
Status Of CrunchPad Litigation - rguzman
http://techcrunch.com/2010/09/15/status-of-crunchpad-litigation/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Techcrunch+%28TechCrunch%29&utm_content=Google+Reader
======
danilocampos
Oh man, Andrew Bridges is the attorney for TechCrunch here. I've worked with
him.

Bridges is _awesome_. Really sharp guy, incredibly good at what he does. He
and Matt Scherb write some really strongly worded stuff that manages to ride
the line between outright _rage_ and total professionalism.

As it happens, you have Bridges to thank for your MP3 players. When the RIAA
tried to sue the Rio out of existence, he said "oh, hell no." (On behalf of
his client, naturally. He's not Lawyer Batman or anything.)

They're not cheap but they're easily the best. Poor Fusion Garage.

~~~
grellas
Since this indeed is a first-class firm for this type of litigation, it bears
noting that litigation such as this very likely has cost Mr. Arrington a
quarter million and up by this point.

The unusual thing here lies in the fact that Mr. Arrington is choosing to
expose details of the discovery to the public view. Since discovery normally
is a matter of public record, as long as it is not subject to a court order
sealing it or otherwise protecting it from disclosure, any party is free to do
this but it is nonetheless rare that anyone would make such a disclosure in
such a public way. Among other things, there is a serious risk that statements
made about the case, or about specific evidence, would be deemed defamatory
and would expose the disclosing party to major legal claims and even to
punitive-damage risks.

Hence, I would observe / speculate about this as follows:

1\. Whatever else might be said about him, Mr. Arrington has guts. He is a
fighter.

2\. He is using this litigation not to recover any monies from FG (likely a
hopeless task) but to figuratively put FG and its founder into the town
square, locked in the stocks and made a spectacle for all the world to see
their shame. One must admit that his perseverance has yielded some pretty
damning evidence against FG.

3\. I disagree with those who say that Mr. Arrington is some sort of poor
lawyer for not having documented this relationship in a binding legal
document. These parties had all sorts of back and forth in what was a very
fluid relationship and it seems that Mr. Arrington, for his part, was pushing
for maximum advantage on terms without wanting to tie himself down to a
premature deal. What he didn't anticipate was that FG would blind-side him as
it did with its own power play pulled at the last minute. This was not
stupidity but a calculated risk on Mr. Arrington's part and it wound up
backfiring on him.

4\. In addition to wanting to shame FG, Mr. Arrington wants to send the world
a message saying, in effect, that anyone who tries to pull this sort of stunt
on him will pay the due penalty for what he does, even if it costs him a large
sum to exact the punishment.

5\. As an incidental matter, in making himself the center of the drama, Mr.
Arrington also derives publicity for himself and for TC, which is really his
stock in trade and likely worth more to him in the long run than the out-of-
pocket cost of the litigation itself (worth more in the sense of reputation,
not in the immediate publicity value itself).

6\. The lawsuit itself is otherwise not worth pursuing, as it seeks money
damages and injunctive relief over what is essentially a dead product. If the
other factors above did not apply, it would be absurd on economic grounds to
pursue this any further.

~~~
ssp
_4\. In addition to wanting to shame FG, Mr. Arrington wants to send the world
a message saying, in effect, that anyone who tries to pull this sort of stunt
on him will pay the due penalty for what he does, even if it costs him a large
sum to exact the punishment._

I have sometimes wondered why companies don't do this more often. It seems
that a consistent and well-publicized "we don't negotiate with terrorists"
stance could be useful to discourage for example patent trolls.

~~~
shabble
The best (and most entertaining) example I can think of this is Monster Cables
threatening to sue a competitor on extremely flimsy grounds, without realising
the owner was previously a high powered lawyer.

Details of the correspondence is at [http://www.audioholics.com/news/industry-
news/blue-jeans-str...](http://www.audioholics.com/news/industry-news/blue-
jeans-strikes-back)

------
aresant
Who at JooJoo completely missed who Arrington is?

Seriously asking, how does that happen?

Arrington would have, assuming they'd delivered the product, relentlessly
promoted (and defended) the CrunchPad.

Calacanis would have bought one and shredded it just to spite Arrington.

Mossberg & WSJ would have had to weigh in to "remain relevant".

And the entire damn tech community would have been involved in talking about
the product, instead of talking about the complete failure of the crackpots
behind it.

I don't get how you miss that so completely - free marketing by one of the
most influential people in early adopter tech world.

A product he loved so much the guy named it as an extension of his brand, and
self.

WTF?

~~~
reneherse
Well, it's kind of a truism that many people in business are concerned only
with what they can get away with. In my own line of work, I've seen seven
figure licensing deals ignored because the smaller party didn't have the means
to litigate. CEO's coaxing contractors to start work on a verbal agreement
then refusing to remunerate because there was no signed contract. Et cetera,
et cetera...

Whether you choose to be the type who screws others is a matter of your
personal code. But despite your honor or lack of it, you will be screwed at
some point. When it happens, how you choose to react may well have an
influence on whether it happens again...

I wish Arrington all the best in this, if he has the cash to burn.

------
lionhearted
For people saying that TC will end this quickly because they're unlikely to
receive compensation, you're missing one important detail - this is a
massively entertaining circus. I'm a casual follower of TechCrunch, but I'll
follow along more closely with this saga happening. Depending on how much
money the litigation is costing them, it could well be paying for itself with
increased pageviews.

~~~
nphase
I'm having a hard time understanding why TC should give up on litigation
because they're unlikely to receive compensation. If someone/a company wrongs
you in a big way, should they not be punished for it? I understand that FG's
reputation is already pretty much shot to hell, and you might say it's
punishment enough. But if I were TC, I wouldn't be happy with that outcome by
itself at all.

Who knows what could end up happening to the joojoo. Maybe the IP even ends up
getting bought up by some OEM vendor and sold as a new product. Or maybe they
even somehow turn around and become profitable. Sure, these all sound absurd.
But if TC can afford to take this to trial and make sure FG gets punished for
it, why wouldn't they?

~~~
protomyth
Some companies (I do believe GE is one of them) make it a policy to pursue
legal claims / counter-claims to the fullest in an effort to discourage future
actions.

~~~
Kadin
For a more near-and-dear example, look at IBM: they pursued SCO to an extent
that I'm sure was unjustified if you analyzed only that particular case. Hell,
I suspect the amount of lawyer time IBM burned while running SCO into the
ground was probably more than SCO's market cap at some points -- they could
have _bought_ them and ended it at just about any time, and there was a lot of
speculation that SCO's goal was (if not a cash settlement) exactly that. But
that would have rewarded the people behind the whole debacle, while slowly
ripping them apart in court didn't.

It's important, if you are a significant enough business or even a private
individual, to realize that knuckling under on one case might invite others.
IBM's stance, and I'd imagine it's also the stance of many other major
companies and wealthy individuals, is analogous to governments that have a
blanket policy against negotiating with terrorists or meeting ransom demands.
In the short run, it might not be the easier or cheaper route out, but in the
long run the alternative might be opening yourself up to death by a thousand
cuts.

~~~
jellicle
> look at IBM: they pursued SCO to an extent

The lawsuit is entitled "SCO v. IBM", not "IBM v. SCO".

------
tptacek
'grellas wrote a monster comment about this when the news broke that TC's
injunction had failed:

<http://news.ycombinator.com/item?id=1644772>

Two things I take away from this:

* TC vs. FG is pretty much a dead issue, since TC is unlikely to recover real money from the CrunchPad debacle (FG's product is itself pretty much DOA).

* Contracts or not, if you engage in a partnership or joint venture with another firm, both firms will end up with fiduciary duties to each other... which is something good to know as you do business.

------
sjtgraham
This Chandra fellow has insanely blackballed himself. No matter how
unscrupulous one may be, surely one has to be an absolute idiot to cheat
someone with as much clout and reach as Michael Arrington. Chandra deserves
everything he has coming to him, the first email is absolutely despicable.

------
rriepe
PR firms take note: Deception and conspiracy won't get you very far in the
end.

I'd hesitate to even call this group a PR firm, though. The Joojoo's launch
was mired in image problems. To spend so much time and effort on a misguided
publicity stunt while ignoring the basics seems amateurish at best.

I'm constantly amazed how the ethical PR people have to work their asses off
to gain the trust of their clients, while groups like this seem to be driving
major business decisions for theirs. This isn't PR. It's just sleaze.

~~~
dotBen
The PR firm helping FusionGarage on the side actually come out the worse
looking party in all of this. I've taken the time to find their name from the
filings just to shame them:

they're called McGrath|Power (<http://www.mcgrathpower.com/>)

Rather than saying what seems obvious _"dude, you're going to create a shit
storm of bad PR you'll never recover from if you divorce Arrington from the
deal. We can't take your money cos we can't make this succeed"_ (pretty
obvious to me), they just took the guys money anyway. So for me they deserve
their own bad PR.

~~~
bl4k
Also consider that McGrath is a PR company that charges clients a lot of money
to get coverage on blogs like Techcrunch. They have dug their own grave.

I can imagine that any client of McGrath's is on a TC blacklist now, and their
current and potential clients are having second thoughts about working with
them.

I read all the McGrath emails, they knew that what they were doing was bad and
'messy', but justified it because the project would have been worth $x (the
amount was redacted).

People talk about FusionGarage being unethical because they do not understand
the culture of the valley (where you do business based on your reputation),
but it was a valley PR firm that pushed FusionGarage into doing what they did,
thinking that their mad PR skills could fool bloggers and the media into
accepting the FG version of events despite the fact that the entire project
from day zero had been covered in blogs.

------
braindead_in
I have been putting this off for sometime. I met Chandra when they were
conceptualizing the product and he was interested in hiring me for it. He had
a grand vision, but I found him completely out of depth. He kept harping about
building an OS for the next generation of devices, being the next Microsoft
etc. etc., and seemed drunk on his own kool aid. He threw TC's and MA's name
freely. Looking at this makes me squeamish now. Good that I turned it down.

But, I still respect him for kind of pulling it off. Conceptualizing a device
and taking it to the market is tough and kudos to them for it. I know, since I
tried and failed in doing the same thing. But this kill any chances they had
for an acquisition or buyout, completely. Nobody's going to even touch them
anymore. I guess that's what MA's trying to do.

Sad to see how it turned out.

------
rumpelstiltskin
No matter how damning the evidence is, and it really is damning, Arrington
still comes off like a right idiot for not having formal contracts in place
that clearly outline who owns what from the beginning.

Seriously, he had to resort to showing photos of fusion garage people in the
techcrunch offices just to prove that they even had a business relationship.

For an attorney, this is just embarassing.

~~~
bl4k
Do you realize that a contract doesn't have to be written right, that contract
law places as much emphasis on oral agreements and your actions?

Arrington was smart in knowing that he didn't need the written contract if
things went bad (exhibit a) and that a written contract would tie down his own
options for the crunchpad (ie. if they signed and then FG didn't deliver,
arrington could have gone to another partner without FG still owning part of
the company).

You can see in the evidence that Arrington spent a lot of time going back and
forward to work out the merger agreement. This was seen as an almost formality
from both parties, hence the reason why it was pushed back so late.

ps. and that PR firm, McGrath Power, I will never ever work with them nor any
company that works with them and I will advise every company I know not to
work with them or to leave them. Seriously sick company, who in evidence,
basically said 'oh this looks bad, but it is worth $x, so lets do it' (the
amount was redacted)

~~~
eli
Forget about the law... How could you possibly form a partnership to work on a
project without having a document that describes exactly how the work will be
divided?

------
jnoller
To me, as a layman, the documents look pretty damning. Sure, Techcrunch did
not have a written contract, but I don't see how the language in those emails
from fusion garage can be construed as anything but a conspiracy to
deceive/screw Techcrunch.

~~~
apgwoz
IANAL: I seem to recall that an oral contract is just as valid as a written
contract, but obviously an oral agreement suffers from selective memory--hence
written contracts. If these documents provide some insight as to a) the fact
that there was an oral contract and b) some of the terms of the contract, c)
deemed admissible in court, then is the fact that they had no written contract
actually a problem?

~~~
sp332
In the USA an oral contract is only binding up to some amount of money
(something large, over a million IIRC), and I think this deal was bigger so it
actually isn't legally binding. Not to say it's a good idea :-)

~~~
drp
I had never heard of that, so I looked it up and found this:
[http://en.wikipedia.org/wiki/Contract#Formalities_and_writin...](http://en.wikipedia.org/wiki/Contract#Formalities_and_writing)
and this <http://en.wikipedia.org/wiki/Statute_of_frauds>

If I'm reading it correctly, many jurisdictions require contracts to be
written when they exceed certain amounts of money. In the US that amount is
$5000.

~~~
Retric
_A statute of frauds defense may also be effected by a showing of part
performance, upon showing of one of two different conditions. If the parties
have taken action in reliance on the agreement, as in the case Riley v.
Capital Airlines, Inc. the court held that part performance does not take an
executory portion of contract out of the Statute of Frauds. Each performance
constitutes a contract that falls outside the Statute of Frauds and was
enforceable to the extent it is executed. But the unexecuted portion of the
contract falls within the Statute of Frauds and is unenforceable. As a result,
only the executed portion of the contract can be recovered, and the doctrine
of part performance does not remove the contract from the statute. On the
other hand, the court in Schwedes v. Romain held that partial performance and
grounds for estoppel can make the contract effective._

If I am reading that right: Because they used TC office space it is implied
that a contract existed and Statute of frauds does not apply to that part.

------
drinian
Fusion Garage has also failed to provide source code as required by the GPL:
<http://lwn.net/Articles/404450/>

------
AlexMuir
This may be the first step in TC killing its litigation. There's not much
point carrying on, at great expense. Now that this evidence is unsealed it
will permanently damage the careers of the people involved. I'd be happy with
that outcome if I was Arrington - unless this PR firm has deep pockets and can
be dragged into it.

~~~
annajohnson
Good point Alex. If TC's real objective is not so much to recover any money
but to make it clear to the world that FG screwed TC over (as well as issue a
warning to everyone else not to mess with TC!) then I'd say: mission
accomplished. No need to rack up even more legal fees unless there is a good
chance of recovering both any damages and the costs of the lawsuit.

------
nphase
Wouldn't it be smarter of Arrington (he's a lawyer, right?) to keep his
approach and related docs under wraps? Wouldn't posts like these just make it
easier for FG, et al. to defend themselves?

Edit: Why am I getting downvoted? It's a simple question, IANAL.

~~~
Kadin
They're part of the discovery process and were unsealed; thus they're part of
the public record.

It makes sense for TC to reveal them: this deprives FG and its PR-firm cronies
the opportunity of spinning them the way they'd prefer, and is probably just
good business in terms of TechCrunch's core business of selling eyeballs to
advertisers. (It got me to visit their site, which I rarely do, FWIW.)

------
maxklein
_Another example – Fusion Garage employee Stuart Tan, who still lists the
Crunchpad as the project he’s working on on his Facebook profile, emails his
girlfriend to tell her that he’s “really sucker these people.”_

This comment is taken out of context, and I believe that written by a
singaporean, it means "these people really suck", and not "I will cheat these
people".

~~~
JoachimSchipper
Do you have a reason to guess that it isn't "these people are suckers" or
something similar?

~~~
maxklein
Read the email, it's obvious when you see it in context.

 _Very tired and pegatron is giving me problem again. Threaten to stop project
again for reasons that they the payment to be early. Really sucker, these
people, anyways, still got to deal with them.."_

He's clearly tired of dealing with these people who suck. Nothing in the email
says in any way that he is suckering the people in.

Just remove the 'er' and it's clear what he is saying:

 _Very tired and pegatron is giving me problem again. Threaten to stop project
again for reasons that they the payment to be early. Really suck, these
people, anyways, still got to deal with them.."_

The other techcrunch interpretation makes little sense in the context of this
email.

------
ErrantX
_wearing my investigators hat_

The question that I can't see a satisfactory answer to is "why?". _With_
Techcrunch onboard the Crunchpad might have worked out, it probably would have
made money even if it was not a long term success. They sacrificed a highly
vocal technology blog with a generally loyal following and lots of PR goodwill
for, well, not a lot as far as I can see.

Working through the evidence now and nothing in there really springs out as
explaining it.

EDIT: ok, it appears that they honestly thought the product was strong enough
on it's own to survive a divorce from Techcrunch. Still not clear why he
wanted the split though...

On a related note the email to the girlfriend from a FG employee is troubling
discovery/disclosure; such material is often covered under privacy laws,
despite the fact that he was using a company account. I'm surprised to see
"personal" correspondence accepted to _civil_ court and, particularly, allowed
to be published.

~~~
chc
My guess: Chandra saw dollar signs, didn't want to share the dollar signs with
Arrington and decided that he just wouldn't.

~~~
bl4k
That is true. He likely mistook the hype and attention around the Crunchpad to
be because of his own work, not the work of Techcrunch.

------
bialecki
I always wonder how often emails like the first one are really written.
They're almost too good to be true. The "high" one gets from writing such
inflammatory emails must be amazing because he/she MUST also know that, since
it's sent electronically, it almost certainly can come back to bite him/her in
the ass.

~~~
SoftwareMaven
Some people really are that clueless about the potential issues around email,
whether it's the fact that it isn't secure or that it can be dredged up from
any number of locations in an eDiscovery process. In fact, I would be a lot of
people, especially at smaller companies, fall into that category.

------
ajg1977
Evil stuff, but I do think this whole thing turned out for the best for
Arrington. The Crunchpad (or JooJoo) was an absolute flop whose only hope of
success was arriving well in advance of the iPad.

There's really very little that his continued involvement would have changed,
but now not only is he disassociated with it, he stands to benefit from any
legal remedies.

------
hvs
It strikes me as more than a little odd that creator of a popular, successful
startup related blog failed to get anything _in writing_ for this particular
venture. That said, it seems like Arrington may be in the right even if, in
the end, that means that he is going to get exactly what Fusion Garage got out
of this whole ordeal: nothing.

~~~
Kadin
My take on it is that there weren't any written agreements because each side
was angling to get the best deal possible in the eventual joint venture.

Only, one of two things happened:

1) FusionGarage never intended for their to be any true JV, and was just
playing TC along from the _very beginning_ , day one. That'd be amazingly cold
if it's true.

2) It started out as a bona fide attempt at a JV, but it became clear to FG at
some point that they weren't going to get as sweet a deal as they wanted...
but rather than either back out graciously or take what they could get, they
decided to play along and then screw TC at the last minute.

I haven't seen anything that really gives weight to either theory. If it's #1,
Chandrasekhar Rathakrisnan isn't just channeling the usual Sun Tzu business-
as-war crap, he's got a full-blown Josef Stalin "loyalty is for dogs" thing
going on. Just on personal experience I find that a bit hard to believe; most
people are just not that good at deception. I'd put my money on #2 if I were a
betting man: FG and TC spent a while trying to feel each other out and get the
best deal possible for their respective sides, but FG decided they could do
better by selling TC out than by negotiating in good faith.

------
tragiclos
I simply can't understand the upside to being as deceitful as Chandra is
accused of being. If the product was going to be a big hit, wouldn't everyone
profit handsomely? And if it was bound to be a failure in the market anyway,
why make a friend into an enemy?

~~~
hga
I don't understand it either, but I've seen it often enough, e.g. people who's
rather have 100% of nothing than a good and (often more than) fair fraction of
something chose the former.

Or in another case the two owners of a company headed for Chapter 7 who
_didn't_ own the most crucial forward looking IP insisting on having majority
control of any new company. And that was the end of that: we weren't going to
give them another chance (or rather, near certainty) of ruining a venture, yet
they had a sufficient claim to any future success that they would have made
life hell in the courtroom if we ended up having any success.

(And this was no small think, a filesystem for Write Once media developed by
the creator of one of the first CD-ROM filesystems, the latter was used to
master the 3-5th CD-ROMs in the US (first two were tests, 3rd was all of
ancient Greek literature). Prior art to the now dismissed Netapp vs. ZFS
case....)

------
cool-RR
_Our partner, Fusion Garage, had inexplicably decided to simply terminate the
partnership over “nothing more than greed, jealousy and miscommunication.”_

Michael Arrington is simply quoting himself from the previous article about
CrunchPad:

<http://techcrunch.com/2009/11/30/crunchpad-end/>

------
michaelhalligan
Has anybody actually done their due diligence to see if there really is a
lawsuit, or to see if there really is even a fusion garage? It seems to me
like it has the potential for an especially lucrative hoax.

~~~
TheBurningOr
A year ago I would have down-voted a thought like this, but every time
something develops with this story, it sounds more and more like a movie plot
and less like a real story.

------
imightbeatroll
It's interesting to note that Arrington is removing comments that point out
his own incompetence for not having a contract with an offshore company.

If he were a fresh out of collage entrepreneur, I'd feel sorry for him, but he
used to be a big shot at a name brand Silicon Valley law firm, so it's pretty
weak for him to play victim when he displayed such incompetence and a lack of
basic common sense.

Never mind that the product was DOA before it was born. It reminds me of the
Henry Kissinger quote to the effect of "fights in academia are so vicious
because the stakes are so small".

------
TotlolRon
At some point in time a big earthquake will level the bay area. That's a given
certainty. It might happen just because of tectonic stuff, or, maybe, it will
happen because this place has lost all honor. And god is watching. Maybe.

------
pmorici
This isn't really interesting to me any more because in the interim since this
all started along came the iPad filling the role the CrunchPad was supposed to
fill.

