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TechCrunch Files Lawsuit Against Fusion Garage

By - Source: Tom's Hardware US | B 12 comments

TechCrunch has filed a federal suit against Fusion Garage, its partner on the CrunchPad project.

Filed yesterday citing Fraud and Deceit, Misappropriation of Business Ideas, Breach of Fiduciary Duty, Unfair Competition and Violations of the Lanham Act, the lawsuit was inevitable. Michael Arrington promised readers he would be taking legal action when he wrote about the whole CrunchPad/Fusion Garage fiasco a few weeks back.

TechCrunch goes on to list eight "additional thoughts" regarding the entire situation. These read more like reasons Fusion Garage is not to be trusted but are summarized below anyway:

- TechCrunch provided documentation to back up all claims while Fusion Garage has made statements regarding TC that lack any evidence.

-Fusion Garage recently deleted its blog. Arrington says the blog contained a lot of statements that directly contradicted made by Fusion Garage this week.

-Fusion Garage "is, and always has been, a company on the very edge of going out of business."

- Investors were reportedly unhappy about the information uncovered during background checks into Fusion Garage and its founder but agreed to support the project anyway.

-Fusion Garage's financial situation "is a mess." According to Arrington it is inappropriate for the press to recommend to people to pre-buy a CrunchPad. He claims Fusion Garage has yet to hire an attorney to address the suit filed yesterday and believes this is because they do not have the cash flow to do so.

-Much of the key intellectual property (including the board and much of the mechanicals) is owned by ODM, Pegatron. Fusion Garage has hired a new ODM and Pegatron has allegedly expressed concerns about their IP being used by the new ODM in order to speed development.

-Finally, Arrington says the founder of Fusion Garage, Chandrasekar Rathakrishnan "isn’t a good guy." According to TechCrunch, Chandra has been caught plagiarizing articles and previous company Radixs disintegrated in shareholder disputes and angry employees. This is something TechCrunch did not find out until last summer.

Arrington's additional thoughts on the matter aside, Engadget's Nilay Patel last week posted an interesting piece regarding the whole mess. Patel reports that there doesn't appear to be a contract between the two companies, which is not a good place to be in:

"Assuming there isn't some secret CrunchPad patent application we don't know about, the only major IP rights we can see TechCrunch asserting to the CrunchPad device have to do with the copyright to the code, and that's a total mess. Since Arrington apparently didn't draw up a contract giving him sole copyright to the CrunchPad's code, he and his lawyers are arguing that TechCrunch and Fusion Garage are "joint owners" to any rights, and that's just about the weakest position Arrington can be in. Joint copyright owners are legally considered to have equal rights to the entire product, and unless there's a written agreement (see how that keeps coming up?) saying they both have to sign off, each joint owner is allowed to non-exclusively sell the entire thing without the other's approval. In our experience it's pretty rare for joint copyright ownership to be an ideal business arrangement, and we can't imagine how Arrington got to within three days of launching the CrunchPad without hammering out the details of who owned what."

Patel also mentions Arrington's former career as an attorney and further questions how Arrington managed to find himself in this kind of situation in the first place.

The whole story makes for a decent read so be sure to check it out here. You can read Michael Arrington's unabridged thoughts and check out the lawsuit on TechCrunch.

Who do you think is in the wrong here? Let us know in the comments below!

Display 12 Comments.
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Top Comments
  • 24 Hide
    chris13th , December 11, 2009 5:10 PM
    I cannot take any of this seriously just because of how stupid the guy in the picture looks.
  • 10 Hide
    darkknight22 , December 11, 2009 5:27 PM
    building a caveman is so easy, even a caveman could do it. as seen in picture.
Other Comments
  • 24 Hide
    chris13th , December 11, 2009 5:10 PM
    I cannot take any of this seriously just because of how stupid the guy in the picture looks.
  • 6 Hide
    tsnorquist , December 11, 2009 5:17 PM
    The possibilities of creative avatars are endless with that picture. Toms should have a photoshop and or caption contest.
  • 10 Hide
    darkknight22 , December 11, 2009 5:27 PM
    building a caveman is so easy, even a caveman could do it. as seen in picture.
  • 0 Hide
    ssalim , December 11, 2009 5:35 PM
    darkknight22building a caveman is so easy, even a caveman could do it. as seen in picture.


    That doesn't make any sense until you did a typo.

    Regardles the caveman pic, which I agree, lol... well that is all I have to say.
  • -5 Hide
    ssalim , December 11, 2009 5:36 PM
    That doesn't make any sense unless* you did a typo. Damn.
  • 0 Hide
    lowguppy , December 11, 2009 5:42 PM
    How about best video game avatar approximation?
  • 0 Hide
    Chipi , December 11, 2009 6:06 PM
    http://www.docstoc.com/docs/18591918/Techcrunch-Tablet-Prototype-B
  • 4 Hide
    gbismack , December 11, 2009 7:54 PM
    $500 for a crippled tablet???? People where excited about the original because it was supposed to be $200. So the company steals the plans and increases the price 2.5X!
  • 0 Hide
    JohnnyLucky , December 12, 2009 12:46 PM
    Sounds like a story line for a high tech soap opera.
  • 0 Hide
    amnotanoobie , December 12, 2009 11:31 PM
    Michael Arrington is an ass, the head of Fusion Garage however looks like....
  • 0 Hide
    Drag0nR1der , December 13, 2009 1:54 PM
    without a contract in place, and claiming joint ownership I really can't see trhis case going anywhere. What kind of idiot even starts developing a product with another company, let alone get within days of launch, without a contract being hammered out? I'd cut my losses and consider it a lesson learnt.
  • 0 Hide
    Anonymous , December 14, 2009 2:43 PM
    Not being privy to all things in this case i would expect a contract would not be entirely necessary, sure would have made life easier for Michael though.

    This looks like one heck of a messy IPO, but if i were to hazard a guess, Micheal's role is more of a integrator rather than innovator, those who developed the original hardware/software will exercise full ownership and would in effect license the right to Micheal to implement the technology in the end of line product.

    to such effect, fusion garage would indeed have full rights to sell a product derived from the collaborative venture but must do so by entering an agreement with the hardware/software developers, which it appears fusion garage has not done with respects to pegatron (according to Micheal).

    Im going to hazard there a good handful of other companies which have their IPO tied up into this device which makes for a real messy law suit, and ensures this poor device will die a slow painful death, no doubt hasten by the rumored approach of the 'divine iTablet'