waymo_largeThere have been two significant developments in the Waymo lawsuit against Uber, which is unquestionably the highest profile trade secrets case of the year.  In the first ruling, U.S. District Court William Alsup referred the record of the case to the U.S. Attorney’s office for investigation of possible theft of trade secrets.  In the second, Judge Alsup released a copy of his opinion yesterday explaining the injunction that he entered against Uber last week.  Significantly, Judge Alsup declined Waymo’s primary request to shut down Uber’s driverless car business.

Instead, he ordered that Uber continue to quarantine former Waymo engineer Anthony Levandowski from its development of Uber’s Lidar technology, the technology that was the subject of the trade secrets he was alleged to have stolen.  Judge Alsup declined to shutdown of Uber’s driverless program because Waymo could not establish that Uber had used the trade secrets that Levandowski allegedly took with him.

Referring the record for a pending civil case to the local federal prosecutor is highly unusual (in fact, I can’t remember it being done) and appears to be directed at Levandowski and his other former Waymo colleagues who joined him at Uber.  However, the injunction looks like a victory for Uber, at least at this early stage in the proceeding.

Background:  The case arises out of Waymo’s claims that Levandowski stole trade secrets for its driverless technology and used them to help jumpstart Uber’s driverless program.  Levendowski left Waymo in January 2016, and started his own company Otto Trucking, which Uber acquired several months later for $680 million.  After several other Waymo employees left to join Levandowski at Uber, Waymo began to suspect that Levandowski might be using its confidential information; Waymo conducted a forensic review of his work computer and discovered that Levandowski had taken over 14,000 confidential files, including trade secrets for its proprietary LiDAR technology.  LiDAR centers around the laser sensors that are apparently critical to detecting objects surrounding the driverless vehicle.

The dispute took a serious turn when a vendor of Uber inadvertently sent an email to Waymo in December 2016 that included drawings that appeared to incorporate Waymo’s LiDAR technology.  As a result, Waymo filed its lawsuit in February 2017 and followed up with a request for an injunction to shutdown Uber’s driverless car business in March.  The parties have been battling over discovery since that time; while many of the key documents, evidence and allegations are under seal because they may contain confidential or trade secret information, it appears that Uber’s primary defense was that its technology was very different from that of Waymo, that it had not used Waymo’s LiDAR technology, and that it had independently developed its own version of LiDAR.

Why Didn’t Judge Alsup Shut Down Uber’s Driverless Car Business?  At the end of the day, despite extensive expedited discovery, Waymo could not prove that Uber was using the trade secrets that Levandowski took with him.  Uber’s belated decision to recuse Levandowski from the development of its version of LiDAR (which took place after the lawsuit and injunction request were filed) also seems to have been influential in Judge Alsup’s decision.

In addition, Judge Alsup expressed some concern over the scope and breadth of the information that Waymo claimed was a trade secret.  In a footnote, Judge Alsup described “Waymo’s overreaching attempt to sweep into the ambit of trade secret protection general approaches and principles far broader than its actual [LiDAR] design” and he said he would factor that into the relief that he actually granted.  In other words, he wasn’t convinced that the underlying trade secrets justified such a broad injunction.

However, Judge Alsup held that “the evidence indicates that, during the acquisition, Uber likely knew or at least should have known that Levandowski had taken and retained possession of Waymo’s confidential files.”  He noted that while Uber had entered into agreements or acknowledgements with other former Waymo employees that they would safeguard Waymo’s trade secrets, such agreements were absent in the hiring and supervision of Levandowski.  For these reasons and the fact that Levandowski was now “radioactive” due to the 14,000 files, Judge Alsup ordered that Levandowski be removed from any role or responsibility relating to LiDAR and that Uber was to take all steps in its power to prevent him from having any communications with anyone else at Uber.

In addition to formalizing the quarantine of Levandowski, Judge Alsup ordered additional expedited discovery, including a broad order allowing Waymo’s counsel and its expert to “inspect any and all aspects of defendants’ ongoing work involving LiDAR.”  Judge Alsup also has required Uber to conduct a thorough investigation and provide an accounting to the court of what was downloaded and who may have seen or heard about the Waymo LiDAR.  Consequently, if the report and accounting differ from the version of events provided by Uber, Judge Alsup retains the ability to modify or expand his order, perhaps event to then shutdown Uber’s driverless operations.

What Does the Criminal Referral Mean?  As I noted above, this move is highly unusual in trade secret cases.  Don’t underestimate the impact of Levendowski’s Fifth Amendment invocation, a development that is also highly unusual.  In most trade secret cases, the defendant testifies about what he or she did and challenges the bona fides of the trade secrets at issue.  For example, they frequently dispute that the information was a trade secret, or that it was adequately protected; they will frequently claim it was publicly available or that is well known in the industry, or that they had some ownership interest in the confidential information.

However, the circumstances of Levandowski’s alleged theft and the volume of the information (14,000 files) means that at least some of the information may have been highly valuable and proprietary and that these types of defenses may have been very difficult to make as to all of the files and information.  In his order denying Uber’s motion to compel arbitration, Judge Alsup hinted at the significance of Levandowski’s Fifth Amendment invocation, noting how it had frustrated both parties’ ability to provide a full record of what happened so that he could effectively rule on the injunction requested by Waymo.

As for Uber, it seems unlikely that the criminal referral puts it at risk, again at least at the moment.  Judge Alsup took pains to note the absence of a smoking gun at the last public hearing, a statement that suggests that there was no evidence Uber was involved in the underlying misappropriation.  However, other former employees from Uber may find themselves at risk since they did send documents to their personal email accounts (although they contend that they did it in furtherance of their duties at Waymo).

Takeaways?  Uber is not out of the woods yet but if the record supports what it has told the Court, it should be able to avoid a shutdown of its development of the LiDAR technology.  Injunctions of this nature are very difficult to secure, and are generally only issued when the new employer is extensively involved in orchestrating the theft of trade secrets or where there is clearly a pattern of circumstantial evidence that suggests that they were (or should have been) aware that multiple employees were using their former employer’s trade secrets.   Based on the present record, it does not appear that Uber was involved to that degree.

However, the Court was clearly troubled by the transfer of the 14,000 files and Levandowski’s invocation of his Fifth Amendment privilege against self-incrimination.  As a practical matter, Levandowski is likely finished as an engineer or supervisor at Uber as the Court’s criminal referral was directed at him.

The next big date is June 23, 2017, when Uber will be required to provide its detailed accounting under oath setting forth who has seen or heard any part of the downloaded materials.