Interserve, Inc. et al v. Fusion Garage PTE. LTD

Filing 208

MOTION to Strike 207 Amended Answer to Complaint filed by CrunchPad, Inc., Interserve, Inc.. Motion Hearing set for 6/9/2011 01:30 PM in Courtroom 3, 17th Floor, San Francisco before Hon. Richard Seeborg. (Attachments: # 1 Declaration, # 2 Proposed Order)(Scherb, Matthew) (Filed on 4/29/2011)

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WINSTON & STRAWN LLP
Andrew P. Bridges (SBN: 122761)
[e-mail]
David S. Bloch (SBN: 184530)
[e-mail]
Matthew A. Scherb (SBN: 237461)
[e-mail]
101 California Street
San Francisco, CA 94111-5802
Telephone:
[phone]
Facsimile:
[phone]

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Attorneys for Plaintiffs

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NORTHERN DISTRICT OF CALIFORNIA

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101 California Street
San Francisco, CA 94111-5802

UNITED STATES DISTRICT COURT

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Winston & Strawn LLP

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SAN FRANCISCO DIVISION

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TECHCRUNCH, INC. (f/k/a INTERSERVE,
INC.), and CRUNCHPAD, INC.,

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Case No. C 09-cv-05812 RS (PSG)
DECLARATION OF MATTHEW SCHERB
IN SUPPORT OF PLAINTIFFS’ MOTION
TO STRIKE FUSION GARAGE’S
AMENDED ANSWER

Plaintiffs,
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vs.
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FUSION GARAGE PTE. LTD., a Singapore
Company,

Date: June 9, 2011
Time: 1:30 P.M.
Place: Courtroom 3, 17th Floor

Defendant.
Hon. Richard Seeborg

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SCHERB DECL. ISO MOTION TO STRIKE AMENDED ANSWER
(CASE NO. 3:09-CV-05812-RS (PSG)

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I, Matthew Scherb, declare under penalty of perjury that the following is true and correct:
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I am an attorney at the law firm of Winston & Strawn LLP, which is counsel of

record for Plaintiffs in this action.
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Exhibit A is a “redline” showing the changes between Defendant’s March 1, 2011

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answer and counterclaim and April 14, 2011 amended answer. The redline compares only the text of

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the pleadings, not the exhibits. I supervised creation of the redline and believe it is accurate. As the

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“Legend” on the final page indicates, text deleted from the March 1, 2011 answer is in red strike-out,

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inserted text is blue and underlined, and moved text is in green (strike-out shows where the text was

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on March 1 and underlined shows where the text moved to on April 14).

101 California Street
San Francisco, CA 94111-5802

Winston & Strawn LLP

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Executed on April 29, 2011.
/s/ - Matthew Scherb
Matthew Scherb

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SCHERB DECL. ISO MOTION TO STRIKE AMENDED ANSWER
(CASE NO. 3:09-CV-05812-RS (PSG)

EXHIBIT A

Defendant Fusion Garage PTE Ltd. ("Fusion Garage"), answering the Amended Complaint of Plaintiffs
TechCrunch, Inc. ("TechCrunch") and CrunchPad, Inc., pleads and avers as follows. PREFATORY
STATEMENT
This lawsuit arises out of a failed merger and the attempt by two Michael Arrington- controlled
entities—one of which, CrunchPad, Inc., is a shell that has never done business, has no assets and no
capitalization—to salvage Arrington's reputation after he found out that he was never going to be able to
deliver on his promise of a "dead simple web tablet for $200." Arrington is using the façade of his alteregos and this lawsuit to appropriate for himself the fruit of the time, innovation, creativity, know-how
and boldness that Fusion Garage and its personnel have shown and put into its web tablet when
Plaintiffs themselves did not want to take the risk.
Plaintiffs' 24-page Amended Complaint is a rant of misstatements that offers a false account of
the parties' dealings with each other. Below, Fusion Garage explains the actual course of dealings
between the parties and the evolution of Fusion Garage's own web tablet device. Fusion Garage denies
all the material allegations in Plaintiffs' Amended Complaint, including the allegation that "Fusion
Garage and Plaintiffs were joint venturers" and the allegation that "Fusion Garage led Plaintiffs to
believe that they were collaborators working earnestly on a common joint venture."
The Parties: Defendant Fusion Garage, a Singapore-based start-up company, was formed in
February 2008 with a goal of building a browser-based operating system for mobile devices. In July
2008, Fusion Garage became aware of a very public blog post purported to have been authored by
Arrington, TechCrunch's founder, in which Arrington expressed his desire to build a "dead simple web
tablet for $200." Arrington made a public offer and challenge, and invited public response. He never
suggested that anyone who responded would become his partner or a joint venturer with him or his
TechCrunch alter-ego. Intrigued by the possible synergies between its own browser-based operating
system and Arrington's web tablet idea, Fusion Garage CEO Chandrasekar Rathakrishnan traveled to
San Francisco for a technology trade show that TechCrunch was hosting. At this trade show,
Rathakrishnan met Arrington, who was likewise intrigued by the possible synergies between his web
tablet idea and Rathakrishnan's operating system. However, as Arrington has already been forced to
admit in this case under oath, both men recognized from the outset that the only possible way

TechCrunch and Fusion Garage could work together would be through a merger of their corporate
entities. (Ex. A at 85:1-6) ("The first meeting I had with Chandra was, I believe, in — I believe in
October . . . At that meeting, we, Chandra and I, agreed that the only way to work together was a
merger of the entities.") (emphasis added).
The Early Merger Negotiations: Plaintiffs began negotiating to acquire Fusion Garage in late
2008. On December 18, 2008, TechCrunch CEO Heather Harde sent Rathakrishnan a "Letter of Intent"
to acquire Fusion Garage for a lump-sum of cash plus 8 percent stock in CrunchPad, Inc., a new shell
company that TechCrunch set up to commercialize their web tablet idea. (Ex. B.) Notably, the Letter of
Intent was unsigned, and included a limited "no-shop" provision, under which Fusion Garage could
shop itself to other corporate suitors if no merger was struck within 60 days. This no-shop provision
shows that TechCrunch did not consider Fusion Garage to be a "joint venturer" who was bound by
duties of loyalty to TechCrunch. Rather, Fusion Garage was simply a potential acquisition target who
could walk away and/or merge with other companies if it did not merge with CrunchPad, Inc. within
this 60-day window.
Arrington and TechCrunch are not in a position to claim that they did not understand the legal
significance of this writing. Arrington is a lawyer, who practiced for three years with two large corporate
law firms. Although he abandoned the law as a profession relatively early on, Arrington knew enough to
know that the Letter of Intent was, in fact, a clear expression that there would be no legal relationship
between the parties unless they entered into a formal, written agreement to do so. In fact, Arrington,
Harde, and TechCrunch contractor Louis Monier explained to Fusion Garage in no uncertain terms that
Arrington could not "formalize something with [Fusion Garage] (as in signed papers) until [Plaintiffs]
close the round of funding" and that the funding and merger must "happen in the right order." (Ex. C.)

Fusion Garage's Early Involvement with Plaintiffs' Web Tablet Efforts: Ultimately, the
parties did not agree to the merger terms set forth in Harde's December 18 Letter of Intent (there was no
other letter of intent presented by Arrington, Harde or TechCrunch) and the funding never came—ever.
In fact, the merger talks virtually ceased in early 2009. In large part, this was due to the fact that
Arrington took a sabbatical from work during this period—burned out from his work schedule and upset

about a recent incident in which he had been spat upon by a heckler in Germany.
Nonetheless, in an effort to show its bona fides as a potential acquisition target, and for no
consideration whatsoever, Fusion Garage supplied a version of its browser software to TechCrunch in
January 2009 for use in "Prototype B" of the "CrunchPad"—the then-current web tablet prototype that
TechCrunch had developed.' Fusion Garage offered this technology to Arrington and his alter ego
under the mistaken belief—based on representations by Arrington— that Arrington and his alter-ego
were so well-connected to the venture capital community that he would actually be able to arrange for
an acquisition of Fusion Garage. This and similar representations by Arrington and TechCrunch were
false: Arrington and Techcrunch were at all relevant times venture-capital wannabes.
The Death of Plaintiffs' Web Tablets Efforts – And Birth of Fusion Garage's Device: By
March 2009, it became clear that Arrington's or TechCrunch's desire to fund a company that could
actually build a web tablet was fading and that his ability to attract venture capital was illusory. Louis
Monier—the consultant that Plaintiffs allegedly hired to spearhead their web tablet efforts—remarked to
Rathakrishnan around this time that Plaintiffs' web tablet project "had no legs," that there was
insufficient funding available, and that Fusion Garage should figure out what to do on its own should it
wish to pursue a web tablet. (Ex. D at 259:12-17.)

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As this name implies, "Prototype B" was TechCrunch's second web tablet prototype. The
first prototype, "Prototype A," was an August 2008 device that TechCrunch created before they had
ever met. Fusion Garage. By Arrington's own admission, Prototype A was a "humble and messy"
device that "barely booted."
Faced with the reality that Arrington and his alter-egos were more form than substance,
Fusion Garage was forced to develop both the hardware and the software for its own web tablet
without any acquisition by TechCrunch or Arrington's new alter-ego, CrunchPad, Inc. During March
and April 2009, Fusion Garage developed its own hardware platform, further refined its operating
system, and built an entirely new web tablet prototype from scratch. Arrington
contributed no technology of any kind to this development effort.
Fusion Garage showed the device to Arrington in April 2009 in an effort to jump-start or
invigorate the lagging merger negotiations. Arrington, always the publicity whore, rushed to blog about

this new device, publishing a lengthy piece about it on April 10, 2009 (Ex. E), but again failed to
secure any venture capital that would support an acquisition of Fusion Garage.
Notably, Arrington's April 10 post makes indisputably clear that this new device was created
solely by Fusion Garage, on both the hardware and software fronts. Specifically, Arrington wrote
that "this time the ID and hardware work was driven by Fusion Garage.. the credit for what we saw

today goes entirely to the Fusion Garage team." (Ex. E) (emphasis added). As Arrington's post
pointed out, this new Fusion Garage device was vastly dissimilar from the previous "Prototype B,"
which had contained Fusion Garage software but third-party hardware. (Ex. E.) Indeed, a cursory
comparison between "Prototype B" and Fusion Garage's April 2009 device shows the vast
differences between the two devices:

Prototype B

Fusion Garage's Web Tablet

Plaintiffs' Inability to Raise Money Stalls the Merger Negotiations: Fusion Garage's
unveiling of its new device did inspire Arrington and his alter ego to make noises about an intent to
continue merger negotiations. Soon, however, an uncomfortable reality—Arrington's utter inability to
raise money—caused the negotiations to fail.
Arrington had earlier expressed his desire that CrunchPad, Inc. acquire Fusion Garage. Fusion
Garage knew, however, that if Fusion Garage was to lose its independence and merely become a
shareholder in CrunchPad, Inc., it needed assurances that Plaintiffs could raise sufficient capital to
launch the device. Arrington and his alter ego also wanted the security of a round of financing before
merging with Fusion Garage. Despite Arrington's self-proclaimed "esteemed position in the technology
world," however, he and his alter egos proved surprisingly inept at raising capital.
As Arrington testified, he knew that Plaintiffs needed to raise roughly $2 million to launch a
web tablet under the CrunchPad name. (Ex. A at 316:9-11) ("$2 million seemed to be roughly the
amount needed to get to the point where we could start producing CrunchPads.") During the middle

part of 2009, Plaintiffs repeatedly sought to raise this $2 million from Silicon Valley venture capitalists
and technology companies—but they failed to even approach this $2 million figure. Indeed, they only
received one term sheet for an amount that was an order of magnitude less than this figure. Arrington

and his alter egos were all turned down by no less than 16 different venture capital funding
sources. Notably, this rejection was not based on anything that Fusion Garage had done or said:
Arrington was simply unable to establish any meaningful credibility with any of the venture capital
sources he contacted about his "web tablet" idea.
Fusion Garage was concerned about the inability of Arrington or his alter egos to raise the
necessary capital. At the same time, it began to dawn upon Arrington that, without necessary venture
capital, any merger with Fusion Garage was doomed, as were the prospects of Arrington or his alter
egos' participating in the development of a web tablet. Arrington has been forced to admit in this case
that, at this time in 2009, he told Fusion Garage and third parties that the "CrunchPad" was dead. (Exs.
F, G.)

Fusion Garage's Continued Work on its Web Tablet During Summer '09: Plaintiffs'
fundraising failures may have stalled the merger talks, but they did not stall Fusion Garage's continued
development of its device during the Summer of 2009. Fusion Garage personnel worked virtually
non-stop during this period to refine the device's hardware and software.
Attempting to take credit for Fusion Garage's own efforts on the hardware front, Plaintiffs'
Complaint alleges that "in July 2009, Plaintiffs and Fusion Garage brought in [Plaintiffs' contractor]
Brian Kindle to oversee hardware development for the CrunchPad." (Amended Complaint 42.) This is
false and known by both Arrington and TechCrunch to be false. In this case, Mr. Kindle conceded he
could not claim any credit for the development of Fusion Garage's hardware. Mr. Kindle was so
unfamiliar with Fusion Garage's development efforts and the relevant technology that he conceded he
had no knowledge about how the CrunchPad's prototypes evolved after he was hired in July 2009, and
he could not identify something as basic as whether the final product's form factor would be plastic or
metal. In fact, Mr. Kindle was so detached from any development process that he could not even
identify photographs of any version of the Fusions Garage prototype. Mr. Kindle's utter ignorance of the

device's evolution during his tenure on the alleged CrunchPad project reflects that he made no
significant contribution to the hardware of Fusion Garage's device.2
Arrington and His Alter Egos as the Worst Sort of "Partner" or " Joint Venturer":
Contrary to Plaintiffs' allegations that they were in a "joint venture" with Fusion Garage in which the
parties owed each other fiduciary duties, Plaintiffs' conduct and statements throughout the entire 200809 period make clear that they were simply in arms-length merger negotiations with Fusion Garage and
did not believe that they owed Fusion Garage any fiduciary duties whatsoever. Moreover, Plaintiffs'
own statements and actions during this time period reveal their belief that any party could unilaterally
walk away at any moment.
2 Nor can Plaintiffs or their representatives claim any credit for the software in Fusion
Garage's device. Indeed, Mr. Arrington admitted in deposition that Fusion Garage did all the software
coding dating back to the launch of "Prototype B" in January 2009. (Ex. A at 338:23339:2.)

For instance, in an October 2008 pitch to potential investors, TechCrunch wrote that it planned
to either acquire Fusion Garage or hire away Fusion Garage's employees. (Ex. H at TC00004114)
("we're working with a Singapore startup that has developed a kick ass working prototype . . . We will
either acquire the startup (or hire the team).") (emphasis added). Two months later, Arrington
brainstormed with TechCrunch CEO Heather Harde about how they could threaten to work with other
software companies if Fusion Garage did not agree to Plaintiffs' proposed merger terms. (Ex. I) ("Tariq
pitched me on using [his operating system] for the tablet. It doesn't work for what we're doing, but it's a
cool UI and if FG gives us any crap about terms we should suggest they are our alternative.")
(emphasis added). Even as late as August 2009, Plaintiffs' contractor Nik Cubrilovic, proposed
"poaching" Fusion Garage's employees and letting Fusion Garage "die" as viable business strategies for
Plaintiffs. (Ex. J) ("option 2 is we kill the project and fusion garage also dies . . . option 3 is we just
poach his guys, run it ourselves.") This behavior is inconsistent with the behavior of someone who truly
believes they are in a joint venture with someone to whom they owe fiduciary duties.
But Arrington's willingness to poach Fusion Garage's employees was just the tip of the iceberg
when it comes to conduct evincing the absence of any fiduciary duties to Fusion Garage.

By late August 2009, the only party that had done anything about actually contacting and
working with a manufacturer for the web tablet was Fusion Garage. Arrington's efforts at raising capital
to finance an acquisition of Fusion Garage had all but failed as of mid- or late-August 2009. It was
during this period that Fusion Garage introduced Arrington and his alter ego TechCrunch to Pegatron
Corporation, the original design and manufacturing company that Fusion Garage had contacted to
discuss building the tablet. Pegatron apparently insisted that it be paid a one-time $700,000 NonRecurring Engineering (NRE) fee before they would begin manufacturing.
Arrington knew that he had no financing for the acquisition of Fusion Garage. He also knew
that he had no funding to pay a $700,000 NRE fee to Pegatron. Keenly aware of the fact that he was
unable to finance either the development of the web tablet or the acquisition of Fusion

Garage, Arrington outright threatened Pegatron that, if it did not drop the demand for a
$700,000 NRE fee, TechCrunch would abandon any interest in developing the CrunchPad and
Pegatron would instead have to manufacture the web tablet for Fusion Garage without
TechCrunch's involvement. Or, as Pegatron confirmed a conversation it had with Arrington's
hired contractor, Brian Kindle:
[Pegaron understands from Kindle that] if Pegatron is not willing to
change current agreement and MOU ($700K NRE / 1200K life
cycle), TechCrunch will drop out of this business and stop merging
Fusion Garage. Fusion Garage will not get any supporting [sic] from
TechCrunch or certain famous business units. But, Fusion Garage
may keep doing business with Pegatron by itself.
(Ex, K) (emphasis added.)
Put simply, by the end of August 2009, Arrington and TechCrunch clearly believed that
they owed no fiduciary duties to Fusion Garage and that Fusion Garage owed none to Arrington
or TechCrunch, and that Fusion Garage had the option of going-it-alone in developing its own
web tablet.
Critically, Arrington and TechCrunch concealed this email string, along with hundreds of
other documents, when they applied for a preliminary injunction in this case.
Fusion Garage's Mounting Doubts That Arrington Could Ever Raise the Requisite

Funding: By the Fall of 2009, with Plaintiffs still incapable of raising anywhere near the $2

million it believed was required to manufacture and sell the devices, Fusion Garage began to
realize that the prospects of a merger with CrunchPad, Inc. were remote. Arrington and his alteregos had failed to come up with any meaningful capital to warrant acquisition of Fusion Garage.
Fusion Garage had also performed all the work to develop its web tablet on its own, with no
meaningful assistance from Arrington or his alter-egos.
While Fusion Garage continued to negotiate with Plaintiffs and hold out hope that their
fundraising efforts would improve, it also began laying the groundwork to sell the device on its
own should the prospective merger with CrunchPad, Inc. fail or never materialize. For instance,
Fusion Garage internally decided that they would call their device the "JooJoo" if Arrington could

not raise the money or develop the capital to acquire Fusion Garage. Fusion Garage registered the web
address www.thejoojoo.com to prepare for this contingency, and also retained McGrath/Power Public
Relations to drive advertising and PR for its device should the merger negotiations fall apart.
Arrington and his alter-egos make much of the fact that Fusion Garage did not disclose this
contingency plan to Arrington or TechCrunch. Of course, Arrington and his alter-ego also never
disclosed to Fusion Garage their intention to poach Fusion Garage employees. They never disclosed to
Fusion Garage the full extent of their complete and utter failure to raise venture capital for any
acquisition of Fusion Garage. In fact, Arrington seemed to go out of his way not to cc anyone from
Fusion Garage on emails or correspondence with venture capitalists who were rejecting Arrington right
and left as a financial target.
Moreover, Fusion Garage was concerned that Arrington might use the TechCrunch blog to
unfairly smear Fusion Garage if he knew that Fusion Garage was considering breaking off merger
negotiations and launching the device on their own. After all, during their months of negotiations,
Fusion Garage had significant contact with Arrington and had witnessed first-hand his mercurial
temper—a temper repeatedly confirmed by Arrington's own colleagues. (Ex. L at 334:17-335:3.)
Arrington has an unfortunate, disturbing, and almost pathological tendency to use the
TechCrunch blog as a weapon against those whom he dislikes or those who disagree with him. For

instance, when faced with a balky screen vendor for one of his early CrunchPad prototypes, Arrington
had expressed his frustration to his colleagues as follows: "fuck that, bulldoze around this problem. find
out who their investors are ... i may just trash them on techcrunch. dicks." (Ex. M) (emphasis added).
When Pegatron refused to budge on the NRE charge, Arrington had Kindle tell Pegatron that he would
drop a "hail storm of negative press" on Pegatron and otherwise use the bad press against Pegatron as
"negative guns"—and to put them in his "crosshairs"—if it did not capitulate to his desires. (Ex. N.)
Fusion Garage had no desire to be likewise "trashed" on the widely-read TechCrunch blog simply for
voicing its growing doubts that the merger would go through or that Arrington's fundraising efforts
would improve.

The End of the Merger Negotiations and Fusion Garage's Launch of the JooJoo: By midNovember 2009, it became clear to Fusion Garage that the merger was not going to go forward. The
fundraising efforts of Arrington and TechCrunch had failed miserably and repeatedly, and they no
longer wanted to take the great financial risk associated with bringing the web tablet to market. Fusion
Garage realized that its web tablet would never see the light of day if Fusion Garage continued to wait
to be merged with CrunchPad, Inc. It was time for Fusion Garage to break off negotiations and launch
its device on its own.
In an effort to soften the blow and avoid confrontation, Mr. Rathakrishnan wrote to Mr.
Arrington on November 17 that Fusion Garage's investors were unwilling to go through with the merger
and that he had no choice but to follow their directives. In fact, Fusion Garage and its investors were on
the same page by this point, and any attempt by Plaintiffs to distort this fact is grossly misinformed and
is utterly ignorant of their own history of "trashing" and causing a "hail storm of negative press" to fall
upon anyone who Plaintiffs believed to have crossed them. Fusion Garage formally launched its device
under the "JooJoo" brand two weeks later, on December 7,
2009.
The Filing of This Lawsuit and Arrington's Smear Campaign Against Fusion Garage:
Plaintiffs responded to the launch of the JooJoo by filing this lawsuit on December 10, 2009. Given the
failure of TechCrunch and Arrington to develop a web tablet or raise money to buy a company that

could develop a web tablet, Fusion Garage's decision to launch the JooJoo was the luckiest thing that
could have ever have happened to them. Fusion Garage did all the work, took on all the risk, and
launched a product that Arrington and TechCrunch had long lost interest in. Plaintiffs' lawsuit enables
them to seek Fusion Garage's profits without having to take on any of the risks associated with having
to run a web tablet business.
Even better for Arrington, this lawsuit permits him to engage in a systematic smear
campaign against Fusion Garage to save face after he found out that it could not deliver on his
promise of a web tablet. He now has someone to blame.INTRODUCTORY STATEMENT
1.

Fusion Garage denies the allegations in Paragraph 1.1,

2.

Fusion Garage denies the allegations in Paragraph 2.

3.

Fusion Garage denies the allegations in Paragraph 3.

4.

Fusion Garage denies that it was ever involved in a joint venture with Plaintiffs. Fusion

Garage responds that the statements cherry-picked by Plaintiffs in Paragraph 4 have been taken
completely out of context, considering Fusion Garage's very real fear about being the subject of
Plaintiffs' history of threatening to use the TechCrunch blog to "trash" and cause a "hail storm of
negative press" to fall upon anyone who they believe to have crossed them—, however unfounded.
Fusion Garage denies that it was ever involved in a joint venture with Plaintiffs.(Exs. A, B, C at 334335.) Fusion Garage further denies the remaining allegations of Paragraph 4.
5.

Fusion Garage admits that Plaintiffs purport to bring this suit to seek redress for the

purported misconduct alleged in the Amended Complaint, but denies the remaining allegations in
Paragraph 5.
PARTIES
6.

Fusion Garage lacks knowledge or information sufficient to form a belief as to the

truth or falsity of the allegations in Paragraph 6, and therefore denies them.
7.

6. Fusion Garage lacks knowledge or information sufficient to form a belief as to the

truth or falsity of the allegations in Paragraph 6, and therefore denies them.7, and therefore denies
them.
7.

Fusion Garage lacks knowledge or information sufficient to form a belief as to the

truth or falsity of the allegations in Paragraph 7, and therefore denies them.
8.

Fusion Garage admits that it is a Singapore company with its principle place of

business in Singapore. The second sentence of Paragraph 8 states a legal conclusion to which no
response is required. Fusion Garage admits that Chandrasekhar Rathakrishnan is a Singapore national
and is the chief executive of Fusion Garage. Fusion Garage further denies the remaining allegations of
Paragraph 8.
JURISDICTION
9.

Fusion Garage admits that this Court has original jurisdiction over the action under 28

U.S.C. § 1332.

VENUE
10.

For purposes of this action, Fusion Garage does not contest venue in the United

States District Court for the Northern District of California. Fusion Garage denies the substance
of the remaining allegations in Paragraph 10.
INTRADISTRICT ASSIGNMENT
11.

Fusion Garage admits that Plaintiffs initially brought claims under the Lanham Act,

for which this action was not subject to intradistrict assignment. Plaintiffs' Lanham Act claims
were dismissed in an Order by Judge Seeborg dated August 24, 2010.
FACTS COMMON TO ALL CAUSES OF ACTION
12.

Fusion Garage lacks knowledge or information sufficient to form a belief as to the

truth or falsity of the allegations in Paragraph 12, and therefore denies them.

12.

13. Fusion Garage lacks knowledge or information sufficient to form a belief as to

the truth or falsity of the allegations in Paragraph 13,12, and therefore denies them.
13.

14. Fusion Garage lacks knowledge or information sufficient to form a belief as to

the truth or falsity of the allegations in Paragraph 14, and therefore denies them.13, and therefore
denies them.
14.

Fusion Garage lacks knowledge or information sufficient to form a belief as to the

truth or falsity of the allegations in Paragraph 14, and therefore denies them.
15.

Fusion Garage lacks knowledge or information sufficient to form a belief as to the

truth or falsity of the allegations in the in Paragraph 15, and therefore denies them. Fusion Garage
states that Exhibit 1 and the quoted language speak for themselves.
16.

Fusion Garage lacks knowledge or information sufficient to form a belief as to the

truth or falsity of the allegations in Paragraph 16, and therefore denies them. Fusion Garage states
that Exhibit 2 and the quoted language speak for themselves.
17.

Fusion Garage lacks knowledge or information sufficient to form a belief as to

the truth or falsity of the allegations in Paragraph 17, and therefore denies them.
18.

Fusion Garage lacks knowledge or information sufficient. to form a belief as to

the truth or falsity of the allegations in the first sentence of Paragraph 18, and therefore denies
them. Fusion Garage admits that Mr. Rathakrishnan meet Mr.met Michael Arrington while at
TechCrunch 50. Fusion Garage lacks knowledge or information sufficient to form a belief as to the
truth or falsity of the remaining allegations in the second sentence of Paragraph 18, and therefore
denies them.

Fusion Garage lacks knowledge or information sufficient to form a belief as to the truth or falsity
of the remaining allegations in the second sentence of Paragraph 18, and therefore denies them.
19.

Fusion Garage states that Exhibit 3 and the quoted language speak for

themselves,. Fusion Garage denies Plaintiffs' characterization and interpretation of this language.
Fusion Garage further denies the remaining allegations of Paragraph 19.
20.

Fusion Garage admits that Mr. Arrington, Ms.TechCrunch CEO Heather Harde,

and Mr. Rathakrishnan meetmet on September 23, 2008, but lacks knowledge or information
sufficient to belief as to the truth or falsity of the allegations of the remainder of the first sentence
of Paragraph 20, and therefore denies them. Fusion Garage states that Exhibit 4 and the quoted
language speak for themselves. Fusion Garage denies the remaining allegations in Paragraph 20.
Fusion Garage further avers that Mr. Arrington even admitted that from the outset the only way
TechCrunch and Fusion Garage could work together would be through a merger of their

corporate entities. (Ex. D at 85:1-6) ("The first meeting I had with Chandra was, I believe, in — I
believe in October . . . At that meeting, we, Chandra and I, agreed that the only way to work
together was a merger of the entities.") (emphasis added).

21.

Fusion Garage states that Exhibit 5 and the quoted language speak for themselves.

Fusion Garage denies Plaintiffs' characterization and interpretation of this language. Fusion
Garage denies the remaining allegations in Paragraph 21.

22.

Fusion Garage lacks knowledge or information sufficient to form a belief as to the

truth or falsity of the allegations in the first two sentences of Paragraph 22, and therefore denies
them. Fusion Garage admits that CrunchPad, Inc. would have been the entity to merge with
Fusion Garage had the parties' merger talks succeeded. Fusion Garage denies that the parties
ever collaborated on a web tablet in parallel with their merger talks. Fusion Garage denies the
remaining allegations of Paragraph 22.further avers that the parties never consummated this merger.

On December 18, 2008, Ms. Harde sent Rathakrishnan a "Letter of Intent" to acquire Fusion
Garage for a lump-sum of cash plus 8 percent stock in CrunchPad, Inc., a new shell company that
TechCrunch set up to commercialize their web tablet idea. (Ex. E.) Notably, the Letter of Intent
was unsigned, and included a limited "no-shop" provision, under which Fusion Garage could shop
itself to other corporate suitors if no merger was

struck within 60 days. (Id. at FG00001047.) This no-shop provision shows that TechCrunch did not
consider Fusion Garage to be a "joint venturer" who was bound by duties of loyalty to TechCrunch. (See

also Ex. F ("Tariq pitched me on using [his operating system] for the tablet. It doesn't work for what
we're doing, but it's a cool UI and if FG gives us any crap about terms we should suggest they are our

alternative." (emphasis added).) Rather, Fusion Garage was simply a potential acquisition target who
could walk away and/or merge with other companies if it did not merge with CrunchPad, Inc. within
this 60-day window. TechCrunch knew that the Letter of Intent was, in fact, a clear expression that there
would be no legal relationship between the parties unless they entered into a formal, written agreement
to do so. Mr. Arrington, Ms. Harde, and TechCrunch contractor Louis Monier explained to Fusion
Garage in no uncertain terms that Arrington could not "formalize something with [Fusion Garage] (as in

signed papers) until [Plaintiffs] close the round of funding" and that the funding and merger must
"happen in the right order." (Ex. G.)
23.

Fusion Garage admits that a prototype known as "Prototype B" was constructed as of

January 19, 2009 and that Fusion Garage provided the source code for "Prototype B." Fusion Garage
avers that it offered this technology to TechCrunch under the mistaken belief—based on representations
by Mr. Arrington—that Mr. Arrington and TechCrunch were well-connected in the venture capital
community and would be able to arrange for an acquisition of Fusion Garage. Mr. Arrington and
TechCrunch failed to arrange this acquisition and failed to secure any funding for Fusion Garage.
Indeed, Mr. Arrington and TechCrunch were turned down by no less than 16 different venture capital
funding sources. Fusion Garage lacks knowledge or information sufficient to form a belief as to the
truth or falsity of the remainder of the allegations in Paragraph 23, and therefore denies them.
24.

Fusion Garage states that Exhibit 6 and the quoted language speak for themselves.

Fusion Garage lacks knowledge or information sufficient to form a belief as to the truth or falsity of
the remaining allegations in Paragraph 24, and therefore denies them.

25.

Fusion Garage lacks knowledge or information sufficient to form a belief as to the

truth or falsity of the allegations in the first sentence of Paragraph 25, and therefore denies them.
Fusion Garage denies the remaining allegations of Paragraph 25.
26.

Fusion Garage lacks knowledge or information sufficient to form a belief as to the

truth or falsity of the allegations in Paragraph 26, and therefore denies them. Fusion Garage states
that Exhibit 7 and the quoted language speak for themselves.
27.

Fusion Garage lacks knowledge or information sufficient to form a belief as to the

truth or falsity of the allegations in Paragraph 27, and therefore denies them. Fusion Garage avers
that Louis Monier—the consultant that Plaintiffs allegedly hired to spearhead their web tablet
efforts—remarked to Mr. Rathakrishnan around this time that Plaintiffs' web tablet project "had
no legs," that there was insufficient funding available, and that Fusion Garage should figure out
what to do on its own should it wish to pursue a web tablet. (Ex. H at 259:12-17.)
28.

Fusion Garage denies the allegations in Paragraph 28.

29.

Fusion Garage lacks knowledge or information sufficient to form a belief as to the

truth or falsity of the allegations in Paragraph 29, and therefore denies them.
30.

'Fusion Garage admits that it drove the industrial design and hardware work for the

its own web tablet out of Singapore, and that it should get the credit for developing its own webthe
tablet. (Ex. I.) Fusion Garage lacks knowledge or information sufficient to form a belief as to the
truth or falsity of the remaining allegations in Paragraph 30, and therefore denies them. Fusion
Garage states that Exhibit 8 and the quoted language speak for themselves.
31.

Fusion Garage denies the allegations in Paragraph 31.

32.

Fusion Garage states that Exhibit 9 and the quoted language speak for themselves.

Fusion Garage denies Plaintiffs' characterization and interpretation of this language. Fusion
Garage denies the remaining allegations in Paragraph 32.
33.

Fusion Garage states that Exhibit 10 and the quoted language speak for themselves.

Fusion Garage denies Plaintiffs' characterization and interpretation of this language. Fusion Garage
denies the remaining allegations in Paragraph 33.

34.

Fusion Garage denies the allegations in Paragraph 34.

35.

Fusion Garage denies the allegations in the first sentence of Paragraph 35. Fusion

Garage avers that Mr. Arrington recognized around this time that any merger with Fusion Garage
was doomed without further venture capital funding. Fusion Garage states that Exhibit 11 and the
quoted language speak for themselves. By August 2009, Mr. Arrington had told Fusion Garage
and third parties that the "CrunchPad" was "dead." (Exs. J, K.) Fusion Garage lacks knowledge or
information sufficient to form a belief as to the truth or falsity of the remaining allegations in
Paragraph 35, and therefore denies them.
36.

Fusion Garage states that Exhibit 12 and the quoted language speak for themselves.

Fusion Garage denies Plaintiffs' characterization and interpretation of this language. Fusion
Garage denies the remaining allegations in Paragraph 36.
37.

37,

38.

Fusion Garage states that Exhibit 13 and the quoted language speak for themselves.

Fusion Garage denies the allegations in Paragraph 37.

Fusion Garage denies Plaintiffs' characterization and interpretation of this language. Fusion
Garage denies the remaining allegations in Paragraph 38.
39.

Fusion Garage states that Exhibit 13 and the quoted language speak for themselves.

Fusion Garage denies Plaintiffs' characterization and interpretation of this language. Fusion
Garage lacks knowledge or information sufficient to form a belief as to the truth or falsity of the
remaining allegations in Paragraph 39, and therefore denies them.
40.

Fusion Garage states that Exhibit 13 and the quoted language speak for themselves.

Fusion Garage denies Plaintiffs' characterization and interpretation of this language. Fusion
Garage denies the remaining allegations in Paragraph 40.
41.

Fusion Garage denies that the parties engaged in any ongoing collaboration

separate and apart from their merger talks. Fusion Garage states that Exhibit 14 and the quoted
language speak for themselves. Fusion Garage denies Plaintiffs' characterization and
interpretation of this language. Fusion Garage denies the remaining allegations in Paragraph 41.
Indeed, Mr. Arrington and Mr. Rathakrishnan agreed from the outset that the only way
TechCrunch and Fusion Garage could work together would be through a merger of their corporate entities.
(Ex. D at 85:1-6)
42.

Fusion Garage admits that Mr. Rathakrishnan met Mr. Kindle at TechCrunch's offices

in July 2009. Fusion Garage avers that Mr. Kindle—as he has conceded under oath— made no significant
contribution to the hardware or software developed by Fusion Garage. Mr. Kindle was so unfamiliar with
Fusion Garage's development efforts and the relevant technology that he conceded he had no knowledge
about how the CrunchPad's prototypes evolved after he was hired in July 2009, and he could not identify
something as basic as whether the final product's form factor would be plastic or metal. In fact, Mr. Kindle
was so detached from any development process that he could not even identify photographs of any version
of the Fusions Garage prototype. Fusion Garage denies the remaining allegations in Paragraph 42,42.
43.

Fusion Garage denies the allegations in Paragraph 43.

44.

Fusion Garage states that Exhibit 15 and the quoted language speak for themselves.

Fusion Garage denies Plaintiffs' characterization and interpretation of this language. Fusion Garage

lacks knowledge or information sufficient to form a belief as to the truth or falsity of the remaining
allegations in Paragraph 44, and therefore denies them. Fusion Garage further avers that around this
same time TechCrunch threatened Pegatron that, if it did not drop the demand for a $700,000 NonRecurring Engineering fee to manufacture the web tablet, that TechCrunch would abandon any interest in
developing the CrunchPad and Pegatron would instead have to. manufacture the web tablet for Fusion
Garage without TechCrunch's involvement. Or, as Pegatron recounted a conversation that it had with
TechCrunch's contractor, Brian Kindle:
[Pegaron understands from Kindle that] if Pegatron is not willing to
change current agreement and MOU ($700K NRE / 1200K life cycle),
TechCrunch will drop out of this business and stop merging Fusion
Garage. Fusion Garage will not get any supporting [sic] from TechCrunch
or certain famous business units. But, Fusion Garage may keep

doing business with Pegatron by itself.
(Ex. L) (emphasis added.) Accordingly, Mr. Arrington and TechCrunch clearly believed that they owed no
fiduciary duties to Fusion Garage and that Fusion Garage owed none to Arrington or

TechCrunch, and that Fusion Garage had the option of going-it-alone in developing its own
web tablet.
45.

Fusion Garage states that Exhibit 15 speaks for itself. Fusion Garage denies

Plaintiffs' characterization and interpretation of Exhibit 15. Fusion Garage denies the remaining
allegations in Paragraph 45.
46.

Fusion Garage states that Exhibit 16 and the quoted language speak for themselves.

Fusion Garage denies Plaintiffs' characterization and interpretation of this language. Fusion
Garage lacks knowledge or information sufficient to form a belief as to the truth or falsity of the
remaining allegations in Paragraph 46, and therefore denies them.

Garage lacks knowledge or information sufficient to form a belief as to the truth or falsity of the
remaining allegations in Paragraph 46, and therefore denies them.

47.

Fusion Garage denies the allegations in Paragraph 47.

48.

Fusion Garage states that the photos in Paragraph 48 speak for themselves. Fusion

Garage denies Plaintiffs' characterization and interpretation of the photos. Fusion Garage denies
the remaining allegations in Paragraph 48.
49.

Fusion Garage denies the allegations in Paragraph 49.

50.

Fusion Garage denies the allegations in Paragraph 50.

51.

Fusion Garage states that Exhibit 17 and the quoted language speak for themselves.

Fusion Garage denies Plaintiffs' characterization and interpretation of this language. Fusion
Garage denies the remaining allegations in Paragraph 51.
52.

Fusion Garage admits that Fusion Garage conducted a demonstration of its web

tablet at TechCrunch's offices on or about October 27, 2009, in furtherance of the still-pending
merger negotiations. Fusion Garage states that Exhibit 18 speaks for itself. Fusion Garage denies
the remaining allegations in Paragraph 52.
53.

Fusion Garage states that Exhibit 19 and the quoted language speak for themselves.

Fusion Garage denies Plaintiffs' characterization and interpretation of this language. Fusion
Garage denies the remaining allegations in Paragraph 53.

54.

Fusion Garage states that Exhibit 20 and the quoted language speak for themselves.

Fusion Garage denies Plaintiffs' characterization and interpretation of this language. Fusion
Garage denies the remaining allegations in Paragraph 54.
55.

Fusion Garage states that Paragraph 55 contains a legal conclusion to which no

response is required. Fusion Garage otherwise denies the allegations in Paragraph 55.
56.

Fusion Garage denies the allegations in Paragraph 56, including subparagraphs (a)-

(i), as well as the implication that TechCrunch had anything to do with the development of Fusion
Garage's web tablet.
57.

Fusion Garage admits that it rightfully claims ownership of the product that it

developed on its own. Fusion Garage denies the remaining allegations in Paragraph 57.
58.

Fusion Garage denies the allegations in Paragraph 58, including the implication

that the parties were ever in a joint venture.
59.

Fusion Garage states that the email reproduced in this paragraph speaks for itself.

Fusion Garage denies Plaintiffs' characterization and interpretation of the email. Fusion Garage
denies the remaining allegations in Paragraph 59.
60.

Fusion Garage states that Exhibit 21 speaks for itself and that no further response is

required. Fusion Garage further denies the remaining allegations of Paragraph 21.
61.

Fusion Garage denies the allegations in Paragraph 61. Fusion Garage avers that

Plaintiffs and their founder, Michael Arrington, have a long history of threatening to "trash"
people and companies in their TechCrunch blog. Fusion Garage's fear of Plaintiffs doing the
same to Fusion Garage was justified, especially considering how Plaintiffs have simultaneously
with this lawsuit publicly harassed, embarrassed, and defamed Fusion Garage in numerous blog
posts.
62.

Fusion Garage denies the allegations in Paragraph 62.

63.

Fusion Garage admitsstates that Plaintiffs' contractor Nik Cubrilovic wanted to

poach Fusion Garage's personnel. Fusion Garage denies the remaining allegations in Paragraph
63.(Ex. M ("option 2 is we kill the project and fusion garage also dies . . . option 3 is we just poach
his guys, run it ourselves."); Ex. N at TC00004114 ("we're working with a Singapore startup that

has developed a kick ass working prototype ... We will either acquire the startup (or hire the
team)." (emphases added).) Fusion Garage denies the remaining allegations in Paragraph 63.

64.

Fusion Garage denies the allegations in Paragraph 64.

65.

Fusion Garage states that Exhibit 22 and the quoted language speak for themselves.

Fusion Garage denies Plaintiffs' characterization and interpretation of this language. Fusion
Garage denies the remaining allegations in Paragraph 65.
66.

Fusion Garage states that Exhibit 23 and the quoted language speak for themselves.

Fusion Garage denies Plaintiffs' characterization and interpretation of this language. Fusion
Garage denies the remaining allegations in Paragraph 66.
67.

Fusion Garage states that Exhibit 23 and the quoted language speak for themselves.

Fusion Garage denies Plaintiffs' characterization and interpretation of this language, as well as its
attribution to Plaintiffs. Fusion Garage denies the remaining allegations in Paragraph 67.
68.

Fusion Garage states that Exhibit 25 and the quoted language speaks for

themselves. Fusion Garage admits that it contracted with McGrath Power to assist in the
launch of its web tablet. Fusion Garage lacks knowledge or information sufficient to form a belief
as to the truth or falsity of the remaining allegations in Paragraph 68, and therefore denies them.
69.

Fusion Garage states that Exhibit 26 speaks for itself. Fusion Garage denies

Plaintiffs' characterization and interpretation of Exhibit 26. Fusion Garage denies the allegation
that it "secretly" planned to do anything that it was not entitled to do. Plaintiffs failed to find
financing and developed cold feet with respect to the merger. Fusion Garage denies the remaining
allegations in Paragraph 69.
70.

Fusion Garage states that Exhibit 27, the quoted language, and the McGrath Power

website speak for themselves. Fusion Garage denies Plaintiffs' characterization and interpretation
of this language. Fusion Garage lacks knowledge or information sufficient to form a belief as to
the truth or falsity of the allegations relating to the purported McGrath Power website, and
therefore denies them. Fusion Garage further denies the remaining allegations of Paragraph 70.

71.

Fusion Garage states that Exhibits 28 and 29 and the quoted language speak for

themselves, and denies Plaintiffs' characterizations and interpretations. Fusion Garage also denies
that it had any obligation to inform Plaintiffs of these facts alleged in Paragraph 71. Fusion
Garage denies the remaining allegations in Paragraph 71.
72.

Fusion Garage states that it was under no obligation to inform Plaintiffs that

"joojoo.com" was registered. Fusion Garage lacks knowledge or information sufficient to form a
belief as to the truth or falsity of the remaining allegations in Paragraph 72, and therefore denies
them.
73.

Fusion Garage states that Exhibit 30 and the quoted language speak for themselves.

Fusion Garage denies Plaintiffs' characterization and interpretation because they are taken out of
the context of Plaintiffs' history of threatening to use the TechCrunch.com blog to "trash" and

cause a "hail storm of negative press" to fall upon anyone who does not acquiesce to their
demands. Fusion Garage denies the remaining allegations of Paragraph 73.
74.

Fusion Garage states that Exhibit 31 and the quoted language speak for themselves.

Fusion Garage denies Plaintiffs' characterization and interpretation of this language. Fusion Garage
denies the remaining allegations in Paragraph 74.
75.

Fusion Garage lacks knowledge or information sufficient to form a belief as to the

truth or falsity of the allegations in Paragraph 75, and therefore denies them. Fusion Garage states
that Exhibit 32 speaks for itself. Fusion Garage denies Plaintiffs' characterization and
interpretation of the exhibit.
76

76. Fusion Garage states that Exhibit 32 and the quoted language speak for

themselves. Fusion Garage denies Plaintiffs' characterization and interpretation of this language.
Fusion Garage denies the remaining allegations in Paragraph 76.
77

77. Fusion Garage denies the allegations in Paragraph 77.

78

78. Fusion Garage states that Exhibit 33 and the quoted language speak for

themselves. Fusion Garage denies Plaintiffs' characterization and interpretation of this language as
it is taken

out of context and is misinformed. Fusion Garage denies the remaining allegations in Paragraph
78.
79.

Fusion Garage states that Exhibits 33 and 34, and the quoted language, speak for

themselves. Fusion Garage denies Plaintiffs' characterization and interpretation of this language as
it is taken out of context and is misinformed. Fusion Garage denies the remaining allegations in
Paragraph 79.
80.

Fusion Garage states that Exhibit 21 and the quoted language speak for themselves.

Fusion Garage denies Plaintiffs' characterization and interpretation of this language. Fusion Garage
denies the remaining allegations in Paragraph 80.
81.

Fusion Garage states that Exhibit 21 and the quoted language speak for themselves.

Fusion Garage denies Plaintiffs' characterization and interpretation of this language. Fusion Garage

denies the remaining allegations in Paragraph 81.
82.

Fusion Garage lacks knowledge or information sufficient to form a belief as to the

truth or falsity of the allegations in Paragraph 82, and therefore denies them. Fusion Garage
denies the implication that its web tablet was created as a result of a joint venture.
83.

Fusion Garage states that Exhibit 36 and the quoted language speak for themselves.

Fusion Garage denies Plaintiffs' characterization and interpretation of this language as it is taken
out of context and is misinformed. Fusion Garage denies the remaining allegations in Paragraph
83.
84.

Fusion Garage states that Paragraph 84 makes legal conclusions to which no

responsive pleading is required. Fusion Garage denies the implication that the parties were ever in
a joint venture.
85.

Fusion Garage states that Exhibit 37 and the quoted language speak for themselves.

Fusion Garage denies Plaintiffs' characterization and interpretation of this language as it is taken
out of context and is misinformed. Fusion Garage admits, however, its very real and justifiable fear
of Plaintiffs' and Mr. Arrington's propensity to "go all nuclear" on people and companies they believe
to have crossedtemper toward those who they perceive cross them.

TechCrunch CEO Heather Harde has testified to Mr. Arrington's temper. (Exs. A, B, C.) Fusion
Garage denies the remaining allegations in Paragraph 85.
86.

Fusion Garage states that Exhibit 35 and the quoted language speak for themselves.

Fusion Garage denies Plaintiffs' characterization and interpretation of this language.
87.

Fusion Garage admits that it announced the launch of its web tablet, the JooJoo, at

a December 7, 2009 press conference in San Francisco. Fusion Garage denies the remaining
allegations in Paragraph 87.
88.

This paragraph states a legal conclusion to which no responsive pleading is

required. Fusion Garage denies the implication that the parties were ever in a joint venture.
89.

Fusion Garage denies the allegations in Paragraph 89.

90.

Fusion Garage lacks knowledge or information sufficient to form a belief as to the

truth or falsity of the allegations in Paragraph 90, and therefore denies them.
91.

Fusion Garage denies the allegations in the first sentence of Paragraph 91. Fusion

Garage lacks knowledge or information sufficient to form a belief as to the truth or falsity of the
remaining allegations in Paragraph 91, and therefore denies them.
92.

Fusion Garage denies the allegations in Paragraph 92.

93.

Fusion Garage denies the allegations in Paragraph 93.

94.

Fusion Garage denies the first sentence in Paragraph 94. Fusion Garage states that

Mr. Rathakrishanan's deposition testimony speaks for itself.
95.

Fusion Garage states that Exhibit 22 and the quoted language speak for themselves.

Fusion Garage denies Plaintiffs' characterization and interpretation of this language.
96.

Fusion Garage denies the allegations in Paragraph 96.

97.

Fusion Garage denies the allegations in Paragraph 97.

98.

Fusion Garage states that Exhibits 23, 16, 25, 38, 28, 18, 29, 20, 30, and 21 and the

quoted language speak for themselves. Fusion Garage denies Plaintiffs' characterization and
interpretation of this language. Fusion Garage denies the remaining allegations in Paragraph 98.
99.

Fusion Garage denies the allegations in Paragraph 99.

100.

Fusion Garage denies the allegations in Paragraph 100.

101.

Fusion Garage denies the allegations in Paragraph 101. FIRST
CAUSE OF ACTION: BREACH OF FIDUCIARY DUTY

102.

Fusion Garage incorporates its responses to each and every paragraph above with

the same force and effect as if fully set forth herein.
103.

Fusion Garage denies the allegations in Paragraph 103.

104.

Fusion Garage denies the allegations in Paragraph 104.

105.

Fusion Garage denies the allegations in Paragraph 105.

106.

Fusion Garage denies the allegations in Paragraph 106.

107.

Fusion Garage denies the allegations in Paragraph 107.

108.

Fusion Garage denies the allegations in Paragraph 108.

109.

Fusion Garage denies the allegations in Paragraph 109.

110.

Fusion Garage responds that this paragraph states a legal conclusion to which no

response is required.
111.

Fusion Garage denies the allegations in Paragraph 111.

112.

Fusion Garage responds that this paragraph states legal conclusions to which no

responsive pleading is required. Fusion Garage denies the implication that the parties were in a
joint venture.
113.

Fusion Garage denies the allegations in Paragraph 113.

114.

Fusion Garage lacks knowledge or information sufficient to form a belief as to the

truth or falsity of the allegations in Paragraph 114, and therefore denies them. Fusion Garage
denies the implication that it needed Plaintiffs' "informed" consent to "act" in any manner.
115.

Fusion Garage denies the allegations in Paragraph 115.

116.

Fusion Garage denies the allegations in Paragraph 116.

117.

Fusion Garage denies the allegations in Paragraph 117. SECOND CAUSE OF
ACTION: FRAUD AND DECEIT

SECOND CAUSE OF ACTION: FRAUD AND DECEIT
118.

Fusion Garage incorporates its responses to each and every paragraph above with

the same force and effect as if fully set forth herein.
119.

Fusion Garage denies the allegations in Paragraph 119.

120.

Fusion Garage denies the allegations in Paragraph 120.

121.

Fusion Garage denies the allegations in Paragraph 121.

122.

Fusion Garage denies the allegations in Paragraph 122.

123.

Fusion Garage denies the allegations in Paragraph 123.

124.

Fusion Garage denies the allegations in Paragraph 124.

125.

Fusion Garage denies the allegations in Paragraph 125.

126.

Fusion Garage denies the allegations in Paragraph 126.

127.

Fusion Garage denies the allegations in Paragraph 127.

128.

Fusion Garage denies the allegations in Paragraph 128.

128.

Fusion Garage denies the allegations in Paragraph 128. THIRD CAUSE
OF ACTION: UNLAWFUL BUSINESS PRACTICES
UNDER
CALIFORNIA LAW

129.

Fusion Garage incorporates its responses to each and every paragraph above with

the same force and effect as if fully set forth herein.
130.

Fusion Garage denies the allegations in Paragraph 130.

131.

Fusion Garage denies the allegations in Paragraph 131.

132.

Fusion Garage denies the allegations in Paragraph 132.

133.

Fusion Garage denies the allegations in Paragraph 133.
FUSION GARAGE'S AFFIRMATIVE DEFENSES
FIRST AFFIRMATIVE DEFENSE
(FAILURE TO STATE A CLAIM)

134.

The Amended Complaint fails to state a claim upon which relief can be granted.

SECOND AFFIRMATIVE DEFENSE
(ESTOPPEL)
135.

Plaintiffs' claims are barred in whole or in part by application of the doctrine of

estoppel.
THIRD AFFIRMATIVE DEFENSE
(UNCLEAN HANDS)
136.

Plaintiffs' claims are barred in whole or in part by application of the doctrine of

unclean hands.
FOURTH AFFIRMATIVE DEFENSE
(WAIVER)
136.

137. Plaintiffs' claims are barred in whole or in part by application of the doctrine of

unclean hands.
FOURTH AFFIRMATIVE DEFENSE
(WAIVER)
137.

Plaintiffs' claims are barred in whole or in part by application of the doctrine of

waiver.
FIFTH AFFIRMATIVE DEFENSE
(ACQUIESCENCE)
138.

Plaintiffs' claims are barred by the doctrine of acquiescence.
SIXTH AFFIRMATIVE DEFENSE
(NO IRREPARABLE HARM)

139.

Plaintiffs' claims for injunctive relief are barred as a matter of law because Plaintiffs

have not suffered any irreparable harm as a result of the acts alleged in the Amended Complaint.
SEVENTH AFFIRMATIVE DEFENSE
(FAILURE TO MITIGATE)
140.

Plaintiffs' claims are barred, in whole or in part, by Plaintiffs' failure to mitigate their

alleged damages.

EIGHTH AFFIRMATIVE DEFENSE
(ADEQUATE REMEDY AT LAW)

141.

Plaintiffs' claims for injunctive relief are barred as a matter of law because

Plaintiffs have an adequate remedy at law for any damages resulting from the actions alleged in
the Amended Complaint.
NINTH AFFIRMATIVE DEFENSE
(ABUSE OF PROCESS)

142.

Plaintiffs' claims are without merit and are an attempt to harass Fusion Garage and

stifle free competition, such that Plaintiffs' claims constitute an abuse of process. TENTH
AFFIRMATIVE DEFENSE

TENTH AFFIRMATIVE DEFENSE
(NO CAUSATION)

143.

Plaintiffs' claims are barred because Plaintiffs' damages, if any, were not caused by

Fusion Garage.
ELEVENTH AFFIRMATIVE DEFENSE
(NO WILLFUL CONDUCT)

144.

Plaintiffs' claims for enhanced damages and an award of fees and costs against

Fusion Garage have no basis in fact or law and should be denied.
PRAYER FOR RELIEF

WHEREFORE, Fusion Garage respectfully requests the following relief:
1.

I.

Judgment in favor of Fusion Garage and against Plaintiffs on all of

Plaintiffs' claims asserted in the Amended Complaint;
2.

That the Court grant Fusion Garage an award for reasonable attorneys' fees and

costs of suit incurred herein; and,
3.

3.

That the Court award Fusion Garage such other and further relief as the Court deems

just and proper.
COUNTERCLAIM
Counterclaimant Fusion Garage PTE Ltd., as and for its Counterclaims against TechCrunch,
Inc. ("TechCrunch") and CrunchPad, Inc. (collectively "Counterclaim Defendants,") alleges as follows:
INTRODUCTORY STATEMENT
1.

Counterclaim Defendants have filed a lawsuit against Fusion Garage for breach of

fiduciary duty, claiming that Fusion Garage breached a "joint venture" to develop and launch a web
tablet computer. Counterclaim Defendants' claim is predicated on the allegation that they and Fusion
Garage jointly participated in the development of the web tablet computer. Indeed, the Amended
Complaint lists a number of "contributions" that Counterclaim Defendants allegedly made to the web
tablet's "specifications, performance characteristics . . . software architecture, hardware platform design
and component sourcing, hardware forms factor and other designs, driver integration, application
programming interface, [and] user interface." (Amended Complaint, 56(a)). However, these allegations
are false. Fusion Garage was entirely responsible for developing the hardware, software, user interface,
and other specifications of its web tablet, and Counterclaim Defendants cannot claim credit for Fusion
Garage's own efforts. Accordingly, Fusion Garage brings this counterclaim to protect its rights and to
oppose Counterclaim Defendants' wrongful attempt to claim credit for Fusion Garage's own device.

PARTIES
2.

Counterclaimant Fusion Garage is a Singapore company with its principal place of

business in Singapore.
3.

Upon information and belief, Counterclaim Defendant TechCrunch is a Delaware

corporation with its principal place of business in this District.
4.

Upon information and belief, Counterclaim Defendant CrunchPad, Inc. is a

Delaware corporation with its principal place of business in this District.

JURISDICTION
5.

The Court has original jurisdiction over this action, including Fusion Garage's

counterclaims, under 28 U.S.C. §§ 1332, 1367, and 2201.

VENUE
6. This District is a proper venue for these Counterclaims because, upon information and
belief, Counterclaim Defendants maintain their principal place of business in this District.

FACTS COMMON TO ALL CAUSES OF ACTION
A.

The Initial Contact Between TechCrunch and Fusion Garage

7.

Fusion Garage is a Singapore-based technology start-up company. On or about about

February 2008, Fusion Garage began developing an innovative browser-based operating system for
mobile devices.
8.

Upon information and belief, Counterclaim Defendant TechCrunch is a California-

based media company that owns and operates the "TechCrunch" blog. Its founder and co-editor is
Michael Arrington.
9.

On July 21, 2008, Mr. Arrington purportedly posted a public message on the

TechCrunch blog expressing his desire for a "dead simple web tablet for $200." This public message
came to the attention of Fusion Garage, which was intrigued by the possible synergies between
Arrington's web tablet idea and Fusion Garage's own operating system software. Fusion Garage's CEO,
Chandrasekar Rathakrishnan, traveled to San Francisco in September 2008 and met with Mr. Arrington
at the "TechCrunch 50" conference that month.

10.

Upon meeting Mr. Rathakrishnan, Mr. Arrington was likewise excited about the

possible synergies between his web tablet idea and Fusion Garage's operating system software.
Accordingly, Mr. Arrington and his colleagues began merger negotiations in the Fall of 2008 to
acquire Fusion Garage. Mr. Arrington also established a new shell company, "CrunchPad, Inc.,"
which was to be the corporation that merged with Fusion Garage and commercialized Mr. Arrington's
proposed web tablet.
11.

Upon information and belief, Mr. Arrington and his colleagues created two web tablet

prototypes in furtherance of his vision. The first prototype, an August 2008 device called "Prototype

A," was (by Mr. Arrington's own admission) a "humble and messy" device that "barely booted." The
second prototype, a January 2009 device called "Prototype B," was a 12.5" x 9.7" x 1.3" device
powered by a VIA Nano processor. Fusion Garage had no involvement in Prototype A, and its
involvement in Prototype B was limited to providing a version of its operating system software to
demonstrate the functionality of this software and prove its bona fides as an acquisition target.
B.

The Death of TechCrunch's Web Tablet Efforts and Birth of Fusion Garage's
Device

12.

By March 2009, it became clear to Fusion Garage that Mr. Arrington's and

TechCrunch's web tablet efforts were stalling. Louis Monier—the consultant that TechCrunch
allegedly hired to spearhead its web tablet efforts—remarked to Mr. Rathakrishnan around this time
that the web tablet project "had no legs," that there was insufficient funding available, and that Fusion
Garage should figure out what to do on its own should it wish to pursue a web tablet. (Ex. D.)
13.

Faced with the reality that Mr. Arrington and TechCrunch would be unable to build a

viable web tablet to house Fusion Garage's software, Fusion Garage began developing both software
and hardware for its own web tablet from scratch. Fusion Garage built successive prototypes of a web

tablet between March and November 2009.

14.

Fusion Garage and Counterclaim Defendants engaged in intermittent merger

negotiations throughout the March '09 — November '09 period. In furtherance of these merger
negotiations, Fusion Garage also kept Mr. Arrington and his colleagues appraised about the
development of its device and provided product demonstrations to Mr. Arrington and the
TechCrunch team.
15.

Neither Mr. Arrington, nor any other agent of TechCrunch or CrunchPad, Inc.,

contributed to the hardware, software, user interface, or other specifications of Fusion Garage's device
in any meaningful way. The device that Fusion Garage developed between March '09 and November
'09 (including all intermediate prototypes created during this period) was entirely a product of Fusion
Garage' own efforts and expertise.
16.

On or about November 17, 2009, Fusion Garage informed TechCrunch that the

merger talks appeared to be at an impasse and that Fusion Garage planned to launch its device
without Plaintiffs' involvement. Fusion Garage formally launched its device, under the name
"JooJoo," on December 7, 2009.
A. The Amended Complaint Tries to Take Credit for Fusion Garage's
Device
16.

Counterclaim Defendants filed suit against Fusion Garage on December 10, 2009,

alleging that Fusion Garage breached its fiduciary duty by launching the JooJoo without their
involvement. (Dkt. 1.) Counterclaim Defendants filed an Amended Complaint on September 13, 2010
which substantially repeated these allegations. (Dkt. 167.)
17.

Specifically, the Amended Complaint attempted to support the breach of fiduciary

duty claim by alleging that "Plaintiffs made numerous contributions to the joint venture with Fusion
Garage." (Id. at 56.) It went on to allege that "Plaintiffs' contributions included [] design and oversight
of the specifications, performance characteristics (including boot speed that Fusion Garage
prominently features in the advertising and promotion of its JooJoo product), software architecture,
hardware platform design and component sourcing, hardware forms factor and other designs, driver
integration, application programming interface, [and] user interface."

(Id.) In short, the Amended Complaint attempts to give Counterclaim Defendants partial or full credit
for the hardware, software, user interface, and other specifications of Fusion Garage's product, in order
to support their claim that they were in a "joint venture" with Fusion Garage over this product.
FIRST CAUSE OF ACTION: DECLARATORY JUDGMENT
18.

Fusion Garage realleges and incorporates by reference the allegations in paragraphs 1

through 17 above.
19.

From March '09 through November '09, Fusion Garage built successive versions of its

own web tablet computer. Counterclaim Defendants were not involved in developing the hardware,
software, user interface, or other specifications for this device.
20.

Counterclaim Defendants have attempted to take credit for the hardware, software, user

interface, and other specifications of Fusion Garage's device, in order to support their claim that they

were in a" joint venture" with Fusion Garage to build and launch this device.
21.

Accordingly, an actual and justiciable controversy exists over whether Counterclaim

Defendants contributed to the hardware, software, user interface, or other specifications for Fusion
Garage's device, as well as whether Counter Claim Defendants are entitled to claim ownership of any
intellectual property associated with Fusion Garage's device, including any copyrights, patents,
trademarks, trade secrets, or applications related to any copyrights, patents, or trademarks.
22.

To protect its rights over its device and defeat Counterclaim Defendants' "joint

venture" allegations, Fusion Garage seeks a declaratory judgment that Counterclaim Defendants did
not contribute to the hardware, software, user interface, or other specifications for Fusion Garage's
device.
23.

Counter Claim Defendants also seek a declaratory judgment that Counter Claim

Defendants do not own any aspect of the intellectual property related to Fusion Garage's device,
including any copyrights, patents, trademarks, trade secrets, or applications related to any copyrights,
patents, or trademarks.

24.

Fusion Garage is therefore entitled to relief as set forth below.
PRAYER FOR RELIEF

WHEREFORE, Fusion Garage prays that the Court enter judgment as follows:
A.
That Plaintiffs and Counter Defendants take nothing by way of their Amended
Complaint;
B.

That each and every purported claim for relief by Plaintiffs and Couterdefendants be

dismissed with prejudice;
C.

A declaration that Plaintiffs and Counterclaim Defendants made no contributions to the

hardware, software, user interface, or other specifications for Fusion Garage's device;
D.

A declaration that Plaintiffs and Counterclaim Defendants do not own any aspect of the

intellectual property related to Fusion Garage's device, including any copyrights, patents, trademarks,
trade secrets, or applications related to any copyrights, patents, or trademarks.
E.

Awarding Fusion Garage its costs of suit incurred herein, including attorneys' fees and

expenses; and
F.

Granting such other relief as the Court may determine just and equitable.
DEMAND FOR JURY TRIAL

Fusion Garage hereby demands a jury trial as to all such triable issues in this action.

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