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Uber-Waymo Settlement

 

The Uber-Waymo ((Waymo is a subsidiary of Google)) trade secret dispute was one of the biggest intellectual property disputes of the last few years, with overarching ramifications for the race to bring autonomous driving technology to market.

In the summer of 2015, it was reported that Anthony Levandowski, a self-driving-car engineer, began asking other Google employees to join him at a new company. ((Kia Kokalitcheva, The full history of the Uber-Waymo legal fight, Axios (May 9, 2017), https://www.axios.com/the-full-history-of-the-uber-waymo-legal-fight-1513301467-41102ff0-1642-4209-abf8-a37d0608027c.html.)) In December of 2015, he allegedly downloaded 14,000 proprietary files onto a personal device and on January 15, 2016, he formed “280 Systems,” which would later become Otto Trucking. ((Id.)) On August 18, 2016, Uber announced it had acquired Otto for $680 million. ((Id.)) Throughout this period, Waymo was suspicious of Levandowski’s actions and their suspicions were confirmed on December 13, 2017, when they were copied on an email chain that showed one of its vendors was working on a part for Uber that was very similar to one of their own design. ((See id.))

On February 23, 2017, Waymo initiated a lawsuit against Uber for stealing their proprietary technology related to their self-driving technology, ((Compl. ¶ 3, Waymo v. Uber Technologies, (No. 3:17-cv-00939).)) specifically, the design for its laser-based radar system. ((Id.)) Waymo claims that Levandowski stole the information before he left Google to form Otto. ((Id.)) Waymo further alleged that Uber leveraged the stolen information to expedite the development of their own LiDAR ((“Light Detection And Ranging” – uses high-frequency, high-power pulsing lasers to measure distances between one or more sensors and external objects)) system. ((Compl. ¶ 5)).

Waymo brought six causes of action against Uber: (1) violation of defense of Trade Secrets Act; (2) violation of California Uniform Trade Secret Act; (3) infringement of Patent No. 8,836,922; (4) infringement of Patent No. 9,368, 936; (5) infringement of Patent No. 9,086,273; and (6) violation of California Bus. & Prof. Code § 17200. ((See Id.))

During settlement talks in 2017, Waymo sought over $1 billion in damages, the appointment of an independent monitor to ensure Uber would not use Waymo technology, and an apology. ((Alexandria Sage, Dan Levine, & Heather Somerville, Waymo accepts $245 million and Uber’s ‘regret’ to settle self-driving car dispute, Reuters (Feb. 9, 2018), https://www.reuters.com/article/us-alphabet-uber-trial/waymo-accepts-245-million-and-ubers-regret-to-settle-self-driving-car-dispute-idUSKBN1FT2BA.)) Those talks were fruitless, but in early February of this year, Waymo agreed to a settlement valued around $500 million. ((Id.)) Unfortunately, Uber’s board rejected the proposal. ((Id.)) However, after four days of testimony in which Waymo struggled to present evidence that Uber actually used Waymo’s trade secrets, the two sides settled for a deal valued around $245 million in the form of a 0.34% equity stake in Uber. ((Id.)) This results in an interesting dynamic in which Waymo’s efforts to out-compete Uber will likely result in decreasing the value of the equity stake. However, it is an intriguing way to hedge their bets against the possibility of losing the race to bring the technology to market. Whether or not this settlement can be considered a victory for Waymo is also called into question when considering SoftBank’s recent investment in Uber. ((Eric Newcomer & Pavel Apeyev, Uber Investors Agree to Sell Stake in SoftBank Deal, Bloomberg (Dec. 28, 2017), https://www.bloomberg.com/news/articles/2017-12-28/uber-investors-are-said-to-agree-to-sell-stake-in-softbank-deal.)) SoftBank purchased shares on the secondary market at a price that valued Uber at $48 billion. ((Id.)) If the settlement was calculated on this valuation, it would only be worth $163 million. ((0.34% of $48 billion is $163 million.)) This low settlement value indicates that Waymo may not have been confident in their chances at winning over the jury. This theory is supported by Sarah Jeong’s analysis of the trial. ((See Sarah Jeong, “I’m not so sure Waymo’s going to win against Uber, The Verge (Feb. 8, 2018), https://www.theverge.com/2018/2/8/16993208/waymo-v-uber-trial-trade-secrets-lidar.)) In an article published the day before the settlement was announced, she wrote, “even if Levandowski took 14,000 confidential documents, that doesn’t’ mean Uber did something wrong–there isn’t a clear link to how those documents got into Uber computers or were used in Uber self-driving car.” ((Id.))

Despite the settlement, Uber continues to deny Waymo’s allegations. In a statement regarding the settlement, Dana Khosrowshahi, CEO of Uber, said that “we do not believe that any trade secrets made their way from Waymo to Uber, nor do we believe that Uber has used any of Waymo’s proprietary information in its self-driving technology, we are taking steps with Waymo to ensure our Lidar and software represents just our good work.” ((Dana Khosrowshahi, Uber and Waymo Reach Settlement, Uber (Feb. 9, 2018), https://www.uber.com/newsroom/uber-waymo-settlement/.)) For Dana, this is one less issue to worry about as he tries to rehabilitate the Uber brand after Travis Kalanick’s departure.

With the case settled, both companies are free to focus on bringing their self-driving technology to market. Professor Daniel Crane wrote, “Glad to see this case settled. We need both Uber and Waymo full steam ahead on automated vehicle technology. Competition is driving innovation.” ((Daniel Crane, Twitter (Feb. 12, 2018), https://twitter.com/DanielDancrane/status/963050769137184770.)) Despite the litigation, there are signs that the companies are moving forward quickly. Waymo’s permit to become a transportation network company in Arizona was approved on January 24. ((Christina Bonnington, Did Waymo Just Put Uber in Second Place, Slate (Feb. 16, 2018), https://slate.com/technology/2018/02/waymo-may-have-put-uber-in-second-place-when-it-comes-to-self-driving-cars.html.)) This means Waymo can start operating as a commercial service and directly compete with Uber and Lyft. On the other hand, Uber is still testing its self-driving technology in Pittsburgh. ((Id.)) Though Waymo looks to have a slight edge at present, it will be interesting to which of the two, if any, comes out on top.

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Justin Lauria-Banta

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