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July 18, 2022
Multinational software company IGEL Technology is pushing back on allegations that it used stolen trade secrets to recruit its competitor’s employees, partners and customers.
The Germany-based thin client software provider has clashed with rival German vendor Unicon GmbH in court battles over the last year. Unicon, which initiated the proceedings, asserts that IGEL and its leadership illegally disseminated and leveraged Unicon’s trade secrets. Unicon has filed multiple cases, both criminal and civil, against IGEL and former Unicon managing director Niels Keunecke in the Munich I Regional Court and Bremen Regional Court. It alleges that Keunecke, a former Unicon managing director, unlawfully took Unicon files and brought them to IGEL. IGEL counters that Keunecke’s deeds don’t fall into the category of a trade secrets violation. IGEL’s legal counsel also rejects the claim that other members of IGEL used the Unicon files that Keunecke took.
The controversy has functioned as a test for Germany’s trade secrets laws and perhaps serves as a cautionary tale for executives planning to move to a new company.
Unicon GmbH’s Philipp Benkler
Keunecke joined IGEL in 2021 as senior vice president of enterprise sales for EMEA, following an attempt to purchase Unicon from its parent company with an investor. Following Keunecke’s departure from Unicon, more than 12 Unicon employees moved to IGEL.
IGEL’s Niels Keunecke
“Last year, there were initial indications that data and documents had been copied and left the company,” Unicon CEO Philipp Benkler said. “We suspected that they might contain strictly confidential Unicon trade secrets. Since then, there have been indications that some of these documents have found their way to IGEL Technology.”
Benkler cites a large number of Unicon files – as many as 27,000 – that Keunecke copied onto his personal drive while working at Unicon.
Jens Matthes, partner at Allen & Overy and IGEL’s lawyer, however, alleges that Keunecke was well within his rights to take the data and that IGEL leadership did not access or use any of it. He pointed to legal rulings that have cleared IGEL leadership of wrongdoing. A judge on May 2 dismissed an injunction Unicon applied for against two IGEL managing directors.
“They put down in writing that they don’t see the slightest hint of any unlawful behavior of the managing directors,” Matthes told Channel Futures.
Allen & Overy’s Jens Mathes
However, IGEL and Keunecke face many more legal challenges. The criminal complaint Unicon filed against Keunecke for infringement of trade secrets more than a year ago remains an ongoing investigation. Investigation is also pending for Unicon’s criminal complaint filed Feb. 14, 2022, against IGEL. In addition, a civil lawsuit against Keuenecke is awaiting a hearing.
Unicon, based in Karlsruhe, Germany, provides endpoint operating systems and endpoint management focused on virtual desktop infrastructure (VDI) and desktop-as-a-service (DaaS) use cases. IGEL, headquartered several hundred kilometers north in Bremen, Germany, similarly provides operating systems for cloud workspaces. IGEL has seen strong revenue growth over the last few years, and its recent expansion included a new office in Unicon’s hometown of Karlsruhe.
Keunecke, a nine-year managing director at Unicon, approached Unicon’s parent company, Fujitsu, in May 2020 to offer a management buyout through an investor. Fujitsu, according to Matthes, had already indicated its interest in selling Unicon.
However, Fujitsu rebuffed the offer. Benkler said Fujitsu determined Unicon’s value to be twice as much. Fujitsu would go on to seek other suitors. According to Benkler, Keunecke announced to Unicon that he would not extend his contract shortly before Unicon and its investment partner made its first of eight presentations to interested parties in October 2020. Keunecke also informed Fujitsu that he might face a conflict …
… of interest, Benkler said.
Near the end of October, Keunecke went on vacation. That’s when, Benkler says, Keunecke sent dozens of emails from his work account to a personal Gmail address.
IGEL officially announced the hiring of Keunecke in a press release on April 19, 2021. Keunecke would be leading IGEL’s efforts in developing the enterprise market. According to Benkler, IGEL played strongly in the midmarket, whereas Unicon held a foothold in the enterprise.
Keunecke was not the only person to move away from Unicon. Twelve employees ultimately gave notice that they were leaving Unicon. All 12 of those people now work for IGEL. Two were managers at Unicon, Benkler said. He said Unicon previously employed 25 people. Maneuvering through the pandemic severely short-staffed took a toll on morale, Benkler said.
“It was not the best situation emotionally,” said Benkler, who took his position as CEO in December 2020. “People were not well, because they were fearing that the company would go bankrupt and thus, lose their jobs, which was not the case.”
The larger market seemed to be feeling the disruption as well. Benkler said he fielded phone calls from a variety of technology partners, channel partners, resellers, distributors and customers who wanted to know about Unicon’s status.
“I had customers calling and asking, ‘Hey, Philipp, how’s it going with you? We heard that some people left you. Are you still the right vendor to work with?’” he told Channel Futures.
Matthes stated that although 12 Unicon employees did move to IGEL, the latter never pursued a policy of “poaching” those people.
Benkler said he learned that the former managing director had left the company with a potential conflict of interest. Benkler said he asked his IT department to check for suspicious activities from Keunecke during his time at Unicon.
He said the search yielded 52 emails in the Unicon firewall going from Keunecke’s Unicon email address to his private Gmail account. At the time, they could only read the header information, but Benkler said several contained the code word for Unicon’s selling process.
Unicon filed a criminal complaint against Keunecke in February 2021, two months before IGEL officially announced his hiring. In May 2021 police raided Keunecek’s house. Six months later, police called Benkler in to verify 40 of the emails Keunecke had sent from his Unicon account to his Gmail.
But that wasn’t all Benkler said he noticed. He said the police recovered 27,000 Unicon documents from Keunecke’s personal drive, including financial data, its pricing sheet and all of its contracts for employees, partners and customers. Keneucke had also taken a document containing a list of Unicon’s top 50 customer accounts. The documents, Benkler said, comprised nearly all of Unicon’s files.
“Imagine seeing your company’s folder structure on your shared drive at the police station,” Benkler said. “I basically found our entire structure. This was not a good feeling.”
Jens Matthes in an interview with Channel Futures did not deny that Keunecke took the files. But he emphasized that Niels was still the managing director of Unicon when he did so. And he had the right to do so, Matthes said.
“He had the authority to access and to take copies of the data that was in the company. He was the most senior person in the company. There was nobody who told him not to do it,” Matthes told Channel Futures. “So he took some copies. And I’m leaving that without …
… any comment. Those are the facts as I see them.”
Moreover, Matthes said Keunecke was acting out of a sense of self-protection rather than maliciousness. He said Keunecke’s announcement that he would not renew his contract had caused him to be “cut off from decision-making processes and from certain information flows.”
As Matthes describes it, Keunecke felt isolated and vulnerable. Transferring those files onto his jump drive was a way to gather evidence that he was doing his job correctly.
“As far as I understand, he felt uncomfortable – very understandably so – and thought, ‘I am in a situation where I’m personally liable towards the shareholders, towards the company, and towards some general obligations under the law. For a company where I’m no longer able to really know what’s going on, where I fear that people are kind of doing something behind my back,’” Matthes said.
Furthermore, Matthes stated that Germany’s trade secrets laws require the aggrieved party to demonstrate that they implemented strict measures to protect their information. The latest trade secrets act, established in 2019, states that an owner’s intent to keep something confidential does not make it a trade secret unless the owner takes the necessary safeguards to protect it.
Matthes argues that Unicon didn’t establish the required level of safeguards. He said Unicon encouraged its employees to use USB drives at work.
“Unicon had a policy in place where they not only encouraged but even told employees to make sure that data was secure and available at all times, expressly,” Matthes said. “So you have to make regular backup copies of what you’re working onto USB sticks and else.”
Benkler fired back at Matthes’ assertion, calling it a “very lame” attempt at an excuse. He said Unicon’s measures included “binding storage concepts, access limitation systems, regular trainings, need-to-know principles and policies.”
“And Niels himself was – as managing director of Unicon – under an additional statutory obligation to maintain secrecy. Requiring employees to ensure that ‘data is secure’ is a part of that. It does clearly not include or mean that they are invited to copy data for other purposes than those of their employer, Unicon. And it does obviously not comprise any disclosure of Unicon’s trade secrets to a direct competitor,” Benkler said.
This leads to another disputed point: Did IGEL leadership see the files Keunecke took?
Matthes said the District Court of Munich ruled in favor of IGEL’s managing directors.
“The only final and binding court decision … After an extensive exchange of submissions and evidence from either side found that there was not even the slightest trace of any unlawful behavior on part of the managing directors of IGEL,” Mathes wrote in an email.
He also said the company would never have meddled in trade secrets violations while preparing for a sale. Private equity firm TA Associates announced its acquisition of IGEL in February 2021.
“IGEL was very keen as always to keep the organization clean and compliant,” Matthes said. “They would never have taken any risks like this, particularly not in such a moment of their own corporate history.”
But Benkler suggests that IGEL’s actions revealed a deeper knowledge of Unicon’s inner workings. He pointed to the fact that IGEL contacted the majority of Unicon’s enterprise customers.
“For example: With one of our customers, he knew how long the contract ran and what the termination terms, including potential fees, might be. And [Keunecke] asked the question, ‘Should we buy this contract?’ internally to management in an email,” Benkler said.
Matthes countered that Keunecke wouldn’t need …
… a document to know which customers to contact.
“There is not a myriad of potential customers out there. We are not talking about selling butter to consumers. We are talking about big ticket investments to a couple of customers at a time. If you are in sales in that business, you know at least your top 20 customers by heart. You know who they are, you know what their name is, you know if they are married or not and if they have children. Every good salesperson does that,” Matthes said.
Police shared a copy of the data they recovered with Unicon. According to Benkler, the files included a Powerpoint branded as an IGEL shareholder update, dated December 2020. One slide was titled “Status Unicon Employee Migration,” and contained a tracking sheet of Unicon employees that had joined IGEL and a success rate metric. An additional slide stated that IGEL in January 2021 would begin “targeted marketing activities tackling current Unicon accounts.” Another bullet point said IGEL would “gossip communication through various channels” about Unicon. Benkler contends that IGEL presented this document to shareholders.
Matthes said IGEL has evidence that all 12 former Unicon employees approached IGEL “of their own initiatives.” He said a number of job vacancies existed at IGEL at the time, and that it made sense to form a migration plan to ensure the former Unicon employees matched up well. He added that IGEL did not hire all of the people from Unicon who applied for a job.
“Nobody at IGEL pursued a plan of poaching 12 people. If that had been the case, Unicon could have asserted claims against IGEL. They never did that,” Matthes said.
Will IGEL file any countersuits? Matthes said the company simply wants to move on from the drama.
“The managing directors of IGEL were absolutely not amused. They were personally disturbed, to say the least, about the tone, accusations and phrases that were slapped into their faces, which I absolutely understand. However, IGEL and its management don’t want to go down to the level at which Unicon is battling. Unicon is throwing dirt at them, and they don’t want to answer by throwing dirt back on them,” Matthes said.
Benkler said Unicon has stabilized following the mass exodus of employees. Fujitsu on Nov. 1, 2021, sold all Unicon shares to Unicon management, who made the purchase with help from a family-backed investment partner. The company stated that the investment will allow it focus on the channel more, and it recently launched MSP licensing.
Headcount at Unicon is close to 50, and Benkler said the company did not lose any customers. However, he said the uncertainty the company faced set its development back by a year.
Benkler said the next court hearing is in November and that the investigation by the public prosecutor is still ongoing.
“What we know is that a lot of people have been involved,” Benkler said. “A lot of our data has been shared. The criminal prosecutors are still continuing their investigations. No respective decision has been made, and I think it’s going to take time until we’re done with all the proceedings.”
U.S. Congress in 2016 enacted the Defend Trade Secrets Act, which criminalized certain misappropriations of trade secrets and allowed owners to sue in federal court. For a comparison of how different U.S. states handle trade secrets as well as the changes implemented by the latest federal law, read this post from a law firm.
Senior News Editor, Channel Futures
James Anderson is a news editor for Channel Futures. He interned with Informa while working toward his degree in journalism from Arizona State University, then joined the company after graduating. He writes about SD-WAN, telecom and cablecos, technology services distributors and carriers. He has served as a moderator for multiple panels at Channel Partners events.
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