Tesla drops lawsuit against former engineer, ending theft allegations that dragged in Chinese competitor Xpeng

Tesla had accused Cao Guangzhi, an engineer, of misappropriation of trade secrets, breach of contract and breach of the duty of loyalty
Terms of settlement are confidential, but include a monetary payment to be made by Cao to Tesla

Tesla

Daniel Renin Shanghai

Published: 5:15pm, 16 Apr 2021

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Tesla, the market leader in China’s booming electric vehicles (EVs) market, has reached an out-of-court settlement with a former staff member who was briefly employed by Xpeng, one of its most aggressive competitors in the country, ending a two-year-long suit that alleges the theft of the US carmaker’s Autopilot system.

Tesla and former engineer Cao Guangzhi reached an agreement on Thursday to “resolve all claims asserted in this action”, according to court documents. The terms of the settlement are confidential, but include a token monetary payment to be made by Cao to Tesla. Cao, who has since also left Xpeng’s staff, also apologised to Tesla, having admitted that he did copy the source code on his personal cloud-based account, that its retention was inadvertent and that he did not disclose it to Xpeng or any other third party, according to the court documents.

“Xpeng is pleased that Tesla and Cao have finally resolved their disputes,” in particular arriving at a resolution “that allows Cao to move forward with his career,” the Guangzhou-based carmaker said, adding that Xpeng was never a party to the law suit. Tesla executives in Shanghai declined to comment.

The settlement puts an end to a cloud hanging over New York-listed Xpeng as it pushes aggressively into China’s EV industry, which may balloon to 45 per cent of vehicles by 2040, according to a forecast by Fitch.

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Tesla had accused Cao of misappropriation of trade secrets, breach of contract and breach of the duty of loyalty, in a lawsuit filed with the United States District Court, Northern District of California. The carmaker claimed that during his employment with Tesla, Cao took copies of source code related to its Autopilot system by uploading it to his personal iCloud account, and that he retained these copies after he resigned in January 2019 and began working for Xpeng in breach of his agreements with Tesla and state and federal law.

The Chinese carmaker says its Navigation Guided Pilot self-driving system was developed independently using proprietary coding and had nothing to do with Tesla’s system.

“After two years of extensive discovery, including against Xpeng, Tesla failed to find any substantive evidence that supports its allegations and innuendos against Xpeng,” the carmaker said in a statement. “Tesla has failed to show any evidence that Xpeng ever possessed, let alone used, any Tesla information from Cao.”

Xpeng last month completed a 3,675km driving test from Guangzhou to Beijing for its self-driving system. It said the frequency of human intervention was 0.71 times per 100km. The average success rate for lane changing and overtaking was 94.41 per cent during the eight-day expedition. The average highway ramp entry and exit success rate was 92.76 per cent and average tunnel pass-through success rate was 94.95 per cent.

Tesla has asked a judge to force Xpeng last year to disclose its self-driving source code, turn over images of computer hard drives and even make an employee available for an interview. Tesla also demanded information from an ex-Apple employee criminally charged in 2018 with trying to take secrets for a new job with Xpeng.

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Tesla claimed that it was significant that both engineers sought jobs with Xpeng around the same time and allegedly used the same “difficult-to-trace” method – Apple Airdrop – to take sensitive files from their American employers, Bloomberg reported.

Tesla’s chief executive Elon Musk lashed out at Xpeng’s self-driving system on Twitter, accusing the Chinese company of stealing Tesla’s old software. “They have an old version of our software & don’t have our NN inference computer”, Musk said in a tweet, while also accusing the carmaker of stealing code from Apple.

Xpeng denied the accusation, noting in its statement that “Tesla has finally dismissed its claims and stopped its search fore evidence that does not exist.”

“Technology innovation is at the core of our foundation and strategy,” Xpeng said. “In our pursuit of popularising smart EVs, we respect any competition. However, we will not tolerate any bullying behaviour or attempt to disrupt competitors. Xpeng fully respects intellectual property rights, and bases its own competitive edge on its in-house proprietary R&D and intellectual property.”

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