Slow Progress But High Stakes in iRobot–Robotic FX Tangle

Hearings in iRobot‘s Massachusetts lawsuit against Illinois rival Robotic FX lurched forward a few steps today, with both sides scoring minor points. But key issues in the case—in which iRobot is accusing Robotic FX and its founder, Jameel Ahed, of misappropriation and misuse of confidential information related to iRobot’s Packbot military robot—remained undecided as Federal district court judge Nancy Gertner put off further testimony until Wednesday. Meanwhile, both today’s proceedings and filings released late last week paint a vivid picture of just how high the stakes are in this case.

Today’s proceeding were a continuation of a hearing about iRobot’s request for a preliminary injunction against Robotic FX, which last month won a $279.9 million military contract for its Negotiator robot—the device that’s the subject of the Massachusetts suit and a separate patent-infringement suit filed in Alabama. Before the first witness took the stand, Robotic FX’s attorneys told Judge Gertner that they had just learned the Government Accounting Office had issued a stay on the contract in response to a protest filed by iRobot (NASDAQ: IRBT) on September 22. The attorneys suggested that the stay rendered iRobot’s request for an emergency injunction moot, but Judge Gertner allowed the hearing to proceed nonetheless.

The first witness called by Robotic FX’s attorneys was Tom Frost, manager of iRobot’s Packbot program. Their examination ranged over a number of issues. Asked how many defense robots iRobot had sold, Frost said iRobot had supplied over 1,000 robots to explosives-disposal units to various military agencies. This prompted Robotic FX’s attorneys to question iRobot’s contention that the loss of the recent contract would cause the company irreparable harm, given the company’s track record of winning previous contracts. Frost disagreed, saying “I think it will be difficult to get another contract for this market, [because] once the military chooses a solution it tends to stick with it.”

In one odd and dramatic moment, a Robotic FX attorney asked Frost: “Do you believe that public perception is important for a company and that bad press is harmful?” Frost agreed. The attorney went on to ask Frost whether it would surprise him that Joseph Dyer, leader of iRobot’s government and industrial robots division, had sold 62,000 shares of iRobot stock on September 13, the night before the Negotiator contract was awarded to Robotic FX. [Editor’s note: According to SEC filings, Dyer was exercising stock options as part of a previously arranged trading plan.] Before Frost could answer, Judge Gertner interjected, asking why the sale of shares was relevant. Robotic FX’s attorney replied that iRobot was claiming irreparable harm from the award of the contract to Robotic FX, but that Dyer appeared to be doing similar harm to shareholders by selling his shares. “So the harm derives from what he’s done, not what the government did?” Gertner asked. Yes, the attorneys answered. “That seems like a stretch,” Gertner said, but she allowed the question nonetheless.

Before Frost could even answer, however, the Robotic FX attorneys dived into a different line questioning, focusing on whether or not … Next Page »

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Wade Roush is a contributing editor at Xconomy. Follow @wroush

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