Tech Companies Battle Over Trade Secret: Uber vs. Waymo


Intellectual Property

August 1, 2018

By: Paige Mankin

 

Waymo vs. Uber

In 2016, Waymo filed a lawsuit against Uber, alleging that their former employee Anthony Levandowski stole trade secrets from Waymo, Google’s self-driving car project, and transferred them to Uber. After more than a year of a heated public relations campaign and a corresponding legal battle fought on both sides, Waymo accepted a settlement offer from Uber. Uber agreed to a financial deal that conceded about $245 million in company equity to Waymo. Further, it agreed to not integrate any of Waymo’s proprietary information into its software or hardware products.

In January 2016,  Levandowski co-founded the self-driving truck company Otto, which Uber acquired eight months later. Prior to founding Otto, Levandowski worked for Google and co-founded Google’s self-driving car program, Waymo. After selling Otto to Uber, Levandowski joined Uber as the Head of Uber’s self-driving program.

Waymo filed suit alleging that Uber and Otto are using its light detection and ranging radar technology, known as LiDAR. Google also makes specific trade secret law allegations against Levandowski, including an allegation that he downloaded 14,000 confidential Google files before resignation.

In February 2017, Waymo learned that Otto and Uber were building LiDAR components which were strikingly similar to its own proprietary design. They filed this lawsuit against Uber for trade secrets and patent infringements, which finally reached a $245 million settlement in May 2018. 

The highly publicized lawsuit between Waymo and Uber is not an isolated incident; in fact, it is simply one of many similar trade secret theft allegations between tech giants. In 2014, T-Mobile filed against Chinese smartphone maker Huawei for the misappropriation of trade secrets. Similarly, in January 2017, Tesla Motors, Inc. (Tesla) filed a breach of contract suit against former employee Sterling Anderson, alleging that Anderson stole confidential Tesla information.

On the one hand, these cases demonstrate the potentially dishonest and illegal behavior of individual employees. On the other hand, each lawsuit is also an example of a company’s failure to protect its own trade secrets. For example, the way in which Waymo discovered the alleged theft was an especially telling example of failed protection. 

According to the lawsuit, Waymo discovered the alleged theft when it was copied on an email from one of its LiDAR component vendors. The email attached machine drawings of an Uber LiDAR circuit board, which looked strikingly similar to its own. Before receiving the email, Waymo had no idea that one of its former engineers had allegedly stolen the file and brought it to its competitors. This may mean that Waymo did not take sufficient precautions against such intellectual property infringements. 

Trade secret protection is increasingly important in the modern world. As technology advances and work becomes more portable, information has become easier to transfer. This means that companies should implement stronger intellectual property protection strategies to maintain a competitive advantage.

Negligence of trade secret protection is an extremely expensive, and even potentially fatal mistake. Although Waymo reached a settlement with Uber over the dispute, it cost them a lengthy and expensive legal battle, not to mention the risk of exposing or losing the trade secret, which could determine its survival in the self-driving car industry.

In a world with increased technological and employee mobility, innovation-driven businesses should be more cautious than ever to protect their trade secrets. This raises the question: how can companies properly protect their own trade secrets?

 

Trade Secret Law Basics

Before we can properly discuss methods of protection, we should first clarify what a trade secret is:

According to the United States Patent and Trademark Office (USPTO), a trade secret “consists of information and can include a formula, pattern, compilation, program, device, method, technique or process…it must be used in business, and give an opportunity to obtain an economic advantage over competitors who do not know or use it.” There is no accurate reporting of the total number of trade secrets in the United States, though some estimate the total to be around 140 million.

Trade secret protection is a complement to patent protection. Unlike patents, which once filed become public information, trade secrets remain confidential after filing. Another distinction is how long the protection lasts: a company’s utility patent expires after 20 years. On the other hand,  a company that has been granted trade secret protection has the ability to file suits or seek damages for as long as it keeps the trade secret protected and secure. 

Coca-Cola is one example of a company that properly guards their trade secret. Coca-Cola’s protected formula has been a trade secret for over 125 years. The popular myth is that “only two employees are privy to the complete formula at any given time, and they are not permitted to travel together. When one dies, the other must choose a successor within the company and impart the secret to that person. The identity of the two employees in possession of the secret is itself a secret.” (https://www.fileopen.com/blog/classification-and-control-keeping-trade-secrets-secret). Coca-cola also built a museum dedicated to the vault that holds the secret formula. 

Whether the myth stands true, the example demonstrates the crucial principle for trade secret protection: limit access. There are several steps you can take:

  1. Distribute information on a need-to-know basis. 

The less people who know the secret, the less likely it will be leaked.

      2. Restrict both physical and electronic access to the secret information.

For physical access, consider securing paper files in locked safes and shredding documents that contain secret information. You may also mark your documents appropriately as confidential if you decide to maintain physical copies.

For electronic access, there are various strategies that you can take. You may create secure passwords for digitally stored information and wipe computer hard drives and servers. You may also employ copy protection to trace copies, regulate facility access, and  retain the right to review external devices. 

     3. Require confidentiality from new hires and departing employees.

When onboarding new hires, make sure to take precautions to protect your trade secrets as well as avoid infringing on those of others. You may consider requiring new employees to sign non-disclosure agreements, and conduct due diligence to make sure they do not bring with them any confidential information from their former employers. For departing employees, you may consider conducting exit interviews to remind them of their confidentiality agreements.

Trade secret protection is a valuable legal strategy for businesses to protect their competitive edge. Recent trade secret litigation cases serve as good reminders of the high stakes involved in failing to take reasonable measures to maintain your trade secret. It is a good lesson to be learned for big and small businesses alike. As the realities of today’s business world suggest that trade secrets will become increasingly crucial in the coming years, we suggest companies stay informed and updated on the value of intellectual property protection. 

 

Reference:

http://money.cnn.com/2018/02/10/technology/waymo-uber-what-we-learned/index.html

https://www.skadden.com/insights/publications/2018/01/2018-insights/the-rise-of-trade-secret-litigation

http://www.wipo.int/wipo_magazine/en/2016/01/article_0006.html

http://www.acc.com/legalresources/quickcounsel/protecting-your-trade-secrets.cfm

https://www.fileopen.com/blog/classification-and-control-keeping-trade-secrets-secret

images:

https://pixabay.com/en/app-apple-hand-holding-ios-iphone-2941689/

https://pixabay.com/en/navigation-car-drive-road-gps-1048294/

https://pixabay.com/en/coca-cola-bottle-beach-retro-821512/