Uber's Courtroom Detour Into the Secrets of the Mind

  • United States
  • 02/05/2018
  • Bloomberg Law

The civil trial pitting Alphabet’s Waymo against Uber’s ride-sharing service over self-driving technology has little to do with driving — and much to do with thinking. Beginning Monday in San Francisco, jurors will be asked to weigh the distinction between trade secrets, which can be stolen, and knowledge, which can’t. It will be a teaching moment for companies thinking about hiring high-level talent from competitors and for engineers contemplating changing jobs.

1. What is a trade secret?
It’s information, which can take many different forms: financial, business, scientific, technical, economic, engineering. According to the legal definition in force in most states, a trade secret is information that has value based on it not being generally known to other people, and is the subject of reasonable efforts to guard its secrecy. Some of the best-known trade secrets are recipes and formulas, such as those of Coca-Cola, WD-40 and Kentucky Fried Chicken. The process of manufacturing Zildjian cymbals has been a family trade secret for almost 400 years.

2. What trade secrets are at stake in the Uber-Waymo trial?
The self-driving program that Google started in 2009 was spun out in 2016 as Waymo, an independent company. Waymo alleges that Uber conspired with one of its top engineers, Anthony Levandowski, to orchestrate the theft of eight trade secrets related to Uber’s light detection and ranging program, or LiDAR, which employs laser beams to sense surroundings and avoid pedestrians, obstacles and other vehicles. One of the eight is a so-called negative secret, or a lesson learned from trial-and-error about a design dead-end or a solution that was abandoned. (Such information doesn’t qualify as a trade secret if it’s something that can be learned as a general skill.) Levandowski is accused of downloading computer files before he left Waymo in 2016 and funneling the secrets to Uber’s driverless program before he joined the ride-hailing company.

3. How do you tell if someone stole secrets or just knows a lot?
That will be a big topic during the trial. The jury will need to sort two piles of information. The first is the set of learned skills professionals develop as they get better at what they do and take with them from job to job. The second is specific know-how that’s proprietary to an employer: engineering decisions made after experimentation, for example, or an algorithm developed to solve a particular problem. Trade-secret theft is stealing from the second pile. If the theft can’t be traced through a paper trail, it can be revealed by anomalies in what would be a normal path of development. If the history of a project shows abrupt movement in a different direction, that can be a clue to trade secret theft.

4. What laws guide these matters?
Protection of trade secrets is guided in most states, including California, by the Uniform Trade Secrets Act. The first federal law for civil claims, the Defend Trade Secrets Act, was signed in May 2016 by then-President Barack Obama. A criminal federal statute, the Economic Espionage Act, was enacted in 1996. It’s common in trade-secrets lawsuits for both the UTSA and the DTSA to be asserted, as they are in Waymo’s case against Uber, but it rarely makes a difference. The rules of trial are similar under state and federal law.

5. Could the trial change how trade secrets are protected?
Waymo’s lawsuit generated so much attention that it may cause some companies to rethink their management of trade secrets in order to avoid similar court battles. While Uber says it took plenty of precautions when it recruited Levandowski, critics including investors suing the company say it could have done more to anticipate and avoid the legal mess and accompanying negative publicity from hiring him.

6. What does all this mean for the future of driverless cars?
Probably not much. While there may be some recalibration, with autonomous driving companies putting their programs or key employees in silos, the impact of this trial will mostly be felt by Waymo and Uber while competitors, perhaps gleefully, watch from the sidelines. Damages could total as much as $3.7 billion, but experts agree the case is unlikely to result in major shifts in behavior industrywide.

The Reference Shelf
Bloomberg Businessweek’s preview of the trial.
Uber has a dishonesty problem, writes Bloomberg View columnist Leonid Bershidsky.
QuickTake Q&As on Uber’s fight with venture capital firm Benchmark and its bid to keep operating in London.
QuickTake primers on the sharing economy and driverless cars.