EMC sues salesmen who joined rival
After losing 30 employees to a fast-growing Silicon Valley rival, data storage giant EMC Corp. is firing back.
It has sued several former, highly paid salesmen for allegedly swiping proprietary information, taking confidential materials, and violating their work agreements with EMC in service of their new bosses at Pure Storage Inc., a Mountain View, Calif., start-up that competes with the Hopkinton company in the flash-storage business.
EMC last week filed suit against a former salesman in Texas, Chadwick Johnson, accusing him of raiding his work laptop before quitting in September and taking files on customers and sales practices, and other sensitive business documents, according to the lawsuit filed in federal court in Boston.
“Johnson’s unlawful conduct is part of a larger campaign by Pure Storage and numerous former EMC employees now employed by Pure Storage to compete unfairly with EMC,” the company’s lawyers charge in the lawsuit.
The suit alleges that Pure Storage is “raiding EMC of its valuable employees, all in an effort to increase Pure Storage’s presence in the marketplace at the expense of EMC.”
EMC refused to comment on the pending litigation, and its attorneys at the Boston law firm Choate Hall & Stewart did not return a call for comment.
Pure Storage would not comment on the specific allegations in the suit. In a statement, its chief executive officer, Scott Dietzen, said the company “has not — and will not — engage in campaigns, public or private, that promote unfair competition or business practices.”
Boston attorney Michael Sheetz is representing Johnson and Ricky Cochran, another former EMC salesman being sued on similar grounds. He has attempted to have the Cochran case dismissed on the grounds that it should be dealt with in arbitration, not in federal court. He has not filed any motions on the Johnson case. Sheetz declined to comment on the cases.
EMC has a reputation for tough tactics against competitors. It has previously sued former employees who left the company and joined rivals for violating employment contracts and noncompete clauses.
When one of its former top executives, David Donatelli, left the company in 2009 to become head of a storage division at competitor Hewlett-Packard Co., EMC sued to block that move. The suit kept him out of the storage industry for about a year.
“They are a tough competitor,” said Roger Cox, vice president of research for Gartner Inc., a technology research firm. “They believe in making sure they protect their investments, and that means protecting the investments that they make in training people.”
And EMC is under increasing attack from upstarts such as Pure Storage, he said. “They’ve been very aggressive in comparing themselves against EMC.”
The four-year-old company has raised about $245 million from some of the country’s top venture capital firms, including $150 million in August that the company said would be used to recruit more talent and prepare for a possible initial public stock offering. It has about 300 employees and is looking to double that number next year.
According to its website, Pure Storage is hiring across the country including in markets such as Boston, New York, and Dallas, looking for candidates in sales, engineering, marketing, and business development.
In the lawsuit against Cochran, who joined Pure Storage this year, EMC claims that he is improperly using information gained while an employee to actively target EMC customers. The company says that the employee agreement that both Cochran and Johnson signed prevents such behavior.
Cochran has disputed that claim in an affidavit filed with the court earlier this month. “Since joining Pure Storage, I have not attempted to solicit the business of any customers of EMC with whom I had a relationship while at EMC,” he said. “I have not used any confidential information I received from EMC in the performance of my duties for Pure Storage.”
For companies such as Pure Storage or EMC, aggressive sales people are highly coveted assets. In its suit against Johnson, EMC said he made more than $1.1 million in a four-year period. Top sales people can earn as much as $500,000 a year.
And Pure Storage’s sales people aren’t the only ones trying to challenge EMC. Over the past few years, almost 30 new start-ups have cropped up to try to sell new storage technology to business clients, according to Cox. In the past three years, he said, investors have invested some $1 billion to fund these upstarts.
Still, none of them are close to challenging EMC. Even though its earnings announced this week fell below analysts’ expectations, it reported revenue of $5.5 billion for the third quarter, about a 5 percent jump over the same period last year.