SiVault Systems, Inc. v. WonderNet, Ltd.

WonderNet Ltd. (defendant) was an Israeli technology company. According to SiVault Systems, Inc. (SiVault) (plaintiff), in 2003, WonderNet represented that it held intellectual-property rights (IPRs) in certain security-biometrics technology in specified territories. Under a 2003 agreement, SiVault delivered 2.5 million shares of SiVault’s stock, plus cash, to WonderNet, in exchange for a license to use WonderNet’s technology. Subsequently, SiVault discovered that WonderNet had misrepresented the extent of its IPRs, which infringed existing patents in certain territories. In January 2005, SiVault initiated arbitration against WonderNet in New York pursuant to the parties’ agreement. SiVault sought rescission and return of money and stock exceeding $350,000 in value. For its part, WonderNet showed that the SiVault stock served as consideration for rights granted in a 2002 agreement, that SiVault had extensive opportunities to investigate WonderNet’s IPRs, and that WonderNet had potential claims against SiVault for breaching the 2003 agreement and another agreement between the parties. WonderNet had not yet filed counterclaims in arbitration. Soon after filing its demand for arbitration, SiVault petitioned the district court in New York for an order of attachment as to the SiVault shares of stock held by WonderNet. SiVault supported its petition with affidavits and evidence of its claims, including evidence of WonderNet’s liabilities and financial condition.