Tesla Settles Two-year IP Dispute with Former Engineer Cao Guangzhi, Who Allegedly Brought Tesla Data to XPeng

“Tesla has failed to show any credible evidence that XMotors ever possessed, let alone used, any Tesla information from Dr. Cao.” XMotors says in its case settlement statement from 16 April, officially ending the two-year lawsuits against its former employee Cao Guangzhi, who briefly joined XPeng as engineer after servicing Tesla for two years.

The story began when Dr. Cao Guangzhi, Tesla’s then autopilot engineer, uploaded 300,000 files and directories, including Tesla’s Autopilot-related source code, onto his personal iCloud before he left the company in late 2018, which was in violation of Tesla’s policies and its agreements with Cao.

Tesla filed a legal complaint saying that “Cao created .zip files of Tesla’s complete Autopilot-related source code repositories, making them smaller and easier to move” while he was preparing for a new career opportunity.

Dr. Cao received an official job offer from XMotors on December 12, 2018, and over the course of the following fortnight, he deleted 120,000 files from his iCloud and disconnected the cloud storage service from his Tesla-issued computer. Dr. Cao admitted such conduct in a court filing.

He also admitted that he logged onto Tesla’s secure network multiple times, and cleared his browser history before he left in January 2019.

Dr. Cao Guangzhi worked his way to becoming Tesla’s 40 employees out of 45,000 to access the software’s source code. Prior to that, he worked successively at GE Healthcare and Apple after earning a Ph.D from Purdue University; he has a strong background in Electronic Engineering from Zhejiang University, one of the top universities in China.

In his legal statement, Dr. Cao “regrets and apologises for the unnecessary harm that Tesla’s lawsuit caused to XMotors. He is grateful to his colleagues at XMotors who supported him during this litigation.”

XMotors, e.g. XPeng is one of the strongest competitors of Tesla in the EV industry in China. Like many electric vehicle start-ups, XPeng used talents who were former staff members of the industry giants such as Tesla. Gu Junli, its former vice president of research and development, was a technical expert of Tesla’s machine learning technology department. Its founder He Xiaopeng also openly voiced Tesla’s impact on him and his understanding of electric car production.

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So it came as no surprise when XPeng’s first model EV-G3 in 2018 appeared visibly similar to Tesla’s Model X, which drew Tesla’s attention and laid the land mine for future IP disputes.

In July 2018, Zhang Xiaolang, a former Apple employee, was arrested and charged with theft of trade secrets after allegedly stealing both the hardware and data on Apple’s secretive autonomous vehicle project. He was facing potentially 10 years in prison.

Regarding Tesla’s lawsuit on Dr. Cao Guangzhi, XPeng accused Tesla for being a bully in one statement regarding its request to show XPeng’s source code, “During the litigation process, Tesla exerted bullying behaviour against a young competitor, instead of trying to resolve the legal case against Dr. Cao on the basis of facts, which is regrettable.”

It all came about at a time when the Trump administration was weighing heavily on punishing China’s intellectual property misconducts since 2017, when the USTR declared the initiation to investigate China on the topic of technology transfer and intellectual property rights, thus begging an arduous trade war that has adversely impacted both countries. Only with the signing of Economic and Trade Agreement between the United States and China in January, 2020, did hope rise for ending the struggles.

The settlement between Tesla and Dr. Cao includes Cao’s monetary payment to Tesla, the amount of which was not disclosed. Dr Cao states that he “is gratified that Tesla has finally dismissed its claims and stopped its search for evidence that does not exist.” And “he is eager to move on to new chapters in his personal and professional life, and he thanks his family and friends for their support.”