Uber Takes Hit in Car-Tech Fight -- WSJ

By Greg Bensinger and Jack Nicas Features Dow Jones Newswires

Judge gives Alphabet unit broad leeway to examine evidence from ride-hailing firm

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Uber Technologies Inc., one of Silicon Valley's most secretive firms, may be forced to open up to one of its archrivals, Google parent Alphabet Inc.

A federal judge on Monday gave Alphabet's driverless-car unit Waymo broad leeway to seek and examine evidence from Uber in a three-month-old lawsuit that accuses the ride-hailing firm of conspiring with a former Waymo executive to steal 14,000 files related to its autonomous-vehicle program.

U.S. District Judge William Alsup ordered Uber to produce a detailed accounting of any employee contact with the allegedly stolen files and all relevant written or oral communication by the Waymo-turned-Uber executive at the center of the case, Anthony Levandowski. The judge also authorized Waymo to depose seven more Uber employees and inspect Uber's work on laser sensors, known as lidar, that Waymo claims is based on its technology.

The preliminary injunction, which was unsealed on Monday, stopped short of forcing Uber to shut down its self-driving efforts, but the order formally barred Mr. Levandowski from working on the technology. Uber last month said it removed Mr. Levandowski from leading its driverless-car program.

The case has riveted Silicon Valley by exposing the secrets of two technology giants dueling to become the first companies to commercialize self-driving cars. Many tech companies and auto makers believe driverless cars will one day replace traditional vehicles, saving lives and costs by reducing human error. Now a feud between two of tech's most-watched companies is publicly playing out over some of the world's most promising technology.

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Google and Uber were once allies. Google's venture-capital firm invested $258 million in Uber in 2013, a top Google executive was on Uber's board until last year, and Uber has long used Google's mapping software for its ride-hailing service. But the two firms have encroached on each other's turf as they battle for control of the road. That rivalry intensified on Sunday when Waymo said it would work with Uber's U.S. ride-hailing competitor, Lyft Inc., to develop self-driving cars together.

Waymo's new discovery powers are a blow to Uber, as was the judge's rejection last week of Uber's bid to move the case to arbitration, said Michael Brophy, an attorney with Withers Worldwide who has tracked the case. He noted the partial injunction is also a win of sorts for Uber, as it can continue testing the vehicles while the case winds its way through court. "Both sides can wave a flag saying they've won something, " he said. Mr. Brophy helped represent Google in a copyright case in 2006.

Mr. Levandowski and Uber are also facing a possible criminal probe after the judge last week referred the case to Justice Department officials for review. The Justice Department and Uber haven't commented on the possible investigation.

Mr. Levandowski didn't respond to a request for comment. He joined Uber as part of the company's $680 million purchase of his Otto self-driving truck firm last year. Uber hasn't disputed Mr. Levandowski took the files, but it denies Mr. Levandowski has made a meaningful contribution to the technology.

For Uber, unmanned vehicles are critical to its future success as they could all but eliminate the cost of paying drivers, which helped contribute to its 2016 loss of at least $2.8 billion. Uber has denied wrongdoing in the lawsuit and said Waymo's true intent is to cripple a competitor.

The judge said Waymo has made a strong case thus far. "The bottom line is the evidence indicates that Uber hired Levandowski even though it knew or should have known that he possessed over 14,000 confidential Waymo files likely containing Waymo's intellectual property," the judge wrote. Evidence also suggests that information from the files "has seeped into Uber's own" driverless-car technology, he wrote.

"We are pleased with the court's ruling that Uber can continue building and utilizing all of its self-driving technology," an Uber spokeswoman said. The company will "demonstrate that our technology has been built independently from the ground up."

Waymo said in a statement it would use the new discovery power "to further protect our work and hold Uber fully responsible for its misconduct."

The Waymo allegations add to Uber's woes this year, following charges of a workplace permissive of sexual harassment and sexism, a series of executive departures, a federal investigation into its use of a technological tool to evade regulators, and a leaked video of Chief Executive Travis Kalanick berating an Uber driver. The company has hired former U.S. Attorney General Eric Holder to help lead an internal investigation of its workplace and is interviewing candidates for its chief operating officer post, to help serve as a check on Mr. Kalanick.

Uber still will be able to test its self-driving cars on the road, currently in California, Pennsylvania and Arizona. Judge Alsup rejected the request from Waymo to block Uber from working on 121 technologies related to self-driving cars that Waymo claimed were trade secrets stolen by Mr. Levandowski. Some of the technologies aren't actually trade secrets and few have been traced to Uber's technology, Judge Alsup wrote.

But Uber faces potential damage to its reputation if this case plays out in a public forum over months or years, possibly hurting the company's ability to retain and recruit from a limited pool of qualified self-driving engineers.

Judge Alsup gave Waymo power to discover if lidar has been incorporated into Uber's driverless-car technology. The judge ordered Uber to describe any employee's knowledge of the allegedly stolen files, including "what they saw or heard, when they saw or heard it, and for what purpose." He also ordered a log of Mr. Levandowski's written or oral conversations regarding lidar, including phone calls, text messages and in-person conversations. And he granted a Waymo attorney and expert authority to inspect all of Uber's work on lidar.

If Waymo turns up new information in that discovery, the firm can file a new injunction request.

Granting Waymo such broad discovery powers "is a sign the court wants to make sure that Waymo has every opportunity to establish its case," said Mr. Brophy, the outside attorney who has tracked the case. "It's not fair for Uber to say, 'We had no contact with Levandowski or any of these documents,' and then not allow Waymo to test that theory."

The company added, "Competition should be fueled by innovation in the labs and on the roads, not through unlawful actions. We welcome the order."

Still, Mr. Levandowski has frustrated Waymo's efforts to build its case by invoking his Fifth Amendment rights and refusing to answer questions or turn over many documents. The judge wrote that despite that, Uber isn't barred from firing Mr. Levandowski. "Uber has no excuse under the Fifth Amendment to pull any punches as to Levandowski," he wrote.

Write to Greg Bensinger at greg.bensinger@wsj.com and Jack Nicas at jack.nicas@wsj.com

(END) Dow Jones Newswires

May 16, 2017 02:47 ET (06:47 GMT)