Liqwd, Inc. et al v. L'Oreal USA, Inc. et al

REDACTED VERSION of 262 Amended Complaint, by Liqwd, Inc., Olaplex LLC.

District of Delaware, ded-1:2017-cv-00014

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE LIQWD, INC. and OLAPLEX LLC,)) Plaintiffs,)) v.) C. A. No. 17-14 (JFB) (SRF)) L'ORÉAL USA, INC., L'ORÉAL USA) DEMAND FOR JURY TRIAL PRODUCTS, INC, L'ORÉAL USA S/D,) INC., and REDKEN 5TH AVENUE NYC,) REDACTED - L.L.C.,) PUBLIC VERSION) Defendants.) SECOND AMENDED COMPLAINT MORRIS, NICHOLS, ARSHT & TUNNELL LLP Jack B. Blumenfeld (#1014) Maryellen Noreika (#3208) 1201 North Market Street P.O. Box 1347 Wilmington, DE 19899 (302) 658-9200 OF COUNSEL: jblumenfeld@mnat.com mnoreika@mnat.com Joseph M. Paunovich Amardeep (Amar) L. Thakur Attorneys for Plaintiffs QUINN EMANUEL URQUHART & SULLIVAN, LLP 865 South Figueroa Street, 10th Floor Los Angeles, CA 90017 (213) 443-3000 Matthew K. Blackburn DIAMOND MCCARTHY LLP 150 California Street, Suite 2200 San Francisco, CA 94111 (415) 692-5202 May 14, 2018 - Original Filing Date May 22, 2018 - Redacted Filing Date IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE LIQWD, INC. and OLAPLEX LLC,)) Plaintiffs,)) v.) C. A. No. 17-14 (JFB) (SRF)) L'ORÉAL USA, INC., L'ORÉAL USA) DEMAND FOR JURY TRIAL PRODUCTS, INC, L'ORÉAL USA S/D,) INC., and REDKEN 5TH AVENUE NYC,) REDACTED - L.L.C.,) PUBLIC VERSION) Defendants.) SECOND AMENDED COMPLAINT Plaintiffs Liqwd, Inc. ("Liqwd") and Olaplex LLC ("Olaplex") (collectively "Plaintiffs" or "Olaplex"), bring this action against L'Oréal USA, Inc.; L'Oréal USA Products, Inc.; L'Oréal USA S/D, Inc.; and Redken 5th Avenue NYC, L.L.C. (collectively, "L'Oréal") 1 for infringing Plaintiffs' exclusive rights under the Patent Laws of the United States (35 U.S.C. § 1 et seq.), misappropriating Olaplex's trade secrets, . The infringing products are the Matrix Bond Ultim8, Redken pH-Bonder, and L'Oréal Professionnel Smartbond 3 step systems (collectively, "Accused Products"). Olaplex alleges upon personal knowledge as to its own activities and upon information and belief as to the activities of others and all other matters, and state as follows: 1 This Second Amended Complaint is filed subject to clarification from the Court regarding Olaplex's leave to amend the complaint to add additional factual allegations establishing personal jurisdiction over L'Oréal, S.A. Olaplex has filed a letter with the Court contemporaneously herewith seeking such clarification. In the event the court provides clarification, and subject to the content thereof, Olaplex will refile this Pleading with either (A) removal of the instant footnote, or (B) additional allegations regarding L'Oréal, S.A. NATURE OF THE ACTION / INTRODUCTION 1. L'Oréal is the world's largest beauty company and reported over $27 billion in revenue during its last fiscal year. 2. A small California start-up called Olaplex recently discovered, developed, and eventually began selling a novel, game-changing product to the professional hair care market. One of Olaplex's three current products is the Olaplex Bond Multiplier No. 1 ("Bond Multiplier"), which protects hair during bleach treatments, and has quickly become a favorite treatment of hair care professionals. As of October 2016, hundreds of thousands of stylists in more than 80 countries have used Olaplex, and it is widely acclaimed to have revolutionized the hair care industry. 3. The effect of using Olaplex during bleach treatments is readily apparent from a side-by-side picture of bleached hair with and without Olaplex. In the picture below, the left swatch of hair is an unprocessed color treated hair sample, the middle swatch of hair is the same color treated hair sample after being subjected to foil bleaching, rinsing, conditioning, and drying, and the right swatch of hair is the same color treated hair sample after foil bleaching with Olaplex Bond Multiplier added, rinsing, treating with Olaplex Bond Perfector (No. 2), rinsing, shampooing, conditioning, and drying. 2 4. 5. THE PARTIES 6. Plaintiff Liqwd is a California corporation, with its principal place of business in Santa Barbara, California. 7. Plaintiff Olaplex is a California limited liability company, with its principal place of business in Santa Barbara, California. 8. Defendant L'Oréal USA, Inc., ("L'Oréal USA, Inc.") is a Delaware corporation, headquartered at 10 Hudson Yards, New York, New York. 3 9. Defendant L'Oréal USA Products, Inc., ("L'Oréal USA Products, Inc.") is a Delaware corporation, headquartered at 10 Hudson Yards, New York, New York, and is a subsidiary of L'Oréal USA, Inc. 10. Defendant L'Oréal USA S/D, Inc., ("L'Oréal USA S/D, Inc.") is a Delaware corporation, headquartered at 10 Hudson Yards, New York, New York, and is a subsidiary of L'Oréal USA, Inc. 11. Defendant Redken 5th Avenue NYC L.L.C., ("Redken") is a New York limited liability company, headquartered at 10 Hudson Yards, New York, New York, and is a subsidiary of L'Oréal USA, Inc. 12. L'Oréal USA, Inc., L'Oréal USA Products, Inc., L'Oréal USA S/D, Inc., and Redken are engaged in the business of manufacturing and distributing hair care products under the "Matrix," "Redken," and "L'Oréal Professionnel" brand names. JURISDICTION AND VENUE 13. This is an action for patent infringement arising under the patent laws of the United States, 35 U.S.C. § 1 et seq., including §§ 271 and 281. This Court has original jurisdiction under 28 U.S.C. §§ 1331 and 1338(a) over the patent-infringement claim and claim for misappropriation of trade secrets under the Defend Trade Secrets Act of 2016, 18 U.S.C. § 1836, as amended. 14. This Court has supplemental jurisdiction over Olaplex's state law claims pursuant to 28 U.S.C. § 1367. The federal and state claims alleged herein are so related that they form part of the same case or controversy. Examples (not comprehensive) of the relation of patent versus non-patent claims include the following:; damages for Olaplex's patent 4 infringement will similarly also require an inquiry into facts regarding development, marketing and sales of overlapping, competitive products. Thus, judicial economy, convenience, and fairness to the parties will result if this Court asserts jurisdiction over the state claims. 15. This Court has personal jurisdiction over L'Oréal. Three of the defendants are Delaware corporations. In addition, on information and belief, L'Oréal has transacted business in this District, contracted to supply goods or services in this District directly or through its agents, has offered for sale, sold and/or advertised its products and services in this District, and has otherwise purposely availed itself of the privileges and benefits of the laws of the State of Delaware. . 16. Venue is proper in this judicial district under at least 28 U.S.C. §§ 1391 and 1400(b). L'Oréal has one or more regular and established places of business in this judicial district, and/or has transacted business in this district. For example, L'Oréal USA Products and L'Oréal USA S/D are incorporated in the State of Delaware. L'Oréal is responsible for acts of infringement occurring in the District of Delaware, as alleged in this Complaint, and has delivered or caused to be delivered infringing products or services in the District of Delaware. L'Oréal also has caused the infringing products to be advertised, promoted, and sold in this judicial district. . 5 BACKGROUND Olaplex & Its Proprietary Hair Care Technology 17. Olaplex is a small company based in Santa Barbara, California that develops professional hair care products. Olaplex created the first successful and effective product in the hair "bond building" market, and it is the world leader in that market. 18. Bleaching is a common chemical treatment performed to lighten or remove color from hair, but it can be extremely harsh on hair. It can give hair a straw-like texture with fragile hair fibers that break easily. If bleach is allowed to stay on the hair too long, it can cause hair to melt (disintegrate), or even to fall out. 19. Repairing damaged hair has long been a shared concern of hair care professionals and their clients. Prior to Olaplex, hair care professionals lived with the fear that bleaching could ruin their client's hair. 20. Dean Christal grew up in the beauty business with his mother running a hair salon out of his childhood home, and his father was a distributor of beauty products in the Midwest. Mr. Christal also gained experience in the haircare and beauty industries by working with his brother, Don Christal, who had founded Alterna Haircare and California Tan (sunless tanner). With this background and an entrepreneurial spirit, Mr. Christal met Dr. Craig Hawker and Dr. Eric Pressley and urged them to tackle the holy grail of hair product development—figuring out how to keep chemical treatments from damaging hair. 21. Working literally in Dr. Pressly's home garage, Drs. Hawker and Pressly came up with the revolutionary technology to protect hair during chemical treatments. 22. This first-of-a-kind approach used a special "binding agent" or active ingredient to protect the hair during chemical treatments (like bleaching). The active ingredient of the Bond 6 Multiplier product is a chemical called "bis-aminopropyl diglycol dimaleate" and whose chemical structure is shown below: Olaplex's Patents 23. Olaplex initially filed applications (and ultimately obtained patents) describing the dimaleate active ingredient used in the Bond Multiplier product. 24. Recognizing the opportunity for unscrupulous competitors to copy Olaplex's proprietary technology and to use less expensive ingredients, Olaplex also obtained additional patents. 25. Two of these additional patents are United States Patent Nos. 9,498,419 and 9,668,954 (collectively, the "Asserted Patents"), entitled "Keratin Treatment Formulations and Methods." The '419 Patent was duly and legally issued by the United States Patent and Trademark Office on November 22, 2016. A copy of the '419 Patent is attached hereto as Exhibit A. The '954 Patent was duly and legally issued by the United States Patent and Trademark Office on June 6, 2017. A copy of the '954 Patent is attached hereto as Exhibit B. 26. Plaintiff Liqwd is the owner of the Asserted Patents. Plaintiff Olaplex is the exclusive licensee of the Asserted Patents with full rights of enforcement and recovery, including the right to pursue recovery of royalties and damages for infringement of the Asserted Patents. 27. Each claim of the Asserted Patents is valid and enforceable. 7 28. The Asserted Patents' claims describe, inter alia, methods for bleaching hair using maleic acid. Olaplex Pioneers Bond Building in 2014 29. In early 2014, Olaplex was only available to select premier hair colorists. Among such premier hair colorists, Tracey Cunningham (a Redken Global Creative Consultant), Guy Tang (a social media superstar with more than a million followers online), and Riawna Capri (a celebrity stylist and co-owner of the Nine Zero One Salon in West Hollywood) began using Olaplex with their clients and friends (including celebrities like Jennifer Lopez and Gwyneth Paltrow), and also spreading the word about the "miracle product" Olaplex. 30. In May 2014, Beauty Launchpad (a national trade magazine) published a one- page feature on Olaplex, entitled "The Power of One." The article describes how Olaplex can be used to help hair when it is being lightened (bleached). Ms. Cunningham is quoted in the article saying that "[y]ou still use your same hair color, your same products, your same technique, and your same shampoos and conditioners, but the hair is stronger and shinier." 31. The first step ("No. 1") is the Bond Multiplier product that is used, for example, in lightening (bleaching) treatments. The second step ("No. 2") is the "Bond Perfector" and is a cream that is applied after chemical processing of the hair and before it is shampooed and/or conditioned. The third step ("No. 3") is the "Hair Perfector," and is designed for at-home use in between visits to the hair salon.