August 4, 2005

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On the cover: Radio lab at Fortuna's C. Crane Company. Photo by Hank Sims
Incident at C. Crane: Was it industrial espionage, or just a big misunderstanding?

story and photos by HANK SIMS

I. The Businessman

THE MORNING OF DEC. 1, 2003, Bob Crane, owner and founder of Fortuna's C. Crane Company, was sitting in his office, leafing through the morning mail. He was pleased to see the new issue of Monitoring Times -- an influential publication among hardcore radio aficionados, C. Crane's target market -- and doubly pleased to see that the magazine contained a mention of the Sangean WR-1, a new radio his company had just started to retail.

These were exciting times for C. Crane. The company was preparing to launch two of its own new products. There was the "Rugged Radio," a solar-powered receiver with a durable case, able to tune in to all the emergency bands, which Crane conceived in response to the Sept. 11 terrorist attacks. Then there was the "CCRadio 2," a digital-age update of C. Crane's signature product and biggest seller. The company's next several years looked to be bright.

Crane also took a bit of paternal pride in the Sangean WR-1. It was he, a former cabinetmaker, who suggested to Sangean executives that they look into making a high-end receiver with a classic wooden case. Now, several years later, here it was, available in cherry or walnut. He started to read the magazine's write-up, and the orderly world he had built for himself -- for his family, his company -- went static.

"A new AM/FM radio coming out in November from Sangean received its first review on the Internet by Chris Justice of RadioLabs," the article read. "His rave review of Sangean's WR-1 wooden radio said, `In a nut-shell, the WR-1, Wooden Radio, is an eye-pleasing, small hi-fi radio with tons of quality audio and simple functions.'"

[Photo below left: Bob Crane]

Reading this over, Crane -- a gentle man with a short, gray beard, steady eyes and a frequent half-smile that hints at secret amusement, then 52 years old -- was at first just confused. Chris Justice was his chief engineer, the head of C. Crane's small research and development unit. This article seemed to refer to confidential side-by-side performance tests between the WR-1 and its competitors that the C. Crane team had done a few weeks ago. What was RadioLabs?

Bob Crane founded the C. Crane Company -- "C" is Crane's middle initial, as well as his wife's and children's -- in 1983, shortly after the Crane clan moved up to Humboldt County from the Bay Area. In his early days in Humboldt County, Crane was frustrated by his inability to receive a steady signal from his favorite radio station -- KGO-AM, San Francisco's talk radio giant. He did some market research and discovered an antenna that could pull in KGO at any hour of the day. Realizing that others were likely to want KGO too, Crane went into business selling the antennas. These were the early days of the talk radio boom; with his inspired decision to advertise heavily on KGO itself, the C. Crane Company quickly built a reputation among radio fans as the place to shop for high-end gear.

In the mid-'90s, Crane decided to move the company toward designing its own, branded products, rather than just retailing what was already out there. First off the block, in 1998, was the "CCRadio" -- a specialty product designed to deliver the sound of the human voice better than any other radio on the market. Manufactured by Sangean, it was a huge hit, selling hundreds of thousands of units. More innovations followed. And leading the charge was the whiz kid Crane had promoted from the customer service department, Chris Justice.

The Monitoring Times article invited readers to check out Justice's web site, www.radiolabs.com. Crane did just that. In the next few days, he also took a look at the computer in Justice's office, and discovered that his e-mail program included a special folder set up to send and receive messages from a radiolabs.com e-mail account. Inside that folder were messages dating back several months: Justice's correspondence with fellow engineers, radio enthusiasts and heads of major electronics firms, including Kevin Wang, president of Sangean's American division.

[Right: The Select-A-Tenna, the first product C. Crane sold.]

After that, it didn't take long for Crane's confusion to turn to anger. In the coming months, the discovery of Justice's side project would lead to search warrants, arrests, firings, the wholesale abandonment of new C. Crane product lines and an enormous, sprawling lawsuit against Justice, RadioLabs and Sangean, one of China's largest electronics manufacturers and previously C. Crane's closest of allies.

And then, after all that, to an odd sort of reconciliation.

II. The Engineer

Months earlier, late in the afternoon of Tuesday, May 20, 2003, Chris Justice [photo at right] was stationed at his equipment-strewn workbench, just around the corner from Bob Crane's office, when he received an e-mail from his friend, the president of Sangean America. Justice often visited Wang in his southern California home while on vacation there; the man had attended Justice's wedding. They worked closely together on C. Crane projects.

"Dear Chris, I can't open the attached MS Word file from Jelyce. This must be the preliminary spec for cost study for Brookstone new hand-cranked radio. If you can open this file, can you review it and comment on it for me? Best Regards, Kevin Wang."

Then 33 years old, Justice, who bears some resemblance to the actor Nicholas Cage, was a rising star in the world of radio. A born tinkerer whose first love was ham radio -- the preferred field of electronics geeks in those pre-Internet days -- Justice, who hailed from the Sacramento area, had already designed a number of innovative products. He was C. Crane's lead engineer on the CCRadio, Crane's first in-house product. He had a hand in any number of products since -- a portable FM transmitter, a lightning arrestor -- but his true calling card was what came to be known as the Justice AM Antenna. A huge leap forward in technology, the Justice Antenna could pull down loud-and-clear AM signals that would sound like a lawnmower on any other antenna. It earned him respect from his peers and plaudits from his growing fan club.

Wang's e-mail referred to a radio that Sangean was manufacturing for Brookstone, a C. Crane competitor. "Jelyce" was Jelyce Tsai, a Sangean employee based in Asia. Justice knew that Sangean had been working on the radio -- the previous month, Wang had sent him an e-mail about it. "This is just for your information," Wang had said. It was to be marketed as an "All-Terrain" radio, one that could take a lot of punishment and still produce great sound. Kind of similar to C. Crane's upcoming "Rugged Radio," in some ways.

[Below left: early sketch of the Brookstone "All Terrain radio.]

Justice reformatted the file and sent it back to Wang with his cautious comments. As a jocosity, he used the nickname for Bob Crane that Wang often used himself, in Crane's presence -- a variant of the Mandarin word for "chicken."

"I think because it looks so much like Rugged Radio, Bob would have a problem with it and the entire concept," Justice wrote. "I didn't show it to him. If you want some comments on this, please call me tonight at my home phone #. Think it would be too much of a conflict of interest if I did comment ... Bob Ghi would be pretty mad at me ... Sorry. At least I have personal time to talk to you about this though."

Truth was, after nine years at C. Crane, Justice felt like it was time to move on. Things hadn't been that smooth lately. He had earned over $100,000 in salary and bonuses in 2001; that had been dropping in the last two years. He was under the impression that Crane had promised him royalties on certain of his inventions, and Crane wasn't delivering. But Justice was wedded to the area, and there weren't likely to be any other jobs for radio engineers in Humboldt County.

III. RadioLabs

In July, he came up with a solution -- to strike out on his own. But it would take time to build a business, so he started a project on the side while continuing to work for Crane. It was called RadioLabs, and in the beginning it would offer radio repair services and retail of some radio-related items. Quickly, though, Justice started to dream up new products that could be patented and marketed under the RadioLabs brand.

On Thursday, July 17, Justice sent an e-mail to Richard Kulavik, a managing engineer at AKM Semiconductor, one of C. Crane's subcontractors for the CCRadio 2 project. AKM is a manufacturer of small computer chips that can be used, among other things, for "digital signal processing" (DSP), a digital technique that can improve audio quality.

"Hello Richard," Justice wrote. "Just thought I would drop you a quick email and let you check out this site. Go to my new website at www.radiolabs.com. There is a DSP section but nothing on it Let me know if you can help me out by promoting the DSP area and also AKM at the same time. I think we might be able to do something big."

[Below left: The CC Radio Plus, a precursor to never-finished CC Radio 2.]

Justice had the beginnings of an idea. He would take what he had learned on the CCRadio 2 project about digital signal processing and use it to make a different product -- a different kind of product, he thought. The CCRadio 2 was going to be a stand-alone radio. He envisioned a kind of box, using the same technology, that could plug into any radio to make it sound great. As he saw it, that wouldn't violate his signed agreement with C. Crane not to engage in any business that would compete with the company.

He told Kevin Wang about RadioLabs early on, too. One week after writing Kulavik, Justice sent an e-mail to Wang asking him to put a link to RadioLabs on the Sangean web site. Later, Wang's colleague Jelyce Tsai sent Justice an e-mail congratulating him on the new business and assuring him that DSP "will be a great business in the future." Justice wrote back, giving Tsai specifics on his DSP box and assuring Tsai that he thought he could bring "Sangean and RadioLabs a LOT of business."

Justice was working out of his house at the time. To fill up the RadioLabs web site, he posted -- temporarily, he told himself -- photographs of his workstation at C. Crane on a page devoted to RadioLabs' radio repair service.

[Right: Chris Justice's blueprint for a
Radiolabs digital signal processing device.]

But even as his DSP box idea began to take shape, Justice's fertile mind hit upon something he thought would be even bigger. Something he thought had the potential to sell millions of units and change the face of radio.

The idea was based on Wi-Fi, the wireless Internet technology that has since been cropping up in homes, cafes, airports, municipal buildings and all sorts of other locales around the country and the world. It allows people with laptop computers to connect to the Internet over the air, through radio waves.

At the same time, more and more radio stations around the world had begun broadcasting their signals over the Internet. Justice's inspiration was to combine the two developments. He pictured an iPod-like device that had the ability to pick up Wi-Fi signals. Owners of the device could store the addresses for their favorite online radio stations in a central database; then, if they were within distance of a Wi-Fi broadcast station, they could tune into radio from around the world with the push of a button. Justice began to develop the idea in a formal proposal.

On Oct. 3, he sent his pitch to Kevin Wang. His cover letter was concise and to the point.

"Kevin," he wrote. "This idea is so powerful for the radio market and the future of radio. Sangean should look carefully at this and the future technology of radio. I already have a lot of the database online. The interface between the radio and the database is simple. Read this document over and you will see what I have been so excited about."

Wang appeared to take the document seriously. He had Tsai look it over and critique it. All the while, he continued to cultivate Justice's future business. In November, he sent an e-mail to a colleague asking him to help Justice get a shipment of items from China to Fortuna.

"Chris Justice of RadioLabs/C Crane Co will need your help to ship some items that he has ordered in the Guang-Dong area," Wang wrote. "He doesn't have any forwarder, so Sangean HK [Hong Kong] will handle his shipping. Initially, I just try to help him out and there will be no handling fee involved.

"Please note that this is for his own company called `Radiolabs' and has nothing to do with C Crane Co. All the email should be addressed to his Radiolabs email address. Important !!!!"

IV. The Crime*

At the time Wang had sent the e-mail to his colleague, RadioLabs was starting to pick up steam. It wasn't just that Justice had several hot products in development, and that Sangean was behind him; the company was retailing a number of third-party products and doing a steady business in repair. It had some interesting and unusual Wi-Fi items, and it was taking advance orders on the Sangean WR-1, the Wooden Radio. Justice posted his review of the unit on the RadioLabs web site, and the review was passed around the Internet, eventually winding up in the hands of the editors at Monitoring Times. It was looking more and more like a real business every day. Justice prepared to cut his ties with C. Crane.

But first, he wanted to get the company's customer list.

Justice had a colleague, Kirk Williams, who was doing some side work with him on RadioLabs. Williams, an information technology specialist with a degree in computer science from Humboldt State, had quit C. Crane abruptly a few months earlier. A coding wizard, Williams had helped RadioLabs boost its ranking in the Google search engine, so that though it was relatively new, radiolabs.com was one of the first pages to come up if a user searched for Wi-Fi products. Williams, 10 years younger than Justice, counted him as one of his best friends.

At some point, Williams gave Justice instructions on how to break into Crane's database systems and retrieve the company's list of customers. On Tuesday, Nov. 18, Williams and Justice exchanged a flurry of e-mails. Most of them were during business hours, when Justice would have been sitting at his computer in C. Crane's offices. Justice had successfully obtained the list.

Williams: "Fucking A dude! Now if we can just find some spammer with cash!!!"

Justice: "No, never! I don't think I could actually stoop that low besides, even though I just did something that my momma would have told me not to, I still have morals!"

Williams: "No I was kidding. I wouldn't do that either but I'm pretty excited about the list though it is dangerous."

Williams wrote that he would put the list into Justice's RadioLabs database, after he removed the e-mail addresses of Crane employees.

Two days later, there was another wave of correspondence between the two, with Williams asking Justice to get the same customer database in a format that would be easier to manipulate. "This is not c. crane's e-mail for deal of the week, product spotlight, etc.," Williams noted. "I'll try to hack their web server and get that too!"

*CORRECTION TO STORY: [correction printed in Aug. 18, 2005 edition]. The story mistakenly implied that Chris Justice and Kirk Williams were arrested for illegally copying the C. Crane Company's customer database. In fact, though criminal charges relating to the incident in question were brought against both men -- charges to which both later pleaded no contest -- neither of them were ever physically taken into custody by the Fortuna Police Department or any other law enforcement agency. The Journal regrets the error.

V. Fallout

After Bob Crane read the Monitoring Times article on Dec. 1, he confronted Justice, telling him that he knew all about RadioLabs. Word got around. That evening, Justice received an e-mail from Ulis Fleming, the Maryland-based proprietor of a web site called Radio Intelligencer. The subject line was "FIRED!" Fleming wrote, "Damn! Sorry to hear that. Are you bummed or happy?"

Justice wrote back: "Um, let you know tomorrow ... kind of working on getting drumk right now. I know I misspelled drumk, but that's OK. Bob found out about RadioLabs and wasn't happy so I will now proceed to dominate his business. : ) "

Justice wasn't officially fired from the company until Dec. 15, after the company had completed the initial phases of its internal investigation. But Crane was not inclined to leave the matter there.

Later in the month, Crane and Ralph Guest, a C. Crane manager, met with an officer from the Fortuna Police Department at the offices of the Harland Law Firm. They provided the officer with copies of e-mails between Justice and Williams that talked about the theft of the C. Crane customer database. In conjunction with a computer crimes specialist at the District Attorney's office, the Fortuna Police Department obtained search warrants on Justice's and Williams' homes, which were executed in January. Later that month, they were charged with grand theft.

On Oct. 4, 2004, Justice and Williams both pleaded no contest to misdemeanor larceny counts for theft of the database. Each was sentenced to three years of probation and 150 hours of community service and ordered to pay a $1,300 fine.

But both knew that was just the beginning of their problems. In April, C. Crane had filed a 14-count civil suit against them, Wang, Sangean and Justice's father, Jack Justice, who had gone into partnership with his son to develop RadioLabs. The suit charged that these parties conspired to misappropriate C. Crane's trade secrets, to engage in unfair business competition and to interfere with the relationship between C. Crane and its subcontractors. It charged that Justice had broken agreements with C. Crane not to engage in business that would compete with the company. And it charged RadioLabs with false advertising for using the picture of C. Crane's repair facility on the RadioLabs web site.

If a jury found for C. Crane, the potential damages could have been enormous. After Crane found out about RadioLabs, he dropped his plans to bring out two new products slated for the coming year -- the CCRadio 2 and the Rugged Radio (Crane cited the May e-mails between Justice and Wang on the Brookstone radio as proof that aspects of the Rugged Radio had been compromised.)

The company felt that its trade secrets had been breached; furthermore, it was not in the mood to do further business with Sangean. In its court filings, C. Crane estimated the lost revenue for the two products to be several million dollars.

VI. The Reunion

After lawyers spent over a year filling 30-odd thick files at the Humboldt County Courthouse with their evidence and arguments, the trial in C. Crane's lawsuit against Sangean went to trial in June.

Sangean settled its part of the case after only a few days of testimony. The terms of the settlement agreement were not disclosed. Speaking from his office in El Monte, Calif., last week, Kevin Wang would say only that it allowed his company and C. Crane to get back to doing business together, and that he was happy for that. "As far as radio retail, I think they are one of the best companies in this country," Wang said.

In response to Crane's charges, Wang said that his company had never sought to appropriate C. Crane's technology. In his mind, Crane's action against Sangean was predicated mostly by hurt feelings. "Mr. Crane -- his position, thinking we had such a good relationship in the past -- he thought that I should be disclosing everything that Chris was doing," Wang said.

The part of the lawsuit aimed at Justice and Williams dragged on three more weeks, with Crane, Williams and Justice all taking the stand. Williams testified that he only wanted to use the C. Crane customer database to test some new software he was trying out. Then, on the morning of Monday, July 18, just a few days before the case was to go to the jury, the attorneys for the defendants announced that over the weekend they, too, had reached a mutually satisfactory settlement with C. Crane.

As with the Sangean settlement, the terms were supposed to be confidential. But someone blurted out one aspect of the agreement in open court -- Justice and RadioLabs would give the C. Crane Company the right of first refusal on its next five new designs. For a while, anyway, RadioLabs will function as a research and development wing of C. Crane.

Today, RadioLabs operates out of a storefront on Main Street in Fortuna, just a block and a half away from the C. Crane warehouse. The Wi-Fi radio concept never came to pass, but Justice sells a number of other Wi-Fi accessories through his web site: powerful antennas, computer cards, Wi-Fi base stations. He's got a contract with the military to manufacture a radio-control device for a shooting range -- the general presses a button, and the targets pop up 500 feet out for a preprogrammed number of seconds while the soldiers hone their skills.

Justice maintains that he didn't intend to go into competition with Crane while he continued to work there. With a couple of exceptions, such as the Wooden Radio, he was selling products that C. Crane wasn't, and he insists that he never knew that Crane would be selling that product. Also, he says he didn't believe himself to be taking Crane's technology. Yes, he was using the same chips and software that were going to be used in the CC Radio 2, but he was going to make a different product. And Crane had never expressed much of an interest in Wi-Fi, he said. (In court documents, Crane said that it was looking into the Wi-Fi business, and had told Justice to look into the market.)

Using the photos of C. Crane on the RadioLabs web site was a boneheaded move, he concedes, but an innocent one. He didn't realize that it was wrong. The thing he does rue -- he winces at the memory of it -- was taking C. Crane's customer database. Though he again insists that Crane misunderstood his motivation, that he never intended to use it to steal business for RadioLabs.

"If I would have used it, it would have been to tell my customers that I was leaving," he says. "I thought it was harmless." In the event, Justice never used the list, or never had a chance to.

He says that he's been working on some "great ideas" for C. Crane to fulfill his part of the settlement. He could, out of spite, offer five lunatic designs that would never fly and release himself from C. Crane that way, he says, but he doesn't want to do that.

Down the street, Bob Crane and his 50 or so employees are handling their daily business -- taking orders, shipping product. The whole experience has been trying, Crane says, but it has really brought the company together. In the next few weeks, he will introduce the "Mini CC Radio," an ultra-portable version of the CC Radio with an improved speaker. The CC Radio 2 remains shelved, for now.

Talking about Justice and his company's last year and a half, Crane loses a bit of his usual polite reserve. Despite himself, a wry tone creeps into his voice when he's asked about Justice opening a shop so near his own.

"He's got cojones," he says. And he's a brilliant engineer, Crane adds -- there's no doubt about that.

Mostly, he's looking forward. Shortly after the settlement, on a tour of his downtown Fortuna warehouse -- the old Daly's building at the corner of 10th and Main -- Crane spoke of his dreams of opening a "destination" C. Crane showroom in the building. It would harken back to the early days of the company, when he was still operating out of his garage. Once, he said, several hundred yards' worth of vehicles lined the road leading to his house, people queuing up for their chance to make a C. Crane pilgrimage. Those people are still out there, he said, and to give them something special on their trip through Fortuna would be good for the company and good for the city.

And if, after their tour through the C. Crane showroom, some customers decide to stroll a block and a half down to the cluttered storefront that houses his former engineer's new shop, that's OK by Bob Crane.

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