DeLorean startup hits speed bumps
Claim of intellectual theft, nebulous history slow plans
SAN ANTONIO — Six months after DeLorean Motors Reimagined, the startup seeking to produce a new incarnation of the 1980s sports car, said it would put its headquarters in Texas, a lawsuit filed against the company has thrown a potential wrench in its gears.
In the lawsuit filed this month, Karma Automotive, based in Irvine, Calif., and owned by Chinese conglomerate, alleges that DeLorean Motors Reimagined was created based on intellectual property that its founders stole while working for Karma.
While the plaintiff ’s claims could be difficult to prove, the timing of DeLorean Motors’ founding in relation to its lead executives’ tenure at Karma could appear suspicious enough to compel attempts to negotiate a settlement, a legal expert said.
And that’s not the only red flag surrounding this DeLorean entity, which is intertwined with a similarly named Humble-based company — DeLorean Motor Co. — founded about 30 years ago with its own history of being sued over intellectual property claims. The Humble company’s claim to the DeLorean name is key to the two companies’ joint venture.
DeLorean Motors Reimagined, which located its headquarters to San Antonio, has a cloudy background to go with a somewhat muddled identify. It hasn’t disclosed information about its investors or working capital even as San Antonio and Bexar County officials granted the company
more than $1 million in incentives and tax breaks,. And while DeLorean Motors Reimagined is incorporated separately from DeLorean Motor Co., the former generally identifies itself as the latter, such as on its website and in a Super Bowl ad that accompanied its launch.
So far, the only plans DeLorean Motors Reimagined has announced involve producing 88 models of its pricey Alpha5 coupe two years from now. Still, CEO
Joost de Vries said the startup will soon become a publicly traded company.
It’s also not clear whether the combined DeLorean entity ever bought the intellectual property rights of John Z. DeLorean’s original 1970s-era company, although a 2014 settlement agreement has apparently shielded it from lawsuits.
Local officials offered incentives in exchange for DeLorean hiring 450 workers. DeLorean will receive the money and tax credits if it hits hiring targets.
That “if ” became bigger after Karma filed its lawsuit.
The original DeLorean went out of business in the early 1980s amid poor sales of the DMC-12 and after its eponymous founder, John DeLorean, was involved in a cocaine bust. He was later acquitted.
The brand resurfaced in the 1990s when Stephen Wynne, a mechanic and native of England, bought the name “DeLorean Motor Company” and other remnants of the company and opened a Houston-area showroom and restoration facility, which houses a massive inventory of parts for the DMC-12.
Wynne still owns “DeLorean Motor Company,” and sits on the board of San Antonio-based DeLorean Motors Reimagined.
Litigation outlook
Karma said it began exploring a venture with Wynne’s company in
2020 to “produce DeLorean vehicles utilizing Karma’s electric vehicle technology.” Karma produces high-priced, luxury electric sports cars, but it has not generated significant sales.
Karma alleges that four top DeLorean Motors Reimagined executives — all former employees of Karma — secretly formed their venture while still working at Karma, taking design and engineering information for an electric vehicle to their new company, according to the lawsuit.
The lawsuit names as defendants de Vries,
Chief Operating Officer Alan Yuan, Chief Marketing Officer Troy Beetz and Neilo Harris, vice president of brand and creative.
DeLorean called the accusations baseless, saying the Alpha5 “has a very specific, unique DeLorean lineage that has no relation to Karma Automotive from a design, engineering, supply chain or manufacturing perspective.”
Despite a range of claims in the suit, it could be an uphill battle for Karma to win in court, said Colin Marks, an associate dean and professor at St. Mary’s University School of Law in San Antonio.
“While you’re working for your current employer, you can’t be trying to form a competitor and breach your fiduciary duty,” Marks said. “A big obstacle for Karma right now is proving everything they allege is a trade secret actually is a trade secret.”
To be considered a trade secret, a set of information must not be known by others, and it must be valuable information, he said.
Karma’s biggest challenge likely will be proving that the technology underlying the Alpha5 is proprietary to Karma. It could be difficult to parse whether the DeLorean founders used general industry knowledge to develop the Alpha5 that an automotive executive would commonly have, or whether it was information specific to Karma.
“You are not supposed to use any confidential information you gained while you were with your former employer, and that’s where these things get really tricky,” Marks said. “Was it general knowledge you had? Because you’re free to do that. Or did I use something I was privy to only because of my position that was confidential?”
De Vries left Karma in August 2021. He has said that by December 2021, financing for the new DeLorean venture was secure and that most of the engineering work on the Alpha5 was done. Beetz, Yuan and Harris were still employees at Karma, according to employment agreements detailed in the lawsuit.
DeLorean has said it worked with Italian design house Italdesign — which crafted blueprints of the original DeLorean DMC-12 — on the Alpha5. So it’s possible the startup used an off-the-shelf design for its new electric coupe.
Nebulous past
The new DeLorean enterprise has a complicated history.
In 1989, John DeLorean signed an agreement to let Universal Studios use the DMC-12 for merchandising and commercial activity related to the “Back to the Future” films that featured DMC-12 automobile modified as a time machine. The agreement granted John DeLorean 5 percent of the royalties from Universal.
Sometime after DeLorean’s death in 2005, Universal Studios began making royalty payments to Wynne’s company, according to a 2014 lawsuit that the DeLorean estate filed against DeLorean Motor Co. Texas, alleging Wynne’s company was using the DeLorean trademarks without permission.
The DeLorean estate has been managed by DeLorean’s widow, Sally Baldwin-DeLorean.
In the 2014 lawsuit, Wynne’s company admitted that “at no time did DMC-TX purchase or license the right to use the DeLorean identity, DMC Marks or DMC Trade Dress from Mr. DeLorean, the Estate or the DMC Estate.”
Baldwin-DeLorean settled that lawsuit with Wynne’s company for an undisclosed amount of money. The settlement agreement prevented the DeLorean estate from ever again suing DMC Texas for using the DeLorean name and stylized trademarks.
Much of Wynne’s business has been licensing DeLorean trademarks to other companies, such as Nike and Mattel, which recently produced an Alpha5 Hot Wheels toy car.
In 2018, Baldwin-DeLorean again sued Wynne’s company, this time for collecting the Universal Studios payments after John DeLorean’s death.
An appellate court sided with Wynne’s company in that case. The court didn’t rule on whether Wynne’s company was entitled to the royalty payments from Universal Studios; it only said the 2014 settlement prevented the DeLorean estate from suing DMC Texas.
Wynne did not respond to requests for comment.
Legally, Wynne’s company is likely to be in the clear. It holds 13 federal trademarks for the words such as “DMC” and “DeLorean Motor Company” that include stylized lettering.
But the origin of how it acquired those trademarks — and the right to license the DeLorean name — remains murky.
In 2018, Wynne’s DeLorean company sued a New York makeup producer, Elysian Cosmetics, which sold a “DeLorean” skin cream product.
Anderson Duff, Elysian’s lawyer in that case, said he learned in that case DeLorean didn’t buy a license to use the original automaker’s intellectual property.
“The DeLorean Motor Company as it operates today didn’t get a license from the DeLorean family,” Duff said during a 2019 intellectual property law conference. “All they got was a settlement that said the DeLorean family would no longer sue them.”