Apple claims startup hired employees to steal chip secrets

Apple has sued a startup for stealing trade secrets to build a competitive chip line. Company filed a lawsuit in California late last week, citing Santa Clara-based Rivos, as well as two former Apple employees, Bhasi Kaithamana and Ricky Wen. It claims the company has launched a “coordinated campaign” to attract Apple employees and encourage them to copy confidential documents before leaving, in violation of their contract with Apple.

The case pits one of the largest tech companies against a much newer rival, which Apple claims has gained an unfair advantage by poaching dozens of its employees to access internal files.

Rivos was founded in May 2021 and has spent months working in stealth mode, hiring employees from several major tech companies. Apple says there were more than 40 of its engineers, many of whom were familiar with Apple’s system-on-a-chip (SoC) designs. But in addition to having only general knowledge of SoCs like the M1 and A15, the lawsuit alleges that Rivos encouraged employees to copy large amounts of work-related documents before leaving.

“Rivos began a coordinated campaign to target Apple employees with access to Apple proprietary and trade secret information about Apple’s SoC designs,” it claims, hoping to gain an unfair advantage. Rivos did not respond to a request for comment on the suit.

“Rivos started a coordinated campaign to target Apple employees”

Kaithamana and Wen, the individual employees named in the suit, were both longtime Apple engineers. Kaithamana had worked for the company for nearly eight years and Wen for nearly 14. Both had signed an intellectual property agreement (or IPA) prohibiting them from disclosing proprietary information. According to the complaint, before leaving in August 2021, Kaithamana copied a series of spreadsheets, presentations and text files to an external USB drive under the name “APPLE_WORK_DOCS”. Wen also allegedly opened files related to Apple’s trade secrets — including “files related to Apple’s unreleased SoC designs” — then made a copy of his company-issued computer’s hard drive just before he left. .

“The sheer amount of information collected, the highly sensitive nature of that information, and the fact that these employees are now performing the same tasks for a competitor with ongoing access to some of Apple’s most valuable trade secrets leave Apple with few alternatives.” says the suit. Apple is seeking monetary damages and an injunction requiring Rivos to return proprietary information.

Tech companies have made intensive efforts in recent years to punish trade secret theft. Congress passed the issue with the 2016 Defend Trade Secrets Act (DTSA), which moved many cases from state to federal courts. One of the most notable cases was former Google and Waymo CEO Anthony Levandowski, who was sentenced to 18 months in prison for disclosing trade secrets at a new startup that was later sold to Uber. (Morrison & Foerster, the law firm that now represents Apple, represented Uber in the case.)

Sharon Sandeen, director of the Intellectual Property Institute at the Mitchell Hamline School of Law, says the Apple case with or without the DTSA likely would have gone a similar way. Sandeen was a critic of the law before it was passed, certain provisions such as a section that would facilitate the seizure of company assets — a rule it says was softened in the final version of the DTSA and rarely enforced.

“There haven’t been many cases that have resulted in a civil seizure, and they haven’t been very successful,” Sandeen said. Conversely, she says, federal courts are sometimes stricter in their legal interpretations than the state’s, leading to significant restrictions on trade secret cases.

Apple says engineers copied documents last year before leaving the company

Trade secret cases sometimes involve very vague claims, such as a now settled lawsuit According to Meta CEO Mark Zuckerberg, the idea for Facebook stole from Cameron and Tyler Winklevoss. In this case, Apple can point to what it characterizes as large-scale document copying and apparent attempts to erase evidence of that copying afterwards. But keeping private company records isn’t necessarily theft of trade secrets either, although it can be a violation of employees’ contracts. Apple must demonstrate that the information was classified, that it had economic value and that Apple made reasonable efforts to prevent it from becoming public.

That might mean focusing on the unreleased chip allegations and the specific value of Apple’s Arm-based chip architecture — which Apple claims is secret and similar to the architecture used by Rivos. That’s a stronger argument than claiming that anything related to Apple’s chips is a protected secret. “They do a good job of establishing at a high level what they believe are the trade secrets,” Sandeen says.

But Sandeen also worries that big companies like Apple and Google could use trade secrets to weaken competitors, wait until there is a clear threat from a potential rival and then file a lawsuit. “What is surprising to me in both Waymo v. Uber and this case is that there was a significant delay between the employees’ departure and the time the lawsuit was filed,” she says. Apple and other “Big Tech” companies have faced increased antitrust investigations in recent years, although Apple’s disputes have largely revolved around the app ecosystem and not its hardware components.

Apple’s lawsuit alleges that it previously notified Rivos of the theft in a letter and never heard back from it. “If Apple doesn’t act now to protect its most sensitive secrets, Apple could lose its trade secret status over them completely,” it says. “That outcome is untenable.”

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