Cyanotech denies
stealing trade secrets

By Russ Lynch
Star-Bulletin

Cyanotech Corp. says its has done nothing wrong despite a federal judge's ruling that it stole trade secrets from neighbor and competitor Aquasearch Inc. and built equipment that violated Aquasearch's patent rights.

The dispute arose from a failed joint venture the two Big Island companies formed in the early 1990s to explore producing natural astaxanthin, a food-coloring pigment and medicinal additive made from microalgae.

Aquasearch installed on Cyanotech's property a closed-tube microalgae breeding system, for which it had applied for a patent that was later granted. The system was to be used by the joint venture, OceanColor Inc., to grow microalgae specifically for the astaxanthin project.

The two companies had disagreements and broke off the joint venture in 1994, when Aquasearch took back its equipment.

In 1995, Cyanotech went ahead with its own astaxanthin development and built its own plant.

Aquasearch alleged that Cyanotech copied its design.

U.S. Judge Alan C. Kay ruled Dec. 30 that the "uncontroverted evidence shows that Cyanotech misappropriated Aquasearch's trade secrets."

After the ruling, Aquasearch said that it "intends to seek the full measure of injunctive relief and damages for Cyanotech's misconduct."

Cyanotech, however, said that Kay's ruling was legally flawed and it does not expect to pay any material damages.

The company said it stopped using the tube system in May 1999 and has developed its own method, for which it has applied for a patent.

The company said it will pursue its own claims against Aquasearch for allegedly misappropriating and using Cyanotech's trade secrets.