Retail giant Wal-Mart Stores Inc has sued Amazon.com, Drugstore.com and their investors Kleiner Perkins Caufield and Byers (KPCB) for using trade secrets it got by recruiting specific members of Wal-Mart’s technical team. The company wants to prevent Amazon et al from hiring former Wal- Mart associates in a bid to duplicate the Bentonville, Arkansas- based company’s business systems, or as Wal-Mart put it in a statement: to bring an immediate stop to what appears to be a wholesale raiding of its proprietary and highly-confidential information systems by Amazon.com and others. Wal-Mart says the defendants should be looking in Silicon Valley and the more traditional places for their development talent: you only come to Bentonville looking for something…you have to want to come here, says Wal-Mart. Rick Dalzell, Amazon’s VP and chief information officer, came from Wal-Mart just over a year ago and since that time Wal-Mart says employees have been leaving the retailer for the other companies regularly, peaking about three months ago, when a huge number moved over. Dalzell is also named in the suit. The plaintiffs last made headlines back in August when they lured Microsoft Corp new media maven Peter Neupert to head the Drugstore.com startup, reportedly an attempt to duplicate Amazon.com but with pharmaceutical goods in place of the books. Even then, various state regulatory complexities made it likely that Drugstore.com would be prevented from selling prescription drugs online (CI NO 3,461). It seems the partners’ legal problems did not end there. Our information and logistics systems are world-renowned and a key factor in our success, claimed Robert Rhoads, senior VP and general counsel for Wal-Mart. He believes Amazon and friends are trying to rip those systems off: Clearly, Amazon.com has targeted a specific combination of individuals for their expertise and inside knowledge of Wal-Mart’s distribution, data warehousing and merchandise management systems, he claimed. Wal- Mart wants the court to issue an injunction against Amazon and other KPCB companies forbidding them to use Wal-Mart systems knowledge or to transfer that knowledge to other companies. The systems involved are the ones behind the Wal-Mart Online web store and those connecting Wal-Mart with its merchants, distributors, data warehouses and Retail Link – software that transfers information from the point of sale systems to its vendors and suppliers. As for Drugstore.com, its expected third-quarter launch never materialized and the domain continues to advertise itself as the future site for all of your health, wellness and beauty needs. Even for the industry’s biggest stars, repeating Amazon’s success is proving a harder-than-expected challenge. Bill Curry, a spokesman for Amazon, said: WeÆre not interested in other peopleÆs trade secrets û weÆre interested in hiring the brightest, hardest working, and most talented people, wherever they might be. Even if every single Amazon.com employee came from Wal-Mart, it would still be less than two-tenths of one percent of their workforce. TheyÆre about 300 times our size and probably sold more yesterday than we sold in the last 12 months. KPCB promises to comment on the case next week.
