Nikola, Tesla Agree To Dismiss $2B Patent Infringement Lawsuit After Battling For Over 3 Years

Embattled EV maker Nikola Corporation NKLA has decided to call a truce with the much larger Tesla Inc TSLA in a 3-1/2 year patent infringement lawsuit.

What Happened: Nikola and Tesla on Wednesday jointly filed a notice with the U.S. District Court of the Northern District Of California, of a voluntary dismissal of the longstanding patent infringement litigation between the companies.

The companies have agreed to withdraw all claims and counter-claims against each other, Bloomberg reported.

Why It's Important: Nikola sued Tesla in May 2018 for infringement of design and utility patents, along with trade dress infringement related to "Nikola One," an alternative fuel heavy-duty or "semi" truck. The company had claimed damages amounting to $2 billion. Nikola unveiled the truck in 2016.

The design patents at issue between the companies included the ornamental design of the semi-truck fuselage, wrap windshield and side door on the vehicle. Nikola also raised objection with respect to a utility patent over a device and method for an automobile door or window lid.

Nikola alleged that Tesla unveiled its own heavy-duty semi-truck that was substantially similar to Nikola's patented designs.

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Tesla for its part filed a counterclaim, denying that it stole the designs and patents.

Nikola, meanwhile, was embroiled in a controversy over misleading investors by falsely claiming that it was closer to releasing a functional product than it actually was. This led to the resignation of its founder Trevor Milton and subsequently his prosecution.

On Oct. 1, 2021, a federal judge administratively closed the case without dismissing it due to a lack of response from both companies. The judge had asked Nikola to respond in a week's time as to why the case should continue.

Following a reply from Nikola, the company was allowed to continue with the case. It was given two additional January deadlines, one for walking the court through the technologies in question and another for a hearing about the scope of the patents Nikola claimed were infringed.

The mutual decision to wind down the case is positive for both parties. Tesla will now be spared of unnecessary distractions and can focus on surging forward with its product roadmaps and vision, while Nikola can go about its rebuilding plans.

At last check, Tesla shares were up 0.51% at $1,155.42 and Nikola was seen rallying 10.08% at $11.36.

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