Struggling electric jet startup Zunum sues Boeing for fraud, misuse of trade secrets, poaching talent

In 2017, Zunum Aero was flying high. The Kirkland, Washington-based aviation startup came out of stealth mode with bold plans to build a fleet of 12-seat hybrid electric jets for short, regional hops between cities. The company, which had received millions of dollars from the venture arms of Boeing and JetBlue, said it would be ready to fly by 2022.

Not long after, those dreams came crashing down to earth. In 2018, Zunum ran out of cash, forcing it to lay off nearly all of its employees and vacate its headquarters. It struggled to raise additional funds that it needed to get its plans back in motion. And now, Zunum is striking back at one of its former investors. The company filed a lawsuit in Washington Superior Court this week accusing aerospace giant Boeing of fraud, technology theft, breach of contract, and misappropriation of trade secrets.

Zunum said that Boeing “colluded with other key aerospace manufacturers and funders” to sabotage its efforts to raise additional cash and tried to poach Zunum’s engineers during the process. The startup claims that Boeing saw its superior technology and potential to disrupt air travel as a threat to its own dominance in the aviation world and sought to undermine it. Using its due diligence as an investor as subtext, Zunum said Boeing gained access to its business plan and proprietary technology, and “exploited” Zunum for its own benefit.

“Boeing saw an innovative venture, with a dramatically improved path to the future, and presented itself as interested in investing and partnering with Zunum,” the company claims in court filings. “But instead, Boeing stole Zunum’s technology and intentionally hobbled the upstart entrant in order to maintain its dominant position in commercial aviation by stifling competition.”

It’s rare that a startup would sue one of its investors after failing to deliver on its promises. But Zunum said its setbacks weren’t because of bad technology or a faulty business plan. Rather, the company claims it was sabotaged by Boeing, which misused its position as an investor to pillage its talent and patents before eventually scuttling the company’s ability to continue to raise money.

Zunum also names HorizonX, Boeing’s venture capital arm, and French engine supplier Safran as co-defendants. The company is seeking compensatory and punitive damages. A spokesperson for Boeing said the lawsuit was without merit and that the company would “vigorously” contest it in court.

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Zunum puts the blame on Boeing. The Chicago-based company repeatedly reneged on promises for additional funds and dissuaded other investors from putting money in, the lawsuit alleges.

“Boeing also kept Zunum beholden to it for much-needed capital and market validation, stringing Zunum along with the prospects of an anchor investment and providing leadership on further fundraising,” the lawsuit says. “Although Zunum also sought investments elsewhere, Boeing actively interfered with and undermined those business relationships while inducing Zunum to continue its reliance on Boeing by holding out the prospect of a strategic partnership or merger.”

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“Zunum discovered that Boeing was secretly developing a replica prototype of Zunum’s flagship aircraft design, staffed by the very same engineers and other professionals whom Boeing had assigned to conduct extensive due diligence on Zunum, under non-disclosure and non-use obligations,” the lawsuit reads.

Source: Struggling electric jet startup Zunum sues Boeing for fraud and misuse of trade secrets – The Verge

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