On The Docket: A High-Stakes Battle Between Manufacturing Giant Jabil And 3D Printer Startup Essentium Over Alleged Trade Secret Theft
For the past several years, an increasing number of 3D printing startups have come up with new technologies that can mass produce parts faster and more efficiently than older technologies. One of them was Pflugerville, Texas-based Essentium, which launched a High Speed Extrusion 3D printer that it claims prints five to 15 times faster than the competition. In what promises to be a fascinating court case, Jabil, one of the country’s giant contract manufacturers with $27 billion in annual revenue, alleges that Essentium and a group of its own former employees who went to work there stole trade secrets related to its efforts to develop high-speed 3D printing technology, known as TenX.
In an amended complaint filed in U.S. District Court in Florida in mid-September, St. Petersburg, Florida-based Jabil alleges that Essentium conspired with the Jabil former employees “to steal highly confidential designs, vendor relationships, and other trade secrets and use them to replicate Jabil’s TenX.” Essentium’s printers, it alleges, “are made by former Jabil engineers, from Jabil designs, using components sourced from vendors that Jabil identified and vetted.”
The amended complaint, which has not previously received attention, adds new details to the original suit, which was filed in July 2019. In addition to Essentium, Jabil named former Jabil employees Erik Gjovik, William “Terry” McNeish III, Jason Greene and Chad Eichele, all of whom subsequently joined Essentium; former Jabil contractor Lars Ugghausen, also at Essentium; and Essentium’s Blake Teipel, Steven Birdwell and Gene Birdwell. A jury trial is currently set for October 2021.
“This is one of the future building blocks of our technology that they stole, in a market that puts a high value on this technology,” John Dulchinos, Jabil’s vice president of 3D printing and digital manufacturing, says. “We couldn’t just turn a blind eye to it because it was so egregious a theft.”
In its response to the complaint in late-September, Essentium denied all the allegations. “Jabil’s second amended complaint (as with prior complaints) is built on a false premise—namely, its allegation that it had developed a ‘best-in-class FFF [fused filament fabrication] printer’ called ‘TenX’ through years of effort and millions of dollars in expenditures, which printer embodied valuable trade secrets that various defendants allegedly stole from Jabil. In truth, Jabil’s TenX never constituted a functional 3D printer at all, much less a ‘best-in-class’ printer that embodied any Jabil trade secrets.” The Birdwells filed a similar response denying the allegations in early-October.
Essentium declined to comment beyond pointing to an earlier statement by CEO Teipel that denied the claims and added that “attempting to bully us and hinder our freedom to innovate with a meritless lawsuit will neither detract nor derail us from our broader mission, which is to transform the $12 trillion dollar industrial manufacturing market through innovation.”
Essentium’s cofounders include MacNeish, head of R&D for machines; Gjovik, chief product officer; and Uffhausen, chief operating officer and chief financial officer. The company has raised $22 million from investors that include BASF Venture Capital, Materialise, and private-equity firm Genesis Park, according to Crunchbase.
It’s not the first time 3D printing companies have wound up in court over trade-secret claims, and given how competitive 3D printing has become in the now-$13 trillion global manufacturing industry it likely won’t be the last. Desktop Metal and Markforged, both of which are based in Massachusetts, for example, had their own trade secrets battle that reached a settlement two years ago. “This is the way it works,” says 3D printing consultant Terry Wohlers, president of Wohlers Associates. “I’m reading this, and it sounds like a family dispute.”
The Jabil-Essentium dispute dates back to a time when the group of Jabil employees were working on its TenX printer. Jabil alleges in its complaint that Gjovik, MacNeish and Uffhausen, along with another former Jabil employee, Gregory Ojeda, who has since left Essentium and reached a settlement agreement with Jabil, held private meetings and used personal emails to communicate their plans starting as early as 2016. At the same time, the group was also “purporting to represent Jabil in negotiations” with Essentium Materials over the printer, though the two sides never reached agreement on a licensing deal, according to the complaint.
Jabil alleges that the three Jabil former employees and the contractor conspired with the Birdwells, who were investors in Essentium Materials, and Teipel, then its president and chief technology officer, to try to create a new company to develop a TenX printer. MacNeish and Uffhausen left Jabil while Gjovik and Ojeda stayed behind. By September, the group had decided that they would “take the TenX technology and business plans with them one way or another (i.e. lawfully or otherwise),” according to the complaint.
Jabil alleges that MacNeish created a zip file with Jabil trade secrets and confidential business information, including thousands of TenX CAD files and other confidential design documents for the 3D printing projects. The manufacturing giant hired a computer forensics expert, Mark Lanterman, to analyze digital evidence, including that associated with a missing laptop that Jabil had issued to MacNeish.
In his declaration filed with the court in November 2019, MacNeish states that he did not take his HP laptop with him, but may have left it at a former colleague’s garage, and “had no idea” how the computer ended up in a bin at the startup’s Irvine, California, outpost known as Essentium West. In the spring of 2019 he discarded the laptop in a dumpster outside the building, according to the declaration. “At the time I placed the HP Z-Book 15 in the dumpster, I did not know that Jabil would sue Essentium or me in the future,” he states in the filing.