Top Engineer Sparks Google-Uber War -- WSJ -2-

Employee ran side businesses, is accused of taking driverless-car secrets

Anthony Levandowski, the former Google engineer at the center of a battle between the tech giant and Uber Technologies Inc., was never a typical employee. And for years, Google was fine with that.

Weeks after Google hired him in 2007 to work on a global photo database called Street View, Mr. Levandowski, then 27 years old, registered a startup to sell a sensor system to Google for the same project, according to public records and former employees of both companies.

For the next four years, Mr. Levandowski split his time between his day job at Google and the startup, 510 Systems LLC, an hour away in Berkeley, Calif., where he directed employees to develop technology related to his Google projects, including self-driving cars, according to former 510 Systems employees.

After Google discovered the side business, instead of reprimanding Mr. Levandowski for a potential conflict of interest, it ultimately bought 510 Systems for about $20 million.

Now Google parent Alphabet Inc. and Uber are embroiled in a legal fight over driverless-car technology, with Mr. Levandowski playing a starring role. The two firms, along with several other companies, are locked in a race to automate cars, a contest that could affect the future of transportation.

A look back at Mr. Levandowski's nine years at Google shows an employee who sometimes operated at the edge of what a typical company would accept -- even one like Google that encourages entrepreneurialism among its workers. While Google's approach helps it create new businesses, it also can spark disagreements between the company and its employees over who owns certain technology.

Alphabet accuses Mr. Levandowski of stealing its driverless-car technology and bringing it to Uber, which he joined as its head of its driverless-car project last year after earning more than $120 million at Google. Alphabet has filed two arbitration claims against Mr. Levandowski and is suing Uber for allegedly conspiring with him.

Last week, the judge handling the civil lawsuit asked federal prosecutors to investigate Alphabet's allegations that Mr. Levandowski stole the trade secrets.

Uber, a ride-hailing company, denies wrongdoing and is contesting the accusations in court. It isn't clear how Mr. Levandowski has responded to the arbitration claims, which are private. Uber declined to make him available for an interview and he didn't respond to requests for comment.

This account of Mr. Levandowski's tenure at Google and simultaneous work for his own companies is based on interviews with a dozen former 510 Systems and Google employees, and on court filings and other public records.

Google encourages employees to spend 20% of their work time on side projects of their choosing that benefit the company, and it has created a so-called incubator for employees to found startups inside the company. Some eventually leave to start their own ventures, such as social-media firms Instagram and Pinterest Inc. Even Google's co-founders, Larry Page and Sergey Brin, have launched their own outside companies in recent years, including firms developing flying cars and an airship.

Mr. Levandowski's outside companies benefited Google for years. Technology developed by 510 Systems helped Google create its own maps and avoid paying for third-party data. When Google launched its self-driving car program in 2009, one of its first vehicles was a Toyota Prius that Mr. Levandowski and 510 Systems engineers had rigged up for a TV show.

The employment agreements signed by many Google employees bar them from starting outside companies that conflict with Google's interests, such as online advertising. It isn't known when Google learned about Mr. Levandowski's initial side project, 510 Systems, or whether his employment agreement permitted his activities there.

Mr. Levandowki started other businesses later in his Google tenure, public records indicate, including an online game for betting on stock-market trends and a California factory building prefabricated housing. Two of the other later startups led to Alphabet's claims against Mr. Levandowski and Uber.

Mr. Levandowski, who stands 6 feet 6 inches tall, was born in Brussels and came to the U.S. in the early 1990s, at age 14. As a teenager in Marin County, north of San Francisco, he created a digital map of his school and started a company to provide technical support for local businesses' websites.

He caught the bug for robots as an industrial-engineering student at the University of California, Berkeley, where he made one with Lego pieces that could sort Monopoly money. He also began experimenting with driverless vehicles, organizing classmates to enter a 2004 Defense Department competition to race autonomous cars across the Mojave Desert. To save money, the team built a driverless motorcycle, dubbed Ghostrider. It crashed within seconds but is now displayed at the Smithsonian Institution.

Around 2006, before he joined Google, Mr. Levandowski was part of a digital-mapping project called VuTool, which used sensor technology developed for the Defense Department race.

Google's Mr. Page was looking for a similar tool for its burgeoning maps service. He believed Google's mission to "organize the world's information" needed a lot more data from streets, according to employees who worked on the project, which became Street View.

Google's team was struggling with an expensive high-resolution camera. Sunlight streaked through images. VuTool was moving faster by using off-the-shelf parts and a system built by Mr. Levandowski and a few classmates that combined information from multiple sensors.

Google hired Mr. Levandowski and the VuTool team in the spring of 2007. A few weeks later, Mr. Levandowski registered 510 Systems, named after Berkeley's area code. He soon began selling his sensor-fusion system to Google via a middleman.

The black-and-yellow box became the brains of the Street View system. It synchronized information from multiple sensors, including cameras, satellite data and the cars' wheels, so images gathered as the vehicles drove through neighborhoods would precisely match where they were taken.

During 510 Systems' first several months, Google was its only customer. Former 510 Systems employees say the transactions occurred through a middleman that branded the devices, sold them to Google and eventually manufactured them directly. Google bought more than 100 over the first year. Former 510 Systems employees said they kept quiet about their high-profile customer, giving Google the code name Aspen.

Mr. Levandowski told few employees at 510 Systems about his Google job, although some figured it out because he often wore Google apparel, the former employees say. Fellow engineers on Google's Street View team knew of Mr. Levandowski's connection to 510 Systems, a former Google employee says.

Alphabet lawyers have suggested Google executives initially didn't know they were buying technology from one of their own employees.

"You did not disclose to Google your involvement with 510 Systems...before Google discovered your involvement with them, correct?" an Alphabet lawyer asked Mr. Levandowski in a deposition last month, according to a transcript. Mr. Levandowski declined to answer, invoking his Fifth Amendment rights.

At 510 Systems, Mr. Levandowski appeared sporadically, often scheduling meetings with managers late at night, former employees say. He brought on his stepmother, Suzanna Musick, as chief executive to help manage the dozen or so employees. Former employees described Ms. Musick, a former consultant, as a competent manager but unschooled in the technology. Ms. Musick didn't respond to requests for comment.

Mr. Levandowski's passion for robots hadn't faded. In 2008, he was asked to make a driverless vehicle to deliver a pizza for a Discovery Channel show. He formed another startup, Anthony's Robots LLC, and assembled a few 510 Systems engineers to modify a Toyota Prius to make it drive on its own. Weeks later, the car -- emblazoned with 510 Systems and Anthony's Robots decals -- drove over San Francisco's Bay Bridge with a police escort and pizza inside.

Months later, in 2009, that car became a seed vehicle for Google's driverless-car project, a bold new venture for a company based on internet search and advertising.

Over the next year, Mr. Levandowski quietly shifted 510 Systems' focus toward driverless cars, pulling 510 Systems engineers onto driverless-car projects. 510 Systems quietly began supplying Google with self-driving technology, including a modified sensor-fusion box and a system that connected computers to a car's steering wheel, gas and brakes.

Photographs viewed by The Wall Street Journal show three of Google's self-driving vehicles at 510 Systems' headquarters in late 2010.

The companies' unusual relationship hardly registered with 510 Systems employees. "Amongst ourselves we said, 'That's a little strange, isn't it?'" said former 510 Systems software engineer Ben Discoe. "But that was extent of it. We liked our jobs."

At last month's deposition, an Alphabet lawyer asked Mr. Levandowski: "You used confidential information from Google to help develop technology at 510 Systems, correct?" Then, "You brought Google Street View source code to 510 Systems...correct?" Mr. Levandowski invoked the Fifth Amendment.

Two former 510 Systems employees said in interviews Mr. Levandowski often would return from a day at Google and suddenly have answers to engineering questions the 510 Systems team had been struggling with.

One day in early 2011, 510 Systems employees awoke to an email from Mr. Levandowski calling a companywide meeting. At the headquarters, they lined up to sign a nondisclosure agreement at a desk manned by Mr. Levandowski. Then he announced Google was buying 510 Systems and Anthony's Robots for its driverless-car program.

The 510 Systems team gathered at Google headquarters that afternoon for barbecue, beers and rides in self-driving cars. The mood soured when the deal's details came out. Mr. Levandowski had sold the company for about $20 million, just below the threshold at which employees would have shared in the proceeds. Google eventually hired about half of the company's 50 or so employees.

Mr. Levandowski signed a noncompete agreement that for two years barred any outside involvement in a variety of areas, including sensors, robotics and driverless cars.

The relationship between Google and 510 Systems "was completely tangled, " says Mr. Discoe, the former 510 Systems software engineer. "I guess the decision to be bought or not be bought was basically: Are we going to untangle this or are we just going to give up and merge it?"

More than five years later, the most valuable piece of the acquisition is 510 Systems' lidar system, a laser sensor crucial to driverless cars because it allows them to effectively see their surroundings. The system was the predecessor to the lidar that Waymo, Alphabet's recently renamed autonomous-vehicle unit, now uses on its most advanced driverless cars.

That lidar, one of Waymo's most valuable technologies, also is at the center of the claims Alphabet has filed against Mr. Levandowski and Uber.

Alphabet has alleged that Mr. Levandowski continued his side dealings in violation of his noncompete agreement. In August 2012, a year after the 510 Systems acquisition, a new business making lidar was founded at 510 Systems' former headquarters, a building owned by Mr. Levandowski, Alphabet alleges. Public records show the new company, Odin Wave LLC, was originally registered by Mr. Levandowski's personal lawyer. That lawyer didn't respond to requests for comment. At the time, Mr. Levandowski ran the lidar team at Google.

Mr. Levandowski quit Google in January 2016, days after launching his own driverless-car venture, Ottomotto LLC. Alphabet alleges that when he left, he took 14,000 confidential files about Google's lidar system, and some top engineers. Mr. Levandowski then merged Ottomotto with the lidar business housed at the former 510 Systems headquarters, Alphabet alleges.

In August, Uber bought the new company for $680 million in stock. Court documents show Mr. Levandowski received more than $250 million.

Write to Jack Nicas at jack.nicas@wsj.com and Tim Higgins at Tim.Higgins@WSJ.com

(END) Dow Jones Newswires

May 24, 2017 02:47 ET (06:47 GMT)