Broin and former employees in lawsuits over trade secrets

High profile ethanol maker Broin Companies and two former employees are embroiled in a set of messy lawsuits involving alleged compromise of trade secrets and enforceability of non-compete agreements.

Broin accuses two former employees previously employed by a Broin-affiliated dry mill conventional ethanol plant in Jewell, Iowa, of learning confidential information and trade secrets about Broin's ethanol production methods before leaving to work at an ethanol plant in Colorado.

The new plant, Sterling Ethanol, is a direct competitor of Broin, the lawsuit alleges.

In working at the new plant, the employees broke agreements not to compete with Broin, according to the lawsuit.

Broin has designed, engineered and built some 25 ethanol plants across the United States, and is building one of the first plants in the U.S. to produce cellulosic ethanol.

Last week, Broin was one of six cellulosic ethanol makers to be identified as receiving money from the Department of Energy. It stands to receive a grant of up to $80 million of taxpayer money. (see U.S. government granting $385M to six cellulosic ethanol plants.)

"Broin and Associates licensed to Horizon Ethanol proprietary technology, design information, and operational information," the lawsuit states. "The licensed technology included trade secrets, formulas, research data, processes, know-how, and specifications related to Broin and Associates' design and construction of the ethanol facility."

Defendants in the lawsuit include Gary T. Hanson, former operations manager at the Horizon Ethanol plant, which began operations about one year ago. Hanson resigned from the Iowa plant Dec. 18 and became affiliated with Sterling Ethanol in northeast Colorado, according to the lawsuit.

In an unusual twist, Hanson filed suit against Broin—not as a counter-suit in response to Broin's allegation, but actually several days before Broin's lawsuit—lawyer Dennis Baarlaer, representing Hanson, told the Cleantech Group today.

"Mr. Hanson alleges that Broin and Horizon are violating the Colorado Trade Secrets Act, and that their attempts to enforce the non-compete agreement is unlawful in Colorado."

Also named by Broin as a defendant is Robert A. Akers, a former maintenance technician at Horizon.

Akers resigned Jan. 22 and also went to Sterling, Broin maintains.

The lawyer representing Akers says Broin's lawsuit will be a stretch for the company to win, given that it's not clear Sterling is a competitor.

"It's a different market. They don't work with the same customer base. They don't sell to the same market," said Stuart Cochrane to the Cleantech Group. "I look at this as an overreach."

"Broin and other employers have the right to protect themselves against individuals who confiscate trade secrets and then try to hurt them economically. But Mr. Akers doesn't fit the bill. He's a maintenance worker. He didn't have knowledge of any trade secrets, whatever those might be. He assisted the company with their equipment, greasing equipment, routine issues."

Among other things, Broin's lawsuit seeks injunctions preventing the two men from working with Sterling, and stopping them from sharing confidential information.

Sterling Ethanol has 30 employees and operates 24 hours a day. The owners are building another plant 40 miles south of it and have plans for more plants.

Broin spokesperson Nathan Schock acknowledged the two lawsuits, but would not comment to the Cleantech Group on specifics. He noted "Broin Companies has valuable confidential information, trade secrets, and technology that we vigorously protect through a number of means, including litigation."

And Broin has not been afraid to use litigation in the past.

Last year Broin sued Genencor International, alleging misuse of confidential and proprietary information. That lawsuit was dismissed in March 2006, and both sides agreed not to disclose details of the dismissal.