Essential might be in trouble. For starters, its PH-1 flagship phone is not selling well. Only 5,000 of them have been sold thus far, several reports said late September. But apart from market underperformance, Essential now has to deal with a lawsuit.

Keyssa, a startup focusing on wireless data transmission, is suing Essential for trade secret theft.

Essential Might Have Stolen Trade Secrets

Keyssa, which is backed by iPod creator Tony Fadell, filed a lawsuit Monday, Oct. 16, in a U.S. federal court in San Francisco, as Reuters reports. Since 2009, Keyssa has been developing a chip for mobile phones that enable large data transfers without the use of wires or Wi-Fi connectivity.

The company claims it had been talking with Essential for 10 months and agreed to provide the technology behind the phone's planned connectivity features that'll enable integration with various accessories and smart home devices.

Had things not fallen through, Keyssa would have been responsible for equipping the phones with a small microchip that enables low-frequency data transfers to using crowded Wi-Fi and Bluetooth connections.

Essential Lawsuit: Here's What Happened

Essential ultimately went with a chip from SiBEAM, which is Keyssa's competitor. Essential is now using SiBEAM's chip to accomplish its grand vision of making the Essential Phone "talk to" different accessories and connected devices without the user having to do anything complicated to enable this integration process.

An example of that exists in the form of Essential's 360-degree camera and dock, both of which attach to the Essential Phone via magnetic sensors and wireless technology. More accessories are planned.

Keyssa claims Essential stole its proprietary wireless technology and that despite using a different chip, the final Essential Phone design incorporates many Keyssa-developed techniques to make sure wireless connectors function properly on a smartphone, including the design of the antenna and the testing methods used during the manufacturing phase.

Keyssa says its meetings with Essential were protected with nondisclosure agreements and that information shared during these discussions were trade secrets — trade secrets Essential used to develop its own products. But because of the NDAs, Essential was technically barred from taking those trade secrets and using it for commercial purposes.

"We are pursuing this action because our attempts to resolve this matter through discussions with Essential have not been successful," Keyssa told Reuters.

Essential has yet to comment on the matter, but it's worth noting that Android cofounder Andy Rubin, the company's CEO, wasn't named in the lawsuit.

Check back with Tech Times as we learn more. Feel free to sound off in the comments section below!

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