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Tesla Sues Electric Truck Startup Rivian for Stealing Trade Secrets

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【Summary】​Electric automaker Tesla has filed a lawsuit in California against electric truck maker Rivian, accusing the startup of stealing trade secrets and poaching employees. In its suit, Tesla claims that Rivian displayed an “alarming pattern” of poaching its employees and stealing trade secrets. However, Rivian has denied the allegations.

Jeremy Carlton    Jul 24, 2020 2:30 PM PT
Tesla Sues Electric Truck Startup Rivian for Stealing Trade Secrets
Rivian's R1T electric pickup is set to rival Tesla's Cybertruck and trucks from GM and Ford

Electric automaker Tesla has filed a lawsuit in California against electric truck maker Rivian, accusing the startup of stealing trade secrets and poaching employees. In its suit, Tesla claims that Rivian displayed an "alarming pattern" of poaching its employees and stealing trade secrets.

Tesla, which is now the world's most valuable automaker, says that four former employees took highly sensitive proprietary information before they resigned to work for Rivian. Tesla also claims that two more Rivian employees have taken sensitive information.

Rivian has denied the allegations. 

"Misappropriating Tesla's competitively useful confidential information when leaving Tesla for a new employer is obviously wrong and risky," according to Tesla's complaint filed in state court in San Jose, California. "One would engage in that behavior only for an important benefit—to use it to serve the competitive interests of a new employer."

Rivian said it requires all new employees to confirm "that they have not, and will not, introduce former employers' intellectual property into Rivian systems."

In its statement, Rivian said "we admire Tesla for its leadership in resetting expectations of what an electric car can be," while calling the claims in the lawsuit baseless and "counter to Rivian's culture, ethos and corporate policies."

"Rivian is made up of high-performing, mission-driven teams, and our business model and technology are based on many years of engineering, design and strategy development," the company said in an emailed statement to Bloomberg. "This requires the contribution and know-how of thousands of employees from across the technology and automotive spaces."

However Tesla disputes that claim. In the new suit, Tesla called itself Rivian's "number one target from which to acquire information," and said that Rivian has hired 178 ex-Tesla employees, roughly 70 of whom joined Rivian directly from Tesla.

Rivian, based in Michigan, is one of the most well-funded startups and is backed by Amazon, Ford Motor Co. and T. Rowe Price and others. The company has raised almost $6 billion so far from investors and plans to start production of its fully-electric electric R1T pickup truck and companion R1S SUV by mid-2021.

Rivain said the The electric Rivian R1T and R1S will deliver more than 400 miles of range. The trucks are designed to be rugged and are capable of handling off-road driving highway cruising. Rivian's electric trucks will reportedly have a price tag of around $60,000 to 70,000.

The electric truck maker is following Tesla's lead in challenging U.S. rivals General Motors and Ford, as well as Tesla in the electric pickup and SUV segment. The truck segment is the most profitable for U.S. automakers. Ford currently dominates the pickup truck segment in the U.S.

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The fully-electric and rugged Rivian R1S SUV.

Rivian was founded in 2009 by R.J. Scaringe, a Massachusetts Institute of Technology graduate with a doctorate in mechanical engineering. 

The company spent the last seven years developing its highly advanced electric skateboard platform that the R1T and R1S are built on. The platform incorporates the motor, battery pack and computer systems, which can also easily be used by other automakers for their own electric vehicles.

As an investor, Ford was working directly with Rivian to co-develop an electric crossover under its luxury division Lincoln. The first electric Lincoln model was supposed to use Rivian's skateboard platform, but Ford canceled those plans this spring, citing the impact of the coronavirus pandemic.

As part of its investment from Amazon, Rivian also has a deal to produce more 100,000 all-electric delivery vans for the e-commerce giant. The electric delivery vans which will go into production once Rivian's own consumer vehicles are under way. 

Rival companies poaching employees is relatively common in Silicon Valley. Tesla has filed other lawsuits in the past against two other EV startups, accusing them of stealing trade secrets. 

In March 2019, Tesla filed a similar suit against China's Xpeng Motors and Silicon Valley-based Zoox Inc. Zoox made its own headlines in the summer of 2018 when the company poached 17 engineers from Apple's secretive ‘Project Titan' autonomous car project.

The other lawsuit names former XPeng employee Guangzhi Cao, once a member of Tesla's Autopilot team and one of about 40 people said to have direct access to the software's source code. Tesla said that Cao quit "abruptly" to take a job at Xpeng. Although Xpeng is based in China, it has a Silicon Valley office that employs around 100 people.

In a statement, Xpeng said "After months of litigation, Tesla has failed to show any credible evidence that XMotors ever possessed, let alone used, any Tesla information from Dr. Cao," The company said it "fully respects any third-party's intellectual property rights and confidential information and will comply with all applicable laws and regulations." 

The court proceedings between Xpeng and Tesla are ongoing.

Although Rivian is based in Michigan, the company's employees are split between sites in California,  its headquarters in Michigan and a production facility in Normal, Illinois. Rivian's factory is a former Mitsubishi Motors factory that the company acquired in 2017.

Like Tesla, Rivian is one of only a few electric vehicle startups that owns a former auto factory to build its vehicles. Tesla purchased a former General Motors assembly plant in Fremont, California which first opened in 1962. Another EV startup Workhorse, purchased GM's Lordstown, Ohio factory, which the automaker closed last year.

Recent reports have said that Rivian plans to move to Silicon Valley near Tesla's headquarters, but the company has denied those claims. 

The case is Tesla Inc. v. Rivian Automotive Inc., 20CV368472, California Superior Court, Santa Clara County (San Jose).

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