DETROIT — Dow Chemical Co. of Midland, Mich., is suing General Electric Co. over allegations that GE Plastics is stealing its engineered thermoplastics trade secrets through predatory hiring practices in the automotive industry.
One issue at stake could be GE's alleged use of Dow trade secrets to help create instrument panels that include structural components made of a polycarbonate/ABS blend. Darin Evans, a defendant named in the suit, helped develop Dow's instrument panel technology before leaving the company in February to join GE Automotive in Southfield, Mich.
Larry Denton, vice president of Dow Automotive in Southfield, confirmed that Evans had worked on the instrument panel technology. But Evans is only one player in the panorama.
``This lawsuit is not about one person,'' Denton said. ``It's about a systematic approach to steal trade secrets by hiring many people and putting them in a similar position to what they did at Dow. Doing that makes it impossible for them not to disclose our trade secrets.''
The lawsuit, filed April 1 in state Circuit Court in Pontiac, Mich., could force other automotive plastics suppliers to think twice before hiring from a competitor. The suit attempts to define what some experts say is a gray area in corporate recruiting — what constitutes learned skills that cannot be transferred to a rival.
If nothing else, the case also brings to light the bad blood between two of the world's largest resin suppliers. At an April 1 news conference, Dow accused GE's auto and plastics operations of questionable business practices in an alleged systematic attempt to damage a competitor.
``GE is not able to duplicate our innovations, so they're pirating our employees to get what they can't discover themselves,'' said Robert Wood, Dow vice president for engineering plastics.
GE has fired back with a statement calling the suit ``corporate nonsense that would get no attention if not cloaked in the guise of a legal complaint.'' GE intends to fight the allegations vigorously, said spokesman Robert Hess.
The complaint alleges that Pittsfield, Mass.-based GE Plastics went on an aggressive hiring spree during the past two years, recruiting 14 Dow employees so that it could abscond with information on the company's confidential resin processes and marketing strategies.
In addition, the suit claims it is likely that the former Dow employees took confidential documents and other materials to GE. The employees had filed confidentiality agreements with Dow requiring them not to disclose such information or material to a competitor.
On April 1, the court issued a temporary restraining order barring GE from using Dow trade secrets or contacting current Dow employees to entice them to leave the company. The suit, which was filed the same day, named both GE and mechanical engineer Evans.
The restraining order also requires GE to return to Dow any documents or material from former employees and for Evans to be transferred to a position where he cannot communicate trade secrets.
The suit alleges that Evans has knowledge of confidential information about projects involving integrated instrument panel systems. Dow has helped to develop a thermoplastic instrument panel, first introduced on the 1994 Buick Roadmaster from General Motors Corp., that includes a reinforcing beam made from a PC/ABS blend.
The panel is in use in Chrysler Corp.'s 1997 Dodge Dakota and Jeep Cherokee, Denton said.
Last year, Dow bid against GE for contracts involving redesigned instrument panels for Chrysler minivans, the suit said. GE subsequently was awarded the minivan contract. Evans was available to work on that design or share confidential Dow information with design teams on that project, the suit alleged.
Another issue could be the use of blow molded instrument panels. Both Dow and GE are helping to develop double-walled thermoplastic instrument panels for Big Three automakers, said Robert Eller, an automotive plastics consultant with Robert Eller Associates in Akron, Ohio.
Of Evans' hiring, GE spokesman Hess said it was inconceivable that the fortunes of two major companies should be affected by an engineer five years out of college working in a nonsupervisory role. GE refused to allow the employees involved to be interviewed for this story.
The 36-page complaint also contends that during the past two years, GE established a consistent hiring pattern that showed intent to steal Dow's secrets.
The suit alleges that enough individuals were hired by GE to set up a mini-Dow.
``One of the linchpins of our position is that GE systematically targeted employees with inside knowledge and information,'' Wood said. ``That's what makes it a serious matter, in our opinion.''
Among the other allegations:
Daniel Kaufman, a former senior product market manager for Dow engineering plastics, called on former Dow accounts in ABS pipe and sheet markets after joining GE Plastics as regional marketing director.
The suit claimed that Kaufman raised questions to clients about Dow products and prepared a document at GE almost identical to one containing confidential Dow material about ABS.
David Von Behren, former Dow Automotive sales manager for North America, had been seen speaking with former Dow clients at public events after joining GE Automotive as manager for commercial operations for original equipment manufacturer teams. Von Behren, who signed a Dow confidentiality agreement, had indicated to Dow upon leaving that he would not contact those accounts, the suit said.
Polymerland Inc., a wholly owned GE subsidiary in Huntersville, N.C., sent a letter in September to Dow members of the Society of Plastic Engineers asking them to join GE.
According to SPE sources at its Detroit chapter, Polymerland officials had obtained the list of names by calling the association's Brookfield, Conn., headquarters after the local chapter had denied a request for the names.
Thomas Nantais, an executive recruiter with Profiles Inc. in Troy, Mich., had continued to pursue Dow employees aggressively on GE's behalf after Dow officials asked GE Automotive to stop his activities.
Nantais denied that GE was interested in Dow's trade secrets or in solely recruiting Dow employees.
``We're an extremely ethical company that does our recruiting in the most likely companies with top talent,'' Nantais said. ``Dow just happens to be one of many of those companies.''
The civil suit seeks a permanent injunction similar to the conditions in the temporary restraining order. It also asks that all the former Dow employees — not only Evans — be transferred to other positions where they cannot disclose trade secrets.
In addition, Dow is seeking monetary damages for GE profit gained by using Dow's trade secrets. The amount of damages would be determined during the trial's discovery phase, when GE employees could take the stand, said Dow lawyer Eugene Driker.
The court has scheduled a preliminary hearing for April 9. Dow has requested a jury trial.
If the case proceeds, it could set a precedent in hiring policies for the automotive plastics industry. The best-known case involves former General Motors Corp. executive Jose Ignacio L¢pez de Arriortua, who was accused of taking confidential documents when he left GM for Volkswagen AG. In January, Volks- wagen agreed to pay $100 million to GM to end the lengthy litigation.
Driker also worked on the L¢pez case.
However, there are differences between the two lawsuits, said Dennis Gros, an executive recruiter for the plastics industry. In Dow's case, a court decision could clear up ambiguities concerning what information an employee can take with him to another job, Gros said.
``Certainly, an employee does not own lists, formulas, patents or results of work that a company has invested money to create,'' said Gros, president of Gros Executive Search Inc. in Brentwood, Tenn. ``However, in the course of creating that product, the employee might have learned some methods of thinking or investigation. The courts can decide how much of that process belongs to the employee and how much is owned by the company.''
Dow's lawsuit is one of several automotive trade-secret cases now in Michigan courts, said Southfield, Mich., lawyer Rodger Young. Young said the intense rivalries and consolidations in the automotive industry are driving the spate of cases.
``It's a symptom of the current economic conditions,'' Young said. ``It's not that more companies are stealing trade secrets than in the past. Currently, though, more companies are more willing to take a case to litigation to exact their pound of flesh.''
A temporary result of the litigation might be to chill a company's plans to recruit from competitors, said Jay Braboy, president of retained executive search firm Braboy & Associates Inc. in Franklin, Mich.
``Everybody is looking at this,'' said Braboy, whose company specializes in the plastics industry. ``Companies that are close to making a hiring decision might step back now and wait to see what happens here. In some ways, this is unprecedented.''