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Alleged IP Theft Cost Industrial Cleaning Company $15M

by Chris Brook on Wednesday January 8, 2020

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The company alleges a former employee violated company policy and betrayed its trust as he "intentionally decimated" its North American business.

Time and time again it’s proven to be extremely challenging for a company that doesn't reside in the U.S., Canada, or Mexico to break into the North American market.

While gaining a foothold here is challenging enough, imagine how difficult it would be if one of your own employees used your company's trade secrets to give him a leg up to launch his own company in America. To make matters worse, what if the new company was providing the same services to the same clients he was supposed to be developing in house for your company?

That's exactly what one firm, an Italian industrial cleaning service, is alleging occurred. As a result of the incident, the company is claiming his actions cost them upwards of $15 million.

In a lawsuit filed last week in the U.S. District Court for the Southern District of Texas, the company, ITW Technologies, LLC, alleges that Justin Weatherford, the company's highest-ranking employee in the U.S., betrayed its trust.

In the complaint, ITW says Weatherford took the company's trade secrets and confidential information to form a new company just days after leaving ITW.

While trade secrets can take many forms, in this case, ITW’s proprietary secrets involved ways to clean refineries and other production units and equipment in the oil and gas industry.

According to ITW's website, the company has specialized in turnkey industrial cleaning and remediation and chemical treatments for a range of industries since 1999.

ITW began expanding its operations throughout North America in 2011 and judging by the lawsuit, Weatherford was instrumental in the effort - he helped incorporate a LCC for the company in Kansas in 2012 and became an employee of the subsidiary for the next five years.

As the lawsuit points out, ITW's business relies on a series of proprietary formulas, operating methods, process steps, optimal temperatures, flowrates, and "specific circulation loops" in order to guarantee that equipment is cleaned properly. The company, like any successful one, also has confidential business information - data about its customers and partners, ways it prices its services, marketing plans, and contract data – that’s essentially to its operation.

The tides began to turn in January 2017 according to the court document. That's when Weatherford, on a day's notice, resigned from the company.

10 days later he went on to start SigmaChem, a Texas-based company that would ultimately compete with ITW, carrying out chemical cleaning services in the oil and gas industry.

ITW realized something was afoot when it looked at Weatherford's corporate email account and discovered that he'd deleted five years of his emails from the company server. While this was concerning - and a direct violation of company policy - there was nothing it could do to glean what he'd done with the data or that he'd even started a new company. As the lawsuit points out it wasn't until one of the company's consultants stumbled upon his LinkedIn profile, two years later, that ITW realized he was running a business similar to their own.

Weatherford signed an NDA with a non-compete provision that mandated he refrain of competing with the comapnby for 36 months following his termination but it doesn't appear that stopped him from forming the new company. At SigmaChem, he thrived.

inking six new contracts within the first six months, a marked improvement over his five years at ITW, in which he signed 12 contracts.

While it's unclear exactly how Weatherford may have taken the trade secrets - the fact that he deleted his emails from the server sounds like there was little evidence of his activity - ITW isn't beating around the bush here.

"Mr. Weatherford breached [his] contract when he took ITW’s confidential, proprietary, and trade secret information and incorporated his own competing business only ten days after resigning from ITW," the complaint reads.

According to the lawsuit, ITW sees SigmaChem's business, industrial and cleaning and decontamination, identical to its own. The services of another organization, Unicat Catalyst, a new entity spun off from Unicat Process Technology, formed as the result of a venture with SigmaChem in December 2018, Unicat Process' services are also identical to those used as ITW's, the suit reasons.

The damage done? ITW is seeking at least $15 million to recover substantial damages it sustained.

Tags:  Industry Insights IP theft

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