United States: Waymo v. Uber – A Cautionary Tale

Last Updated: August 21 2017
Article by Laura N. You

Earlier this year, Google subsidiary Waymo, LLC filed suit against Uber in federal court in California, alleging that Uber misappropriated trade secrets related to Waymo's self-driving vehicle technology. The facts, as alleged by Waymo, are fairly juicy (as far as legal cases go) and they implicate a plethora of legal issues beyond just trade secret misappropriation. 
To give you some background, Waymo is the self-driving vehicle division of Google's parent company, Alphabet, Inc., and has been developing self-driving vehicle technology since 2009. It recently partnered with Lyft, seemingly with the ultimate aim of introducing a fleet of automated vehicles. Uber has likewise been developing self-driving vehicle technology with the same end-game in mind, putting these two entities on a competitive collision course. 
Waymo has developed its own Light Detection and Ranging (LiDAR) system. LiDAR is laser technology mounted to the exterior of a self-driving vehicle that creates a real-time 3D image of the vehicle's surroundings; essentially, it allows the vehicle to "see" its surroundings so it can navigate as a human driver would (perhaps even better, according to the complaint). Waymo alleges that its particular LiDAR technology is more cost-efficient than others, making it a competitive advantage for the company. 
And now, to the more sensational part of the story: Waymo claims that one of its former engineers, Anthony Levandowski, downloaded 14,000 confidential files from Waymo shortly before leaving the company without notice in January 2016 to form his own self-driving truck start-up, Ottomotto. In August 2016, Uber purchased Ottomotto for $680 million and, thereafter, put Levandowski in charge of Uber's entire self-driving vehicle division. Then, in December 2016, a Waymo employee was mistakenly copied on an email from a LiDAR component supplier to Uber. The email attached drawings of a LiDAR circuit board that was strikingly similar to Waymo's own LiDAR technology. Naturally, Waymo claims that the drawing was in fact its LiDAR circuit board, information it claims is a trade secret and was among the information that Levandowski wrongfully downloaded before he left the company. To see all of Waymo's allegations against Uber, you can view the complaint here.
The case is currently set for trial in October of this year. If Waymo is successful, it will maintain whatever leg-up on the industry that its cost-efficient LiDAR technology gives it, and could be the first to introduce a fleet of self-driving vehicles for ride-sharing. 
This case presents a multitude of legal issues. Here are a few of the most interesting:

  • Trade Secret Misappropriation. The $680 million question is whether Uber knowingly acquired Ottomotto in order to obtain Waymo's LiDAR technology. And, roughly speaking, that is what Waymo will have to establish in order to prove its case.  

    Among other things, Waymo will have to show that Uber actually acquired Waymo's trade secret. So far, Waymo has been unable to locate the 14,000 documents Levandowski stole from Waymo on Uber's servers. Waymo insists that correspondence between Levandowski and Uber indicate a "cover-up" and Uber maintains it never received any of the downloaded files.
    Even if it can ultimately show Uber's acquisition of the files, Waymo will also have to demonstrate that the information in question is actually a trade secret. And, it will be necessary to show that the information was subject to reasonable efforts to maintain its secrecy – such as appropriate technological safeguards, encryption methods and/or security clearances. 
  • Due Diligence and Attorney-Client Privilege. Ottomotto was just six months old when Uber purchased it, and Levandowski was less than a year removed from Waymo. Uber's due diligence efforts should have covered the source of Ottomotto's intellectual property, which either was not completed thoroughly or Uber decided to move forward with the purchase anyway, in a rush to obtain Ottomotto before another company did. It could also be possible that Uber believed that its due diligence efforts in any eventual litigation would be protected by attorney-client privilege. Uber was wrong. In June, the Court ordered Uber to hand over the due diligence report its attorneys prepared.

  • Employment Law. Non-competition clauses are unenforceable under California law, which makes it far more likely that an employee would take material when moving to another employer or (in Levandowski's case) when leaving to start his own competitive entity. Levandowski's employment agreement with Uber stated that he would not use material from former employers. But, if Waymo's allegations are true, Uber should have taken more aggressive steps to ensure that Levandowski never used any information from the Waymo files. Doing so might have prevented the company from becoming a trade secret defendant. 

  • Arbitration. Uber attempted to use the arbitration clause in Waymo's employment agreement with Levandowski to push the case to arbitration. With a slew of bad press as of late, it's no surprise that Uber wanted to keep the facts of this case out of the public eye. The court rejected Uber's efforts. Levandowski is not a defendant in the case and Waymo has no agreement with Uber, let alone an agreement requiring arbitration. 

This case serves as a cautionary tale for suppliers, reminding them that in today's automotive industry, where innovative technology and talent are more valuable than ever, the importance of thorough due diligence and the need for implementation of robust security measures to protect company trade secrets and other confidential information cannot be overstated.

This article is reprinted with permission from Warner Norcross & Judd LLP. This article is not intended as legal advice. For additional information, please contact the author of this article.

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