Waymo and Uber end trial with sudden $244 million settlement

Uber promises to make sure that none of Waymo’s software, hardware is used.

Cyrus Farivar – Feb 9, 2018 11:03 am | 209

Autodesk VRED Design 2017. Credit: Waymo

In a stunning turn, Waymo and Uber have settled their self-driving trade secrets lawsuit on the fifth day of the trial.

Ars has learned that Uber has agreed to pay out 0.34 percent of Uber’s equity, with a $72 billion valuation, resulting in a payout of over $244 million. That same source noted that had this settlement been a jury verdict, it would have been the fourth highest jury verdict for trade secret misappropriation reported in the last decade in United States.

In a statement, Waymo said: “We have reached an agreement with Uber that we believe will protect Waymo’s intellectual property now and into the future. We are committed to working with Uber to make sure that each company develops its own technology. This includes an agreement to ensure that any Waymo confidential information is not being incorporated in Uber Advanced Technologies Group hardware and software. 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.”

For his part, Uber CEO Dara Khosrowshahi wrote in a public statement that “while we won’t agree on everything going forward, we agree that Uber’s acquisition of Otto could and should have been handled differently.”

He continued: “But 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. 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.”

A source close to the deal told Ars that the settlement is a “significant haircut” over the initially proposed arrangement of $1 billion.

The two companies will now continue to compete in self-driving and ridesharing, in what Khosrowshahi called the “great race to build the future.”

Still, at least some outside attorneys not involved with the case suggest that there must be some questionable behavior.

“A settlement like this is unusual if trade secrets hadn’t been taken and some kind of activity that people would deem to be improper,” Sam P. Israel, a New York-based attorney who has extensive experience in this area of the law, told Ars.

“I think people are going to be a little bit more careful to make sure that if they’re going to misappropriate somebody’s trade secrets than apparently happened here and they move quicker to get it patented.”

How we got here

Waymo filed the lawsuit nearly a year ago, accusing one of its former engineers, Anthony Levandowski, of downloading 14,000 files (9.7GB of data) before abruptly resigning from the company in January 2017.

Levandowski then formed a company, Ottomotto, which was eventually acquired by Uber for an astonishing $680 million just a few months later. Uber maintained that it hasn’t improperly benefited from what Levandowski took. In fact, since this case began, Uber even fired Levandowski because he would not comply with subpoenas.

Moreover, Levandowski was expected to be called to the witness stand as Waymo’s final witness on Friday, but he was unlikely to say anything of substance, as he had previously invoked his Fifth Amendment privilege. Waymo still has an arbitration claim pending against him.

Exactly what precise trade secrets Uber is accused of taking remains publicly unknown. For Waymo, showing that what Uber acquired was indeed a trade secret and that it was misappropriated wasn’t a slam dunk, which may be why the case ultimately settled.

Uber is still facing an ongoing criminal probe as the result of questionable activities that its former and current employees were alleged to have engaged in, possibly including illegal wiretapping, hacking, and more. US District Judge William Alsup issued constant reminders in both his written orders and in-court instructions that the case was to be solely focused on the misappropriation of eight alleged trade secrets and “not whether or not Uber is an evil corporation.”

Since Dara Khosrowshahi took over last year as Uber CEO from co-founder Travis Kalanick (who appeared as a witness earlier in the week), he has had to now apologize twice for his company’s behavior. In November 2017, Khosrowshahi disclosed that Uber had paid out hackers who spirited away data on 57 million customers and drivers in 2016, and the company fired two top security executives.

In a statement released shortly after the Friday court session concluded, Kalanick said: “had the trial proceeded to its conclusion, it is clear Uber would have prevailed.”

Had the case continued, the losing party likely would have appealed, which could have dragged out for years and may have involved a new trial. That would have been particularly difficult for Uber, as the company is expected to hold its initial public offering later this year or in 2019.