LOADTEK INSTRUMENTS LTD
POWTEK LTD
ADX ELECTRONICS

DISPUTE EXPLANATION by Antony Dean 28-11-99
RE: "MARTIN ELTON'S THEFT OF INTELLECTUAL PROPERTY"
(DRAFT)

IN A NUTSHELL

This is by far the most serious of Martin Elton's dishonest actions, and is at the core of the dispute. It is also the hardest to take corrective action against, and the hardest to explain.

From early 1997 to mid 1999, Martin Elton and I embarked on a project to develop and sell electronic loads - using his idea, and my business structure. After some months it became clear that an immense investment of time would be necessary to achieve our goal. Cost of materials and labour were covered by capital I put up, and the proceeds of sale were re-invested to support the project. Over the period, I worked the equivalent of 70 full time weeks of work for the project (2800 hours chargeable), all without pay. Our one permanent worker worked around 1000 hours (mostly paid). However, Martin Elton was already in full-time employment (for our major customer, unknown to them at the time!), and while he also put in some long hours, his contribution can't possibly approach the figures above. He refuses to submit his timesheets.

Martin Elton now says all this past effort is virtually worthless, and he can do with it what he wants. He says copyright is not an issue as he can change component values, positions of screws etc, and eventually redesign sections of the product. He started another business in competition with Loadtek, taking assets, stock, designs, artwork, suppliers, workers, customers etc - without payment, agreement, or consideration of prior ownership. He told me that his design "is 1% the same as what we used to make".

At the same time he says that there is a lot of value there and he wants to continue! His company has sold a load using exactly the same design, built from Loadtek stock. He is changing parts of the design as fast as he can. In the mean time I must recover from the debit that resulted from such heavy investment in this project in the first place, until then the various agreements that were signed aren't worth the paper they are written on.

He started off as a friend, then progressed from an overly eager business partner, to parasite, to predator. Although his actions are far too transparent to be those of a skilful con-man, the effects of such an abuse of trust remain the same. It now appears he has simply used me as a stepping stone towards the type of business he wanted all along.

I am writing this because I know he can't get away with it forever.


HISTORY OF THE PROJECT

before the beginning...

Martin Elton immigrated from England and became a colleague where I was working about 5 years ago. He seemed very "eager" to make friends, people found this a bit unusual but harmless nonetheless. We used to get on very well. He left to work for another local electronics manufacturer.

I eventually left too for full time business. Some months after this, Martin rang up and we started talking about "business opportunities". He was very eager to get "on team" and believed that business partnerships were the only way to go. He was very interested in the projects I was working on at the time and wanted to become involved in anything. I was already working in another joint venture manufacturing and sales project, and he kept asking for the same sort of deal. I was not so keen, one was enough! We worked together on a side project with some other people, which did not go beyond working prototype.

Martin introduced to me the idea of making some electronic loads for the company where he worked, who he knew had a requirement for these to test their product. It all sounded very quick and simple, plus he was in the right place to support the product for this customer if it became a longer term thing. The loads weren't the only project we investigated at the time, and it was a few months before we began working on this product in earnest.

I did have to temper Martin's enthusiasm on a number of occasions. For example, he expected that my existing product would "start to make itself" within the next month or two, leaving room for the loads. I had to remind him that things generally do not work this way. This, along with his almost fanatical enthusiasm to get involved in my projects, were my first warning signs. But he was so positive and enthusiastic I decided to give him the benefit of the doubt, and it was all being done under the name of my business so what could I lose?

in the beginning...

We turned our attentions towards this project, we had some initial discussions, did some initial research. My first real documentation was on the 20th March 1997, where I noted this was a "quick, simple project - that's all". Within a few days I faxed Martin a quote at his work for two units, which he forwarded to the appropriate people.

The following few months were spent making a prototype. This amounted to a maybe a couple of hour per day on average, challenging and interesting work. Martin had worked out a basic circuit, I came up with the heatsink and basic mechanical design, Barry (our mechanical designer who I was paying) designed the first circuit board layout and handled all the mechanical details and fitting it into a case.

Barry and I demonstrated this prototype early July. In due course the customer ordered two loads for delivery within the next few months.

straight into top gear...

We weren't ready for what followed. Moving from prototype to production is never easy, but this project went from taking up only a few hours per day to 80 hour weeks (for me) on average! This was in addition to my consulting work (which made the money to buy parts and equipment for this project). We all worked our butts off, but Martin had a 9 to 5 job (which he was being paid for, buy our customer, still unknown to them).

These were tough months. All day, into the wee hours most nights, all weekend. If it wasn't making the circuit behave, or designing a production circuit board, there was always something around the corner, like the immense effort needed to get the product into the cases. We were only a week or two late with our deliveries, which was a miracle considering the task at hand.

This was really the first of three major blows to the project: The product was simply much harder to manufacture than we estimated.

something doesn't smell right...

In November, after the first run, I felt I was doing a disproportionately high amount of the work. It was unfair to expect Martin to put in 80 hour weeks since he already has a full time job, but I was not prepared to accept such an imbalance. Although I had been making the value of our time contributions clear all along, Martin seemed to lapse back into the general idea that "since our success is a certainty we will all make so much money that it doesn't matter". Since he believes that you always get what you think about, he would not even consider the possibility of anything else. This was another warning sign.

I forced him to discuss the issue, and he agreed that "technically" we would eventually be paid for our work, at the going rate, which was at that time my hourly contracting rate (I believe similar to his hourly rate at his work). We also agreed that whatever happened, we would make our hourly contributions balance one day, probably by him continuing on with the day to day running of the business when the product had been developed. I requested, and he promised, to keep an accurate record of time spent from that time onward (as I have done all along).

Around this time, Martin turned up at my place with a "trading agreement" he wanted signed, as up to that time there was no official way of telling the loads project work apart from my own business, and he probably felt I was having a disproportionately large say in the running of the project (which was after all under the wing of my business). It talks of equal input and equal responsibility, so I saw no harm in signing it, as it was what I intended to honour anyway. (How he can get around this now I don't know, except by saying that it was only to protect him and it can't be used against him as "that's not what it was for"!). Regardless of opinions, here it is in black and white:

(Ignore the $1B part, it wasn't being treated as extremely serious by myself, as I had no intention of ripping Martin off anyway. Name of customer and parts of our signatures smudged out. The date at the bottom is correct.)

While I'm on a "negative" tack, I should mention that both of the first two units delivered caught on fire during use! One burnt out a power connection that had not been given a quality control check before delivery, and the other fell victim to a circuit design bug that blew up all the power components. We gave the customer a $500 refund for the burnt unit and repaired both units. A teething problem perhaps, but Martin seemed convinced that as it stood we had the best product in the world. Warning signs coming thick and fast...

and they want more...

Our customer then ordered more, with more features, and steadily increasing ratings. It wasn't any easier. The end of 1997 passed before delivery. A couple of months into 1998 we were left wondering what the big problem was. By this time I had put so much effort into the project that I couldn't just quit. It came to me very clearly - we simply had an enormous task ahead of us, we had to make the jobs fit into the time available. From previous runs, both were known quantities. Martin didn't seem to like this sort of thinking as he is not a realist, but he did support initiatives to improve our manufacturing process. Much of 1998 was devoted to improving the manufacturability of our product, and we really did make some quite amazing gains in efficiency.

but who is going to buy it?

Again in the first few months of 1998, we began researching our international market, as we really did have the basis of a very good product, and it seemed certain that it should go places. We had been assuming all along that demand would outstrip our production capability, given the problems with production. I was a bit more reserved about the demand being so extensive given my prior experiences with direct sales from my website.

We incorporated a company to market the product (Loadtek Instruments Ltd!). I did a web page. Martin had already attained a list of addresses from his work, I guess mostly customers and some competition. I didn't really stop to think about that, because we needed a market. But I did keep asking Martin when he would 'come clean' about his involvement with his employer (and our major customer), he always had some excuse, and treated them purely as a stepping stone onto bigger things. I continued to deal with them under my own business's name - ADX Electronics. (To force the issue would be to risk our business partnership, eventually I did, and my concerns were proven accurate).

Anyway, 6 weeks after sending out about 50 brochures there was nothing. The responses did start to roll in at that point, and even included a few requests for representation, but it was clear that the huge demand for standard units in OEM quantities was not there. We all got it terribly wrong.

We supplied a few more units, and our overseas customers seem perfectly happy. The product itself is fine.

But this was the second major blow to the project: Marketing of this product was not going to be the trivial exercise we had hoped it would be.

the proof of the pudding...

Towards the end of 1998, we began another production run for our local customer. This went a lot faster than before, but the same old problems kept reappearing. It became clear to me that the team was basically falling apart, with crossed objectives, and an overly simplistic "to land a plane, you point it at the ground" mentality coming from Martin. From his point of view I was making everything far too complicated with my requirement for such things as intelligent planning, ISO9001 techniques, and systems to assist manufacturing (which I had found necessary).

This was the third major blow to the project: In finally saw with total clarity, that as it was, our team was limited to mediocre success at the best.

I could tell that we were both right, we just had differing objectives. Martin was willing to continue working blindly towards his dream until any form of success arose. I wanted to settle for nothing less than volume OEM sales and a production system to suit, as that is the basis I was working/investing on all along. I started feeling that Martin's support of these objectives was simply part of his "be positive at any cost" approach to business.

party like it's 1999...

I didn't stop working though, as by that stage I wanted to at least recover my investment, and with due attention to business planning and the like I saw no reason why this couldn't happen. I worked solidly throughout January and February on customising units for customers.

However, it was starting to stink too much. I was working full time, travelling to our local customer and supporting the product for free, while my business partner enjoyed a steady paid job there, just a few rooms away! Something needed to be done.

I decided to stop "unjustified commitment" at the two year point, 20 March 1999. This didn't go down well, as the source of free work for both Martin and this local customer was drying up. As Loadtek's management, we attempted to address business plans and the like, but by then I knew that the reality was neither positive nor simple enough for Martin to accept. He just wanted to "go for it". I liked that idea, but it had failed us too many times before.

I began addressing the problems that were causing my own business to stumble, which in turn motivated me to force discussion of loads project issues that had been ignored since the very beginning. There was no positive answer to this, the situation simply became more tense and eventually Martin "cracked" by sending a "mad" email to which I replied to in kind, and this whole horrible situation was born (continued elsewhere).

what does this have to do with the "theft of intellectual property"?

Well, not much. The facts are covered perfectly well in the "ceased trading fabrication" page and at the top of this page. If you have read through all of this, you will have a reasonably good idea of what the intellectual property in question actually is, and how much unpaid work was involved - and you can probably see why I am not be too happy with Martin at the moment!

Whatever may be happening now, I am convinced Martin didn't consciously go out to rip me off from the start. In fact it is his compulsive misrepresentation of the truth from the start that I object to most strongly. Rather like dealing with a stereotypical car salesman, I knew what was going on - but I was not prepared for my business partner to respond to direct questions with lies (even if they were white lies). I now understand just how total his belief in the "power of positive thought" is, and that in times of opportunity or trouble he will say and he will hear anything to make it so. One of his favourite books is "how to win friends and influence people" - he quotes from it like a bible. Enough said there.

What he is doing now is really just the inevitable result of these misrepresentations backfiring. Because he has lied to himself (as he freely admits he likes to do)(link TBD), I can't see him letting go of these misconceptions in a hurry, because they are self sustaining.

So I don't think he's bad at heart - just by nature - and only then because of blind optimism overriding all else. It has taken me a while to realise how he can be bad without meaning it.

Still, it's no excuse for lying, cheating and stealing to gain access to over two years of my work, which he agreed I would be paid for.

what else can I say?

I am in a much better position to not be in business with him, whatever the loss!

I accept that the time I put in was a business investment, and a return was never guaranteed. I accept that I made a mistake by going into business with him.

But I don't accept that he has unlimited access to my work, when this was never the agreement. If he uses it without my permission, he should at least pay at the agreed rate.

If you've read this far then at least someone else may learn from my bad experience!

This is a draft document, largely off the top of my head. As far as I know it is accurate.