The US legal system is considered one of the most effective in the world in the field of intellectual property and copyright protection. Yet there have been attempts to skirt around every law that has ever been written. The trial against Capella Space has been dragging on since November 2018 and has become perhaps the most high-profile case in the US technology sector.
The stumbling block was the DaHGR deployable reflector antenna. The device was developed and patented in 2015 by MMA Design LLC, which at that time was co-owned by Thomas J. Harvey. He served as CEO and owned 50% of the company. Moreover, he co-authored all patents. Several space companies became interested in technology at once. At the same time, America's Capella Space and the Finnish ICEYE contacted MMA Design LLC. They first wanted to purchase two antennas for ground testing of the satellite and then sought consultations as part of the development of their own radar antenna. Tom Harvey founded the consulting company TJ Harvey Engineering LLC and took a week off from work, which he spent in Espoo. That is where the ICEYE office is based. Returning from his creative "vacation," Harvey copied about 10,000 files owned MMA Design LLC, although he was not the sole owner of the development. So in his hands was all the design documentation for the DaHGR antenna and the ICEYE client, which he stole from his partner. Harvey quit the company in August 2016. A month later, he sued MMA Design co-owner Mitch Wiens for violating fiduciary duties. He probably acted in advance and sued against the backdrop of the expected counterclaim.
Meanwhile, negotiations between MMA Design and Capella Space, which lasted parallel to negotiations with the Finns, reached an impasse. The parties agreed to supply two antennas for 40% in cash and a 60% stake in Capella Space. In June 2016, the company received the first DaHGR terrestrial antenna and began testing trials. As part of further negotiations, the buyer tried to "push" MMA Design in an attempt to secure ownership of the technology or, at a minimum, to impose restrictions on the sale of such antennas to competitors. As a result, Capella formed a price offer for the order of radar antennas, but at a price significantly lower than previously agreed. For its part, the manufacturer refused unprofitable cooperation. Contrary to the agreements, it did not receive its share of Capella Space shares for the test sample supplied earlier. The problems with an unscrupulous partner did not end there.
DaHGR terrestrial antenna
Exactly two days after the negotiations were stopped, Capella entered into a consultancy contract for the development of the radar antenna with TJHE, the firm of that same Tom Harvey. Recall that he illegally took possession of the project documentation for the DaHGR project and stole from MMA Design the second potential client in six months. With Harvey's help (and thanks to the fact he had in his possession stolen property), the situation looked good for Capella Space. The company handed over the available antenna specifications to competitors MMA Design in order to conduct a tender for the production and supply of such devices. A year earlier, Capella Space received a government contract with the U.S. Defense Department to develop a miniature prototype SAR KA. The volume of financing amounted to $11 million. Against the background of the contract, Capella closed the $14.9 million investment round. Already after the conflict with MMA Design, the company received permission to launch two test satellites. On the eve of the launch, it successfully closed another investment round for $19 million.
On November 16, 2018, MMA Design LLC filed a lawsuit against Capella Space and Tom Harvey for copyright infringement. The plaintiff accused Harvey of making a replica of the T-DaHGR antenna for Capella Space, saying without this technology, the company would not have been able to attract investments and conclude government contracts. On August 21, 2019, the court rejected the Capella Space petition for insolvency charges. The lawsuit continues to this day.
The MMA Design LLC copyright scandal is not the first in the history of Capella Space. The company specializes in high-resolution Earth images using its own constellation of radar spacecraft. Capella Space also offers satellite leasing with full access for a period of three years.
The company was founded by five Stanford students in 2016. At first things went well. In total, the company attracted about $77 million of investments. Since 2017, it has been working under government contracts in the framework of cooperation through DIU, an organization of the US Department of Defense focused on the search and implementation of commercial technologies, for a total of $10.4 million. However, the promising startup has not "taken off." Numerous scandals related to the failure of contracts, litigation with partners, staff leakage and the biography of the owners are the reasons. During the first years of its existence, Capella Space earned the reputation of an unreliable and unscrupulous partner with whom the companies taught by bitter experience no longer work.
In addition to the aforementioned MMA Design LLC, such a decision was made by the River Front Service, which almost went bankrupt due to the actions of Capella Space. In March 2018, the River Front Service sued Capella Space for flagrant violation of the terms of the contract: the company missed the satellite manufacturing deadline, failed to fulfill its obligations and refused to pay for the supplied RFS components. As a result, the customer suffered a loss of $450,000.
The more toxic Capella Space became, the more actively employees quit. In 2017, four quit; in 2018, there are already 17 people, including co-founder Will Woods. Last year and in the three months of 2020, the company lost its director of satellite subsystems, Allen Kummer and Business Development Manager, Andrew Ulmer. A total of one-third of full-time employees quit. Many of the remaining 54 are looking for new jobs on LinkedIn. Among the claims are the lack of a clear strategy for the development of the company, disagreement with the actions of the owners and their reputation.
Who is Payam Banazadeh?
The scandal and subsequent lawsuit with MMA Design LLC began with the filing of Capella Space co-owner Payama Banazadeh. He was born in the city of Shemiranat and until 2006 lived in Iran. He immigrated to the United States, where he enrolled at Stratford High School in Houston. In 2008, he entered the Cochrell Technical School of the University of Texas at Austin, where he was part of the Cubsate Design Team. Three years internship at NASA JPL. In September 2014, he became a student at Stanford University with a degree in business management. Then he met with future partners in Capella Space.
Over the years of life in the United States, Banazadeh's ties with Iran grew stronger. He pointed out that in recent years he has significantly strengthened his influence in the Iranian community: he ran for president of the Persian Student Association, is a junior mentor in Public Affairs Alliance of Iranian Americans (PAAIA) and a member of the board of directors at PAAIA NexGen. The organization provides assistance to Iran American specialists and students. Recently, Banazadeh even appeared in an espionage scandal. Media say he worked with Iranian intelligence agencies and used Capella Space as a cover for illegal activities. This is also indicated by former employees of the company. According to them, Banazadeh is building a soap bubble and has long lost confidence in the commercial segment of the market. So, due to poor management, the launch of the first test satellite Capella 1 was postponed twice. In the first two years of its existence, the company manufactured only two satellites.
However, Banazadeh had problems not only with the management of the company, but also with US law enforcement agencies. In February 2018, he was a defendant in the criminal case, People of the State of California v. Payam Banazadeh. The case file was not disclosed, but it is known that his lawyer was James Dunn - a specialist in the field of theft, drug trafficking, possession of weapons, domestic violence, sexual crimes and violent criminal offenses. Prior to that, in 2015, he was a defendant in California accused of committing misdemeanors (which could have included traffic violations, petty theft, illegal drug possession).
Capella Space is a case for beginning entrepreneurs on how to avoid doing business. It is instructive for investors who invest tens of millions of dollars in a facade with a flimsy foundation. And the company's partners - current and future - should get to know the sad experiences of MMA Design LLC and River Front Service. Who were deceived, robbed and almost made bankrupt.