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Cutera, a leading cosmetic and laser equipment maker in the U.S., has expanded its lawsuit against Lutronic USA to include the latter's parent company in Korea, according to legal documents filed with the U.S. District Court for the Eastern District of California, Wednesday.
In January 2020, Cutera filed the suit against the U.S. subsidiary of the Korean aesthetic laser device maker for allegedly stealing trade secrets by hiring its former employees. The company also sued the former workers, most of whom are salespeople including former executive Larry Laber, for violating their contracts and duties. The amount of damages sought by Cutera has not yet been determined but is rumored to be in the tens of millions of dollars.
The court in early 2021 issued a preliminary injunction against Lutronic USA, ordering it not to use Cutera's trade secrets and not to destroy any related documents. In its complaint filed with the court, Cutera said it decided to file new complaints against Kosdaq-listed Lutronic, headed by CEO and board Chairman Hwang Hae-lyung, and a former contractor, seeking damages that could be in the tens of millions of dollars.
The company, headquartered in California, also claimed the ongoing litigation will create a significant overhang for Lutronic and severely hamper its potential efforts to pursue an initial public offering in the U.S.
"There have been several new developments in Cutera's efforts to stop Lutronic from stealing confidential information and trade secrets, and luring away Cutera employees with false promises, including new revelations about Lutronic's wrongdoings from a former executive and extensive detailing of how an independent contractor played both sides," read a legal memo filed.
The firm makes numerous claims against its Korean competitor, including misappropriation of trade secrets, violation of the Racketeer Influenced and Corrupt Organizations Act and unfair competition. Cutera claimed, citing Lutronic's former CFO, that Hwang met with its executive to learn about its trade secrets, including one 14-hour-long meeting where Cutera employees divulged trade secrets to Hwang and the CFO.
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"Lutronic hired a former Cutera consultant, James Bartholomeusz, to acquire the firm's trade secrets and to create for Lutronic a product that copied a Cutera product that the consultant worked on while at the company. Lutronic and Hwang also hired the head of Cutera's sales organization, Laber, so that he could transfer the firm's sales team to Lutronic. Lutronic wanted to destroy Cutera's sales team."
It then alleged Lutronic knew Laber was violating his legal duties to Cutera and that Hwang as well as Lutronic's CFO and CTO helped him do so, adding Lutronic interfered with the employment contracts of the former Cutera employees and committed acts of unfair competition in violation of law.
Kim Byung-wook, a lawyer at Haewoo Law Office in Seoul, said luring away employees from competitors with the promise of higher salaries and stock options has for years been a widely known method for many to acquire trade secrets and technological knowhow.
"I do not know about U.S. laws in detail regarding unfair competition. But under Korea's Prevention of Unfair Competition Act, there is significant ground that Lutronic's hiring of former Cutera employees could be ruled illegal," Kim said. "In principle, the courts tend to view recruiting key employees from competing companies as problematic and if there is evidence showing attempts to steal trade secrets, the plaintiff is in a much better position than the defendant."
Founded in 1997, Lutronic produces various laser devices for aesthetic purposes, and generates most of its revenue from exports. It operates subsidiaries in the U.S., Japan, Germany and China.
In the second quarter of 2022, it posted 44.7 billion won ($34.4 million) in sales and an operating profit of 12.1 billion won. Lutronic officials could not be reached for comment.
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