The story begins in 1997, when plaintiff Eliot Bernstein and others3 invented video technologies (the "Inventions").4 The Inventions permit transmission of video signals using significantly less bandwidth than other technologies.5 They also provide a way to "zoom almost infinitely on a low resolution file with clarity,"6 something that is generally believed to be impossible. The Inventions were quickly incorporated into "almost every digital camera and present screen display device" and they "played a pivotal part in changing the Internet from a text based medium to a medium filled with magnificent images and video, thought prior to be impossible on the limited bandwidth of the Internet."7 They are also used by DVDs, televisions, cable television broadcasting, certain *44 websites, and "chips," presumably integrated circuits"
In 1998, Bernstein's accountant, Gerald R. Lewin, suggested that Bernstein contact Albert T. Gortz, an attorney at Proskauer Rose LLP, regarding the Inventions.9 Gortz, an estate planner, put Bernstein in contact with Proskauer partner Christopher C. Wheeler, a real estate attorney, who told Bernstein that he would determine whether Proskauer's New York office had partners with appropriate experience in patent law.10 Several weeks later, they represented that partners Kenneth Rubenstein and Raymond A. Joao would secure patents for the Inventions and would perform other trademark, trade secret, and copyright work.11 Apparently impressed by the Inventions, Proskauer agreed to accept 2.5% of the equity of Iviewit, Inc., the company that owned the Inventions, in return for its services.12 Unbeknownst to Bernstein, Rubenstein and Joao did not at the time work for Proskauer.13 Rubenstein subsequently joined Proskauer, but Joao *55 remained at the firm Meltzer Lippe Goldstein Wolf Schlissel, P.C. ("MLG")
Rubenstein was also counsel to MPEGLA LLC, one of the largest users of the Inventions. When he was hired by Proskauer, MPEGLA became Proskauer's client. MPEGLA bundled the Inventions in with other technologies that they license, but did not pay Iviewit any royalties.15 In fact, plaintiffs allege that Rubenstein was part of a scheme to steal the Inventions.16 Apparently as part of this scheme, Joao filed for more than ninety related patents in his own name.17 Then, to mask the theft, Proskauer created numerous *454454 illegitimate companies with names similar to that of Iviewit in various jurisdictions (the "Similar Companies").18 Proskauer filed defective patent applications for Iviewit and valid applications for the Similar Companies.
Proskauer then brought in representatives from Real (a consortium that at the time comprised Intel; Silicon Graphics, Inc.; and Lockheed Martin, and *66 that was later acquired by Intel).20 Real made use of the Inventions without first arranging for a license from Iviewit.21 Proskauer required Real and other interested parties to sign non-disclosure agreements, but did not enforce these agreements
Proskauer also distributed the Inventions to Enron Broadband. Enron "booked enormous revenue through [Enron Broadband] without a single movie to distribute," but because they lost use of the Inventions, the deal "collapsed over night causing massive losses to Enron investors" — indeed, plaintiffs allege that this may be "one of the major reasons for Enron's bankruptcy
Meanwhile, Proskauer pursued investors for the Similar Companies. Using fraudulent documents, they secured millions of dollars from the Small Business Administration, Goldman Sachs, Gruntal Co., Wachovia Securities, and various others, 24 including defendant Huizenga Holdings, Inc.25 Plaintiffs also *77 allege that in March of 2001, the Tiedemann Investment Group ("TIG") invested several hundred thousand dollars in the Similar Companies.26 Plaintiffs suggest that some of this money may have been stolen.
2. Discovery of the Theft
Almost immediately after Joao began work on the patents, Bernstein discovered that Joao had made changes to the patent applications after they were signed. Bernstein forced Joao to fix the applications, mailed them, and then dismissed Joao.28 Joao was replaced by William J. Dick, Douglas A. Boehm, and Steven C. Becker of Foley Lardner LLP ("Foley").29 But they too filed false papers, not only with the U.S. Patent and Trademark Office ("PTO"), but with various foreign patent offices.
Bernstein began to discover the full extent of the scheme. To ensure Bernstein's silence, Brian G. Utley, President of one of the Similar Companies, flew to Iviewit's California office and told Bernstein that "if he did not shut up *88 about what was discovered . . . that he and law firms [sic] would destroy him, his family and his companies."31 Utley explained that if he were not made CEO, Bernstein and his family would be in danger from Proskauer and from Foley.32 In response, Bernstein told *455455 his wife and children to flee their home.33 Bernstein also attempted to have all corporate records from Iviewit's Florida office shipped to California, though defendants were able to destroy many of those documents before they could be shipped.34 Utley and Michael Reale, Vice President of Operations for one of the Similar Companies, told Iviewit's Florida employees that they were fired and should join the Similar Companies.35 Utley and Reale also stole equipment that belonged to Iviewit, leading to the filing of charges with the Boca Raton Police Department.36 Not satisfied with threats, defendants blew *99 up Bernstein's car.37 Fortunately for Bernstein, he was not in the vehicle at the time.
Plaintiffs contacted the New York Attorney General's Office and requested that the Attorney General and the New York State Disciplinary Committee open an investigation into the actions of these attorneys.39 "For his failure to respond to the earlier complaints, former [New York Attorney General] Eliot Spitzer and [the New York Attorney General] have also been included herein as defendants. . . ."
Meanwhile, in the year 2000, Arthur Andersen LLP began an audit of the Similar Companies.41 Arthur Andersen discovered some of these irregularities and requested clarifying information from certain parties, including Proskauer, which provided false information to prevent Arthur Andersen from discovering the full extent of the fraud.
Bernstein also discovered a federal bankruptcy action filed in the Southern District of Florida.43 In this case, defendant RYJO Inc., a subcontractor for Intel and Real, was attempting to steal some of the Inventions.44 Defendant Houston Shady, P.A. were counsel to Intel and Real in this action, which was filed in 2001.45 This case was dropped after it was discovered by Iviewit.
Bernstein also learned of Proskauer Rose LLP v. Iviewit.com, Inc., 47 an action in Florida state court presided over by defendant the Hon. Jorge Labarga, Justice of the Circuit Court of the 15th Judicial Circuit in and for Palm Beach County, Florida.48 Bernstein and Iviewit fired the attorneys who claimed to be representing Iviewit, Sachs Saxs Klein, P.A., and retained new counsel, Steven Selz and Schiffrin Barroway Topaz Kessler, LLP ("SBTK"), to represent the Iviewit companies in these actions.49 Unfortunately for *456456 Iviewit, SBTK joined in *1111 the conspiracy with Proskauer.
The Complaint also alleges that Justice Labarga was part of the conspiracy and finds substantial fault with his handling of the case.51 In fact, plaintiffs suggests that the Iviewit case may have distracted Justice Labarga from his work on Bush v. Gore, leading possibly to its result.52 Labarga granted a default judgment against Iviewit.53
See id. ¶ 394 ("That on information and belief, it then became apparent that Labarga was not only part of the conspiracy but in the words of the Supreme Court Justice, Sandra Day O'Connor, in relation to the Florida Supreme Court election recount in the Bush v. Gore presidential election that Labarga was central too [sic], that he was `off on a trip of his own . . .,' perhaps referring to the Iviewit Companies matters which were consuming him at the same time.") (quoting Jan Crawford Greenburg, Supreme Conflict: The Inside Story of the Struggle for Control of the United States Supreme Court (2007)).
In 2003, Plaintiffs filed a complaint with the Florida Bar that alleges Wheeler and Proskauer violated various ethical rules.54 However, the Florida Bar failed to give the complaints due consideration.55 Plaintiffs therefore appealed to *1212 the Florida Supreme Court, 56 but that court closed the case "without explanation or basis in law."57 The events involving Florida lasted from Spring 2003 to Spring 2004.
3. Further Cover-up
As mentioned earlier, plaintiffs had filed complaints with the New York Appellate Division, First Department Disciplinary Committee ("1st DDC") against Rubenstein, Joao, and Proskauer itself. But Proskauer arranged for defendant Steven C. Krane, a partner at Proskauer and member of the 1st DDC, to have the complaints delayed and then dismissed.59 Plaintiffs discovered Krane's involvement on May 20, 2004.60 They filed a complaint against Krane with the 1st DDC. Believing Krane to be conflicted in his representation of Proskauer, plaintiffs contacted Catherine O'Hagan Wolfe, then the Clerk of the First Department, but the First Department took no action, allegedly because of the *1313 involvement of the judges of the First Department in the conspiracy.
In July of 2004, Plaintiffs filed a formal complaint with the First Department.
The First Department voted to begin investigating Rubenstein, Proskauer, Krane, MLG, and Joao and transferred the investigation to the Second Department Disciplinary Committee ("2d DDC"), which refused to pursue it.
Plaintiffs also contacted defendant the Hon. Judith Kaye, Chief Judge of the New York Court of Appeals, but "she failed to intervene. . . .
Plaintiffs also requested an investigation by the New York Lawyers' Fund for Client Protection. It declined because it too was controlled by the conspiracy.
Plaintiffs had a similar experience with the State of New York Commission of Investigation.66 They then contacted Eliot Spitzer, then-Attorney General of the State of New York, but he too conspired with defendants and *1414 refused to investigate.
Similar inquiries with the Virginia State Bar were unsuccessful.
Plaintiffs allege that the conspiracy violated their rights to due process pursuant to the Fifth and Fourteenth Amendments (count one).69 They also allege antitrust activity in violation of sections 1 and 2 of Title 15 of the United States Code (count two).
They further charge violation of Title VII of the Civil Rights Act of 1964 (count three)71 and the Racketeering and Corrupt Organizations Act (count four).
In addition, plaintiffs allege a series of state law claims, including legal malpractice, breach of contract, tortious interference, negligent interference with contractual rights, fraud, breach of fiduciary duties, misappropriation of funds, and conversion.
For each count, plaintiffs request one trillion dollars in compensatory damages and punitive damages. Plaintiffs also *1515 request an injunction to prevent the unauthorized use of the Inventions, although they acknowledge that "the granting of this prayer for relief, effectively, halts the transmission of and viewing of video as we know it. . . ."
They further request that the Court appoint a federal monitor to oversee the operations of the First and Second Department Disciplinary Committees, the Florida Bar, the United States Patent and Trademark Office, the Federal Bureau of Investigation, the United States Attorney's Office, and the Virginia Bar Association.
Plaintiffs further seek an injunction to correct all past wrongdoing and ask the Court to request the Attorney General to institute civil or criminal proceedings.
The precise basis for plaintiffs' first claim is unclear. They allege:
The conspiratorial actions of the defendants in sabotaging IP applications through fraud and theft, and the ensuing white washing of attorney complaints by the defendants and other culpable parties both known and unknown with scienter, thereby continuing the violation of Plaintiffs inventive rights is contrary to the inventor clause of the Constitution of the United States as stated in Article 1, Section 8, Clause 8, and the due process clauses of the Fifth Amendment to the Constitution of the United States, and Fourteenth Amendment to the Constitution of the United States.
Source of above
ELIOT I. BERNSTEIN, ET AL., PLAINTIFFS, V. STATE OF NEW YORK, ET AL., DEFENDANTS. NO. 07 CIV. 11196 (SAS). UNITED STATES DISTRICT COURT, S.D. NEW YORK. AUGUST 8, 2008