A star employee leaves a company to join, or become, a competitor, and the former employer sues both the departing employee and the company who hired him for stealing its secrets. Legal battles like that are pervasive across all industries, but one of these high profile, high-stakes lawsuits is at the center of the race to self-driving cars: the dispute between Google and Uber. The suit will do more than determine the future of an important industry — it is a window into the rising number of disputes over talent mobility and trade secrets.
The case is complicated, but in this piece I’ll lay out the facts as we know them, and explain what’s at stake. Ultimately, it’s people more than information that should be free. Hiring employees from another company should be easy — and protected by law — but employers need to emphasize that those hires come with know-how and skills, but not with trade secrets.
In the escalating Google-Uber dispute, Anthony Levandowski, a key engineer working for Google’s self-driving car arm, Waymo, allegedly downloaded in 2015 more than 14,000 confidential files, or 9.7 gigabytes of data to his laptop. Levandowski then resigned from Waymo without prior notice and formed autonomous vehicle companies Ottomotto and Otto Trucking, recruiting two of his former co-workers at Waymo to his new ventures. In August 2016, Uber bought Otto for approximately $680 million and hired Levandowski to lead its self-driving car efforts. In his new position, Levandowski reported directly to Uber CEO Travis Kalanick. According to District Court Judge Alsup who is presiding over the case, the evidence suggests that when Uber bought Otto, “Uber likely knew or at least should have known” Levandowski purloined and retained Waymo’s classified files, and that these “files likely contain[ed] at least some trade secrets.”
Upon arriving at Uber, Levandowski strategized with his new employer and prepared a defense to litigation against Waymo. Then, in October 2016, Google claims one of its forensics security engineers discovered Levandowski’s alleged downloading, and two months later, Google accidentally received an email from one of Uber’s suppliers with designs that “bore a striking resemblance to Waymo’s unique LiDAR design.” LiDAR (Light Detection and Ranging) is the technology that helps self-driving cars “see” their surroundings. Waymo claims to be the first company to complete a fully self-driving trip on public roads without a steering wheel and foot pedals. It accuses Uber of stealing its trade secrets and infringing its patents. The patent claims proved too weak to succeed, so the crux of the case turns on misappropriation of trade secrets taken by the former employee.
For now, Judge Alsup has ordered that Uber remove Levandowski from any role connected to LiDAR (a move Uber had preemptively made on its own accord, before, eventually altogether firing Levandowski from Uber) and compile a log of all oral and written communication where Levandowski mentioned LiDAR. Waymo was granted further expedited discovery to inspect all aspects of Uber’s ongoing LiDAR work.
During his six-hour deposition, Levandowski invoked his Fifth Amendment right against self-incrimination more than 400 times. Levandowski also hasn’t allowed Uber to search any of his personally owned devices and refused to answer any questions that may implicate his utilization of Waymo’s intellectual property while in Uber’s employ. Levandowski knows stealing trade secrets is a federal crime punishable by up to 10 years of imprisonment. The axe may soon fall because as of May 11, District Judge Alsup has referred the matter to the U.S. Attorney’s office. (Google also brought a private arbitration case against Levandowski accusing him of poaching employees. While working at Waymo, Levandowski signed the standard “At-Will Employment, Confidential Information, Invention Assignment, and Arbitration Agreements.”) Uber has called the lawsuit a “baseless attempt to slow down a competitor.” It claims it never received any proprietary information from Levandowski and that merely hiring an employee of a competitor isn’t against the law.
Uber is certainly correct on the last point: California employers are free to hire anyone, including the most valuable key employees, from their competitors. Talent mobility has been the wind beneath the meteoric growth of Silicon Valley. Unlike other states around the country, California doesn’t enforce non-compete clauses, which prohibit an employee from moving to a competitor or founding their own company in the field of their former employer. The pervasive use of non-competes has become an increasing concern to local and national policymakers. Research shows that non-competes reduce innovation, entrepreneurship, and, most basically, job mobility, all of which are fundamental to a healthy economy. In my book, Talent Wants to be Free, I have argued based on my own and other empirical studies that partly thanks to California remains the tech center of the world in part because of its refusal to enforce noncompetes. In 2016, I was honored to be invited to the White House to speak about my research on employee mobility and post-employment restrictions. Following the meeting, the Obama Administration issued a Call for Action urging states and Congress to push back against the expansion of noncompetes.
While employees should be free to use the skills and talent to move freely in the market, they should not be allowed to take trade secrets. The Waymo lawsuit is one of the first to be brought under the Defend Trade Secrets Act, a new federal law that amends the Economic Espionage Act and grants federal courts original jurisdiction over trade secret cases.
Uber insists it independently developed a sophisticated self-driving system, which it has named Fuji. Judge Alsup is sympathetic to the harm that can come from overly expansive claims of innovation as property. “It would be wrong to allow any company to leverage a single solution into a monopoly over broad swaths of other solutions,” he wrote. “To do so would be to allow monopolization of broad scientific or engineering concepts and principles.” Still, he observed that Uber’s Fuji uses at least one element common to Waymo’s counterpart, GBr3. If Uber cannot show independent origin for that element, this evidence will cut against Uber and favor a finding of trade secrets misappropriation. As with many trade secret cases, the heart of this battle is thus deeply factual.
The Latin proverb, Scire tuum nihil est, nisi tescire hoc sciat alter, reminds us that “Your knowledge is nothing if no one else knows you know it.” And the utopist cyber thinker Stewart Brand is famous for coining the phrase “Information wants to be free.” When knowledge is embodied in people, the phrase is even more powerful: talent wants to be free, in the sense of allowing people to move throughout their careers and build upon their experience and skills. So how can we allow talent to move within an industry and flourish, while protecting company’s secrets? Distinguishing between trade secrets and general skill or know-how common to a profession is not always easy. In some cases, the final answer may well be found in a courtroom. Still, companies should not be chilled from hiring their competitor’s best talent. They can ultimately avoid the risk of litigation by making it clear that those hired cannot bring along technology or data which were obtained or learned from their previous employer.