Trade Secrets and Employee Mobility
When employees move between competing companies, especially in innovation-driven sectors like robotics and artificial intelligence, the risks surrounding trade secret misappropriation come sharply into focus. Tesla’s recent lawsuit against former engineer Zhongjie “Jay” Li underscores these dangers, raising important questions about where lawful knowledge transfer ends and unlawful theft of proprietary information begins. This high-profile case offers timely lessons for companies seeking to protect their competitive edge and for employees striving to navigate career moves without crossing legal lines.
Background of the Tesla Lawsuit
In June 2025, Tesla sued former engineer Zhongjie Li and his startup, Proception Inc., for alleging theft of trade secrets from its Optimus humanoid robotics program. Li, who worked at Tesla from August 2022 to September 2024 on advanced robotic hand sensors, allegedly downloaded sensitive design files, specifications, source code, and prototype videos to personal devices shortly before resigning. Less than a week after leaving Tesla, he founded Proception, which unveiled robotic hands remarkably similar to Tesla’s designs within five months. Tesla seeks an injunction to stop the use of its trade secrets and financial compensation for the alleged willful misappropriation.
Key Trade Secret Misappropriation Risks
This case underscores several risks companies face when employees transition to competitors or start their own ventures:
- Unauthorized Access and Data Theft: Li allegedly accessed and downloaded Tesla’s confidential information beyond his authorized role, including using personal smartphones which bypassed security policies. These actions highlight the risks of employees exploiting digital access to steal sensitive data before leaving a company.
- Use of Trade Secret to Launch Competing Ventures: The lawsuit highlights how misappropriated trade secrets can be used to rapidly launch competing startups, as seen with Proception’s swift formation and development of robotic hands resembling Tesla’s technology, potentially undermining years of Tesla’s R&D efforts.
- Use of Personal Device: Tesla alleges that Li used personal smartphones to download highly sensitive files related to its Optimus robot’s hand sensors before leaving the company. This underscores the significant risks companies face when employees use personal devices, which are harder to monitor and can facilitate unauthorized data theft.
- Legal and Financial Exposure: Tesla is seeking compensatory and punitive damages, as well as injunctive relief against Li and Proception Inc., highlighting the severe legal and financial consequences of trade secret theft and serving as a deterrent to similar misconduct by employees and startups.
Lessons for Companies and Employees:
- Monitoring and Restricting Access: Companies should enforce strict digital access controls and continuously monitor employee activity, especially during role changes or when employees are preparing to leave, to reduce the risk of trade secret theft.
- Enforcing Confidentiality Agreements and Policies: Tesla’s lawsuit highlights the importance of strong confidentiality agreements and policies, supported by laws like the Defend Trade Secrets Act and California Uniform Trade Secrets Act, to protect trade secrets and enable legal remedies for misappropriation.
- Implementing Clear Policies on Device Use: Establishing and enforcing clear policies that prohibit personal device use for sensitive work, along with educating employees on data security, is essential to prevent unauthorized data downloads.
- Preparing for Potential Litigation and Settlement: Tesla’s case highlights the importance of companies being prepared to address trade secret misappropriation to protect their intellectual property.
Tesla’s lawsuit against Zhongjie Li highlights the critical importance of protecting trade secrets in fast-moving industries like AI and robotics. For companies, it underscores the need for strong safeguards to protect innovation. For employees, it is a reminder to respect confidentiality obligations and understand the legal boundaries when changing jobs or launching startups. As Tesla states, “Innovation must be earned, not stolen.” This principle will continue to shape employee mobility and intellectual property protection in the technology sector.