Tesla’s Lawsuit Against Matthews Inc: Arbitration and Court Rulings

Tesla’s lawsuit against Matthews International has, so far, gone Matthews’ way. Tesla sued the Pittsburgh manufacturer in June 2024 for more than $1 billion, alleging theft of trade secrets tied to dry battery electrode (DBE) manufacturing. The case was pushed into arbitration, and the arbitrator ruled that Matthews keeps the right to sell its own DBE equipment to other customers. A federal court confirmed that award in October 2025, and a February 2026 interim ruling rejected Tesla’s bid for a broad injunction against Matthews’ third-party sales.

What Tesla Alleged

Tesla filed its complaint on June 14, 2024, in the U.S. District Court for the Northern District of California, bringing claims for trade secret misappropriation, breach of contract, and unfair competition.¹

The two companies had worked together since 2019, when Matthews began supplying equipment for Tesla’s dry battery electrode process. Tesla said it shared confidential manufacturing information under written confidentiality agreements during that relationship, and that Matthews then folded the information into its own patent applications, publicly disclosing what Tesla considered protected trade secrets, and sold battery equipment containing Tesla’s proprietary technology to competitors.² Tesla asked for preliminary and permanent injunctions, transfer of ownership over the related Matthews patent applications, and more than $1 billion in damages.

Matthews called the suit “utterly without merit” and an attempt to “bully” the company, saying its DBE technology traced back more than 25 years, well before the Tesla relationship began.²

Why the Case Went to Arbitration

On June 25, 2024, Matthews moved to compel arbitration under the parties’ contract. Judge Edward J. Davila granted the motion on October 7, 2024, and stayed the federal case.¹ The dispute went to JAMS, with retired Judge Jay C. Gandhi as arbitrator.

The fight turned on Section 16.4 of the General Terms and Conditions governing the relationship, which addressed “Background IP” and equipment that “relates to dry processing of ultracapacitor/battery electrodes.” Tesla read the clause as a broad bar on Matthews selling any DBE equipment or related technology to third parties. Matthews argued the operative language was qualified by “based on Tesla specifications,” so it kept the right to sell equipment built on its own foundational technology as long as Tesla’s specific proprietary information was not included.³

The March 2025 Arbitration Award

The arbitrator sided with Matthews in an award entered on March 20, 2025, and posted in corrected form on April 14, 2025. Finding the contract language ambiguous, he applied California’s parol evidence rule and looked at extrinsic evidence, including negotiation history, which supported Matthews’ position that it always intended to retain its foundational DBE know-how. He also concluded that Tesla’s reading would render other provisions superfluous, including Section 1.1, which established the non-exclusive nature of the agreement.³

The core holding was that Section 16.4 “does not vitiate Matthews’ intellectual property rights in dry battery electrodes (DBE) machinery.” Matthews could keep selling its DBE equipment to customers other than Tesla, provided the equipment did not include Tesla’s proprietary IP or jointly developed materials.³

Federal Court Confirmation in October 2025

Matthews moved in the Northern District of California to confirm the award. Tesla cross-moved to vacate it. On October 1, 2025, Judge Davila granted Matthews’ motion and denied Tesla’s, entering judgment for Matthews. The court found the arbitrator had acted within his authority and had properly construed the contract, and noted that the arbitrator “did not refuse to enforce a term in manifest disregard of the law; he just refused to enforce Tesla’s interpretation of the term.”³

The February 2026 Interim Ruling on Injunctions

Tesla’s remaining claims for injunctive relief were still open after the contract-interpretation award. On February 13, 2026, the arbitrator issued an interim decision denying Tesla’s request for broad injunctions that would have stopped Matthews from selling its DBE technology and equipment to third parties. He imposed a narrow injunction barring Matthews from using certain specific parts in its DBE machines. Matthews said it already had replacement parts on hand and did not expect the restriction to materially affect operations or sales.⁴

After the ruling, Matthews announced it would immediately resume marketing, selling, and delivering DBE products to other customers in the electric vehicle market.⁵

Where the Case Stands

The dispute is not over. Matthews has acknowledged that the final arbitration award may differ from the interim ruling and could be subject to further challenge.⁵

The costs are climbing. In its fiscal second-quarter report for the period ending March 31, 2026, Matthews disclosed $2.175 million in Tesla-related legal costs for the quarter and $11.172 million across the preceding six months.⁶ For now, though, every ruling on the central question of Matthews’ right to sell its own DBE equipment has gone against Tesla.

1
CourtListener. Tesla, Inc. v. Matthews International Corporation Docket
2
Best Magazine. Tesla Files $1 Billion Lawsuit Against Matthews International for Stealing Trade Secrets
3
A&O Shearman US Arbitration. Matthews International Corporation v. Tesla, Inc., No. 25-CV-03325-EJD
4
Matthews International Corporation. Matthews International Obtains Important Clarity on Right to Sell DBE Equipment
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Matthews International Corporation. Matthews International Highlights Support From Investment
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Matthews International Corporation. Matthews International Reports Results for Fiscal 2026