Android phone startup Essential is sued for allegedly stealing trade secrets

Essential, the Android phone startup backed by Android co-founder Andy Rubin, hasn’t had the success some predicted. But if delayed shipments, privacy gaffes, and disappointing sales weren’t bad enough, Essential’s latest setback threatens to do lasting damage to its smartphone business. On Tuesday, October 17, Keyssa, a wireless company backed by iPod creator and Nest founder Tony Fadell, filed a lawsuit against Essential alleging that it stole trade secrets.

The dispute stems from Essential’s work with Keyssa’s transfer technology, which copies gigabit-size using a low-frequency network. According to documents made public, Essential sought Keyssa’s technical consultation under a non-disclosure agreement, working with a team of the firm’s “top engineers and scientists” and exchanging “many thousands” of emails, technical documents, and confidential presentations.

In August, Essential told Reuters that it “considered Keyssa as a component supplier for Essential Phone and chose to proceed with a different supplier that could meet our performance specifications for the product.”

Essential decided to end the relationship after 10 months, assuring Keyssa that it would use a different wireless technology in the Essential Phone (it eventually sourced it from Sibeam). But Keyssa says it reneged on the confidentiality agreement, knowingly implementing antenna designs and techniques in the phone’s modular accessories pin.

It’s not Essential’s first legal dispute. In June, accessory maker Spigen, which has a trademark on the Essential name for certain battery packs, chargers, and Bluetooth headphones, sent a cease-and-desist letter to Essential, accusing it of misappropriation. It still hasn’t been resolved — Essential’s trademark application was denied twice because it sought the use “Essential” for a nonspecific range of consumer electronics products, according to Android Police.

But if Keyssa’s lawsuit is found to have merit, the impact could be far worse. The Essential Phone’s range of modular accessories, which attach to the back of the phone using a combination of magnetic pins and a 60GHz wireless USB adapter, is one of the handset’s selling points. At launch, some models were bundled with the clip-on Essential Camera, an impressive 360-degree, 12-megapixel 4K camera that Essential claims is the “world’s smallest.”

Keyssa, which earlier this year partnered with smartphone manufacturers like Samsung and Foxconn, says it is seeking damages. “Keyssa has not been compensated for Essential’s use of this guidance and know-how,” a spokesperson told Reuters. “We are pursuing this action because our attempts to resolve this matter through discussions with Essential have not been successful.”

The court proceedings in San Francisco are scheduled to begin later in 2017.