CrunchPad Federal Lawsuit Filed; Some Additional Thoughts

Comment

Thursday afternoon we filed a lawsuit against Fusion Garage in the Northern District of California Federal court. The causes of action include Fraud and Deceit, Misappropriation of Business Ideas, Breach of Fiduciary Duty, Unfair Competitition and Violations of the Lanham Act. The complaint is embedded below, or you can view it here.

This was the first time I’ve ever filed a lawsuit, and it was certainly not the way I thought the whole CrunchPad project would end when I first wrote about the idea in July 2008.

I believe the lawsuit (and attached exhibits) speaks for itself. A timeline is provided as well as supporting evidence from the Fusion Garage blog (now deleted) and emails between our companies. But I do have a few additional thoughts:

  1. We’ve shown through our posts (see The End Of The CrunchPad and CrunchPad Litigation Imminent) and that we’ve got nothing to hide. Our statements are backed up with emails and other evidence. Fusion Garage also makes a lot of statements about us, none of which are backed up by evidence.
  2. Fusion Garage deleted their blog shortly after the dispute erupted. A lot of statements on that blog directly contradict statements made by Fusion Garage this week (these are included in the lawsuit). That deletion, combined with the fact that they very clearly misled us over the last month into believing everything was on track, while they simultaneously registered a new domain name and rebuilt the case of the device to include the new brand, shows a pattern of lies. The press has mostly given them a pass on this.
  3. Fusion Garage is, and always has been, a company on the edge of going out of business. Their main shareholder, the guy who wrote the now infamous email telling us that we were no longer part of the project, is a chiropractor named Bruce Lee. The company was constantly raising debt from unsavory investors, borderline loansharks, to make payroll. We paid a lot of expenses directly, and we agreed with Fusion Garage that they had to clean up their cap table before we could acquire them. Fusion Garage agreed and attempted to do this but was never successful. All of this is shown in the exhibits to the lawsuit.
  4. We have had financing from top tier investors lined up for the CrunchPad. Those investors didn’t love the way Fusion Garage and its founder checked out on background checks, but they were willing to support the project. That financing was on hold until we launched the device. At any time we could have pulled the trigger on it, and we have statements and evidence to support it (these investors are also talking to press directly). We also had partnerships lined up for retail distribution at unheard of terms, as well as soft revenue to drive the retail price down on the device. All of this has evidence to support it. All of these partners will support these statements on record.
  5. Fusion Garage’s financial situation is a mess, and it is inappropriate for press to recommend to people to pre-buy a CrunchPad. The company has not yet hired an attorney to respond to our lawsuit. We believe they do not have the cash flow to do so. When the device goes on pre sales today, linked to from scores of gadget and press sites, they will suddenly have cash flow to defend themselves. What they won’t have is cash flow to build the devices. We believe it is irresponsible for press to link to the pre-sale site without disclosing this to readers.
  6. Much of the key intellectual property, including the board and much of the mechanicals, is owned by Pegatron, the manufacturing arm of Asus. Pegatron was licensing this IP back to the project exclusively. Fusion Garage is no longer working with Pegatron, they’ve hired a new ODM. They have likely given Pegatron’s IP to the new ODM to speed development. Pegatron has expressed concern to us about this, and I would not be surprised if they sued Fusion Garage separately over this issue.
  7. A few people have suggested that we can’t own any IP in the CrunchPad because we are just a blog. That’s not correct. The entire blueprint of the device was created by me. And we also have hired direct resources, including the former head of hardware at Vudu, as well as very high level software engineers, who have worked directly on the project here and in Singapore with the Fusion Garage team. Their direct work on the project was crucial to its success, and the device would not be finished without their work. The fact that Fusion Garage had nearly its entire team here in California for the last few months working with us illustrates this. Why would they have brought them all here at great expense (and we organized visas and housing) unless this was a joint project? The answer is they wouldn’t have.
  8. The founder of Fusion Garage, Chandrasekar Rathakrishnan, isn’t a good guy. He has been caught plagiarizing articles. His previous company Radixs disintegrated in shareholder disputes and angry employees. We didn’t learn about this until last Summer because Singapore media, including blogs, are largely controlled by the government. Embarrassing stuff just isn’t reported. But we’ve spoken to plenty of people associated with the company, and their statements will be included in the lawsuit. Chandra and Fusion Garage have shown a long term pattern of deceit in their business dealings. There is no reason to think that anything will change now.

The lawsuit is below:

http://viewer.docstoc.com/v2/
SF-38-303-C2_20091210160410_00000001

More TechCrunch

Tags

Ahead of the AI safety summit kicking off in Seoul, South Korea later this week, its co-host the United Kingdom is expanding its own efforts in the field. The AI…

UK opens office in San Francisco to tackle AI risk

Companies are always looking for an edge, and searching for ways to encourage their employees to innovate. One way to do that is by running an internal hackathon around a…

Why companies are turning to internal hackathons

Featured Article

I’m rooting for Melinda French Gates to fix tech’s broken ‘brilliant jerk’ culture

Women in tech still face a shocking level of mistreatment at work. Melinda French Gates is one of the few working to change that.

11 hours ago
I’m rooting for Melinda French Gates to fix tech’s  broken ‘brilliant jerk’ culture

Blue Origin has successfully completed its NS-25 mission, resuming crewed flights for the first time in nearly two years. The mission brought six tourist crew members to the edge of…

Blue Origin successfully launches its first crewed mission since 2022

Creative Artists Agency (CAA), one of the top entertainment and sports talent agencies, is hoping to be at the forefront of AI protection services for celebrities in Hollywood. With many…

Hollywood agency CAA aims to help stars manage their own AI likenesses

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

2 days ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

3 days ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities