You always know that during the early years of any market, there will always be shenanigans and dodgy behaviour which will result in the lawyers getting involved and making some good cash. This has been happening with the ride-share and autonomous vehicle market.
Last year it was Waymo and Uber at loggerheads over their technologies. At the core of the dispute was Otto, the self driving truck company that Uber had bought. Otto was founded by Anthony Levandowski, whose previous role had been at Alphabet, Waymo and Google’s parent company and he was instrumental in getting Google’s autonomous car division up and running before it became Waymo.
Waymo claimed that Levandowski had illegally downloaded thousands of files containing confidential information about its technology, notably around its LIDAR systems. Uber have stated that their LIDAR is different to the Waymo system, although it would be fairly close theoretically and Levandowski chose to take the 5th, meaning that he didn’t want to incriminate himself! Apparently Waymo only learned about the issues when a component vendor sent some circuit board designs to Levandowski and inadvertently cc’ed a Waymo employee, possibly forgetting that Levandowski was no longer at that company.
Waymo also alleged that Uber had then taken the systems from Otto and applied it to their own autonomous cars. Uber naturally denied all charges. Another allegation was that Travis Kalanick, at that time the head of Uber, had been quietly in discussions with Levandowski long before Otto was founded. The allegations included payments of millions of dollars if Levandowski jumped ship. Otto was allegedly a way to cover that jump.
By the time the case reached the court and jury earlier this year, Uber had sidelined Kalanick due to a personal implosion after several unethical practices had been exposed. This helped Waymo, because they wanted to make Kalanick the central character with Levandowski. It didn’t help Uber that Kalanick’s behaviour lended itself to be the bad guy!
The timeline that the court saw showed that apart from anything else, Levandowski was guilty of a conflict of interest – there was a period when he worked for Google and owned Ottomotto, the corporate name for the Otto company. He had left Google in January 2016 and sold Ottomotto to Uber in August, a mere 7 months later, for a cool $680M of Uber equity. Levandowski became head of Uber’s self driving systems.
On Uber’s side, they claimed that the tech that Levandowski was using with Otto was useless and didn’t work – Waymo used redundant systems and Otto didn’t. The term “redundant” means that there was a backup system in case one failed on the fly. Apparently whilst at Google/Waymo, Levandowski had argued about cost savings by only using one system. Incidentally, Uber dismissed Levandowski when he took the 5th and refused to co-operate with the investigation.
After a week in court with both sides laying out their cases, there was a sudden resolution. Waymo were originally after $1.85B in damages which Uber naturally rejected, so Waymo then downgraded the amount to $1B. Uber offered 0.34% of their equity to Waymo with both parties covering their own legal costs. At the time, that offer was worth $245M, although it was equity so could fluctuate with the fortunes of the company. Waymo accepted that offer and Uber released a public apology.
The offer was made out of court and so on the 5th day of the trial, both parties asked the judge to dismiss the case which was done. Part of the agreement was that Uber confirmed that no Waymo technology was being used in their cars. Since the court case, Uber has had problems with their cars and had to stop testing after a fatal accident and Waymo has continued down its path committing to buy thousands of vehicles from a range of manufacturers.
Many reports suggested that had Kalanick remained at the top of Uber, he would have fought tooth and nail with Waymo. The current CEO, Dara Khosrowshahi, was more realistic and knew that the costs both financially and to their reputation were likely to be high. He knew that the media would savage them if they fought on knowing that they had done something unethical and it was proven in court. To offer equity meant that no monies were handed over and that each party could deal with their own legal costs quietly.
Google was an early investor in Uber and now Waymo has become a tiny owner in the company and no doubt will be keeping a closer eye on their “competitor”.