Harry here. It’s been a busy week for Uber, and not in a good way. I thought Uber’s bad PR with drivers was bad, but this week’s news (maybe a criminal lawsuit?) is even worse for Travis K. and Co. Today, senior RSG contributor John Ince covers the whole story among Uber, Google, Waymo and Otto and how the fight for autonomous cars is going.
The real fight between Uber and Google over what ‘may be the most lucrative business in history’ is starting [Business Insider]
Sum and Substance: “This is not your garden variety trade secrets case. This is a case that involves what potentially may be the most lucrative business in history, and Google is trying to keep its main competitor on the sidelines.” The lines from one of Uber’s court filings are more than mere hyperbole. Two of the largest companies in the self-driving-car sector have been mud-slinging since Waymo, a recent spin-out of Google, sued Uber in February.
Uber has sought to frame the development of this technology as “existential” to the future of its ride-hailing business. A court order forcing it to stop its research could derail its efforts to catch up with the progress that other companies have made, Uber says…. There have already been several eyebrow-raising twists in this case, including accusations that Uber may have hidden evidence from the court and an Uber executive pleading the Fifth Amendment to avoid self-incrimination.
[In] 2015, its former star engineer, Anthony Levandowski, downloaded more than 14,000 files — 9.7 gigabytes of data — containing information about the company’s self-driving-car technology to his laptop and transferred those files to an external storage device. Those files included plans for Waymo’s proprietary lidar system, according to the company. Levandowski left Waymo in January 2016, weeks after downloading the files, Waymo says. He went on to start Otto, a startup focused on self-driving trucks, which Uber acquired six months later.
Levandowski became the head of Uber’s self-driving-car efforts until he had to step aside from the position because of the lawsuit. Waymo says one of Uber/Otto’s suppliers for lidar equipment accidentally sent it an email late last year. The lidar designs in the email “bore a striking resemblance to Waymo’s unique lidar design,” Waymo says. Two weeks later, Waymo filed a preliminary injunction motion to bar Uber from using any of its trade secrets and intellectual property or infringing on its patents while developing its self-driving vehicles….
While the preliminary injunction hearing is a critical moment for the self-driving-car industry, one more decision hanging over the case could change everything: Uber’s motion to compel arbitration. Uber has been trying to keep the case from ever going to a jury trial, and its main justification is the mandatory arbitration clause in Google’s employment contract with Levandowski.
Alsup appears to be relishing the irony of the situation, telling Waymo’s attorneys during a court hearing last week that it would be “poetic justice” if the litigation were to wind up in private arbitration. Arbitration clauses are increasingly common in everything from bank and credit card contracts to employment agreements, and Google is hardly alone in using them. Big companies in particular like private arbitration because it lets them resolve sensitive disputes with employees, about anything from sexual harassment to stealing confidential information, outside of the public’s eye. … Regardless of Alsup’s ruling on arbitration, the claims of patent infringement will move forward because they don’t involve Levandowski’s actions. But having that arbitration agreement could mean that the most controversial claims in the high-stakes case could be resolved in secret.
My Take: This Google / Alphabet / Waymo / Uber / Otto / Levandowski lawsuit is emerging as the most significant trial in recent memory in Silicon Valley. It pits two giants, and two former partners, against each other.
Google Ventures was an early investor in Uber and David Drummond, Alphabet’s legal counsel used to be on Uber’s board. Now they’re bitter rivals for a technology that’s likely to determine the future direction of the self-driving car industry. The deeper I dig into the details of this case, the more convinced I am that Uber really has something serious to hide here. That’s why they’re trying to get this case into arbitration. In arbitration all the messy details will be hidden from public view.
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These compulsory arbitration clauses have become commonplace in Silicon Valley. It’s the issue that has held up Shannon Liss-Riorden’s case on behalf of drivers against Uber. Uber is hiding behind that clause all drivers were required to approve before they could go online and get to the business or earning money. In my humble opinion, Uber’s actions here don’t pass the smell test. I’m siding with Google / Alphabet / Waymo here – if details of Uber’s tactics come to light in a court of law (instead of being kept behind closed doors in arbitration) I think we’ll all be better off. As of Thursday, that’s just what the judge ruled. (See below)
Waymo’s lawsuit against Uber is going to trial, judge rules [TechCrunch]
Sum and Substance: Waymo’s lawsuit against Uber, its competitor in the automated vehicle business, is going to trial. Judge William Alsup ruled that Uber could not force the lawsuit over theft of trade secrets into private arbitration. Instead, the trial will play out publicly, with evidence being presented mostly in the open. This is not the scenario that Uber wanted.
Waymo, the self-driving car subsidiary of Google’s parent company Alphabet, has accused Anthony Levandowski, one of its former engineers, of stealing thousands of confidential documents from Waymo before founding his own self-driving truck startup and eventually going to lead Uber’s self-driving team. … Judge Alsup wrote in his decision that Waymo wasn’t bound to arbitration in this case. “Defendants have repeatedly accused Waymo of using ‘artful’ or ‘tactical’ pleading to evade its arbitration obligations by omitting Levandowski as a defendant,” Judge Alsup wrote. “These accusations are unwarranted.”
Waymo has pursued a separate arbitration against Levandowski and his co-founder Lior Ron over employee poaching. The company claims Levandowski and Ron, also a former Googler, used confidential salary information to poach Google employees to their self-driving truck startup, Otto. Uber acquired Otto in August 2016 in a deal worth roughly $680 million. “Waymo has honored its obligation to arbitrate against Levandowski by arbitrating its claims (concerning employee poaching) against Levandowski. Its decision to bring separate claims against defendants in court was not only reasonable but also the only course available, since Waymo had no arbitration agreement with defendants.
Even though he is not a defendant here, moreover, Levandowski’s assertion of his Fifth Amendment privilege has obstructed and continues to obstruct both discovery and defendants’ ability to construct a complete narrative as to the fate of Waymo’s purloined files. As a practical matter, it is hard to imagine how consolidating proceedings as to Levandowski and defendants, whether here or in arbitration, could alleviate these difficulties,” Alsup wrote.
The decision hints that Alsup’s pending decision on a preliminary injunction might not be favorable to Uber. Waymo had asked for the injunction to prevent Uber from using its technology while the case proceeds, and Alsup’s comments in the arbitration ruling suggest he’s not too keen on Uber’s behavior. If Waymo gets everything it wants from the injunction, it could effectively halt Uber’s self driving development plans entirely while the trial plays out….
Update: Judge Alsup has also referred the case to the U.S. Attorney for a possible criminal investigation.
My Take: This is a huge blow to Uber. It puts everything out there in public view, and my guess is they’re going to be a lot of eye openers in this trial. The trial will be a feast of the media, and pay attention to that update on this story – the judge has referred this case to DOJ for criminal investigation. Looks like Mr. Levandowski is going to be invoking his Fifth Amendment rights a lot more in the coming weeks, months and years.
Has Uber Killed Off Its Self-Driving Trucks? [BackChannel]
Sum and Substance: Travis Kalanick shares news of Uber Freight, but behind the scenes his plans to reinvent trucking tech seem to have flagged.
Uber CEO Travis Kalanick unveiled the company’s first Uber Freight vehicle yesterday in Pittsburgh. In a tweet, he showed off the first step in his company’s plan to connect shippers with truckers, extending its ride-sharing model to cargo. On the surface this news seems to boost Uber’s ambitions to take over, and eventually automate, not just human transport but also freight and logistics. After all, who could forget the tiny, less-than-a-year-old self-driving truck startup it acquired for an extraordinary $680 million last summer, which is now at the center of its legal imbroglio with Google?
But an investigation into the events that followed the acquisition of that startup, Otto, suggests that Uber’s work on self-driving trucks is in fact flagging. At a hearing in the US District Court in San Francisco last Wednesday, Waymo accused former employee Anthony Levandowski and Uber of using Otto as a shell to conceal his swift move to the ride-sharing company. “Uber and Levandowski created a cover-up scheme for what they were doing,” Waymo’s lawyer told the court. “They concocted a story for public consumption.” In other words, Uber wasn’t particularly interested in trucking — it was far more invested in the procurement of its personnel.
If Waymo is right, the level of theatrics is epic. Otto launched in May of last year with a slick film of an autonomous truck rolling down a Nevada highway with no one behind the wheel. “We’re going to continue our testing with urgency,” cofounder Lior Ron told Backchannel at the time. Uber acquired Otto a few short months later, and through the fall of 2016 the ride-hailing company kept on developing its autonomous trucks.
But a spate of recent evidence suggests that even if Waymo’s accusation is wrong, Uber’s commitment to automated trucking was shallow, and today its self-driving semis are nowhere to be seen. (The truck featured in the photo Kalanick tweeted last night shows no evidence of self-driving gear.) Federal records show that Otto’s 18-wheelers are covering fewer miles than ever before. Key engineers have been reassigned to its self-driving car program. And ambitious plans for pilot projects across the nation have been delayed or cancelled.
Perhaps most telling, emails obtained under public records legislation suggest that one month before Otto emerged from stealth, Levandowski was already envisaging its future as an autonomous urban taxi service. So even as Kalanick boasts about his company’s latest venture into trucking, a parallel, conflicting story is now emerging around the company’s ambitions for autonomous freight. Otto, the gem in Uber’s portfolio of acquisitions, was drifting away from robo-trucking before the world even knew its name.
My Take: This article gives a thorough look behind the scenes of Uber’s entry into long distance trucking. From all appearances, it looks fishy. Uber’s acquisition of self-driving firm Otto for $680 million, the author of this article surmises, was little more than an elaborate scheme to mask Uber’s true ambition – to acqui-hire the Waymo team and technology to power their own self-driving car unit.
The big question lurking now is, what is this going to cost them? We already know it cost them $680 million to buy Otto, but will the courts impose a bigger fine on Uber for their actions, and potentially shut down Uber’s ambitions in driverless cars? Stay tuned.
Exclusive: Uber faces criminal probe over software used to evade authorities [Reuters]
Sum and Substance: The U.S. Department of Justice has begun a criminal investigation into Uber Technologies Inc’s use of a software tool that helped its drivers evade local transportation regulators, two sources familiar with the situation said. Uber has acknowledged the software, known as “Greyball,” helped it identify and circumvent government officials who were trying to clamp down on Uber in areas where its service had not yet been approved, such as Portland, Oregon. The company prohibited the use of Greyball for this purpose shortly after the New York Times revealed its existence in March, saying the program was created to check ride requests to prevent fraud and safeguard drivers. The Times report triggered a barrage of negative publicity for the company.
The criminal probe could become a significant problem facing the company that is already struggling with an array of recent business and legal issues. … Uber received a subpoena from a Northern California grand jury seeking documents concerning how the software tool functioned and where it was deployed, one person familiar with the request said. That indicates a criminal investigation is underway. The second source confirmed that was the case….
The technology at issue in the criminal probe helped Uber tag some users so that they saw a different version of its standard app, the company said in a blog post in March. … The technology was used partly to prevent fraud and protect drivers from harm, the company blog post said. If a ride request was deemed illegitimate, Uber’s app showed bogus information and the requester would not be picked up, the employees told Reuters.
However, the Greyball technique was also used against suspected local officials who could have been looking to fine drivers, impound cars or otherwise prevent Uber from operating, the employees said. The system might have gone farther than suggested by Uber’s terms of service for app users. For example, it mined credit card information to see if the owner was affiliated with a credit union used by police and checked social media profiles to assess the likelihood that the person was in law enforcement. After the Times exposed the program in March, regulators who had been unable to catch Uber in places where it was banned accused the company of obstructing their inquiries.
My Take: Just like in the Waymo / Uber lawsuit, the presence of a criminal probe ratchets up the stakes in Uber’s evolution because, if found guilty, Uber’s executives could find themselves behind bars. Now the company not only has to worry about all the PR fallout from its questionable ventures, but it’s got DOJ breathing down its back. When one of those lawyers comes to your door, you’ve got to drop everything – because it’s your life – not just your company.
Readers, what do you think of this week’s busy news for Uber? Are you surprised Uber ditched its plans for robo-trucking?
-John @ RSG
Latest posts by John Ince (see all)
- Uber’s Days Are Numbered — With or Without Travis Kalanick - August 19, 2017
- Early Uber Investor Sues Co-founder Travis Kalanick, Accusing Him of Fraud - August 12, 2017
- Uber’s Search for New C.E.O. Hampered by Deep Split on Board - August 5, 2017