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Fabricator Claims Competitor Poached Employees, Then Data

by Chris Brook on Tuesday June 16, 2020

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One company is alleging a rival shop lured two of its most senior employees away - along with trade secrets, confidential information, and a list of its customers.

Two companies are set to square off in court if a lawsuit centered on stolen intellectual property, filed earlier this month, moves forward.

The case involves an oil and gas materials manufacturer, the Virginia-based NRI ATM, and a competitor, Montana-based Plant Services.

The case itself revolves around ATM Machine Works, a Texas company that specializes in custom metal fabrication, like clamps for oil pipes, that NRI eventually acquired in December 2018. NRI wasn’t the only company interested in ATM’s technology however. It turns out Plant Services, which runs a metal fabricating subsidiary, Metal Works, was also looking to acquire the company around the same time.

While things at NRI ATM went swimmingly following the acquisition; two of the most senior employees there, workers Alvin Bell and Ruen Reynoso continued their employment responsibilities, fabricating products and working with customers, Alfred Domingue Jr., who owned the company, stayed on for a few months to ease in the acquisiton transition. Things changed in 2020 however.

When Reynoso and Bell resigned within two weeks of each other - Reynoso on March 16, Bell on April 2 - NRI realized something was awry. It became even clearer that something was afoot shortly after, when Plant Services' orders for goods through NRI halted, soon after the employees’ resignations.

The lawsuit makes a point to say that when NRI acquired ATM, it got the company's trade secrets, confidential business information, and the general goodwill of its business. It also acquired a SanDisk external storage device that the company used in day-to-day operations to convert customer specifications into patterns for metal fabrication. That storage device mysteriously disappeared following Bell and Reynoso’s resignations.

The lawsuit makes it clear what NRI's suspicions are - that the two employees jumped ship for Metal Works, but not before taking the SanDisk device, including NRI's proprietary drawings and electronically-stored information, with them.

“By hiring Bell and Reynoso, Metal Works gained access to the significant investment ATM and NRI had already spent optimizing its manufacturing processes without having to invest the time and money to refine its own processes,” the lawsuit – filed in the Texas’ Eastern District Court, where Bell and Reynoso reside, reads.

The company claims that Metal Works ignored the workers' employment agreements and conspired outright with Bell and Reynoso to misappropriate its trade secrets in order to compete with NRI

“By hiring Bell and Reynoso, Metal Works was able to take wrongful advantage of the goodwill and significant investment that ATM and NRI had made in Bell and Reynoso”

The lawsuit also accuses the two of using NRI's customer lists to solicit former customers

NRI had several agreements in place with the employees - documents requiring them to honor nonsolicitation and noncompetition covenants, and to have them adhere to strict confidentiality in the event the left employment there. In exchange for signing the documents, the company paid them handsomely; both Reynoso and Bell were paid $60 per hour and received 50 percent of their annualized based compensation ($75,000) as a bonus.

Like many trade secret theft cases before it, it appears the documents and even the money weren’t enough to stop NRI ATM’s employees from absconding with the company’s most valuable entity – its data.

Tags: IP theft

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Chris Brook

Chris Brook is the editor of Data Insider. He is a technology journalist with a decade of experience writing about information security, hackers, and privacy. Chris has attended many infosec conferences and has interviewed hackers and security researchers. Prior to joining Digital Guardian he helped launch Threatpost, an independent news site which is a leading source of information about IT and business security for hundreds of thousands of professionals worldwide.