Facts

Plaintiff Jacob Chapsky was an engineer at the Jet Propulsion Laboratory. Defendant Chen-Yuan Kuo was an engineering professor in Arizona State University, and defendant Chih-Lung George Yang was a former graduate student of Kuo's who became an engineering professor in Taiwan.

PLAINTIFF'S CONTENTIONS:
Plaintiff contended that the defendants induced him to invest in video conferencing technology they were promoting. The defendants claimed that the technology was able to combine multiple video and audio feeds from different sources into a single display in real time using drastically less computational power than existing technologies. The technology had actual promise, and would have been extremely valuable if it had been able to perform as represented, but the defendants materially misrepresented its state of development. The truth was that the technology required another two years of development to approach the results claimed by the defendants, by which time industry standards had evolved to render the technology largely obsolete. Chapsky invested $350,000 and lost his entire investment.

DEFENDANTS' CONTENTIONS:
The defendants disputed the plaintiff's version of the facts and specifically denied that any misrepresentations were made.

Result

According to the Plaintiff: The parties stipulated to submit the matter to binding arbitration before retired Judge Gary L. Taylor, through JAMS. At arbitration, the defendants admitted that their representations to Chapsky about the technical details of the technology were false but said that the misrepresentations were "business terminology," meaning falsehoods one might say to achieve business objectives. Judge Taylor found by clear and convincing evidence that the defendants had committed fraud under Civil Code section 1710(3) by suppressing material facts of which they were aware. Judge Taylor also rejected defenses claiming inequitable conduct by Chapsky or his son. He awarded $350,000 in compensatory damages; $50,000 in punitive damages against each of the defendants; $178,152 in attorney fees and $43,001 in costs, for a total award of $671,153. Chapsky filed a motion to confirm the arbitration award against Kuo, Yang and various defaulted parties, including Yang's wife, Man-Fang Huang. According to the Defendants: The defendants intended to contest the arbitrator's award. However, rather than do so, the defendants decided to settle the dispute by buying out plaintiff's interest in the patent and video conferencing technology. As part of the settlement, the defendants acquired plaintiff's interest in the entities that owned the patent and licensing rights to the technology. The defendants also obtained a full release from plaintiff and plaintiff's son, Lars Chapsky, a former engineering professor at Arizona State University, who worked as president and manager of the entities. The US Patent and Trademark Office has recently granted another patent regarding the video conferencing technology.

Other Information

According to the Plaintiff: Prior to arbitration, Chapsky offered to accept $350,000. The defendants offered zero and stated that they intended to defense the case and seek attorney fees. After the arbitration, while Chapsky's motion to confirm the arbitration award was pending, the parties settled. To avoid collection risk, Chapsky agreed to accept $518,000. The settlement amount has been fully paid.