Freightmate admits using Flexport docs as AI trade secrets case settles
Freight-tech start-up Freightmate has acknowledged acquiring and using confidential Flexport shipping documents, as a settlement brings to an end a closely watched trade secrets dispute that has raised questions about the ownership of data used to develop AI-powered logistics software.
The settlement, approved by a California federal court yesterday, follows a ruling that Freightmate and its founders failed to preserve electronic evidence relevant to the case, prejudicing Flexport's ability to pursue its claims.
However, the judge found that Flexport had not proved that the defendants deliberately destroyed evidence with the intention of preventing its use in litigation.
Under the stipulated judgment, Freightmate and co-founders Bryan Lacaillade and Yingwei (Jason) Zhao acknowledge acquiring and using some of approximately 2,000 confidential Flexport shipping documents.
Mr Zhao also acknowledges acquiring confidential Flexport information, including 'trade secrets', while both founders acknowledge that they knew, or should have known, that acquiring the documents violated their agreements with their former employer.
The acknowledgements were made solely for the purposes of the judgment; the court made no findings of fact or determination of liability, and Freightmate has not admitted the remaining allegations in Flexport's complaint.
Agreed facts filed ahead of a trial scheduled for 19 October provide a detailed account of how the documents moved between the companies.
In May 2024, while still employed by Flexport, Mr Zhao downloaded approximately 2,000 shipping documents from its internal freight forwarding system and uploaded them to Freightmate's Google drive. The documents related to approximately 70 shipments and included bills of lading, shipping instructions, packing lists, and arrival notices.
Small samples, approximately five to ten documents, were used to assess how effectively ChatGPT could extract standard shipping information.
The agreed facts do not establish that the documents were used to train Freightmate's AI models or incorporated into its finished products.
They also reveal that Freightmate had secured a $650,000 investment in May 2024, while Mr Zhao was still employed by Flexport and had already become a Freightmate shareholder, director, and officer.
The founders had, however, initially appeared keen to avoid breaching their employment agreements. In a December 2023 message, Mr Lacaillade warned colleagues, "We cannot use Flexport resources for anything as we build this out based on our offer letter", and urged them to compare their contracts and seek legal advice to avoid being sued.
But in March, Mr Lacaillade told Mr Zhao: "Man it's tough to focus on Flexport work when I'm so much more excited about the Freightmate work."
And by May 2024, Mr Zhao had become a Freightmate director and shareholder while still employed by Flexport, and had transferred both shipping documents and a compressed source-code file from his employer's systems.
On 1 July 2024, at Mr Lacaillade's direction, Flexport shipping documents were deleted from Freightmate's Google drive, email accounts, and personal devices.
Freightmate has maintained that the removal formed part of a 'clean room' process, intended to ensure its Docmate document automation platform was independently developed. It has also disputed Flexport's allegations that proprietary code was incorporated into its technology.
The litigation increasingly focused on whether confidential freight data, AI prompts, and development workflows had contributed to Docmate, rather than simply whether software code had been copied.
The court concluded that the loss of evidence had prejudiced Flexport, but found that the company had not established the specific intent required for more severe sanctions. It also ruled that the July 2024 deletions did not breach evidence-preservation obligations, because litigation was not yet reasonably foreseeable.
Flexport subsequently challenged the ruling, seeking stronger sanctions, but the settlement has now removed the need for a trial.
Under the agreement, Freightmate is permanently prohibited from possessing or using Flexport confidential data, while an independent forensic examiner will inspect specified repositories to identify any remaining Flexport shipping documents, and oversee the deletion or return of identified material and any necessary changes to Freightmate products.
The report must address whether any Freightmate products incorporated, were trained on, or were otherwise derived from Flexport data, and whether any necessary remediation has been completed.
Freightmate will bear the examination costs, capped at $25,000, as well as the costs of any required remediation. The examiner must report to the parties' lawyers by 30 January 2027.
Importantly for Freightmate, the judgment expressly allows the company to continue competing with Flexport, and independently developing and selling freight forwarding software. Its existing products may remain available during the examination, subject to the settlement's conditions.
The financial terms of the settlement remain confidential, with both parties bearing their own legal costs.
Mr Lacaillade told The Loadstar: "We're glad to have this resolved. I'm incredibly grateful to our team, customers, and partners for their support throughout this journey, and we're excited about what's ahead for Freightmate."
The settlement closes a case that has exposed some of the complexities surrounding AI development in freight forwarding, particularly the use of proprietary operational data, and the difficulty of establishing how that information may have contributed to automated systems.
Although the underlying 'trade secrets' allegations will not now be tested at trial, the forensic examination leaves one important question outstanding: whether any Flexport information remains incorporated in Freightmate's software, datasets, or AI models.
Flexport has been approached for comment.
