Tesla Gave Up Its Patents, But People Are Freaked Out That Faraday Future Put Its Own Into A Separate Company

from the a-tale-of-two-electric-car-startups dept

Over the last couple of years, there's been a tremendous amount of attention placed on upstart electric car maker, Faraday Future. The company, that originally had very secretive backers (later revealed to extraordinarily wealthy Chinese investors), sprung out of nowhere a year ago and was quickly touted as an expected competitor to Tesla. What a difference a year makes. In the last few weeks, there have been a bunch of reports about how the company is flailing. It kicked off with a pretty damning Buzzfeed story about serious problems at the company, including unpaid bills and a bizarre situation involving having workers focus on designing another car for a totally different company owned by their major investor:

In December 2015, employees at Faraday’s headquarters in Gardena, California, received a mandate from Jia: Design a prototype LeEco car that could be shown off publicly at a spring event in Beijing. According to several former employees, some of Faraday’s designers were pulled off of their core projects to work on the vehicle. And in April 2016, LeEco unveiled a sleek, electric sedan called LeSee. On stage, Jia, who has been outspoken about his plans to usurp Tesla, touted LeSee as a LeEco creation as the white sedan glided across the stage to park in a mock garage. The audience couldn’t see that the seemingly self-driving car was in fact being piloted from backstage via remote control.

Back in California, some Faraday employees were unsettled, sources told BuzzFeed News. Though they’d designed the car for LeEco per Jia’s request, they were not given credit for doing so, and the company didn’t receive payment in exchange. And the development of the LeSee had distracted them from work on Faraday’s own vehicles. “[The LeSee project] certainly added pressure onto the design team. It crunched timelines,” a former employee with knowledge of the project told BuzzFeed News. “It certainly made getting deadlines met that much more difficult.” Faraday declined to comment on the project and the specifics of its relationship with LeEco. LeEco declined to comment on the project as well. In a statement to BuzzFeed News, LeEco said that the two companies are “strategic partners” by “bringing together global resources in several areas.”

The Verge then did its own big report on problems at Faraday Future, which included the somewhat bizarre claim that Faraday Future's "intellectual property" was owned by... an entirely different company:

In addition, these sources revealed to The Verge that the company’s intellectual property is not owned by FF, but by a separate entity named FF Cayman Global, a revelation which raises questions about Faraday Future’s relationship with its investors and suppliers, and could further endanger the company’s success.

Later in the article it notes:

According to former employees, FF is in effect not one, but two companies, with a separate entity based out of the Cayman Islands just for FF’s intellectual property. “If you’re an investor, you’re fucked,” one ex-executive said. “The company doesn’t own the IP.”

And that resulted in other publications, like Business Insider putting out an entire article freaking out about the idea that "Faraday Future doesn't own its intellectual property," as if that was the worst thing in the world. It got another quote from another anonymous ex-employee saying more or less the same thing:

"Some of the reasons some of us left was because we were afraid that all of the work that’s being done in the US, there is no proper corporate structure or legal entity structure," the employee told Business Insider. "The feeling we had was that the IP [intellectual property] was not protected and if and when Faraday goes under, these guys would just pick up all the IP and all these other people in the US would be out of a job."

That's all interesting... but what's amazing is that in all of these discussions about how Faraday Future "doesn't own its intellectual property" absolutely no one seems to point out the fact that the company that everyone compares it to, Tesla, famously dumped all its patents into the public domain and told anyone to go ahead and use them. That seems like a relevant point to make in articles about this upstart competitor and its "intellectual property." Of course, it's possible that the articles could mean something else when it says "intellectual property" -- such as trademarks -- but it seems unlikely that the trademarks for a flailing company that is unlikely to ever get anything on the market are that valuable.

The whole story, and the ignoring of Tesla's stance on patents... is just strange. It is true that sometimes failing companies hang onto their patents as a sort of last ditch effort to extract some return for their investors in a patent fire sale. But if you've reached that point, things have already gone way too far south to really matter. Tesla has shown that it can build a pretty damn successful company without relying on "intellectual property." It seems that people should stop freaking out that Faraday Future may have dumped its patents into some offshore company, and focus on the company's real problems -- like the fact that its execs are racing out the door as fast as possible.

Filed Under: corporate structure, electric cars, intellectual property, patents
Companies: faraday future, tesla