EMC Sues Pure Storage For Hiring Practices, Misappropriation Of Confidential Information

EMC this week filed a lawsuit against startup flash storage vendor Pure Storage, alleging that Pure Storage hatched a "deliberate scheme" to acquire EMC intellectual property by hiring 44 of its former employees.

In the lawsuit, which was filed Monday at the U.S. District Court in Massachusetts and can be read on the Scribd website, EMC alleges that at least 44 former EMC engineers and sales people left the company "under suspicious circumstances" to join Mountain View, Calif.-based Pure Storage since August of 2011.

Those employees, many of whom EMC described as "among the highest performing EMC professionals in their positions," had signed "key employee agreements" that EMC said included clauses to not disclose confidential information about EMC products or customers, to return such confidential information to EMC upon leaving the company, and to not solicit other EMC employees to work for a competitor, according to the lawsuit.

[Related: Pure Storage Gets $150M Funding, Talks Big Plans For All-Flash Storage Arrays ]

EMC in the lawsuit also said it has already initiated legal action against six former employees, and that in "numerous instances, these former employees returned misappropriated EMC materials only after EMC was compelled to initiate litigation and in several instances only pursuant to Court direction."

It is no surprise that EMC would initiate such a lawsuit, said John Woodall, vice president of engineering at Integrated Archive Systems (IAS), a Palo Alto, Calif.-based solution provider and Pure Storage partner.

"I think Pure is making headway against EMC, and taking deals," Woodall said.

Pure Storage has hired people from EMC, NetApp and other storage vendors, Woodall said. "People like working for hot startups," he said. "EMC grabbing other vendors' employees? I say, yeah, so? It tells me Pure is winning, and shows that Pure is on EMC's radar."

Woodall said one unusual aspect of the lawsuit is the fact that EMC is calling out Pure Storage for hiring 44 EMC people.

"Maybe you don't want to do that," he said. "Why highlight the fact that so many people are leaving EMC for a competitor. By highlighting this, people will question what is happening at EMC. Those people are probably not leaving for the money. They are looking to join a winner."

NEXT: EMC's Lawsuit Good News For Pure Storage?

The lawsuit, coming swiftly after Pure Storage in August unveiled a $150-million round of funding in the company, tells the industry that Pure Storage is doing a lot of the right things.

"That might be one of the best recruiting tools for Pure," IAS' Woodall said. "I wonder who will be employee number 45 to leave EMC for Pure."

EMC declined to comment on the lawsuit, but a company spokesperson emailed a statement to CRN that read, "Pure Storage has waged a deliberate, unlawful and sustained campaign to steal EMC's confidential and proprietary information. We are simply taking the necessary legal action to protect EMC's rights."

Matt Kixmoeller, vice president of product for Pure Storage, told CRN that Pure Storage believes in employee freedom as long as employees behave in an ethical manner and follow their commitments to former employers.

Pure Storage, for instance, does not have a non-compete clause in its own employment agreements, but does have clauses to protect the company's intellectual property rights, Kixmoeller said. "This is not unusual in Silicon Valley," he said. "We want to retain our employees at Pure. The legality of non-competes differs around the world. California does not recognize them."

Ultimately, Pure Storage is an intellectual property company, and expects employees to respect its own and others' rights, Kixmoeller said.

"When we hire employees, we don't want any intellectual property from their former employers whatsoever," he said. "It's not helpful to us. We hire people for their brains going forward. We make it clear what we expect from them."

Kixmoeller said Pure is not contesting EMC's saying the company hired 44 former EMC employees. The company currently has over 300 employees, he said.

Pure is helping individual employees defend themselves from allegations they misused EMC intellectual property, Kixmoeller said. He also said that, as far as he knows, no former EMC employees have left Pure Storage because of the lawsuits.

"We are well funded to protect ourselves, and we intend to do so," he said.

In its lawsuit, EMC cited 32 former U.S. employees by name who left the company since August of 2011 to join Pure Storage. In addition, EMC said at least 10 other employees outside the U.S. have done so.

NEXT: Pure Storage CEO's Open Letter Response

EMC alleges that despite its sending letters to Pure Storage and its CEO Scott Dietzen about the alleged activities, and despite lawsuits against several of those employees, "the systematic pattern of unlawful conduct by Pure Storage continues. The only legitimate conclusion is that these unlawful activities are being directed and endorsed by Pure Storage at the highest levels of the organization."

Dietzen on Tuesday released an open letter to "current, prospective and future" customers and partners about the litigation, in which he wrote, "We at Pure believe there is no merit whatsoever to any of these complaints."

Dietzen also wrote that Pure Storage welcomes competition in the all-flash storage array market, including competition from the EMC XtremIO product line, which is slated to be officially introduced to the market next week.

"Competition makes our products better and makes us into a better company, more attuned to customer and partner needs. Competition also fuels market growth. We are excited that EMC's principal flash storage offering in XtremIO will be in the market soon (coincidentally slated to be announced just a week after this lawsuit was filed), as we expect both Pure Storage and XtremIO to benefit handsomely from the ongoing shift of $15B in annual spend from performance (oxymoron) mechanical disk to all-flash for the price of disk," he wrote.

EMC has a history of aggressively going after former employees who move to work with competitors.

In its highest-profile case, EMC in 2009 sued Dave Donatelli, the former president of EMC's storage division, after he left the company to join arch-rival Hewlett-Packard as executive vice president for enterprise servers, storage and networking.

In that case, HP one month later agreed Donatelli would not touch HP's storage business until the order was lifted.

PUBLISHED NOV. 6, 2013