Federal judge mulls restraining order request from autonomous trucking company shareholders

SAN DIEGO (CN) — In a hearing on Monday in a case relating to self-driving trucks, trade secrets and China, things got complicated fast.

“Well I’m tired,” said U.S. District Judge Roger Benitez towards the end of a hearing on a motion for a temporary restraining order filed by stockholders in TuSimple Holdings, a company that develops technology for the self-driving, long-haul trucking industry.

The stockholders say in their complaint that TuSimple is the victim of misappropriation of trade secrets by the company’s founders and other defendants, and that at least some of those secrets “have been determined by the United States to be vital to our national security.”

On Monday, Benitez considered the plaintiffs’ motion for temporary restraining order, which asked the court to block the defendants from violating a National Security Agreement, and from selling or transferring in any way the company’s trade secrets to entities outside of the U.S. — including TuSimple co-founder Mo Chen’s other company Hydron, which designs and sells autonomous trucks with hydrogen powered engines.

According to the plaintiffs’ complaint, Chen started Hydron with the backing of a Chinese oligarch with ties to the Chinese Community Party.

The plaintiffs claim that the defendants are trying to sell off TuSimple’s its assets quickly, and delisted it from the Nasdaq stock exchange, in order to take the proceeds and more trade secrets to China so they can escape federal scrutiny and get out of reach of U.S. courts.

They also asked in their restraining order motion that the court block the transfer of any proceeds from the sale or disclosure of TuSimple’s trade secrets — or the sale of its other assets — outside of the U.S.

“The software could have been transferred already. It could be in the wrong hands. That’s why we need to keep their assets here,” said Albert Chang, one of the plaintiffs’ attorneys.

The company’s trade secrets, according to the plaintiffs, are designs, blueprints, schematics, specifications, software, source code, summaries of technical analyses, status reports, and technical data revolving around their “L4” autonomous driving technology, “Autonomous Freight Network” technology, and other tech they developed to operate autonomous semi-trucks.

In 2021, the Committee on Foreign Investment in the United States, a federal interagency committee that reviews transactions involving foreign investment deemed as threats to national security, started investigating transactions related to the co-founders of TuSimple, especially a transaction in 2017 in which Sun Dream, a subsidiary of the Chinese media conglomerate of Sina, acquired a 20% stake in the company, according to the complaint.

Around the same time, Chen, the co-founder and majority shareholder of TuSimple, started Hydron in secret with intellectual property and technology taken from the company, the plaintiffs claim.

The federal investigation resulted in TuSimple having to enter into a National Security Agreement, which requires the company to protect their technology and not allow it to be shared without approval by a U.S. government committee, the plaintiffs added in their complaint.

“The source code they’re so worried about going to China is already in China,” said Robert Smith, an attorney for TuSimple, which is listed as the nominal defendant in the complaint.

Smith argued at Monday’s hearing that some of the technology developed by TuSimple was created in tandem with the company’s subsidiary in China, but they stopped sharing information and trade secrets after the federal investigation found that the technology involves trade secrets of national security interest.

He added that TuSimple does not have any relationship with Hydron anymore, and that the company is delisting itself from Nasdaq because of “the expense of being a listed company,” and because it has decided to go private.

The company’s move to China, Smith added, isn’t a secret it’s trying to hide, and it will continue to be incorporated in Delaware.

Smith argued the plaintiffs haven’t shown any evidence that the company plans to move sensitive technology overseas. If there was serious evidence, then the federal agencies that oversee the technology would be in court to stop them, he said.

Ultimately, at the end of the hearing Monday, Benitez did not grant the plaintiffs’ their desired restraining order, but he also didn’t dismiss the motion. Instead, he said he needed more time to think about it, and if he does grant it in the future, it will be a more limited restraining and focused order than what the plaintiffs requested.