Federal Circuit Clears Way for Uber-Waymo Showdown

(CN) – In twin blows to Uber and its beleaguered former engineer, the Federal Circuit ruled Wednesday that the ride-hailing company will face trial over accusations it stole rival Waymo’s driverless car trade secrets – and must hand over highly sought evidence in the case.

The Washington-based appeals court issued separate rulings affirming a trial court’s order denying Uber’s motion to compel Waymo to arbitrate its claims, and dismissed an appeal by former Uber and Waymo engineer Anthony Levandowski seeking to stop Uber from producing a due-diligence report Waymo says will prove the theft.

“The district court’s analysis is correct,” Circuit Judge Pauline Newman wrote in the Federal Circuit’s unanimous ruling regarding arbitration.

Waymo’s case centers around a due-diligence report Uber commissioned on Otto, a driverless trucking startup Levandowski founded shortly after leaving Waymo. The report was prepared by investigation firm Stroz Friedberg, which Uber’s attorneys hired to evaluate the legal risks Uber and Levandowski would face if Waymo parent Google sued over Uber’s planned acquisition of Otto.

The due-diligence report, which Waymo has asked for multiple times since filing its lawsuit, purportedly relates to Levandowski’s downloading of 14,000 proprietary files from Waymo’s server before resigning to lead Uber’s driverless car program. The files include information on Waymo’s secret LiDAR system, a laser-based scanning and mapping technology its driverless cars use to “see” their surroundings.

Waymo sued Uber and Otto in February, claiming Uber bought Otto to acquire Waymo’s technology to get driverless cars to market first. Analysts predict companies late in developing the cars will flounder, and next month’s high-stakes trial could have far-reaching implications on Uber’s ability to stay competitive.

“Since filing this case, Waymo has found significant and direct evidence that Uber is using stolen Waymo trade secrets in its technology,” Waymo said in a statement Wednesday. “We are still reviewing materials received late in the discovery process and we look forward to reviewing the Stroz report and related materials.”

Levandowski intervened to stop Uber from producing the due-diligence report after U.S. Magistrate Judge Jacqueline Scott Corley in June granted Waymo’s motion to compel, arguing Corley’s order and U.S. District Judge William Alsup’s affirmation violate his Fifth Amendment right against self-incrimination.

The Federal Circuit on Wednesday dismissed Levandowski’s appeal to keep the report secret, ruling he hadn’t shown he was entitled to an order prohibiting its disclosure.

“While Mr. Levandowski contends that “‘disclosure of privileged information would irreparably taint the adversary process’ because ‘[c]ourts cannot force litigants to unlearn information,’ he has not specified why that general argument applies with greater force here than in any other case,” Circuit Judge Evan Wallach, quoting from Levandowski’s appeals brief, wrote for the three-judge panel.

Wallach called “unpersuasive” Levandowski’s argument that disclosure would be “particularly injurious or novel,” concluding the report isn’t covered by attorney-client privilege or work-product protection – an argument Uber had made to Corley. Wallach added that a post-judgment appeal would protect both Levandowski’s rights and his attorney-client privilege.

Uber said Wednesday it would comply with the panel’s decision.

“We did not join Mr. Levandowski’s appeal to block disclosure of the report, and we are ready to finally disclose it to Waymo today,” Uber said in a statement. “While Waymo has obtained over 238,000 pages of production documents from Uber and conducted a dozen inspections over 61 hours of our facilities, source code, documents, and engineers’ computers, there’s still no evidence that any files have come to Uber, let alone that they’re being used.”

The same appeals panel affirmed Alsup’s order denying Uber’s motion to compel arbitration, ruling there is no relationship between Waymo’s claims against Uber and employment agreements between Waymo and Levandowski.

Uber had argued Waymo is legally obligated to arbitrate its claims because they arise out of two employment agreements Levandowski signed with Waymo in 2009 and 2012 that contained arbitration clauses.

Although only parties to an arbitration agreement can invoke arbitration, nonparty Uber said it was entitled to do so because Waymo’s allegations against it are connected to the contracts.

Alsup, citing Goldman v. KPMG LLP, decided by a California appeals court in 2009, and Kramer v. Toyota Motor Corp., decided by the Ninth Circuit in 2013, disagreed, ruling Waymo doesn’t rely on the employment contracts to prove its claims, and that Waymo’s claims weren’t connected to the contracts.

Both cases held that when a nonparty seeks to enforce an arbitration clause, reliance on a contract is required.

“We agree with the district court that precedent does not compel arbitration of the case based on the Waymo-Levandowski employment agreements,” Newman wrote.

Circuit Judge Kara Fernandez Stoll joined Newman and Wallach on both panels.

Waymo is represented by Charles Verhoeven with Quinn Emanuel Urquhart & Sullivan in San Francisco; Uber by Hamish Hume with Boies Schiller Flexner in Washington; and Levandowski by Miles Ehrlich with Ramsey Ehrlich in Berkeley. They did not return requests for comment Wednesday.

Trial is set for Oct. 10.

 

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