A “Bet the Company” Trade Secret Case: Waymo LLC v. Uber Technologies, Inc.

A “Bet the Company” Trade Secret Case: Waymo LLC v. Uber Technologies, Inc.

By Richard Reice and Joni Zucker[1]

In perhaps the mother of present day trade secret cases, Waymo LLC, a subsidiary of Alphabet Inc. (parent company to Google), has sought a preliminary injunction against Uber for alleged misappropriation of self-driving car technology, called LiDAR, a laser system which allows self-driving cars to “see” the world around them.   Waymo sued under the DTSA (about which we have previously written) for theft of trade secrets and for infringement.

In the late winter of 2015, former Waymo employee Anthony Levandowski downloaded 14,000 files on Waymo’s technology to his laptop and created his own company, OttoMotto, which is dedicated to equipping trucks with self-driving technology, shortly before resigning from Waymo.  In August 2016, Uber bought OttoMotto for $680 million and named Levandowski vice president of its self-driving car project.  Levandowski’s alleged misappropriation of trade secrets was discovered by accident.  In December 2016, Waymo was copied in an email from a third party vendor, showing the LiDAR system Uber was using and its striking resemblance to the LiDAR technology developed by Waymo.

In February 2017, Waymo filed the lawsuit against Uber, claiming violation of the DTSA along with three patent infringement claims and violation of California state trade secret and business law and seeking a preliminary injunction to stop Uber from developing its driverless car using Waymo technology.  Uber sought to arbitrate based on an employment agreement between Levandowski and Waymo, but because Levandowski is not a defendant, the motion was denied on May 11.  U.S. District Judge William Alsup partially granted the injunction against Uber, barring Levandowski from involvement in Uber’s LiDAR development.   Judge Alsup also referred Levandowski’s alleged theft of 14,000 files to the U.S.  Attorney’s Office for a potential criminal investigation.  Uber’s defense has been extensive — imagine, if you will, spending $680 million for a company based on technology it does not own and can no longer use.  Uber does not deny that Levandowski took the files, but denies that they were used in OttoMotto/Uber’s technology.  Waymo sees it another way, believing Uber conspired with Levandowski to replicate Waymo’s system. There is evidence that Levandowski was negotiating a contract with Uber for the acquisition of OttoMotto in October 2015, before he took the files and left Waymo.  In trying to keep Levandowski from being deposed, Uber even tried to take the Fifth on Levandowski’s behalf.

The DTSA defines many types of technology and information as “trade secret” provided that the owner has taken reasonable measures to keep it secret and the information derives economic value from being kept secret and a person can obtain economic value from the use of it.  This case is a good one to illustrate that the economic value of a secret comes not only from its ability to be sold, but from the money and time spent on developing it and the avoidance of the misappropriator from doing the same.  Waymo spent tens of thousands of hours over the years and tens of millions of dollars in the development of their LiDAR system.  Uber, on the other hand, in a classic unfair competition scenario was seemingly able to develop theirs almost instantly at a much lower cost given its use of allegedly purloined Waymo IP and know-how.

Facing little choice if it is to escape its present circumstances and tremendous liability, Uber announced on Tuesday, May 30, that it had fired Anthony Levandowski.  Uber made the decision when Levandowski continued to assert his Fifth Amendment right by refusing to hand over evidence and cooperate in the investigation of the alleged trade secret theft.  On May 15, Uber sent Levandowski a letter requesting his cooperation with Judge Alsup’s May 11 order to conduct an investigation into the stolen materials.  This letter demanded that Levandowski assist in the investigation and instruct his attorneys to cooperate and share information—in other words, Uber demanded that Levandowski waive his Fifth Amdendment rights and attorney-client privilege or face adverse employment action up to and including termination.   Levandowski did not comply with the request and on May 26, Uber sent Levandowski a letter stating that his employment was terminated “for Cause” unless he cured the deficiencies stated within 20 days, or by June 15.  In a rather unique argument, that is iffy at best, Levandowski argues that Uber’s actions are coercive and unconstitutional—that the Preliminary Injunction Order of May 11 wrongly forces him to choose between continued employment and his Fifth Amendment rights.

Life for most employers will not be as complicated as Waymo’s and Uber’s. But the case is stark reminder that failure to engage in preventative due diligence when hiring and protecting trade secrets can have bet the company consequences.

[1] Richard Reice is a partner in HNRK.  Joni Zucker is a summer associate.   ©2017 HNRK

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