SUPERIOR COURT OF CALIFORNIA COUNTY OF SAN FRANCISCO Document Scanning Lead Sheet Jan?12?2017 9:41 am Case Number: CGC-17-556365 Filing Date: Jan?12?2017 9:38 Filed by: ANNA TORRES Image: 05702434 COMPLAINT THE PEOPLE OF THE STATE OF CALIFORNIA VS. LILY ROBOTICS, INC., ET AL 001005702434 Instructions: Please place this sheet on top of the document to be scanned. SUM-100 L) NOTICE TO DEFENDANT: (A VISO AL DEMANDADO): LILY ROBOTICS, INC., a Delaware Corporation, and DOES 1 through 100, inclusive YOU ARE BEING SUED BY PLAINTIFF: (LO ES TA DEMANDANDO EL DEMANDAN TE): THE PEOPLE OF THE STATE OF CALIFORNIA You have been sued. The court may decide against you without your being heard unless you respond within 30 days. Read the information below. You have 30 CALENDAR DAYS after this summons and legal papers are served on you to file a written reSponse at this court and have a copy served on the plaintiff. A letter or phone call will not protect you. Your written response must be in proper legal form if you want the court to hear your case. There may be a court form that you can use for your response. You can find these court forms and more information at the California Courts Online Self-Help Center your county law library, or the courthouse nearest you. If you cannot pay the ?ling fee, ask the court clerk for a fee waiver form. If you do not file your response on time, you may lose the case by default, and your wages. money, and property may be taken without further warning from the court. There are other legal requirements. You may want to call an attorney right away. If you do not know an attorney, you may want to call an attorney referral service. If you cannot afford an attorney, you may be eligible for free legal services from a nonprofit legal services program. You can locate these nonpro?t groups at the California Legal Services Web site the California Courts Online Sell-Help Center or by contacting your local court or county bar association. NOTE: The court has a statutory lien for waived fees and costs on any settlement or arbitration award of $10,000 or more in a civil case. The court's lien must be paid before the court will dismiss the case. Lo han demandado. Si no responds dentro de 30 dies, la oorte puede decidir en su contra sin escuchar su version. Lea la informaoi?n a continuacic'in. Tiene 30 DIAS DE CALENDARIO despu?s de que le entreguen esta citacion papa/es iegales para presenter una respuesta por escrilo en esta corte hacer que se entregue una copia al demandante. Una carta una llamada telefonlca no lo protegen. Su respuesta por escrito tiene que estar en formato legal correcto si desea que procesen su case en la corte. Es posible que haya un formulario que usted pueda usar para su respuesta. Puede encontrar estos formulan?os de la corle mas informacion en of Centre de Ayuda de las Cortes de California en la biblioteca de ieyes de su condado 0 en la corte que le quede mas cerca. Si no puede pagar la cuota de presentacion, pida al secretario de la corte que le d? un formulan'o de exenci?n de page do cuotas. Si no presenla su respuesta a tiempo, puede perder el caso por incumplimiento la corte le podra quitar su sueldo, dinero bienes sin mas advertencia. Hay otros requisitos legales. Es recomendable que llama a un abogado inmediatamente. Si no conoce a un abogao?o, puede llamar a un servicio de remision a abogados. Si no puede pagar a un abogado, es posible que cumpla con los requisitos para obtener sen/isles iegales gratuitos de un programa de servicios legales sin fines de lucro. Puede encontrar estos grupos sin fines de lucro en el sitio web de California Legal Services, en 6/ Centre de Ayuo'a de las Cortes de California, poni?no'ose en contacto con la corte 0 el colegio de abogados locales. AVISO: Por fey, la oorte tiene derecho a reclamar las cuotas los costos exentos por imponer un gravamen sabre cualquier recuperaci?n de $10,000 6 mas de valor recibida mediante un acuerdo una concesion de arbitraje en on case do derec?ho civil. Tiene que pagar el gravamen de la corle antes de que la corle pueda desechar el caso. COUNTY OF SAN FRANCISCO, CIVIC CENTER COURTHOUSE 400 MCALLISTER STREET, SAN FRANCISCO, CA 94102 The name, address, and telephone number of plaintiff's attorney, or plaintiff without an attorney, is: (El nombre, la direcci?n el numero de tel?fono del abogado del demandante, 0 del demandante que no tiene abo The name and address of the court is: UMBER: (El nombre direcci?n de la corte es): SUPERIOR COURT OF CALIFORNIA 55 6 3 6 5 EVAN H. ACKIRON, SBN 164628, 732 BRANNAN STREET, SAN 1-9560 DATE: Clerk, by DEPUIY (F9003) JAN 1 9 9mm GLERK OF THE COURT (Secretario) . (Adjunto) (For proof of s'e'rvic?e Wills summons, use Proof of Service of Summons (form (Para prueba de entrega de esta citation use el formulario Proof of Service of Summons, NOTICE TO THE PERSON SERVED: You are served 1. C) as an individual defendant. 2. as the person sued under the fictitious name of (specify): 3_ on behalf of (specify): LILY ROBOTICS, INC., A Delaware Corporation under: CCP 416.10 (corporation) cop 416.60 (minor) (3 GOP 416.20 (defunct corporation) I: CCP 416.70 (conservatee) GOP 416.40 (association or partnership) CCP 416.90 (authorized person) other (specify): 4. by personal delivery on (date): Page 1 of 1 Form Adopted for Mandatory Use Code of Civil Procedure 412.20 465 Judicial Council of California Mo cagov SUM-100 (Rev. July 1, 2009] CM-01 0 ATTORNEY OR PARTY WITHOUT State Bar number and address FOR COURT USE ONLY GEORGE GASCON, DISTRI ATTORNEY (SBN 182.345) EVAN ACKIRON, MANAGING ASSITANT DISTRICT ATTORNEY (SBN 164628) 732 BRANNAN STREET SAN FRANCISCO, CA 94103 TELEPHONE Not: 415?551-9560 NO.: 415-551?9580 ATTORNEY FOR (Name): THE PEOPLE OF THE STATE OF CALIFORNIA Qty of an Francisco SUPERIOR COURT OF CALIFORNIA, COUNTY OF SAN FRANCISCO . - sameness: 400 MCALLISTER STREET JAN 12 2017 MAILING ADDRESS: 400 MCALLISTER STREET . cmmozupcooe SAN FRANCISCO, CA 94102 CLERK OF COURT BRANCH CIVIC CENTER COURTHOUSE By. CASE NAME: PEOPLE V.1LILY ROBOTICS, AND DOES 1-100, INCLUSIVE 1 Su rlor California ct?) Deputy Clerk CASE COVER SHEET Complex Case Designation CASE NUMBER 3:23;? '3 2:311:33; I: Counter :1 Joinder . . . . i - - demanded demanded IS WIth first appearance by defendantc,ge-1 7 exceeds $25,000) $25,000 or less) (Cal. Rules of Court, rule 3.402) items 1?6 below must be completed (see instructions on page 2). 1. Check one box below for the case type that best describes this case: Auto Tort Contract Provisionally Complex Civil Litigation Auto (22) Breach of contract/warranty (06) (Cal. Rules of Court, rules awe?3.403) Uninsured motorist (46) 1: Rule 3.740 collections (09) Antitrust/Trade regulation (03) Other PIIPDIWD (Personal :1 Other collections (09) :1 Construction defect (10) Damageerongful Death) Tort Insurance coverage (18) El Mass tort (40) Asbestos (04) I: Other contract (37) Securities litigation (28) Product liability (24) Real Property Environmentalfl'oxic tort (30) Medical malpractice (45) Eminent domain/Inverse Insurance coverage claims arising from the condemnation (14) Wrongful eviction (33) Other real property (26) Unlawful Detainer Commercial (31) Residential (32) Drugs (38) Judicial Review Asset forfeiture (05) Petition re: arbitration award (11) Writ of mandate (02) Otherjudicial review (39) 1:1 Other (23) (Other) Tort above listed provisionally complex case types (41) Business tortlunfair business practice (07) Enforcement Of Judgment Civil rights (08) Defamation (13) Fraud (16) Intellectual property (19) Professional negligence (25) Other tort (35) oyment Wrongful termination (36) Other employment (15) Enforcement of judgment (20) Miscetlaneous Civil Complaint 1:1 RICO (27) Other complaint (not specified above) (42) Miscellaneous Civil Petition Partnership and corporate governance (21) Other petition (not speci?ed above) (43) rn 3 DD 2. This case I: is IE is not complex under rule 3.400 of the California Rules of Court. If the case is complex, mark the factors requiring exceptional judicial management: a. Large number of separately represented parties d. Large number of witnesses . b. Extensive motion practice raising difficult or novel e. Coordination with related actions pending in one or more courts issues that will be time?consuming to resolve in other counties, states, or countries, or in a federal court 0. CI Substantial amount of documentary evidence i. Substantial postjudgment judicial supervision 3. Remedies sought (check all that apply): am monetary b- nonmonetary; declaratory or injunctive relief 6. .punitive 4. Number of causes of action (specify): TWO (2) 5. This case I: is is not a class action suit. 6. If there are any known related cases, file and serve a notice of related case. You may use form 15.) Date: HTMNO (TYPE OR PRINT NAME) Wen/11 OF PARTY ORALTORNEY FOR PARTY) NOTICE 0 Plaintiff must ?le this cover Sheet with the first paper filed in the action or proceeding (except small claims cases or cases filed under the Probate Code, Family Code, or Welfare and Institutions Code). (Cal. Rules of Court, rule 3.220.) Failure to ?le may result in sanctions. File this cover Sheet in addition to any cover sheet required by local court rule. 0 If this case is complex under rule 3.400 et seq. of the California Rules of Court, other parties to the action or proceeding. 0 Unless this is a collections case under rule 3.740 or a complex case, this cover Sheet will be used for statistical purposes onl . age 1 of 2 CIVIL CASE COVER SHEET you must serve a copy of this cover sheet on all Form Adopted for Mandatory Use Judicial Council Of California (Rev. July 1, 2007] Cal Rules of Court, rules 230, 3.220, 3400?3403, 3.740; Cal. Standards of Judicial Administration, std. 3.10 courtinfo . ca. gov CM-010 INSTRUCTIONS ON HOW TO COMPLETE THE COVER SHEET To Plaintiffs and Others Filing First Papers. If you are ?ling a ?rst paper (for example, a complaint) in a civil case, you must complete and ?le, along with your ?rst paper, the Civil Case Cover Sheet contained on page 1. This information will be used to compile statistics about the types and numbers of cases filed. You must complete items 1 through 6 on the sheet. In item 1, you must check one box for the case type that best describes the case. If the case ?ts both a general and a more speci?c type of case listed in item 1, check the more speci?c one. It the case has multiple causes of action, check the box that best indicates the primary cause of action. To assist you in completing the sheet, examples of the cases that belong under each case type in item 1 are provided below. A cover sheet must be ?led only with your initial paper. Failure to file a cover sheet with the first paper filed in a civil case may subject a party, its counsel, or both to sanctions under rules 2.30 and 3.220 of the California Rules of Court. To Parties in Rule 3.740 Collections Cases. A "collections case" under rule 3.740 is defined as an action for recovery of money owed in a sum stated to be certain that is not more than $25,000, exclusive of interest and attorney's fees, arising from a transaction in which property, services, or money was acquired on credit. A collections case does not include an action seeking the following: (1) tort damages, (2) punitive damages, (3) recovery of real property, (4) recovery of personal prOperty, or (5) a prejudgment writ of attachment. The identification of a case as a rule 3.740 collections case on this form means that it will be exempt from the general time-for-service requirements and case management rules, unless a defendant ?les a responsive pleading. A rule 3.740 collections case will be subject to the requirements for service and obtaining a judgment in rule 3.740. To Parties in Complex Cases. In complex cases only, parties must also use the Civil Case Cover Sheet to designate whether the case is complex. If a plaintiff believes the case is complex under rule 3.400 of the California Rules of Court, this must be indicated by completing the appropriate boxes in items 1 and 2. If a plaintiff designates a case as complex, the cover sheet must be served with the complaint on all parties to the action. A defendant may ?le and serve no later than the time of its first appearance a joinder in the plaintiff's designation, a counter-designation that the case is not complex, or, if the plaintiff has made no designation, a designation that the case '5 comp'ex' CASE TYPES AND EXAMPLES Auto Tort Contract Auto (22)?Personal Injury/Property Breach of Contract/Warranty (06) Provisionally Complex Civil Litigation (Cal. Rules of Court Rules 3.400?3.403) Damage/Wrongful Death Uninsured Motorist (46) (if the case involves an uninsured motorist claim subject to arbitration, check this item instead of Auto) Other (Personal Injury! Property DamageNllrongful Death) Tort Asbestos (04) Asbestos Property Damage Asbestos Personal lnjuryl Wrongful Death Product Liability (not asbestos or toxic/environmental) (24) Medical Malpractice (45) Medical Malpractice? Physicians Surgeons Other Professional Health Care Malpractice Other (23) Premises Liability slip and fall) Intentional Bodily Injury/PD/WD assault, vandalism) Intentional lnfliction of Emotional Distress Negligent ln?iction of Emotional Distress Other (Other) Tort Business Tort/Unfair Business Practice (07) Civil Rights discrimination, false arrest) (not civil harassment) (08) Defamation slander, libel) (13) Fraud (16) Intellectual Property (19) Professional Negligence (25) Legal Malpractice Other Professional Malpractice (not medical or legal) Other Tort (35) Employment Wrongful Termination (36) Other Employment (15) CM-01O (Rev. July 1, 2007} Breach of RentallLease Contra ct (not unlawful detainer or wrongful eviction) Contract/Warranty Breach?Seller Plaintiff (not fraud or negligence) Negligent Breach of Contractl Warranty Other Breach of Contract/Warranty Collections money owed, open book accounts) (09) Collection Case?Seller Plaintiff Other Promissory NotelCollections Case Insurance Coverage (not provisionally complex) (18) Auto Subrogation Other Coverage Other Contract (37) Contractual Fraud Other Contract Dispute Real Property Eminent Domain/Inverse Condemnation (14) Wrongful Eviction (33) Other Real Property quiet title) (26) Writ of Possession of Real Property Mortgage Foreclosure Quiet Title Other Real Property (not eminent domain, landlord/tenant, or foreclosure) Unlawful Detainer Commercial (31) Residential (32) Drugs (38) (if the case involves illegal drugs, check this item; othem/lse, report as Commercial or Residential) Judicial Review Asset Forfeiture (05) Petition Re: Arbitration Award (11) Writ of Mandate (02) Writ?Administrative Mandamus Writ-Mandamus on Limited Court Case Matter Writ?Other Limited Court Case Review Other Judicial Review (39) Review of Health Officer Order Notice of Appeal?Labor Commissioner Appeals CIVIL CASE COVER SHEET Antitrust/Trade Regulation (03) Construction Defect (10) Claims Involving Mass Tort (40) Securities Litigation (28) Environmental/Toxic Tort (30) Insurance Coverage Claims (arising from provisionally complex case type listed above) (41) Enforcement of Judgment Enforcement of Judgment (20) Abstract of Judgment (Out of County) Confession of Judgment (non- domestic relations) Sister State Judgment Administrative Agency Award (not unpaid taxes) Petition/Certi?cation of Entry of Judgment on Unpaid Taxes Othe? Enforcement ofJudgment ase Miscellaneous Civil Complaint RICO (27) Other Complaint (not specified above) (42) Declaratory Relief Only lnjunctive Relief Only (nonr harassment) Mechanics Lien Other Commercial Complaint Case (non-tort/non-complex) Other Civil Complaint Miscellaneous Civil Petition Partnership and Corporate Governance (21) Other Petition (not specified above) (43) Civil Harassment Workplace Violence Elder/Dependent Adult Abuse Election Contest Petition for Name Change Petition for Relief From Late Claim Other Civil Petition Page 2 of 2 GEORGE GASCON DISTRICT ATTORNEY . . . GEORGE GASCON District Attorney JUNE D. CRAVETT, SBN 105094 Assistant Chief District Attorney EVAN H. ACKIRON, SBN 164628 Managing Assistant District Attorney NANCY TUNG, SBN 203236 DANIEL C. AMADOR, SBN 247642 STEPHANIE J. LEE, SBN 279733 Assistant District Attorneys 732 Brannan Street San Francisco, California 94103 (415) 551-9574 Attorneys for Plaintiff The People of the State of California t?k?a?aggp JAN 1:2?2017 CLERK OF ?25 COURT Deputy Clerk SUPERIOR COURT OF THE STATE OF CALIFORNIA CITY AND COUNTY OF SAN FRANCISCO UNLIMITED JURISDICTION THE PEOPLE OF THE STATE OF CALIFORNIA, Plaintiff, V. LILY ROBOTICS, INC., a Delaware Corporation, and DOES 1 through 100, inclusive, Defendants. 65 COMPLAINT FOR PERMANENT INJ UN CTION, CIVIL PENALTIES, RESTITUTION, AND OTHER EQUITABLE RELIEF Business and Professions Code ?17200 et seq. 17500 et seq. GEORGE GASCON DISTRICT ATTORNEY The District Attorney for the City and County of San Francisco, authorized to protect the general public within the State of California from false and misleading representations and unlawful business practices, brings this suit in the name of the People of the State of California. The People hereby allege the following on information and belief: PARTIES AND VENUE 1. The authority of the District Attorney for the City and County of San Francisco to bring this action is derived from the statutory law of the State of California, speci?cally Business and Professions Code sections 17200 et seq. and 17500 et seq. 2. Defendant LILY ROBOTICS, IN C., is a Delaware corporation with its headquarters and principal place of business located in the City and County of San Francisco at 374 Harriet Street, San Francisco, CA 94103. 3. The true names and capacities, whether individual, corporate, associate, or otherwise, of the defendants sued herein under the ?ctitious names of DOES 1 through 100, inclusive, are unknown to Plaintiff, who therefore sues said defendants by such ?ctitious names. Each ?ctitiously named defendant is responsible in some manner for the violations of law herein alleged. Plaintiff will amend its complaint to show the true names and capacities of such defendants, as well as the manner in which each ?ctitious defendant is responsible for the violations of law herein alleged, when these facts are ascertained. 4. At all relevant times, defendant LILY ROBOTICS, INC., has committed the acts, caused others to commit the acts, rati?ed the commission of the acts, or permitted others to commit the acts alleged in this complaint and has made, caused, rati?ed, or permitted others to make the false or misleading statements alleged in this complaint. Whenever reference is made in this complaint to any act of defendant, such allegation shall mean that LILY COMPLAINT FOR PERMANENT INJUNCTION, CIVIL PENALTIES. RESTITUTION, AND OTHER EQUITABLE REMEDIES 2 GEORGE GASCON DISTRICT ATTORNEY ROBOTICS, INC., acted individually and jointly with the other unknown defendants. The terms ?Lily Robotics? and ?defendant,? wherever used in this complaint, shall mean LILY ROBOTICS, INC. 5. Whenever in this complaint reference is made to any act of any corporate defendant, such allegation shall be deemed to mean that such corporate defendant did the acts alleged in the complaint through its of?cers, directors, agent, employees, and/or representatives while they were acting within the actual or ostensible scope of their authority. 6. Defendant at all times mentioned herein has transacted business within the City and County of San Francisco and throughout the State of California. The violations of law herein described have been committed within and from the City and County of San Francisco, and elsewhere within the State of California. 7. The actions of the defendant, as hereinafter set forth, are in violation of the laws and public polices of the State of California and are inimical to the rights and interests of the general public as consumers, competitors and citizens. Unless the People are granted the remedies sought herein, including injunctive relief by order of this Court, defendant will continue to engage in the unlawful acts and practices set forth below and will continue to cause injury and harm to the general public. COMPLAINT FOR PERMANENT INJUNCTION, CIVIL PENALTIES. RESTITUTION, AND OTHER EQUITABLE REMEDIES 3 GEORGE GASCON DISTRICT ATTORNEY INTRODUCTION 8. Lily Robotics, Inc., is a company that sells a single product: a purportedly autonomous, ?ying camera drone, known as a ?Lily? or ?Lily Camera,? that can ?lm a user doing a variety of activities. According to the defendant?s advertising, the user simply throws the Lily into the air to begin ?lming and directs the Lily with a remote tracking device. According to the promotional materials, the tracker has several pre-determined ?ight paths from which the user chooses; the Lily, for instance, will ?follow,? ?lead,? or ?loop? around the user. In addition, the Lily Camera purportedly is waterproof and can land safely in the user?s hand. 9. Lily Robotics was co-founded by Antoine Balaresque and Henry Bradlow. At all relevant times, Balaresque was the Chief Executive Of?cer and a frequent company spokesperson, and Bradlow worked as the Chief Technology Of?cer. Balaresque gave numerous interviews and presentations about Lily over the course of 201 5 and 2016. Both Balaresque and Bradlow presently remain in these positions at Lily Robotics. 10. On May 12, 2015, Lily Robotics launched its preorder campaign with the release of a professionally-produced promotional video (?Promotional Video?) that purported to demonstrate the Lily Camera?s most noteworthy features. A minute and thirty-four seconds in duration, the video takes the viewer through the multitude of ways one might use a Lily. From outdoor sports to family gatherings, the Promotional Video shows a Lily in ?ight, and effortlessly integrates footage that, according to the Promotional Video, was taken by a Lily Camera. 1 1. In the month it was released, the Lily Promotional Video was the ninth most watched advertisement on YouTube in May 2015, with 5.3 million views that month alone. The COMPLAINT FOR PERMANENT INJUNCTION, CIVIL PENALTIES, RESTITUTION, AND OTHER EQUITABLE REMEDIES 4 GEORGE GASCON DISTRICT ATTORNEY Promotional Video was published on the Internet to the general public on Lily Robotics?s website, on YouTube, and via other media outlets? websites that reported on the Lily Camera. 12. Notwithstanding the implicit and explicit representations that a Lily Camera was used to ?lm those portions of the Promotional Video that are seen from the point of view of a Lily Camera, Lily Robotics did not disclose that those images in the Promotional Video were in fact ?lmed by a much more expensive, professional camera drone (the DJ I Inspire) that was not made by Lily Robotics that cost between two and four times as much as the defendant was asking for a Lily Camera. The DJ I Inspire was the opposite of the ?autonomous? camera that Lily Robotics was touting. In order to achieve the POV video seen in the Promotional Video, the I Inspire required two people to operate and ?lm those shots. Lily Robotics intentionally misled consumers into believing that the footage from the point of View of the camera drone was actually from a Lily Camera, and failed to make any disclaimers regarding the true source of the video footagethe Promotional Video had more than 30 million views, garnering Lily Robotics more than $34 million in ?preorder? sales?more than 60,000 units from more than 200 countries. Lily Robotics?s website prominently displays the Promotional Video on its home page. below the video was a button that consumers could click to preorder a Lily Camera until the preorder period ended on October 7, 2016. The consumer provided credit card information to pay hundreds of dollars upfront for a Lily Camera, to be delivered at a future date speci?ed at the time of the preorder sale. Funds transferred immediately at the time of purchase for the full preorder price, including shipping costs and sales tax, even though the product purportedly would not be shipped until later. COMPLAINT FOR PERMANENT INJUNCTION, CIVIL PENALTIES. RESTITUTION, AND OTHER EQUITABLE REMEDIES 5 GEORGE GASCON DISTRICT ATTORNEY 14. After unveiling the Lily Camera through the Promotional Video, Lily Robotics obtained $14 million of Series A funding in 2015. According to a witness, defendant also applied for and received a $4 million loan in 2016, because the equity funding it previously received was likely to run out before the product could be shipped. 15. Despite taking all of these prepaid orders, Lily Robotics has continued to delay shipment of the Lilys. When defendant began accepting preorders in May 2015, it told customers that the Lily Camera would ship in February 2016 or May 2016, depending on when the preorder was made. Then, in December 2015, Lily Robotics delayed all shipments to ?Summer 2016.? It delayed shipments again in August 2016; according to its notice, US. customers would get their Lily Cameras in ?December 2016 to January 2017,? while its non- U.S. customers would get them sometime ?later in 2017.? As of the writing of this Complaint, not a single unit has been shipped. 16. Through this civil enforcement action, the People seek to return to customers the $34 million they paid to Lily Robotics as a result of Lily Robotics?s fraudulent advertising. The People also will ask the Court to impose substantial civil penalties and permanent injunctive relief to deter this kind of conduct in the future. Lily Robotics?s conduct amounts to: (1) false advertising based on the false and misleading Promotional Video that it used in order to induce consumers to purchase its camera drone; (2) violations of the Consumer Legal Remedies Act; (3) theft by false pretenses by using the false and misleading Promotional Video and other false representations to obtain money from preorder customers; and (4) violations of the Federal Trade Commission regulations governing shipping representations and delays. COMPLAINT FOR PERMANENT INJUNCTION, CIVIL PENALTIES, RESTITUTION. AND OTHER EQUITABLE REMEDIES 6 GEORGE GASCON DISTRICT ATTORNEY ALLEGATIONS False and Misleading Representations About the Lily Camera Drone Lilv Robotics ?s False and Misleading Promotional Video 17. Lily Robotics announced it would be taking preorders for the Lily Camera with a media blitz on or about May 12, 2015. Simultaneously, it released a professionally produced Promotional Video, ?Introducing the Lily Camera,? in which viewers were able to ?Meet Lily.?l Introducing tho. I Camera 18. Lily Robotics engaged CMI Productions, LLC to produce the Promotional Video. According to the contract for services, the purpose of the Promotional Video was to ?create excitement and drive sales? of the Lily Camera. 19. The Promotional Video introduced prospective consumers to the Lily Camera and its purported functionality through snowboarding, kayaking, and family sequences. Consumers 1 The video can be found on the homepage for defendant at (last COMPLAINT FOR PERMANENT INJUNCTION, CIVIL PENALTIES, RESTITUTION. AND OTHER EQUITABLE REMEDIES 7 GEORGE GASCON DISTRICT ATTORNEY watching the Video were introduced to Lily?s purported ?Throw Go? capability, as a snowboarder throws the Lily into the air, and its rotary blades begin turning as it recovers into ?ight. A second sequence shows the snowboarder throwing the Lily over a bridge, after which the Lily dips and recovers out of the canyon. lnlrorimtino 111:: lliy accessed January 5, 2017). COMPLAINT FOR PERMANENT INJUNCTION, CIVIL PENALTIES, RESTITUTION. AND OTHER EQUITABLE REMEDIES 8 GEORGE GASCON DISTRICT ATTORNEY 20. The Promotional Video demonstrates Lily?s purported preset ?ight paths from the point-of?view of the Lily Camera. In one sequence, a snowboarder goes down a groomed ski run with ramps to jump. White text appears on the screen, highlighting Lily?s purported capabilities. As the snowboarder approaches a ramp, the Promotional Video shows the jump from the rear, with the text ?Lily Shot Follow? as the video continues. Introdmmq the Camera 21. In another sequence, the snowboarder is shown throwing the Lily over a bridge. The Lily Camera begins to and the next frame shows the same snowboarder now waving from a bridge as the POV video pans up with the text ?Lily Shot I Fly Up.? The video then transitions to a scenic shot of the mountains and a lake with the snowboarder walking along the bridge with the caption ?Lily Shot Side.? COMPLAINT FOR PERMANENT INJUNCTION. CIVIL PENALTIES, RESTITUTION, AND OTHER EQUITABLE REMEDIES 9 1 lnzr'oju-slnn the lily Camels 10 11 22. The Promotional Video shows the Lily in water-sport situations with a kayaker 12 displaying the purported POV ?Lily Shot Lead? and ?Lily Shot Follow? angles as the 13 kayaker negotiates whitewater rapids. 14 lnlmerr?irw; :lv Carmina 15 16 Lily Shotl Lead GEORGE GASCON DISTRICT ATTORNEY COMPLAINT FOR PERMANENT INJUNCTION. CIVIL PENALTIES. RESTITUTION. AND OTHER EQUITABLE REMEDIES 10 1 23. The next scene of the video focuses on a multi-generational family out for a hike on a 2 grassy knoll. The matriarch takes the Lily Camera out of the bag and is shown successfully lulredlit 1m; Hn- 15?; (Larwm 10 ll at was it throwing it in the air to demonstrate the ease of the ?Throw Go? functionality and the POV 12 13 ?Lily Shot Loop? featureGEORGE GASCON ATTORNEY COMPLAINT FOR PERMANENT INJUNCTION. CIVIL PENALTIES, RESTITUTION. AND OTHER EQUITABLE REMEDIES ll 1 24. The Promotional Video intersperses text in the frame that states what appear to be key 2 features of the Lily Camera, such as ?Full HD SloMo 1080p60/720p60,? ?Easy Landing,? and 3 ?20min Flight Time.? It touts Lily?s ?Tracking Device,? which records sound, tells the Lily 4 which ?Lily Shot? the user wants to employ, and takes pictures. The Video also shows text that 5 indicates that the Lily is ?Waterproof,? ?Ultra Portable,? and takes ?12 stills. 6 Intmm Th1? I My iamv-Easy ending 19 20 21 22 23 GEORGE GASCON DISTRICT ATTORNEY COMPLAINT FOR PERMANENT INJUNCTION, CIVIL PENALTIES, RESTITUTION, AND OTHER EQUITABLE REMEDIES l2 25. The Promotional Video repeatedly conveys to the viewer that Video taken from the 13 perspective of the Lily was actually shot with a Lily. The POV video was labeled as such? 14 ?Lily Shot Lead,? ?Lily Shot Follow,? ?Lily Shot I Fly Up,? ?Lily Shot Side,? ?Lily Shot 1 5 Loop.? Nearly all of these ?Lily Shots? are immediately preceded by a user deploying a Lily 1 6 into action, telling the viewer that the next frame?s action was captured by a Lily. At no time 17 during the video is there any disclaimer stating or implying that these ?Lily Shots? were not 18 really taken with a Lily Camera or that the shots are aspirational dramatizations of what Lily 19 Robotics hopes the Lily Camera will be able to do. 20 Lily Robotics Intended to Mislead Potential Customers with the Promotional Video 21 26. In fact, none of the video in the Promotional Video was shot by a Lily Camera. Most 22 notably, the POV footage used in the Promotional Video was ?lmed using a professional 23 COMPLAINT FOR PERMANENT miuncnou, PENALTIES. RESTITUTION, AND OTHER EQUITABLE REMEDIES 13 GEORGE GASCON DISTRICT ATTORNEY camera drone called the DJ I Inspire.2 The DJ 1 Inspire-is a 4K-resolution, professional camera drone that retails for over $2000, which is two to four times more than Lily?s offering price between $499 and $899 presale. The DJ I Inspire is not autonomous. To capture the POV images shot by the DJ I Inspire, two individuals were needed to operate the DJ I Inspire. One person piloted the drone with a traditional ?joystick? controller while a second person controlled the camera. 27. On information and belief, at the time of the ?lming of the Promotional Video, Lily Robotics did not have a single Lily Camera prototype that had all of the features advertised in the Promotional Video. Instead, its co-founders Balaresque and Bradlow, who were present during the ?lming, brought several prototypes to use during the ?lming. Some, which looked good on the outside but were not fully functional, were used only for ?beauty shots.? Others had some functionality but did not look like the product being advertised. Some actually were able to ?lm video, but even those were merely Lily Camera prototypes with GoPro-branded cameras mounted to them. 28. At the time of the ?lming of the Promotional Video, Lily Robotics knew that it did not have a product that could do what was going to be advertised in the Promotional Video. Prior to the ?lming, Balaresque was exceedingly concerned about anyone being able to deconstruct the Promotional Video and determine it was a GoPro and not a Lily Camera that ?lmed POV sequences. In an email chain from February 2015 with CMI Director Brad Kremer, Balaresque wrote, ?For VFL [View From Lily] shots, we will be using a Go[P]ro mounted on a Lily prototype. However, we do not feel comfortable telling people that we shot VFL scenes with a 2 Ground footage was ?lmed using a professional Red Epic camera. Footage of a Lily Camera drone in ?ight was also ?lmed by a DJ I Inspire drone. COMPLAINT FOR PERMANENT INJUNCTION, CIVIL PENALTIES, RESTITUTION, AND OTHER EQUITABLE REMEDIES 14 GEORGE GASCON DISTRICT ATTORNEY Go[P]ro (because the whole thesis of our product is that you do not need a Can you modify a Go[P]ro image in post-processing so that people cannot tell that it was taken from a 29. Even after Kremer assured Balaresque that no one would be able to tell that the edited VFL shots were taken from a GoPro, Balaresque was still not statis?ed. He asked, ?Are you sure that the Go[P]ro lens does not create a unique deformation/pattern on the image? I am worried that a lens geek could study our images up close and detect the unique Go[P]ro lens footprint. But I am just speculating here: I don?t know much about lenses but I think we should be extremely careful if we decide to lie publicly.? 30. Balaresque and others from Lily Robotics were intimately involved in editing the Promotional Video. As stated above, in the ?nal version of the Promotional Video, none of the POV footage was taken with a Lily. The defendant knew this to be so at the time the Promotional Video was published. Lilv Robotics ?s Marketing Belied How the POVFootage Was Actually Taken 31. Even though the POV footage in the Promotional Video was filmed by an expensive, professional drone being operated by two persons?one piloting the drone and one operating the camera?Lily Robotics marketed the Lily as a simple product for those who were not experienced with drones. In a company press release issued at the time of the pre?order launch, the company stated, ?The camera, completely engineered for tough aerial and water environments, is built for outdoor action sports enthusiasts and for anyone who just wants a 3 Witnesses used the terms and to refer to the same shot?one from the perspective of the Lily Camera drone. COMPLAINT FOR PERMANENT INJUNCTION, CIVIL PENALTIES. RESTITUTION. AND OTHER EQUITABLE REMEDIES 15 GEORGE GASCON DISTRICT ATTORNEY simple, fun way to record and share their everyday activities.?4 The simplicity of the Lily is targeted to everyday people, as seen by the marketing on the Lily website. It states, ?Easy as l, 2, 3. No setup required. Just throw Lily in the air to start a new video. It?s that simple.? Easy as l, 2, 3. Th row. Go! 32. Co-Founder/CEO Antoine Balaresque reinforced this idea by telling people that he came up with the idea for a Lily Camera after seeing how his mother would take photographs on their family vacations and would never be in the pictures. For instance, he told this story during a presentation at UC Berkeley: ?My whole family came here from France. We had this great trip, and I remember very well browsing through pictures on the family camera and I couldn?t see my mother in any of the images. She cared so much about all these memories, and as a result, because she was taking the pictures, she was missing from all these memories. So this is really how the ?rst idea for a ?ying camera came about.?5 4 (last accessed January 5, 2017.) 5 (last accessed January 5, 2017). COMPLAINT FOR PERMANENT INJUNCTION, CIVIL PENALTIES, RESTITUTION, AND OTHER EQUITABLE REMEDIES 16 GEORGE GASCON DISTRICT ATTORNEY 33. In fact, as early as December 2014, Balaresque sent an email containing production ideas and scenes to include in the Promotional Video. One idea that appeared under the heading ?Awesome Scenes? was a scene where a ?grandma picks up or throws Lily in the air at some point in the video (shows that anyone can use Lily).? 34. Lily Robotics apparently reached the audience it intended to reach. In a January 2016 interview with Fortune magazine, a reporter spoke to Lily Robotics?s spokesperson Kelly Coyne, and reported that ?Coyne says that most of the company?s preorders come from people who have never owned any sort of ?ying device before, and that the company?s employees are ?heads-down so that, when someone gets a Lily, they can experience what?s in that [Promotional] video.??6 The Promotional Video Led to Millions of Dollars in Preorders 35. In 2015 alone, Lily Robotics presold over 60,000 Lily Cameras for a total of about $34,000,000, driven in large part by the Promotional Video. According to media reports, the Promotional Video was viewed 5.3 million times on YouTube during May 2015, and Balaresque stated at the previously-mentioned appearance at UC Berkeley that the Promotional Video had been viewed more than 30,000,000 times. In addition, Lily Robotics, the Lily Camera, and the Promotional Video were featured in positive articles and videos published by major media outlets, such as CNN, CNBC, Business Insider, Forbes, Wired, and countless others. 36. Beginning on May 12, 2015, the date the Promotional Video was released, Lily Robotics invited potential customers to go to its website, where they could click on a button to 6 (last accessed January 5, 2017) COMPLAINT FOR PERMANENT INJUNCTION, CIVIL PENALTIES, RESTITUTION, AND OTHER EQUITABLE REMEDIES 17 GEORGE GASCON DISTRICT and input their credit card number to pay hundreds of dollars for a Lily Camera to be shipped to them at a later date. Lily Robotics made representations about estimated ship dates to consumers throughout the presale period. It also told consumers that they could request a refund at any time, and had a 30-day return policy once the product actually shipped. may; . - -. ?reinvented. I I LY Tech Specs 37. Pre-ordering on the website was a simple task. When a customer clicked a button on the home page to a new screen would appear for the customer to input name, email address, credit card number, expiration date, CVC number, shipping country and postal code.7 7 (last accessed purchase pop-up screen on October 5, 2016) COMPLAINT FOR PERMANENT INJUNCTION, CIVIL PENALTIES, RESTITUTION, AND OTHER EQUITABLE REMEDIES 18 GEORGE GASCON DISTRICT ATTORNEY Quantity 1 Inform-lien Plymont i 01 2018 Have: a p'nr?no one? Shipping (United Suns onIy) Untied Slates $999 $899 $20: $919 Confirm 9ayment Vowered by i It ., ram: - 1.. 38. In May 2015, consumers could preorder a Lily Camera for $499, a substantial discount from the stated retail price of $999. When preorders started on May 12, 2015, Lily Robotics told consumers that the camera drone would ship in February 2016. Preorders continued, with price increases in $100 increments. On June 16, 2015, Lily?s Facebook page stated that the new preorder price for the camera drone would be $599 with a ship date in May 2016, though the initial preorders would still be shipped in February 2016. . Lily June 16.2015 5" We have reached the end of the initial pre?order period. We want to thank you all again for the huge amount of support Lily has received. We are currently laser?focused on putting Lily Cameras in your hands by February 2016. Lily is now available for pre-order at $599 with a May 2016 shipping date. Visit for more information. COMPLAINT FOR PERMANENT INJUNCTION. CIVIL PENALTIES, RESTITUTION. AND OTHER EQUITABLE REMEDIES 19 GEORGE GASCON ATTORNEY 39. On July 13, 2015, there was another price increase from $599 to $699, with a stated May 2016 ship date. I my Juty 1.3 2015 TWO DAYS left to pre-order your Lily Flying Camera for $599 with a May 2016 ship date. visit to learn more! .LILY Lily - The Camera That Follows You The world's first true ?ying camera. 5721"}? 40. On July 20, 2015, through its Facebook page, Lily Robotics continued to con?rm a February 2016 ship date for its initial month?s preorders and a May 2016 ship date for orders after June 16, 2015. I Lily July 2021313 a Lily is working hard to prepare for our February ship date! Check out our latest update on our blog! And thanks to all of our customers for ?lling out our survey! COMPLAINT FOR PERMANENT INJUNCTION, CIVIL PENALTIES, RESTITUTION, AND OTHER EQUITABLE REMEDIES 20 GEORGE GASCON DISTRICT ATTORNEY i now do a pre-order when is the planned shppingldelivery date? Like Reply duty 21. ems at Glisten: I Lily H-if you pre-order by August 15, you can expect your order to ship in May 2016. Like Reply 9 O1 sums. zsrsasseram 41. Another price increase occurred on October 1, 2015, with the price increasing from $699 to $799. No shipment date was provided in the Facebook post, though in a later October 15, 2015, Facebook post, Lily Robotics represented that ?everything is on track for the dates we have stated.? - Lily September 18. 2015 u?t As September winds down, so does the $699 pre?sale price. Lily will be available for $799 starting October tst! .7 When can we expect its arrival? I Like - Repty 01 Qcteber ?15 2015 at I Lily Hi- everything is on track for the shipping dates we have stated. Like Reply - 05- Octoser '16 at ?EAEprn COMPLAINT FOR PERMANENT INJUNCTION, CIVIL PENALTIES, RESTITUTION. AND OTHER EQUITABLE REMEDIES 21 GEORGE GASCON DISTRICT ATTORNEY 42. On November 30, 2015, Lily Robotics?s website blog published a post entitled ?First units off the production line!? and described the ?world-class Chinese manufacturing partner? producing the units, and how Lily?s teams have been ?re?ning our designs to ensure they are built at the highest standards of quality? and to ?expedite production.?8 43. Through the end of 201 5, the Lily Camera drone continued to be much anticipated. In November 2015, it was announced as a winner of ?Most Innovative? product, which would be awarded at the January 2016 Consumer Electronics Show. In December 2015, the Lily Camera was also featured on the front page banner of the Wall Street Journal for the article ?Gadgets That Will Define Life in 2016.? I Lily December 30, 23015 ?a Lily starts out 2016 with a bang! We agree WSJ. Lily is a product that will de?ne life in 2016! 8 (last accessed January 5, 2017). COMPLAINT FOR PERMANENT INJUNCTION, CIVIL PENALTIES, RESTITUTION. AND OTHER EQUITABLE REMEDIES 22 GEORGE GASCON DISTRICT Insufficient Delay Notices and False and Misleading Reassurances to Customers Delay Announcements And Promises that Preorder Proceeds Will Not Be Used to Pay Operational Expenses 44. On December 17, 2015, founders Balaresque and Bradlow posted a letter to Lily Robotics?s webpage entitled ?Shipping and Fundraising Update.?9 The letter, addressed to the ?Lily Community,? explained that accommodate ?ight software optimization, hardware improvements, and additional rounds of testing, we will be delaying pre-order shipments until summer 2016.? The letter further explained technological challenges that necessitated a delay in shipment, but sought to assuage consumer fears of funds being dissipated or that no product would ship by announcing that Lily Robotics was ?not using your money to run the company,? that ?[e]very pre-order dollar we?ve received has been placed in cold storage,? and that Lily Robotics has secured ?1 5 million dollars in private funding.? Lily Robotics told its customers in the interest oi transparency, we?d aiso like to shed some light on our hnancials. Some of you have asked about the status oi your pre-order Funds. As you may know, we are a privately Funded company, not a crowd?tUnded project. This means that we are not using your money to run the company. Every ore?order dollar wet-e received has been placed in cold storage. We have no plans to use a smgie cent of that money until your Lily Camera goes into ?nal production. So how are we 37 salaries. operational costs, and Rng? Today, we?re pleased to share that we have secured a total of 15 million dollars in private Funding. Our investors include goal-la Capital, 3V Angei, the Stanlordegtartx Fund, as well as musician Steve Aolii and For teal3 legend Joe Montana - 3. We are very tortunate to have the support ol this Incredible group oi people This backing ailows us to progress toward otr ship date. expand the team as needed, and remain laser?Focused on delrvering a state olthe art Flying camera to you in Summer 2036. 9 (last accessed January 5, 2017). COMPLAINT FOR PERMANENT INJUNCTION, CIVIL PENALTIES, RESTITUTION, AND OTHER EQUITABLE REMEDIES 23 GEORGE GASCON DISTRICT ATTORNEY that customers could get a full refund ?anytime from the moment you purchase your Lily Camera until 30 days after your order arrives, no questions asked.? 45. The next price increase was mentioned in a blog post on Lily?s website on February 8, 2016.10 No ship date was mentioned, though the price would rise on February 12, 2016, from $799 to $899. Most of you already have your Lily Camera pre order locked and loaded, but we still want to give you a heads up that as of next Friday, February 12th, pre-orcler pricing For Lily Camera will raise to $899 USD. If you know someone who wants to Jorn the Lily Community, we?d love to have theml Be sure to let them know that they Still have a week to order at the $799 USD price tier. With that, we leave you to catapult head into the weekend Make it a good onel *Iearn Lily 46. On August 25, 2016, Lily Robotics again announced a shipment delay through another letter signed by co-founders Balaresque and Bradlow.11 Domestic pre-orders would now ship between ?December 2016 and January 2017,? and would be ful?lled in the order they were placed. International pro-orders now had an indeterminate ?later in 2017? shipping date due to ?regulatory and logistical constraints.? Balaresque and Bradlow continued to promise ?your pre-order dollars will continue to remain untouched.? They also included a bar chart with their manufacturing plans, showing delivery of the ?rst domestic unit approximately in the third week of December. Again, Lily Robotics told its customers that ?if you?d like a refund, please contact support@lily.camera and we will process your request as soon as we can.? (last accessed January 5, 2017). 6/ (last accessed January 5, 2017) COMPLAINT FOR PERMANENT INJUNCTION. CIVIL PENALTIES, RESTITUTION, AND OTHER EQUITABLE REMEDIES 24 GEORGE GASCON DISTRICT ATTORNEY All United States pre~orders will ship between December 2016 and January 2017. Dre?orders ae tul??led In the order which they were aIacee? Due to regulatory and IagisticaE coostra ate. mtemationa? Ste~orders start shipping Iatez' in Edi? We w?Ii be sharing a more detaiec I?oIIoc: plan in the coming weeks in the meantir?ne. your preorder doiiars WII- to remam untoucl?rea. Here :5 our manufacturing pIan; August October November December January Production Tlmellne testing with user group. hirdm build mass producticm. Plum! Hardware testing with user group. Assembly line ?nal tests validation. line ready for scale prodiwiim. All {Ire-orders delivered United-Suites. Plane 2 Run Productlon I?m-Sela Delivery We Are ?are First Unit Delivered 47. The preorder price remained at $899 until Lily closed the preorder rounds on October 7, 2016. The FTC ?Mail Order? Rule 48. The Federal Trade Commission promulgated a series of regulations governing mail, Internet, and telephone orders of merchandise called the ?Mail Order Rule,? which applies to the preorders that Lily Robotics solicited. (See 16 C.F.R 435.1-435.3.) The Mail Order Rule protects consumers by establishing clear guidelines for each step of the mail order process. For example, when accepting mail orders, a business must provide consumers a shipping date that is based on a reasonable belief that goods can be shipped in that time frame. (16 C.F.R. The Mail Order Rule also delineates what a business must do if goods cannot be shipped by the date or dates promised. (16 C.F.R. Further, it places an af?rmative duty on a seller of goods to obtain a buyer?s express consent when shipping of the COMPLAINT FOR PERMANENT INJUNCTION. CIVIL PENALTIES. RESTITUTION, AND OTHER EQUITABLE REMEDIES 25 GEORGE GASCON DISTRICT ATTORNEY product will be delayed beyond 30 days. (16 CPR. A seller must automatically cancel a customer?s order and refund the customer?s money if the seller is unable to secure the customer?s express consent for the delay. (16 CPR. Lily Robotics Did Not Have A Reasonable Basis For Any of Its Stated Shipping Dates 49. The FTC provides guidelines to help businesses adhere to the Mail Order Rule. Businesses should be ready to demonstrate the reasonableness of its stated shipping date with factors such as the anticipated demand, the supply needed for shipment, the ful?llment system?s ability to ful?ll orders, and adequate recordkeeping to ensure items can be shipped. or?telephone?order (last accessed January 10, 2017).) When making a representation about a shipping date, the seller?s reasonable basis must be based on information that under the circumstances would satisfy a reasonable and prudent businessperson, acting in good faith, that the representation is true. Lily Robotics knew or should have known shortly after launching its pre-sale campaign that it could not make and ship enough Lily Cameras to ful?ll the orders by the dates it said it would, yet it continued to tell its customers it could for months and months afterward. 50. Lily Robotics?s initial solicitation for preorder sales in May 2015 promised a February 2016 ship date. Preorders placed after June 16, 2015, were promised a May 2016 ship date. Lily Robotics, at the time it made these representations did not have a reasonable, good faith belief to do so. Lily Robotics had a target preorder sales goal of $2.5 million, based on its revenue sharing agreement with CMI, which was entered into in December of 2014. Just two months prior to the launch, defendant apparently did not have a fully functional prototype Lily COMPLAINT FOR PERMANENT INJUNCTION. PENALTIES, RESTITUTION. AND OTHER EQUITABLE REMEDIES 26