On Monday, January 29th, Faraday & Future Inc., the electric car manufacturer founded by Chinese billionaire and entrepreneur Jia Yueting, filed a one-count Defend Trade Secrets Act complaint against Evelozcity, Inc., an electric car manufacturer that was recently created by Faraday & Future's former CFO and CTO. The case is Faraday & Future Inc. v. Evelozcity Inc., 18-cv-00737, U.S. District Court, Central District of California (Western Division).
Some of you may recall that Faraday & Future Inc. ("Faraday") made headlines this time last year when it debuted a prototype electric car at the Consumer Electronics Show in Las Vegas that boasts a 1050 horsepower engine and the ability to travel from zero to 60 miles per hour in 2.39 seconds. After spending a year trying to outrace Tesla by rapidly expanding and hiring new executives from traditional car manufacturers such as BMW, Faraday now claims that its highly confidential and proprietary trade secrets used to build its cars have been stolen by its own former executives.
In what will no doubt be a highly contested (not to mention expensive) dispute, Faraday has alleged that its former CFO, Stefan Krause, and CTO, Ulrich Kranz (both previously BMW executives), formed Evelozcity while working for Faraday, and systematically solicited at least 20 employees not only to leave Faraday, but also to copy and take highly valuable and proprietary trade secret information concerning its artificial intelligence technology. The complaint alleges an electrifying scheme by Krause and Kranz in which they were both hired by Faraday, embarked on a (what turned to be a failed) coup d'état of Yueting, founded Evelozcity, stole Faraday's trade secrets and employees, and then resigned from the company all within the 2017 calendar year. Despite alleging that both Krause and Kranz have non-solicit provisions in their employment agreements, and that such allegations may also constitute a breach of their duty of loyalty, Faraday has only asserted one count against Evelozcity for its founders' purported theft of its valuable intellectual property. Faraday's decision to neither name its former executives individually nor pursue a breach of contract claim is likely because, as we all know, restrictive covenant enforcement in California is largely a non-starter.
While Faraday has not alleged the precise amount that it seeks in damages in addition to injunctive relief, it does claim in the first paragraph of the complaint that it "has invested hundreds of thousands of work hours and over $1 billion dollars in developing the next generation of AI electric vehicles." We wouldn't be surprised to see such a higher figure demand in what will certainly be a high profile trade secrets case.
We will continue to monitor the Faraday case so please check back for updates.
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