Posted: March 18th, 2018
By: Christopher Lewis *| Staff WriterThe business world is predominantly focused on profitability and finding new ways to turn a profit; Uber and Waymo share in this focus. In their quest to build a self-driving car, their respective trade secrets are of the utmost importance as, in most contexts, trade secrets provide a powerful tool that when used properly can exponentially grow the profitability of a business. Trade secrets are often hard to quantify, however, particularly when the accused party did not show a bad faith intent to take the information and use it to their advantage. To help decipher this area of the law, there are many different definitions that have been promulgated by various Restatements. One of the most predominant definitions comes from the Uniform Trade Secrets Act, which states that a trade secret exists when two factors are met: the material derives independent economic value from not being readily ascertainable and the material is under reasonable efforts to keep it secret. This gives the general framework that courts will use in examining these trade secret issues.
On February 5th, 2018, a trial started on various trade secrets claims brought by Waymo alleging that Uber acquired trade secrets belonging to Waymo when it hired a former Waymo employee. The employee, Anthony Levandowski, was alleged to have taken roughly 14,000 different files related to Waymo’s self-driving car data before he left to start his own business, Otto, which was also focused on self-driving cars. It was only seven months later that Uber bought Otto for $680 million. Waymo alleged that when Mr. Levandowski was hired by Uber, he brought the trade secrets with him and has been using them for Uber’s advantage ever since. The reason that Waymo had gone after these trade secrets with such a ferocity is that Waymo and Uber are direct competitors in the field of self-driving cars and these trade secrets could undermine any advantage that Waymo might have on Uber.
As the trial began, Uber was quick to distance itself from Mr. Levandowski noting that he had been fired in May of 2017 for refusing to cooperate with the company. Although, just because Mr. Levandowski was fired did not void the possibility that he had already given the trade secrets to Uber, and, therefore, the trial went on. As the case approached the jury trial, however, the court dismissed all but 8 of the 120 plus claims of stolen trade secrets, and internal emails showed that Waymo was losing confidence in the suit. This signified a huge shift in the perception of this case as previously the case had seemed to be almost insurmountable for Uber. In addition, Uber had been asserting that the protected information that was brought over by Mr. Levandowski had actually provided very little benefit to their self-driving car program and expressed regret for bringing him on board. Both of these factors served to decrease the chances that the damages would be high if Waymo won.
Consequently, on February 9th, 2018, Uber and Waymo announced that they had reached a settlement in their trade secrets case. In the end, this seemed to be a fairly even settlement as Waymo was able to ascertain that Uber was not currently using the majority of its trade secrets and gained reassurances that Uber would not use any in the future. As for Uber, they were able to avoid an exorbitant payout and instead only handed over to Waymo a 0.34% stake in the company which is valued at $245 million. One important factor that also weighs heavily in the favor of both parties is that by settling they both avoided revealing any more of their trade secrets which, as mentioned above, could cause them to lose their trade secret status. Often, just the fact that the parties are litigating a trade secrets issue can cause trade secrets to be revealed to the public and lose their protection.
Christopher is a Second-Year Law Student at Wake Forest University where he is a staff member on the Journal of Business and Intellectual Property Law. He is an alumnus of Clemson University where he graduated cum laude with a major in electrical engineering and a minor in mathematics. Christopher plans to pursue a career in Intellectual Property Law upon graduating.