Two enterprising former Tesla (TSLA) contractors are accused by federal prosecutors in New York of starting a business using key battery manufacturing technology ripped off from the Elon Musk-led electric automaker and selling the important intellectual property.
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As per a report by the Associated Press, one of the men — a 58-year-old Ningbo, China-based Canadian citizen named Klaus Pflugbeil was arrested on March 19 on Long Island by undercover federal agents in a sting operation disguised as a sit-down meeting to negotiate a potential sale price for the Tesla IP.
The other person named in the criminal complaint is 47-year-old Ningbo resident Yilong Shao, who remains at large. The two are charged with conspiracy to transmit trade secrets, which can carry a penalty of up to 10 years in prison if convicted.
The important IP in question involves a proprietary technology owned by Tesla that is used on high-speed battery assembly lines.
According to the filed complaint, Pflugbeil and Shao both worked at a Canadian company that developed the technology that was bought in 2019 by “a U.S.-based leading manufacturer of battery-powered electric vehicles and battery energy systems."
Prosecutors did not name the companies involved in the fiasco, but at the time, Tesla was the technology's sole owner. According to Electric Autonomy Canada, Tesla purchased a battery manufacturing company in Richmond Hill, Ontario named Hibar Systems in 2019.
In a statement with officials with the Justice Department and FBI, Breon Peace, U.S. attorney for the Eastern District of New York, said that the defendants set up a business in China off the backbone of the Tesla IP.
“The defendants set up a company in China, blatantly stole trade secrets from an American company that are important to manufacturing electric vehicles, and which cost many millions of dollars in research and development, and sold products developed with the stolen trade secrets,” Peace said.
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According to the complaint, undercover federal agents made contact with the enterprising duo at a trade show in Las Vegas. The agents posed as businesspeople and established a relationship with them on the basis of purchasing a battery production line for use in a battery manufacturing facility on Long Island.
As per the federal prosecutors, they were able to get Pflugbeil and Shao to send them a proposal that reportedly contained Tesla’s “battery assembly trade secrets."
Prosecutors said that the duo opened their business in China in mid-2020, later expanding to locations in Canada, Germany and Brazil. The business operated by Pflugbeil and Shao makes the same kind of battery assembly lines used by Tesla - albeit with their IP - and marketed themselves as an alternative source for the assembly lines.
According to information publicly available on business social media site XING, defendant Klaus Pflugbeil is listed as a "partner" of Ningbo-based Ningbo Psycho Machine Co.Ltd., which he stated as his current position since October 2020.
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