30/05/2018
A legal dispute between two of the giants of the driverless vehicle field came to an end recently as Uber settled with Waymo, the autonomous vehicle development company that is a subsidiary of Google’s parent company. The settlement came midway through a California trial in which Waymo accused Uber of taking its trade secrets, with Uber to pay Waymo around $245 million.
The dispute concerned a former employee who left Waymo in 2016 to found his own autonomous vehicle company. Before leaving, he is alleged to have downloaded 14,000 secret documents from Waymo’s internal servers and taken these documents with him. Six months’ later, Uber paid the reported figure of $680 million to acquire this new company founded by the ex-Waymo employee, including all of its intellectual property. The trial in California was to determine whether Uber incorporated any of Waymo’s trade secrets into Uber’s own driverless car technology. Waymo was relying on secrecy to prevent its competitors from gaining the benefits of Waymo’s private research. Would patents have been a better option?
One thing we do not know is the technological details of the trade secrets because parts of the trial relating to the specifics were conducted confidentially. But, it is believed that the trade secrets concerned advances Waymo had made in the field of LIDAR. Briefly, LIDAR is a surveying method similar to radar that measures distance to a target by illuminating the target with pulsed laser light and measuring the reflected pulses with a sensor. In other words, the trade secrets concerned the electronic eyes of an autonomous vehicle, and how it determines where it is relative to the road, other road users and obstacles.
The settlement involves Uber compensating Waymo to the tune of $245 million. Waymo had previously demanded compensation of $1.8 billion. While Waymo’s higher figure may have been a negotiating tactic for ‘anchoring’ purposes, it is possible it reflected a weakness in Waymo’s case. Looking back, and with the benefit of hindsight, was secrecy the best approach for protecting Waymo’s intellectual property? Why did they not patent this technology?
Trade secrets are an important way to protect a company’s intellectual property, and the law on trade secret protection has recently been toughened up in Europe to reflect this. But, they have the disadvantage that secrets are only protected while they are kept a secret. Once a secret’s confidential status is lost, the protection is lost.
In the case of a departing employee, the degree to which knowledge gained by an employee during the course of employment is owned by employer is complicated. Onerous restrictions that might unfairly inhibit the employee’s future employment opportunities are considered unenforceable in many jurisdictions. But it would not matter if a former employee passed on details of the technology if the technology were patented. Competitors would still be unable to use the patented technology without infringing.
For companies like Coca Cola, the notion of a ‘secret formula’ kept in a vault adds an air of mystery that is as much a marketing feature as IP protection. But, it does mean that nearly all of Coca Cola’s employees do not know the formula. The risk that a departing employee would take the ‘secret formula’ to a competitor is low. This secrecy is probably not possible for Waymo. It is hard to see how confining the secrets to only a few individuals would allow a technology company such as Waymo to grow and develop as it has done – Waymo would have needed to share the confidential information widely among its staff. Therefore at first glance, this is a different situation to that of Coca Cola. If Waymo had any particular concerns about former employees passing on confidential information, patents might have been a better choice.
Another point to consider is the nature of the technology – would it be possible to actually keep the LIDAR technology secret once self-driving cars reach the market? Waymo does not have any self-driving cars on the market at present, but it is reasonable to assume that the technology could be reverse engineered once they do. Google, Waymo’s sister company, is able to keep most of its technology on its own servers, but a self-driving car must be able to continue to operate without a permanent internet connection. Even with such a connection, issues of lag must mean that the processing of LIDAR information must take place in the vehicle itself. Thus the trade secret could only be expected to last until Waymo’s self-driving cars reach market. Given the 20 year term of a patent, it would require a level of pessimism unusual in the autonomous vehicle field to expect self-driving cars not to reach market before the patent’s expiry. Once again, it appears that patents might have been a better option.
There are costs involved in filing and prosecuting patent applications, such as attorney fees, official fees and translation costs, but these are negligible compared to the amounts at stake in this dispute: $1.8 billion compared to the cost of drafting several patent applications?
It is also true that Waymo is no stranger to the patent system. A quick search on the Espacenet database for patent rights with Waymo listed as applicant shows over one hundred patent rights with priority dates going back as far as 2010. Therefore Waymo has been using patents to protect its intellectual property and a decision was presumably made not to use patents in the case of the LIDAR technology that Uber was alleged to have misappropriated.
Could it be the case that secrecy itself was viewed as more important than protection? The quid pro quo of a patent is that the patentee must disclose their invention to the world, with most patent applications published 18 months from their priority date. This is the case regardless of whether the application is eventually granted. Perhaps Waymo knew that patents would not be granted, for example if Waymo were using techniques that were in the public domain. In such cases, there may still have been value in not revealing to their competitors which, of the many techniques in the public domain, Waymo was using in its LIDAR technology.
Similarly, a public disclosure in a patent application of Waymo’s LIDAR technology might have prompted competitors to shift their research into the same area with the aim of obtaining patents covering future advances in that area. Rather than have a monopoly on their technology, Waymo might have feared that they would be forced to cross-license their patents just to implement their own technology, which might not provide the same competitive advantage.
Another possibility is that Waymo might have intended to file a patent application later, keeping the technology secret in the meantime. The risk with this is that some other party might file a patent covering the technology before Waymo. Defensive disclosures could prevent this, but then they would come to light as part of the discovery process in any trial for misappropriation of trade secrets. Waymo would have found it difficult to argue that the material taken was secret if they themselves had disclosed it earlier as a defence against future patents.
Overall, there can be many reasons in favour of choosing patents and many other reasons in favour of choosing trade secrets to protect an invention. On the surface facts available, it looks like Waymo might have made a mistake in not patenting this technology. But Waymo may have had sensible reasons to take that approach for their LIDAR technology but use patents in other areas. Alas, Waymo’s decision-making process remains a secret.
We all know that technological advances can give a company a competitive edge but maintaining that edge can be difficult with keen-eyed competitors about. If you are unsure how to maintain that edge, whether that be in autonomous vehicles or any other technical field, come speak to us for some advice on how to protect your technology. We can explore which solution is right for you.
This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking any action in reliance on it.
