ALBANY — Two companies formerly cooperating on cutting-edge biotechnology to develop environmentally friendly products of the future are now locked in an old-fashioned legal fight over breach of contract.
Ecovative Designs LLC of Green Island, N.Y., and Bolt Threads of Emeryville, Calif., have filed dueling lawsuits on opposite sides of the continent, with potentially millions of dollars at stake.
Ecovative is a biotechnology company formed in 2007 by two RPI graduates to develop commercial uses for mushroom products. Bolt is a biotechnology company developing environmentally friendly and sustainable materials for the textile industry.
The two agreed in 2018 to partner on a mushroom-based substance called mycelium that Bolt plans to market as Mylo, an alternative to leather.
Their partnership soured after less than a year.
Bolt sued Ecovative on Feb. 25 in federal court in California; Ecovative sued Bolt on March 15 in state Supreme Court, Albany County.
Lawyers for the two sides describe the same series of events in very different terms. Here’s where the two sides concur:
- Bolt and Ecovative agreed on April 12, 2018, that Bolt would license certain Ecovative technology.
- Bolt would pay Ecovative for meeting milestones in this process.
- Bolt terminated the agreement Feb. 25, 2019.
The narratives diverge sharply from there. Here are some points and counterpoints from the two lawsuits:
- Ecovative says the California court does not have jurisdiction to hear the case, Bolt says it does.
- Bolt says it didn’t pay Ecovative because Ecovative missed its milestones and so was in breach of contract. Ecovative says it met the milestones, so Bolt is in breach for not paying.
- In its complaint, Bolt does not reveal the amount of money at stake; Ecovative says it was $20 million — half paid after execution of the agreement, then later, two $5 million payments of stock and cash for meeting the milestones.
- Bolt states the conditions include Ecovative delivering a process that Ecovative could replicate on production scale, but Ecovative didn’t do this. Bolt doesn’t even think Ecovative had such a process when it signed the agreement. Ecovative says there were no such benchmarks, and quotes a section of the 21-page agreement written in all capital letters with a disclaimer to that effect.
- Bolt says Ecovative was supposed to run a pilot-scale incubator and deliver mycelium tissue to Bolt for processing and product development at least once every two weeks. Ecovative says Bolt did not supply written progress reports every 15 days on its attempts to validate Ecovative’s process, and under the agreement, this failure constituted validation.
- Bolt says that on Nov. 19, it sent Ecovative written notice of its material breach and said it was grounds to terminate the agreement if not cured. Bolt says it later extended the termination date to Feb. 12, but Ecovative did not cure the breaches; instead, Ecovative asserted it was not in breach, so Bolt terminated the agreement Feb. 25.
- Ecovative counters that in November 2018, Bolt’s CEO called Ecovative’s CEO and said Bolt was unhappy with progress and wanted to renegotiate the agreement; however, it saw no way to avoid making the stipulated payments, so instead it would assert that Ecovative was in breach of the agreement, as this would be the best context for negotiating a modified agreement. Ecovative says it agreed in principle on a non-binding basis to the terms of a modified agreement with Bolt. Two days later, Bolt sent the termination notice to Ecovative and initiated legal action.
- Bolt says Ecovative’s failure to produce material in sufficient quality and quantity caused Bolt to suffer harm, delay its commercial efforts, lose revenue and sustain damage to its reputation. Bolt seeks damages in an amount to be proved at a jury trial; determination that Ecovative is in breach; an order that Bolt does not owe further payments specified under that agreement; and an order declaring the agreement is terminated.
- Ecovative says Bolt’s claims that it breached the agreement were groundless and designed to let it avoid making payments owed. In fact, it says, Bolt is the one that breached the agreement — Ecovative met or exceeded the terms of the agreement. Ecovative seeks a money judgment against Bolt for its breaches, including pre- and post-judgement interest, and it seeks a declaration that the agreement remains in effect and its terms must be satisfied by Bolt.
Ecovative notes in its court papers that in September 2018, Bolt launched a Kickstarter campaign offering for sale multiple items made from the transferred Ecovative technology.
As of March 27, Bolt still had a glowing reference to Ecovative on the portion of its website in which it discussed the Mylo leather substitute:
“Our friends at Ecovative pioneered this mycelium fabrication technology, which literally grew out of the great work they’ve been doing in creating soft flexible foams. We were blown away, and thrilled when they agreed to allow us to help develop it into a commercially viable new material. We’ve established a long-term partnership with Ecovative to optimize this technology and put processes in place to produce commercial-ready Mylo material and bring products to market that consumers will love.”
As of March 27, Ecovative was still giving a shout-out on its website to Bolt:
“We work with best-in-class brands such as Dell, Ikea, Biomason, Gunlocke, Bolt Threads and Sealed Air.”