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Abu Dhabi, UAESunday 25 February 2018

Uber-Waymo court case reveals unpleasant face of Silicon Valley

US trial was an examination of oversized egos, the culture of Silicon Valley and how technological expertise is bought and sold

Former Uber CEO Travis Kalanick, left, and Anthony Levandowski, co-founder of Otto. Uber has settled a lawsuit alleging that it ripped off self-driving car technology from Google's autonomous vehicle division Waymo. Tony Avelar/AP
Former Uber CEO Travis Kalanick, left, and Anthony Levandowski, co-founder of Otto. Uber has settled a lawsuit alleging that it ripped off self-driving car technology from Google's autonomous vehicle division Waymo. Tony Avelar/AP

On paper the US legal battle between Google’s self-driving vehicles division Waymo and the ride hailing app Uber was about the use of a complex laser mapping technology.

“We have reached an agreement with Uber that we believe will protect Waymo’s intellectual property now and into the future,” Waymo said at the weekend, after the case ended.

In reality, the trial was an examination of oversized egos, the culture of Silicon Valley and how technological expertise is bought and sold.

After only four days the two sides stunned observers by announcing a $245 million settlement. But not before a year of legal discovery and about two dozen witnesses had guaranteed another round of bad publicity for Uber, painting a picture of an aggressive start-up riddled with “bro” culture and a disregard for business norms.

Court documents described how it ran counter-intelligence and surveillance operations to spy on competitors while executives used “ephemeral” messaging apps to automatically delete communications as they went about building a self-drive car empire.

The philosophy was summed up neatly on the first day, when lawyers for Waymo introduced meeting notes written by Travis Kalanick, Uber’s former chief executive.

“Cheat codes. Find them. Use them,” he wrote in April 2016. In gamer jargon, they are the secret portal into hidden features of computer games. In the context of the courtroom battle, it hinted at what Waymo’s lawyers claimed was a cavalier attitude to the law.

They argued that one of the company’s former engineers took thousands of confidential documents with him when he became chief of Uber’s self-driving car project.

Anthony Levandowski was a rock star of the sector. His expertise with robotic vehicles landed him at Google in 2007 where he was part of the team that built the first driverless car allowed on the roads. His rapid advances in using laser pulses for obstacle detection – Lidar technology - produced a number of spin-off companies as well as glittering magazine profiles.

He left at the start of 2016 to found Otto, which fitted autonomous technology to lorries. After barely two months the company was acquired by Uber for a deal that reportedly could have been worth as much as $680m.

The court case revolved around exactly what Uber had bought. Waymo, owned by Google’s parent company Alphabet, alleged that Mr Levandowski downloaded more than 14,000 confidential files containing designs for autonomous vehicles in December 2015 before he left.

But some of the most embarrassing details came in supporting documents that were made public by the judge in the weeks before the trial began.

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In particular, a due diligence report compiled by cybersecurity firm Stroz Friedberg for Uber as it considered acquiring Otto revealed that Mr Levandowski met Uber executives before he left Waymo and tried to recruit Waymo employees for his new employer.

Mr Levandowski’s phones contained “pictures of the construction process of Google car”, including components as well as “drawings and diagrams, such as figures depicting radar technology”, Stroz Friedberg said.

For its part, Uber insisted the report was part of its efforts to ensure that proprietary information did not end up in its hands. However, a second document, a 37-page letter written by a lawyer for one of its former security employees, was more difficult to dismiss. It set out examples of espionage and described a sophisticated operation to hide documents from lawyers and regulators.

In the letter, former Uber security officer Richard Jacobs said the company’s security team recommended that staffers use ephemeral messaging systems, such as Wickr, to ensure that sensitive text was automatically deleted. And he described Uber’s ThreatOps division, which ran counter-intelligence operations to identify and hit back at competitors.

At times the letter reads like a spy novel, describing “walk-in” informants from rival competitors as "Humint" – or human intelligence.

Surveillance operations apparently included eavesdropping on rival executives at a California hotel in 2016 as they discussed a $3 billion Saudi Arabian investment in Uber, and the unauthorised recording of Uber’s own employees and contractors at the Autonomous Technologies Group in Pittsburgh.

A marketplace analytics team “fraudulently impersonates riders and drivers on competitor platforms, hacks into competitor networks, and conducts unlawful wiretapping”, it continued.

It was all part of a “sophisticated strategy to destroy, conceal, cover up, and falsify records or documents with the intent to impede or obstruct government investigations as well as discovery obligations in pending and future litigation”.

The document was introduced in November, prompting a delay as both sides scrambled to deal with its implications. At the same time, it emerged that federal prosecutors had launched an investigation into Uber’s alleged espionage activities, based on claims in the letter.

An Uber spokesman responded: “While we haven’t substantiated all the claims in this letter - and, importantly, any related to Waymo - our new leadership has made clear that going forward we will compete honestly and fairly, on the strength of our ideas and technology.”

For Uber, the whole trial was a throwback to the leadership of Mr Kalanick. He resigned last year under pressure from shareholders following a string of complaints about its aggressive corporate culture, including allegations of sexual harassment. A new chief executive, Dara Khosrowshahi, has been on something of an apology tour ever since, drawing a line under past behaviour.

However, Mr Kalanick returned to take the witness stand last week.

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Waymo’s lawyers introduced email and text messages as they sought to reveal his competitive nature and the battle between rival companies to develop autonomous vehicles.

“I just see this as a race and we need to win. Second place is a loser,” Mr Kalanick wrote to Mr Levandowski in one exchange.

The messages were peppered with the sort of slang popular in the all-male worlds of frat houses and Silicon Valley – with references to “ballers” and going “open kimono”.

At the same time, Mr Kalanick described how a once warm relationship between Google and Uber soured as the ride hailing app started moving into self-driving vehicles.

"It was like big brother and little brother," he said, right up until Uber hired a team of robotics and self-driving car engineers in 2015 and his relationship with Larry Page, chief executive of Alphabet (an early Uber investor), deteriorated.

“He sort of was a little angsty and said ‘Why are you doing my thing?’ and was just upset,” Mr Kalanick testified.

The result was a corporate battle with a personal edge, mirroring earlier examples of rivalries that exploded into court with allegations of plagiarism or poaching of staff – whether Apple versus Microsoft in the 1990s over the use of graphic interfaces, or Instagram versus Snapchat more recently.

It is the sort of problem that is endemic to the cutting-edge world of Silicon Valley, according to the New York University Stern School of Business professor Arun Sundararajan, where it is difficult to agree who owns the ideas inside an engineer’s head.

“There’s always going to be some spillover of intellectual property when employees move from one company to another,” he said. “This isn’t a world where you learn what you need for the job before you join a company and use that knowledge for a decade.”

Although Prof Sundararajan agreed that downloading 14,000 documents put this case in a different realm.

That still left a problem for Waymo, however, in proving that they added up to a trade secret.

“Information that is generally known in the field or is readily ascertainable by proper means by those skilled in the art at the time of the alleged misappropriation cannot qualify as a trade secret,” William Alsup, the federal judge in charge of the case, wrote in draft jury instructions that were never needed.

Waymo needed to prove not only that the information had been obtained by Uber but that they were being used for “unjust enrichment”.

The end arrived rapidly last Friday morning after each side had a chance to assess the power of Mr Kalanick’s testimony and before Mr Levandowski gave his evidence.

Uber Technologies agreed to pay $245m worth of its own shares to Waymo. With it came an agreement that the two would work together to ensure that Waymo’s Lidar tech is not incorporated into Uber products.

For Uber it meant an end to the negative headlines.

Sarah Jeong, writing about the case for The Verge, a technology website, said: “It seemed like every few weeks there’d be a new public filing in the case that would blare out more juicy tidbits about Uber’s horrible corporate culture.”

For Waymo, the case had slowed Uber’s chase and allowed it to maintain its status as the frontrunner in developing self-driving cars, according to Prof Sundararajan. And for Uber the damage could have been much worse than simply having its internal culture dripped on to the news pages every few days.

“The fact that it could have been complicit in the theft of intellectual property raised to me questions about the viability of the company,” Prof Sundararajan said. “It was also counter to Uber’s image of being badly behaved on the culture front but smart on the deal making front.”

So while Friday’s settlement provoked gasps in the courtroom, there was something inevitable about Silicon Valley’s biggest, brashest court case coming down to a deal.