This week’s IP Matters is all about trade secrets over self-driving car technology in a very competitive and lucrative industry. It’s between Alphabet subsidiary Waymo and Uber.
Alphabet subsidiary Waymo wanted $2.6 billion in damages from Uber for allegedly stealing a single trade secret on self-driving cars.
The $2.6 billion damages is only for one of the nine trade secrets Waymo claimed a former executive of the stole. According to Alphabet, after a former executive, Anthony Levandowski, had launched his own self-driving startup Otto, he downloaded 14,000 files from Waymo and took them to Uber.
Uber denied the allegation. It maintained that none of the downloaded files got to Uber. It described Alphabet’s $2.6 billion damages as not only “inflated” but also “based entirely on speculative future profits and cost savings in a nascent market.”
Before the fifth day of the trade-secret infringement trial, Waymo accepted $245 million in Uber shares for settlement of the dispute.
For months, while Waymo struggled to prove its case, details about both companies flew from the trial room to the media and the public. Details of both companies’ settlement negotiations were also flying out of the boardroom. Waymo had offered to accept $1 billion settlement from Uber. Uber didn’t bite. Waymo slashed the settlement offer by half. Uber still didn’t bite. The parties proceeded to trial.
But before the case was going to proceed to trial, Waymo accepted to settle: $245 million in Uber shares. This is a little less than 10% of the damages Waymo had sued for.
Uber’s need to save the brand from too many ugly lawsuits may have informed this settlement.
While the trial lasted, Uber had put up a strong defense against Waymo’s allegation, showing that none of the Waymo’s trade-secret files found their way to Uber. So Uber’s eventual decision tosettle came as a surprise to many.
But for a company that has been having the worse of times with lawsuits, Uber’s out-of-court settlement may have been understandably informed by the need for the ride-hailing company to ensure that its self-driving software, Lidar, doesn’t remain held back by long trials.
Below are some pertinent points from the Waymo-Uber trade-secrets infringement suit:
- Avoid lawsuits especially when you need to get to the market before your competitors: Alphabet’s Waymo sued Uber early last year. In less than a year, this lawsuit has cost Uber 3 major things. First, it has wasted Uber’s time by delaying Uber’s kick of the ball in a competitiveand lucrative self-driving car market. Second, Uber had to fire Levandowski, its self-driving team leader. (When you play big in a market like the US, you can’t afford not to fire the man who brought termite-infested wood into your home, to borrow one of Chinua Achebe’s proverb.) Third, apart from having to let go of some of its shares, Uber’s long-term profits must have been affected.
- When heavyweights leave your company, ensure they didn’t take your trade secrets along with them: Waymo didn’t sue Uber until it discovered that its former engineer Anthony Levandowski had been hired by Uber to lead Uber’s self-driving car project. With thousands of documents in his possession, Waymo reasonably sniffed a rat. Learn when to sniff a rat in your business. It will save your business a lot of trouble.
- A company—especially technology companies—must have an intelligent system for keeping trade secrets ‘secret’: Waymo suspected Levandowski because it discovered Levandowski had accessed its trademark secrets. It also discovered that Levandowski had downloaded over 14,000 confidential files just before leaving Waymo. If Waymo couldn’t trace the downloads on its server, I doubt it would have been able to push its case against Uber this far.
- Unlike copyright which—apart from originality—requires that the infringing element must have been expressed in a fixed medium, trade secrets don’t always require this. This is one of the reasons why trade secrets are so delicate. However confident Uber is about its claim that it never used any of Waymo’s trade secrets, Uber may have decided to still settle the matter because of the circumstances surrounding its inclusion of Levandowski in its self-driving car team. Levandowski’s team-leader position in Uber’s self-driving run is a vital fact. Even if Levandowski never used any of the over 14,000 secret files he downloaded from Waymo servers, he must have acquired sizeable knowledge about Waymo’s self-driving car technology. So whether oral or written, knowledge shared with his new team at Uber may be held adequate to hold Uber by the tail, if not by the neck. So Waymo’s self-driving trade secrets in Levandowski’s mind alone is adequate to find possible infringements.
- Nigeria does not have any trade-secrets protection law: Unlike the regime in the United States where the scenario above took place, there is no legislation on trade secrets in Nigeria. This has legal implications. First, for your trade secrets to be protected in Nigeria, it must be either under contract or a tort.Trade-secret protection becomes contractual when you include relevant clauses in your business contracts, employment contracts, and other contractual documents aimed at protecting your trade secrets or restricting confidential information. When Nigeria decides to have a trade-secrets law, it may create both civil and criminal liabilities, just as the Nigerian Copyright Act has done.
I will now briefly point out what your technology company or business can take away from this week’s IP Matters:
- Trade secrets give your businesses competitive edge: Trade secrets—though not strictly a type of intellectual property—have become one of the most vital assets of businesses today. How your business protects them will increasingly matter as today’s business environmental gets increasingly competitive and disruptive.
- Keep third parties out by observing due diligence before acquiring any company or technology: Technology businesses—whether big or small—need to be vigilant when buying up any business, or technology, otherwise they may end up buying themselves reputation-destroying lawsuits. Uber purchased Levandowski’s Otto company six months after he had left Waymo as head of its research team for years. Uber bought Otto for $680 million. This was one of Uber’s big mistakes—it failed to conduct due diligence before buying Levandowski’s Otto.
- Before hiring a major employee or executive from any of your competitors, be extra cautious: Not all employees or executives are free of legal risks. This is especially so with industries where the entire infrastructure of a business is built on IP or the business is entirely IP business. From an IP-protection angle, that new partner or employee you are bringing into your team may be a risk to your business. So always do your checks. When Uber paid $250 million of Uber stock to Levandowski to join and lead Uber’s self-driving car team, little did Uber know it was going to pay another $245 million in Uber stock to Waymo to clean up Levandowski’s mess. Uber hired a lawsuit!
- Many businesses are not protecting their trade secrets, consequently creating avoidable risks for their businesses. Even many more are unaware that certain components of their business operations or business methods are indeed their trademark secrets, thus creating needless competitors for themselves.
In IP matters, it’s never too early because IP matters to business and development, any day.