Tesla sues Calif. DMV after agency called its autopilot deceptive marketing

Elon Musk's Tesla is taking the California Department of Motor Vehicles to court, an attempt to win back the right to use the term "autopilot" when advertising its line of cars.

In a case filed Feb. 13, the electric vehicle giant claims that the department "wrongfully and baselessly” labeled Tesla a “false advertiser,” and argues that the department did not effectively prove that customers had been led to believe the vehicles could be operated without human oversight.

Last year, a judge for California's Office of Administrative Hearings ruled that the company had engaged in deceptive marketing by describing its fleet's driver assistance systems as "Autopilot" modes. The court argued that Tesla's Autopilot and “Full Self-Driving Capability” (FSD) did not meet the necessary autonomous driving criteria under NHTSA’s Levels of Automation system — the features are rated by the NHTSA as Level 2 automation, where Level 5 is a fully autonomous vehicle. The decision claims features need to be at least Level 3 to be described as "self-driving."

In using such terms, Tesla has misled drivers and poses a consumer risk, the decision said. Tesla has faced multiple legal challenges that its self-driving features led to the deaths of multiple people. The company was found partially liable for a fatal, autopilot-related incident in August.

The California ruling went into effect on Jan. 15, and included a 30-day business suspension across the state unless the company ceased using the term in 60 days or changed its systems. Tesla responded in typical fashion: A tongue-in-cheek social post and a claim that sales would not be hit by the decision. Then, in January, the company effectively discontinued Basic Autopilot in the U.S., reshuffling its fleet offering with a standard traffic awareness mode and an option to upgrade your vehicle to FSD, now called "Full Self-Driving (Supervised)."

A few weeks later, the state's DMV announced Tesla had met its obligations and would not face a suspension of its license, but now the company is fighting back against the decision with more force.

"An Administrative Law Judge found that Tesla broke state law by misleading consumers with the term ‘autopilot.’ Tesla agreed to stop this practice, and now they’re challenging it anyway. DMV is committed to protecting the traveling public and will defend the Administrative Law Judge’s findings and decision in court," a DMV representative said in a statement to CNBC.