An ongoing dispute involving allegations ranging from the theft of intellectual property to interfering with a prospective investment could slow the momentum of a fast-growing local food technology startup.
West Sacramento-based The Better Meat Co. is in litigation with a competitor, Boulder, Colorado-based Meati Foods, regarding a patented process the local company uses to produce animal-free protein products.
The Better Meat Co., which was founded in 2018, has partnered with national food producers including Hormel Foods Corp. (NYSE: HRL) and Perdue Farms to offer products that include Better Meat's meatless protein products. The company opened a 14,000-square-foot production facility in West Sacramento in June, and CEO Paul Shapiro told the Business Journal in October that demand was already outstripping that facility's capacity. He said Better Meat was seeking a location for a new facility that would be 10 times larger.
Meati Foods, meanwhile, is a producer of meat-like proteins made from mushroom root. It was founded in 2017, according to a spokesperson.
The Better Meat Co. filed suit against Meati on Friday, alleging that it interfered with Better Meat's raising of investment capital by inventing a dispute regarding its patented process.
"We're rooting for innovators everywhere working to improve animal welfare and food sustainability," Better Meat Co. said in a statement it sent to the Business Journal. "At the same time, we filed this lawsuit because we won't stand idly by while a company with no patents to its name spreads fiction in an effort both to take our patents and slow our growth into the marketplace."
Better Meat's Rhiza product, which is said to have the texture of meat and to be high in nutrients including iron and fiber, is made from ingredients including fermented potatoes and sorghum.
The local company alleges that Emergy Inc., which does business as Meati Foods, falsely claims to own or have invented The Better Meat Co.'s core technologies, specifically the novel combination of particle-size and water-weight limitations that are at the heart of its patent, which was issued on July 13, according to the lawsuit. The patented process allows the resulting product to remain shelf stable and gives it its meat-like texture.
A few days after receiving its patent, Better Meat and a former employee received letters from Emergy, alleging that the former employee stole inventions during an educational fellowship and that those inventions were used in the approved patent.
That former employee was Better Meat Co. co-founder and former chief technology officer Gus Pattillo, Meati Foods Vice President of Communications Christina Ra told the Business Journal.
The Better Meat Co. said in a statement to the Business Journal that Pattillo joined Better Meat in March 2019 and left amicably and under his own volition in May 2021.
Pattillo could not immediately be reached for comment by the Business Journal. His LinkedIn profile states that he co-founded Better Meat in May 2018 and left the company in June. It says he is now the co-founder and CEO of another sustainability-focused startup operating in "stealth mode."
The letters sent by Emergy accused The Better Meat Co. and its former employee of trade secret misappropriation and unfair competition and demanded that they withdraw Rhiza from the market and assign Emergy ownership of the patent, according to the lawsuit.
The two groups reportedly continued to correspond over the following weeks with supporting arguments as to why they felt the other was wrong, though no legal actions were taken.
Then, beginning in late November, The Better Meat Co. said it began to engage with potential investors in a Series A venture capital financing round. After becoming aware of those efforts and the identity of a lead investor who had signed a term sheet, Emergy and its investors acted to undermine Better Meat's ability to raise capital, its lawsuit claims.
The financing would allow the company to build a commercial production facility, the lawsuit states. Better Meat representatives declined to specify if the facility was the same one that Shapiro had previously said the company was planning in October.
Emergy sent a letter to The Better Meat Co. on Dec. 15 stating its intent to move forward with legal actions over the patent.
Ra said Emergy had made attempts over the course of five months to inform The Better Meat Co. of its alleged theft of intellectual property but was met with negligent responses.
"Even though Meati has advanced it products and processes light-years ahead of what they were when the theft took place, it is crucial Meati do what is required to protect its hard work, employees, investors and integrity of the entire alternative protein industry," Ra said in email to the Business Journal.
Less than 20 minutes after the threat of litigation was sent, Emergy investor Paul Vronsky, operating partner of San Francisco-based Bond Capital, allegedly sent an email to The Better Meat Co.'s lead investor notifying him of a "significant trade secret and patent dispute," according to the lawsuit.
"In sending these emails, defendants intended to discourage the lead investor from continuing his business relationship with plaintiff, and intentionally targeted lead investor in order to disrupt the Series A financing process," the lawsuit states.
As a result, The Better Meat Co. said its ability to obtain investments on favorable terms was damaged.
"We categorically deny the allegations and will vigorously defend ourselves against these claims," said Devon Spurgeon, who identified herself as a spokesperson for Bond Capital and Vronsky, in an email to the Business Journal.
Better Meat Co. CEO Shapiro declined to comment regarding the lawsuit, as did the company's legal representative.
The lawsuit was filed in the U.S. District Court of the Eastern District of California.
In November, The Better Meat Co. was named the winner in the food and agriculture category of the Business Journal's Sacramento Region Innovation Awards.
