2020 transformed how the legal world works with trade secrets—especially when it comes to the electric vehicles (EV) sector.
An emerging and competitive field like EV would be a significant risk for trade secret theft in normal times, but the pandemic has only increased the reality. As people worked from home, they brought with them the tools and supplies from their workplaces, which for many people blurred the lines of ownership and for which purposes those resources should and shouldn’t be used. Confidential information was particularly a challenge, with employees being forced to remove trade secrets from tap-key, hardwired, in-house systems, and view it from laptops at kitchen tables, making information security more difficult and opportunity for thrift easier.
Below is a briefing on the law, the threat, and what you can do to prepare for litigation.
The law
For years trade secrets have been governed predominantly by the Uniform Trade Secrets Act (UTSA), which applies a common legal framework across state lines for information that derives value from not being generally known or is the subject of efforts to maintain its secrecy.
In 2016, the laws were strengthened when President Obama signed the Defend Trade Secrets Act, which defined trade secrets more broadly and placed their jurisdiction in federal courts, giving victims easier access to courts and legal proceedings.
Why is EV so susceptible to trade theft?
The market for electric vehicles is both still emerging and heavily competitive, making it ripe for competition, and by extension, theft.
Some cases have recently made headlines, with companies battling publicly to defend their secrets and assert their dominance in the industry. In late 2020, Karma Automotive sued Lordstown Motors, alleging that Lordstown stole trade secrets relating to infotainment technology. Just last week, Tesla expanded its trade secrets lawsuit against Revian, claiming theft of battery technology. In 2019, a Chinese EV startup was sued by both Apple and Tesla for allegedly stealing self-driving tech, and last February, LG Chem won a suit against SK International at the International Trade Commission where SK was found to have stolen trade secrets relating to lithium-ion battery production.
Growing demand and public focus
The risks that companies are taking can, in part, be attributed to the rewards offered to those that win the race for the best EV, market drivers being chief among them.
The American public is showing clear signs of readiness to adopt electric vehicles, and purchases are on an upward trajectory. Still, the reality is that barriers remain before the full potential of the industry can be unleashed. Chief among those are the higher cost compared to a gas car and the lower range of some battery options.
By eliminating those barriers and creating a low-cost car that matches the range of gasoline, companies can unlock an enormous market and value potential, enough of a reason to duel for technology.
Other incentives include public promises, such as the Biden Administration’s commitment to shift half of the new U.S. auto fleet to electric by 2030, which also comes with the addition of significant government subsidies.
Tech brings new challenges
When a company like General Motors starts recruiting and hiring 3,000 tech workers to drive tech integration into new models like EVs, what is original, and what is a trade secret? Is it intellectual property theft if tech employees bring over best practices and technology ideas from a competitor? Do non-compete clauses govern such a transition if a worker shifts industries?
All are questions that the EV industry has been coping with and which will surely be the subject of litigation if they have not already.
Adding to the legal complications that come with the integration of the two industries is also the shifting generational beliefs around ownership of ideas and technologies. Where Boomers and Gen X are partial to believing that by virtue of creation, something is owned, such as an object or a technology, younger generations that have been bred in startup cultures and rapidly changing technologies are partial to a mentality that some broad technological innovations are created to be shared.
As that kind of Millennial and Gen Z mindset impregnates an EV industry that is increasingly reliant on them, their migration into the industry will come with the transfer of ideas that older generations would classify as theft, but others may not. Litigation will likely play a role in intervention here, too.
The Cali factor
Trade secrets and knowledge transfer are also exacerbated by California’s prohibition on non-compete agreements. The state, home to big tech titans and, as of late, more car startups, has written into its code that, “California law prohibits employers from enforcing restrictive covenants against employees, particularly covenants that take the form of a non-compete agreement.” (California Business and Profession Code Section 16600)
The law is favorable for startups looking for experienced tech workers and incentivizes transplanting workers from more experienced companies.
How to prepare
Companies that hire workers in the EV and tech space and the workers that they hire should prepare to be in the legal crosshairs as the industries continue to merge.
To prepare for oncoming trade secret litigation, companies must enlist help from those who know the industry best, including technologists, industry insiders, chief information security officers, and valuation specialists.
If your company needs help tackling these challenges, reach out to WIT to provide the absolute best expert witnesses that will help you come out on top. Our electric vehicles expert team was created to address what we expect to be the key areas of litigation that will arise in the move to electric fleets; WIT affiliate experts can provide industry and academic perspectives essential to any litigation.