Palo Alto Daily Post: Startup, Stanford in Legal Battle

A startup that has built an artificially intelligent chatbot app that answers medical questions is embroiled in an escalating legal battle over investments it received from Stanford and other investment firms. Both sides are accusing each other of deceit.

MedWhat.com is an 8-year-old company founded by Arturo Devesa, a data scientist and researcher who moved from Florida to Stanford to research MedWhat technology at the Stanford University School of Medicine. Devesa moved the company from Palo Alto to back to Spring Hill, Fl last year.

In 2013, StartX accepted MedWhat into its startup accelerator program and agreed to fund the project. StartX is a nonprofit that educates entrepreneurs and their companies and Stanford invests in certain StartX participants through the Stanford-StartX Fund.

Technology analyst, Rob Enderle said MedWhat, like others health bots, is "still pretty much a startup". "This whole idea of an AI-based assistant is certainly, it's been pretty common since IBM focused Watson on the same market opportunity," Endele told the post. IBM, of course, is the big kid on the playground". Endele said the Watson technology has been actively hard to train and bring into market", allowing other companies like MedWhat and Sensely to "step in with products that at least appear to be easier to bring in and bring up to speed."

But, Enderle said, "all the companies are still pretty young. This is a market that's just emerging at this point in time."

Stanford StartX filed suit against MedWhat in May, claiming that the startup had failed to pay interest on promissory notes to investors, falsely claim that it had received millions of dollars from others investors and failed to disclose it had sold its technology to another company, Linda Healthcare.

Questions About Investors

In 2016, Devesa allegedly asked Stanford-StartX to participate in its Series A and claimed that Regent Capital Venture and a professional investor called Massive Investment had already committed to invest $3.2million and $400,000, respectively. Jan 19. 2017, Devesa is said to have mailed Stanford-StartX stating "I confirm all other investors have already funded". Stanford-StartX then transferred $400,000 as an investment. But according to the suit, Regent hadn't agreed to invest, neither any entity called Massive Investments".

MedWhat claims it did receive $400,000 from Massive Investments/Cibo Australia. MedWhat also claims it received an investment confirmation from Regent before Stanford-StartX investment.

Devesa also says that Stanford-StartX started investing in its competitor Sensely in February 2017, divulging and using confidential information from MedWhat without informing MedWhat.

MedWhat Sues Stanford

On June 20 of this year, MedWhat fired back with its own lawsuit alleging Stanford had committed a breach of contract, breach of its fiduciary duty, wire fraud, unfair business practices, securities fraud, injurious falsehoods, intellectual property infringement and blackmail.

MedWhat also alleges that Susan Weinstein, Stanford University's assistant vice president for business development, and Stanford-StartX Fund managing partner Suzanne Fletcher knew that IncWell ventures committed wire fraud by impersonating Devesa on the phone with First Republic Bank.

Devesa claims that Fletcher, Weinstein, and Boa conspired to access to Devesa's financial information in order to spread misinformation about MedWhat.

Bahram Seyedin-Noor, an attorney representing Stanford-StartX and other investors going after MedWhat, said that neither Fletcher nor Weinstein had any knowledge of anybody impersonating Devesa.

The suit further states that Stanford University President Marc Tessier Lavigne had approved of filing a frivolous lawsuit against MedWhat and in misusing the legal process to bankrupt MedWhat as means to help the competition.

Manipulations of Young Entrepreneurs Claimed

"He designed a strategy to use StartX to manipulate young entrepreneurs, StartX startups, technologies and ideas to benefit chosen Stanford investments strategies, aligned with friendly Silicon Valley venture funds" the suit claims.