Michael Arrington for TechCruch posted a rather unique blog entry today (November 30th, 2009) that I thought was worth sharing. He has been working for almost two years on a new Internet Tablet called CrunchPad.

In Michael's own words, "I want a dead simple and dirt cheap touch screen web tablet to surf the web." And he was prepared to unveil the end-product on November 20th in San Fransisco when he got a "bad news" email from the hardware manufacturer he had partnered with.

I encourage you to read the whole post before continuing, but for those who don't wanna, I'm gonna summarize it all and then bitch about it for a while...

Hopefully, you read the post already. If not, here's a rundown:
Michael, represented by TechCrunch, had been working with Chandra Rathakrishnan, the CEO of a partner company called Fusion Garage. Despite shared working conditions, including using space in TechCrunch's very own offices and actually sharing some employees, Fusion Garage was considered a separate entity.

Then came along a mysterious third-party company who wanted to buy out TechCrunch and Fusion Garage. That's when things get really confusing from Michael's perspective. Suddenly, Fusion's shareholders didn't see the value in continuing to work with TechCrunch, since they already had the working physical models and all of the blueprints to them.

In on quoted email, a shareholder wrote: "We still acknowledge that Arrington and TechCrunch bring some value to your business endeavor…If he agrees to our terms, we would have Arrington assume the role of visionary/evangelist/marketing head and Fusion Garage would acquire the rights to use the Crunchpad brand and name. Personally, I don’t think the name is all that important but you seem to be somewhat attached to the name."

In other words, "Hey, thanks for the idea and all the hard work you put in, but we can take it from here and really don't need any more assistance from you. Bye-bye!"

This is a nightmare scenario for startup firms everywhere. You spend months, even years, getting your initial capital secured, work 16 to 18 hours a day meeting personally with the heads of companies who like your ideas and finally settle down to business with a group that you feel has the same goals and vision as yourself. Then, overnight, they take your product and run.

The saddest part of the whole story is that no one owns the IP for the product outright, both firms share the copyright. Without patents or patent application receipts, Michael has nothing to show that the whole project was his idea from the start.

So Fusion Garage is free to take their part of the project, which is pretty much the whole damned thing, and run. And it is all perfectly legal, as far as copyright laws are concerned.

In the end, Michael and TechCrunch could have saved themselves a whole ton of grief with the proper contracts, but instead it appears as if they relied on a gentleman's agreement.

I imagine that if Fusion Garage moves ahead with the release of the gadget, TechCrunch has at least a civil case they can pursue, but is it really worth the money it will cost to get the lawyers involved? In his own words, Michael stated that he never expected the device to be a huge money-maker, so a lawsuit may just be too futile to pursue.

It looks like TechCrunch has wasted their time and money and Fusion Garage has taken advantage of a fat little sheep.

Take this as a lesson learned from the mistakes of others: No "partnership" is equal on both sides. In today's business world, you can't trust even your own brother to stand with you when the stakes get high enough. Copyright your work, patent your hardware, and for God's sake, require contracts with your partners and employees.