nutshell, ForeverGreen assert Pruvit’s sub-license of Axcesse Global’s ketone technology is not legitimate, and Pruvit are suing ForeverGreen for interfering with it (among other things).
ForeverGreen’s response to Pruvit’s lawsuit was a series of counterclaims of their own, in addition to to requesting a TRO and preliminary injunction be granted against Pruvit.
(ForeverGreen) seeks to enjoin Pruvit arguing that they (1) are likely to succeed on their claims of patent infringement and misappropriation of trade secrets and (2) are currently being irreparably harmed by Pruvit’s sale of KETO//OS.
That was on October 26th, with the prospect of an injunction hanging over Pruvit management and their affiliates since.
A hearing on the matter was held on December 3rd and 4th, with a decision finally handed down by Judge Nowak on December 23rd.
Nowak’s decision took into account ForeverGreen’s “likely success on the merits” (of their allegations), irreparable harm, price erosion, reputational harm, harm to shareholder value, loss of market share and other first to market opportunities, future lost profits, loss of right to exclude and “other factors”.
Interesting findings with respect to the above factors include;
- ForeverGreen showed ‘that they are likely to succeed on the merits of their misappropriation of trade secrets and patent infringement claims‘ (with respect to Pruvit’s lawsuit against ForeverGreen and Axcesse Global)
- ForeverGreen failed to establish that Pruvit continuing to operate would cause irreparable harm to their business
- one of the reasons ForeverGreen wanted the injunction was because they didn’t want to ‘drop the price of KetonX to compete with Pruvit, who is currently selling KETO OS to distributors “at a 32% discount from ForeverGreen’s legitimate price”‘
- the court rejected ForeverGreen claimed Pruvit’s lower prices amounted to price erosion of their own KetonX offering, which in turn would lead to irreparable harm
- ForeverGreen were worried side-effects of Pruvit’s KETO OS product (including “headaches, diarrhea and nervous system issues”), would harm the reputation of ForeverGreen’s KetonX product
- Pruvit claimed the alleged side effects would apply to ketosis supplements generally, alleging that KetonX has the same or similar side effects
- ForeverGreen failed to produce evidence to show side effects associated with Pruvit’s KETO OS was affecting their own product sales
- ForeverGreen attributed a “significant” reduction in shareholder value to the introduction of Pruvit’s KETO OS
- Pruvit got Ron Williams to admit that the reduction in shareholder value might instead be attributed to ForeverGreen losing millions of dollars over the past twelve years
- ForeverGreen claim Pruvit’s earlier launch of KETO OS deprived them of customers and distributors, ‘who undoubtedly would have joined ForeverGreen had ForeverGreen rightly been first to market and the sole source of ketosis supplements in the industry‘ (the court rejected the assertion that this caused ForeverGreen irreparable harm)
- ForeverGreen lost at least one distributor to Pruvit because ‘the distributor paid for ForeverGreen’s KetonX product but it was never delivered’ (the court ruled this had nothing to do with Pruvit)
- ForeverGreen claim that if Pruvit are allowed to continue to sell KETO OS, they will lose ‘out on at least $35.5 million annually‘
- the ForeverGreen filed their TRO and preliminary injunction only after Pruvit filed a lawsuit against them, ‘supports a lack of urgency and irreparable harm … and ultimately weighs heavily against granting injunctive relief‘
The apparent price-war between ForeverGreen and Pruvit is particularly interesting, as on the surface it appears ForeverGreen are upset they might have to drop the price of KetonX to remain competitive.
ForeverGreen claims that “Pruvit is undercutting the market by selling products nearly at cost, setting an untenable price for the market”
Pruvit countered by ridiculing ForeverGreen’s supplier contracts;
The fact that Pruvit can negotiate better pricing on raw materials does not constitute price erosion.
And then there was this gem from ForeverGreen to top it all off:
[I]f ForeverGreen is forced to reduce the price of its KetonX product to match Pruvit’s KETO//OS, ForeverGreen will likely not be able to increase its price back to its original price in the future without destroying good will and customer relationships that ForeverGreen has worked so hard to foster.”
In support of its price erosion argument, Mr. Williams testified that, if not for Pruvit’s KETO//OS price, “[i]t is our opinion that the market value [of KetonX] would be different”.
So uh what? “Wah wah someone is selling a similar product cheaper and that means we can’t price gouge consumers!”
The bigger question here is if ForeverGreen are operating at a 32% higher margin than Pruvit, and are able to at the very least price match Pruvit to compete – why haven’t they?
Of course your customers are going to get pissed off if you give them a discount, obliterate the competition by way of an injunction and then jack your prices back up.
That’s not Pruvit’s problem, that’s a ForeverGreen greed problem.
Getting back to Judge Nowak’s decision though;
Because (ForeverGreen) have failed to carry their burden of showing irreparable harm in the absence of a preliminary injunction, the Court need not address the remaining preliminary injunction factors.
Despite assuming arguendo that Defendants demonstrated a likelihood of success on the merits, Defendants have failed to meet their burden to show irreparable harm will result absent a preliminary injunction.
Accordingly, the Court finds such injunctive relief is not warranted at present.
The impact of ForeverGreen’s injunction denial on Pruvit’s case or ForeverGreen’s counterclaims has yet to be seen.
My takeaway from all of this wasn’t so much the denial of the injunction, but that you’ve got two companies fighting to keep marketing a product that apparently causes “headaches, diarrhea and nervous system issues”.
Doesn’t sound like much has changed since Lacore began testing ketosis supplements in China back in early 2014… but uh yeah, don’t let that get in the way of a race to the bottom.
Are retail customers really spending tens of millions of dollars a year for “significant gastrointestinal side effects”?