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Alphabet’s lawsuit against Uber, explained

A little less than two months in and yes, it’s already a saga.

Two self-driving cars, one from Way and one from Uber Waymo, Uber

Earlier this year, Google parent company Alphabet filed a lawsuit against Uber for allegedly stealing trade secrets.

A flurry of legal motions in recent weeks has obfuscated key elements of the case while also bringing to light new information. At stake is Uber’s self-driving efforts. If it loses, it may have to cease operating any technologies that use these trade secrets. The judge will decide on May 3 whether Uber has to stop using any of Alphabet’s technology.

In the meantime, we’re going to help you make sense of it.

The Background

The executive at the center of the lawsuit is Anthony Levandowski, the head of Uber’s self-driving effort. He worked at Alphabet’s self-driving division, now called Waymo, until January 2016 when he left to create Otto, a startup focused on autonomous trucks.

As Levandowski was forming his startup he was also consulting for Uber’s self-driving project.

Uber then acquired Otto in August, only six months after Levandowski founded the company, and he became the head of Uber’s entire self-driving group, supplanting Uber’s existing executives and creating what some inside the company have called a “mini civil war.”

The timing is important since it plays into Alphabet’s lawsuit.

The case

On Feb. 23, Alphabet dropped a bombshell complaint alleging Levandowski stole 14,000 confidential files from Alphabet before he left.

In those files were the designs for a key part of most self-driving systems: The lidar. Lidar stands for Light Detection and Ranging, a laser-based radar that can recognize objects such as oncoming traffic and pedestrians, which is why it’s considered crucial to self-driving systems. (Elon Musk, perhaps not surprisingly, disagrees.) Levandowski led the lidar team at Alphabet.

Business Leaders And Government Officials Attend Washington Ideas Forum
Waymo CEO John Krafcik
Chip Somodevilla / Getty

Why is lidar so important to Alphabet?

In December, Alphabet created a new brand name, Waymo, to house all its self-driving technology. Before that, the company had been working solely on the self-driving software: The brains of the car. But it recently announced that it was also going to be building its own sensors — including lidar.

Alphabet saw an opportunity in lidar. Much of the current lidar technology costs more than $20,000 per car. Alphabet believes it has created a design that would bring down that cost by 90 percent.

In other words, Alphabet’s proprietary lidar is a big part of its value proposition as a parts supplier. While the company isn’t an automotive supplier in the traditional sense, it’s competing with those suppliers for relationships with automakers. So being able to offer a closely integrated software and hardware suite is key to edging out competitors like Mobileye, which was recently acquired by Intel.

Injunction Junction

That’s why Alphabet is asking the court to keep the ride-hail company from using any of Alphabet’s “trade secrets” in its autonomous systems that Levandowski may have taken.

Alphabet filed sworn testimony from its forensic engineer Gary Brown, who said he searched Levandowski’s Alphabet-issued computer and found evidence that he downloaded 14,000 files and transferred some of those files to his personal device.

Alphabet also alleges Levandowski has had a long relationship with Uber CEO Travis Kalanick and other Uber executives, meeting with them as early as the summer of 2015 — half a year before he left Alphabet.

Uber is expected to file its opposition to the injunction on Friday.

Discovery

The court has ordered Uber to provide any and all documents, files and hardware that mention any information related to the 14,000 files that Alphabet claims are in Uber’s possession. That was due on March 31.

After Uber searched company-issued computers belonging to Levandowski and the two other former Alphabet employees named in the suit, it produced only 900 documents. The company says it also searched seven “randomly selected” employees as part of its inquiry.

Alphabet, however, countered that Uber’s search was both limited and insufficient.

Uber said it provided all the documents relevant to the order, and that it interviewed 85 employees who previously worked at Alphabet as part of its effort to unearth any documents that may have come from Alphabet.

Judge William Alsup, presiding over the suit, agreed this week that Uber’s look was insufficient and ordered the company to institute a more thorough search, including looking through the corporate computers of everyone who works on lidars.

Anthony Levandowski
Anthony Levandowski
LinkedIn

Levandowski asserts his rights

Uber is in a tough spot. Levandowski asserted his Fifth Amendment rights to avoid potentially incriminating himself, on the advice of his personal criminal counsel. That means neither the court nor Uber can force him to take the stand or produce any documents he has in his personal possession.

Judge Alsup called the move “extraordinary,” pointing out that Uber so far hasn’t denied he has the 14,000 files.

“Maybe you will,” he said at the discovery hearing on Wednesday. “But if it's going to be denied, how can he take the Fifth Amendment? This is an extraordinary case. In 42 years, I've never seen a record this strong. You are up against it. And you are looking at a preliminary injunction, even if what you tell me is true.”

Uber’s attorneys now have to prove that even if Levandowski has the documents, Uber did not make use of them in any way.

Due diligence

There’s one document in particular the two sides are arguing over.

When Uber was in the process of acquiring Otto, it paid someone to prepare a “due dilligence” report on the company, standard practice in any acquisition. Due diligence is really just a way of making sure the property you’re buying is a real thing and has real assets; it also lays out the liabilities.

But, in this case, Alphabet says the due diligence report will prove that Levandowski stole files from Alphabet.

The attorneys put it more plainly in a motion on Wednesday: “Uber was aware, prior to acquiring Otto, that Mr. Levandowski took documents from Waymo.”

Levandowski’s attorney argues the report should not be admissible since it’s covered under Levandowski’s Fifth Amendment rights.

That’s because Levandowski, his co-founder Lior Ron, Uber and a number of attorneys entered into a confidentiality agreement — called a Joint Defense agreement — that prohibited disclosing things like who put the due diligence report together and “whether Mr. Levandowski possessed any documents that were reviewed by the third party, and the identity of any of Mr. Levandowski’s possessions that may have been reviewed.”

At a hearing on Thursday, Judge Alsup decided that he will look at both the unredacted and redacted versions of the report to determine whether it should be admissible.

What happens if the judge grants the injunction?

If the judge grants Alphabet’s motion for a preliminary injunction, Uber will have to stop using any and all systems, designs, hardware and more that include things from Alphabet’s list of asserted trade secrets.

That is, of course, if Uber is using any of those things in the first place.

The actual list is under seal but includes things like the lidar circuit board and a list of suppliers. Judge Alsup still has to decide which things on that list are trade secrets — he actually derided Alphabet over some of the supplier names on the list, suggesting they wouldn’t qualify as trade secrets. Alphabet could still add more to that list after the discovery process.

So it’s yet to be determined what exactly Uber will have to stop using and how far the injunction will go.

If the judge rules in Alphabet’s favor, it could also mean Levandowski has to stop working on Uber’s self-driving efforts altogether until a judgment on the actual suit is determined.

The hearing for the injunction is scheduled for May 3.

The twist

But there’s a catch. If Uber has its way, this case will not play out in public.

Toward the end of March, Uber filed a motion for arbitration, asking the judge to take the case behind closed doors rather than hashing it out in court.

Uber argued that because all of Alphabet’s claims are based on actions Levandowski allegedly committed while he was an Alphabet employee, the case should be bound by the employee agreement.

Alphabet’s employee agreement contains a broad clause that says all disputes with the company should be resolved privately in arbitration.

That’s when Uber revealed that Alphabet is already in the middle of arbitration with Levandowski. Alphabet had separately accused Levandowski of using confidential information to poach employees to join him at Otto.

Uber is arguing that Alphabet’s lawsuit against the ride-hailing startup should be added to that arbitration. The hearing to determine whether this dispute should be resolved privately is scheduled for April 27. Waymo has to file its opposition to arbitration by April 10.


This article originally appeared on Recode.net.

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