Forbes Leadership: Uber’s Disaster Movie

Forbes Leadership

 

 by: David Pridham | March 21, 2018

This is not about the death of a woman run over this week by an Uber driverless car. This is about what happened before the tech ever got deployed in the vehicle in the first place. It had to be stolen first.

One year ago, ride-hailing company Uber was accused of the outright theft of autonomous vehicle technology from rival Waymo, the self-driving spinout of search giant Google.  This case featured the sort of larcenous treachery one usually finds in a made-for-TV movie or Netflix series.

The Setup

The antagonist in the case is hungry upstart Uber, a firm already scandalized by its massive data breaches, egregious exploitation of drivers, the serial cheating of local regulatory agencies, and widespread sexual harassment within its ranks. Add to all that the perfect human villains: an arrogant, egomaniac CEO Travis KaUber Logolanick — soon to be booted out by his own board — and the avaricious engineer Anthony Levandowski, who stole self-driving secrets from Uber’s arch-rival Waymo.

The evidence clearly indicated that Levandowski had downloaded 14,000 documents just prior to his departure from Waymo so he could start his own self-driving truck company, Otto. To no one’s surprise, Uber then quickly bought Levandowski’s Otto for $680 million.

You know how straw gun purchases work, right? Consider Uber’s purchase of Otto a kind of straw theft of self-driving trade secrets. The ruse fooled no one.

Payback

So faced with cWaymo Vanlear evidence of wrongdoing, Uber wisely chose to settle the case by paying Waymo (Google) $245 million for its trade secrets. That represents roughly .34% of Uber’s $72 billion valuation. Ironically, Google was an early investor in Uber, and recently sold a $350 million stake in the ungrateful Uber to smooth the way for Softbank’s investment in that troubled self-driving startup.

But there remained important questions bubbling under the headlines of this sordid drama. Among the biggest were the relative value of trade secret versus patent protection, as well as the outsized role played by employee non-compete agreements in today’s high-tech sector.  So let’s break it down

The Dilemma: Trade Secrets vs. Patents

Beyond the rote legal details and the massive settlement (plus Otto purchase price), the case raises questions about the transient nature of trade secrets locked up in the heads of key employees. Can companies trust their trade secrets, or are they better off patenting to protect the value of their innovations? It depends.

You’ve heard the old adage about how that at the end of every day, a company’s most valuable secrets walk out the door (in its employees’ heads). So the Waymo v. Uber imbroglio is if nothing else a clarion call for companies to manage their trade secrets a lot better than Waymo (Google) managed its self-driving secrets. Either that, or just disclose those secrets and protect them with iron-clad patents.

With patents in hand, or at least patent applications in process with the USPTO, much of this case’s argument would be moot.

The Twist

Further complicating matters is the practice today of requiring most high tech workers, especially high ranking ones, to sign and adhere to an employee non-compete agreements.  These are designed to restrict the flow of trade secret knowledge by inhibiting valuable employees from moving to other companies.

As Judge William Alsup, the presiding judge in Uber-Waymo case, asked in reference to these rigid non-competes, “Is an engineer really supposed to get a frontal lobotomy before they go to the next job? I think the answer has to be no.”

The Irony

It is no small irony that while the Uber-Waymo case appears to spotlight the inherent weakness of trade secret compared to patent protection, that lesson may be lost on Google, which publicly criticizes patents (especially software patents) for supposedly “inhibiting innovation.” Google campaigned hard for the America Invents Act (AIA) in 2011, which, along with the 2014 Supreme Court ruling in Alice Corp v CLS Bank ruling, made it much more difficult to enforce a patent for software.

This along with the trade off to expose your secrets via the patenting process has caused firms of all industries to rethink the once obvious choice to patent one’s innovations and be secure in the knowledge that their value was protected and competitors could not steal them.

But with the enforceability of patents under greater question thanks to the recent legal developments above, many firms today wonder whether should: a) file for a patent, b) risk exposing intimate technical details to the competitive market once a patent application is made public, c) trust the innovation to remain safe in the heads of employees that walk out the door everyday.

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