August 4, 2005
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On the cover: Radio lab at
Fortuna's C. Crane Company. Photo by Hank Sims
at C. Crane: Was it industrial espionage, or just a big misunderstanding?
story and photos by HANK SIMS
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:
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
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
[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.
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.]
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.
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."
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
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
"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 !!!!"
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.
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
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,"
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
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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