On Dec. 8, two Broadcom employees left to start Innovium, which was incorporated on Dec. 11.
Broadcom apparently didn’t take kindly to that. And after it allegedly lost five employees to Innovium in a four-day span, Broadcom filed a lawsuit.
It accuses Innovium founders Mohammed Issa and Puneet Agarwal of breach of contract in allegedly poaching talent from their former employer. Broadcom also accuses the two of using trade-secret knowledge — such as a familiarity with weaknesses in Broadcom’s chips — to pitch themselves to investors.
But Innovium’s founders say they did everything above the board. The former Broadcom employees reached out to Innovium themselves, the startup claims in court documents. And the investor pitches were handled solely by Innovium CEO Rajiv Khemani, the startup claims; Khemani was once an executive at Cavium but has never worked at Broadcom.
The stakes in all this could be the future of a startup that’s had barely two months to even start planning a product, based on the timeline Innovium describes in court filings.
In addition to asking for unspecified damages, Broadcom is asking the court to make Innovium stop the alleged poaching and for Issa and Agarway to pay back the salary they received “when they were in breach of their fiduciary duties” at Broadcom. As Innovium has no product yet — nor even a web site, as far as we could tell — there’s no mention of a preliminary injunction.
Broadcom: They Poached Our Engineers
Broadcom sued Innovium on Jan. 20 in California State Superior Court for the County of Santa Clara, accusing Issa and Agarwal of breach of contract and breach of fiduciary duty, among other charges.
The suit also charges Khemani with “intentional interference with contractual relations” and “aiding and abetting a breach of duty of loyalty.”
Innovium, which is apparently planning to develop Ethernet switch chips, has 10 employees, according to court documents. Broadcom seems particularly peeved about five who left the Ethernet switch division during a four-day “flurried raid,” as Broadcom’s complaint puts it, that Innovium supposedly conducted in January.
That would violate contracts Issa and Agarwal supposedly signed upon joining the company, in 2005 and 2004, respectively. The contracts include a statement that they wouldn’t “interfere with the business” by inducing an employee to leave” Broadcom for one year after their own departures, according to the lawsuit.
Broadcom claims the employees left in a hurry, quitting “just three weeks shy of an equity vesting date on February 5, 2015, and a payment of annual bonuses in late February 2015, thereby leaving a significant amount of money on the table (and in one case, even triggering an obligation to repay a significant signing bonus).”
Innovium: We Waited for Them to Call
Innovium’s response, filed Feb. 5, claims that its ex-Broadcom employees all reached out to the startup themselves. In fact, as a condition of employment, each employee had to affirm “that he or she contacted Innovium expressing interest in employment and was not solicited,” Innovium claims.
“If a former colleague reached out for any reason — to say good luck in the endeavor, to ask them to lunch — Mr. Issa and Mr. Agarwal would not mention Innovium unless they were specifically asked if opportunities were available. That did not take long,” Innovium’s response states.
Innovium claims to have a trail of emails and messages backing up this version of events. Innovium further claims that Broadcom executives told departing employees that something big, presumably the lawsuit, was going to happen after Jan. 19.
Broadcom: They Learned From Mistakes
Broadcom’s core accusation is that Issa and Agarwal attracted investment to Innovium by using information garnered at Broadcom, such as knowledge about what customers liked and disliked about particular switch chips.
The complaint says the duo enlisted Khemani to help them find funding and told potential investors “that they knew the strengths of and potential areas of improvement for Broadcom’s products, had learned from Broadcom’s mistakes and successes, and could use that information to make an even better product on their own.”
Broadcom also points out that neither Issa nor Agarwal signed the company’s one-page Termination Certification. The certification is described as a one-page document stating that they wouldn’t disclose or use any Broadcom confidential information, among other things.
Innovium: We Kept Quiet
Innovium counters by saying Issa and Agarwal “talked about their interest in being part of a new company but were adamant that they would not work on or even discuss any kind of product definition or development until after they resigned from Broadcom.”
Neither was Innovium’s fundraising based on the prospect of bettering Broadcom’s chips, the startup’s response claims.
This is where Khemani’s background is important, because he has never worked at Broadcom. Before Issa and Agarwal quit their jobs, Khemani went out fundraising on his own, using pitch slides that he’d drawn up himself, Innovium’s court filing claims. No product concept existed at the time; the pitch was that investors should bet on a team with a good track record in a market Khemani knew well, the filing states.
Issa and Agarwal left Broadcom only at the point “when the fundraising discussions began to look like they might be successful,” Innovium’s response says.
Innovium goes on to claim Broadcom contacted venture capital funds, including some that did invest in Innovium and some that didn’t, to announce the lawsuit.
Ethernet Competition Is Emerging
It seems pretty safe to assume Innovium wants to develop an Ethernet switch chip, joining a market that hadn’t had much serious competition in recent years but is suddenly attracting some attention.
Broadcom amassed roughly 90 percent share of the Ethernet switch chip market as of last year, according to The Linley Group. Intel, Marvell, and Vitesse are among the established competitors in Ethernet switch chips, although they obviously weren’t able to stop Broadcom’s ascent in recent years.
Startups have been absent from the space partly because funding is so difficult in semiconductors. But Xpliant emerged recently, backed by (and subsequently acquired by) Cavium. Barefoot Networks, under the wing of Nick McKeown of Stanford, appears to be taking a shot at Ethernet chips as well, targeting new OpenFlow methodologies.