Judge Halts Waymo-Uber Showdown Amid Allegations of Uber Cover-Up

SAN FRANCISCO (CN) – A federal judge on Tuesday indefinitely delayed a high-stakes trial over whether Uber stole trade secrets on self-driving vehicles from rival Waymo, after federal prosecutors revealed evidence obtained in a criminal probe that it may have done so.

U.S. District Judge William Alsup ordered Uber’s former security manager Richard Jacobs to testify about the evidence: a sealed demand letter his lawyer sent to Uber’s in-house lawyer Angela Padilla after he was forced to resign earlier this year. The 37-page letter, obtained by the Justice Department during an investigation into possible corporate espionage by Uber and sent to Alsup on Nov. 22, revealed Uber had set up a secret intelligence team to steal trade secrets from Waymo and unnamed competitors overseas.

It also revealed Uber stores the stolen trade-secret information on computers that bypass its servers, and that its employees communicate about it using Wikr, an encrypted messaging application that erases messages after a certain amount of time. Uber says it is innocent because Waymo’s trade secrets never made it to its servers; multiple searches failed to find any. But the letter, portions of which were read aloud in court, states Uber used the tactics to keep trade secrets off its servers so it could avoid disclosing them in civil and criminal cases.

“It turns out the server is only for the dummies and the real stuff goes on on the shadow system,” Alsup said Tuesday during what was supposed to be a hearing to hammer out details ahead of next week’s trial.

Waymo sued Uber and co-defendant Ottomotto, a driverless trucking startup founded by former Waymo engineer Anthony Levandowski, on trade secret theft claims this past February. The Google spinoff claims Levandowski downloaded 14,000 files of trade secrets before resigning in January 2016 to start Ottomotto, and that Uber quickly struck a deal to buy the company and hire him to build autonomous vehicles using Waymo’s technology. Levandowski is not a defendant in the civil suit, but he faces a criminal probe stemming from the allegations.

The Jacobs letter also states Uber’s team stole trade secrets from Waymo by hiring risk and threat analyst Edward Russo last year to “enable competitive intelligence and theft of trade secrets by recruiting sources in competitive organizations” that he had identified as willing to give Uber their employers’ trade secrets, according to Waymo attorney Charles Verhoeven of the firm Quinn Emanuel Urquhart & Sullivan.

Jacobs, who is cooperating with the Justice Department’s investigation, corroborated his lawyer’s statements about stealing trade secrets from overseas competitors and hiding the evidence. But he denied the allegation as to Waymo, calling it “hyperbole.” Russo, who also testified Tuesday, denied the letter’s allegations against him.

“It’s never been my role to engage in theft of trade secrets,” Russo said.

The revelation Uber may have concealed evidence comes a week after Waymo asked Alsup for permission to tell the jury the defendants intentionally destroyed evidence to derail its case, including five disks of proprietary Google information Levandowski kept after leaving Waymo.

Waymo claimed the defendants were obligated to preserve evidence when they began hiring various law firms in January 2016 in anticipation of a lawsuit, the same month Levandowski resigned and a month before Waymo’s legal action.

Uber countered in its own brief that Waymo had known about the destruction of Google disks since June but hadn’t objected until its case “fell apart” following its failure to uncover trade-secret theft by Uber in a hotly contested due-diligence report. It also said it wasn’t obligated under Micron Technology, Inc. v. Rambus Inc., decided by the Federal Circuit in 2011, to preserve evidence before Waymo sued.

The report, prepared for Uber by digital forensics firm Stroz Friedberg as part of the Ottomotto acquisition, revealed Levandowski took and accessed Waymo’s confidential files while working at Ottomotto. But the firm’s investigators couldn’t determine whether the files made it to Uber.

On Tuesday, Jacobs also testified Uber had retained him to consult on issues surrounding his resignation. According to his lawyer’s letter, he was demoted to an analyst position in retaliation for not cooperating enough with Uber’s policy of hiding evidence from discovery. Jacobs said he settled with Uber in August over his termination for $4.5 million.

Arturo Gonzalez, an attorney with Morrison & Foerster who represents the defendants, clarified the defense team didn’t know about the Jacobs letter until last week. Padilla, the in-house Uber attorney who received the Jacobs letter, is set to testify about it on Wednesday.

Evidentiary testimony will also take place during the days originally scheduled for trial, Dec. 5 to Dec. 21.

“If half of what’s in that letter is true, it would be a huge injustice to Waymo to have to go to trial,” Alsup said. “There’s enough there under oath to believe there’s a 50-50 chance it will turn out to be something very bad for Uber.”

 

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