Nikola v. Tesla: When A First Name Trolls It’s Last

“…lawsuits like this would never be filed by a professional licensing specialist whose livelihood depends on brokering reasonable business transactions around valuable IP.”

 

 by: Patrick Anderson, CTO, Dominion Harbor | May 3, 2018

No, the famous inventor did not cleave himself in twain in order to sue himself, though if anyone could, it would be Tesla. In the headline-spawning, not to mention coverage-outkicking, move of the month, alternative fuel truck manufacturer Nikola Motors let fire a complaint against Tesla demanding no less than $2 Billion (with a “B”) dollars for design patent infringement.

The lawsuit appears to be the culmination of a multi-year troll job (in the social media sense) perpetrated by Nikola. Their very name is an obvious reference meant to gain Tesla founder Elon Musk’s attention. In addition, the company has a habit of tagging Musk in Twitter posts promoting Nikola truck products. But, leaving aside the merits of this dispute between two operating companies, Nikola’s demand even fails a test of basic logic according to the facts provided in their own complaint.

First, Nikola seemingly admits a fundamental truth that appears to be without controversy: Tesla has not sold a single unit of its accused Tesla Semi. According to various industry reports, “pre-orders” and/or “reservations” for the Tesla truck range in the hundreds to the thousands. Leaving aside what the differences in those terms might mean, let’s just take a look at the numbers alleged by Nikola. According to the complaint, “[a]nalysts estimated that Tesla has received over 1,200 reservations.” In addition, the complaint also pegs the selling price between “$150,000 to $200,000.” This puts the maximum possible revenue to Tesla, assuming they were paid in full for all 1,200 “reservations” (a dubious assumption to be sure), at a mere $200 M. Thus, their $2B minimum estimate of damages exceeds the total possible revenue received by Tesla to date by a factor of 10.

But what about lost profits, you say? Sure, let’s take a look. Nikola has alleged that their own product, which sells for $900,000, has received 7,000 “reservations” for a total of $6.3 Billion in sales. Nikola complains about diverted sales (of products NO ONE has apparently yet to sell, mind you), but makes no allegation that any customer has canceled a “reservation,” much less canceled to order a Tesla Semi instead. Granted, Tesla would not invest money and effort into the Tesla Semi product if it did not expect to reach revenues in the billions over its lifetime. Unfortunately for Nikola, damages do not work that way. Damages require proof, especially for lost profits. And a going-forward royalty is highly speculative; it’s doubtful that a court would just reduce all the future royalties down to such a high figure. It takes a mighty stretch of logic to say that a defendant who has sold exactly 0 infringing products, and only has “reservations” worth less than a quarter of ONE billion dollars somehow must cough up “in excess of $2 billion” as Nikola claims, regardless of how strong the merits.

As an aside, Nikola complains that, should problems arise with the Tesla Semi (such as problems other Tesla products have experienced, “the market will attribute these problems to Nikola because of the similarities.” A rich comment, to be sure, from a company that used the name of an inventor to specifically generate association with an already successful company named after that same inventor!

Turning to the merits, Nikola’s lawyers inexplicably seem to call attention, right in the complaint, to the differences between the patented features and Tesla’s accused product. (For those keeping score at home, this is the exact opposite of what you’re supposed to do.)

For example, one of Nikola’s patented features is something they call the “mid-entry door.” It looks like this:

Only the solid lines form part of the patent claim, so note the solid outline of the door to the cab of the truck. Granted, the Tesla truck is generally similar overall (as seen in the image below on the left). However, Nikola goes out of its way in the complaint to highlight the very different positioning and shape of the door, which is the subject of the actual patent claim, by also including the image on the right.

 

It’s worth noting that these differences don’t necessarily mean that Nikola’s claims lack merit. Ultimately, the infringement question comes down to whether the patented and accused designs are “substantially the same.” It’s also worth noting that journalists have confused the Nikola design with the Tesla Semi, going so far as to publish a photo of the Nikola product alongside Tesla’s logo. Thus, even if Nikola’s claims have merit, the complaint essentially hands Tesla a non-infringement roadmap.

This is a remarkable combination of calling attention to weaknesses in your legal position while also seeking a royalty of 10x the total revenue. This is the kind of complaint that you won’t see from capable, professional licensing specialists. This absurd complaint serves as much as a press release as it does a lawsuit initiation, and certainly is not an invitation for licensing discussions. Instead, professional licensing specialists focus discussion around the merits of the claim and lead with reasonable offers that at least attempt to bear resemblance to the actual value of the appropriated technology.

But that won’t stop the narrative for Nikola centering around this arbitrary $2 Billion amount, and efficient infringement apologists will continue to make licensing specialists the villains. These apologists love to blame licensing specialists, inventing the mythical troll “problem” and using that myth as the foundation for dismantling the patent system. But it is lawsuits like this one that create actual problems – and lawsuits like this would never be filed by a professional licensing specialist whose livelihood depends on brokering reasonable business transactions around valuable IP.

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