Uber and Waymo Settle Trade Secrets Suit Over Driverless Cars
Posted February 9, 2018 8:08 p.m. EST
Updated February 9, 2018 8:13 p.m. EST
SAN FRANCISCO — Waymo and Uber settled their legal fight Friday, nearly a year after Waymo first accused the ride-hailing company of plotting to steal important self-driving car technology.
After four days of arguments and testimony in U.S. District Court here, Uber agreed to provide Waymo, the self-driving car unit under Google’s parent company, Alphabet, with 0.34 percent of its stock. According to Waymo, the settlement’s terms value Uber at $72 billion, meaning the Alphabet unit’s stake is worth about $245 million.
The settlement closes a legal fight that riveted Silicon Valley. It pitted the most successful company from the dot-com era against this generation’s biggest startup in a fight over autonomous vehicles — a potentially trillion-dollar industry that is expected to transform transportation.
The trial also offered a peek into how Silicon Valley really works: the rise of promising startups that challenge incumbents; the inner workings of rich, but often chaotic, technology companies; the complicated rivalries among billionaire tech entrepreneurs; and the costly competition for engineering talent.
The dispute between the two companies started in 2016 after Uber acquired Otto, a startup making self-driving trucks that was founded by Anthony Levandowski, an early member of Google’s self-driving car project. Uber agreed to pay a reported $590 million for Otto just six months after it was founded.
But Waymo — which was spun out from Google in late 2016 — claimed the deal was part of a plan to steal its laser-sensor technology, a key component for operating self-driving cars. Levandowski had begun talking with Travis Kalanick, Uber’s chief executive at the time, about the possibility of working together on autonomous-vehicle technology while he was still employed at Google, according to evidence presented at the trial.
Levandowski was accused of downloading thousands of Google files related to self-driving car technology before he left the company. Uber learned about what he had done but still went ahead with the deal, Waymo claimed. That was the basis of Waymo’s claim that Uber had misappropriated eight trade secrets related mainly to LIDAR — an abbreviation for “light detection and ranging” — sensors that help self-driving cars see the world around them.
The first few days of the trial revealed a number of embarrassing details connecting Uber with Levandowski. However, Waymo had yet to deliver on the substantive legal part of the argument that Uber knowingly stole Waymo’s trade secrets for use in its products. Judge William Alsup admonished Waymo’s lawyers Wednesday for not having made much progress on its trade secret misappropriation claims.
Before the trial started, Uber offered to settle with Waymo in exchange for 0.68 percent of the company’s equity, or about $500 million, but its board of directors pulled the offer and allowed Kalanick to testify, according to two people familiar with Uber’s thinking who were not authorized to speak publicly on the matter.
After testimony Thursday, settlement talks restarted, and Uber offered the lower percentage, these people said. For Waymo, the financial terms were not as important as scoring concessions on not using Waymo’s technology, said a person familiar with Waymo’s deliberations who was not authorized to discuss them.
The settlement included an agreement that none of Waymo’s confidential information was being incorporated in Uber’s autonomous vehicle technology. After almost a decade of work on self-driving cars, the Uber stake may be the first substantial money that Waymo has made from the technology. Alphabet was already a major investor in Uber through its venture capital arm, GV. It has also made a billion-dollar investment in Uber’s main rival in the United States, Lyft.
Although it settled the lawsuit, Waymo’s court fight may have succeeded in embarrassing a rival while delivering an unspoken warning to former and current employees to be cautious about leaving the company with know-how developed there. It also struck a deal before Larry Page, Alphabet’s chief executive, who rarely speaks in public, had to testify in court next week.
Waymo’s lawyers presented evidence that entertained the throngs of technology reporters gathered to cover the trial, including texts and emails between Levandowski and Kalanick using chest-puffing terms like “burn the village” and “second place is first” loser. There were also pictures of notes on whiteboards from a brainstorming “jam sesh” led by Kalanick, declaring, among other things, that “laser is the sauce.”
The settlement helps resolve one of Uber’s many lingering issues from Kalanick’s tumultuous time as chief executive, which ended in June. His successor, Dara Khosrowshahi, has said he hopes to change the perception that Uber has been too quick to break rules.
The settlement also clears away a significant legal risk as Uber prepares for an expected initial public offering. It is still dealing with a Department of Justice investigation into its business practices. Although the company insists it did not take any Waymo trade secrets, Khosrowshahi said in a statement that he regretted the events that led to the litigation.
“My job as Uber’s CEO is to set the course for the future of the company: innovating and growing responsibly, as well as acknowledging and correcting mistakes of the past,” he said in the statement. “The prospect that a couple of Waymo employees may have inappropriately solicited others to join Otto, and that they may have potentially left with Google files in their possession, in retrospect, raised some hard questions.”
Kalanick released a statement that was not nearly as conciliatory.
“No trade secrets ever came to Uber,” the statement said. “The evidence at trial overwhelmingly proved that, and had the trial proceeded to its conclusion, it is clear Uber would have prevailed.” The loser in the legal proceeding may be Levandowski, who was fired by Uber over his refusal to cooperate with the company’s defense. An Uber spokesman, Matt Kallman, said the company had fired Levandowski in May before Otto could meet any of its performance targets. As a result, he lost out on an estimated $250 million worth of equity in Uber — almost exactly how much Uber paid Waymo.
Alsup referred Levandowski’s case to the Justice Department, although it was not clear whether a criminal case was being pursued against him. Levandowski, who received a $120 million bonus for his work on Google’s self-driving car, was expected to refuse to answer questions if he had taken the stand as scheduled next week.