Cilliers v. Cobalt Northern District of Illinois Opinion on Deceptive Purchase of Intellectual Property

A technology company that was accused of purchasing intellectual property and assets in a deceptive manner was denied its motion to dismiss a complaint against it for breach of contract and fraud. The plaintiffs alleged that the technology company deceived them, inducing them to sell their assets and intellectual property with promises that the company would maintain and expand the WiFI network that the plaintiffs ran when the technology company intended only to use the IP and assets to attract new rounds of investment. The court found that the technology company failed to develop its arguments in its motion and that its failure to elaborate and cite authority waived its arguments.

Chirstiaan Cilliers, Daphne Cilliers, World WiFi Network, Inc., and Sunrise Global Marketing, Inc. sued Cobalt Holdings, Inc., in federal court alleging fraud, breach of contract, and several state-law claims. The plaintiffs claimed that Cobalt fraudulently induced them to enter into agreements to sell all of their business assets and intellectual property, consisting of a roaming WiFi network it had developed and maintained in several Caribbean countries. The plaintiffs alleged that Cobalt told them that it intended to further develop the WiFI network when it, in fact, held no licenses to operate WiFI networks in the Caribbean and wanted to acquire the network and intellectual property solely to attract investors as part of a planned round of funding.

The plaintiffs also argued that Cobalt failed to pay everything it was required to under the sale agreements and that Cobalt wrongfully terminated the Cilliers’ employment with Cobalt in order to avoid paying all of its obligations under the agreement. Cobalt moved to dismiss the plainitffs’ claims, arguing that the plaintiffs had failed to state claims.

Cobalt argued that its agreement with WWN required WWN to take notice of any indemnification claims under the agreement prior to the first anniversary of the contract. The court rejected this argument, stating that Cobalt impermissibly made a factual argument outside of the pleadings, which the court would not consider on a motion to dismiss. The court also noted that the plain language of the contract excepted fraud claims.

Cobalt also argued that its agreement with SGM undercut any argument that the plaintiffs detrimentally relied upon information given to them by Cobalt. The court found that Cobalt waived its argument by failing to properly develop it and by failing to cite any authority to support its argument. The court also rejected Cobalt’s challenge to the plaintiffs’ state-law claims. Cobalt argued that its agreement with the Cilliers required the Cilliers to arbitrate any disputes that they might have with Cobalt concerning their employment. The court found that this argument was also undeveloped and that the failure to elaborate on the conclusory statement that the plaintiffs were required to arbitrate their dispute waived the arbitration argument. Finally, the court found that Cobalt’s last argument, challenging the plaintiffs’ request to form a constructive trust on 87,000 shares of Cobalt stock, was undeveloped and made in a stream of consciousness matter, and also failed to cite any authority, and was therefore waived.

You can view the full opinion here.Super Lawyers named Illinois commercial law trial attorney Peter Lubin a Super Lawyer and Illinois business dispute attorney Patrick Austermuehle a Rising Star in the Categories of Class Action, Business Litigation, and Consumer Rights Litigation. Lubin Austermuehle’s Illinois business trial lawyers have over thirty years of experience in litigating complex class action, copyright, noncompete agreement, trademark and libel suits, consumer rights and many different types of business and commercial litigation disputes.  Our Schaumburg and Northfield business dispute lawyers, civil litigation lawyers and copyright attorneys handle emergency business lawsuits involving copyrights, trademarks, injunctions, and TROS, covenant not to compete, franchise, distributor and dealer wrongful termination and trade secret lawsuits and many different kinds of business disputes involving shareholders, partnerships, closely held businesses and employee breaches of fiduciary duty. We also assist Chicago and Oak Brook area businesses and business owners who are victims of fraud. You can contact us by calling (630) 333-0333 or our toll-free number (833) 306-4933.  You can also contact us online here.