On June 14, 2024, Chinese Ningbo resident Klaus Pflugbeil was accused of conspiring to steal commercial secrets from electric car manufacturer Tesla to establish his own business in China. Pflugbeil pleaded guilty in a federal court in the eastern district of New York on the 13th, while his accomplice Yilong Shao remains at large.
According to the indictment, Pflugbeil and Shao used commercial secrets from “a leading electric car company in the United States” to build their own business, even promoting their business as an alternative to products of the American company. They operated a Chinese company that sold battery manufacturing technology, including electric vehicle batteries.
The prosecutor did not specifically mention the name of the “leading electric car company in the United States,” but indicated that it acquired a battery assembly line manufacturer based in Canada in 2019. This description aligns with Tesla’s acquisition of the Canadian company Hibar.
The prosecutor stated that both Pflugbeil and Shao were former employees of this Canadian battery assembly line manufacturer.
On March 19 of this year, Pflugbeil traveled to Nassau County on Long Island, where he was arrested while attempting to transmit multiple commercial secrets of Tesla to an undercover agent whom he believed was a businessman from Long Island.
Tesla acquired a Canadian automation precision dispense pump and battery assembly line manufacturer in 2019. Before its acquisition by Tesla, the Canadian manufacturer sold battery assembly lines to customers. These assembly lines contained or utilized Tesla’s proprietary technology of “continuous motion battery assembly”, which allows manufacturers to operate battery production lines at high speed without interruption.
Manufacturers with commercial secrets of battery assembly can produce parts at a rate five to ten times higher than competitors without this technology.
According to the indictment, Pflugbeil and Shao planned to use Tesla’s commercial secrets in their own business activities before 2019. Pflugbeil told Shao that he had many “original files” related to the technology and was looking for more “original drawings”. Shao subsequently confirmed, “We have PDF files of all original assembly drawings.”
The two took measures to conceal the fact that they were stealing documents. For instance, Pflugbeil mentioned in a letter to Shao that he created a document from the Tesla files stolen by Shao, stating that “its format is different, so it looks very original, not like a copy.”
In July 2020, Pflugbeil joined company B established by Shao, which expanded in China, Canada, Germany, Brazil, among other places. Company B manufactured products identical to the precision dispense pumps and battery assembly lines developed by the Canadian manufacturer. Pflugbeil promoted B as their alternative source and advertised on Google, YouTube, and LinkedIn.
On his Linkedin account, Pflugbeil’s profile picture featured a quote in English attributed to Benjamin Jowett: “The way to do great work is to not mind who gets the credit.”
On September 11, 2023, undercover agents participated in a packaging and processing industry trade show held in Las Vegas, Nevada. Posing as businessmen, the agents expressed interest in purchasing battery assembly production lines from Company B to produce batteries at a facility on Long Island. They were introduced to Yilong Shao at the trade show, and later contacted Pflugbeil via email.
Subsequently, on November 17, 2023, Pflugbeil sent an undercover agent a detailed 66-page technical proposal via email. The proposal stated, “This technical document contains proprietary information of B and must be kept confidential.” However, the proposal actually contained commercial secret information of Tesla’s battery assembly: Pflugbeil used at least six drawings in the proposal sent to the undercover agent, which were actually Tesla’s confidential information regarding battery assembly.
The 58-year-old Pflugbeil faces a maximum of 10 years in prison and will be sentenced on October 9 of this year.
Federal prosecutor Breon Peace in the Eastern District of New York stated, “Today’s plea demonstrates how swiftly we bring to justice those who misappropriate intellectual property belonging to American companies to defend our economic and national security.”
Assistant Attorney General for National Security Matthew G. Olsen said, “Despite Pflugbeil agreeing to protect what he knew to be proprietary sensitive technology, he chose to abscond to China with these commercial secrets, seeking unfair illegal advantages in critical industries like electric vehicle manufacturing. Now he must be held accountable for this illegal conduct that endangers our national security.”