AI Bulletin – June 16, 2020
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- Terminating sanctions in autonomous vehicle trade secret case
- FTC guidance on AI and deceptive and unfair trade practices
- FOIA request to the National Security Commission on AI
- Amazon and Microsoft moratoriums on police use of facial recognition technology
- ACLU litigation against facial recognition company
- New privacy litigation targets TikTok in California and Illinois
- Patent Office rules that AI cannot be named inventor
- QE wins summary judgment victory in trade secret and CFAA case
SPOTLIGHT – WERIDE LITIGATION
Terminating Sanctions in Autonomous Vehicle Trade Secret Case
Background. WeRide is an autonomous vehicle start-up with offices in Guangzhou and San Jose. As described in its complaint, WeRide spent tens of millions of dollars over 18 months to develop proprietary source code for self-driving cars. In early 2018, WeRide’s CEO, Jing Wang, was removed amid allegations that he stole trade secrets from Baidu, his former employer. Wang then founded a competing autonomous vehicle company, which he called AllRide, and made disparaging statements about WeRide to investors to divert funding to AllRide. In July 2018, Wang recruited WeRide’s Head of Hardware Technology, Kun Huang, to join AllRide. On his way out the door, Huang downloaded confidential information from WeRide using company-issued laptops, copied it onto at least three personal USB drives, and wiped the laptops clean before returning them to WeRide. In October 2018, AllRide posted a video to social media showing a self-driving car performing advanced maneuvers it could not have developed independently in the three months it had been in existence.
Complaint and Causes of Action. A month after the video’s debut, WeRide—represented by Quinn Emanuel—filed a complaint in the Northern District of California for misappropriation of trade secrets against Wang, Huang, and AllRide. The complaint also asserted claims for breach of contract and breach of fiduciary duty against Wang and Huang, and claims for defamation and intentional interference with prospective economic advantage against Wang.
First Preliminary Injunction. In December 2018, WeRide moved for a preliminary injunction to prevent the defendants from continuing to use or disseminate WeRide’s trade secrets. Judge Davila of the Northern District of California granted the preliminary injunction against Huang and AllRide in March 2019, finding WeRide had shown it was likely to succeed on the merits of its trade secret misappropriation claims. Judge Davila also ordered the defendants to turn over any devices that had ever contained WeRide’s trade secrets to WeRide for inspection and granted expedited discovery into AllRide’s source code. Judge Davila declined, however, to enjoin Wang, based on Wang’s sworn insistence that he had “nothing to do” with AllRide.
Second Preliminary Injunction and Amended Complaint. Forensic analysis of the devices turned over by Huang pursuant to the preliminary injunction revealed overwhelming evidence showing that Wang was at the top of AllRide’s organization chart, contrary to his denials in response to the motion for preliminary injunction. At the same time, expert source code review showed AllRide’s source code did not match the capabilities it displayed in marketing materials and which its corporate representative testified AllRide had independently developed. To make matters worse, the defendants had created new shell companies to avoid discovery and the preliminary injunction.
Based on this new evidence, in July 2019, WeRide amended its complaint and moved for an expanded injunction to bind Wang and the new shell companies. Judge Davila granted the motion in October 2019, holding Wang’s earlier declaration “was, at best, inaccurate,” and Wang “frustrated the intention of the Preliminary Injunction by making these inaccurate statements to the Court.” Judge Davila further enjoined the defendants from creating any new entities or transferring assets, found they had been involved in “chicanery,” and ordered them to turn over their entire source code repositories to WeRide for forensic imaging and analysis.
Spoliation Investigation. For months the defendants failed to provide any meaningful responses to discovery requests or document productions. On the eve of the hearing on WeRide’s sixth motion to compel, AllRide filed a letter with the Court admitting it had learned months earlier (but well after the entry of the first preliminary injunction order) that it had maintained a 90-day auto-delete setting on its emails, and the vast majority of its emails from critical periods in the litigation had been destroyed. In addition, certain email addresses associated with Jing Wang appeared to have been intentionally deleted.
The Court ordered an investigation of the spoliation. Through numerous depositions, document review, and other work, WeRide uncovered extensive additional evidence of destruction beyond what had been disclosed by the defendants. Four email accounts associated with Wang and his wife had been destroyed. Two of those addresses used fake names. Two more AllRide email accounts that Huang used while still employed with WeRide had also been destroyed. So had laptops of engineers who worked on at-issue technology and additional source code repositories. Thousands of source code files on Huang’s devices were modified days after the issuance of the preliminary injunction. And Wang had encouraged AllRide to adopt an ephemeral messaging app, which automatically deleted messages between AllRide employees, in the middle of the litigation.
Terminating Sanctions. WeRide moved for terminating sanctions in October 2019, less than a year after the litigation began, arguing that the defendants’ destruction of evidence was so comprehensive that it deprived WeRide of the opportunity to prove its claims. Judge Davila agreed, granting terminating sanctions and entering the default of AllRide, Huang, and Wang on April 24, 2020. The Court found the amount of spoliation was “staggering,” and “occurred on such a massive scale” that no other sanction could address the prejudice to WeRide. Judge Davila awarded WeRide all its attorneys’ fees incurred in connection with the sanctions motion, the spoliation investigation, and the discovery disputes before Magistrate Judge Cousins. Weeks later, the parties settled all claims on confidential terms.
Legal Teams. WeRide was represented by a Quinn Emanuel team led by Claude Stern, Co-Chair of the firm's National Intellectual Property Litigation Practice, and Ryan Landes. AllRide was represented by Wilson Sonsini, Vinson & Elkins, Kilpatrick Townsend, and Greenberg Traurig.
OTHER RECENT DEVELOPMENTS
U.S. GOVERNMENT & REGULATION
- The Federal Trade Commission recently issued guidance on how companies can use artificial intelligence without engaging in deceptive or unfair trade practices and without running afoul of the Fair Credit Reporting Act. Key considerations include transparency, fairness, accuracy, and accountability.
- Documents obtained through a Freedom of Information Act request by the Electronic Privacy Information Center (EPIC), an independent watchdog, describe the setup, funding, organization, and commercial and strategic interests served by the congressionally appointed National Security Commission on Artificial Intelligence.
- Amazon announced it was "implementing a one-year moratorium on police use of Amazon’s facial recognition technology," in the hope that "this one-year moratorium might give Congress enough time to implement appropriate rules" for the ethical use of such technology.
- Microsoft’s President also announced in an interview that the company “will not sell facial-recognition technology to police departments in the United States until we have a national law in place, grounded in human rights, that will govern this technology.” He further stated that “we need to use this moment to pursue a strong national law," expressed concern that “if all of the responsible companies in the country cede this market to those that are not prepared to take a stand, we will not necessarily serve the national interest.”
- In a complaint filed May 28 in Illinois state court, the ACLU alleges that Clearview AI’s facial-recognition technology violates Illinois laws requiring collectors of biometric data to obtain prior informed consent from people whose data are collected and to disclose information regarding the data’s intended use and retention. Clearview’s technology, which the company’s founder has described as “basically a search engine for faces and which is used by law-enforcement organizations around the country,” scrapes the internet for publicly available images, compiles them in a database, and uses AI-driven facial-recognition technology to make the database searchable.
- Lawsuits filed earlier this month by teenage plaintiffs in California and Illinois allege that TikTok’s use of AI-powered facial-recognition violates state privacy laws requiring collectors of biometric data to obtain prior consent and disclose details regarding the data’s use and retention.
- The U.S. Patent and Trademark Office recently determined that AI systems cannot be named as inventors on patent applications in the U.S. The PTO held that inventors must be natural persons, under TItle 35 of the United States Code, and noted the Federal Circuit has similarly ruled that inventors cannot be corporations or sovereigns.
- Quinn Emanuel obtained summary judgment on behalf of eBay and StubHub in a trade secret theft and Computer Fraud and Abuse case involving group-planning mobile app software. In a 41-page order, Judge Stephen Wilson of the Central District of California held that plaintiff Calendar Research failed to identify its purported trade secrets with reasonable particularity and dismissed the federal Defend Trade Secrets Claim in its entirety. The only federal claim remaining, brought under the CFAA, related to whether one of the individual defendants accessed his work email after leaving the company. The parties agreed to dismiss this claim with prejudice, and the Court entered judgment in favor of the individual. The Quinn Emanuel team was led by Dave Grable, Co-Chair of the firm’s National Trial Practice Group.