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Waymo's Case Against Uber Headed to Trial

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The legal confrontation started off with Alphabet’s (GOOGL - Free Report) Waymo suing Uber for patent infringement and theft of intellectual property and trade secrets through Anthony Levandowski, a former employee.

In October, it separately initiated arbitration proceedings against Levandowski, as required under the terms of his employment contract with Alphabet for the theft and for violation of confidentiality obligations in his contract to improperly recruit his Waymo colleagues to Otto and Uber.

The Evidence So Far

Waymo has shown that in January 2016, Levandowski downloaded 14K files that included self-driving technology and trade secrets and left Waymo without notice. The following day, he met Uber executives, received $250 million as a restricted stock award and also formed the self-driving truck company Otto that was subsequently acquired by Uber for $680 million.

Subsequently, Levandowski and Uber also signed an agreement to indemnify each other.

Waymo also submitted the statement of an eyewitness, Pierre-Yves Droz, a former colleague and close confidant of Levandowski's in a fresh filing.

What Waymo Wants

Waymo is seeking an injunction to prevent Uber from using the infringing technology in its self-driving vehicles and seeking damages for any proven infringements. Moreover, it also wants to prevent Levandowski from doing further work on self-driving technology.

What Uber Wants

Uber says that since Google has filed for private arbitration against Levandowski, it should also move the allegations of trade-secret theft and unfair competition against Uber into arbitration since both these are related to the same matter and involve Levandowski.

Arbitration proceedings are private and also have different rules related to evidence, which could safeguard Uber’s reputation and business prospects.

The company is willing to continue the patent infringement aspect of the case in court. 

What the Judge Says

Judge William Alsup said initially that despite the significant circumstantial evidence of Uber’s guilt, Waymo had failed to establish a link between the theft and Uber (this happened because the case against Levandowski was in arbitration and he was not made a joint defendant in this case, as required by the terms of his employment).

To establish that connection, Waymo put Levandowski on the stand, where he invoked the Fifth Amendment to refuse to testify on the grounds that the testimony could incriminate him.

Judge Alsup then referred the matter to the U.S. Attorney to determine if a criminal investigation is called for while making these telling statements:

“Defendants have repeatedly accused Waymo of using ‘artful’ or ‘tactical’ pleading to evade its arbitration obligations by omitting Levandowski as a defendant,” Judge Alsup wrote. “These accusations are unwarranted.”

“Waymo has honored its obligation to arbitrate against Levandowski by arbitrating its claims (concerning employee poaching) against Levandowski. Its decision to bring separate claims against defendants in court was not only reasonable but also the only course available, since Waymo had no arbitration agreement with defendants.

"Even though he is not a defendant here, moreover, Levandowski’s assertion of his Fifth Amendment privilege has obstructed and continues to obstruct both discovery and defendants’ ability to construct a complete narrative as to the fate of Waymo’s purloined files. As a practical matter, it is hard to imagine how consolidating proceedings as to Levandowski and defendants, whether here or in arbitration, could alleviate these difficulties.”

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Alphabet is a Zacks Rank #2 (Buy), which makes it attractive for accumulation. However,  there are plenty of other Internet services stocks (Zacks Industry Rank 89) up for grabs right now, including Autohome (ATHM - Free Report) , Limelight Networks , Marchex (MCHX - Free Report) and Synacore , all of which also carry a Zacks Rank #2.

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