News Article

FBI adds twist to dispute
Date: Oct 09, 2015
Author: Will Astor
Source: Rochester Business Journal ( click here to go to the source)

Featured firm in this article: Lumetrics Inc of Rochester, NY

FBI agents have launched a criminal probe involving Bristol Instruments Inc.

Federal agents several weeks ago conducted a search at the local optics firm's headquarters in Victor, Ontario County. The search is part of a criminal investigation into the role of a former Lumetrics Inc. official accused of illegally passing Lumetrics' trade secrets to Bristol Instruments.

Buffalo-based FBI spokeswoman Maureen Dempsey said that, lacking a publicly filed record detailing the probe, the bureau would neither confirm nor deny the investigation or the search.

Papers filed last week in ongoing civil cases Lumetrics is pressing in U.S. District Court against Bristol Instruments confirm the search and the criminal investigation, however.

In a Sept. 23 filing, Lumetrics attorneys asked the court to "require Bristol to preserve documents and things seized or examined in connection with the pending criminal investigation of Bristol's conduct so that those documents and things will be available in this civil action."

Peter Battisti, Bristol Instruments president and chief financial officer, confirmed an investigation is underway.

"We're cooperating with the authorities in the investigation into the actions of Todd Blalock," Battisti said in a phone interview this week. "There really isn't much else to tell."

Blalock is a onetime Lumetrics chief technology officer who after leaving Lumetrics worked for Bristol Instruments for a time.

A self-described co-founder of Lumetrics and the writer of computer code behind one of the firm's key product lines, Blalock left Lumetrics under a cloud several years ago after allegedly trying and failing to oust Lumetrics CEO John Hart.

Before he left, Blalock openly spoke of his plans to pass Lumetrics software secrets and technology he had helped develop to Bristol Instruments, testified Glen Hallit, Lumetrics manufacturing manager, in sworn statements.

Hallit's affidavits were filed in civil cases Lumetrics has brought in state and federal courts as part of a dogged but so far unsuccessful pursuit of Blalock and Bristol Instruments.

Preceding the recently begun criminal probe were two state court and two federal court actions in which Lumetrics failed to make charges against Blalock or Bristol Instruments stick. It currently is pursuing separate federal civil actions against Blalock and Bristol Instruments.

Hart declined to say whether he had been in contact with the FBI or to otherwise comment on the criminal probe.

Citing the possibility that Blalock could be charged with one or more crimes, a lawyer defending Blalock in the Lumetrics case asked the court to temporarily put the civil action on ice.

"Blalock is a possible target of a criminal investigation involving theft of trade secrets," wrote Steven Cole of Leclair Korona Giordano Cole LLP in a Sept. 30 court filing. "The prejudice to Mr. Blalock in forcing him to choose between invoking and waiving his Fifth Amendment privilege before the criminal investigation is complete far outweighs Lumetrics' secondary concern for timely enforcement of the action."

The government's criminal investigation of Blalock "is based upon the same basic allegations as are set forth in the pending litigations filed by Lumetrics. Very recently, I was informed that the government had executed a search warrant at the premises of Bristol Instruments," Cole wrote.

Blalock left Lumetrics in 2011. He next worked for Bristol Instruments, leaving that firm in 2013.

In papers filed in previous state and federal court actions, Lumetrics officials claimed Blalock stole proprietary software, trade secrets and materials vital to producing one of Lumetrics' key products, an optical interferometer, and toiled secretly in a home workshop to perfect a prototype incorporating the allegedly purloined technology.

According to Hallit's sworn testimony, Blalock believed his earlier refusal to sign a non-compete agreement left him free to do as he pleased with code he developed while working for Lumetrics.

Lumetrics first went after Blalock and Bristol Instruments in two 2012 state court actions. State Supreme Court Justice Matthew Rosenbaum found the evidence Lumetrics presented insufficient to prove Bristol used stolen technology to develop its interferometer products.

In a subsequently filed federal case, U.S. District Judge Elizabeth Wolford in 2014 dismissed an action targeting Blalock but left the door open for Lumetrics to refile the case. Lumetrics revived the action before a month had passed.

Last January, Lumetrics filed a separate federal case targeting Bristol Instruments. Wolford is presiding over both actions.

Blalock inked a settlement agreement with Lumetrics in November 2014, Cole wrote in a separate Sept. 30 court filing.

In the filing Cole describes the pact's terms as including:

Blalock's promise to file a declaration fully disclosing most facts relevant to the case. Facts covered by a 2012 confidentiality agreement Blalock inked with Bristol can be left out of the declaration but must be revealed if Lumetrics' attorneys seek them in discovery requests;
Blalock's agreement not to tell Bristol Instruments what information he is revealing under the settlement;
Blalock's promise not to cooperate with Bristol Instruments if it tries to legally limit what he can say; and
Lumetrics' agreement to let its case against Blalock be put on hold until its dispute with Bristol is settled and its promise to consider dropping its case against Blalock after its case against Bristol Instruments wraps up.

"Lumetrics intends to pursue its civil cases against Blalock and Bristol for copyright infringement and trade secret misappropriation in connection with Bristol's 157 Series devices, without regard to the ongoing federal criminal investigations," the Lumetrics CEO Hart wrote in an email to the Rochester Business Journal last week.