Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
A bitter fight over alleged corporate espionage involving two of Silicon Valley’s hottest start-ups took a new twist on Tuesday, after $12bn HR software company Deel claimed arch-rival Rippling had directed one of its employees to “pilfer” the company’s assets by posing as a customer.
The latest claim comes after Rippling alleged earlier this year that a staff member had been spying on behalf of Deel. The employee locked themselves into a bathroom and smashed their phone with an axe when confronted with allegations, according to their own testimony.
In new legal filings seen by the Financial Times, Deel has countered by arguing that: “Rippling has been actively engaged in a carefully co-ordinated espionage campaign, through which it infiltrated Deel’s customer platform by fraudulent means and pilfered the company’s most valuable proprietary assets.”
The case has exposed the increasingly bitter rivalry between the two San Francisco-based groups, backed by some of the Valley’s top investors, who are competing in the typically staid world of workforce management software.
The two tech unicorns are backed by some of America’s most high-profile start-up investors. Andreessen Horowitz, Altimeter Capital and General Catalyst have invested in Deel. Founders Fund, Baillie Gifford and GIC have financed Rippling, which was valued at $16.8bn last month. Coatue has invested in both companies.
Deel has sought to dismiss Rippling’s initial claims of directing corporate espionage and has filed a lawsuit in Delaware alleging its rival is trying to impugn Deel’s reputation. Its latest filings were lodged on Tuesday morning as an amendment in that case.
It alleges that Brett Alexander Johnson, Rippling’s “competitive intelligence manager”, posed as a customer and accessed details of Deel’s products and business practices over the course of six months. That information was in turn used to build one of Rippling’s products, Deel alleges.
Deel’s investigation “remains in its nascent stages”, but the company nonetheless claims it has “unequivocal proof” of Johnson’s alleged activities.
It also alleges that Rippling chief executive Parker Conrad encouraged Johnson’s activities with the intention of uncovering “the secrets by which Deel has achieved years of profitability.”
Rippling originally filed a suit against Deel in California in March. Deel has filed motions to dismiss that and move the case to Ireland. It has separately filed a civil lawsuit against Rippling in Delaware. The latest allegations are an amendment to the Delaware suit.
The dispute stems from Rippling’s claim in a March court filing that Deel had cultivated a Rippling employee, Keith O’Brien, to steal confidential business information over a four-month period.
“The highest levels of Deel’s leadership are implicated in a brazen corporate espionage scheme and they will be held accountable,” said Alex Spiro, legal counsel for Rippling, at the time.
When first confronted by solicitors acting for Rippling, O’Brien locked himself in a bathroom. He has later admitted in an affidavit unsealed in an Irish court to destroying his phone with an axe and dumping it down a drain.
O’Brien also said in his testimony that he was operating for Deel at the direction of chief executive Alex Bouaziz,
Deel has suggested O’Brien, was in fact a whistleblower concerned with Rippling’s business practices and claimed he provided testimony under duress.
Rippling did not immediately respond to a request for comment.
