UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY -------------------------------------------------------X : PROSEC PROTECTION SYSTEMS, INC., : : : Plaintiff, : v.

: : : GUARD RFID SOLUTIONS, INC., : Defendants. : --------------------------------------------------------: : : X COMPLAINT

Civil Action No.

JURY DEMANDED

Plaintiff, Prosec Protection Systems, Inc., by its undersigned attorneys, for its Complaint against Defendant Guard RFID Solutions, Inc. alleges: JURISDICTION AND VENUE 1. 101 et. seq. 2. Jurisdiction of the subject matter of this action is conferred on this Court by 28 This cause of action arises under the Patent Laws of the United States, 35 U.S.C.

U.S.C. 1331, 1332, 1338(a) and 1367(a). 3. Venue is proper in this judicial district pursuant to 28 U.S.C. 1391(b), (c) and (d). THE PARTIES 4. Plaintiff, Prosec Protection Systems, Inc. (hereinafter Prosec or Plaintiff), is a

New Jersey corporation having a principal, regular and established place of business at 1985 Swarthmore Avenue, Lakewood, NJ, 08701. Plaintiff also does business as McRoberts Security Technologies.

5. of security. 6.

Plaintiff is a security company established in 1992 with expertise in a variety of areas

One area of expertise of Plaintiff is infant security, in connection with which Plaintiff

has marketed and sold to hospitals the McRoberts MyChildTM Infant Protection System for several years. 7. Upon information and belief, Defendant Guard RFID Solutions, Inc. (hereinafter

Guard), is a Canada corporation having a principal, regular and established place of business at No. 8 1600 Derwent Way, Delta, British Columbia, Canada V3M 6M5. 8. 9. Defendant is a manufacturer of infant security systems. Upon information and belief, Guard transacts business within this district, derives

substantial revenues from intrastate and interstate commerce and has committed among other acts alleged herein, breach of contract and tortious acts of patent infringement within this district and also without this district having injurious consequences within this district, and Guard is otherwise within the jurisdiction of this Court. 10. In particular, upon information and belief, Guard is selling in this district one or more

products that infringe upon Plaintiffs exclusive rights under United States Patent No. 5,440,295 as is more thoroughly described below, has breached the license agreement under which Plaintiff is at least an exclusive licensee and Defendant is the licensor, and/or is actively doing business in this district and thereby is, and has been, regularly availing itself of the benefits of doing business in this district.

FACTUAL BACKGROUND

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Plaintiff is the exclusive licensee under United States Patent No. 5,440,295, entitled

Apparatus and Method For Preventing Unauthorized Removal of a Newborn Infant From a Predetermined Area, duly issued by the United States Patent and Trademark Office on August 8, 1995 (hereinafter the 295 patent). The 295 patent has at all times been valid and subsisting. 12. On or about September 1, 1997, Plaintiff entered a License Agreement

(Agreement) with the inventors, Richard Ciecwisz and John Cardello (Inventors), of the 295 patent in which Plaintiff was granted exclusive rights for the life of the 295 patent to make, use, produce and sell anywhere in the world goods and services utilizing the 295 patent. 13. The Agreement granted Plaintiff the right to exclude others from selling goods and

services under the 295 patent, the right to grant sublicenses, no restriction on assignment, and the right to sue infringers. 14. From September 1997 until about October 2009, Plaintiff paid all royalties due the

Inventors under the Agreement for sales of the MyChildTM Infant Protection System. 15. In a letter to Plaintiff dated October 22, 2009, counsel for Defendant asserted on

various grounds that the 295 patent was invalid and its intention to sell products covered by the 295 patent. 16. Under a provision of the Agreement, the assertion of invalidity is a ground for

Plaintiff to cease paying royalties under the Agreement, and Plaintiff ceased royalty payments to the Inventors. 17. On or about June 27, 2011, Defendant sent a letter to Plaintiff alleging Defendant had

acquired all rights to the 295 patent, withdrawing the issues of invalidity of the 295 patent raised in the October 22, 2009 letter, and demanding payment of all monies due to the Inventors

through the date of the assignment and monies due to the Defendant, as the new licensor, since the date of the assignment.. The June 27 letter did not include a copy of any assignment. 18. On or about July 28, 2011 Plaintiff, through its counsel, requested a copy of the

assignment document. 19. On or about July 29, 2011, counsel for Defendant sent a copy of what purported to be

an assignment document conveying the 295 patent rights from the Inventors to Defendant. 20. By a letter dated August 8, 2011, Plaintiff, through its counsel, requested

confirmation from Defendant that Defendant would honor Plaintiffs exclusive rights under the 295 patent, and requested satisfactory assurances that Defendants withdrawal of the contentions of invalidity were genuine and would not be reasserted by Defendant licensor before the expiration of the 295 patent. 21. Upon information and belief, at least one reason Defendant acquired the 295 patent

was to make an insincere withdrawal of the invalidity contentions it previously made, so that it could collect royalties from Plaintiff that had been withheld due to the contention of invalidity, and simultaneously continue to infringe the 295 patent. 22. Defendant, through its counsel, responded that under the Agreement, the licensor

retained the right to make, use and sell under the 295 patent, that Defendant was not precluded from making, using and selling its TotGuardTM products that could be alleged to infringe the 295 patent, and that Plaintiff was required to pay royalties. Defendant made no representation that it would not reassert its allegations of invalidity. 23. Plaintiff, through its counsel, responded that Defendants demand of royalties while

contending that it is permitted to operate in competition with Defendant under the 295 patent is a

breach of Defendants express and implied obligations under the Agreement. 24. 7.a. of the Agreement provides that in the event of any misrepresentation, breach of

warranty, or non-fulfillment of any covenant made, by licensor in the agreement, licensee shall have the absolute right to take any and all action available to it in the law or in equity in its sole and absolute discretion. 25. Plaintiff, through its counsel, informed Defendant by letter dated August 19, 2011

that based on 7.a. Plaintiff exercised its right to withhold royalties unless and until Defendant provided (1) a warranty that Guard does not now, and will not in the future, make, use or sell umbilical tags for use in conjunction with any apparatus or method described in any claim of the 295 patent, including umbilical tags advertised by Guard on its website under the TotGuardTM name; and (2) a warranty that the withdrawal of the previous contentions of invalidity of the 295 patent by Guard is genuine and that Guard will not renew these contentions before expiration of the295 patent. 26. Plaintiff also offered to place all royalties in escrow until Defendant fulfilled the

required warranties. 27. Defendant, through its counsel, refused to provide such warranties and stated it

considered the Agreement void and terminated. 28. Upon information and belief, on or about May 1, 2011, Defendant informed Luther

Midelfort hospital/clinic (a part of the Mayo Clinic Health System) (Luther Midelfort), a customer of Plaintiff with whom Plaintiff (as its d/b/a McRoberts Security Technologies) had an existing Master Security System Agreement for the provision of security systems, umbilical tags, maintenance and support services to hospitals in the Mayo Clinic Health System, that Plaintiff is no

longer a distributor of the MyChild IP System and is not authorized to sell these systems to new customers. 29. As of May 1, 2011, Plaintiff was at all times a distributor of the MyChildTM IP

System and is authorized to sell these systems to new customers. 30. 31. The MyChildTM IP System is covered by claims of the 295 patent. Upon information and belief, at the time Defendant made the aforementioned

statement to Luther Midelfort, Defendant knew Plaintiff was an authorized distributor of the MyChildTM IP System and the exclusive licensee under the 295 patent. 32. Upon information and belief, as a result of the misrepresentation of Defendant, Luther

Midelfort canceled its Master Security System Agreement with Plaintiff. 33. Upon information and belief, since at least as early as January 2010 Defendant has

made similar representations to Plaintiffs customers that Plaintiff is either not authorized to sell products that are covered in the Agreement and/or is not the exclusive distributor of such products, and as a result of the representations Plaintiff has lost customers. 34. In its letter of August 19, 2011, Plaintiff requested from Defendant a retraction of all

statements made by Defendant to the effect that Plaintiff does not own exclusive rights under the 295 patent, any statements that Defendant is in any way entitled to operate under the 295 patent, and any other statements made by Defendant inconsistent with Defendants obligations as licensor under the Agreement. 35. inaccurate. COUNT I PATENT INFRINGEMENT Defendant refused to retract such statements, asserting that such retractions would be

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Plaintiff re-alleges all of the foregoing paragraphs, as if fully set forth herein. Upon information and belief, Defendant has been and is directly infringing, and

indirectly infringing by way of inducing infringement and/or contributing to the infringement of the 295 patent, by manufacturing, importing into the United States, offering for sale and/or selling its TotGuardTM system, and/or components thereof, which system employs an electronic radio frequency identification (RFID) tag operable to be attached to the umbilical of an infant, and a reader for identifying and tracking the RFID tag attached to the infant. 38. Since at least as early as March, 2011, Defendant has been the licensor of the 295

patent which is licensed exclusively to Plaintiff. 39. Upon information and belief, Defendant has had full knowledge of Plaintiffs rights

under the 295 patent since at least October, 2009. 40. Plaintiff is entitled to enjoy the exclusive nature of the Agreement without the

competition of the licensor Defendant. 41. All of the acts of Defendant are without the permission, license or consent of Plaintiff

and, if allowed to continue, will continue to cause irreparable injury to Plaintiff, unless enjoined by this Court. 42. Defendant has been unjustly enriched and Plaintiff is entitled to an accounting and

award of damages, interest, attorneys fees and costs. 43. Defendants acts of infringement have been willful, wanton and exceptional, thereby

subjecting Defendant to an award of enhanced damages. 44. Defendants foregoing activities have damaged Plaintiff in an amount as yet unknown,

but if Defendants foregoing activities continue, Plaintiff believes damages will exceed at least the

sum of at least $1,000,000, and will likely be far higher.

COUNT II BREACH OF CONTRACT 45. 46. Plaintiff re-alleges all of the foregoing paragraphs, as if fully set forth herein. An Agreement exists between the Plaintiff and Defendant, wherein Defendant is the

owner of the 295 patent and the Plaintiff is the exclusive licensee. 47. 48. Defendant is in breach of the Agreement by its acts enumerated hereinabove. Defendant has breached its obligation to respect the exclusive nature of the Agreement,

including through its making, using, selling and/or offering for sale of devices and/or systems upon which at least one claim of the 295 patent reads. 49. Defendant has breached the Agreement by failing to fulfill the warranty of good faith

inherent in the Agreement inasmuch as Defendant has made false and/or misleading representations to Plaintiffs customers regarding the Plaintiff and/or the nature of the Agreement as described above. 50. Defendants foregoing activities have damaged Plaintiff in an amount as yet

unknown, but if Defendants foregoing activities continue, Plaintiff believes damages will exceed at least the sum of at least $500,000, and will likely be far higher.

COUNT III TORTIOUS INTERFERENCE WITH CONTRACTUAL RELATIONSHIP 51. 52. Plaintiff re-alleges all of the foregoing paragraphs, as if fully set forth herein. Plaintiff had a protectable contractual relationship with the Luther Midelfort

hospital/clinic, whereby Plaintiff supplied Luther Midelfort pursuant to a Master Security System Agreement with security systems, umbilical tags, and maintenance and support services to hospitals in the Mayo Clinic Health System. 53. The Master Security System Agreement provided that as health care institutions were

added to the Mayo Clinic Health System, Plaintiff would be the supplier of the aforementioned products and services. 54. Upon information and belief, Defendant is aware of the exclusive nature of Plaintiffs

rights under the 295 patent, and has interfered with Plaintiffs contractual relationship with Luther Midelfort maliciously, intentionally and without justification or excuse. 55. Upon information and belief, as the licensor under the Agreement, Defendant has at

all times at least since acquiring the 295 patent had knowledge of the terms of the Agreement, knows Plaintiff has exclusive rights under the 295 patent, and knows Plaintiff is authorized to sell and has been selling the MyChildTM Infant Protection System. 56. Upon information and belief, Defendant made a knowingly false statement to

Plaintiffs customer, Luther Midelfort, regarding Plaintiffs authority and ability to supply maintenance and support services as well as products to Luther Midelfort. 57. As a result of the intentional false statements of Defendant to Luther Midelfort,

Luther Midelfort terminated its contract with Plaintiff, resulting in the loss of not only the business Plaintiff was doing with Luther Midelfort but the opportunity to supply goods and services to entities added by expansion of the Mayo Health System. 58. Defendants foregoing activities have damaged Plaintiff in an amount as yet

unknown, but if Defendants foregoing activities continue, Plaintiff believes damages will

exceed at least the sum of at least $500,000, and will likely be far higher.

JURY DEMAND 59. Plaintiff hereby demands trial by jury.

PRAYER WHEREFORE, Plaintiff prays for a judgment, including: A. B. C. D. this action; E. F. an award of treble damages for Defendants willful infringement of the 295 patent; a permanent injunction against Defendant, and its respective officers, directors, That Defendant infringed and/or continues to infringe the 295 patents; that the acts of infringement by Defendant were, and continue to be, willful; damages, with interest, pursuant to all applicable statutes including 35 U.S.C. 284; declaring this case exceptional and awarding Plaintiff its attorneys fees and costs of

agents, servants, employees, attorneys, successors, licensees, assigns and all others in active concert or participation with the Defendant, prohibiting the engaging in any acts that constitute infringement, inducement of infringement or contributory infringement of the 295 patent; G. H. I. J. a declaration that the Agreement is valid and subsisting; that Defendant is in breach of the Agreement; that Defendant has tortiously interfered with the contractual relationship of Plaintiff; a permanent injunction against Defendant, and its respective officers, directors,

agents, servants, employees, attorneys, successors, licensees, assigns and all others in active concert

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or participation with the Defendant, prohibiting the engaging in any acts that constitute tortious interference with Plaintiffs business; K. L. damages arising from all Defendants tortious acts; and such other and further relief as this Court deems just and proper.

Respectfully submitted, GIBSON & DERNIER, LLP Attorneys for Plaintiff Suite 504, 900 U.S. Highway 9 North Woodbridge, NJ 07095 Telephone (732) 634-7634 Facsimile (732) 634-6887 tgibson@gdiplaw.com

Dated: September 22, 2011

s/Timothy X. Gibson/ Timothy X. Gibson (TG 6800)

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