Waymo And Uber Head For A Self-Driving Car Crash In Court

Both companies have a lot to lose.

By Joel Rosenblatt
Bloomberg Businessweek 

September 8, 2017

There’s a month to go before the trial starts, but in many ways Waymo can already count its trade-secrets lawsuit against Uber Technologies Inc. as a win. The unusually speedy pretrial discovery process has yielded a steady drip of embarrassing revelations for Uber. It’s forced the ride-hailing company to fire the head of its driverless car division. And it’s contributed to the ouster of Uber Chief Executive Officer Travis Kalanick, now the most highly anticipated witness in a case that could reshape the nascent market for self-driving car technology.

But Waymo, the company formed from the Google Inc. self-driving car project, hasn’t won yet. There are no more fact discovery hearings before the trial begins on Oct. 10, and Waymo is running out of time to locate the 14,000 computer files it claims engineer Anthony Levandowski stole while in its employ and transferred to Uber’s driverless program, which he took over last year. Without that smoking gun, Waymo, a unit of Alphabet Inc., may have a tough time directly tying Levandowski’s actions to Uber’s alleged trade-secret theft, forcing it to try to convince a jury using strong but circumstantial evidence.

“They didn’t sue the guy who supposedly committed this great theft,” says Arturo González, a lawyer for Uber, which has denied using Waymo’s trade secrets. “It’s like your neighbor steals your lawn mower, and instead of suing him, you sue the guy who bought it at the auction.”

Uber hasn’t exactly been upfront about the evidence in this case. U.S. District Judge William Alsup has repeatedly upbraided the company for misleading him about the trail of evidence and its often-clandestine early dealings with Levandowski, including the 2016 acquisition of his self-driving truck company, Otto, for $680 million in stock. Emails between Uber executives and lawyers show “they knew good and well what they were getting into with Mr. Levandowski,” the judge said during a hearing on July 26. “It’s a mess of your own making.”

Levandowski has refused to testify, asserting his constitutional right against self-incrimination. His lawyer, Miles Ehrlich, declined to comment for this story. In May, Alsup referred the lawsuit to federal prosecutors for possible investigation. So far, no criminal case has materialized.

“If you can’t prove that Uber got these trade secrets, then, you know, maybe you’re in a world of trouble”

Like Uber’s lawyer, Alsup has also warned Waymo that while it’s made a compelling case that Levandowski took the 14,000 files, it needs to prove more than that to sway a jury. “If you can’t prove that Uber got these trade secrets, then, you know, maybe you’re in a world of trouble,” he said during the July 26 hearing.

Absent an explicit trail of evidence, Waymo is betting it can persuade jurors that a comparison of its designs with Uber’s is sufficiently damning. “We have documentary, physical, and testimonial evidence showing the specific use of multiple Waymo trade secrets, specific pieces of technology, that can be found copied in Uber’s,” says Charles Verhoeven, Waymo’s lead trial lawyer. Most important: the laser-radar technology known as lidar, which helps driverless cars navigate obstacles and one another. “This is an intentional scheme to steal technology that goes to the top of the company,” Verhoeven says. “All Waymo wants is for its trade secrets not to be used.”

Kalanick’s testimony may prove pivotal because he and Levandowski were close, going on long walks together as they planned the future of Uber’s self-driving car program. The two met before Levandowski left Waymo, raising questions about whether they conspired to bring Waymo’s technology to Uber.

Google parent Alphabet doesn’t have a reputation for sore-loser litigiousness or even for particularly caring about much of its intellectual property; it paints itself more as a for-profit academy where knowledge is the priority. It’s been rare for the company to use its IP, which includes thousands of patents, to attack competitors. Driverless cars, however, seem to have hit a nerve.

Just before Christmas, Alphabet sued another former employee for allegedly taking trade secrets to driverless-technology company Drive.ai. A former Google employee who’s raising money for another autonomous driving startup says he’s had to field unusually pointed questions from investors worried about the possibility of a legal threat, even though he didn’t work on Google’s self-driving project. (He declined to speak publicly for fear of retribution from Alphabet.)

“If Waymo loses the lawsuit against Uber, it’s possible that folks will start to question whether Waymo has lost its competitive edge,” says Eric Goldman, a professor at Santa Clara University School of Law who focuses on internet and intellectual-property cases. And there’s a lot more competition than there used to be.

When Uber first began its self-driving effort in 2015, Google’s project “seemed to be the only game in town,” says Mike Ramsey, an auto analyst at researcher Gartner Inc. Ramsey estimates that some 50 companies are now working in autonomous driving. “A lot of things have changed since then,” he says. In those two years, General Motors Co. and Ford Motor Co. have each paid hundreds of millions of dollars to buy self-driving companies. And since Waymo sued Uber, Fiat Chrysler Automobiles NV, Waymo’s initial car partner, has formed a self-driving partnership with BMW AG. Chris Urmson, Waymo’s former top executive, is also raising money for his own company, another likely competitor.

Whether or not Waymo wins its lawsuit, it’s fair to wonder if Uber will stay in the race. Incoming CEO Dara Khosrowshahi, the former head of travel site Expedia Inc., has a long list of business and cultural problems to resolve. While driverless cars were an obsession for Kalanick, Khosrowshahi may not have the same love for an unproven technology that has hall-of-fame liabilities attached. “It’s like Delta owning special jet-engine technology,” says Ramsey, who suggests Uber may stop trying to build its own lidar and other components, instead waiting for them to become cheap enough to be interchangeable.

In his first address to new employees, on Aug. 30, Khosrowshahi said he’s most interested in making the company a better ride-hailing company. “Especially in times of trouble, you really want to focus on the core,” he said, according to comments released by a spokesperson. “The core of this business is what’s going to pay the bills.”

Now that Kalanick, Waymo’s hostile star witness, isn’t running Uber, might the companies settle the suit and ignore a bruising trial? Maybe. That would, for example, remove the threat that the case could embarrass Alphabet executives on the witness stand. But Khosrowshahi, after all, was hired by the board of Uber, where Kalanick remains a force bigger than the director’s seat he continues to occupy. “I’m a fighter,” Khosrowshahi told his staff in that first address. “I am all in, and I’m going to fight for you with everything in my body.”

BOTTOM LINE - While Waymo has put Uber on the defensive during pretrial proceedings, it could fail to win over a jury, and it has a lot of fresh competition in driverless technology.
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Waymo And Uber Head For A Self-Driving Car Crash In Court

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