The same day Corncob Inc. received a Wisconsin Innovation Award, two Minnesota companies accused the Waukesha-based startup of stealing their business projects and misrepresenting the development of its water treatment product.
[caption id="attachment_316624" align="alignright" width="381"] Douglas Hwang holds up a model to show the membrane system’s resemblance to a corncob during a 2017 product demonstration[/caption]
Plymouth, Minnesota-based Clark Technology LLC and Clark Engineering Corp. filed a lawsuit Oct. 3 in the U.S. District Court for Eastern Wisconsin against Corncob and its parent company Pro-Equipment Inc., which is also based in Waukesha.
The same day, Corncob was recognized in the agriculture category by the Wisconsin Innovation Awards for its dynamic membrane water filtration system. Corncob is also a 2017 graduate of The Water Council’s Brew startup accelerator, a program that includes a $50,000 equity investment, space in the Global Water Center and business training and mentorship.
The lawsuit alleges Corncob and Pro-Equipment broke an agreement with the Minnesota companies to not circumvent relationships with existing or prospective customers. It also claims Corncob marketed Clark Tech’s Leachbuster water treatment system as Corncob I, the first generation of its products.
An attorney for Corncob declined to comment on the case, saying his clients believe the facts and law are on their side and they would make their arguments in court. A spokesperson for the Wisconsin Innovation Awards said the judging for this year’s event was completed months ago and the case was not considered in this year’s award. A spokesperson for the Milwaukee-based organization said The Water Council had no knowledge of the lawsuit and directed questions to Corncob.
Corncob’s water treatment system uses spinning membrane discs in a pressurized housing to convert water from a number of different sources to potable drinking water. During a product demonstration in early 2017, founder Douglas Hwang touted the ability to customize the system to different applications, but also acknowledged the challenges of scaling the concept.
At the time, Corncob was searching for a location for its first installation of Corncob II.
According to the lawsuit, Pro-Equipment entered into an agreement with Clark Engineering in 2014 to manufacture a version of the Leachbuster system for a landfill wastewater treatment project in Kandiyohi County, Minnesota. Clark had agreed to sell the systems to Anoka, Minnesota-based Apex Efficiency Solutions SBC.
The complaint alleges that Pro-Equipment “promised and represented” to Clark Engineering as far back as 2013 that it would not circumvent the company’s relationship with Apex or other perspective customers. Similar guarantees were also allegedly made to Clark Tech in 2015, 2016 and 2017. The guarantees were allegedly made to convince Clark Tech to continue using Pro-Equipment for manufacturing Leachbuster systems.
Clark Tech and Apex reached two agreements in 2015 to pursue projects together. One was for a wastewater treatment project in Monroe County, Wisconsin and the other was at Northern Star Co. in Chaska, Minnesota.
The lawsuit alleges that Pro-Equipment began working directly with Apex and in 2017 reached agreements to sell Corncob II units for both projects, replacing Leachbuster units in both cases.
Clark Tech allegedly also reached a deal in 2015 with Apex that called for the two companies not to work with third parties introduced to them by the other. Clark says Hwang and Pro-Equipment were introduced to Apex by Clark Tech.
The complaint alleges that Hwang knew about the agreement and pursued work with Apex anyway. It also claims that in October 2017 and again in December 2017, Hwang told Clark Tech that his company was not working with Apex.
Clark Tech also alleges that Corncob has marketed the Leachbuster system it manufactured as Corncob I. The company claims Corncob “lessened, co-opted or converted the goodwill” earned through the development of Leachbuster. It also says Corncob has allegedly given the false impression that its product, instead of Clark Tech’s, were successfully implemented in Kandiyohi County and at a private commercial project in South Dakota.
Clark Tech is seeking an order blocking Corncob and Pro-Equipment from working with Apex on the Monroe County and NSC projects, except as a subcontractor for Clark Tech, stopping Corncob from marketing Corncob I or claiming Corncob II is a “next generation” product, requiring corrective advertising, and awarding monetary damages.
Corncob and Pro-Equipment have not made any filings with court.