Scilabs Nutraceuticals Inc., Files Multimillion Dollar Suit Against Naturade for Fraudulent Business Practices

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Scilabs Nutraceuticals, a dietary supplement manufacturer, has filed suit against Naturade, a division of NNC LC, for the alleged misappropriation of trade secrets, fraud, and breach of contract.

In an industry experiencing rapid growth, practices such as reverse engineering of proprietary formulas should be illegal. While it harms the image of the industry, the consumer is the one who will suffer in the end.

Scilabs Nutraceuticals, a dietary supplement manufacturer, has filed suit against Naturade, a division of NNC LC, for the alleged misappropriation of trade secrets, fraud, and breach of contract. The complaint, case number 00341089, filed in Orange County Superior Court, Santa Ana, seeks to hold Naturade liable for damages.

As stated in the case, in late 2008 Naturade partnered with Scilabs to develop working formulas for thirteen Naturade brand products. According to court documents from Richard Robinette, CEO of Naturade, these products were distributed to over 25,000 major retailers nationwide including Sam’s Club, The Vitamin Shoppe, vitacost.com, iherb.com, UNFI, Tree of Life, Stop n Shop, Publix, Meijer, and a “host of mid-size and small chains…”. In December of 2009, after the investment of hundreds of hours of skilled research and development on the part of Scilabs, Naturade abruptly severed its contractual ties. Naturade went on to work with other labs and reverse engineer Scilabs’ formulas. In doing so, Naturade allegedly not only breached established contractual agreements, but also violated Scilabs’ right to ownership of its own intellectual property.

According to Paul Edalat, CEO and Chairman of Scilabs, Naturade and Robinette allegedly conspired to defraud Scilabs. In the suit, Scilabs contends that Robinette fraudulently induced Scilabs to do business with promises of longevity and large volumes of production, despite its recent bankruptcy. “(Robinette) had intentions to use Scilabs to rebuild Naturade as a brand and move business elsewhere,” Edalat states. “Theft of intellectual property cannot be taken lightly; we will battle this and we will prevail.” In order to accommodate the anticipated growth in business volume Scilabs asserts that it was not only forced to cease pursuing new customers, but to make large monetary and time investments to the tune of hundreds of thousands of dollars.

Furthermore, Scilabs contends in court documents that Naturade is unfairly competing by misappropriating Scilabs' formulas. What was once a method of advancement in nutraceutical research and development has turned into a tool for propagating widespread fraud and unfair competitive practices. While the Food and Drug Administration does not regulate what can be considered “knock-off” dietary supplements, a food in the eyes of the FDA, Section 403 of the Food, Drug, and Cosmetics Act, protects consumers from misbranded foods. As Edalat states, “In an industry experiencing rapid growth, practices such as reverse engineering of proprietary formulas should be illegal. While it harms the image of the industry, the consumer is the one who will suffer in the end.”

For more information regarding the lawsuit please visit http://www.scilabsvnaturade.com

Scilabs Nutraceuticals Inc., is a contract manufacturer based in Irvine, California. For more information please visit http://www.scilabs.net

Contact:
Tracey Kelley, director of public relations
Tracey (at) Scilabs (dot) net

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