Blake v. Professional Coin Grading Service et. al.

8/4/2019 Blake v. Professional Coin Grading Service et. al.

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UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

DUANE C. BLAKE,

Plaintiff,

v.

PROFESSIONAL COIN GRADINGSERVICE; NUMISMATIC GUARANTYCORPORATION OF AMERICA; andCOLLECTORS UNIVERSE, INC.,

Defendants.

)

))))))))))))

Civil Action No. ____________________

COMPLAINT

(Filed Electronically)

Duane C. Blake (Mr. Blake), by and through his attorneys, Lawrence G. Cetrulo, Esq.

and Michael A. Capuano, Esq. of Cetrulo & Capone, LLP, and those certain of counsel

attorneys, Kevin T. Duffy, Jr., Esq. and Gary G. Staab, Esq. of Duffy & Staab Attorneys at

Law, and David L. Ganz, Esq. and Jerrietta R. Hollinger, Esq. of Ganz & Hollinger, P.C., and for

his Complaint against Defendants Professional Coin Grading Service (PCGS), the Numismatic

Guaranty Corporation of America (NGC), and Collectors Universe, Inc. (CU), (collectively,

Defendants) hereby alleges:

Nature of the Action

1. This action arises out of the misappropriation, re-branding, and wide-scalecommercial exploitation of Mr. Blakes coin safeguard, labeling and monitoring system (the

AURA System) by the Defendants.1

2. Having learned of Mr. Blakes AURA System under the circumstances described

1 AURA stands for Axially Ultimate Refractory Angles.


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below, Defendants then wrongfully took it, and have been using it wrongfully and profitably for

the past year and a half under the trade names SecurePlus and Plus (+) (by Defendant

PCGS), and Plus (+) (by Defendant NGC) (hereinafter, Secure Plus and +).

3. Defendants have engaged, and continue to engage, in false commercial advertisingof Mr. Blakes AURA System by representing his AURA System to the public, over the Internet

and in trade publications such as Coin World, COINage Magazine, Coin Week, Coin News, and

elsewhere, as their own, thus depriving Mr. Blake of his rights of ownership, business

opportunities, royalties and enjoyment of the other benefits of his creation.

4. Defendants actions violate the Federal Lanham Act and give rise to severalMassachusetts statutory and common law claims as follows:

a. Violations of 15 U.S.C. 1125(a) (the Lanham Act) (Count I);b. Conversion (Count II);c. Breach of Contract (Count III);d. Breach of the Covenant of Good Faith and Fair Dealing (Count IV);e. Unjust Enrichment (Count V);f. Civil Conspiracy (Count VI);g. Misappropriation of Trade Secrets Mass. G.L. c. 93, 42 (Count VII);h. Unfair Business Practices Mass. G. L. c. 266, 91 (Count VIII);i. Injunctive Relief (Count IX).

5. Mr. Blake, accordingly, asks this Court for relief, including: (i) damagesincluding, but not limited to reasonable royalties, compensatory and consequential damages

believed to be in excess of $6,500,000.00 (plus prejudgment interest thereon); (ii) restitution; (iii)

treble damages (on the Lanham Act claim); (iv) exemplary damages as may be appropriate; (v)

reasonable attorneys fees, expenses and costs incurred in bringing this action; or (vi) enjoinder of

Defendants continued use of Mr. Blakes property; and (vii) such other and further relief as the

Court may deem just, proper and equitable.


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The Parties

6. Plaintiff Blake is a United States citizen and resident of the Commonwealth ofMassachusetts, living in Norfolk County. Mr. Blake is a life-long coin collector and researcher,

and, more recently, coin dealer, doing business in Massachusetts as the Aura Coin Company, and

as such, engages in the buying, selling and grading of rare, primarily U.S. coins.2 Mr. Blake is

the sole creator and independent owner of the AURA System. Annexed hereto as Exhibit A is

true and correct copy of Mr. Blakes pending patent application regarding his AURA System,

entitled AURA Devices and Methods for Increasing Rare Coin Value, as filed with the United

States Patent and Trademark Office. Said filing, with a priority dating of July 14, 2009, presumes

Mr. Blake to be the legal owner of the AURA System.3

7. Upon information and belief, defendant Professional Coin Grading Service(PCGS) is a California entity, with its principal place of business at 1921 E. Alton Avenue,

Santa Ana, California. PCGS was founded in 1986, and is in the business of providing third-

party grading services for coins submitted to it by consumer members, collectors and dealers.

PCGS charges a fee for both PCGS membership and coin grading submissions. PCGS maintains

its own website at http://www.pcgs.com.

8. Upon information and belief, defendant Numismatic Guaranty Corp. of Americad/b/a NGC, is a privately-owned corporation located within the State of New Jersey, and the

State of Florida, with its principal place of business at 5501 Communications Parkway, Sarasota,

Florida. NGC was founded in 1987, and is in the business of providing independent third-party

2 Mr. Blake is also an attorney licensed to practice law in Massachusetts and before the United States Patent and Trademark Office

(USPTO).

3 As required by 35 U.S.C. 122, this patent application, U.S. Pat. Ser. No. 12/804,141, has been maintained under confidence by

both the USPTO and Plaintiff Blake. However, the application has now been made public as specified by federal statute on June

2, 2011. While this application describes the defendants SecurePlus and + systems in detail, a patent infringement count

cannot be included herewith as the patent application has not yet been formally issued by the USPTO. Exhibit A is thus submitted

for evidentiary purposes at this time. However, a Petition to Make Special for an expedited prosecution based on Third-Party

Commercial Infringement is being been filed with the USPTO. When the patent application is issued, Mr. Blake intends to amend

this Complaint to add the additional patent infringement count.


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grading services for coins submitted to it by consumer members, collectors and dealers. NGC

charges a fee to consumers and dealers for both membership and coin grading submissions. NGC

maintains a website at http://www.ngccoin.com.

9. Upon information and belief, Collectors Universe, Inc., (CU), is a publicly-traded Delaware corporation founded on February 3, 1999, with its principal place of business in

California. CU is a related entity to PCGS, as PCGS is the coin division of CU, and CU is also

believed to have its principal place of business at 1921 E. Alton Avenue, Santa Ana, California.

CU is primarily in the business of providing independent third-party authentication and grading

of coins, stamps, memorabilia and other collectibles. As a result of the close relationship between

CU and PCGS, many of the factual allegations and claims regarding PGCS herein apply with

equal force to CU. CU maintains a website at http://www.collectors.com.

Jurisdiction, Venue And Choice Of Law

10. The Court has complete diversity of citizenship jurisdiction over this action under28 U.S.C. 1332, federal question jurisdiction under 28 U.S.C. 1331 (for Mr. Blakes Lanham

Act claim), and supplemental jurisdiction under 28 U.S.C. 1367(a) as to the state law claims.

11. Venue is proper in this District under 28 U.S.C. 1391(a) and 1391(c), as theunlawful acts of defendants, including advertising and promotion of the Secure Plus and +

Systems in Boston, Massachusetts, and telephone, e-mail and Internet communications relating to

this action have been made by and between the parties and disseminated to others via

correspondence, print media, regular mail, electronic mail, and the Internet in Massachusetts, and

have been intended by defendants to reach Massachusetts. Furthermore, defendants have actively

transacted, advertised and promoted their Secure Plus and + goods and services in Boston,

Massachusetts.4

4 For example, in August 2010, both PCGS and NGC were in attendance and doing business at the American Numismatic

Association Annual Coin Show in Boston, Massachusetts.


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12. Upon information and belief, PCGS and NGC Authorized Dealers sell defendantsSecure Plus and + related goods and services within Massachusetts.

13. Upon information and belief, PCGS and NGC advertise and sell Secure Plus and+ related goods and services within Massachusetts.

14. An actual case or controversy has arisen between the parties in this District.15. Massachusetts choice of law is proper in this case and should be applied as to Mr.

Blakes claims sounding in both contract and tort.

General Averments and Allegations

16. The U.S. rare coin market is a highly active multi-million dollar industry, andmuch of that market is influenced and/or controlled by the close-knit cottage industry of third-

party coin grading services (TPGS), like Defendants, through their grading and labeling of

sonically-sealed, or slabbed coins with viewable grading labels, large independent coin auction

houses, and third-party Authorized Dealers who sell these graded and labeled coins to the

public.

17. Defendants PCGS and NGC are widely considered within the rare coin market tobe the premier TPGS not only within the United States, but throughout the entire world.

18. PCGS claims it has graded and labeled over 18 million coins with a declared valueof over $18 billion since 1986, as well as over 2 million coins in just the last 12 months.

19. NGC claims it has graded and labeled over 20 million coins since 1987.20. Although the rare coin market is large and growing, many old school protocols

still exist and are typically honored. For example, handshake agreements are commonplace, and

the failure to keep ones word may result in blacklisting.

21. When TPGS such as Defendants PCGS and NGC grade and label a coin, theydo so by first making an assessment of a particular raw coins condition. They then place the


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coin inside a sealed, tamper-resistant hard plastic holder, known as a slab, and insert a label

inside a compartment within the slab separate from the coin to indicate the grade (i.e., the

physical condition) of that particular coin.5

22. The coin is then placed into the stream of commerce and marketed to the public inthe sealed slab. Thus, an ungraded raw coin becomes a graded coin as a result of the

grading and labeling process and methodologies.

23. The purported benefit of third-party grading and labeling of a coin is to removeuncertainty as to its condition and authenticity (important determinants of rare coin value) so that

collectors and non-expert investors alike may be thereafter assured that those qualities have been

properly and expertly determined.

24. Nevertheless, there remain imperfections in the marketplace. For example, thegrading of coins is still largely fragmented depending on grading source, and highly subjective.

Doctored coins are being passed off as original. Furthermore, there are significant differences

in the properties of coins valued by collectors that are not reflected in the coins graded and

labeled condition.

Mr. Blakes Development of the AURA System

25. Mr. Blake first began developing his AURA System in 2008 to address some ofthose imperfections.

26. A practical application of Mr. Blakes AURA innovations was reflected when Mr.Blake assembled a high-end collection of rare Matte Proof Lincoln Cents on the Registry as an

honorarium to his father, named the William Blake Memorial Eye Appeal and Pedigree

5 Coins can be graded adjectivally (poor, fair, good, very good, fine, very fine, extremely fine, about uncirculated, and mint

state i.e. uncirculated), or numerically, using a scale of 1 to 70 where the label for a graded coin may contain a number

from 1 (lowest or poor) to 70 (highest, or uncirculated). Between the numbers 60 and 70, coins are designated by

different levels of Mint State, or uncirculated. This 1-70 grading scale, known as the Sheldon System, has been in use

since 1948.


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Collection.6

27. While building that collection, Mr. Blake became very aware that the elements ofcoin quality known as eye appeal can be extremely important to the value of a coin.7

28. Mr. Blake came to believe that the identification and labeling of eye appeal on acoins grading label could unlock additional commercial potential for the more appealing of two

otherwise physically identical coins of the same labeled grade.

29. In other words, Mr. Blake believed that if rare coins could be graded and labeledaccording to their eye appeal, then high end coins within a grade, that is, those with better eye

appeal, could be separated from other coins of the same technical grade, and coin buyers would

be willing to pay a premium for such high end coins within the same grade. Therefore, the

inherent value of the better or premium rare coin within the same Sheldon System grade

would be increased.

30. Mr. Blake also realized that, as a result recent technological advances, a coin couldbe digitally photographed and recorded during the grading process, such that its stored image

could be consulted during future submissions of the same coin to help determine whether any

alterations or modifications to the coins condition had occurred.

31. Mr. Blake further reasoned that his AURA System could be used to determinewhether coins which had been already graded had subsequently been intentionally altered and/or

modified. Thus, through the use of his AURA System, Mr. Blake intended to help curtail at

least for graded coins the pernicious practice known in the industry as coin doctoring.8

6 In early 2008, Mr. Blake began formally assembling the collection, and described as follows: In this [Eye Appeal]

collection, some of the finest toned matte proofs in existence have been assembled. All are high end for their grades.

(Emphasis added.)

7 Eye appeal takes into account such properties as luster, contact marks, toning, and sharpness of strike.

8 Coin doctoring is employed by unscrupulous individuals who treat rare coins with chemicals and/or heat in an effort to

increase their eye appeal, and hence the condition and value of the coin. Coin doctoring is considered unlawful if done with

fraudulent intent. Understanding that this activity was a major impediment to insurance company coverage of rare coins for theft

or alteration, Mr. Blake designed his AURA System to help resolve this problem.


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32. Lastly, Mr. Blake saw the numismatic industry as fragmented, with multipleTPGS, including PCGS and NGC, competing with one another using disparate standards for

grading premium quality coins. Mr. Blake believed that his AURA System could provide the

industry with a way for third-party grading companies to utilize the same technical eye appeal

and high/low end coin recognition systems to further promote certainty and uniformity of grading

standards for the rare coin market.

33. On July 14, 2009, Mr. Blake filed U.S. Prov. Pat. App. Ser. No.: 61/226,263,entitled Determining, Labeling and Monitoring the Eye Appeal of a Coin as a first step in

protecting his AURA System.

34. Mr. Blake filed a U.S. federal trademark registration on July 21, 2009 for thebrand AURA which was assigned U.S. TM App. Ser. Num.: 77785578, in the goods and

services Class 42 for Coin grading services. 9

35. On July 14, 2010, Mr. Blake filed U.S. Pat. App. Ser. No.: 12/804,141, entitledAURA devices and methods for increasing rare coin value claiming priority from Mr. Blakes

263 application.

Mr. Blakes Confidential Disclosures to Defendants

36. Because both PCGS and NGC were well-positioned in the coin grading industry,Mr. Blake intended to couple his AURA System with the industrial and marketing assets of one

or all Defendants, in order to conduct market testing to determine whether the rare coin market

would accept his AURA System.

37. If the rare coin market did accept Mr. Blakes AURA System, he intended to offera royalty-bearing license to the grading company or companies that wished to adopt and promote

it. Mr. Blake believed that the AURA System would be of the highest commercial benefit to the

(..continued)

9 Mr. Blakes AURA Trademark application was abandoned on September 27, 2010 due to Defendants wrongful acts.


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company or companies which tested, proved, licensed and ultimately promoted his ideas to

consumers.

38. In late 2008, Mr. Blake contacted PCGS to discuss market testing his AURASystem. Mr. Blake first approached PCGS founder and Collectors Universe CEO David Hall.

Upon information and belief, Hall, independently of his positions with PCGS and CU, is also a

private dealer in rare coins through his own coin company, David Hall Rare Coins.

39. Hall referred Mr. Blake to PCGS President Don Willis. After having severaldiscussions with Willis explaining the publicly-known aspects of his AURA System, Willis

abruptly declined Mr. Blakes proposal for a market testing arrangement with a terse Thanks but

no thanks.

40. Soon thereafter, in the spring of 2009, believing that any PCGS testing of hisAURA System was now a dead letter, Mr. Blake approached NGC Senior Numismatist David

Lange with a similar request regarding Mr. Blakes desire to test-market his ideas through NGC.

41. Lange introduced Mr. Blake to NGC Marketing Director Scott Schechter, as theappropriate person within NGC to discuss the matter.

42. On July 22, 2009, Blake wrote an email to Lange and Schechter about NGClicensing the AURA System.

43. Schechter expressed interest in Mr. Blakes AURA System.44. In anticipation of further discussions, Mr. Blake transmitted by email on July 26,

2009, a Confidentiality Agreement (the Agreement), for Schechter and NCG to review.

45. Two days later, on July 28, 2009, Mr. Blake received an email message fromSchechter suggesting a telephone call, and after a series of emails, a telephone call was scheduled

between them. Schechter called Mr. Blake on August 18, 2009 at the agreed time at his home in

Massachusetts. By then Mr. Blake had filed his patent and trademark applications, and he so


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informed Schechter.

46. At the beginning of that telephone call, Schechter stated that he had misplaced theAgreement, so Mr. Blake immediely emailed another copy to Schechter. Schechter then expressly

agreed to treat all disclosures made by Mr. Blake as highly confidential. Schechter further agreed

to return a signed Agreement to Blake.

47. Mr. Blake and Schechter then had a lengthy discussion about Mr. Blakes AURASystem and its possible market testing by NGC.

48. During the call, Mr. Blake described to Schechter his prior unsuccessful proposalto PCGS and Willis.

49. Also during that call, in reliance upon Schechters agreement to treat his AURASystem confidentially and to abide by the other terms of the Agreement, Mr. Blake disclosed to

Schechter components of the AURA System and valuable information from the patent

application. Among other proprietary information disclosed by Mr. Blake to Schechter was Mr.

Blakes idea that incremental grades be placed on coin holder labels for beautiful high-end coins,

and his proposed imaging solution to the coin doctoring problem.

50. Mr. Blake further disclosed his marketing plans to introduce the new value-addedmethods into the numismatic community. Mr. Blake and Schechter also discussed the possibility

that, were the rare coin market to accept Mr. Blakes AURA System, then Mr. Blake and NGC

would in good faith negotiate the terms of a license agreement to NGC. Schechter said that he

was impressed with Mr. Blakes ideas and believed that a market test was a viable way to

proceed.

51. NGCs Schechter told Mr. Blake that he understood that the information beingdisclosed was sensitive and valuable, and assured him that confidence would be maintained by

NGC.


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52. In that August 18, 2009 call, Schechter not only orally agreed that NGC wouldabide by the terms of the Agreement, he further represented to Mr. Blake that the Agreement

would be signed and returned, including the provision specifying that the entirety of what was

relayed by Mr. Blake to Schechter that day and prior to that day would remain confidential and

subject to the Agreement.

53. Schechter, while sounding positive and excited about working together with Mr.Blake on market testing the AURA System, told Mr. Blake that because he was busy with other

marketing initiatives, he, Schechter, would re-initiate contact with Mr. Blake in the fall of 2009

after he had had a chance to review the AURA System with other NGC executives.

54. Mr. Blake waited over a month but did not hear back from Schechter; nor did hereceive the promised signed Agreement.

55. On September 29, 2009, Mr. Blake followed up with another email to Schechter,attaching yet a third copy of the Agreement. However, neither Schechter nor any other NGC

representatives contacted Mr. Blake then or ever again.

56. Mr. Blake followed up with a final email communication to Schechter, with afourth copy of the Agreement attached on March 28, 2010.

57. However, neither Schechter, nor any other NGC representative responded to anyof Mr. Blakes communications after August 18, 2009.

Defendants Conversion and For-Profit Use in Commerce of Mr. Blakes AURA System

58. In early 2010, CU President David Hall started a PCGS message boardcommunication string entitled The Big One is Coming March 25 and dedicated to the topic of

what turned out to be the upcoming Secure Plus opening announcement.

59. From January to March 25, 2010, Hall, using the pseudonym Home Run Halldisclosed and advertised Blakes proprietary and confidential AURA System on the Message


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Board by asking all and any PCGS members (both coin collectors and dealers of all levels) to

attempt to guess the substance of the Big One correctly. A prize of $1,000.00 was offered to

any person who in fact could correctly guess the nature of the upcoming Big One

announcement.

60. On March 25, 2010, Defendants PCGS and NGC made a dual announcement froma press conference in Houston, Texas that both PCGS and NGC would be adding, when

appropriate, in addition to the numeric Sheldon System grade placed within their coin labels as

was done historically, a Plus or more accurately, a + symbol on the label after the numeric

grade to indicate a coin of a higher quality within its specific grade (i.e., a coin grade 65+

would be considered a better, more valuable coin than a coin graded a plain 65).

61. The new grading methodologies announced on March 25, 2010 were named theSecurePlus and the + labeling methodologies by PCGS and NGC, respectively. Since that

time, PCGS and NGC have offered the Secure Plus and Plus (+) grades to consumers

throughout the United States.

62. Upon hearing this news, Mr. Blake immediately emailed Schechter and demandedto discuss the meaning of the new + initiatives in light of their past confidential

communications about Mr. Blakes AURA System.

63. Schechter did not respond in any way to Mr. Blakes email.64. Defendants market branding descriptions regarding the Secure Plus and +

methodologies are virtually identical to the AURA System as contained in Mr. Blakes pending

AURA patent application.

65. Upon information and belief, NGC representative Schechter and/or others at NGCdisclosed Mr. Blakes AURA System to PCGS.

66. Upon information and belief, PCGS and NGC analyzed the information that was


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disclosed by Mr. Blake to Schechter, and together, in an attempt to convert and use his AURA

System for themselves, renamed and rebranded the AURA System disclosed to Schechter as their

Secure Plus and + methodologies.

67. NGC and PCGS, having now both adopted the + grading designation, have infact tested and proved the commercial viability of the AURA System and established the AURA

System as a new commercially valuable rare coin industry grading standard, but without having

to pay Mr. Blake any licensing or other fee for the benefits they so derived.

68. Mr. Blake expended significant resources to develop his proprietary AURASystem, including the costs related to compensating patent counsel, and costs associated with the

preparation and filing expenses of patent and trademark applications, all of which are in the

prosecution stages before the USPTO.

69. Upon information and belief, the rare coin market has since accepted the new +labeling methodology, and PCGS and NGC have both made substantial profits on their Secure

Plus and Plus (+) labeling programs and the + labeled products offered to consumers.

70. Upon information and belief, the increased value of coins given a + designationby Defendants has been widely recognized in the marketplace.

71. Upon information and belief, Hall, the founder of PCGS, and President ofCollectors Universe, has personally profited from the Defendants conversion of Mr. Blakes

AURA System and their subsequent implementation of the Secure Plus and Plus (+)

labeling programs through, among other things, the increase in value of coins given a +

designation owned by and sold through his own coin company, David Hall Rare Coins.

72. Mr. Blake never intended his AURA System to be used to mislead the public.73. However, upon information and belief, PCGS has engaged in exaggerated and

misleading commercial advertising while promoting the Secure Plus labeling methodology in


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violation of a 1990 FTC Consent Decree (to which PCGS still remains subject) that will tend to

damage the image and marketability of Mr. Blakes AURA System.

74. Mr. Blake has been damaged, and continues to be damaged by Defendants use ofMr. Blakes re-branded AURA System, NGCs direct and indirect breach of the Agreement, their

bad faith, and, among other false claims, their claims that Mr. Blakes proprietary AURA System

is their own. Mr. Blake has been unlawfully deprived of opportunities to license his valuable

AURA System to other third-party grading services, and the Defendants behavior has

necessitated this lawsuit.

COUNT I

Violation of Section 43(a) of the Lanham Act (15 U.S.C. 1125(a)

75. Mr. Blake hereby realleges and incorporates by reference the foregoing paragraphsof the Complaint as if fully restated and realleged herein.

76. Defendants, through national commercial advertising and promotion in interstatecommerce, used false advertising to confuse and deceive the public both within and outside of the

rare coin market (i.e., coin collectors, dealers, investors, customers and prospective customers) by

falsely representing that Defendants are the creators and owners of Secure Plus and +

labeling methodologies, which, in reality are the AURA System owned by Mr. Blake.

77. Such representations constitute false designations as to the true origin of theSecure Plus and + labeling methodologies, as well as false descriptions and representations

of the Secure Plus and + labeling methodologies (i.e., Mr. Blakes AURA System) in

violation of Section 43(a) of the Lanham Act, 15 U.S.C. 1125(a).

78. Upon information and belief, Defendants intended to confuse and deceive, and infact have confused and deceived, coin collectors, coin dealers, investors, customers and

prospective customers in and outside of the rare coin market into believing that NGC and PCGS


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have in fact independently created and singularly own the Secure Plus and + labeling

methodologies, and have the right to grant licenses to one another, and openly and publicly sell

products created with such labeling methodologies, as well, when in fact Defendants have stolen

the intellectual property rights behind these labeling methodologies from Mr. Blake.

79. Coin collectors, coin dealers, investors, customers and prospective customers havebeen and/or are likely to have been, and are presently being confused and deceived into believing

that NGC and PCGS are the creators and owners of the Secure Plus and + labeling

methodologies and Defendants are actually harming the rare coin market as a result of creating

and furthering these false representations.

80. Defendants false and misleading statements have deceived and/or are likely todeceive a substantial segment of their intended audience.

81. Defendants misleading activities are material and have influenced and/or arelikely to influence coin collectors, coin dealers, investors, customers and prospective customers

purchasing decisions regarding Defendants products and coin collectors, coin dealers, investors,

customers and prospective customers decisions about whether to participate in Defendants

programs and purchase Defendants services.

82. As a direct and proximate result of Defendants unlawful conduct, the goodwillassociated with Mr. Blake and his ideas and plans concerning his AURA System have been

and/or are likely to be diminished.

83. As a direct and proximate result of Defendants unlawful conduct, Mr. Blake hassuffered and/or is likely to suffer damages in the form of lost royalties in an amount that are

presently believed to be in excess of $6,500,000.00, and irreparable injury to his business

reputation.

84. Defendants violations of 15 U.S.C. 1125(a) are intentional and willful, and


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entitle Mr. Blake to recover restitution and damages in an amount to be determined at trial.

85. Defendants intentional and willful violations of 15 U.S.C. 1125(a) entitle Mr.Blake to recover his reasonable attorneys fees.

86. Defendants violations of 15 U.S.C. 1125(a) are intentional and willful, andentitle Mr. Blake to treble damages in an amount to be determined at trial.

87. Defendants wrongful conduct is a substantial factor in directly and proximatelycausing damage to Mr. Blake as described above, and he will continue to be harmed so long as

Defendants wrongful conduct continues. Mr. Blake is therefore entitled to damages as described

above.

COUNT II

Conversion


89. As a result of wrongfully taking, sharing and profiting from Mr. Blakes AURASystem, Defendants have wrongfully exercised dominion over Mr. Blakes personal property and

royalty streams, over which Mr. Blake has expended significant time and money to create and

develop.

90. Defendants exercise of dominion over Mr. Blakes proprietary AURA System iswithout right because Defendants were not authorized or licensed to take, share and/or use the

AURA System. Furthermore, Defendants actions constitute the conversion of Mr. Blakes

property, and Defendants have deprived Mr. Blake, the rightful owner, of the benefits of his own

property. As such, Defendants wrongfully converted Mr. Blakes property to their own

commercial use and benefit, or have conferred the commercial use and benefit of Mr. Blakes

property upon others, and without providing any remuneration or credit to Mr. Blake.


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91. As a direct and proximate result of Defendants conversion of Mr. Blakesproperty, Plaintiff has expended significant time and money investigating Defendants actions in

an effort to uncover the full extent of their wrongdoing. In addition, if Defendants continue to

use Mr. Blakes AURA System for their or others benefit, or further disseminate or

commercially benefit from Mr. Blakes proprietary AURA System, Mr. Blake will suffer

substantial additional damages.

92. As a direct and proximate result of Defendants conversion of Mr. Blakes AURASystem, Mr. Blake has suffered and will continue to suffer damages in an amount that is presently

believed to be in excess of $6,500,000.00, and injury to his business reputation.

COUNT III

Breach of Contract (vs. Defendant NGC)


94. The Agreement emailed to Schechter employs the following restrictions regardingthe development and licensing of Mr. Blakes Confidential Information (as defined therein)

through NGC:

Mr. Blake agrees to disclose the Information to Receiving Party[NGC] solely for the following purpose (the Purpose): To allowReceiving Party to access, develop and customize, and assist withspecifications needed for licensing, purchase, and/or manufacturinggoods and/or services relating to the Information, including projectplanning and raising capital.

95. The Agreement contains the following No-Grant provisions regarding Mr. BlakesConfidential Information as provided to NGC:

Nothing contained in this Agreement shall be construed as a grantby Mr. Blake, expressly or impliedly, of any rights, by license orotherwise, on or with respect to any patent, other intellectualproperty, copyrights, trademarks, trade secrets, or rights in software


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or other inventions, discovery or improvement relating to theInformation, which is developed, made, conceived, or acquiredprior to or after the date of this Agreement.

96. The Agreement contains the following restrictions regarding the ownership of Mr.Blakes Confidential Information:

In the event that the Receiving Party (NGC or any third party,including PCGS) makes an inventive contribution to anenhancement of the Information, as defined by United States patentlaw or state statutes or common law, during the Term of thisAgreement, the Receiving Party agrees to assign its interest in anysuch invention, inventive contribution or enhancement to Mr.Blake.

97. The Agreement contains the following restrictions regarding the legal handling ofMr. Blakes Confidential Information within NGC and to third parties, such as PCGS:

In consideration of its receipt of the Information, Receiving Partyagrees that the Information shall be considered confidential andproprietary to Mr. Blake, and that Receiving Party shall (a) Notdisclose the Information (or any portion or copy thereof) except toits employees when necessary under the Purpose, and not publishthe Information or disclose it to any third party; and (b) Not use theInformation (or any portion or copy thereof) for any purpose exceptthe Purpose expressly set forth above. Prior to disclosingInformation to any agents, employees and representatives,Receiving Party will advise them of the confidential and proprietarynature of the Information and secure in writing the agreement ofsuch persons to comply with the terms of this Agreement.

98. Because of the representations and assurances given by Schechter, Mr. Blakedisclosed his confidential and valuable AURA System to NGC, though subject to the above-

enumerated paragraphs of the Agreement.

99. After initially inducing Mr. Blake to disclose the details of his confidential AURASystem, and despite numerous opportunities to speak, NGC remained silent, never in any way

indicating it did not agree to be bound by the terms of the Agreement.


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100. Mr. Blakes contract with NGC, as set forth in the Agreement, is valid andenforceable.

101. By failing to perform the duties set out in the contract and converting Mr. BlakesAURA System, NGC breached the Agreement.

102. NGCs breach of contract is willful and knowing.103. As a direct and proximate result of NGCs breach of contract, Mr. Blake has

suffered and continues to suffer substantial financial and reputational damages for which NGC is

liable.

COUNT IV

Breach of Covenant of Good Faith and Fair Dealing (vs. Defendant NGC)


105. Mr. Blake disclosed his AURA System to NGC in good faith and pursuant to theoral assurances from NGC Director of Marketing Scott Schechter that his disclosures relating to

his AURA System would remain confidential, and within NGC.

106. Mr. Blake further disclosed his AURA System to NGC relying on the belief thathe and NGC would do market testing of his AURA System in order to gauge the interest of the

rare coin market in Mr. Blakes AURA System.

107. Mr. Blake further relied on NGCs assurances that a license agreement would benegotiated should such market testing prove positive.

108. Mr. Blake further reasonably relied on the fact that NGC, while having ampleopportunity to dispel any expressed doubts, remained silent, and in no way communicated


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anything to contradict Mr. Blakes belief that he and NGC had a legally enforceable, valid and

accepted agreement in place regarding Mr. Blakes AURA System that was communicated to

NGC by Mr. Blake.

109. Mr. Blake acted in good faith and on that reasonable belief.110. In all contracts governed by Massachusetts law, there is an implied covenant of

good faith and fair dealing that neither party shall do anything that will have the effect of

destroying or injuring the right of the other party to receive the fruits of his contract.

111. The actions of NGC, as described above, constitute a violation of the covenant ofgood faith and fair dealing inherent in the contract with Mr. Blake, and at Mr. Blakes great

expense and injury.

112. As a direct and proximate result of NGCs breach of the covenant of good faithand fair dealing, Mr. Blake has suffered and continues to suffer substantial damages for which

NGC is liable.

COUNT V

Unjust Enrichment (and Quantum Meruit)


114. Defendants have impermissibly gained valuable benefits for themselves andcontinue to gain such benefits at Mr. Blakes expense. These benefits include substantial profits

they are making from Mr. Blakes proprietary AURA System, including the full use and benefit

of a valuable federal patent application, copyright and other proprietary information related

thereto.

115. Mr. Blake reasonably and honestly bargained for, and has a right to valuablebenefits and a reasonable expectation of receiving value for the use of his developed property in


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return.

116. It is unjust for Defendants to commit the acts described herein, and it would beinequitable for Defendants to retain the full benefit conferred to them at Mr. Blakes expense

without in any way compensating Mr. Blake for the value of those benefits.

117. As a direct and proximate result of Defendants unlawful conduct, Mr. Blake hassuffered and/or is likely to suffer damages in the form of lost royalties in an amount not presently

known, and injury to his business reputation. Defendants unlawful conduct is intentional and

willful, and entitles Mr. Blake to be made whole in an amount to be determined at trial, but

believed to be in an amount not less than $6,500,000.00.

COUNT VI

Civil Conspiracy


119. Upon information and belief, Defendants knew that Mr. Blake held an ownershipinterest in the AURA System and that he therefore had an interest in the outcome of the Secure

Plus and + marketing campaign and proceeds from the development and sales of Secure

Plus and + labeled products.

120. Upon information and belief, PCGS and NGC knew that excluding Mr. Blakefrom participation in the Secure Plus and + programs would cause the profits derived from

Secure Plus and + sales to be entirely retained by PCGS and NGC, and that the failure to

compensate Mr. Blake constituted a breach of NGCs Agreement with Mr. Blake.

121. Upon information and belief, NGC, acting in concert with PCGS and against Mr.Blakes interests, excluded Mr. Blake from the Secure Plus and +product development and

market testing discussions in order to deprive, or with the natural and probable effect of


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depriving, Mr. Blake of any proceeds of the Secure Plus and + labeling methodologies-

derived revenues.

122. Upon information and belief, NGC and PCGS knowingly and actively participatedin and provided substantial assistance to each other in furthering NGCs breach of its Agreement

with Mr. Blake, and the exclusion of Mr. Blake from the development, testing, and profits

derived from the valuable Secure Plus and + programs.

123. Upon information and belief, as a result of NGCs and PCGS conspiracy with oneanother, Mr. Blake suffered, and continues to suffer, direct harm, including being deprived of his

rightful share of the proceeds from the valuable Secure Plus and + programs in an amount

to be determined by the trier of the fact after trial, but believed to be in an amount not less than

$6,500,000.00.

COUNT VII

Misappropriation of Trade Secrets and Confidential Information

Pursuant to Massachusetts G.L. c. 93, 42


125. Upon information and belief, Defendant NGC obtained Mr. Blakes trade secretsand confidential information pursuant to a confidential relationship with Mr. Blake.

126. Upon information and belief, defendant PCGS obtained Mr. Blakes trade secretsand confidential information pursuant to its relationship with NGC.

127. Defendants have used Mr. Blakes trade secrets and confidential information forthe benefit of themselves and unknown others, and such use constitutes misappropriation of Mr.


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Blakes trade secrets and confidential information.

128. Mr. Blake has taken reasonable steps to protect his trade secrets and confidentialinformation by instituting confidentiality agreements, filing a United States Patent application,

and adopting other procedures regulating the access to, designation of, and dissemination of his

proprietary and confidential information.

129. Mr. Blake has the right to exclusive ownership, enjoyment, and use of his tradesecrets and confidential information.

130. Defendants continue to harm Mr. Blake by such misappropriation of trade secretsand confidential information.

131. Mr. Blake has suffered direct and consequential harm as a result of Defendantsmisappropriation of Mr. Blakes trade secrets and confidential information, and is entitled to

damages therefor.

132. By posting Mr. Blakes proprietary and confidential information on the Internet,the Defendants have misappropriated and publicly disclosed Mr. Blakes trade secrets and

confidential information.

133. Upon information and belief, Defendants had the ability to implement incremental+-type grading before March 25, 2010, yet choose not to do so.

134. Upon information and belief, although PCGS and NGC shared the + elementof Mr. Blakes AURA System, PCGS did not license or in any way share the Secure element of

Secure Plus with NGC.

135. Upon information and belief, PCGS started the Collectors Registry in 2001.136. Upon information and belief, David Hall Rare Coins sold a collection of valuable

Secure Plus and + labeled coins in 2011 for over $4,000,000.

137. Mr. Blake is an aggrieved party pursuant to G.L. c. 93, 42A.


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as described in Counts I VIII above.

145. In the absence of cessation of the aforementioned actions, Plaintiff has noadequate remedy at law and hence seeks the above-sought relief, or alternatively, to enjoin any

repetition of the objectionable conduct.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff Duane Blake respectfully requests that judgment be entered by

this Honorable Court in his favor against the Defendants as follows:

1. Awarding Mr. Blake damages including, but not limited to reasonable royalties,compensatory and consequential damages in excess of $6,500,000.00, including prejudgment

interest thereon;

2. Awarding restitution as appropriate for the equitable and common law violations;3. Awarding treble damages (on the Lanham Act claim) and exemplary damages

according to proof;

4. Awarding reasonable attorneys fees, expenses and costs incurred in bringing andprosecuting this action; or

5. Enjoinder of any repetition by Defendants of the objectionable conduct; and6. Awarding Mr. Blake such other and further relief as the Court may deem just,

proper and equitable.

JURY TRIAL DEMANDED.

Mr. Blake hereby requests a trial by jury on all claims so triable.

Respectfully submitted,Plaintiff,Duane C. Blake,By his counsel,


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/s/ Lawrence G. CetruloLawrence G. Cetrulo, Esq.BBO # 080000Michael A. Capuano, Esq.BBO # 670389Cetrulo & Capone LLP

Two Seaport Lane, 10th FloorBoston, MA 02210Tel: (617) 217-5500Fax: (617) 217-5200

August 31, 2011

Of Counsel:Kevin T. Duffy, Jr., Esq.Gary G. Staab, Esq.Duffy & Staab - Attorneys at Law10 Glenville StreetGreenwich, CT 06820(203) 531-3300

David L. Ganz, Esq.Jerrietta R. Hollinger, Esq.Ganz & Hollinger, P.C.1394 Third AvenueNew York, NY 10075(212) 517-5500

Blake v. Professional Coin Grading Service et. al.

Documents

Transcript of Blake v. Professional Coin Grading Service et. al.