Page 10 of the complaint, emphasis mine:
The Founders and Martino held a series of discussions, beginning in late 2005, as to how to best rationalize the production of ARDUINO Boards and related products. The precise details of these understandings evolved as the market for ARDUINO Boards evolved,
[...]
• Smart Projects would manufacture Boards;
• Smart Projects would pay a percentage of what it received for selling Boards, as royalties to the Partners.
It may be that both sides violated the agreement, which appears to have been
done over e-mail and not transcribed or memorialized in a contract. It looks like they had some more "discussions" that I'm sure neither side will be able to recall verbatim. This is getting a little more difficult to nail down than if there was an actual contract. Elsewhere in the document, plaintiffs allege that
Gianluca has 20% ownership of the Arduino trademark. Was use of the 20% ownership contingent on signed consent from the other partners, or was that something else left to chance because nobody bothered to draw up a contract?
If Banzi's crew gets tired of Gianluca's manufacturing and wants to branch out, but they told Gianluca he would
always have say over the board manufacturing business, wouldn't he feel provoked by that? In Exhibit F, he says of board manufacturing:
On the other hand, I need to have the 'first choice' and to know where we are going in order to be on the market both for me and both for the distributor chain. I obviously would not to change this situation, but If You think in a different way, You know I'm 1 on 5, so don't worry about proposing something different.
So, he is open to discussion if they want to change how it works. He acknowledges being 1 out of 5. However, this does not imply that he will
agree with any arbitrary decision, no matter how injurious to his interests. The exhibit doesn't include a record of anyone correcting him about that issue, nor his agreement to terms that don't stipulate he will have first say over the manufacturing.
In the complaint, the argument continues: "Thus, Martino recognized from the beginning that the Arduino trademark and property belonged to an entity separate and apart from his company Smart Projects." - Maybe separate from Smart Projects, but not separate from
Martino.
He has a 20% interest, "held in trust" by Tinker.it. Banzi's share was also held in trust by Tinker.it. So far, I have seen no documentation that his use of the trademark was agreed to be contingent on consent of the other founders, or that his decisionmaking regarding the trademarks was somehow subordinate to Banzi's, whose ownership was structured identically to his own. Furthermore,
SmartProjects is directly named in the emails in which they discuss the formation of their partnership, as the party that will be responsible for manufacturing the boards. It cannot be reasonably stated that Smart Projects was some external entity that had no stake in the Arduino project. In fact, Gianluca points out elsewhere that Smart Projects shouldered the financial and administrative risks associated with manufacturing. It would be
easy for him to make the case that the other partners benefited from risks taken by Smart Projects in the name of the Arduino project.
Things evolve further:
On December 19, 2008, Smart Projects, at the direction of Martino, filed Italian trademark application number TO2008C003952 for ARDUINO in its own name (“the Italian Application”), four months prior to the U.S. filing discussed in the following paragraph. Despite previously participating in conversations with the Founders regarding Arduino, LLC’s ownership of the trademark, Martino did not inform the Founders of the Italian Application.
The first thing I see is that Gianluca files for the trademark in Italy, which he may have had some right to do, as he owned (and owns) 20% of the trademark. The second thing I see is that this move is somewhat duplicitous. If he deliberately failed to inform the others, it indicates that he may have been protecting his own interests by securing leverage over the mark in Italy, perhaps so that he would have a "bargaining chip" later. It may also be that he saw himself as a reasonable agent to register the trademark there, due to his ownership interest. If this duplicity seems unjust, consider that his agreement with the other members, which Banzi freely offers in the complaint, includes him running the hardware side. He states further that he would be amenable to discussing change, but - again - nowhere does he agree in advance to whatever terms the other members see fit.
Then, there is this:
It was not until July 3, 2010 that Martino first referenced the Italian Registration in a response to a cost estimate provided by Arduino’s American attorney for filing a Community Trademark application that would cover the countries of the European Union. Mellis asked Martino to explain this filing, and Martino merely confirmed registration of the mark, but even then did not reveal that the filing was in the name of Smart Projects.
Banzi's side seems to allege that the filing of the trademark is improper because it was done under Smart Projects rather than Tinker.it. That seems like a fair complaint to me. It would seem more "friendly" and less legally murky to register the mark in the name of Tinker.it, because that way he could say that Banzi has part ownership of the controlling entity (Tinker.it), and so he would not be assigning total control of the mark to himself. However, there are mitigating circumstances. Firstly, Smart Projects
is named as the firm that will manufacture the boards in the original discussions, so Smart Projects, as an entity, is an integral part of the original discussions. Tinker.it
is not the entity that took the financial risk of manufacturing the boards. That entity was, in fact, Smart Projects, a company commanded by a man who happens to own 20% of the trademark. As the head of his company, he
can acquire rights and property that he has a legal right to acquire, and he
can assign it to that company, unless some law or provable agreement states otherwise. (Or a jury, if the facts are too murky for the judge to rule on summarily. That is probably how this will play out unless they settle before trial.)
Interestingly, the documents make mention of royalty payments coming from manufacturers
other than Smart Projects years ago, in the 2000s. I don't know if they were making whole boards, or sub-assemblies, or involved in some other way. It may be that discussion of who would run the manufacturing side have been oscillating between Gianluca and the others
for years. In this environment, where they have been waffling about their IP for so long and not memorializing nearly enough stuff in actual contracts, this kind of schism may have been inevitable. They may have given Gianluca the impression that he would always have the first say, but then violated this with talk of bringing in other manufacturers. I conjecture that Gianluca and the "dog hunter" guy may have put their heads together and, between themselves, decided to leverage Gianluca's share of the IP to defend their income streams, the rest of the team be damned, with their betrayal of the original terms (that Smart Projects would have say over manufacturing) as justification to prove that their implied contract was breached.
As an aside, the uniform commerce codes, which apply in Massachusetts, allow the injured party of a contract breach to deduct from the other party/parties whatever funds are necessary to make the breach right. He could state that he withheld royalties in order to cover the damages from "Arduino.cc" deciding that he would no longer call the shots regarding the manufacturing.
Martino represented that Smart Projects had filed and that it held the registration in trust on behalf of Arduino, LLC
No exhibit is mentioned in conjunction with this statement. Absent further evidence, we can't know whether this event actually happened, or how. What was the "representation" exactly? Perhaps there is a clue:
The Founders relied on Smart Projects’ representations that the Italian Registration was being held in Smart Projects’ name in trust for Arduino. The Founders’ understanding was that Arduino owned the ARDUINO trademark worldwide and that Smart Projects was its licensee, since it was paying royalties to Arduino.
Does this mean that they are retroactively defining the "representation" in the preceding paragraph as their "understanding" (also lacking any reference to the exhibits) that Arduino (of which both the plaintiffs
and the main defendant hold significant membership percentage) own the mark worldwide? How was that understanding formed? Is there any contractual language that stipulates the minimum requirements for any member to take action concerning their trademark? May one do it unilaterally, or must all consent? What if 3/5 say yes and 2/5 say no - what is the critical percentage for a vote? Simple majority, 2/3, unanimous, etc.?
Where are the articles of incorporation? They may be available online through the State of Massachusetts' secretary of state, or whatever office runs those things in MA.
It doesn't look good that Smart Projects withheld royalties, or that it was renamed to Arduino. However, if the other founders breached Gianluca's notion of this nebulous "understanding" mentioned in the complaint, and absent any notarized contracts (which is a huge failure for those running an operation on this scale), it seems that it may not be as simple as Arduino.org "stealing" anything or treating the other partners unfairly.
