IN THE UNITED STATES DISTRICT COURT
`FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
`DURHAM DIVISION
`
`SMARTSKY NETWORKS, LLC, a
`Delaware limited liability company
`
`Plaintiff,
`
`v.
`
`WIRELESS SYSTEMS SOLUTIONS,
`LLC, a Delaware limited liability
`company; DAG WIRELESS LTD, an
`Israeli company; DAG WIRELESS USA,
`LLC, a North Carolina limited liability
`company; LASLO GROSS, a North
`Carolina resident; SUSAN GROSS, a
`North Carolina resident; DAVID D.
`GROSS, a resident of Israel,
`
`Defendants.
`
`)
`)
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`
`CIVIL ACTION NO.
`__________________
`
`JURY TRIAL REQUESTED
`
`VERIFIED COMPLAINT FOR INJUNCTIVE RELIEF AND DAMAGES
`
`Plaintiff SmartSky Networks, LLC (“SmartSky” or “SSN”) files this action against
`
`Defendants Wireless Systems Solutions, LLC (“WSS”), DAG Wireless, Ltd. (“DAG
`
`Israel”), DAG Wireless USA, LLC (“DAG USA”) (DAG Israel and DAG USA,
`
`collectively, “DAG”), Laslo Gross, Susan Gross, and David D. Gross (collectively, the
`
`“Gross Defendants”), (collectively, the “Defendants”) seeking injunctive relief and
`
`damages for misappropriation of trade secrets, breaches of contracts, and violation of the
`
`North Carolina Unfair and Deceptive Trade Practices Act.
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 1 of 76
`
`1:20-cv-00834
`
`
`FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
`DURHAM DIVISION
`
`SMARTSKY NETWORKS, LLC, a
`Delaware limited liability company
`
`Plaintiff,
`
`v.
`
`WIRELESS SYSTEMS SOLUTIONS,
`LLC, a Delaware limited liability
`company; DAG WIRELESS LTD, an
`Israeli company; DAG WIRELESS USA,
`LLC, a North Carolina limited liability
`company; LASLO GROSS, a North
`Carolina resident; SUSAN GROSS, a
`North Carolina resident; DAVID D.
`GROSS, a resident of Israel,
`
`Defendants.
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`CIVIL ACTION NO.
`__________________
`
`JURY TRIAL REQUESTED
`
`VERIFIED COMPLAINT FOR INJUNCTIVE RELIEF AND DAMAGES
`
`Plaintiff SmartSky Networks, LLC (“SmartSky” or “SSN”) files this action against
`
`Defendants Wireless Systems Solutions, LLC (“WSS”), DAG Wireless, Ltd. (“DAG
`
`Israel”), DAG Wireless USA, LLC (“DAG USA”) (DAG Israel and DAG USA,
`
`collectively, “DAG”), Laslo Gross, Susan Gross, and David D. Gross (collectively, the
`
`“Gross Defendants”), (collectively, the “Defendants”) seeking injunctive relief and
`
`damages for misappropriation of trade secrets, breaches of contracts, and violation of the
`
`North Carolina Unfair and Deceptive Trade Practices Act.
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 1 of 76
`
`1:20-cv-00834
`
`
`
`TABLE OF CONTENTS
`
`INTRODUCTION………………………………………………………………..….¶¶ 1-8
`
`PARTIES …………………………………………………….………………....¶¶ 9-15
`
`JURISDICTION AND VENUE …………..…………………………………..….¶¶ 16-19
`
`FACTUAL BACKGROUND …………………………………………………...¶¶ 23-166
`
`I.
`
`II.
`
`SmartSky’s Airborne Wireless Business. ………………..….……..¶¶ 23-29
`
`The Gross Family Businesses: WSS and DAG …………..………..¶¶ 30-51
`
`III.
`
`SmartSky Engages WSS to Develop SmartSky ATG Products.…...¶¶ 52-86
`
`A.
`
`B.
`
`Statements of Work and the
`
`
`
`Purchase Orders
`
`IV.
`
`SmartSky Provides WSS With Materials and Equipment to Build the
`
`Products. ……………………………………………………...…..¶¶ 87-94
`
`V.
`
`SmartSky Authorizes WSS to Use SmartSky Intellectual Property to
`
`Develop and Build the Products .………………………………....¶¶ 95-101
`
`VI.
`
`The Agreements Protect SmartSky’s Intellectual Property..…….¶¶ 102-124
`
`VII. WSS Accepts Tens of Millions of Dollars from SmartSky But Refuses to
`
`Perform Under the Agreements…….……………………………¶¶ 125-136
`
`VIII. WSS Claims Ownership of the Products and SmartSky Equipment and
`
`Threatens to Sell the Products to Third Parties in Violation of the
`
`
`
`………………………………………..……………....¶¶ 137-150
`
`IX. WSS Uses its Alter Ego DAG to Produce and Sell the Products..¶¶ 151-162
`
`2
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 2 of 76
`
`
`
`X.
`
`SmartSky Terminates the Agreements and Demands that WSS and DAG
`
`Cease and Desist from Misappropriating SmartSky IP and Developed IP
`
`and from Selling the Product or Derivatives Thereof in the SmartSky Field
`
`of Use...……………………………………………………..……¶¶ 163-166
`
`CAUSES OF ACTION 1-14 …………………………………………………...¶¶ 167-275
`
`PRAYER FOR RELIEF
`
`DEMAND FOR JURY TRIAL
`
`EXHIBITS
`
`1.
`
`2.
`
`3.
`
`4.
`
`5.
`
`6.
`
`7.
`
`8.
`
`9.
`
`
`
`PO002129
`
`April 4, 2019 Terms & Conditions
`
`Reciprocal Confidentiality and Non-Disclosure Agreements dated
`
`December 1, 2017
`
`Amended Reciprocal Confidentiality and Non-Disclosure Agreements
`
`dated January 27, 2018
`
` Mutual Non-Disclosure Agreement dated January 27, 2018
`
` Multi-Party Non-Disclosure Agreement dated February 22, 2018
`
`WSS Roster
`
`Recommendation Letter for Ofek Toledano
`
`10.
`
`Email dated December 13, 2018
`
`3
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 3 of 76
`
`
`
`11.
`
`Reciprocal Confidentiality and Non-Disclosure Agreement” dated January
`
`15, 2019
`
`12.
`
`https://www.computerweekly.com/news/252487478/DAG-Wireless-
`
`unveils-4G-5G-infrastructure-for-in-flight-connectivity (last visited Sept. 8,
`
`2020)
`
`13.
`
`Termination Letter dated September 4, 2020
`
`4
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 4 of 76
`
`
`
`INTRODUCTION
`
`1.
`
`Since 2018, SmartSky has paid WSS over $30 million to develop, build, test,
`
`and produce components to complete SmartSky’s proprietary, end-to-end, air-to-ground
`
`(“ATG”) wireless communication network for in-flight travelers, airlines, flight crews, and
`
`other data users. WSS took the money, but has failed to perform. WSS members Laslo
`
`Gross and Susan Gross, and WSS executive David Gross, instead funneled SmartSky
`
`intellectual property, equipment, and materials to a family-owned alter ego, DAG, to build
`
`a competing product that they intend to market and sell as their own. As of the date of this
`
`filing, DAG has publicly claimed that it developed the very ATG network components that
`
`SmartSky paid WSS tens of millions of dollars to develop and build, and is actively
`
`marketing and offering to sell products based on this claim. In a futile attempt to avoid
`
`plain and obvious legal liability, DAG claims that it developed its technology independent
`
`of and with no reliance on the millions of dollars of SmartSky intellectual property,
`
`equipment, and materials that DAG obtained directly from WSS. DAG’s claim is
`
`disingenuous, implausible, and false. In the final analysis, the business relationship
`
`between SmartSky and WSS resulted in: (1) WSS receiving over $30 million and access
`
`to SmartSky intellectual property, (2) DAG using those resources to build itself products
`
`while WSS strung SmartSky along with frequent delays, and (3) SmartSky left holding the
`
`bag.
`
`5
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 5 of 76
`
`
`
`3.
`
`WSS failed to perform under the Agreements, setting SmartSky’s proposed
`
`launch date back months if not years. Either because WSS recognized it could not fulfill
`
`its contractual obligations, or because it wanted to own and profit from the products it was
`
`building for SmartSky, WSS began making unreasonable, extra-contractual demands to
`
`excuse and divert attention from its failure to perform and hide its ulterior motives.
`
`6
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 6 of 76
`
`
`
`
`
`7
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 7 of 76
`Case 1:20-cv-00834-NCT-LPA Documentl Filed 09/10/20 Pa
`
`
`
`7.
`
`Absent interim relief from the Court—and ultimately permanent injunctive
`
`relief—SmartSky’s business will be irreparably harmed, and Defendants will have
`
`succeeded in going to market with the very technology that SmartSky paid WSS to develop.
`
`PARTIES
`
`9.
`
`Plaintiff SmartSky is a Delaware limited liability company organized and
`
`existing under the laws of the State of Delaware with its principal place of business at 430
`
`Davis Drive, Suite 350, Morrisville, NC 27560.
`
`10.
`
`Defendant WSS is a North Carolina limited liability company, organized and
`
`existing under the laws of the State of North Carolina with its principal place of business
`
`at 102 Ripplewater Lane, Cary, North Carolina, 27518. WSS maintains an office at 630
`
`Davis Drive, Morrisville, North Carolina 27560. (https://www.wireless2.com/contact-1
`
`(last visited on Sept. 8, 2020).)
`
`11.
`
`Defendant DAG Israel is an Israeli limited partnership, organized and
`
`existing under the laws of Israel with its principal place of business at Nahalat Yitzchak
`
`8
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 8 of 76
`
`
`
`32, 3rd Floor Tel Aviv, Israel 67448. DAG Israel is the managing member of DAG USA,
`
`according to DAG USA annual reports filed with the North Carolina Secretary of State.
`
`12.
`
`Defendant DAG USA is a North Carolina limited liability company,
`
`organized and existing under the laws of the State of North Carolina with its principal place
`
`of business at 630 Davis Drive, Suite 250, Morrisville, North Carolina, 27560, where WSS
`
`also does business. DAG may be served by its registered agent, David Gross, at WSS’s
`
`principal place of business, which is also the registered agent address for DAG USA, 102
`
`Ripplewater Lane, Cary, North Carolina, 27518.
`
`13.
`
`Defendant Laslo Gross is an individual residing in North Carolina and may
`
`be served at 102 Ripplewater Lane, Cary, North Carolina, 27518. Laslo Gross is Susan
`
`Gross’s spouse and David Gross’s father.
`
`14.
`
`Defendant Susan Gross is an individual residing in North Carolina and may
`
`be served with process at 102 Ripplewater Lane, Cary, North Carolina, 27518. Susan Gross
`
`is Laslo Gross’s spouse and David Gross’s mother.
`
`15.
`
`Defendant David Gross is an individual residing, upon information and
`
`belief, in Israel. David Gross is the son of Laslo Gross and Susan Gross.
`
`JURISDICTION AND VENUE
`
`16.
`
`This Court has original jurisdiction over this matter pursuant to 28 U.S.C. §
`
`1331 because SmartSky pleads a claim under the Federal Defend Trade Secrets Act, 18
`
`U.S.C. § 1836 et seq. (“DTSA”)
`
`9
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 9 of 76
`
`
`
`17.
`
`This Court has supplemental jurisdiction over the remaining claims in this
`
`lawsuit because they form part of the same case or controversy as the federal question
`
`raised under the DTSA. 28 U.S.C. § 1367.
`
`19.
`
`DAG is bound by the foregoing jurisdiction and venue provisions because it
`
`is an alter ego of WSS, has benefited from the Agreements, and its conduct is closely
`
`related to the contractual relationship between WSS and SmartSky.
`
`20.
`
`The Gross Defendants are bound by the foregoing jurisdiction and venue
`
`provisions because they have benefited personally from the Agreements, and are closely
`
`related to the contractual relationship between WSS and SmartSky.
`
`10
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 10 of 76
`
`
`
`21.
`
`The Court has general, or at least specific, personal jurisdiction over DAG
`
`Israel because, without limitation, DAG Israel has a North Carolina affiliate (DAG USA)
`
`for which DAG Israel purports to be the managing member; has made contracts with and
`
`provided services for North Carolina companies (WSS and SmartSky); its members and
`
`employees travel to North Carolina for work-related purposes; and it has committed and
`
`directed tortious acts towards SmartSky in North Carolina.
`
`22.
`
`The Court has general, or at least specific, personal jurisdiction over David
`
`Gross because, without limitation, he is the registered agent for a North Carolina company
`
`(DAG USA); works for and executed contracts on behalf of a North Carolina company
`
`(WSS); frequently communicates with and provides services for North Carolina companies
`
`(WSS and SmartSky); travels to North Carolina for work-related purposes; owns property
`
`in North Carolina; and has committed and directed tortious acts towards SmartSky in North
`
`Carolina.
`
`FACTUAL BACKGROUND
`
`I.
`
`SmartSky’s Airborne Wireless Business
`
`23.
`
`Founded in 2011, SmartSky is an industry leader in developing and
`
`deploying the next generation of ATG communication networks for air travelers, designed
`
`to deliver best-in-class speed, capacity, and latency to provide users seamless data
`
`transmission and connectivity during air travel.
`
`24.
`
`SmartSky is an innovator, revolutionizing ATG connectivity with over 185
`
`granted patents globally, more than eighty of which are issued in the US alone, and more
`
`11
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 11 of 76
`
`
`
`than 129 patents pending globally. SmartSky’s patented, trade secret, proprietary, and
`
`confidential technology represents an investment of tens of millions of dollars in research
`
`and development over nearly a decade. It is because of these innovations that SmartSky
`
`boasts the only ATG network design capable of offering services with real-time
`
`bidirectional high-speed connectivity without the high latency of satellite-based solutions
`
`or the speed limitations of dated cellular technology.
`
`25.
`
`SmartSky goes to great lengths to protect its intellectual property, including
`
`by seeking patent protection for its novel inventions, and preventing public disclosure of
`
`its proprietary, confidential, and trade secret information, including by requiring that
`
`contractors and employees enter non-disclosure agreements.
`
`26.
`
`SmartSky contracts with third parties to build components necessary for the
`
`rollout of its unique, patented, and trade secret ATG network technologies. Through these
`
`agreements, SmartSky authorizes use of its intellectual property—subject to non-disclosure
`
`and confidentiality restrictions—and provides equipment, materials, and tools to facilitate
`
`performance by these third parties.
`
`27.
`
`SmartSky sells its completed products and technologies to value added
`
`resellers (“VAR”), original equipment manufacturers (“OEM”), and maintenance, repair
`
`and overhaul (“MRO”) companies (collectively, the “Customers”). The Customers then
`
`sell the SmartSky products to airlines, fleets, private jet owners, and operators for
`
`installation in aircraft. Once the ATG network is commercially launched, SmartSky plans
`
`to provide monthly service to the Customers or the end users to ensure a seamless high-
`
`12
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 12 of 76
`
`
`
`speed, low-latency broadband connection from aircraft to the internet that is on par with a
`
`home or office Wi-Fi network.
`
`28.
`
` Because the ATG communications industry is highly competitive,
`
`SmartSky is required to release new products and technologies to its Customers in a timely
`
`manner. Failure to do so will harm SmartSky’s reputation and cause Customers to fulfill
`
`needs through SmartSky’s competitors. Once a competitor has claimed “real estate” on an
`
`aircraft by installing its hardware, it is extremely difficult to get that system removed and
`
`replaced due to the substantial investment and permanent aircraft modifications required
`
`for a Federal Aviation Administration (“FAA”)-certified equipment installation.
`
`29.
`
`For these reasons, it is crucial that parties contracting with SmartSky timely
`
`complete and deliver pursuant to their contractual obligations.
`
`II.
`
`The Gross Family Businesses: WSS and DAG
`
`30. WSS claims to be in the business of developing, manufacturing, and selling
`
`wireless technology and products, including software for use in computer and
`
`communications networks and protocols for the exchange of information. Before entering
`
`the Agreements, WSS had no specific expertise in aviation technology, including ATG
`
`communication technology.
`
`31. WSS is run by husband and wife Laslo Gross and Susan Gross.
`
`32.
`
`The Grosses have employed their son, David Gross, as an executive at WSS
`
`since 2010. Through at least August 18, 2020, David Gross represented through his
`
`LinkedIn profile that he was currently employed by WSS as Director of Operations.
`
`13
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 13 of 76
`
`
`
`Between then and the date of this filing, David Gross changed his LinkedIn profile to state
`
`that his employment with WSS ended in January 2018.
`
`33.
`
`Each of the Gross Defendants has access to SmartSky IP—which consists of,
`
`without limitation, trade secrets and patented information—under the business relationship
`
`between SmartSky and WSS. Indeed, David Gross is WSS’s designated “coordinator” for
`
`receiving confidential information from SmartSky pursuant to a Reciprocal Confidentiality
`
`and Non-Disclosure Agreements (“WSS NDA”), dated December 1, 2017 and amended
`
`on January 27, 2018. True and correct copies of the WSS NDAs are attached hereto as
`
`“Exhibit 4” and “Exhibit 5.”
`
`34.
`
`David Gross executed the December 1, 2017 WSS NDA on behalf of WSS.
`
`The agreement specifically required David Gross and WSS to “keep such information
`
`confidential and not to disclose the same to third parties or to act upon said Proprietary or
`
`Confidential Information . . . .” Each of the Gross Defendants is under obligation to not
`
`disclose or misuse SmartSky IP.
`
`35.
`
`On January 27, 2018, David Gross signed a “Mutual Non-Disclosure
`
`Agreement” on behalf of WSS. A true and correct copy of the Mutual Non-Disclosure
`
`Agreement is attached hereto as “Exhibit 6.”
`
`36.
`
`In February 2018—the same month that WSS was entering its second and
`
`third POs with SmartSky, and literally days after David Gross was listed as WSS’s
`
`“coordinator” on the amended WSS NDA—the Gross Defendants formed DAG Israel.
`
`Laslo and Susan Gross installed their son David Gross as DAG Israel’s ostensible head.
`
`14
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 14 of 76
`
`
`
`37.
`
`But David Gross never stopped working for WSS. Simultaneous to his role
`
`with DAG, David Gross remained employed by WSS as Director of Product Management
`
`or Operations. In this capacity—despite now claiming on his LinkedIn profile that he ended
`
`employment with WSS in January 2018—David Gross signed, without limitation, the
`
`following SmartSky SOW’s on WSS’s behalf:
`
`a.
`
`b.
`
`c.
`
`SOW 2 – Feb. 9, 2018
`
`– Feb. 16, 2018, Dec. 13, 2018
`
`SOW 4 – Feb. 9, 2018
`
`38.
`
`On February 22, 2018, David Gross executed a “Multi-Party Non-Disclosure
`
`Agreement” on WSS’s behalf, which listed him as WSS’s “primary representative . . .
`
`responsible for coordinating disclosure or receipt of Confidential Information.” A true and
`
`correct copy of the Multi-Party Non-Disclosure Agreement is attached hereto as “Exhibit
`
`7.”
`
`39.
`
`David Gross still conducts all business communication with SmartSky from
`
`a WSS email address (david@wirelesss2.net).
`
`40.
`
`David Gross is not unique among DAG employees. DAG held out its entire
`
`development team as working for WSS: they communicate from “@wirelesss2.net”
`
`domains, are included on a list of “WSS Personnel” that was circulated to SmartSky
`
`employees, and did not disclose that they were not in fact employed by WSS during
`
`frequent and numerous interactions with SmartSky. A true and correct copy of the WSS
`
`roster—provided by WSS to SmartSky—is attached hereto as “Exhibit 8”
`
`15
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 15 of 76
`
`
`
`41.
`
`Boaz Reuven, Erez Loebl, Golan Adari, and Ofek Toledano are engineers
`
`who work primarily in Israel and have been held out to SmartSky as WSS employees. But
`
`they are employees of DAG. On December 18, 2019, David Gross requested that
`
`SmartSky’s Mike Dodson write recommendation letters for Loebl, Adari, Toldano, and
`
`Bakhrayba to attend an electrical engineering program in the United States. In the example
`
`recommendation letter that David Gross had prepared for Toledano (which presumably
`
`took the same form as his letters for the other three individuals), David Gross wrote on
`
`DAG letterhead and described Toledano as having “worked at our company, DAG
`
`Wireless Ltd. in Israel.” No mention is made of WSS. A true and correct copy of this letter
`
`is attached hereto as “Exhibit 9.” Upon information and belief, David Gross described the
`
`employment of Loebl, Adari, and Bakhrayba in the same manner in separate letters.
`
`43. When SmartSky personnel visited Tel Aviv in December 2018 to view
`
`WSS’s progress, they were greeted with an email stating: “Welcome to WSS DAG
`
`Israel.” A true and correct copy of this email is attached hereto as “Exhibit 10.”
`
`16
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 16 of 76
`
`
`
`44.
`
`Upon SmartSky learning of DAG Israel’s existence, SmartSky, WSS, DAG,
`
`and Hermon Labs Ltd. entered a “Reciprocal Confidentiality and Non-Disclosure
`
`Agreement” dated January 15, 2019 (the “Joint NDA”). David Gross—while still
`
`employed by WSS—signed on behalf of DAG Israel. Boaz Reuven was listed as DAG
`
`Israel’s “coordinator for disclosing or receiving information.” A true and correct copy of
`
`the Joint NDA is attached hereto as “Exhibit 11.”
`
`45.
`
`Upon information and belief, Laslo Gross and Susan Gross control or have
`
`substantial say over DAG’s business objectives, business strategy, finances, hiring
`
`decisions, termination decisions, marketing, advertising, and workflow.
`
`46.
`
`The WSS and DAG websites share similar layouts and some identical
`
`content. In at least one place—DAG’s description of “Telecoms and Mobile”—DAG
`
`specifically references “WSS” instead of DAG. https://www.dagwireless.com/markets
`
`(last visited Sept. 8, 2020).
`
`47.
`
`Both websites have “Markets” tabs describing the various industries in which
`
`the companies offer their respective services. Both companies currently list “Aviation” as
`
`a “Market,” and provide identical written descriptions of that work. (Compare
`
`https://www.dagwireless.com/markets and https://www.wireless2.com/aviation
`
`(last
`
`visited Sept. 8, 2020).)
`
`48.
`
`In June 2019, DAG USA was formed in North Carolina, with DAG Israel
`
`named as its managing member and organizer and David Gross named as its registered
`
`17
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 17 of 76
`
`
`
`agent with a registered agent address at the same address as WSS’s principal place of
`
`business, 102 Ripplewater Lane, Cary, North Carolina, 27518.
`
`49.
`
`Property records from Wake County, North Carolina show that David Gross
`
`is one of two owners (the other being his brother, Michael Avi Gross) of the 102
`
`Ripplewater Lane property. Laslo Gross and Susan Gross are residents of the 102
`
`Ripplewater Lane property.
`
`50.
`
`In its 2020 Annual Report to the state of North Carolina, submitted April 16,
`
`2020, DAG USA listed DAG Israel as its managing member, with David Gross as its
`
`registered agent.
`
`51.
`
`DAG is an alter ego or mere business conduit for WSS, Laslo Gross, Susan
`
`Gross, and David Gross.
`
`III.
`
`SmartSky Engages WSS to Develop SmartSky ATG Products.
`
`52.
`
`By December 2017, SmartSky had contracted with numerous VARs, MROs,
`
`and OEMs to supply ATG network products, including software technology, and had
`
`received interest from several more. To satisfy these existing agreements and win
`
`additional business, it was crucial for SmartSky to bring its technology to market timely.
`
`SmartSky’s primary competitors were working on or had existing products, but SmartSky’s
`
`system would be faster and less expensive.
`
`18
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 18 of 76
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`
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`A.
`
`The Products
`
`55. WSS’s primary proposed deliverables to SmartSky included advanced
`
`remote radio heads (“ARRH”), Base Band Units (“BBU”), Airborne Radio (“ABR”), Test
`
`UEs, and SmartCarts (collectively, the “Products”) to be developed in accordance with
`
`SmartSky specifications and requirements.
`
`56.
`
`The ARRH is a remote software defined radio (SDR) fixed to a
`
`communications tower as part of the terrestrial base station. The ARRH and antenna (WSS
`
`did not develop or manufacture the antenna, which was already tested and in use in the
`
`demonstrated
`
` system) establish a wireless communications link with the ABR (see
`
`infra ¶ 57) send and receive data between the terrestrial network and the aircraft. The
`
`ARRH is one component necessary for SmartSky’s robust ATG communications network
`
`and uses SmartSky’s proprietary beamforming technology to generate steerable beams that
`
`19
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`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 19 of 76
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`
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`allow the same frequency to be reused to communicate with in-flight ABRs by air-link.
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`The ARRH sends high-speed data communications links that can be maintained
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`continuously and uninterrupted in time while the ABRs move between steerable beams
`
`from different base stations. The ARRH employs Orthogonal Frequency Division
`
`Multiplexing (“OFDM”) and frequencies in the 2.4 GHz band.
`
`57.
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`The BBU:
`
`a.
`
`b.
`
`is located at the base of the terrestrial base station;
`
`provides the communications logic to enable communications with the ABR
`
`via the ARRH;
`
`c.
`
`allows seamless transition from one ARRH to another located on the same
`
`tower;
`
`d.
`
`facilitates uninterrupted user experience by interfacing with other terrestrial
`
`network elements that enable the ABR to communicate to and from the internet as well as
`
`communicate with the centralized terrestrial network functions that enable ABRs to move
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`seamlessly between terrestrial base-stations;
`
`e.
`
`employs LTE protocols modified to SmartSky’s specification, thereby
`
`ensuring communications can be established with a fast moving very distant ABR;
`
`f.
`
`is a part of a land based, nationwide network of base stations, fully meshed
`
`broad-band communications transport and data centers which when combined with the
`
`ARRH, ABR, and the other pre-existing components (including ground and aircraft
`
`20
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`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 20 of 76
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`
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`antennas and the wireless access point in the aircraft) to form a robust ATG
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`communications network.
`
`58.
`
`The ABR is installed in an aircraft and functions much like a modem. It
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`communicates to the terrestrial network by connecting wirelessly to the ARRH, which is
`
`then hardwired to the BBU. Data sent and received by the ABR from the terrestrial network
`
`is forwarded to a WiFi access point that is located on the aircraft and connected to the ABR.
`
`The end-user can then access SmartSky’s ATG by connecting to the WiFi access point
`
`with their personal communications device (computer/tablet/mobile phone) just like at
`
`home or the office. This high-speed wireless connection allows multiple end users
`
`(passengers and crew on the aircraft) to send and receive data, voice, or video. To assure
`
`the end user’s connection to the terrestrial network is robust and seamless, the ABR:
`
`a.
`
`communicates with multiple ground stations that receive high-speed
`
`wirelessly transmitted data (which the end user would receive on his computer/tablet
`
`/mobile phone on the aircraft as data, voice or video);
`
`b.
`
`communicates with multiple ground stations that have overlapping
`
`coverage areas, and to provide a high-speed data communications link continuous and
`
`uninterrupted in time while an aircraft moves between coverage areas;
`
`c.
`
`d.
`
`e.
`
`f.
`
`accounts for Doppler shift due to aircraft speeds greater than 100 mph;
`
`employs frequencies in the range between 2 and 6 GHz using OFDM;
`
`employs LTE protocols;
`
`and combines with other components to form a robust ATG network.
`
`21
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`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 21 of 76
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`
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`59.
`
`The Test UE and SmartCart are crucial test devices used for maintaining a
`
`functioning ATG wireless network.
`
`60.
`
`Test UE units are designed to verify the operation of the ground station
`
`(ARRH/BBUs) at the time of installation, where testing is performed below four hundred
`
`feet in ground elevation and within a few hundred feet from the site. Test UE can also
`
`measure performance of the system software in the field because they operate on the same
`
`signals used by the ABRs.
`
`61.
`
`A SmartCart unit is a mobile test “cart” that emulates the SmartSky ground
`
`network to allow installation personnel to ensure proper installation and operation of the
`
`SmartSky system prior to the aircraft taking flight.
`
`62.
`
`The Products must work in tandem to establish a robust ATG network to
`
`enhance air traveler connectivity.
`
`B.
`
`63.
`
`Statements of Work and the
`
`On December 22, 2017, SmartSky and WSS entered into SOW 1, “Modelling
`
`– Noise Cancellation, Doppler, Range and Altitude,” and PO001658. SmartSky paid WSS
`
`$850,000 in full satisfaction of the PO.
`
`65.
`
`On February 9, 2018, SmartSky and WSS entered into SOW 2, “Task Areas
`
`1 & 2,” and PO001767. SmartSky paid $1,100,000 toward SOW 2 but WSS failed to
`
`deliver on its development promises.
`
`22
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`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 22 of 76
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`
`
`
`
`23
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`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 23 of 76
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Pae 23 of 76
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`
`
`72.
`
`DAG claimed in a press release that it obtained FCC certification for an ABR
`
`product on or around August 11, 2020, but SmartSky has been unable to corroborate this
`
`claim.
`
`24
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 24 of 76
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`
`
`C.
`
`76.
`
`Purchase Orders
`
`In addition to the services contracted for under the SOWs, SmartSky entered
`
`stand-alone POs for development and production of ATG hardware necessary to develop
`
`its end-to-end network.
`
` defines “Specification” as “the specifications for
`1 Section 1.11 of the
`the Product as described within the attached applicable SOW.”
`25
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 25 of 76
`
`
`
`77.
`
`On or around June 13, 2018, SmartSky and WSS entered PO2129 for the
`
`production of 516 BBUs and 1,548 ARRH units. In exchange, SmartSky would pay WSS
`
`$15,480,000.00. (See Ex. 2.) PO2129 was governed by the April T&C, in which the parties
`
`agreed that “[d]elivery time is of the essence.” (Ex. 3, April T&C, § 3.)
`
`78. WSS has delivered less than half of the ARRH units—708 of 1,548—despite
`
`being paid more than the value of the PO—$8,331,947.64 of $8,255,994.84.
`
`79.
`
`SmartSky returned 119 ARRH units for phase updates. WSS agreed to
`
`update these units “at no charge to SSN,” pursuant to WSS Invoice #191881 dated
`
`December 19, 2019, but has now refused to return the units and demands additional
`
`payments for them.
`
`80. WSS has claimed that additional units were available for pickup, but
`
`conditioned pickup on entering into a new license agreement, even though those terms were
`
`already dictated by the existing April T&C. In an email dated June 22, 2020, a WSS
`
`employee indicated the ARRH units were still being produced, which was at odds with the
`
`claim they were finished and ready for pickup.
`
`81.
`
`On or around September 6, 2018, SmartSky and WSS entered into PO002410
`
`(“PO2410”) for production of 100 SmartCarts. On September 19, 2019, SmartSky made a
`
`$500,000 prepayment due under the PO. The parties cancelled PO2410 and replaced it with
`
`26
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 26 of 76
`
`
`
`PO004424 (“PO4424”), dated March 20, 2020. The $500,000 prepayment applies to the
`
`prepayment under PO004424. WSS failed to deliver any SmartCarts.
`
`82.
`
`On August 17, 2020, WSS offered 459 ARRH units for pick-up, but refused
`
`testing to which SmartSky was entitled by contract.
`
`85. WSS has delivered the 516 BBUs, and SmartSky paid in full—$7,224,000.
`
`86.
`
`On or around October 23, 2018, SmartSky and WSS entered into PO002550
`
`(“PO2550”) for production of 50 Test UEs. SmartSky paid a $166,667 prepayment due
`
`under the PO. WSS failed to deliver any Test UEs.
`
`IV.
`
`SmartSky Provides WSS With Materials and Equipment to Develop and Build
`the Products.
`
`27
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 27 of 76
`
`
`
`89. WSS used, or is using, the SmartSky Materials to manufacture the ARRH
`
`units and ABRs.
`
`90. WSS also lacked much of the specialized equipment and tools necessary to
`
`develop, test, and troubleshoot the Products.
`
`92. WSS shipped some SmartSky Equipment to DAG Israel.
`
`28
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 28 of 76
`
`
`
`V.
`
`SmartSky Authorizes WSS to Use SmartSky Intellectual Property to Develop
`and Build the Products.
`
`95.
`
`SmartSky has expended significant time, effort, and expense to develop
`
`valuable, confidential, and proprietary technical information relating to the ATG network
`
`that it contracted with WSS to build.
`
`29
`
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 29 of 76
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`
`
`
`
`30
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`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Page 30 of 76
`Case 1:20-cv-00834-NCT-LPA Document 1 Filed 09/10/20 Pae 30 of 76
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`
`
`97.
`
`SmartSky has taken reasonable steps to keep the confidential and proprietary
`
`information alleged in the immediately preceding paragraph secret and to prevent public
`
`disclosures. These steps include, without limitation:
`
`a.
`
`requiring vendors, third-party contractors, and subcontractors like
`
`WSS and DAG to sign non-disclosure agreements;
`
`b.
`
`c.
`
`requiring SmartSky employees to sign non-disclosure agreements;
`
`making non-disclosure of confidential and proprietary information
`
`explicit in SmartSky’s employee handbook;
`
`d.
`
`restricting SmartSky’s employees’ physical and electronic access to
`
`confidential and proprietary information and to reports containing such information;
`
`e.
`
`f.
`
`requiring a valid user login to access electronic information; and
`
`requiring two-factor login for SmartSky employees.
`
`98.
`
`As a result of the considerable investment in the research, development,
`
`marketing, and sale of its ATG network and component parts, and its efforts to keep
`
`confidential and proprietary information from public disclosure or use, SmartSky’s
`
`31
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`
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