Uber reaches settlement with Waymo in dispute over trade secrets
After four days of blistering testimony that detailed the alleged theft of Waymo computer files and trade secrets — and Uber’s reaction to it — Uber threw in the towel.
Under a settlement announced Friday, Uber said it has agreed to pay $245 million in Uber equity to Waymo’s parent, Google’s Alphabet.
In a statement posted on its website Friday morning, Uber CEO Dara Khosrowshahi struck a conciliatory tone, expressing regret over the company’s actions.
“To our friends at Alphabet: we are partners, you are an important investor in Uber, and we share a deep belief in the power of technology to change people’s lives for the better,” he wrote. “Of course, we are also competitors. And while we won’t agree on everything going forward, we agree that Uber’s acquisition of Otto could and should have been handled differently.”
Waymo sued Uber in February 2017, alleging that the ride-hailing start-up possessed stolen trade secrets covering driverless car technology.
The trial, which began Monday in U.S. District Court in San Francisco, featured a string of witnesses that cast Uber in a bad light, including damaging testimony from former Uber board member and venture capitalist Bill Gurley, who admitted he did not read key due diligence documents before voting to pay alleged trade secret thieves $592 million.
The money bought a driverless truck company named Otto, run by former Google engineer Anthony Levandowski.
Further testimony on Thursday showed that Uber and the firm that authored the due diligence report, Stroz Friedberg, failed to reveal that Levandowski repeatedly plugged and unplugged devices into the laptop containing Google files, and transferred the files at least two times.
It fit in to the public perception of Uber as a company that plays fast and loose in an aggressive attempt to dominate the market for ride-hailing services around the world.
Khosrowshahi was named CEO in August in large part to boost Uber’s image. Sexual harassment, loose protection of customer data, spying on journalists and encouragement of an over-aggressive bro culture were just a few of the controversies that led the Uber board to force out co-founder Travis Kalanick as CEO in June.
A former Expedia CEO, Khosrowshahi pledged to improve Uber’s image, culture and corporate governance as he prepares for a public stock offering as early as 2019.
Continuing witness testimony and resulting bad press “would have hurt their valuation,” said Rebecca Lindland, an analyst at Kelley Blue Book. It’s “incredibly important that Uber clear their decks, get themselves back on solid footing and get this distraction out of the way,” she said.
While neither company said it won or lost, Kalanick, who remains an Uber board member, expressed vindication and theoretical victory in a prepared statement: “As Uber’s statement indicates, no trade secrets ever came to Uber. … The evidence at trial overwhelmingly proved that, and had the trial proceeded to its conclusion, it is clear Uber would have prevailed.”
Dan Handman, a trade secrets attorney at Hirschfeld Kraemer in Los Angeles, begs to differ. “When you settle a case for this amount of money in the middle of a trial, you do it because you’ll get worse if it goes to a verdict.”
Google was seeking $1.8 billion in damages. Unlike the settlement, which will be paid in Uber equity, damages resulting from a jury verdict would have to be paid in cash, Handman said.
In the settlement, Uber did not admit to any legal wrongdoing.
“To be clear, while 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,” Khosrowshahi said.
Trial testimony made clear that Levandowski downloaded 14,107 proprietary documents from Waymo to his personal laptop before leaving to lead Uber’s self-driving project in January 2016 and copied those files to external devices.
Although those files weren’t found on Uber servers, computer forensics experts testified that the information could be stored practically anywhere.
Waymo charged that the downloaded files contained eight trade secrets that Uber used in laser-sensor technology to try to catch up with Waymo in the potentially hot new market for self-driving cars. If the trial had continued to the end, the jury would have been instructed to determine whether the information was truly trade secrets, and that Uber possessed them.
In its own statement, Waymo said it is committed to “working with Uber to make sure that each company develops its own technology.”
“We have reached an agreement with Uber that we believe will protect Waymo’s intellectual property now and into the future,” the company said.
“We have always believed competition should be fueled by innovation in the labs and on the roads and we look forward to bringing fully self-driving cars to the world.”
In 2013, Google invested in Uber. Kalanick said he thought the two would work together — Google on driverless cars, Uber on ride-hailing. But soon after, Google executives stopped answering his emails, Kalanick testified, before Google struck a deal with Uber arch-foe Lyft.
That’s when Uber launched its own driverless technology program, which, the company said, will continue.
To Evan Rawley, a professor at the University of Minnesota who has followed Uber’s exploits since the company was a start-up, the company is rethinking its decision to go it alone in driverless cars. He expects Uber now to partner with other companies to develop driverless technology, including, perhaps, Waymo. The fact that the settlement is in equity, not cash, is “a golden opportunity for them to align themselves better with (Waymo parent) Google.”
As for Levandowski and others involved in the file downloads, the U.S. Attorney in San Francisco has opened a criminal investigation on the matter.
Feb. 10, 12:45 p.m.: This article has been updated with information about a U.S. attorney’s investigation.
2:45 p.m.: This article was updated with reaction and comments from a trade secrets attorney and a professor.
10:20 a.m.: This article was updated with settlement details and analyst reaction.
9:40 a.m.: This article was updated with testimony from the trial.
8:30 a.m.: This article was updated to include a statement from Waymo and additional comments from Uber CEO Dara Khosrowshahi.
This article was originally published at 8:20 a.m.