Last month, executives of San Antonio-based electric vehicle startup DeLorean Motors Reimagined LLC responded to a lawsuit accusing them of building their venture with trade secrets stolen from their previous employer, California-based Karma Automotive.
In a court filing, DeLorean CEO Joost de Vries, Karma's former vice president of marketing, and his colleagues maintain that their one-time employer gave them permission to "pursue investors outside of Karma Automotive" as they worked to electrify an original DeLorean — the discontinued sports car popularized by the '80s film Back to the Future — that de Vries and others worked on while employed there.
The claim is the latest salvo in a legal battle that experts warn could take months, if not years, to play out. The court fight began unfolding mere months after San Antonio and Bexar County approved an incentive package worth roughly $1.1 million to attract DeLorean Motors Reimagined to Port San Antonio.
Despite the ongoing legal dispute — which includes allegations of IP theft and claims of trademark infringement — San Antonio's Economic Development Department said in a statement that the legal wrangling does "not impact our agreement with DeLorean."
Just the same, the signs of impending legal trouble were there, said Michael Connelly, a Washington, D.C.-based attorney with more than 25 years of experience litigating intellectual property disputes. He and other experts maintain that those issues should have raised a red flag as local officials weighed whether to offer incentives to the company.
Local officials should have been especially cautious, Connelly added, because the electric vehicle, or EV industry, is susceptible to lawsuits.
"You have a relatively small pool of very talented people that get drawn around in different directions," Connelly said. "These lawsuits are popping up, where they're always under the guise of trade secret theft for anything from hiring practices to customer lists to battery technology or design elements."
When asked whether the lawsuit could be the end of CEO de Vries' DeLorean dream, Connelly responded, "It certainly could be."
Connelly pointed out that Lordstown Motors, another EV startup helmed by former Karma employees, also faced a lawsuit from Karma alleging intellectual property theft.
Further, the Wall Street Journal last year reported that Lordstown is under U.S. Justice Department investigation, and the company also is the subject of a Securities and Exchange Commission inquiry based on vehicle pre-orders. The company has said it's cooperating with regulators on both.
The speed at which DeLorean Motors Reimagined was able to form a company, launch an ad, secure public subsidies and debut a prototype at a car show in California made a lawsuit even more likely, according to Connelly.
"I mean, it's just crazy fast," Connelly said. "I imagine all of that would leave Karma in disbelief about anything they read that said this happened from February to now."
Even so, taxpayer money has yet to reach the coffers of the fledgling DeLorean venture, and the availability of those funds is contingent upon the company hitting local job-creation targets, according to city and county officials.
Superbowl shuffle
DeLorean Motors Reimagined grabbed national headlines in February when it aired a commercial during Super Bowl LVI. The next morning, San Antonio Mayor Ron Nirenberg took a victory lap on social media, tweeting that the company, which wasn't even incorporated in Delaware until more than a week later, would establish its new headquarters in the Alamo City.
Soon after, city council unanimously approved up to $562,500 in grants for DeLorean Motors Reimagined to lure the company to locate its headquarters at Port San Antonio and create 450 jobs.
Bexar County Commissioners Court followed suit, clearing the way to offer the car manufacturer an additional $513,000 in tax incentives over the next 10 years.
Following the death of John DeLorean, the founder of the original DeLorean Motor Co., in 2005, there have been at least three lawsuits involving the DeLorean trademark. Two were filed by DeLorean's estate against Stephen Wynne, the owner of a DMC Texas, a company that provided parts for owners of the original DeLorean vehicles.
Wynne's company has since been merged into the San Antonio-based DeLorean Motors Reimagined, according to the online auto-industry news site Autoevolution.
The question of who has the right to use the DeLorean trademark hinges on a 2014 legal settlement in which Wynne's company admitted that DMC Texas never acquired the licensing rights to the DeLorean name. As part of that settlement, the estate of John DeLorean agreed to never again sue DMC Texas over the trademark, the Express-News reports.
Although Wynne is likely in the clear regarding the use of the DMC trademark, managing to fight-off a following lawsuit by the DeLorean estate in 2018, John DeLorean's daughter, Kathryn DeLorean Seymour, has expressed her disdain for the new San Antonio-based start-up.
In a June Instagram post, DeLorean Seymour asked the EV automaker to "stop lying and stop speaking about John now, he despised you." DeLorean Seymour also appeared to hint that she and others related to John DeLorean are working on their own version of the distinctive '80s car, with renderings of their own revamped DeLorean featured in a video posted on her Instagram account.
'Basic due diligence'
The controversy surrounding the DeLorean trademark was one of the first things that popped into economic development scholar Nathan Jensen's head when he first read about the EV startup.
Jensen, a government professor at the University of Texas at Austin, said city and county officials should have scrutinized the potential intellectual property issues before moving to approve an incentives package for DeLorean Motors Reimagined.
"This does seem like, at least on the surface, that some basic due diligence would reveal at last a hint of a problem," Jensen said.
During municipalities' incentive negotiations, it's common for them to ask companies about prior or existing lawsuits, tax records and financial records, according to Jensen. The state's Texas Enterprise Fund, which provides grants to companies looking to relocate here, requires two years of financial records and statements, for example.
In an email to the Current, San Antonio Economic Development Department officials said they completed "a review of legal and business history" of the team behind DeLorean Motors Reimagined but declined to reveal further details.
Jensen said the disputes swirling around the EV startup raise questions about why San Antonio is targeting economic development incentives to companies with lofty ambitions instead of investing in what he calls "community goals."
Providing better services to small businesses often does more to foster local economic development than spending money to lure startups, Jensen said. But, he added, the most significant contributing factor to robust economic development is a stronger investment in education.
"Instead of giving money to the business, you're creating a workforce," he said. "That's particularly valuable, and the great thing about that is that even if these businesses move or they fail, you've invested in the people in your community."
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