I’m reading a fascinating legal complaint by 3D Systems against one of their former employees and his new employer, and there’s lessons to be had by all 3D printing companies here.
The case brought forward by 3D Systems in September of last year concerns the activities of a Paul Miller, formerly a sales representative with 3D Systems, one of the largest 3D printer manufacturers in the world.
3D Systems appears to allege that Miller absconded with 3D Systems’ client and prospects lists when he abruptly resigned from 3D Systems and resurfaced in the employ of Union Tech. Union Tech is a China-based company that also manufactures 3D printers, and recently set up operations in the USA.
Client and prospect lists are incredibly valuable because of the time, effort and cost to obtain them. Companies often “price” the acquisition cost per prospect when planning an advertising campaign, for example. These prospects often can, with proper sales techniques, be converted into paying customers. In other words, these lists are literally worth money.
The catch is that the lists are, by necessity, in the possession of every company’s sales force.
And those people could leave the company and join a competitor. What stops them from simply taking the lists with them?
The standard solution is contractual: when a sales person begins selling for a company, their employment agreement will contain clauses that, for example, insist on the return and destruction of such data upon exit, or a period during which they cannot work for a competitor. Sometimes this is as short as six months, but can be much longer. It just depends on the nature of the business and those involved.
Reading through the 3D System complaint in this case is quite fascinating. Some highlights - and remember, this is 3D Systems’ view of the situation. Union Tech may have an entirely different story:
- Miller began working at 3D Systems in 1996 selling equipment and eventually became Director of Sales.
- In this role Miller had access to all the lists and other proprietary information.
- Miller signed a “Employee Confidentiality and Non- Solicitation and Arbitration Agreement” in 2013 that required secrecy of information and return of data upon his eventual exit. The agreement apparently required Miller to not solicit any 3D Systems clients for one year.
- Miller abruptly resigned from 3D Systems in August 2017, and “refused to identify his new employer”.
- 3D Systems immediately terminated his access to company data.
- 3D Systems reminded Miller to return his laptop, which presumably contained some of the important data.
- 3D Systems, through Miller’s former email account, received a message from a computer data recovery company, who seems to have been responding to a request for services sent to them before Miller’s departure.
- Subsequent messages, intercepted by 3D Systems as they were still mistakenly being copied to his old 3D Systems address, included a new email address for Miller as “firstname.lastname@example.org”, strongly suggesting he then worked for 3D Systems’ competitor, Union Tech.
- Miller then replied to one of the messages, similarly mistakenly copying 3D Systems, identifying him as the “Director of Sales, North America” for Union Tech.
- In the message a shared Google Link was presented, which 3D Systems visited and discovered a spreadsheet apparently containing “the entirety of 3D Systems’ marketing data and customer contact information for more than 440,000 qualified sales leads generated by 3D Systems salespeople, both throughout the United States and internationally, for the five-year period from 2012 through 2017”.
3D Systems believes that Miller took this data in breach of the employment contract and thus launched a lawsuit against him and Union Tech.
Where is this lawsuit today? It’s hard to tell without reading hundreds of pages of legal documents, which I not eager to do. However, by skimming through the filings it appears that Union Tech sought arbitration rather than a trial, but it appears the case may go to trial, as legal discovery occurs and witness lists have been filed.
I’m definitely not a lawyer, but it appears that 3D Systems may have a strong case here. It’s unclear how damaging this may be to Union Tech, who otherwise produce excellent equipment and have been seeking to expand operations into the USA since 2016. Legal matters such as this will no doubt take many months or even years to conclude.
But what is the lesson here? It may be tempting to abscond with data when you leave a company, but it is not legal and can come with significant risks if you do. Companies should be built through their own work, performed expertly and legally. Good products should be easy to sell and you should not need to break the law to succeed.
Meanwhile, companies should vigorously protect their customer data - it's gold.