Not your garden variety trade secrets case

When one of the lawyers appearing at last week's preliminary injunction hearing in Waymo v. Uber said it was "not your garden variety trade secrets case," he might have been accused of understatement. The self-driving car sector is expected to be worth billions of dollars. It turns out that Anthony Levandowski, who led the autonomous vehicle development effort at Waymo, a sister company of Google, was given $250 million in stock to come to Uber and pursue the same dream. And this was on top of the $680 million that Uber paid for a company that Levandowski had just founded a few months before. But in many other ways the facts of the case aren't all that unusual, and stand as an object lesson in the challenges of managing talent and technology in fast-growing industries.

Although trade secret cases come in a wide variety of fact patterns, one common thread seems to pass through them all: In virtually every dispute there is some behavior that in hindsight seems pretty foolish. And so it was with Levandowski's departure from Waymo. Before leaving in early 2016, he went on the company's intranet to find instructions on downloading documents. Then, using special software to facilitate the task he spent eight hours copying over 14,000 files, apparently thinking no one would notice or care. After transferring them to a separate drive he wiped clean the company laptop.

So far Levandowski's behavior, sorry to say, was not very unusual. Surveys show that a large percentage of departing employees take information they're not supposed to.

Although Levandowski had apparently already discussed joining Uber when he quit Waymo, his next move was to establish a new company called Otto, which was supposed to develop self-driving long-haul trucks. Only a few months later Otto was acquired by Uber, and according to evidence produced by Waymo, this had been the plan all along. Although setting up an interim company is not typical, it has in the past occasionally been used as a "head fake" to shield from view a potentially threatening hire by a direct competitor. The problem is that while perhaps delaying the inevitable lawsuit, these arrangements can in hindsight be characterized as a cover-up, and that is exactly what Waymo attempted to do at the injunction hearing.

One highly unusual aspect of the case is that Levandowski — who has not been named as a defendant due to an arbitration agreement with Waymo — has invoked the Fifth Amendment, refusing to provide substantive answers to questions or permit access to his personal computer or even allow Uber to reveal thousands of documents that have been withheld under a joint defense agreement. (Unsurprisingly, immediately after he left Waymo, Levandowski and Uber agreed that litigation was likely.) This has complicated Uber's defense in the preliminary injunction proceedings.

Uber's main argument has been that the 14,000 files downloaded by Levandowski never made their way into Uber. It backed this up with an impressive effort: by the time of the hearing, 40 attorneys had interviewed 85 witnesses and had reviewed over 300,000 documents extracted from more than 200 terabytes of information. But without the computer and testimony of Levandowski, Judge William Alsop was left to ponder aloud this question: "what prevented him from bringing [his personal] laptop to work every day at Uber and consulting the 14,000 files as needed, and then having conversations with people where he never mentioned Waymo, but simply says, 'Why don't we try it this way?'"

In asking that question, the judge was drawing on an important aspect of trade secret law, that liability doesn't require direct copying but can be based on influencing the direction of a development project by subtle use of information from an earlier one, such as approaches that don't work or that are less efficient. The judge was also getting to the heart of the difficult task that courts are often asked to perform in these cases: assess the risk, based on preliminary and incomplete evidence, that valuable information may be compromised in some way before trial, and determine whether and how to intervene to reduce that risk.

In this case, the evidence was more incomplete than usual, and at the hearing Waymo suggested that the court should fill the gap by making an "adverse inference" from Levandowski's claiming the Fifth; that is, that if it were available the evidence would show that trade secret information of Waymo was actually transferred and had infected Uber's project to such a degree that an injunction is appropriate. The parties then argued about whether adverse inferences require corroborating evidence and whether that evidence could be circumstantial (for example, that Levandowski now has the 14,000 files in his possession because he did before).

Ultimately, Alsop has to balance competing interests based in part on evidence and argument from proceedings closed to the public, where specific information about the nature of the two companies' work has been examined in detail. He may accept Uber's stipulation to an injunction that merely sidelines Levandowski from working on the central LiDAR technology pending trial. Or, he may issue a broader injunction preventing Uber from using some or all of the trade secrets that it has identified under seal, perhaps appointing a technically qualified master to report on compliance.

Whatever the outcome of the preliminary injunction, the Waymo v. Uber case has already provided some lessons on the dangers of hiring high-level managers into directly competitive positions. That doesn't mean we'll never see this sort of case again, however. Where the stakes are high, you can expect the players to take corresponding risks.

James Pooley, senior counsel at Orrick, Herrington & Sutcliffe, is an expert in trade secrets law who is a member of the IP Hall of Fame and former deputy director of the World Intellectual Property Organization.