EMC Sues Pure Storage, Alleges Misuse of Trade Secrets By Former Employees
Speaking of the swiftly moving world of enterprise storage, the biggest company in that space is suing one of its fastest-moving upstarts, and it’s bound to get ugly.
Storage giant EMC yesterday sued Pure Storage in the U.S. District Court in Massachusetts. The key claim, according to the complaint — which you can read in full below — centers on how Pure has hired several former EMC employees. As EMC calls it, a ….
… nationwide pattern of collusion with numerous former EMC employees to induce violations of their legal obligations to EMC, to misappropriate and bring to Pure Storage competitively sensitive confidential EMC information and trade secrets …
The complaint mentions Pure Storage director and ServiceNow CEO Frank Slootman as someone who has “intimate and confidential knowledge of EMC’s business.” In the suit, EMC accuses Slootman of being “actively involved for Pure Storage in the identification and/or recruitment of highly skilled EMC employees.” Slootman re-joined Pure’s board in August after it secured a $150 million round of funding led by investment bank T. Rowe Price. That round is expected to be Pure’s last before it seeks an initial public offering next year.
EMC goes on to allege that Pure has been able to “target and raid with unnatural precision a collection of EMC’s highest achieving technical and sales professionals,” and to “assign former EMC employees to unlawfully interfere with EMC’s customer relationships.” By EMC’s count, 44 of its former employees have left the company under what it calls “suspicious circumstances,” only to surface at Pure. Together, it said, they now comprise more than half of Pure’s sales team. EMC has sued at least six of these former employees separately in state court.
Pure just issued a statement, attributed to CEO Scott Dietzen:
“We do not believe there is any merit to the complaint filed by EMC against Pure Storage and we intend to defend ourselves vigorously against these allegations. Pure Storage is committed to building a world-class technology company, whose actions are defined by integrity and transparency. We believe in employee freedom and in hiring the very best; at the same time, we have a strong policy against the use of any third party confidential information. We believe all employees — including our own and those of our competitors — should be free to follow their dreams and support their families as they see fit, provided they honor their lawful commitments and safeguard the IP of past employers. We are committed to protecting the IP of our competitors as we protect our own, but we will not be deterred from hiring great people that seek to join the Puritan team.”
A few minutes after that statement arrived, I got Dietzen on the phone. First, he said that Pure hasn’t yet had time to review the complaint in full, but he did describe the thrust of its allegations as “without merit,” and promised a vigorous defense. “We have the resources to defend ourselves,” he said. Since Pure also considers its own IP to be important, it expects the same when its employees leave.
Dietzen called the lawsuit a “sideshow” to distract from what’s going on in the marketplace. He said Pure’s products are entirely based on flash memory chips and are often replacing EMC’s older hard-drive based products. “EMC is the market leader in mechanical-disk based storage arrays and we compete against them all the time,” he said.
One thing worth noting is the timing. EMC is expected to release its first all-flash storage array product, one that would compete directly against Pure’s products, later this month. That product is to be based off its acquisition last year of Israel-based XtremeIO.
Dietzen went on to say that 44 employees would amount to about 13 percent of Pure’s total headcount. He said that employees are required to go through a strict process during which they promise to honor all requirements to prior employees with regard to their intellectual property and other confidential information. “They must agree to that or they don’t get to join,” he said. “It’s a squeaky clean process.”
Here is EMC’s 48-page complaint. It lists all the names of the 44 former EMC employees who have jumped to Pure so far. This looks like it’s going to be a hard-fought lawsuit.