A California Superior Court judge is allowing Tesla’s lawsuit against an electric vehicle (EV) start-up to proceed.
Judge William Monahan denied Rivian’s motion to dismiss litigation filed by Tesla against Rivian and multiple former employees of Tesla who currently work for Rivian, an emerging EV manufacturer.
“It will be interesting to find out if Rivian did actually do the things Tesla claims that it did because it would be somewhat surprising if Rivian was specifically targeting Tesla employees for their trade secrets,” said Christian Scali, managing partner and co-chair of the automotive practice at Scali Rasmussen law firm.
Tesla alleges that Rivian misappropriated its trade secrets, confidential, and proprietary information by poaching employees from departments such as environmental health and safety.
“The EV market is competitive because it's a novelty so whenever you have new entrants into a market, there are a lot of people vying for market share and that's where we are with electric vehicles,” Scali told the Southern California Record. “Obviously, Tesla is the 800-pound gorilla in the EV world given its notoriety. Rivian is a relative newcomer to the scene.”
CNN reported that Amazon and Ford are among the companies that have invested in Rivian, which is aiming to manufacture electric trucks and vans.
“Throughout the decades, manufacturers have made these claims against each other so this was nothing new but it is a lot easier given the technology we have today,” Scali said.
While Tesla complains Rivian cherry-picked some 178 of its employees, Rivian argues that Tesla doesn’t want competition and is using the allegations to shut Rivian out of the EV market, according to media reports.
“Misappropriating Tesla’s competitively useful confidential information when leaving Tesla for a new employer is obviously wrong and risky,” the complaint states. “One would engage in that behavior only for an important benefit – to use it to serve the competitive interests of a new employer.”
Scali asserts that there is some case law in California for the proposition that a company, like Tesla, bringing a trade secret claim against another may have done it maliciously for purposes of stymieing competition.
“It appears that Rivian was trying to get that determination upfront, which I don't think was a good tactic because there is no way that it will win on a demurrer,” Scali said. “If Tesla really is trying to stymie competition by bringing this lawsuit, it’s something that Rivian will have to develop facts for in the context of the case and bring a motion at the end of the case to make that determination.”
The fact that Judge Monahan dismissed Tesla’s international interference in contract claim is a function of how the complaint was written, Scali added.
“If Tesla would have pleaded the claim based on facts that were different from the facts underlying their trade secret claim that claim would have likely survived dismissal but it doesn't really do anything to limit the allegations or recovery that's potentially there,” he said. “They still have those avenues of recovery in the trade secret claim.”