[BreachExchange] After the sudden end of a dramatic trial, the key takeaways from Waymo v Uber

[Audrey McNeil]

http://www.iam-media.com/blog/Detail.aspx?g=fb42a26a-4161-
4b8e-a069-4fd810b1efa0

Waymo v Uber was shaping up to be one of the trials of the year when it
abruptly came to a halt late last week after the two sides reached a
settlement to their trade secret dispute.

Under the terms of the agreement, Uber will give the Alphabet-owned company
0.34% of its equity (which is the equivalent of around $245 million) and
has promised that none of Waymo’s confidential information will be
incorporated into the ride-sharing company’s hardware or software.  “We
have reached an agreement with Uber that we believe will protect Waymo’s
intellectual property now and into the future,” Waymo trumpeted in a
statement.

So who came out on top and what can we learn from this high-stakes
courtroom tussle? Here are some of the key takeaways that IP execs may want
to reflect on:

A sign of things to come?

One of the things that was so startling about this case from the off was
that it was an Alphabet business using its IP rights to go on the
offensive. When it comes to IP assertion, the tech giant has litigated very
rarely. Google did pursue a patent infringement suit against BT but that
was only after the British company had transferred patents to a third party
which had then used them to sue the US company. So does the Uber suit point
to a more litigious future for Google in the short term?

That might be a stretch, but the Uber case does show the extremely high
stakes that are being played for as autonomous vehicle technology continues
to be developed by auto sector incumbents and a band of established and
start-up tech businesses. That means that any company in this emerging
sector should be looking to jealously guard its IP, be it via patents or
trade secrets. This, of course, raises the spectre of more legal spats.

“It’s a naïve fantasy to think that if only everyone understood the rules
we wouldn’t get cases like this — people’s judgement gets clouded and they
miscalculate,” comments trade secrets expert James Pooley. “You see that
particularly in fast moving industries where there can be a small pool of
talent to recruit from.”

What’s more, as is the case for any emerging technology, there are going to
be winners and losers in the race to commercialise autonomous vehicles. The
history of the tech sector is full of examples of companies that pioneered
a particular innovation, but failed to reap the profits as they were
surpassed by hungrier and often more nimble competitors. Those losers will
undoubtedly still like to see some sort of return on the millions of
dollars they have invested into R&D - which could mean that they look to
assert their stockpiles of IP through the courts.

The bottom line, here, is that Alphabet has used its IP as a plaintiff to
secure an outcome that helps its business objectives. As its operations
continue to expand into new areas and its R&D investments grow, it is
unlikely to be the last time this happens.

That’s settled

Even by the standards of trade secrets disputes - affairs frequently riven
with emotion that lay bare some of the juiciest aspects of corporate
intrigue - Waymo v Uber was a particularly gripping spectacle. In court we
had the spectacle of former Uber CEO Travis Kalanick running through his
own lexicon of corporate jargon and declarations such as “laser is the
sauce”. Before the case even reached court there was a drip-drip of juicy
insider tidbits such as those in the Jacobs letter, a 37-page document
compiled by the lawyer for a former Uber employee, which detailed various
allegedly questionable practices at the company, including how it gathered
information on competitors.

It’s disclosures like those that can make litigation so unappealing and
often drive the two sides to a settlement. “When they get started trade
secret cases are generally fuelled by a lot of emotion, even when the
players involved are very big companies,” says Pooley. “Decision makers are
aware of what’s at stake and trade secret cases, unlike patent disputes,
are about fault.”

Over time, Pooley says, those strong emotions can lessen and the interest
in pursuing what can be a high-profile courtroom dispute wanes. That may
have been particularly true in this case where Uber CEO Kalanick was forced
out part way through and his replacement was presumably less attached to
seeing the case through to a bitter conclusion.

“For a business, particularly a high-tech, fast growing company, a lawsuit
is about history and what they’re doing is about the future,” Pooley
reflects. “Sooner or later the inclination to settle is going to over-take
the willingness to fight.”

Who won?

Neither side landed a knockout blow and both can take some positives out of
the settlement.

For Uber it closes a messy dispute which had led to much of the
barnstorming start-up’s dirty laundry being aired in public. This
settlement gives the new CEO an opportunity to draw a line under what has
been a particularly tumultuous time for the company and focus instead on
what could be a multi-billion dollar IPO next year. What isn’t certain is
how much this dispute has set back Uber’s own self driving project — that
will only become clearer once we start to see more autonomous vehicles on
the road.

For Waymo, the case has seen star engineer (and former Waymo employee)
Anthony Levandowski forced out of Uber, while it has managed to closely
guard its technology and ensure that its self-driving rival doesn’t receive
a valuable leg-up in the race to dominate the market for autonomous
vehicles.

Alphabet reportedly turned down a higher settlement offer to ensure that
the agreement included assurances from its courtroom rival that
confidential information from Waymo would not be incorporated into Uber’s
technology.  That should prove far more valuable than a settlement
involving an extra few hundred million dollars.

So for those keeping a tally we’ll put this one down to, in English
football parlance, a score draw (also known as a tie for our American
readers).

Into the C-suite

For the IP cognoscenti, it has been clear for some time that trade secrets
have moved up the chain in terms of their importance. That’s in large part
due to a 2016 piece of legislation that meant that their theft could be
pursued more easily at the federal level.

If the wider corporate community weren’t aware of the risks associated with
trade secret theft before, there’s no getting away from it now.

This case has shown that for a much wider range of businesses than ever
before, trade secrets can’t simply be the domain of the chief IP counsel –
every senior exec from the CEO down should be aware of the risks,
particularly when making high-profile hires.

This case has also happened at a time when patent rights in the US have
become substantially weaker, so businesses now arguably have far greater
incentive to protect more of their IP via trade secrets rather than patent
filings. Uber’s and Waymo’s days in court have placed trade secrets firmly
on the corporate radar.

What next for Waymo and Uber?

The settlement gives Alphabet a greater financial interest in Uber’s
success (Google was an early investor in the ride-sharing business) and
draws a line under a messy chapter between two companies that had once been
close (Alphabet’s top in-house lawyer had previously sat on Uber’s board).

At a time when IP value creation for several big tech companies is about
collaboration rather than assertion might we see a new era of cooperation
between the recent courtroom rivals? In a statement Waymo declared that:
“We are committed to working with Uber to make sure that each company
develops its own technology.” In other words Uber should keep its hands off
its competitor’s innovations.

But if Waymo keeps its lead in the development of autonomous vehicles, then
the end result might be that Uber is once again forced to the negotiating
table, only this time to agree a licensing deal for the search giant’s tech
and vast trove of IP.
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