Dumpster-Diving Detectives and Tales of Industrial Espionage: Court Filings Reveal Twists and Turns of iRobot-Robotic FX Case
The private detective took up position near the six-unit condominium building in Chicago shortly after noon. At 3:02 p.m. the white Saturn with Indiana plates he’d been waiting for appeared, stopping down the street near a rusty dumpster. The detective, Tomas Romano, snapped pictures as a man wearing a lime-green polo shirt got out of the Saturn’s passenger side, moved to the trunk, and began ferrying items from the car to the dumpster. After about 10 minutes, the car and its occupants drove away. Romano waited for a colleague to arrive, then the two looked inside the nearly empty dumpster. Besides a battered couch, they saw an old tire, a beer bottle, and some soggy newspapers and cardboard, along with various other debris. They also retrieved a few other items, including a box for a paper shredder and another box with “iRobot” written on its label.
Such was the scene described in an affidavit from Romano filed on August 20 with the U.S. District Court for the Northern District of Alabama. According to the affidavit, the man spotted putting items in the dumpster fit the description of Jameel Ahed, founder of Robotic FX, an Illinois-based maker of military robots. On Friday, August 17, the day before Romano’s dumpster stake out, Burlington, MA-based iRobot (NASDAQ: IRBT) had filed suit in Massachusetts and Alabama against Robotic FX (the Massachusetts suit also named Ahed, a former iRobot employee). The lawsuits claimed infringement on patents for iRobot’s PackBot military robot and misappropriation and misuse of confidential information related to the machine. Yesterday links to filings in those cases—including Romano’s affidavit and surveillance photos—were posted on robotstocknews, a blog run by an iRobot investor. Xconomy learned of the posting through an anonymous phone call; the court documents that the blog linked to were posted on a commercial server.
The documents contain all the ingredients of a thriller, with the private eyes, dumpster diving, industrial espionage, and a high-stakes intellectual property battle—all with hundreds of millions of dollars and military lives in the balance. Just last Friday, Robotic FX beat out iRobot to win a $280 million contract to deliver its “Negotiator” bomb-detection robots—the very ones that are the subject of the pending lawsuits—to the U.S. military for use in the Middle East. As word of iRobot’s defeat leaked out this week, shares in the robotics maker have plummeted nearly 6 points, a fall of some 25 percent.
The documents that the robotstocknews post linked to were largely favorable to iRobot. Many of the filings in the Massachusetts action are sealed. But public documents, coupled with a brief e-mail statement from Ahed, give more of the Robotic FX side of the story, including the company’s questions about the timing of the iRobot lawsuits just weeks before the big military contract was awarded to Robotic FX. “We make a vital homeland security device and my former company has known about our growing business for at least two years,” said Ahed’s e-mail. “Only now, when we are rivals for an important U.S. Government contract did they file this lawsuit. We believe we will prevail.”
Beyond that, neither Robotic FX nor iRobot would comment about the case, although Robotic FX has previously denied any wrongdoing. Following is what we pieced together from the court filings.
On the night of Friday, August 17th, according to Romano’s affidavit, an affiliate of the firm he works for, Kroll Associates, had witnessed Ahed and two other people “removing items from Robotic FX’s principle place of business” and loading them into the white Saturn. On the 18th, Romano writes that he was asked to observe Ahed “with the objective of documenting any activity suggestive of the destruction of evidence” relevant to the patent-infringement case.
The affidavit describes the dumpster as mostly empty. That, combined with the fact that the pre-existing refuse was still damp from recent rains, made it relatively easy to identify the items that Ahed had discarded, Romano asserts. He and his colleague, Thomas Sterner, “retrieved what amounted to two trash bags full of items thrown in the dumpster.” These included a box for a paper shredder, a box marked SolidWorks with a UPS label bearing a Massachusetts shipping address, “a box marked ‘iRobot’ containing numerous circuit boards and other electrical components,” as well as “a severely damaged VHS video cassette tape marked ‘IS Robotics SWARM 2000.’” (IS Robotics was the original name of iRobot.)
In filings for the Massachusetts case, iRobot alleges that Ahed set up Robotic FX while he was still an iRobot employee. The suit charges that Ahed “transferred—without iRobot’s knowledge or authorization—iRobot proprietary information to Robotic FX. After leaving iRobot, Robotic FX began producing tactical robots derived from and incorporating iRobot’s confidential information and trade secrets. Robotic FX’s ‘Negotiator’ robot is a conspicuous and unmistakable copy, in design and functionality, of iRobot’s PackBot.”
According to the suit, Ahed first worked at iRobot as a summer intern in 1999, and began full time work in July 2000. For both positions, iRobot states, Ahed signed Invention and Confidentiality agreements, both of which were attached to the filing. Ahed terminated his iRobot employment on June 21, 2002, the document states; that same day, he executed a termination document certifying that he had not retained any confidential information or material. However, iRobot alleges, a day later “Ahed logged on to iRobot’s network and transferred confidential and proprietary iRobot information via email from his iRobot email account to his external email account at Robotic FX.”
IRobot maintains that it did not become aware of Ahed’s efforts to create the Negotiator robot before September of 2005, and that Robotic FX issued its first public photos and information about the Negotiator the following March. It evidently wasn’t until February of 2007, however, that iRobot’s attorneys contacted Ahed demanding that he “immediately cease and desist from all manufacturing, importation, marketing, sales and distribution activity with respect to the infringing robot.” (The letter is included as an exhibit with the Massachusetts suit.) A little over a month later, the suit alleges, Ahed replied through his counsel that he had complied with his confidentiality obligations to iRobot and that “any insinuation to the contrary is baseless.”
On August 20—the same day Romano’s affidavit was filed—an Alabama judge issued an amended temporary restraining order prohibiting Robotic FX “from failing to preserve all evidence, information, data and documents concerning the patents at issue” in the Alabama infringement case. He also ordered the U.S. Marshals Service to search Robotic FX’s operations and the homes of Ahed and Robotic FX chief operations officer Kimberly Hill and seize any documents and other material relating to the case. The next day, iRobot filed an emergency motion in U.S. District Court in Illinois seeking to enforce the judge’s order. On August 21, according to a September 18 filing in U.S. District Court in Alabama, iRobot attorneys and federal marshals carried out the searches the Alabama court had ordered. IRobot’s lawyers claimed that the search of Hill’s residence turned up “evidence that the hard drive of a laptop computer had recently been wiped clear of all data, in direct violation of this Court’s TRO.”
Where the paper trail leaves off, Robotic FX was seeking to have the Alabama case transferred to Massachusetts and consolidated with the case already in the Bay State. In a September 18 filing in Alabama, iRobot opposed that move, arguing that the Alabama court should retain jurisdiction, in part because Robotic FX “appears to have made, used sold, or offered to sell its infringing Negotiator robots” in Alabama and not in Massachusetts.
A hearing in the Massachusetts case is scheduled for tomorrow, September 20. In a September 18 filing, Ahed wrote that iRobot “has failed to specifically identify the subject matter of its trade secrets, how this subject matter qualifies as a trade secret, which trade secrets were allegedly appropriated by Robotic FX and whether any such appropriated trade secrets are actually used in Robotic FX’s Negotiator robot.” He further charged that “iRobot seeks to shut down Robotic FX’s business by preventing its Negotiator robot from fulfilling a major military defense contract.”