Waymo accepts $245 mln and Uber's 'regret' to settle self-driving car dispute

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By Alexandria Sage, Dan Levine and Heather Somerville

SAN FRANCISCO, Feb 9 (Reuters) - Uber Technologies Incwill pay $245 million worth of its own shares toAlphabet Inc's(GOOG.NaE) Waymo self-driving vehicle unit tosettle a legal dispute over trade secrets, allowing Uber's newchief executive to move past one of the company's most bruisingpublic controversies.

The settlement was announced on Friday just before the fifthday of testimony was about to begin at a jury trial in SanFrancisco federal court.

Waymo sued Uber last year, saying that one of its formerengineers who became chief of Uber's self-driving car projecttook with him thousands of confidential documents.

The lawsuit cost Uber precious time in its self-driving carambitions, a key to its long-term profitability. Uber fired itsself-driving chief after Waymo sued, and it is well behind onits plans to deploy fleets of autonomous cars in one of the mostlucrative races in Silicon Valley.

The settlement now allows Uber CEO Dara Khosrowshahi to putanother scandal behind the company and move ahead withdevelopment of self-driving technology after the tumultuousleadership of the firm by former CEO Travis Kalanick, whotestified at the trial on Tuesday and Wednesday.

As part of the deal, Waymo gets a 0.34 percent stake inUber, worth about $245 million based on Uber's current $72billion valuation, a Waymo representative said. The settlementalso includes an agreement to ensure Waymo confidentialinformation is not being incorporated into Uber technology,which Waymo has said was its main goal in bringing the lawsuit.

In settlement talks last year, Waymo had sought at least $1billion from Uber, and wanted an independent monitor to ensureUber does not use Waymo technology in the future, Reutersreported. Waymo also asked for an apology.

Waymo had agreed earlier this week to a settlement proposalvalued at $500 million, but Uber's board rejected those terms onTuesday, two sources familiar with the negotiations said. Bylate Thursday, Waymo had agreed to the $245 million deal, one ofthe sources said.

Khosrowshahi expressed "regret" for the company's actions ina statement on Friday.

"While we do not believe that any trade secrets made theirway from Waymo to Uber, nor do we believe that Uber has used anyof Waymo's proprietary information in its self-drivingtechnology, we are taking steps with Waymo to ensure our Lidarand software represents just our good work," Khosrowshahi saidin a statement.

Neither company offered details on what those steps willentail. Shares of Alphabet rose about 1.4 percent on Friday.

Elizabeth Rowe, a professor at the University of FloridaLevin College of Law, analyzed about 150 trade secret verdictsthrough 2014 and said $245 million would rank as second highest.Given that landscape, along with the fact that Alphabet CEOLarry Page could have had to testify next week, the settlementmakes sense for Waymo, she said.

"Their risks would have gone up on many levels," Rowe said.

Waymo's lawsuit said that Anthony Levandowski, theself-driving car chief Uber eventually fired, downloaded morethan 14,000 confidential files containing designs for autonomousvehicles in December 2015 before he went on to work at Uber in2016.

The U.S. Department of Justice is conducting a separate,criminal investigation into the trade secrets. Levandowski hasnever publicly addressed the allegations of taking the documentsand law enforcement has not charged anyone with their theft.Levandowski was not a defendant in the case.

SERIES OF PROBLEMS AT UBER

The Waymo lawsuit was the most pressing legal battle forUber but only one item in a long list of controversies that havedogged the company for the last year.

Public accusations of sexual harassment and a toxicworkplace prompted an internal investigation at Uber thatresulted in more than 20 people being fired, while the companyfaces multiple federal criminal probes. The company has alsoexperienced turmoil at the top with the ousting of Kalanick inJune and a bitter board dispute.

Uber planned to have self-driving cars in 20 cities by theend of 2018, 50 cities by 2019 and 150 cities by 2020, accordingto documents shown in court. It is far from achieving thoseambitions.

Uber now has small pilots in Tempe, Arizona and Pittsburgh,Pennsylvania. Its has acquired a California permit but stilldoes not have self-driving cars transporting passengers there.

The settlement increases Alphabet's stake in Uber from aninitial investment of $258 million in 2013, which was at thetime Uber's largest fundraising round.

Uber has gone on to raise more than $14 billion in newfunding and last month closed a deal with SoftBank Group Corp, in which the Japanese conglomerate, along with otherinvestors, took about a 17.5 percent stake in the company.SoftBank bought the majority of its stake at about a 30 percentdiscount off of Uber's valuation.

The deal was an opportunity for early investors andemployees to cash in their shares and gave lossmaking Uber amuch-needed financial boost.

Autonomous cars offer a multi-billion-dollar opportunity toremake urban transportation systems, and companies includingApple Inc, General Motors Co and scores ofstartups are competing to develop the technology.

To prevail at trial, Waymo had to prove not only that Uberacquired Waymo's trade secrets, but that it also used them inits own technology. In four days of testimony, however, Waymohad presented little public evidence that Uber actually usedWaymo's trade secrets.

During Kalanick's second day of trial testimony, Waymosought to portray him as so eager to improve Uber's laggingautonomous car business that he did a deal with Levandowskiwithout properly assessing the risks.

Kalanick appeared subdued in front of jurors, but hereturned to his famously pugnacious style in a statement onFriday, saying Uber's sole objective was to hire the mosttalented scientists and engineers.

"Had the trial proceeded to its conclusion, it is clear Uberwould have prevailed," Kalanick said.

(Reporting by Alexandria Sage, Dan Levine and HeatherSomerville; Editing by Bill Rigby and Grant McCool)