Alphabet Adds Trade Secret Law to Self-Driving Car Wars

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By Tony Dutra

Alphabet Inc.’s allegation of trade-secret theft by Uber Technologies Inc. unleashes a powerful new weapon in Silicon Valley’s battle over skilled engineers for autonomous-driving technology ( Waymo LLC v. Uber Techs., Inc. , N.D. Cal., No. 17-cv-00939, complaint filed 2/23/17 ).

Google parent company Alphabet’s self-driving car business, Waymo LLC, is seeking to strike a devastating blow to Uber’s $680 million acquisition of Ottomotto LLC by accusing its former manager, Anthony Levandowski, of downloading thousands of confidential files about lidar technology before leaving to co-found Ottomotto. Lidar, or light detection and ranging technology, is a remote sensing method critical to the development of autonomous vehicles.

The case—the highest-profile application to date of the Defend Trade Secrets Act (DTSA) that took effect in May 2016—illustrates how the federal trade secret law could be used to great effect in California, a hotbed of emerging technology where employment law strictly limits what companies can do to stop employees from taking their skills and knowledge to a competitor.

California, unlike other states, doesn’t allow companies to extend nondisclosure restrictions beyond employment termination. So Silicon Valley employees, essentially, can leave a company and take with them to the next company anything that what was in their heads.

“California law strongly disfavors most types of post-employment restrictions,” according to IP attorney Peter J. Toren of Weisbrod Matteis & Copley PLLC, Washington. But Levandowski allegedly went further.

Tale of Two Downloads

In a similar case a month earlier, Tesla went after a former program manager for an alleged breach of contract by soliciting its employees. Under California law allowing unrestricted employee mobility, that was likely the most it could charge Sterling Anderson, now an executive at Aurora Innovation.

In both cases, the complaints allege that former employee downloaded gigabytes of proprietary and confidential information before leaving Tesla and Waymo, respectively. The difference in charges may rest with the type of employee who did the alleged downloading.

Tesla’s complaint described Anderson as a “non-technical program manager” with “organizational (though not technical) oversight” of a development team. Levandowski, however, has a reputation as a leading figure in self-drive technology. In 2011, Google acquired his company, 510 Systems, which had already shown a robotized Toyota Prius.

Tesla’s charges were “probably designed to get quick action and negotiation,” according to Stephen Y. Chow of Burns & Levinson LLP, Boston. He noted that Aurora doesn’t have Uber’s wealth and said that “contract cases such as non-solicitation are straightforward without the necessity to identify and prove trade secret value and reasonable efforts to protect. Also, Elon Musk told the world that anyone who wants to use Tesla patents can do so for free.”

Both Anderson and Levandowski allegedly solicited employees of their former firms, potentially breaching a provision of their employment contracts that California allows to continue after termination. While that’s the primary charge Tesla made, Waymo didn’t even bother.

Trade Secret Theft Worth More

Waymo’s trade secret charges may have multiple purposes, none of which could be considered “quick.”

The potential for an extensive damages award could be the biggest goal. Damages “are usually not that great” for the state law claims Tesla made against Anderson, Toren said. By contrast, both the state misappropriation charge and the DTSA give Waymo a shot at showing either how much it was damaged by the trade secret loss, or that the defendants were “unjustly” enriched by the alleged theft, he said.

What additional value, if any, Waymo perceived in the federal charge is unclear, since the DTSA’s main advantages over state claims are that it can reach international misappropriation and allow for seizure of misappropriated materials—neither of which applies here.

“The DTSA claim provides a basis for jurisdiction in federal court, rather than state court, for Waymo,” Robert B. Milligan of Seyfarth Shaw LLP, Los Angeles, said. Waymo also asserted a federal-court-only patent infringement charge against Uber, he said.

But the complaint said the patents were on “a prior generation of Waymo’s proprietary LiDAR [Light Detection and Ranging] designs,” and it’s possible Uber is beyond that generation as well. The DTSA might then be a backup to stay in federal court if Waymo can’t make its patent charge stick, Milligan said.

But What Prospects?

The combination of a state and federal charges for trade secret misappropriation gives Waymo flexibility, since the standards for qualifying for trade secret protection are slightly different. But the flexibility comes at a cost, Chow said.

“Even though Waymo’s allegations are pretty damning, there may be a lot of expense before getting anywhere,” he said.

To contact the reporter on this story: Tony Dutra in Washington at adutra@bna.com

To contact the editor responsible for this story: Mike Wilczek at mwilczek@bna.com

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