A federal judge’s orders last week in a lawsuit by Google’s parent company, Alphabet, against ride-hailing app company Uber may have launched a major rethink on how the automobile industry braces for competition and protects its intellectual property (IP). Alphabet subsidiary Waymo had accused Uber of stealing trade secrets and patent infringement by hiring Anthony Levandowski, an engineer who formerly led Google’s driverless car project, and buying a firm he had founded after leaving Google.
Judge William Alsup of the U.S. District Court for the Northern District of California ordered Levandowski to turn over some 14,000 documents he allegedly downloaded before he left Google and granted a preliminary injunction Waymo sought to prevent Uber from using know-how Levandowski brought to the firm. Judge Alsup also referred the case for a federal criminal investigation. Uber has since taken Levandowski off its driverless car project and asked him to comply with the court order or risk termination of his job. Meanwhile, Levandowski has remained silent on the matter, citing the Fifth Amendment right against self-incrimination.
Wharton management professor John Paul MacDuffie, who is also director of the school’s Program on Vehicle and Mobility Innovation; Dorothy Glancy, professor of law at Santa Clara University; and Penn Law professor R. Polk Wagner examined the far-reaching changes the Waymo-Uber lawsuit could bring, on the Knowledge at Wharton show on Wharton Business Radio on SiriusXM channel 111. (Listen to the podcast at the top of this page.)
Below are select highlights from their discussion:
Revisiting Trade Secrets as IP Protection: According to Wagner, trade secret law has traditionally not been seen as “a particularly reliable or useful way to protect technology,” partly because it is difficult to keep such technology secret when it is implemented and products based on it are sold. But that conventional wisdom is up for a reexamination. “If Google is successful at putting a dent in Uber’s ability to compete in this field as a result of this case, then people will take notice of that and you will probably see more people using trade secrets” as part of their intellectual property strategies, said Wagner. “On the other hand, if Google is not successful, or even if they win this case and they don’t slow Uber down very much, then people are going to go back to what we traditionally think of in IP, which is unless you have a patent covering the technology, you don’t have a lot of protection.”
“These are trade secrets that are incredibly hot and at the heart of a fierce and fast-paced competition around an exciting new technology.” –John Paul MacDuffie
Added MacDuffie: “These are trade secrets that are incredibly hot and at the heart of a fierce and fast-paced competition around an exciting new technology.”
Wagner’s guess is that in the meantime, all the companies involved in driverless technology must be filing as many patents as they can. “So you are going to see a wave of patent litigation, and that is going to begin as soon as some of these patents start to actually issue, which is in the near future — and some of them are probably already issued,” he said.
Coalitions, Collaborations the Way Ahead: According to MacDuffie, driverless car technology will spur the automobile industry — and the technology companies in the space — to develop completely new business models. He raised some fundamental questions on how that model might work. Will individuals buy their own autonomous vehicles and lease them to, say, an Uber? Will Uber become a company that is good at managing a fleet of hard assets like cars? Or will other firms that already have that capability — including auto companies — join the fray?
“There are a lot of possibilities of combinations of companies and skills that would be needed in the end,” MacDuffie predicted. “We may end up with competition among a few companies or coalitions of companies that have different models of how they put the hardware and software together for driverless cars. What makes them win may not be being first; it may be some other attribute of performance.”
Wagner noted that driverless technology appears to be evolving as “platform technologies,” similar to a dominant company like a Microsoft building the Windows platform on which others build products. “Being at the bottom of that stack, or being the Windows of the driverless car world, is enormously valuable,” he said, adding that the battle for those stakes is being fought right now. “In an industry with significant network effects, which this certainly appears to be, they can get locked into — for potentially decades — an area which will have a lot of impact on our society.”
“A general rule of thumb with trade secret litigation is if there is trade secret litigation, something has gone horribly wrong.” –R. Polk Wagner
Uncertain Policy Terrain for Driverless Technology: According to Glancy, it would be tough to draft public policy relating to driverless vehicles if trade secret laws are to be dominant. She noted that in her study of all the pleadings in the Waymo-Uber case, major parts are redacted because of the trade secrets law. “I don’t see how it is easy to make good public policy about something like driverless cars when all of these particulars of what makes them work keep getting redacted from the only public papers we have about this, which are the court pleadings,” she said.
Glancy also questioned Judge Alsup’s ordering Levandowski to turn over the documents he took from Google and for Uber to insulate its employees against each other to avoid any continued IP vulnerabilities. “How in the world – once a trade secret has been disclosed to a competitor – do you put the genie back in the bottle?” she asked.
“A general rule of thumb with trade secret litigation is if there is trade secret litigation, something has gone horribly wrong,” Wagner said. “You are almost certainly not going to survive the litigation with your trade secret intact. The technology is already out of the box; you can’t undo that now, no matter what.”
“How in the world – once a trade secret has been disclosed to a competitor – do you put the genie back in the bottle?” –Dorothy Glancy
Who Will Make the Cheapest Lidar: At the heart of the Waymo-Uber battle is the so-called Lidar technology, a laser-based scanning and mapping mechanism that creates real-time 3D images and allows a vehicle to “see” its surroundings and thereby detect traffic and pedestrians. Current costs are trending at between $8,000 and $10,000 each, and a driverless car would need four of them, noted Glancy.
“A lot of the Google advances were on the cost side of Lidar and not so much on the functionality of it,” said MacDuffie. “Google was moving faster to get to the low-cost Lidar, and that’s what they are saying Uber was stealing.” Many firms are working in this space, and the goal is to bring down Lidar’s cost to between $400 and $500 apiece with economies of scale, he added.
Image credit: Uber