According to court papers submitted by Tesla since the case was filed last year, it is alleged that over 70 employees have been poached by Rivian; nine of which took some of Tesla’s confidential information with them, including ‘core technology’ for the company’s next generation batteries.
The dispute recently escalated when Tesla asked the judge at the Superior Court of California for permission to expand its complaint to take into account new evidence, which has been granted. The court papers provide further information about the alleged theft of trade secrets and other market sensitive information by former Tesla employees.
In one case, a former employee is alleged to have sent a copy of Tesla’s business plan to her personal Gmail account, which contained confidential and proprietary information. Another former employee is alleged to have encouraged other Tesla employees to download documents from a password-protected, restricted-access drive, which contained details of many of Tesla’s most sensitive battery technology advances.
Foil flag
Among the technologies at the centre of the dispute is Tesla’s ‘foil flag’ technology, which Tesla states allows electricity to flow through a battery more efficiently; minimising heat loss and providing greater battery yield. The documents that were allegedly taken have been described by Tesla as a ‘treasure chest’ of competitive secrets.
Historically, Tesla has tended to avoid filing a large volume of patents; preferring to keep many of its core technologies under wraps. However, in recent years the company has increased its number of patent filings, including in relation to battery technology advances which could give the company a competitive advantage in an increasingly crowded field.
In the world of fast-paced electronics engineering, such as EV battery production and AI-enabled systems, the use of trade secrets to protect innovation activity is widespread. Rather than rely on them entirely as a form of intellectual property (IP) protection however, many innovative companies opt for a hybrid model of patents and trade secrets.
Concept and implementation
In one example of a hybrid strategy, patents can be used to protect the broad inventive concept, while trade secrets are used to protect its optimal implementation. In another example, which is often used in software, patents can be used to protect the visible outputs of the software and trade secrets for the underlying processes. Deciding which features to patent, and which not, often comes down to how detectable they are and whether a competitor could identify them easily by reverse engineering the end product.
The ‘black box’ nature of many software-related or electronic innovations means trade secrets can be an effective means of IP protection on route to market, provided that the information remains out of the public domain.
For Rivian, the timing of this latest legal development is far from ideal. The EV maker has just started deliveries of its mass market R1T pickup truck and is hoping to generate a high volume of sales before the introduction of Ford’s F-150 Lightning in spring next year and Tesla’s Cybertruck later in 2022.
The company is also preparing to make an initial public offering (IPO) which is expected to raise up to $8 billion, valuing the company at an estimated $80 billion. While the court ruling is unlikely to come until after the IPO, the case could cast a shadow over the stock’s valuation.
Waymo
The theft of trade secrets is taken seriously by many courts around the world, but perhaps most notably by those in the US.
When a senior engineer left what is now known as Waymo in 2016 to form a rival firm which was ultimately purchased by Uber, a successful claim was brought by Waymo against Uber and the individual concerned for the misappropriation of IP. In this case, the court found that the individual took the source code and design files of an entire engineering project with them, and sanctions including a hefty fine and prison sentence were imposed.
In a separate case, AON has recently been granted a partial injunction by a US court for the alleged misappropriation of trade secrets by five former employees who joined a rival firm.
While the stakes are high for both companies at the centre of this dispute, it is unclear which way the hammer will fall. Regardless of the outcome, other innovative companies operating in fast-moving fields of R&D should review their information management processes and ensure that robust controls are in place to guard against IP leakage in the future。