Since its founding in 2014, Nikola has been a controversial figure in the electric vehicle market. The company had built a reputation for copying its competitor, Tesla.
Nikola’s very own founder, Trevor Milton, has often been called an “Elon Musk wannabe.” Nikola’s name alone mimics Tesla’s homage to famous engineer and inventor, Nikola Tesla.
Thus, it may have come as a surprise when Nikola sued Tesla, claiming that Tesla had been infringing on Nikola’s own design patents.
The Complaint
In May 2018, Nikola filed suit against Tesla in the U.S. District Court for the District of Arizona. Nikola’s complaint alleged that Tesla, in designing the Tesla Semi, had infringed on three of Nikola’s design patents. Nikola sought $2 billion in damages. Docket No. 2:18-CV-01344.
Legal Standard: Design Patent Infringement
A product infringes a design patent if “an ordinary observer, familiar with the prior art designs, would be deceived into believing that the accused product is the same as the patented design.” Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665, 681 (Fed. Cir. 2008). The ordinary observer is an “ordinary purchaser of the article charged to be an infringement.” Goodyear Tire & Rubber Co. v. Hercules Tire & Rubber Co., Inc., 162 F.3d 1113, 1116 (Fed. Cir. 1998).
Motion to Dismiss
In July 2018, Tesla filed a Fed. R. Civ. P. 12(b)(6) motion to dismiss Nikola’s lawsuit on the grounds that Tesla’s truck and Nikola’s designs were “substantially different” and an ordinary observer would not be deceived into believing Tesla’s truck and Nikola’s design were the same. Def.’s Mot. Dismiss ¶ 2.
Motion to Transfer Venue
Just two months later, Tesla filed a motion to transfer venues from the District of Arizona to the Northern District of California. Def.’s Mot. Transfer Venue ¶ 1. The company argued that Arizona was not a convenient venue. Id.
Under 28 U.S.C. § 1404(a) and (b), a defendant may move to change venues for the “convenience of parties and witnesses.”
As part of its motion to transfer venue, Tesla argued that neither Tesla nor Nikola had any legitimate connection to Arizona, aside from Nikola’s potential plans of moving its headquarters there. Def.’s Mot. Transfer Venue ¶ 1.
Furthermore, Tesla developed its Semi in the Northern District of California, both Tesla and Nikola were incorporated in Delaware, Tesla was headquartered in California, and Nikola was headquartered in Utah at the time. Thus, Arizona was not a convenient venue. SEC CIK #0001318605; SEC CIK #0001731289.
Motion to Transfer Venue: Granted
In December 2018, Magistrate Judge Bernardo Velasco stated that Tesla’s motion to transfer venue should be granted in his Report and Recommendation to District Judge James A. Soto. Finding no clear error, Judge Soto granted the motion. However, he stated that Tesla’s motion to dismiss will “remain pending upon the transfer of venue.” Nikola Corp. v. Tesla, Inc., 2018 WL 6584980 (D. Ariz. Dec. 7, 2018).
Motion to Dismiss: Denied
After transferring the case, Tesla’s motion to dismiss the case was denied in September 2020. The Northern District of California denied Tesla’s motion on the grounds that Tesla would have to show that its design and Nikola’s design patents were substantially similar at trial. Nikola Corp. v. Tesla, Inc., 2018 WL 5408059 (N. D. Cal. Sept. 9, 2020).
Milton’s Fraud Charges
Separately, in July 2021, the U.S. Attorney’s Office in Manhattan accused Trevor Milton, Nikola’s founder and former CEO, of securities fraud and wire fraud. U.S. Attorney Audrey Strauss found that Milton “told lies to generate popular demand for Nikola stock.” Michael Wayland, Grand Jury Indicts Trevor Milton, Founder of Electric Carmaker Nikola, On Three Counts of Fraud, CNBC (July 29, 2021, 8:38 AM).
Ironically, one of the allegations against Nikola’s founder was that he had falsified a video of Nikola’s very own truck driving down a road, when it was actually rolling down a hill. Id.
As Nikola dealt with the backlash over its founder’s acts, the company had stopped responding to the Northern District of California’s requests. Tesla also stopped responding. Sean O’Kane, Judge Shelves Nikola’s $2 Billion Patent Lawsuit Against Tesla, The Verge (Oct. 1, 2021 2:21 PM).
Outcome
District Judge James Donato, who was assigned the case, gave Nikola until October 6, 2021 to show cause as to why the case should not be dismissed for failure to prosecute. It is still unclear whether Nikola has since responded. Id.