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16 February 2018

Uber settles Waymo case in abrupt fashion, blushes spared?

The Waymo-Uber case has been settled, in an abrupt fashion that throws up a lot of questions. The deal is worth around $245m in Uber stock, or just 0.34% of the company – which currently values itself at an extremely inflated $72bn. Reuters had previously claimed that Waymo was seeking $1bn in cash, which would have been very problematic for Uber – a company that does most of its deals in stock, and is believed to hold very little cash.

Uber also rejected a $500m settlement earlier this week, which means that Waymo is now settling for only around 25% of what it apparently initially wanted – which is still pocket change for a company of its size. Part of the current agreement includes a promise that Uber will collaborate with Google to ensure that no IP is being used in Uber’s systems, which could be a valuable peek behind the curtain for Google/Waymo. Uber has always maintained that it does not use any Google IP.

It was a very abrupt end to a case that was expected to last weeks, and which was filed way back in January 2017. Both sides will have wanted to avoid gambling on the conclusion of a jury, which can be rather unpredictable in technology cases like this, but it seems that either Uber lost its nerve (probably at the potential PR nightmare of having ex-CEO Travis Kalanick examined on the witness stand for two days), or that Waymo has conceded that it wasn’t going to win the case.

Waymo is trying to defend what appears to be a significant technical lead in the LiDAR market, with its 64-laser Grizzly Bear 3 (GBR-3) unit said to cost around $4,000 – a fraction of the $75,000 equivalent that the likes of Velodyne offers (although the automotive industry is working hard to manage this feat internally).

Back in December 2016, a Gorilla Circuits staffer accidentally forwarded an email to someone at Waymo, instead of the intended recipient at Otto. The Waymo employee recognized a PCB inside that email that looked a lot like one of Waymo’s designs, and the matter was escalated all the way up the chain – leading to the lawsuit.

From the off, it has seemed strange that Waymo was pursuing Uber instead of the man who they allege stole their IP. A cynical interpretation of that strategy could conclude that Waymo wanted to wound Uber, a company that is both a technology rival to Waymo and the dominant presence in the ride-sharing market that Waymo/Google is expected to try to enter at some point.

Furthering this, it initially looked like the presiding judge was siding with Waymo, thanks to the hammering dished out during evidence discovery – leading up to the first day in court. Uber had always looked on the back foot, and it looked like Waymo was only a short distance from proving that there was some sort of IP-theft conspiracy ordered by Uber’s leadership.

However, once the trial began, there was no sign of this. The case closed before it was Uber’s turn to present its own evidence, where it would have tried to exonerate itself – but of course, that carries the risk of being cross-examined by Waymo.

Both companies had brought LiDAR designs to court, and perhaps Uber saw that it was not prepared to risk its chances through the conclusion of the trial. Sure, Uber might have seen the writing on the wall, and wanted to settle before the hammer could be brought down, but it could also have sensed blood in the water, as Waymo struggled under its burden of proof, and could have ridden the case out to the bitter end – potentially emerging exonerated.

The Verge published a day-four summary of the case proceedings, noting that it seemed that Waymo’s case was unclear and somewhat weak – failing to find the smoking gun that would nail Uber on conspiracy charges, but finding an awful lot of circumstantial evidence that suggests Uber’s much-covered internal problems influenced its actions in the acquisition of Otto – and with it, the alleged theft of Waymo intellectual property.

The evidence discovery (the most interesting part of the case), made it clear that Anthony Levandowski is in a lot of trouble should Waymo pursue him – as Waymo is suing Uber over this, not the man allegedly at the heart of the case. With each new piece of evidence, Uber was subject to a new raft of bad press.

Pleading the Fifth Amendment in the Uber trial, he did not challenge the evidence that makes a very compelling case that Levandowski transferred 9GB of Waymo to a company laptop, wrote that data to disks he hid in his home, sent and then deleted texts about shredding evidence, and was in frequent communication with then-CEO of Uber, Travis Kalanick.

Notably, Levandowski is indemnified by Uber for IP claims, meaning Uber is meant to compensate if he faces such claims. Uber didn’t dispute this evidence in the pre-trial phase, but did challenge the idea of conspiracy – potentially holding evidence that showed Kalanick wasn’t aware of Waymo documents until after the acquisition, and that he ordered Levandowski to destroy them once he was told of their existence.

All these grim details were brought to light after Uber had been raked over the coals by the press, for its internal culture and alleged ingrained misogyny. New CEO Dara Khosrowshahi was brought in to clean up, although Kalanick has retained his chairman role on the board (despite an investor lawsuit to try and remove him), and this abrupt settlement may have been ordered by Khosrowshahi to try and end the chapter.

But as The Verge notes, Uber may have stood a good chance at winning this case, due to the issue of Waymo not wanting to reveal the trade secrets at the heart of the case – because in making them public through the trial, they would cease to be protected trade secrets. At the beginning of the trial process, Waymo was claiming that over 100 such secrets were involved, but this figure was whittled down to just 8.

Again, we have no idea what those secrets concern, possibly ranging from hardware designs to software, but the disclosure of the 8 took place in 45-minutes of sealed court time. They could be utterly compelling secrets that require little explanation, or they could be extremely tenuous.

So while we can’t know what was in that sealed session, we can infer that they may have been weak claims given the Judge’s reaction after the public were allowed back into the courtroom. The Verge reports that Judge Alsup chided Waymo for putting up “stuff that looked like promotional videos,” and that “only about two-thirds of it deserved to be sealed.”

Alsup added that the Waymo team was “leaving the impression with the jury that you invented LiDAR, that you invented self-driving cars, and that that’s what this case is about.” It appears that Alsup was growing quite weary of Waymo not actually pursuing the IP theft at the heart of the case, and later, he took aim at the aforementioned Gorilla Circuits email that started this entire event.

“You know, you have been attached to that email. You have squirmed left and right trying to figure out some way to build your case around it. And even though Trade Secret 96 got thrown into oblivion [out of the case], you’re still trying to find some way to screw that into the case, and it has nothing to do with any trade secret that’s in play.” Alsup appeared to have lost patience with Waymo’s approach.

There are further details that pointed to Waymo suffering under that burden of proof. Many deleted files were not able to be recovered, and a hard drive called ‘NEWCO,’ the code name for Otto within Uber, that had been connected to Levandowski’s laptop could bot be found. That HDD could have been the smoking gun needed to prove that Waymo trade secrets had made their way into Uber, but Waymo has not succeeded in finding it.