Should Tesla Be Worried About This $2 Billion Patent Suit?

By Chris Lange Updated Jan 12, 12:09AM EST · Published May 2, 10:50AM EDT

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Should Tesla Be Worried About This $2 Billion Patent Suit? — © Thinkstock

It came to light recently that Elon Musk’s brainchild, Tesla Inc. (NASDAQ: TSLA) is being sued by electric hydrogen truck startup Nikola Motor for patent infringement. The suit is for over $2 billion, and it alleges that Tesla copied the design of Nikola’s big rigs, originally unveiled in May 2016. The firm is also seeking other damages due to “confusion in the market.”

According to the suit, Nikola released its design in May 2016 and alleges that sometime after Tesla took this idea and ran with it. At that time, Tesla had not mentioned that it was pursuing a big rig, but this would change quickly.

In late April 2017 — just shy of one year after Nikola published its design, Tesla did not have any design patents on its semi truck. And Tesla had not announced that it was seeking this protection, but it did finally release a teaser image of its semi.

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However, Nikola is claiming that the similarities between these two big rigs are just too similar:

On November 7, 2017, Nikola sent a letter to Tesla that identified the semi-truck design features Nikola was patenting and demanded that Tesla not unveil its semi until Tesla’s infringement had been resolved. Tesla never responded.

On 16 November 2017, Tesla unveiled its semi design in Hawthorne, California at an event and reception attended by hundreds of journalists, industry leaders, potential customers, and Tesla employees. The event was streamed online and viewed by thousands more individuals. Almost immediately, Tesla received orders for its Semi. Upon information and belief, Tesla’s market value jumped by roughly $2 billion after the Semi unveiling.

In the suit, Nikola noted that Tesla has never claimed that its design was unique. Upon information and belief, Tesla does not have any patents protecting the design of its semi truck and has not filed any applications for design patent protection.

One of the highlights from the lawsuit that could be very telling is:

On September 22, 2016, Tesla contacted Kevin Lynk, Nikola’s Chief Engineer. Tesla told Lynk that “Tesla is building a new team to focus on development of heavy trucks.” Tesla said that “Based on [Lynk’s] background at Nikola, it seems like your background would be a great fit.” Tesla then asked if Lynk “would be open to a quick call to hear what we’re up to?

Poaching employees is one thing, although not illegal, but for projects that are eerily similar, this seems to imply much more. Ultimately it’s not about what you know but what you can prove in court.

Shares of Tesla were last seen trading at $299.98, with a consensus analyst price target of $316.92 and a 52-week range of $244.59 to $389.61.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.