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Tesla lawsuit unmasks fierce headhunting by China's Xpeng

Ex-employee allegedly moves to Guangzhou startup with 300,000 files

A Model 3 Tesla vehicle navigates morning rush hour using the car's auto pilot feature in Los Angeles, California on March 20.   © Reuters

NEW YORK -- Tesla has sued one of its former engineers for allegedly stealing proprietary self-driving technology before decamping to Chinese electric vehicle maker Xpeng Motors -- the second time an employee at the Guangzhou-based company faces trade secret theft charges in the U.S.

Tesla brought the suit on Wednesday against Cao Guangzhi, an ex-member of Tesla's self-driving team. The complaint, filed in a district court in Northern California, came eight months after the U.S. government indicted another Xpeng engineer for stealing trade secrets from Apple.

Xpeng's founder and CEO, He Xiaopeng, called the lawsuit "questionable" in a Friday post on Chinese social media platform Weibo. A statement issued by Xpeng said the company "has been complying and will comply with all applicable laws and regulations," and that it has launched an investigation into the matter.

Over the past year, Xpeng has been aggressively expanding its research and development team. The startup, which had around 1,000 on staff in early 2018, now has over 3,000 employees, 70% of whom work in R&D. Just last week, the company opened up nearly 40 new positions in its self-driving department.

Founded in 2014, Xpeng has received funding from Alibaba Group Holding and Foxconn Technology Group, or Hon Hai Precision Industry.

Cao, who joined Xpeng in January, worked as a computer-vision scientist in Tesla's autopilot division. Tesla's complaint alleges that Cao uploaded over 300,000 files and directories from Tesla's source code to his personal iCloud account, before receiving an official job offer from Xpeng on Dec. 12.

Prior to Tesla, Cao was a senior engineer at Apple, where he worked on the first-generation dual camera for the iPhone, which now powers its popular portrait mode, Cao's LinkedIn profile shows.

Zhang Xiaolang, the first Xpeng employee to come under scrutiny, was charged in San Jose last July. He designed and tested circuit boards to analyze sensor data for Apple's self-driving project.

The U.S. charges alleged that upon abruptly leaving his role, Zhang took with him confidential files, including a 25-page document containing detailed schematic drawings of a circuit board that is part of Apple's proprietary infrastructure technology.

Cao and Zhang are far from the only Xpeng employees that had put in stints at an American tech heavyweight like Tesla or Apple.

Xpeng's principal engineer and head of AI, Husam Abu-Haimed, joined in May 2018 from Cruise Automation, General Motors' autonomous-driving subsidiary.

Its autonomous driving center head, Wu Xinzhou, made the move in December from Qualcomm, where he was a senior director of engineering in autonomous driving.

UBS estimates that around 50% of all new cars will have basic autonomous equipment by 2020 and that annual revenue for advanced driver-assistance systems will reach $70 billion, compared with $10 to $15 billion currently.

This is a pie that the likes of China's Baidu, Didi Chuxing and Huawei Technologies, alongside American giants like Apple, Uber, Tesla and Google, all want a slice of.

As tech companies race to a driverless future, legal disputes over proprietary autopilot technology have been thrust into the spotlight. In 2018, the industry saw its most high-profile lawsuit about trade secret theft settled between Google's Waymo and Uber, which paid $245 million to the former.

On Wednesday, Tesla also filed a trade secret theft suit against an employee at Zoox, an American self-driving startup.

Tesla's complaint against Xpeng's Cao, however, comes at a time when China and the U.S. remain locked in a monthslong trade war, where Washington has repeatedly accused China of intellectual property theft and economic espionage.

Gaston Kroub, attorney at Kroub, Silbersher & Kolmykov, a New York law firm specializing in intellectual property, said that Tesla, like other Silicon Valley companies, is trying to send a message to its current and ex-employees that trade secret theft will not be tolerated.

"Accordingly, Chinese companies in self-driving must be very diligent when hiring ex-Tesla -- or any other Silicon Valley -- employees to make sure that those employees don't take confidential material with them, or even worse use that confidential material in their new jobs," Kroub said in an email interview.

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