Apparently part of the fraud case against Philip Whitley is based on proving he lied about patenting his technology. The prosecutors are going through the motions of showing that he had no New Zealand patent activity whatsoever, and just some dubious activity in the US that didn’t even result in a patent application.

Patent for software ‘didn’t exist’

Whitley tried to claim that a patent application was filed but the evidence was destroyed due to a mental breakdown he suffered

Patent evidence ‘burnt’ due to paranoia

I don’t know what bearing it has on the case, but the prosecution looks to be trying to smear Whitley a bit by showing that he was living it up on investor’s money, burning through $7,000/week in household expenses, plus lots of other lavish lifestyle items:

Whitley’s lavish life recounted

And the saddest news of all is the story of an investor who desperately tried to recreate Whitley’s so-called revolutionary software by reading Programming For Dummies:

Desperate investor ‘tried to recreate software’

A lot of people commenting on stories about Euclid Discoveries ask why people like me are so harsh and pessimistic about Euclid. After all, isn’t it possible that somebody could come up with a revolutionary technology?

People like Philip Whitley provide the answer to that question. For the past 30 years, the field of data compression has been marked by steady, incremental progress. Virtually every case where somebody has claimed a revolutionary new technique has resolved as either an outright fraud or a failure to deliver.

So when people like me hear incredible claims, we think of cases like Whitley’s, where investors lose millions of dollars based on promises from a guy who never delivered, and is accused of actively scamming the investors. We have seen this same thing happen dozens of times. (Literally.)

What we have never seen is somebody pop up out of the woodwork with a new technique that suddenly takes existing state-of-the-art and doubles performance, triples it, or even increases it by 460%.

Incredible claims require incredible evidence. Absent such evidence, the risk that people are being scammed is so high that raising alarms seems like the right thing to do.

Not everyone involved with Euclid knows that the same management team has been working on another startup, Corista. Corista is working on medical imaging, and rumor has it that they too will depend on some impressive compression breakthroughs in order to succeed.

It’s a pretty good deal for the Wingard family. By leveraging the funding techniques developed at Euclid by Richard Wingard, Liz Wingard can presumably draw another few hundred K per year at Corista, which makes for a nice total family income.

Corista is a story I don’t know much about, although I have heard it is using the same Angel/LLC funding techniques that have worked so well for ED. I only bring up their name because of this quote from a job posting on their web site:

Corista is the 2nd company to be developed by this management team. The first, Euclid Discoveries (www.eucliddiscoveries.com) has developed a video image compression technology that compresses video images and provides a substantial improvement over current state of the art. Euclid Discoveries is currently represented by a leading NYC Investment Bank in the acquisition process. The company was founded in 1999 and is privately funded.

They key sentence in there is that Euclid is ostensibly in the acquisition process.

The Investment Bank is of course Allen & Co., in the person of Nancy Peretsman. Nancy’s name is brought up a lot in an attempt to gain legitimacy, but Nancy’s actual involvement is speculative at this point. And of course, whether Allen & Co. is going to be able to sell ED is even more speculative.

- Mark

Euclid Discoveries has been raising money, fear, and loathing for so long now that they feel to me like a lifelong friend.

I was working my through some old emails last week and I came across an angry message from a Euclid supporter sent all the way back in 2003. Gray Smith is one of the Kentucky investors that have been mentioned here so often, and he took offense at some of my skepticism, firing off this email:

Mark -

Sorry, but you will soon be eating your “E words” regarding Euclid Discoveries. And, unfortunately, your reasoning on the subject is so far off-base that I’m forced to discount everything else you’ve ever said.

Regarding the business model and funding strategies, can you think of one example of a small tech enterprise that survived venture capitalism or hand-holding with the likes of, say, Microsoft? Can you say “Hotmail”?

Secondly, the principals of Euclid have sat on the MP3 standards committee for a number of years. Their product will hit the market compatible with every existing application, and will be the sole property of the principals and investors.

Do some homework. The PR firm handling their publicity (and their patent firm) are the premiere [sic] firm(s) in the niche. They don’t take on losers. And they’ve seen the demo.

Have a nice day.

Gray Smith

You’ll note that Gray is using several of the key strategies Euclid supporters have engaged in since the beginning:

• Attack the messenger instead of debating the facts: “your reasoning on the subject is so far off-base that I’m forced to discount everything else you’ve ever said.”
• Claim legitimacy by association - by virtue of hiring a PR firm, ED suddenly is imbued with some sort of goodness, because PR firms only accept payment from companies that are really going somewhere.
• Confuse business relationships with technical skill. Getting on the MP3 standards committee is not like getting into the Rock and Roll Hall of Fame. It is not an endorsement by your peers. It is an indication that you are capable of filling out an application form and sending it in with a check that doesn’t bounce.

And yes, Gray, I can think of many small tech companies that have survived venture capitalism or hand-holding with the likes of, say, Microsoft? Can you say “YouTube?”

Gray is apparently still working at the same company in Louisville that he was back in 2003, so I sent him an email asking if he had an update on how soon I would be eating my words.

So far, no response.

- Mark