Automation of Our Auto Nation: New Tech Requires a New Look at Trade Secret Laws

Self-driving cars—once a thing of the future—are now becoming a reality. And, as with any new technology, there is a learning curve. Once consumers are able to test out new products, they adapt, preferences change, and what once seemed absurd or over-the-top becomes commonplace. Manufacturers then face perhaps an even steeper learning curve, trying to stay one step ahead of what the public will demand—and two steps ahead of the competition.

In such a rapidly-changing environment, it is no surprise that new laws must be created and old laws must be adapted to apply to new technologies. This is especially so in the area of intellectual property protection.  Accordingly, we have begun to see intellectual property litigation related to autonomous cars.

One such case was filed by Faraday & Future, Inc. against Evelozcity, Inc. in the Central District of California on January 29, 2018. The complaint alleges that two of Faraday’s former senior executives stole Faraday’s trade secrets, along with several employees, and started their own competing company, Evelozcity.

Faraday is an electric-car startup in Los Angeles that develops “smart mobility ecosystems.” It is scheduled to release its first high-tech model, the FF-91, in the beginning of 2019. In connection with the FF-91, Faraday claims that it owns a number of trade secrets, including “proprietary variable platform architecture (‘VPA’) and VPA2 technology, battery technology, power-train, safety features, autonomous driving, internet of vehicles technology, and proprietary software and source code.”

According to Faraday, its former CFO, Stefan Krause, and former Chief Technology Officer, Ulrich Kranz, had extensive access to Faraday’s confidential and trade secret information. After having worked for Faraday only a few short months, Krause and Kranz allegedly persuaded at least 20 employees to leave Faraday for Evelozcity—a competing company that Faraday claims was incorporated in November 2017 by Faraday’s former Senior Corporate Counsel, Andrew Wolstan.  Faraday claims several of these employees, with Evelozcity’s encouragement, copied sensitive electronic documents using various external storage devices and, in one instance, wiped a computer in an attempt to cover up the misappropriation.

Evelozcity has not yet filed an answer to Faraday’s complaint.  That said, it did make a public statement: (1) denying having any of Faraday’s proprietary technology; and (2) stating that Faraday’s complaint “continues Faraday’s pattern of hurling false and inflammatory accusations against” Evelozcity and that Evelozcity “will respond . . . at the appropriate time.”

It will be interesting to see what Evelozcity’s response entails and how it influences the development of trade secret laws surrounding this exciting new technology. We here at TSW will be sure to keep you posted on how the case unfolds.