Fusion Garage files to dismiss CrunchPad lawsuit

By Nilay Patel

posted February 1st 2010 2:51PM

It looks like Fusion Garage is out to remind people that there's more than one $499 tablet in the world today: CEO Chandra Rathakrishnan is talking up the Joojoo tablet's pre-orders, and the company's lawyers have filed a delightfully snippy motion to dismiss TechCrunch founder Michael Arrington's lawsuit over the device formerly known as CrunchPad, saying his claims are "legally barred, facially flawed, and fatally imprecise." As we predicted from the outset, the argument boils down to the fact that there was never any contract between Fusion Garage and Michael Arrington or TechCrunch -- and Fusion Garage also points out it can't have stolen an idea that Arrington posted "all over the Internet." Snap. It's a little more complicated than that, though -- we've broken it down after the break, grab the PDF and follow along.

Okay, so if you'll recall, TechCrunch's hastily-written complaint alleged that Fusion Garage was guilty of false advertising, breach of fiduciary duty, misappropriation of a business idea, fraud, and unlawful business practices, all because Fusion Garage essentially took their ball and went home instead merging with Arrington's CrunchPad, Inc. In its motion, Fusion Garage says that each of those claims is wrong in some way -- sometimes in several ways -- and asks the court to dismiss them. The company also points out that it's not at all clear whether it's being sued by TechCrunch, CrunchPad, Inc., or Michael Arrington personally; Mike's not listed as a party to the suit, but his name keeps coming up, and the complaint refers to both TechCrunch and CrunchPad, Inc, as "TechCrunch," which we also found odd from the start. That issue comes up a few times in the claims -- let's go through them.

Misappropriation of a business idea: We always thought this claim was a little strange, and Fusion Garage's first heading for this section says it all: "Plantiff's claim does not exist under California law." Business ideas aren't physical property like tables and chairs, so TechCrunch can't sue for misappropriation under regular property law -- it would have to rely on trade secret law, and Fusion Garage says there weren't any secrets involved here since all of Arrington's ideas for the product (like "large icons on the home screen") were openly disclosed on TechCrunch.
False advertising: This one is based on the timeline of events -- if you'll remember, Michael Arrington had publicly killed the CrunchPad before we'd ever heard from Fusion Garage. Since the project was dead, Fusion Garage says its statements can't be considered false advertising that harmed a competitor's product -- there's no competing product. What's more, Fusion Garage says that it's not saying anything untrue, and points to specific lines from TechCrunch's own complaint as supporting evidence for its claims. Fusion Garage also points out that false advertising law specifically excludes disputes over who invented something -- it only covers the statements about the "nature, characteristics, or qualities" of competing products, and there's no TechCrunch product.
Breach of fiduciary duty: This is where the ambiguity of who's suing who comes in -- Fusion Garage says there's no claim for breach of duty because it's not at all clear whether Fusion Garage had a deal with TechCrunch, CrunchPad, Inc, or Michael Arrington personally, and TechCrunch's complaint uses all three somewhat interchangeably. (This is why you need contracts, people.) Fusion Garage also says that it doesn't make sense for TechCrunch to refer to their relationship as a partnership because it was so unequal: Arrington repeatedly threatened to shut the whole thing down unilaterally but once Fusion Garage walked away he filed a lawsuit. This claim is actually pretty easy for TechCrunch to fix up in an amended complaint -- expect to hear more about it as this case drags on.
Fraud: In order to allege fraud, TechCrunch has to be extremely specific about the time, place, and exact content of the alleged false statements, and also say how those statements damaged them. As you'd expect, then, Fusion Garage goes into great detail about how the claims aren't specific enough and TechCrunch hasn't shown how any of the statements actually harmed the company. Another relatively easy one for TechCrunch to clean up and try again.
Unlawful business practices under California law: These are the state versions of the federal claims, so if the big claims fail, they take these with it.

Well, that's not a bad opening move by Fusion Garage, but nothing's stopping TechCrunch from amending its complaint to deal with some of these issues -- we'll let you know what happens next.