The US subsidiary of South Korea’s Lutronic is facing a lawsuit for allegedly misappropriating trade secrets through former employees of Cutera it hired recently, according to documents reviewed by The Korea Herald.
Aesthetic laser equipment maker Cutera -- listed on Nasdaq -- claimed that forensic research results showed that Lutronic Aesthetic had poached 13 employees, encouraging them to steal trade secrets and destroy evidence until February. In return, they were rewarded with stock options.
Cutera in January filed a lawsuit against Lutronic Aesthetic in the US District Court for the Eastern District of California. It has also sued its employees for violating their contract and duties in a separate court
Those who defected to Lutronic Aesthetic were mostly Cutera’s salespeople targeting North America, including former executive Larry Laber, it added.
The total damages Cutera is seeking has yet to be quantified, but it is expected to exceed $18 million, or over 10 percent of Lutronic’s total assets.
“Rather than investing its own resources to develop the sales organization and infrastructure, the evidence here establishes that Lutronic and its CEO (Hwang Hae-lyung) decided to cheat and get a head start by hiring (Laber) so that he could use our trade secrets, and in turn hire numerous other sales professionals to join him,” read a legal memo filed last month.
A Lutronic representative refuted the claim, saying such legal actions are commonplace in the industry when someone leaves a company.
The Korean firm added it was acquitted last year of similar charges by Cynosure, another US-based competitor, for hiring its sales employees.
“We did not intend to bring in the Cutera sales team (for ulterior intentions),” the representative told The Korea Herald. “Our offer was solely to Laber, and those who worked with him decided to follow because of his influence and reputation in the industry.”
Lutronic’s legal counsel in US could not be immediately reached for comment.
Cutera last month also asked the court to issue a preliminary injunction to prevent Lutronic from destroying essential evidence and expects a hearing within six weeks.
Founded in 1997, Lutronic produces laser devices for aesthetic purpose, along with Cutera, El.En, Sisram Medical and Cynosure.
Goyang-based Lutronic generates three-fourths of its revenue from exports. It operates nine overseas subsidiaries -- in Japan, China, Germany, France and the US.
Its first foreign subsidiary in the US, Lutronic Aesthetics, was founded in 2007.
The company is still in the red. In 2018, Lutronic Aesthetics’ net loss came to 7.3 billion won, rising twofold compared to a year prior. Its parent firm logged a 15.4 billion won net loss, as per its consolidated financial statement.
However, last year it started narrowing its losses with increased sales of new products including Lutronic Genius and Clarity II. Its US subsidiaries’ revenue jumped twofold on-year in the first three quarters of 2019.
CEO Hwang holds 21.45 percent voting rights of Lutronic.
Meanwhile, Cutera recorded a net loss of $30.8 million in 2018, a sharp turnaround from $30 million net profit in 2017.
By Son Ji-hyoung(firstname.lastname@example.org)