Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_09-cv-05812/USCOURTS-cand-3_09-cv-05812-10/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 28:1338 Trademark Infringement

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For the Northern District of California 

**E-filed 08/24/2010** 

IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF CALIFORNIA 

SAN FRANCISCO DIVISION 

INTERSERVE, INC., et al., 

 Plaintiffs, 

 v. 

FUSION GARAGE PTE. LTD, 

 Defendant. 

____________________________________/

No. C 09-5812 RS (PVT) 

ORDER DENYING MOTION FOR 

PRELIMINARY INJUNCTION, AND 

GRANTING IN PART AND DENYING 

IN PART MOTION TO DISMISS 

I. INTRODUCTION 

 The parties to this action have widely divergent views as to the nature of their prior 

relationship and the legal consequences flowing from those interactions. What is not reasonably 

disputable, though, is that between September of 2008 and November of 2009, the parties 

collaborated in an attempt to bring to market a tablet computer, which they intended to call the 

“CrunchPad.” Then, shortly before the parties had planned to announce that the product would 

soon be released, defendant Fusion Garage advised plaintiffs that it would proceed on its own, and 

market a tablet computer under the name “joojoo” instead.1

 Plaintiffs filed this action contending, in essence, that they are co-owners of the joojoo. 

They seek a preliminary injunction requiring defendant to sequester all proceeds it obtains from 

 

1

 Fusion Garage markets the product with the name in all lower case letters. 

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selling the product. Defendant opposes the motion for preliminary injunction, and moves to dismiss 

the complaint. 

 While plaintiffs have shown that defendant may have breached fiduciary duties arising from 

a joint venture between the parties, they have not established the likelihood of irreparable injury 

necessary to support a preliminary injunction. Additionally, even if plaintiffs eventually prove an 

entitlement to share in any profits realized from sales of the joojoo, their request to sequester 100% 

of the sales proceeds is overbroad and not tenable. Accordingly, the motion for a preliminary 

injunction will be denied. The motion to dismiss will be granted in part and denied in part. 

II. BACKGROUND 

 Michael Arrington is the founder and editor in chief of the widely read and influential 

“TechCrunch,” blog, which focuses on Silicon Valley high technology companies and issues. 

Plaintiff Interserve, Inc. is a corporation formed to own and manage the blog and its related business 

interests. In July of 2008, Arrington posted an entry on TechCrunch proposing a project to develop, 

“a dead simple and dirt cheap touch screen web tablet to surf the web.” The entry set out a specific 

strategy: 

We’ll organize a small team of people to spec this out. First is the marketing 

document that just outlines what the machine will do – we have a first draft of that 

already and will post it soon. Then we’ll spec out the hardware and get people to help write 

the customized Linux and Firefox code. Once we’ve completed the design we’ll start to 

work with the supply chain company to get an idea on the cost of the machine (the goal is 

$200), and hopefully build a few prototypes. 

The blog post invited members of the public to contribute to the project, promising prototypes to 

“[a]nyone who contributes significantly to the project.” Notably the post went on to state, “[i]f 

everything works well, we’d then open source the design and software and let anyone build one that 

wants to.” The name “CrunchPad” was subsequently chosen for the planned device. 

 Although the record is not clear as to when or why the vision for the project changed, at 

some point it apparently did. The complaint alleges that Arrington incorporated plaintiff 

CrunchPad, Inc. (CP, Inc.) as an “offshoot” of Interserve, for the purpose of “commercializing” the 

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CrunchPad. (Hereafter, plaintiffs will be referred to collectively as “TechCrunch,” except where 

there is a need to distinguish between the two entities.) 

 By the end of August 2008, TechCrunch had constructed an admittedly crude prototype, 

which it referred to as “Prototype A.” Then, following a conference held by TechCrunch in 

September of that year, Arrington was introduced to Chandrasekhar Rathakrisnan, the founder of a 

startup technology company based in Singapore and known as Fusion Garage. Fusion Garage 

contends that at the time it was developing a customized software browser operating system, 

although TechCrunch now alleges Fusion Garage misrepresented the nature of the product and its 

development status. 

 The parties dispute what transpired next. TechCrunch contends that it and Fusion Garage 

agreed to collaborate on the development of the CrunchPad. Fusion Garage asserts that the parties 

began to negotiate—by email and by “on and off” verbal discussions—for an agreement by which 

TechCrunch would acquire Fusion Garage. Indeed, for the next year or more the parties did 

exchange a number of proposals for TechCrunch to purchase Fusion Garage in exchange for an 

equity interest in the then newly-formed CP, Inc. Although the parties never reached a binding 

agreement for such an acquisition, the record is clear that during the same time period they 

nevertheless went forward with efforts to design and build the CrunchPad as a commercial product. 

As TechCrunch describes it, the parties worked “hand in glove” for thirteen months. The parties’ 

joint efforts included all of the following: 

 • In December of 2008, Louis Monier of TechCrunch communicated with Fusion Garage to 

help define the user interface, technical specifications, and software details for a working prototype 

assembled by Mr. Monier’s team. At the time, Fusion Garage commented: “This is great news. 

Good to see the first signs of the baby.” 

 • Fusion Garage’s CEO and software team worked for several months largely from 

TechCrunch’s headquarters in Atherton, California. 

 • Fusion Garage publicly described the parties’ work together: “It’s our software running on 

the tablet . . . We continue to work with Louis Monier on the feature set and the user experience . . . 

. We would like to take the opportunity to thank Michael [Arrington] and Louis for giving us 

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the opportunity to work with them on the TechCrunch Tablet.” 

 • Fusion Garage later reported, “the collaboration with the Crunchpad project 

happened as a result of meetings we had with Mike Arrington and co, subsequent to 

[the conference hosted by TechCrunch]. We worked closely with Louis Monier in getting the 

software in shape for the hardware prototype B. We continue to work with them in getting the 

software in shape to make crunchpad an easy to use device.” 

 • TechCrunch paid some vendor bills incurred by Fusion Garage in development of the 

project. 

 • In August of 2009, at least two TechCrunch senior engineers traveled to Singapore and 

Taiwan to work with Fusion Garage on software, design, user interface issues, and with the parties’ 

jointly-selected manufacturer, Pegatron, on hardware and pricing. 

 • TechCrunch sponsored business visas for four Fusion Garage Indian nationals working on 

the project. During September of 2009, Fusion Garage and TechCrunch personnel continued 

working together in TechCrunch’s California offices to prepare the CrunchPad for its thenscheduled launch in November. 

 • As late as mid-November of 2009, Fusion Garage was proposing that the parties jointly 

announce the product at a November 20th event. 

 

 In late November of 2009, Fusion Garage advised TechCrunch that it was considering 

bringing the tablet computer to market without TechCrunch’s participation. After some final 

negotiations back and forth, on December 7, 2009, Fusion Garage released a webcast announcing 

the introduction of the joojoo. This action soon followed. 

III. LEGAL STANDARDS 

 A. Preliminary Injunction

 “A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on 

the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the 

balance of equities tips in his favor, and that an injunction is in the public interest.” Winter v. 

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N.R.D.C., Inc., 129 S.Ct. 365, 374 (2008). Injunctive relief is an “extraordinary remedy” and may 

only be awarded in response to a firm demonstration that the plaintiff is entitled to such relief. Id. at 

376 (citation omitted). 

 While the Winter decision established that a party moving for preliminary relief must 

establish a “likelihood” of irreparable harm, the Ninth Circuit has recently clarified that courts 

should still evaluate the likelihood of success on a “sliding scale.” Alliance for Wild Rockies v. 

Cottrell, __F.3d __, 2010 WL 2926463 (9th Cir. 2010) (“[T]he ‘serious questions’ version of the 

sliding scale test for preliminary injunctions remains viable after the Supreme Court’s decision in 

Winter.”) As quoted in Cottrell, that test provides that, “[a] preliminary injunction is appropriate 

when a plaintiff demonstrates . . . that serious questions going to the merits were raised and the 

balance of hardships tips sharply in the plaintiff’s favor,” provided, of course, that “plaintiffs must 

also satisfy the other Winter factors, including the likelihood of irreparable harm.” 2010 WL 

2926463 at *7. 

 B. Motion to Dismiss

Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a claim may be dismissed 

because of a “failure to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). A 

dismissal under Rule 12(b)(6) may be based on the lack of a cognizable legal theory or on the 

absence of sufficient facts alleged under a cognizable legal theory. Johnson v. Riverside Healthcare 

Sys., 534 F.3d 1116, 1121 (9th Cir. 2008); Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). 

 In reviewing a complaint under Rule 12(b)(6), all allegations of material fact are taken as 

true and construed in the light most favorable to the non-moving party. Marceau v. Blackfeet Hous. 

Auth., 540 F.3d 916, 919 (9th Cir. 2008); Vignolo v. Miller, 120 F.3d 1075, 1077 (9th Cir. 1999). 

The Court, however, is not required “to accept as true allegations that are merely conclusory, 

unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 

1049, 1056-57 (9th Cir. 2008); Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 

2001). Although they may provide the framework of a complaint, legal conclusions are not accepted 

as true and “[t]hreadbare recitals of elements of a cause of action, supported by mere conclusory 

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statements, do not suffice.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949-50 (2009); see also Warren v. 

Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003). 

 Additionally, Rule 9(b) of the Federal Rules of Civil Procedure requires that “[i]n allegations 

of fraud or mistake, a party must state with particularity the circumstances constituting fraud or 

mistake.” To satisfy the rule, a plaintiff must allege the “who, what, where, when, and how” of the 

charged misconduct. Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997). In other words, “the 

circumstances constituting the alleged fraud must be specific enough to give defendants notice of 

the particular misconduct so that they can defend against the charge and not just deny that they have 

done anything wrong.” Vess v. Ciba-Geigy Corp. U.S.A., 317 F.3d 1097, 1106 (9th Cir. 2003). 

IV. DISCUSSION 

 A. Preliminary Injunction

 1. Existence of joint venture

 The heart of Fusion Garage’s opposition to the motion for a preliminary injunction is its 

fervent argument that it never entered into a partnership or joint venture with TechCrunch, and that 

it therefore had no fiduciary duties towards TechCrunch with respect to exploiting the opportunity 

to develop and market a tablet computer. Fusion Garage argues that TechCrunch has failed to 

identify any trade secret or other legally protectable interest it has in the joojoo, which Fusion 

Garage contends is solely it own property, developed through its own efforts.2

 

 A partnership is “the association of two or more persons to carry on as coowners a business 

for profit . . . whether or not the persons intend to form a partnership.” Cal. Corp. Code § 16202 

(a) (emphasis added). Additionally, an agreement to form a partnership can be “written, oral, or 

implied.” Cal. Corp. Code § 16101 (10) (emphasis added). A joint venture differs little from a 

 

2

 TechCrunch denies that it is asserting any claim for misappropriation of trade secrets, and that it 

is instead claiming misappropriation of “business ideas.” TechCrunch, however, does not advance 

that claim as a basis for injunctive relief and it fails in any event for the reasons discussed below in 

connection with the motion to dismiss. 

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partnership. Weiner v. Fleischman, 54 Cal.3d 476, 483 (1991) (“From a legal standpoint, both 

relationships are virtually the same.”). The term “joint venture” generally is used more often when 

the parties are jointly engaged in a single specific project, as opposed to operating an ongoing 

business enterprise together. Id. Nevertheless, a “joint venture may be of longer duration and 

greater complexity than a partnership” and “the courts freely apply partnership law to joint ventures 

when appropriate.” Id. Here, because TechCrunch and Fusion Garage were jointly engaged in the 

development of a specific project—a tablet computer—the term “joint venture” is likely more apt 

than “partnership,” but the distinction is of little consequence. 

 In both joint ventures and partnerships, the parties owe fiduciary duties to each other. See

Leff v. Gunter, 33 Cal.3d 508, 514 (1983) (“Partners are trustees for each other, and in all 

proceedings connected with the conduct of the partnership every partner is bound to act in the 

highest good faith to his copartner and may not obtain any advantage over him in the partnership 

affairs by the slightest misrepresentation, concealment, threat or adverse pressure of any kind.” 

(quoting Page v. Page 55 Cal.2d 192, 197 (1961).). Of particular relevance here is the principle 

that, “[a] partner may not dissolve a partnership to gain the benefits of the business for himself, 

unless he fully compensates his copartner for his share of the prospective business opportunity.” 

Leff, 33 Cal.3d at 515 (quoting Page, 55 Cal.2d at 197). 

 Fusion Garage advances six basic arguments in support of its contention that the parties’ 

relationship here was neither a partnership nor a joint venture. First, Fusion Garage points to 

statements by Arrington proposing that while TechCrunch and Fusion Garage would share in any 

profits derived from the CrunchPad, each would “bear its own losses of time, money, and energy if 

the project was not successful.” Because a partnership typically includes an agreement to share in 

profits and losses, Fusion Garage contends this shows the parties were not in a partnership or joint 

venture. Fusion Garage reads too much into Arrington’s statement. In any partnership or joint 

venture, each party typically contributes resources—be they time, energy, or in some cases only

money—to the joint undertaking, and each party stands to lose what it has contributed should the 

project fail. Arrington’s statement appears to reflect little more than this basic reality. 

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 Sharing in “losses,” in contrast, refers not only to the loss of such contributions, but also to 

the responsibility all partners or joint venturers have for any debts and obligations the enterprise 

may incur above and beyond what they have each invested. Nothing in Arrington’s statement 

attempts to disclaim any responsibility either party would have for such losses, rather he seems to 

have been optimistically assuming few if any obligations would be incurred, at least in the 

development stages. Additionally, the record indicates that when the project did incur debts to third 

parties, TechCrunch in fact assisted Fusion Garage in meeting those obligations.3

 Fusion Garage next contends that no partnership or joint venture could have existed because 

a TechCrunch employee at one point proposed taking certain actions that would have violated any 

fiduciary duties TechCrunch held towards Fusion Garage. This shows, Fusion Garage contends, a 

“clear belief” on Tech Crunch’s part that no fiduciary duties existed, thereby supporting a 

conclusion that there was in fact no partnership. TechCrunch has adequately shown, however, that 

it took steps to reject its employee’s suggestions. At most, therefore, Fusion Garage has shown a 

potential breach of fiduciary duty by TechCrunch, or an attempted breach, not that there was no 

partnership or joint venture giving rise to fiduciary duties in the first instance. 

 Fusion Garage also points to evidence that at certain points in time Arrington threatened to 

terminate the project and end the parties’ relationship. Contending that there can be no partnership 

or joint venture where one party reserves a “unilateral” right to end it, Fusion Garage argues this 

disproves TechCrunch’s claims. The flaw in this argument is that any partner or joint venturer 

generally does have the unilateral right to dissolve the relationship. The only caveat is that doing so 

does not immediately end the fiduciary duties, or the obligation of the dissolving party to “fully 

compensate[] his copartner for his share of the prospective business opportunity.” Leff, supra, 33 

 

3

 Furthermore, the absence of any specific agreement as to the sharing of profits and losses does 

not preclude the formation of a partnership. Holmes v. Lerner, 74 Cal.App.4th 442, 454 (1999) 

(“The presence or absence of any of the various elements set forth [in the prior statute governing 

partnerships], including sharing of profits and losses, is not necessarily dispositive . . . [T]he 

crucial factor [is] the intent of the parties revealed in the terms of their agreement, conduct, and the 

surrounding circumstances when determining whether a partnership exists.” (emphasis added)). 

Here, the parties’ conduct in jointly working to develop a tablet computer speaks louder than any 

uncertainties that may have existed between them as to the details of how their relationship would 

be structured. 

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Cal.3d at 515 (quoting Page, supra, 55 Cal.2d at 197). Fusion Garage has not pointed to any 

evidence that Arrington’s threats to terminate the project were accompanied by any intent to 

appropriate the parties’ joint property or business opportunity to TechCrunch alone, without any 

compensation to Fusion Garage that might be required under the particular circumstances existing at 

the time.4

 Fusion Garage further asserts that there is no evidence the parties were “co-owners of a 

business.” While this argument may support the notion that the relationship between TechCrunch 

and Fusion Garage was more appropriately labeled as a “joint venture” than a “partnership,” it does 

not undermine the conclusion that they held fiduciary duties toward each other. See Weiner, supra, 

54 Cal.3d at 482 (“A joint venture usually involves a single business transaction.”); Leff, supra, 33 

Cal.3d at 514 (joint venturers “assume[] the status of fiduciaries” and none of them can pursue the 

object of the venture “to the exclusion of the others.”) 

 Fusion Garage next offers a series of closely related arguments that no partnership or joint 

venture came to fruition in light of the fact that the parties were negotiating for an acquisition of 

Fusion Garage by CP, Inc. that never was finalized and because various contingencies never came to 

pass. Fusion Garage relies heavily on cases such as Bustamante v. Intuit, Inc., 141 Cal.App.4th 191 

(2006) and City Solutions, Inc. v. Clear Channel Communications, Inc., 201 F.Supp.2d 1035 

(N.D.Cal. 2001) in which parties’ negotiations for prospective cooperation in business ventures 

were found not to have given rise to any partnerships or joint ventures, or attendant fiduciary duties. 

In those cases, however, the parties had not jointly put effort into developing, designing and 

building a tangible product to bring to market, or in any other way actually begun the business the 

proposed collaboration was intended to undertake. Here, while TechCrunch and Fusion Garage may 

have been in ongoing negotiations for the purpose of structuring their relationship in some other 

fashion other than that of joint venturers or partners, that in no way undermines the legal effect of 

the conduct they undertook in jointly developing the tablet computer. 

 

4

 While any such evidence, if it existed, could conceivably give rise to the doctrine of unclean 

hands that might affect TechCrunch’s ability to pursue its claims, it would not in and of itself prove 

that no partnership or joint venture had ever been formed. 

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 Finally, Fusion Garage argues that the terms of the parties joint venture were simply to 

uncertain and unsettled to be enforceable. While it may be true that the parties never reached a 

meeting of the minds on how the business would operate on an ongoing basis, their cooperative 

efforts in developing the product were sufficient to give rise to an obligation on both parties’ part 

not to usurp the fruits of those efforts. See Holmes, supra, 74 Cal.App.4th at 457-459 (rejecting 

contention that partnership agreement was too indefinite and affirming jury verdict of breach based 

on evidence that the parties had agreed “it’s going to be our baby, and we’re going to work on it 

together,” and had in fact done so.) Accordingly, TechCrunch has made a credible showing that it 

may be able to establish the existence of a joint venture under which Fusion Garage owed it certain 

fiduciary duties. Such duties may have precluded Fusion Garage from proceeding to market with 

the joojoo without taking appropriate steps to dissolve the relationship and to compensate 

TechCrunch. 5

 2. Irreparable harm and scope of relief 

 Even assuming TechCrunch has made a sufficient showing as to the likelihood of success on 

its breach of fiduciary duty claim, however, it has failed to show that any injunctive relief, much 

less the specific relief it requests, is warranted. This is not a case where a plaintiff seeks to enjoin 

the sale of a product based on alleged infringement of intellectual property or other ownership 

rights. TechCrunch characterizes its request to sequester sales proceeds as only being a narrower—

and therefore more reasonable—imposition on Fusion Garage’s continued operations. 

 Because it seeks only to freeze monies, however, the only purpose an injunction would serve 

would be to secure TechCrunch’s ability to recover monetary damages should it prevail on the 

 

5

 TechCrunch’s motion for a preliminary injunction also attempts to establish that it has a 

likelihood of success on its claims for fraud and violations of the Lanham Act. While the adequacy 

of TechCrunch’s pleading of those claims for relief will be discussed below in the context of Fusion 

Garage’s motion to dismiss, TechCrunch has not shown that those claims would support issuance of 

the injunctive relief it seeks, even assuming it has shown a likelihood of success as to either of them. 

The fraud claim would at most give rise to a right to damages. While the Lanham Act claim 

theoretically could support an injunction against further “false advertising,” it would not support the 

sequestration of joojoo sales proceeds, as TechCrunch demands.

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merits of this action. Such injunctions are available in some circumstances. See e.g. In re Focus 

Media Inc., 387 F.3d 1077, 1084 (9th Cir. 2004) (“when the plaintiff creditor asserts a cognizable 

claim to specific assets of the defendant or seeks a remedy involving those assets, a court may in the 

interim invoke equity to preserve the status quo pending judgment where the legal remedy might 

prove inadequate and the preliminary relief furthers the court’s ability to grant the final relief 

requested.” (quoting United States v. Oncology Assocs., P.C., 198 F.3d 489, 496-497 (4th Cir. 

1999)). Nevertheless, TechCrunch has not adequately shown a likelihood that it will be unable to 

recover in the absence of preliminary relief. TechCrunch has pointed to some evidence that Fusion 

Garage was in precarious financial circumstances during the parties’ relationship, and evidence that 

initial sales of the joojoo were poor. TechCrunch has not persuasively demonstrated, though, that 

Fusion Garage presently lacks the resources to satisfy any damages award.6

 Additionally, and equally significant, TechCrunch has failed to show why it would be 

entitled to a freeze on all joojoo proceeds. As noted above, an injunction may be appropriate where 

a plaintiff has an equitable claim to “specific assets” held by a defendant. Even assuming 

TechCrunch prevails on the merits, however, that would not give it a claim to 100% of the revenues

Fusion Garage derives from selling the product. At most, TechCrunch may have a right to share in 

any profits Fusion Garage earns from the device. Even assuming Fusion Garage breached fiduciary 

duties, that does not give TechCrunch the windfall of collecting all joojoo sales proceeds, without 

regard to the costs Fusion Garage incurs in producing and marketing the machines. TechCrunch has 

not attempted to identify what portion of the sales price of each joojoo represents profit, or if indeed 

Fusion Garage has realized any profits at all. Accordingly, TechCrunch’s motion for a preliminary 

injunction is denied. 

 

 

6

 The evidence of poor joojoo sales is a double-edged sword. While it suggests that Fusion Garage 

will have less resources to respond in damages, it also decreases the likelihood that damages will be 

substantial. Similarly, TechCrunch has not adequately addressed the fact that if it is correct as to the 

precariousness of Fusion Garage’s financial condition, sequestering sales proceeds would appear 

more likely to damage TechCrunch’s chances of eventual recovery than to enhance it. 

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 B. Motion to Dismiss

 

1. Breach of fiduciary duty 

 In seeking dismissal of TechCrunch’s claim for breach of fiduciary duty, Fusion Garage 

presents the same substantive arguments as proffered in its opposition to the motion for preliminary 

injunction. Those arguments have been addressed above, and will not be repeated here. For the 

same reasons that TechCrunch has made a credible showing as to the existence of a joint venture, it 

has adequately pleaded its claim for breach of fiduciary duty.7

 Accordingly, the motion to dismiss 

this claim is denied. 

 2. Misappropriation of “business ideas” 

As the discussion above reflects, in the context of a breach of fiduciary duty claim by a 

partner or joint venturer, misappropriation of a business opportunity belonging to the parties 

collectively is actionable. See Leff, supra, 33 Cal.3d at 515. As a stand-alone claim, however, 

misappropriation of business ideas is not. In Desny v. Wilder, 46 Cal.2d 715 (1956) the plaintiff 

submitted a story synopsis to Paramount Pictures proposing a movie to be based on certain historical 

(and public domain) events involving a boy trapped in a cave. Id. at 724-725. Paramount thereafter 

made a movie about those events, but refused to pay plaintiff for the idea. Id. The California 

Supreme Court held that it had been error to grant summary judgment for Paramount because there 

were facts suggesting the existence of an implied contract between the parties. The Desny court 

made very clear that ideas are not independently protectable. 

Generally speaking, ideas are as free as the air and as speech and the senses . . . . it is 

clear that California does not now accord individual property type protection to 

 

7

 Fusion Garage’s motion to dismiss does emphasize the additional argument that TechCrunch has 

not clearly delineated whether the claimed fiduciary duties were owed to Interserve, to CP, Inc. or 

perhaps to Arrington himself. The precise identity of the parties to the joint venture at any particular 

point in time is certainly subject to further factual development. For pleading purposes, however, 

the complaint adequately alleges the role of both Interserve and CP, Inc. in the parties’ 

arrangements. 

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abstract ideas . . . . Neither common law nor statutory copyright extends protection to 

an idea as such. 

Id. at 731. 

Parties can, however, enter into an implied or express contract whereby one party agrees to 

pay for the other’s ideas. Id. at 733 (“Even though an idea is not property subject to exclusive 

ownership, its disclosure may be of substantial benefit to the person to whom it is disclosed. That 

disclosure may therefore be consideration for a promise to pay.”). Hence, there exists what the 

parties here refer to as a “Desny claim,” but such a claim sounds in contract. 

 Yet, TechCrunch is attempting to bring a common law tort claim. It relies on Hollywood 

Screentest of Am., Inc. v. NBC Universal, Inc., 151 Cal. App. 4th 631 (2007). In that case, the 

plaintiff had “pitched” certain ideas for a “reality” television series to NBC. The network turned 

plaintiff down, but later announced a show that plaintiff contended included many of the ideas it had 

proposed. The Hollywood plaintiff pleaded several breach of contract claims, consistent with 

Desny. It also pleaded one common law claim for misappropriation. The court described the 

elements of such a claim as: 

1) the plaintiff has made a substantial investment of time, effort and money into 

creating the thing misappropriated, such that the court can characterize the “thing” as 

a kind of property right, 2) the defendant has appropriated the thing at little or no 

cost, such that the court can characterize defendant's actions as reaping where it has 

not sown and 3) the defendant has injured plaintiff by the misappropriation. 

151 Cal. App. 4th at 650. 

 In Hollywood, the court held that summary judgment had properly been granted as to this 

claim (and all the other claims) because the undisputed facts showed that the television series 

plaintiff was challenging had been independently created by certain third parties who had not been 

exposed to plaintiff’s ideas, rather than by NBC. Id. at 649-651. TechCrunch contends that 

Hollywood thus supports the viability of its claim, as long as there is no independent creation 

defense. To the contrary, in Hollywood, the court expressly noted that it was not reaching NBC’s 

additional argument that “this cause of action fails because, under Desny . . . . ideas are not 

considered property.” 151 Cal. App. 4th at 650 n. 10. Thus, the case is not authority for the notion 

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that ideas can be property notwithstanding the clear rules discussed in Desny. Rather, the court in 

Hollywood merely elected to reject the tort claim on the same ground it had upheld summary 

judgment on the contract claims rather than to wade into a different set of legal principles.8

 

Accordingly, TechCrunch’s tort claim for misappropriation of business “ideas” is dismissed without 

leave to amend. This ruling is without prejudice to TechCrunch’s right to allege a claim based on 

implied contract, consistent with the holding in Desny, in the event it has a good faith factual and 

legal basis to do so.9

 3. Fraud 

As presently constituted, the complaint mentions any number of misrepresentations, false 

promises, and failures to disclose on the part of Fusion Garage. The allegations, however, constitute 

a hodgepodge that renders it difficult to differentiate between mere conclusions of falsity and any 

factual representations that might be sufficient to establish that material misrepresentations were 

presented, that promises were made without intent to perform, or that there was a duty to disclose 

matters omitted. Similarly, TechCrunch has not alleged with adequate specificity how and to what 

extent it reasonably relied on each alleged misrepresentation and was damaged thereby. 

 Moreover, while TechCrunch has argued that discovery undertaken after the complaint was 

filed has provided it with substantially more information regarding the circumstances and nature of 

Fusion’s Garage’s allegedly fraudulent conduct, it has not yet incorporated those matters into the 

 

8

 At oral argument, TechCrunch cited to City Solutions, Inc. v. Clear Channel Communications, 

365 F.3d 835 (9th Cir. 2004), as additional support for this claim for relief. City Solutions does 

appear to support the notion that at least in some circumstances, the common law tort of 

misappropriation can serve to protect “confidential” information that a party has spent “substantial 

time and skill in developing,” even where that information does not rise to the level of a trade secret 

and is not protected by patent law or copyright. The facts TechCrunch has alleged here, however, 

plainly take it outside City Solutions.

9

 Fusion Garage also contends that this claim is preempted by the Uniform Trade Secrets Act. 

Such preemption would arise to the extent TechCrunch is attempting to recover for misappropriation 

of trade secrets under the guise of a different claim for relief. TechCrunch insists, however, that it 

has not pleaded, and does not intend ever to argue, that any of the “business ideas” it contends were 

misappropriated were trade secrets. 

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complaint.10 Under these circumstances, dismissal of the fraud claim with leave to amend is 

appropriate. 11

 4. Lanham Act 

 Fusion Garage contends that TechCrunch has not alleged except in conclusory terms that it 

has suffered a “competitive injury” sufficient to give it standing to bring claims under the Lanham 

Act. See Jack Russell Terrier Network of N. Cal. v. Am. Kennel Club, Inc., 407 F.3d 1027, 1037 

(9th Cir. 2005) (“[F]or standing pursuant to the ‘false advertising’ prong of § 43(a) of the Lanham 

Act, 15 U.S.C. § 1125(a)(1)(B), a plaintiff must show: (1) a commercial injury based upon a 

misrepresentation about a product; and (2) that the injury is ‘competitive,’ or harmful to the 

plaintiff’s ability to compete with the defendant.”). 

 TechCrunch apparently is not presently engaged in developing or marketing a tablet 

computer such that it could be said to be in competition with Fusion Garage in any traditional sense. 

On the other hand, the allegations of the complaint show that TechCrunch plainly was engaged in 

developing the CrunchPad, and it presumably retains such know-how as it gained in that process 

and would not have to start entirely from scratch should it decide to re-enter the field. Similarly, 

TechCrunch’s argument that it should not be deprived of standing where it was Fusion Garage’s 

alleged wrongdoing that has prevented it from presently participating in the market makes some 

sense. Accordingly, while the motion to dismiss the Lanham Act claim will be dismissed on 

 

10 As an apparent result of the complaint having been prepared in a short time period, it contains 

oversights such as the omission from each claim for relief of a complete reference to the preceding 

paragraphs TechCrunch intended to incorporate by reference. While standing alone this would not 

serve as a basis for dismissal, it does provide an additional reason that amending the pleading is in 

order. 

11 Fusion Garage’s motion to strike “extrinsic speaking evidence” submitted by TechCrunch in 

support of its motion to dismiss is denied. To the extent those materials go beyond the factual 

allegations of the complaint, however, they have been considered only in evaluating whether leave 

to amend is warranted, not as a basis for concluding that any portion of the complaint presently 

states a claim. 

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grounds that TechCrunch has failed to allege sufficient facts showing it has suffered competitive 

injury, leave to amend will be granted.12

 5. UCL 

 TechCrunch’s claim under California’s unfair competition law, Business & Professions 

Code §17200, rises and falls with its ability to allege fraud adequately. Accordingly, the claim is 

dismissed with leave to amend, for the same reasons as the fraud claim. TechCrunch’s claim for 

false advertising under §17500 of the statute turns on the same standing issue as its Lanham Act 

claim. Accordingly, it too is dismissed with leave to amend. 

V. CONCLUSION 

 TechCrunch’s motion for a preliminary injunction is denied. Fusion Garage’s motion to 

strike “extrinsic speaking evidence” is denied. Fusion Garage’s motion to dismiss is denied as to 

the claim for breach of fiduciary duty. Fusion Garage’s motion to dismiss is granted, without leave 

to amend, as to the tort claim for misappropriation of business ideas, but without prejudice to any 

related claim sounding in contract that TechCrunch may be able to plead in good faith. The motion 

to dismiss is granted, with leave to amend, as to the claims for fraud, violations of the Lanham Act, 

and violations of California Business & Professions Code §§17200 and 17500. Any amended 

complaint shall be filed within 20 days of the date of this order. 

 

Dated: 08/24/2010 

RICHARD SEEBORG 

UNITED STATES DISTRICT JUDGE 

 

12 It would be premature to accept Fusion Garage’s invitation to parse each of the statements 

alleged to be false in the Lanham Act claim to determine if they are in fact true, or inactionable for 

other reasons. Even assuming such an inquiry would not involve factual questions inappropriate for 

resolution on a motion to dismiss, unless TechCrunch can satisfy the threshold standing 

requirement, those issues will not arise. Fusion Garage’s motion to strike is therefore also denied. 

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