By Melissa Angell

Law360 (March 24, 2021, 6:46 PM EDT ) A Seattle federal judge has declined to ax Allied BioScience's lawsuit accusing its former CEO of trying to hold the company's intellectual property hostage, finding the executive's conduct may reflect efforts to claim an ownership stake in the inventions in question.

In a five-page order Tuesday, U.S. District Judge Barbara J. Rothstein determined that ABS satisfied the "case or controversy" requirement in laying out its claims against former CEO Craig Grossman, who's alleged to have attempted to claim ownership over various inventions referred to in the complaint as the "Grossman inventions."

Specifically, ABS alleges that after leaving the company, Grossman continued to use his former job titles at ABS and an ABS-style signature block when corresponding with outside parties, according to Tuesday's order. He also purportedly discussed ABS products with Walt Disney Co. representatives after leaving the company.

"By using an ABS signature bloc and discussing specific technologies with outside parties, the court finds that defendant's actions could constitute claiming ownership of Grossman inventions," Judge Rothstein said.

Tuesday's decision marks the latest development in the ownership spat first launched last November by ABS, whose SurfaceWise 2 surface disinfectant was the first to be approved by the EPA to continuously protect against COVID-19.

Grossman served previously as the founder, president and CEO of ABS but no longer has any official role with the company, according to the complaint, which accuses Grossman of misappropriation of trade secrets and a breach of fiduciary duty, among other allegations.

ABS said Grossman helped invent some of the company's technology and that those inventions have been described or claimed in some of its patents. Yet Grossman refuses to sign an agreement declaring the company owns the inventions unless he is paid more than he deserves, ABS said.

The suit claims that despite having no affiliation with ABS, Grossman "continues to hold himself out as an agent of ABS" including through using an "ABS-like email signature block in a deceptive and misleading way, and apparently he claims some continuing ownership of the Grossman inventions."

The company claims that after Grossman received a cease and desist letter, his attorney responded in an email that the ex-CEO agreed that ABS owns the technology he invented while at ABS and while a consultant for the company.

However, Grossman faces accusations of attempting to negotiate terms of the agreement and sought additional money in exchange for signing the agreement, court documents show.

The lawsuit arrived several weeks after the chemical company PureShield Inc. claimed in a lawsuit filed in Texas federal court that Allied BioScience Inc.'s SurfaceWise 2 surface disinfectant, which advertises protection against COVID-19 for up to seven days, infringes 10 of PureShield's patents.

When the U.S. Environmental Protection Agency approved Texas' emergency request for approval of Allied's anti-COVID-19 sprays in August, Administrator Andrew Wheeler said it was the first time the agency approved a product that claims it can block the virus for such a long period of time.

Grossman moved to dismiss the suit last December, arguing ABS did not successfully allege there is any "justiciable case or controversy about ownership of the Grossman inventions." He also argued the allegations within the complaint are not sufficient to invoke a federal venue.

Grossman further argued that dismissal is appropriate since based on their agreements, ownership of the "Grossman inventions" is assigned to ABS.

ABS insists, however, that a dispute remains over ownership of such inventions, specifically regarding potential inventions unidentified at this time that the parties might disagree over.

On Tuesday, Judge Rothstein didn't buy into Grossman's argument and ruled the former CEO cannot escape the suit at this time.

The judge continued that Grossman's refusal to sign a "confirmatory assignment agreement," paired with an attempt at negotiating additional compensation, "implies a divergence with his official position that 'ABS is the sole owner of the Grossman inventions.'"

The judge found that in addition to sufficiently pleading an ownership dispute, ABS successfully established a basis for its breach of fiduciary duty claim as well.

Representatives for the parties did not immediately respond to Law360's requests for comment on Wednesday.

ABS is represented by Clifford S. Davidson of Snell & Wilmer LLP.

Grossman is represented by Will Rava of Perkins Coie LLP.

The case is Allied BioScience Inc v. Craig Grossman, case number 2:20-cv-01650, in the U.S. District Court for the Western District of Washington.

--Additional reporting by Craig Clough. Editing by Philip Shea.

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