Flying electric car trade secrets dispute heating up

As the sci-fi dream of commercialized flying cars seems close to landing in reality, the electronic vertical takeoff and landing (“eVTOL”) industry is heating up, spurring new bouts over trade secrets.

Wisk Aero LLC (“Wisk”) is a veteran eVTOL company, and has been developing the technology for over a decade. The aircraft they manufacture are often described as “air taxis” or “flying cars.” The technology behind these aircraft is now at a sufficiently sophisticated stage that commercialized versions are imminent.

Defendant Archer Aviation Inc. (“Archer”) is one of the companies seeking to capitalize on the budding market for these vehicles, and is a relative newcomer in the industry. In furtherance of its business, Archer hired numerous engineers away from Wisk.

After discovering that some of those newly hired engineers had downloaded Wisk confidential documents before their departure to Archer, Wisk brought claims in the District Court for the Northern District of California under the Defend Trade Secrets Act (“DTSA”), 18 U.S.C. § 1836 et seq., and the California Uniform Trade Secrets Act (“CUTSA”), Cal. Civ. Code § 3426 et seq., alleging that Archer misappropriated numerous trade secrets in its quest to bring a viable aircraft to market on an accelerated timetable.

Wisk ultimately filed an amended complaint, and sought a preliminary injunction to prevent Archer from using its allegedly misappropriated trade secrets. In turn, Archer moved to dismiss Wisk’s complaint. On August 24, 2021 Judge William Orrick denied both motions, as well as an additional motion to strike brought by Archer, and ruled that the case would have to be determined on the merits. See generally Wisk Aero LLC v. Archer Aviation Inc., No. 3:21-CV-02450-WHO, 2021 WL 4073760 (N.D. Cal. Aug. 24, 2021).

In its motion to dismiss, Archer argued that Wisk failed to identify its trade secrets with reasonable particularity and failed to demonstrate that the trade secrets were in fact kept in secrecy, and held independent economic value as secrets, pursuant to CCP § 2019.210.

The court held that 2019.210 does not require a plaintiff to “illustrate the measures taken to maintain the trade secrets’ secrecy and how they derive independent economic value from that secrecy” at the pleading stage. Wisk Aero, 2021 WL 4073760 at *13. In doing so, the judge corrected a statement he made in dicta in Openwave Messaging, Inc. v. Open-Xchange, Inc., No. 16-CV-00253, 2018 WL 2117424 (N.D. Cal. May 8, 2018), in which he wrote that these two elements needed to be included “to satisfy the Section 2019.210 disclosure requirement.” Id.

The court also held that Wisk sufficiently alleged misappropriation based on allegations that Archer hired away numerous Wisk employees around the same time thousands of files, many allegedly containing trade secrets, were downloaded from Wisk drives. The court also pointed to a presentation by Archer on aircraft design containing hundreds of slides created by in a suspiciously short amount of time after the departure of many of the Wisk employees.

Archer essentially argued that even if Wisk employees did take trade secrets, there was no allegation that Archer knew of these trade secrets. The court found this unavailing, writing, “At the very least, the allegedly implausible development timeline concurrent with the influx of former Wisk employees reasonably implies that Archer ‘had reason to know’ that the Maker was improperly derived in part from Wisk’s trade secrets.” Id. at *15.

Despite ruling in Wisk’s favor on the Motion to Dismiss, the court rejected its Motion for Preliminary Injunction after concluding that Wisk was unlikely to succeed on the merits.

Wisk pointed to several different technological systems within its eVTOL aircraft designs that it asserts were misappropriated by Archer, but third-party testimony proved fatal for Wisk. For example, Wisk provided a detailed argument that its Battery System Management Architecture (BSM) was misappropriated. However, a disinterested third party provided a declaration on Archer’s behalf that it had provided the BSM for the Maker, and that none of Wisk’s technology was involved.

Another disinterested third party provided a declaration that for the Motor Control Algorithms and Architecture, the third party provided the motors requested by Archer and that the necessary configuration (including algorithms), and that it was not stolen from Wisk.

The court also rejected Wisk’s argument that Archer hired one of its engineers to “recreate” a Motor Optimization Model, holding that the record evidence showed that the engineer was hired to design a model for the same purpose as the trade secret Wisk alleges was misappropriated. But the record did not show that the engineer was hired to, or in fact did, use Wisk’s trade secrets to recreate the very model developed by Wisk.

Wisk’s other arguments also fell short. For example, Wisk alleged that other trade secrets had to be misappropriated based on the improbably short time it took Archer to model, simulate, and test the aerodynamics of the Maker, but the court held that although evidence of a fast timeline could be evidence of misappropriation, Wisk’s evidence and expert declarations failed to show that the Maker would have had to use Wisk’s technology, and not just similar technology.

The court found no evidence to suggest that the technology used to develop the Maker had to come from Wisk. The court noted that there are many competitors in the eVTOL industry, and the technology could have come from a number of places.

The court also acknowledged that thousands of documents downloaded by a former engineer, later hired by Archer, was suspicious, but noted that Wisk failed to discuss the specific contents of those documents, and was unable to tie those documents to the trade secrets it alleged were misappropriated or the technology used in the Maker. Wisk’s silence on what seemed to be marquee evidence, the court said, was “telling.” Id. at *24.

The court considered the totality of the circumstances and concluded that, while Wisk had adequately pled misappropriation, the evidence did not demonstrate a likelihood of success on the merits that Archer had misappropriated Wisk’s trade secrets.

As air taxis or flying cars become commercially viable, the rush to market is likely to incite aggressive hiring of qualified engineers, and stoke suspicions of trade secret misappropriation within the industry. This case may prove to be a bellwether for similar disputes to come. www.crowelltradesecretstrends.com