GEMEX SYSTEMS INC Et Al v. ANDRUS SCEALES STARKE & SAWALL LLP Et Al Complaint

STATE OF WISCONSIN CIRCUIT COURT MILWAUKEE COUNTY
GEMEX SYSTEMS, INC. )

6040A W. Executive Drive )
Mequon, WI 53092, and )
)
UGTS,INC. )
Mequon, WI 53092, )
)
Plaintiffs, )
)
v. ~HON. Mi\XIN~ VVHiTE, BR. 01
ANDRUS, SCEALES, STARKE )
)
C.I\/~~
J ~ V ih
D1
~~.4.
11
& SA WALL, LLP
100 East Wisconsin Avenue )
Suite 2600 )
Milwaukee, WI 53202, ) Case No.:
)
COOK & FRANKE, S.c. ) Case Code: 30703
660 E. Mason Street )
Milwaukee, WI 53202, ) SUMMONS
)
JEFFREY S. SOKOL )
9947 S. Austin Street )
Oak Creek, WI 53154, )
)
WESTCHESTER FIRE )
INSURANCE COMPANY )
436 Walnut St. )
PO Box 1000 )
Philadelphia, PA 19106, )
)
ST. PAUL FIRE & MARINE )
INSURANCE COMPANY )
385 Washington St. ) flLfOA&\IlJ ' -
St. Paul, MN 55102, and ) AlJTHFNTrrATffi
)
) JAN 07 201/
Defendants. ) JUH''tI BARRfJT
)
_OfOrcuftCoutL
~
~ ,EXHIBIT
i -'-
Case 2:11-cv-00148-CNC Filed 02/07/11 Page 1 of 31 Document 1-1
...~
SUMMONS
THE STATE OF WISCONSIN, to each person named above as a Defendant:
You are hereby notified that the Plaintiffs, Gemex Systems, Inc. and UGTS, Inc., have filed a lawsuit or
other legal action against you. The Complaint, which is attached, states the nature and basis of the legal
action.
Within forty-five (45) days of receiving this Summons, you must respond with a written answer, as that
term is used in Chapter 802 of the Wisconsin Statutes, to the Complaint. The court may reject or
disregard an answer that does not follow the requirements of the statutes. The answer must be sent or
delivered to the Clerk of Court for Milwaukee County, whose address is Milwaukee County Courthouse,
Room 104,901 N. Ninth Street, Milwaukee, WI 53233, and to Plaintiffs' attorneys:
Robert L. Gegios Ari B. Lukoff

William E. Fischer FAEGRE & BENSON LLP
KOHNER, MANN & KAILAS, S.c. 2200 Wells Fargo Center
Washington Building-2nd Floor 90 South Seventh Street
Barnabas Business Center Minneapolis, MN 55402-3901
4650 North Port Washington Road
Milwaukee, Wisconsin 53212-1059
You may have an attorney help or represent you.
If you do not provide a proper answer within forty-five (45) days, the court may grant judgment against
you for the award of money or other legal action requested in the Complaint, and you may lose your right
to object to anything that is or may be incorrect in the Complaint. A judgment may be enforced as
provided by law. A judgment awarding money may become a lien against any real estate you own now or
in the future, and may also be enforced by garnishment or seizure of property.
Dated this 7th day of January, 2011.
p hac vice to be pending

Michael F. Cocks on
pro hac vice to be pending
Ari B. Lukoff
State Bar No. 1061330
Faegre & Benson LLP
2200 Wells Fargo Center
90 South Seventh Street
Minneapolis, MN 55402-3901
Telephone: (612)766-7000

fax: (612)766-1600
WRoberts@faegre.com
MCockson@faegre.com
ALukoff@faegre.com
Robert L. Gegios
State Bar. No. 1002906
William E. Fischer
State Bar. No. 1045725
Kohner Mann & Kailas, S.C.
Washington Building
Barnabas Building Center
4650 N. Port Washington Road
Milwaukee, WI 53213-1059
Telephone: (414)962-5110
fax: (414)962-8725
rgegios@kmksc.com
wfischer@kmksc.com
ATTORNEYS FOR PLAINTIFFS GEMEX

SYSTEMS, INC. AND UGTS, INC.

STATE OF WISCONSIN CIRCUIT COURT MIL WAUKEE COUNTY
GEMEX SYSTEMS, INC. )

Mequon, WI 53092, and )
)
UGTS, INC. )
Mequon, WI 53092, )
)
Plaintiffs, )
)
v. )
)
ANDRUS, SCEALES, STARKE )
& SA WALL, LLP )
100 East Wisconsin Avenue )
Suite 2600 )
Milwaukee, WI 53202, ) Case No.:
)
COOK & FRANKE, S.C. ) Case Code: 30703
660 E. Mason Street )
Milwaukee, WI 53202, ) COMPLAINT
)
JEFFREY S. SOKOL )
9947 S. Austin Street )
Oak Creek, WI 53154, )
)
WESTCHESTER FIRE )
INSURANCE COMPANY )
436 Walnut st. )
PO Box 1000 )
Philadelphia, PA 19106, and )
)
ST. PAUL FIRE & MARINE )
INSURANCE COMPANY )
385 Washington St. ) f.u.coAND - -
St. Paul,:MN 55102, ) AUTHtNl'rrATR')
)
Defendants. ) JAN 07 2011
)

COMPLAINT
The plaintiffs, GemEx Systems, Inc. and UGTS, Inc., through their attorneys,
allege as fo1lows:
THE PARTIES
1. Plaintiff GemEx Systems, Inc. ("GemEx") is a Wisconsin
corporation with its principal place of business located at 6040A W. Executive Drive,
Mequon, Wisconsin, 53092.
2. Plaintiff UGTS, Inc. ("UGTS") is a Wisconsin corporation with its
principal place of business located at 6040A W. Executive Drive, Mequon, Wisconsin,
53092.
3. Defendant Andrus Sceales, Starke & Sawall, LLP ("Andrus
Sceales") is on information and belief a Wisconsin limited liability partnership with its
principal place of business located at 100 East Wisconsin Avenue, Suite 2600,
Milwaukee, Wisconsin, 53202.
4. Defendant Cook & Franke, S.C. ("Cooke & Franke") is on
information and belief a Wisconsin service corporation with its principal place of
business located at 660 E. Mason Street, Milwaukee, WI 53202.
5. Defendant Jeffrey N. Sokol is on information and belief an adult
resident of the State of Wisconsin residing at 9947 S. Austin Street, Oak Creek,
Wisconsin, 53154. Sokol is an attorney and, on information and belief, until recently was

a shareholder in Cooke & Franke. Until November, 2005 Sokol was a partner in Andrus
Sceales.
6. Defendant Westchester Fire Insurance Co. is on information and
belief an insurance corporation organized under the laws of the state of New York with
its principal place of business in Philadelphia, Pennsylvania. Defendant Westchester Fire
Insurance Co. is an insurer of Defendant Andrus Sceales.
7. Defendant st. Paul Fire & Marine Insurance Co. is on information
and belief an insurance corporation organized under the laws of the state of Minnesota
with its principal place of business in St. Paul, Minnesota. Defendant St. Paul Fire &
Marine Insurance Co. is an insurer of Defendant Cook & Franke.
JURISDICTION AND VENUE
8. The Court has personal jurisdiction over the Defendants pursuant to
Wis. Stat. § 801.05.
9. Venue for this action is proper in Milwaukee County pursuant to
Wis. Stat. § 801.50.
BACKGROUND
A. GEMEX AND UGTS.
10. GemEx was founded in 1998 to develop and commercialize
technology based on analytical instruments and related services for the gem and jewelry
industry. GemEx's patented spectrophotometry system scientifically measures and
records the interplay of light reflecting and refracting within gemstones. Using GemEx's
patented and unique scanning technology, diamonds and other gemstones can for the first

time be evaluated and compared on the basis of their objectively measurable visual
attributes.
11. GemEx's proprietary technology, known as GemEx Light
Performance Analysis®, produces a "light measurement" rating that measures the three
fundamental characteristics of the visual beauty of a cut diamond: white light, color light,
and scintillation. In addition to providing an objective tool for measurement, the GemEx
system permits a gemstone's appearance and its visual characteristics to be transmitted as
a digital image over the Internet so it can be viewed using conventional PC technology.
This permits gemstones to be evaluated and compared without the need for physical
inspection and without the subjectivity that may come into play in connection with the
conventional "4-C" grading of color, clarity, carat weight and cut.
12. VaTS initially developed the and patented (in U.S. Patent No.
5,615,005 ("the '005 patent")) the original concept and technology that forms the basis
for the GemEx method of Light Performance analysis. The UGTS system for accurately
measuring the color of gemstones, later known as its GemSpec System®, was introduced
to the gemstone industry in 1995. LambdaSpec Instruments was formed in 1995 to
further develop, manufacture, and market the UGTS system. LambdaSpec, an affiliate of
UGTS by way of common ownership, was granted a worldwide license for the UGTS
proprietary technology.
13. In 1997, the owners of UGTS and LambdaSpec, Dr. James and
Cynthia Stoll, decided that they could no longer provide adequate capital for continuing
operations and projected growth. They offered to sell the businesses to their employees.

In response, GemEx was formed by Randy Wagner, the President of LambdaSpec, and
by Kurt Schoeckert, a LamdaSpec engineer and technical expert. GemEx acquired the
assets of LambdaSpec in 1998 and at the same time signed an exclusive worldwide
license with UGTS for all of its patents, technology and copyrights. Pursuant to the
terms of the license agreement, GemEx paid UGTS more than $1 million in royalties
over the next ten years for the use of the '005 patent.
14. GemEx became the operating company responsible for further
developing and marketing UGTS's proprietary technology on a worldwide basis,
technology now known as the GemEx System. GemEx and UGTS acted in concert to
retain and extend patent, copyright, and other intellectual property protection for UGTS
technology and the GemEx system. GemEx acquired DOTS in 2009 and DOTS is now a
wholly-owned subsidiary of OemEx.
B. THE DEVELOPMENT OF THE GEMEX SYSTEM.
15. GemEx directed its efforts to the development and use of the UGTS
technology for the analysis and comparison of cut diamonds. It designed a product
known as the BrillianceScope® to meet the specific requirements of measuring and
creating a digital record and report of a given diamond's "Light Performance® analysis."
The BrillianceScope®was introduced to the industry at major trade shows in 1998.
16. The OemEx System produces a GemEx certified Light
Performance® report that uses light science and spectrometry to measure the brilliance of
a particular stone. Certified Light Performance® reports provide professional diamond
buyers and the ultimate consumer with information that can be used to make objective

comparisons between stones and to verify the quality of a diamond before purchasing.
The GemEx System represents a paradigm-shifting improvement over the traditional
methods of evaluating cut diamonds, which for the most part was dependent upon the
advice of a jeweler using the subjective "4-C" method. GemEx's technology gives
scientific and objective information to the diamond buying public so that they need no
longer depend on the expert-driven "4~C" method as the basis for comparing and buying
diamonds.
17. The GemEx business model is focused on the use of Certified Light
Performance® reports and digital light images produced by the BrillianceScope® in all
levels of the diamond distribution chain from the manufacturers to the retail jewelry
store, and ultimately to the consumer. GemEx makes its BrillianceScope® technology
available to manufacturers, wholesalers and retailers, who use the technology to measure
the light performance of cut diamonds and transmit the reSUlting report to GemEx using
its proprietary digital imaging and internet transmission protocols. GemEx conducts a
detailed review of the diamond scan data and, assuming the scan meets its rigorous
quality control tests, issues a certified LightPerformance® report that is available to
diamond buyers, including the ultimate consumer.
18. GemEx does not sell or license its technology, but instead charges an
authorized user for each GemEx certified report. Retailers who obtain their own certified
LightPerformance® reports or who purchase cut diamonds from manufacturers or
wholesalers who have themselves obtained certified LightPerformance@ reports, enjoy a
substantial and increasing competitive advantage.

19. GemEx has enjoyed a significant market advantage as the provider
of this new and objective method of diamond evaluation and certification. The market
for its services is worldwide and has grown rapidly as its LightPerformance® reports have
become accepted by the industry. Until recently GemEx had no competitors in the
market for the testing of cut diamonds using scientific spectrophotometry, because its
controlling, patent-protected position prevented competitors from using its proprietary
technology .
C. THE PATENT.
20. UGTS obtained a patent covering the design and application of
imaging spectrophotometry for the scanning of cut gemstones light performance and
color. U.S. Patent No. 5,615,005 (Gemstone Evaluation System) ("the '005 Patent") was
issued on March 25, 1997. GemEx uses the patented inventions offered as the
BrillianceScope® technology and the GemEx system under a worldwide exclusive
licensing agreement with UGTS.
21. The '005 patent is valid and enforceable. Its claims are broad and
difficult to circumvent. No competitor or prospective competitor could commercially
display or market a device that is comparable to the GemSpec® or BrillianceScope®
without infringing the '005 Patent. No competitor or prospective GemEx competitor
could commercially display or develop light measurement reports for cut gemstones
using photospectometry without infringing the '005 Patent. In the normal course, the
'005 Patent would not have expired until 2014.

22. GemEx should have been able to use its patent protection to exclude
competitors using its technologies from the market until the '005 Patent expired. As a
direct and proximate result of the negligence of the patent counsel retained by UGTS and
GemEx to protect their intellectual property, as more fully set forth below, the 7Yz year
maintenance fee for the '005 Patent was not paid, and the '005 Patent expired in 2005.
23. Until recently, UGTS and GemEx had never been challenged on the
'005 Patent and GemEx had never been faced with competition attempting to use
technology covered by the '005 Patent. Although a few firms had attempted to emulate
the business of GemEx without using the patented technology, they had not been
successful.
24. As a direct and proximate result of the patent expiration, GemEx's
competitors and prospective competitors are already using its patented technology to
compete with GemEx, and the competitive and business advantages conferred on UGTS
and GemEx by the '005 Patent have been lost.
D. PATENT COUNSEL FOR GEMEX AND UGTS.
25. Andrus Sceales served as patent and intellectual property counsel for
GemEx and UGTS for many years. According to its website, Andrus Sceales "is the
longest operating intellectual property law firm in the State of Wisconsin." It claims the
expertise to provide its clients with "experienced intellectual property counsel" and with
the "latest methodologies regarding the procurement, management and protection of
intellectual property rights." Andrus Sceales prosecuted and procured the '005 Patent for
UGTS.

26. Cook & Franke has served as patent counsel for Gemex and UGTS
since November 2005. According to the firm's website, its "intellectual property
practice" group has experience in "counseling clients in all aspects of patent acquisition
and enforcement." The firm claims to provide its clients with both "counseling" and
"transactional services" relating to their patents.
27. Jeffrey S. Sokol is an attorney licensed to practice in the State of
Wisconsin. He holds himself out as an expert in patent and intellectual property law and
is admitted to practice before the United States Patent and Trademark Office ("USPTO").
Until November 2005, Sokol was a partner in Andrus Sceales. He thereafter became a
shareholder in Cook & Franke. While at Andrus Sceales, Sokol was the partner in charge
of that firm's representation of GemEx and UGTS. Similarly, at Cook & Franke, Sokol
was the shareholder in charge of that firm's representation of GemEx and UOTS. On
information and belief, Sokol recently left Cook & Franke.
E. THE EXPIRATION OF THE '005 PATENT.
28. Andrus Sceales represented UGTS and acted as patent counsel in
connection with the '005 Patent. After OemEx was formed in 1997, Andrus Sceales
represented UOTS and GemEx in connection with patent and intellectual property
matters. Among other things, the firm undertook to represent UOTS and OemEx in
connection with seeking patents involving inventions covered by the '005 Patent in
various foreign jurisdictions.
29. Andrus Sceales also specifically represented UGTS and OemEx in
connection with continuing matters relating to the '005 Patent. At the time the '005

Patent issued, the firm correctly advised UOTS that maintenance fees would be payable
in order to preserve the patent. In a March 17, 1997 letter from Eugene R. Sawall of
Andrus Sceales to Randy Wagner ofVOTS, Mr. Sawall advised: "[T]his patent will be
subject to the requirement of maintenance fees payable during the third, seventh and
eleventh years. We have docketed the patent according/y." (emphasis added).
Docketing of maintenance fee payment dates is a common service offered by patent
counsel to their clients. There are established protocols for the effective management of
a patent docketing system. One purpose of such a system is to assure that maintenance
fees will be paid on a timely basis.
30. Andrus Sceales correctly determined the dates on which the
maintenance fees would be due: September 25 of 2000, 2004 and 2008. Andrus Sceales
was patent counsel of record for the '005 Patent and it was the firm's address that was on
record at the USPTO for maintenance fee reminders and other official notices.
31. Andrus Sceales arranged for and paid the first maintenance fee for
the '005 Patent, due on September 25,2000, in a timely manner. By letter dated July 31,
2000 the firm advised OemEx and UOTS that the "first maintenance fee will be due on
the above patent on or before September 25, 2000 to keep the patent alive." The firm
asked GernEx and UOTS to advance the legal fees for its services in making the
maintenance fee payment, which included the amount of the maintenance fee itself. In
the July 31, 2000 letter from Mr. Sawall to Mr. Wagner, Andrus Sceales stated: "Our
charges for attending to payment of the fee and including the fee itself will be $540.00
for a small entity and $995.00 for a large entity, payable in advance." (emphasis in
10

original.) GemEx and UGTS advanced the fees requested. Andrus Sceales then made
the maintenance fee payment in a timely fashion.
32. Sawall, who had been Andrus Sceales partner in charge of the of the
GemEx and UGTS account, retired before the second maintenance fee payment on the
'005 Patent was due. Sokol, with the permission of GemEx and UGTS, took his place as
the Andrus Sceales partner in charge of their intellectual property matters.
33. Despite its March 1997 statement that it had "docketed" all three of
the maintenance fees for the '005 Patent, Andrus Sceales failed to advise GemEx and
VGTS that the second maintenance fee was due in advance of the September 25, 2004
due date. Andrus Sceales did not arrange for or make the second maintenance fee
payment by the due date.
34. On October 14, 2004 the VSPTO sent Andrus Sceales, as patent
counsel of record, a "maintenance fee reminder" notice for the '005 Patent. The Notice
states that late payment would be accepted within the six month grace period provided by
statute, but emphasized that unless payment was received "THE PATENT WILL
EXPIRE AS OF THE END OF THE GRACE PERlOD." (emphasis in original).
35. Several weeks after receiving the reminder notice, Andrus Sceales,
through Sokol, advised GemEx and VGTS by letter dated November 15, 2004 that the
second maintenance fee payment was "due on or before December 25, 2004." Sokol's
letter did not accurately reflect either the facts or the law. In fact, the second
maintenance fee payment was not "due" on December 25, but was already overdue. The
sixth month grace period (which the letter does not even mention) was not "due" to
11

expire on December 25, 2004 but on March 25, 2005. Sokol's letter did request that
OemEx and VOTS advise the firm whether they want to pay the fee and, if so, requested
advance payment of their legal fees in the amount of $1,265.00, including the second
maintenance fee itself.
36. On December 3, 2004 GemEx and UOTS responded by directing
Andrus Sceales to pay the second maintenance fee. Included with the written instructions
was OemEx Check No. 5053 in the amount of $1265.00, the amount Andrus Sceales had
requested. This payment included the amount necessary to pay the maintenance fee, as
well as the amount charged by Andrus Sceales for its services in making the payment.
Andrus Sceales received the instructions, cashed the check, and credited the firm's
account for its legal work relating to the '005 Patent. It did not, however, actually pay
the second maintenance fee. Sometime later, Andrus Sceales revised its accounting
records, and moved the credit for the $1265.00 payment on the '005 Patent to another
GemEx account, this one involving Sokol's work on a provisional application involving a
different patent. The policies and procedures of Andrus Sceales require an accounting
change of this kind to be approved by the partner in charge of the accounts, in this case
Mr. Sokol.
37. Andrus Sceales failed to pay the second maintenance fee by the
December 25 "due date" set forth in Sokol's November 15 letter. And it failed to pay the
maintenance fee by March 25, 200S-the end of the sixth month grace period set forth in
the USPTO reminder notice. As a result of the failure of Andrus Sceales to pay the
second maintenance fee, the '005 Patent expired. At the time, GemEx and UGTS were
12

not aware that Andrus Sceales had failed to carry out their written instructions to pay the
maintenance fee. As a result of its failure to do so, the '005 Patent expired.
38. The USPTO mailed a Notice of Expiration dated April 27, 2005 to
Andrus Sceales as patent counsel of record for the '005 Patent. Andrus Sceales received
the Notice of Expiration on May 13,2005. It did not forward a copy of the notice to its
clients GemEx and UGTS. It did not otherwise advise its clients that it had received
official notice from the USPTO that the '005 Patent had expired. As of April 2005, the
'005 Patent could have been reinstated by promptly taking corrective action and paying
the overdue maintenance fee. Andrus Sceales took no action to protect its clients' rights
or to preserve the patent.
39. In November 2005 Sokol resigned his position as a partner in
Andrus Sceales and joined Cook & Franke as a shareholder. Sokol had been the Andrus
Sceales partner in charge of GemEx and UGTS matters before his departure, and he
sought the permission of his clients to take their patent and intellectual property matters
with him to Cook & Franke. They agreed. On December 5, 2005, UGTS and GemEx
advised Andrus Sceales by letter that they had decided "to transfer all of its matters to
Jeffrey S. Sokol at his new law firm Cook & Franke S.C." Gemex and UGTS understood
that Sokol and his new firm would thereafter be the attorneys responsible for all of the
patent and intellectual property matters that had been the responsibility of Andrus
Sceales, including all matters relating to the '005 Patent and the underlying GemEx
technology.
13

40. In his December 5, 2005 letter, Mr. Cassens of UGTS and GemEx
instructed Andrus Sceales to "immediately make available all of our files, together with
all of the electronically stored files, documents, docketing information and any other
information relating to our client matters to Mr. Sokol." UGTS and GemEx understood
that the referenced materials would be transferred from Andrus Sceales to the Cook &
Franke firm, as Mr. Sokol and Cook & Franke were taking responsibility for "all" of the
GemEx and UGTS "client matters."
41. On December 8, 2005, Andrus Sceales sent Sokol and Cook &
Franke a letter confirming the transfer of its files relating to the Sokol clients who were
moving their business to the new firm, including "UGTS (Gemex)." A checklist attached
to the letter lists the specific files that are being transferred: it includes Andrus Sceales
file relating to the '005 Patent (Andrus Sceales Matter No. 3016-00003). The cover letter
states that only those hard copy files with a "check" against them on the checklist are
being "enclosed with this pick up." The hard copy file relating to the '005 Patent is not
checked. On information and belief, the '005 Patent file was not included in the
December 8 "pick-up" of hard copy files because it had been listed by Andrus Sceales as
"inactive" and stored off site.
42. Although Sokol and Cook & Franke were later provided with some
electronically stored information relating to the '005 Patent, neither ever inquired as to
why Andrus Sceales had failed to include the hard copy file relating to the '005 Patent
with Cook & Franke's December 8 "pick-up" of the "UGTS (Gemex)" files.
14

43. Sokol, Andrus Sceales, and Cook & Franke knew or should have
. known that GemEx expected them to see to the orderly transfer of pertinent files relating
to "all of its matters" to Sokol and his new firm, including the file on the '005 Patent, the
key patent for the GemEx and UGTS proprietary technology. Indeed, at the time Sokol
left to join Cook & Franke, there was still legal work to be done on the '005 Patent,
namely the ongoing payment of maintenance fees.
44. Sokol, Andrus Sceales, and Cook & Franke knew that the '005
Patent and the protection that it conferred on the GemEx business model was vitally
important to GemEx and UGTS. The '005 Patent provides UGTS and GemEx with
broad protection for the proprietary technology that is central to the GemEx System.
Sokol, while at Andrus Sceales, was representing UGTS and GemEx in their efforts to
obtain patent protection worldwide for their technology by prosecuting foreign patents on
the same inventions that were covered by the '005 Patent. He continued his
representation of GemEx and UGTS on these foreign patent applications at Cook &
Franke. Given the importance of the '005 Patent to these ongoing efforts, Sokol and
Cook & Franke should have been aware of the status of the '005 Patent.
45. Cook & Franke never inquired why the '005 Patent file was not
"checked" on the December 8 checklist and why the hard copy of the key Gemex patent
file was never transferred to Cook & Franke. Had it done so, it would have discovered
that Andrus Sceales had mistakenly let the patent expire and thereafter mistakenly listed
the file as "inactive." Had it exercised appropriate care in its representation of GemEx
and UGTS in connection with their efforts to secure foreign patents, it would have known
15

that the '005 patent has mistakenly been allowed to expire. Had it discovered these facts
at the time of the file transfer in 2005 or later in its ongoing representation, GemEx and
UGTS would have had ample time to petition the USPTO to reinstate the '005 Patent
within the two year window for "unintentional abandonment." No one inquired. Nothing
was done. Cooke & Franke continued its representation of GemEx and UGTS on related
patent matters without discovering that the basic U.S. patent on the subject inventions
had been allowed to expire.
46. GemEx and UGTS did not learn of the '005 Patent's expiration until
November 2008 when GemEx's business attorney undertook a review of GemEx's
intellectual property in relation to a pending business dispute with a third party. They
promptly obtained the services of new patent counsel and filed a petition for the
reinstatement of the patent. The new patent counsel sought the cooperation of Sokol,
Andrus Sceales and Cooke & Franke in connection with its effort to prepare the petition.
Sokol and the two firms failed to timely cooperate with the new patent counsel, and as a
result of the delays, the petition was not filed until September 29, 2009.
47. On September 14, 2010, the USPTO granted GemEx's petition for
reinstatement. The reinstatement, however, fails to restore GemEx to the position it
would have been in had the '005 Patent not lapsed prematurely. While no competitor to
the GemEx System had attempted to enter the market before the premature expiration,
businesses with knowledge of the lapse began to market competitive machines and
services during the lapse period. These competitors may have acquired intervening rights
to practice the '005 Patent as a result of the untimely lapse. Indeed, during the lapse
16

period, when charged with infringing the '005 Patent, one of OemEx's competitors
responded by stating that there could be no infringement because the '005 Patent had
lapsed. The competitor never disputed that its product was covered by the '005 Patent.
48. In light of the competitor's comments, upon the '005 Patent's
reinstatement, GemEx notified others in the industry in an attempt to reinforce what
remained of the '005 Patent. To date, no response has been received from GemEx's
competitors indicating that they would respect GemEx's rights in the now·damaged '005
Patent. Consequently, GemEx's ability to enforce and enjoy the full scope of the '005
Patent has been compromised at a critical time in the marketplace, and the value of
GemEx's investment in its patented technology has been significantly reduced.
CLAIMS FOR RELIEF
First Claim For Relief

(Negligence Against Defendant Sokol)
49. Plaintiffs incorporate by reference, as though set forth in full, the
allegations contained in paragraphs 1 through 48.
50. Sokol acted as patent counsel for GemEx and UGTS and (after
Eugene Sawall's retirement) was the partner in charge and manager of their account at
Andrus Sceales. It was Sokol's responsibility to monitor and supervise the conduct of
Andrus Sceales and its legal and non·legal personnel in connection with and in
furtherance of that firm's representation of GemEx and UOTS. Sokol was also the
shareholder in charge and manager of their account at Cook & Franke. It was Sokol's
responsibility to monitor and supervise the conduct of the Cook & Franke firm and its
17

legal and non-legal personnel in connection with arid in furtherance of that firm's
representation of GemEx and UGTS.
51. Sokol owed plaintiffs a duty of reasonable care as their attorney and
as the lawyer in charge of their representation by Andrus Sceales and Cook & Franke. In
connection with discharging his duty of reasonable care, Sokol was required to exercise
the degree of professional care, skill, ability and judgment usually exercised by attorneys
who hold themselves out as experts in patent law.
52. Sokol breached and failed to discharge his duty of reasonable care
by virtue of his negligent acts and omissions, including, among other things:
a. his failure to adequately monitor and advise his client as to the status
of the patent that was central to their business and crucial to the
success of their business plan;
b. his failure to assure that Andrus Sceales had a docketing system that
would protect its clients, including GemEx and UGTS, from the
possibility of inadvertent failure to pay the required maintenance
fees for their patents;
c. his failure to assure that Andrus Sceales maintained a docketing
system that would provide for timely notice to its clients that it had
received a notice of expiration with respect to their patents;
d. his failure to assure that Andrus Sceales would pay the second
maintenance fee on the '005 Patent when specifically directed to do
18

so by its clients, thereby allowing the '005 Patent to expire
prematurely;
.. ,'"
e. his failure to discover that the second maintenance fee had not been
paid in a timely fashion;
f. his failure to respond in a timely and appropriate manner to the
notice of expiration of the '005 Patent received by Andrus Sceales;
g. his failure to correct the untimely '005 Patent expiration;
h. his failure to arrange for an orderly transfer of the Gemex and UGTS
files from Andrus Sceales to Cook & Franke;
1. his failure to investigate the reasons why Andrus Sceales did not
immediately transfer its hard copy file on the '005 Patent to Cook &
Franke;
J. his failure to discover that Andrus Sceales had placed its file for the
key patent owned by his clients GemEx and UGTS on inactive status
because their patent had been allowed to expire; and
k. his failure to confirm the status of the '005 Patent after he arranged
for the transfer of all matters relating to GemEx and UGTS from
Andrus Sceales to Cook & Franke.
53. As a direct and proximate result of Sokol's negligence and the
breach of his duty to exercise reasonable care in the representation of his clients, the
plaintiffs have suffered damages.
19

Second Claim For Relief
(Negligence Against Defendant Andrus Sceales)
, ,.':
55. Andrus Sceales acted as patent and intellectual property counsel for
GemEx and UGTS. It was Andrus Sceales' responsibility to monitor and supervise the
conduct of its legal and non-legal personnel in connection with and in furtherance of that
firm's representation of GemEx and UGTS.
56. Andrus Sceales owed plaintiffs a duty of reasonable care as their
patent and intellectual property counsel. In connection with discharging its duty of
reasonable care, Andrus Sceales was required to exercise the degree of professional care,
skill, ability and judgment usually exercised by attorneys who hold themselves out as
experts in patent law.
57. As part of the duty of reasonable care, Andrus Sceales owed its
clients a duty to carry out their instructions with respect to the payment of the second
maintenance fee on the '005 Patent and to keep them informed of the status of the '005
patent and any changes in that status.
58. Andrus Sceales breached and failed to discharge its duty of
reasonable care by virtue of its negligent acts and omissions, including, among other
things:
20

a. its failure to adequately monitor and advise its clients as to the status
b. its failure to assure that it had a docketing system that would protect
its clients, including GemEx and UGTS, from the possibility of
inadvertent failure to pay the required maintenance fees for their
patents;
c. its failure to assure that it maintained a docketing system that would
provide for timely notice to its clients, including GemEx and UGTS,
that it had received a notice of expiration with respect to their
patents;
d. its failure to pay the second maintenance fee on the '005 Patent
when specifically directed to do so by its clients, thereby allowing
the '005 Patent to expire prematurely;
e. its failure to respond in a timely and appropriate manner to the
notice of expiration of the '005 Patent;
f. its failure to correct the untimely '005 Patent expiration;
g. its failure to arrange for an orderly transfer of its GemEx and UGTS
files to Cook & Franke; and
h. its failure to discover that it had mistakenly placed the file for the
key patent owned by its clients GemEx and UGTS on inactive status
because their patent had been mistakenly allowed to expire.
21

59. As a direct result of Andrus Sceales' negligence and the breach of its
duty to exercise reasonable care in the representation of its clients, the plaintiffs have
suffered damages.
Third Claim For Relief

(Negligence Against Defendant Cooke & Franke)
61. Cook & Franke acted as patent and intellectual counsel for GemEx
and UGTS. It was Cook & Franke's responsibility to monitor and supervise the conduct
of its legal and non-legal personnel in connection with and in furtherance of its
representation of GemEx and DGTS.
62. Cook & Franke owed plaintiffs a duty of reasonable care as their
patent and intellectual property counsel. In connection with discharging its duty of
reasonable care, Cook & Franke was required to exercise the degree of professional care,
skill, ability and judgment usually exercised by attorneys who hold themselves out as
experts in patent law.
63. Cook & Franke breached and failed to discharge its duty of
reasonable care by virtue of its negligent acts and omissions, including, among other
things:
a. its failure to adequately monitor and advise its clients as to the status
22

b. its failure to discover that the second maintenance fee on the '005
Patent had not been paid in a timely fashion;
c. its failure to discover that Andrus Sceales had received a notice of
expiration of the '005 Patent;
d. its failure to arrange for an orderly transfer of the GemEx and VGTS
files from Andrus Sceales to Cook & Franke;
e. its failure to investigate the reasons why Andrus Sceales did not
immediately transfer its hard copy file on the '005 Patent to Cook &
Franke;
f. its failure to discover that Andrus Sceales had placed the file for the
key patent owned by its clients GemEx and VOTS on inactive status
because their patent had been mistakenly allowed to expire; and
g. its failure to confirm the status of the '005 Patent after it arranged for
the transfer of all matters relating to GemEx and VGTS from Andrus
Sceales to Cook & Franke; and
h. its failure to correct the untimely '005 Patent expiration.
64. As a direct result of Cook & Franke's negligence and the breach of
its duty to exercise reasonable care in the representation of its clients, the plaintiffs have
suffered damages.
Fourth Claim For Relief

(Breach of Contract Against Defendant Andrus Sceales)
23

allegations contained in paragraphs I through 64.
66. Andrus Sceales on the one hand and GemEx and VGTS on the other
hand entered into a contract through which Andrus Sceales agreed, in return for payment,
to act as patent and intellectual property counsel for GemEx and UGTS.
67. Pursuant to the contract, Andrus Sceales and its partner Sokol were
required to act with reasonable care in their representation of the Plaintiffs. In
discharging their responsibilities under the contract, they were obliged to exercise the
degree of professional care, skill, ability, and judgment expected of them as attorneys
holding themselves out as experts in patent law. The contract obliged them to carry out
the instructions of their clients with respect to matters entrusted to them.
68. Andrus Sceales and its partner Sokol breached the contract with
Plaintiffs by virtue of their negligent conduct, by failing to provide Plaintiffs with
adequate and appropriate legal services, and by failing to carry out Plaintiffs' instructions
with respect to matters for which they were responsible.
69. All conditions precedent to Plaintiffs' recovery for breach of
contract have been performed or otherwise have been satisfied.
70. As a direct result of the Defendant's breach of their contract with
Plaintiffs, the Plaintiffs have suffered damages.
Fifth Claim For Relief

(Breach of Contract Against Defendant Cook & Franke)
24

': ' allegations contained in paragraphs 1 through 70.
72. Cook & Franke on the one hand and OemEx and UOTS on the other
hand entered into a contract through which Cook & Franke agreed, in return for payment,
to act as patent and intellectual property counsel for GemEx and UGTS.
73. Pursuant to their contract, Cook & Franke and its shareholder Sokol
were required to act with reasonable care in their representation of the Plaintiffs. In
discharging their responsibilities under the contract, they were obliged to exercise the
degree of professional care, skill, ability and judgment expected of them as attorneys
holding themselves out as experts in patent law. The contract obliged them to carry out
the instructions of their clients with respect to matters entrusted to them
74. Cook & Franke and its shareholder Sokol breached their contract
with OemEx and DOTS by virtue of their negligent conduct and by failing to provide the
Plaintiffs with adequate and appropriate legal services.
75. All conditions precedent to the Plaintiffs' recovery for breach of
contract have been performed or otherwise have been satisfied.
76. As a direct result of the Defendant's breach of their contract with
Plaintiffs, the Plaintiffs have suffered damages.
Sixth Claim For Relief

(Direct Action Against Defendant Westchester Fire Insurance Company)
25

78. On information and belief, Defendant Westchester Fire Insurance
Company issued a policy of liability insurance to Defendant Andrus Sceales. The
insurance policy provided coverage for the acts and omissions of Defendant Andrus
Sceales, its partners and employees made in the course of providing of professional
services. Under the terms of the insurance policy, Westchester Fire Insurance Company
agreed to indemnify its insureds for the acts and omissions that caused UGTS and Gemex
to suffer damages.
79. Pursuant to secs. 632.24 and 803.04(2), Wis. Stats., Defendant
Westchester Fire Insurance Company is liable, up to the amounts stated in the policy, to
Plaintiffs for any damages Plaintiffs are entitled to recover against its insureds.
Seventh Claim For Relief

(Direct Action Against Defendant St. Paul Fire & Marine Insurance Company)
81. On information and belief, Defendant St. Paul Fire & Marine
Insurance Company issued a policy of liability insurance to Defendant Cook & Franke.
The insurance policy provided coverage for the acts and omissions of Defendant Cook &
Franke, its partners and employees made in the course of providing of professional
services, including coverage for the acts and omissions of Cook & Franke partners before
they became partners .. Under the terms of the policy, S1. Paul Fire & Marine Insurance
Company agreed to indemnify its insureds for the acts and omissions that caused UGTS
and Gemex to suffer damages.
26

82. Pursuant to secs. 632.24 and 803.04(2), Wis. Stats., Defendant St.
Paul Fire & Marine Insurance Company is liable, up to the amounts stated in the policy,
to Plaintiffs for any damages Plaintiffs are entitled to recover against its insureds.
PRAYER FOR RELIEF
Wherefore, GemEx and UGTS, Inc. respectfully request that this Court:
A. Award Plaintiffs damages in an amount to be determined at trial;
B. Award Plaintiffs the attorney fees and expenses paid to Defendants
during their representation of Plaintiffs and any attorneys fees and expenses incurred as a
result of the Defendant's wrongful conduct;
C. Award Plaintiffs pre-verdict, post-verdict, and post-judgment
interest and costs as allowed by law;
D. Award Plaintiffs their costs, disbursements, and attorneys fees as
allowed by law; and
E. Award Plaintiffs such other relief as the Court deems just and
proper.
JURY TRIAL DEMAND
Plaintiffs demand a jury trial on any issues so triable.
27

Dared:~.. 7I WI/
pro hac vice to be pending

Ari B. Lukoff
State Bar No. 1061330
Faegre & Benson LLP
2200 Wells Fargo Center
90 South Seventh Street
Minneapolis, MN 55402~3901
Telephone: (612)766~7000
fax: (612)766~1600
WRoberts@faegre.com
MCockson@faegre.com
ALukoff@faegre.com
Robert L. Gegios
State Bar. No.1 002906
William E. Fischer
State Bar. No.1 045725
Kohner Mann & Kailas, S.C.
Washington Building
Barnabas Building Center
4650 N. Port Washington Road
Milwaukee, WI 53213-1059
Telephone: (414)962-5110
fax: (414)962~8725
rgegios@kmksc.com
wfischer@kmksc.com
ATTORNEYS FOR PLAINTIFFS GEMEX

SYSTEMS, INC. AND UGTS, INC.
tb.us.S248539.11
28

GEMEX SYSTEMS INC Et Al v. ANDRUS SCEALES STARKE & SAWALL LLP Et Al Complaint

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GEMEX SYSTEMS INC Et Al v. ANDRUS SCEALES STARKE & SAWALL LLP Et Al Complaint

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STATE OF WISCONSIN CIRCUIT COURT MILWAUKEE COUNTY

GEMEX SYSTEMS, INC. )

THE STATE OF WISCONSIN, to each person named above as a Defendant:

Robert L. Gegios Ari B. Lukoff

You may have an attorney help or represent you.

Dated this 7th day of January, 2011.

p hac vice to be pending

Case 2:11-cv-00148-CNC Filed 02/07/11 Page 2 of 31 Document 1-1

ATTORNEYS FOR PLAINTIFFS GEMEX

Case 2:11-cv-00148-CNC Filed 02/07/11 Page 3 of 31 Document 1-1

GEMEX SYSTEMS, INC. )

Case 2:11-cv-00148-CNC Filed 02/07/11 Page 4 of 31 Document 1-1

1. Plaintiff GemEx Systems, Inc. ("GemEx") is a Wisconsin

Mequon, Wisconsin, 53092.

2. Plaintiff UGTS, Inc. ("UGTS") is a Wisconsin corporation with its

principal place of business located at 6040A W. Executive Drive, Mequon, Wisconsin,

3. Defendant Andrus Sceales, Starke & Sawall, LLP ("Andrus

Milwaukee, Wisconsin, 53202.

4. Defendant Cook & Franke, S.C. ("Cooke & Franke") is on

business located at 660 E. Mason Street, Milwaukee, WI 53202.

5. Defendant Jeffrey N. Sokol is on information and belief an adult

Case 2:11-cv-00148-CNC Filed 02/07/11 Page 5 of 31 Document 1-1

6. Defendant Westchester Fire Insurance Co. is on information and

its principal place of business in Philadelphia, Pennsylvania. Defendant Westchester Fire

Insurance Co. is an insurer of Defendant Andrus Sceales.

7. Defendant st. Paul Fire & Marine Insurance Co. is on information

Marine Insurance Co. is an insurer of Defendant Cook & Franke.

JURISDICTION AND VENUE

8. The Court has personal jurisdiction over the Defendants pursuant to

Wis. Stat. § 801.05.

9. Venue for this action is proper in Milwaukee County pursuant to

Wis. Stat. § 801.50.

A. GEMEX AND UGTS.

10. GemEx was founded in 1998 to develop and commercialize

industry. GemEx's patented spectrophotometry system scientifically measures and

Case 2:11-cv-00148-CNC Filed 02/07/11 Page 6 of 31 Document 1-1

11. GemEx's proprietary technology, known as GemEx Light

system permits a gemstone's appearance and its visual characteristics to be transmitted as

conventional "4-C" grading of color, clarity, carat weight and cut.

to the gemstone industry in 1995. LambdaSpec Instruments was formed in 1995 to

Case 2:11-cv-00148-CNC Filed 02/07/11 Page 7 of 31 Document 1-1

14. GemEx became the operating company responsible for further

developing and marketing UGTS's proprietary technology on a worldwide basis,

wholly-owned subsidiary of OemEx.

B. THE DEVELOPMENT OF THE GEMEX SYSTEM.

known as the BrillianceScope® to meet the specific requirements of measuring and

The BrillianceScope®was introduced to the industry at major trade shows in 1998.

16. The OemEx System produces a GemEx certified Light

a particular stone. Certified Light Performance® reports provide professional diamond

Case 2:11-cv-00148-CNC Filed 02/07/11 Page 8 of 31 Document 1-1

The GemEx System represents a paradigm-shifting improvement over the traditional

quality control tests, issues a certified LightPerformance® report that is available to

diamond buyers, including the ultimate consumer.

LightPerformance® reports or who purchase cut diamonds from manufacturers or

wholesalers who have themselves obtained certified LightPerformance@ reports, enjoy a

substantial and increasing competitive advantage.

Case 2:11-cv-00148-CNC Filed 02/07/11 Page 9 of 31 Document 1-1

controlling, patent-protected position prevented competitors from using its proprietary

BrillianceScope® technology and the GemEx system under a worldwide exclusive

licensing agreement with UGTS.

difficult to circumvent. No competitor or prospective competitor could commercially

display or market a device that is comparable to the GemSpec® or BrillianceScope®

without infringing the '005 Patent. No competitor or prospective GemEx competitor