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Uber Said It Will Cover Engineer's 'Bad Acts' Like Secrets Theft

June 23, 2017
“What Uber did was to leave the door open for Levandowski to use whatever he remembered of Waymo’s trade secret information, so long as he didn’t deliberately memorize it.”

Uber made an unusual commitment to the engineer it hired to lead its driverless car project: It would cover the costs of legal actions against him over information stored in his head from his previous job at Waymo.

That promise -- buried in the fine print of an otherwise straightforward employment contract for an executive -- emerged in documents unsealed last week in San Francisco federal court.

Waymo alleges that in 2015, Anthony Levandowski and Uber Technologies Inc. hatched a plan for him to steal more than 14,000 proprietary files, including the designs for lidar technology that helps driverless cars see their surroundings. Uber, which acquired Levandowski’s startup, Otto, in August for $680 million, has denied Waymo’s allegations.

The Alphabet Inc. unit’s claims were bolstered Wednesday when it told the court Uber has said that Levandowski informed then-Chief Executive Officer Travis Kalanick more than a year ago that he had five discs containing Google data. Kalanick told him not to bring the information with him to Uber, and Levandowski said he then destroyed the files, according to the filing.

Even though neither of the men are still at the company -- Kalanick stepped down this week while Levandowski was fired last month -- Uber has to defend itself from Waymo’s suit as well as a possible criminal probe after U.S. District Judge William Alsup asked prosecutors to take a look at the allegations.

Risky Benefit to Offer

Uber’s legal fees promise is further evidence that the talent competition in the driverless car sector is cut-throat. It was a highly risky benefit to offer, according to Jim Pooley, a lawyer at Orrick in Menlo Park, California.

The indemnification document may be “very powerful” evidence that Uber suspected Levandowski would be taking proprietary information from Waymo, said Pooley, who has more than 35 years of litigation experience and is the author of the “Secrets: Managing Information Assets in the Age of Cyberespionage.”

“What Uber did was to leave the door open for Levandowski to use whatever he remembered of Waymo’s trade secret information, so long as he didn’t deliberately memorize it,” the lawyer said.

Waymo hasn’t sued Levandowski directly. In its suit against Uber, the engineer has refused to testify, asserting his constitutional right not to incriminate himself. But if the judge’s referral of the case to prosecutors leads them to pursue a criminal case against Levandowski and he’s found to have broken the law, all bets could be off. Normally indemnification clauses are voided for criminal conduct.

“This provision shows how serious we were about preventing any Waymo trade secrets from ever coming to Uber,” Matt Kallman, a spokesman for Uber, said in an emailed statement. “We explicitly did not want any Otto employee using any such information, whatever its source. The law in California recognizes that while it is of course not possible to erase people’s memories, that does not prevent employees from changing jobs, even between competitors. The law permits those employees to use their expertise to do their jobs.”

Miles Ehrlich, Levandowski’s lawyer, declined to comment on the filings or how he’s being paid. Johnny Luu, a spokesman for Waymo, declined to comment.

‘Treasure Trove’

Judge Alsup has speculated that Uber may have been complicit in Levandowski using the information in a way that wouldn’t leave electronic footprints.

“It remains entirely possible that Uber knowingly left Levandowski free to keep that treasure trove of files as handy as he wished (so long as he kept it on his own personal devices), and that Uber willfully refused to tell Levandowski to return the treasure trove to its rightful owner,” the judge said in a May 11 ruling.

Pooley, the lawyer at Orrick, said he’s never seen a written agreement that makes overt reference to “bad acts” like Levandowski’s contract with Uber.

The document, dated April 11, 2016, references “Pre-Signing Bad Acts,” which covers behavior including fraud and trade-secrets theft, as well as “Post-Signing Specified Bad Acts.” Misconduct in the latter time period wouldn’t be indemnified, “with the exception of retaining confidential information solely in the memory of an employee.”

Pooley said such a “vague and potentially very broad exception” looks “very troublesome” for Uber as the case heads toward trial because the company basically told Levandowski: Don’t worry about what’s in your head.

By Joel Rosenblatt

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