Uber‘s legal battle with Alphabet Inc’s (NASDAQ:GOOG, NASDAQ:GOOG) self-driving car spinoff, Waymo, just took another turn for the worse. The latest court filing by Waymo might provide the final straw and sway things hugely in Google’s favor.
According to the filing, Uber CEO Travis Kalanick may have known that former Google engineer, Anthony Levandowski, had downloaded thousands of files from Waymo before he left to co-found self-driving truck startup, Otto.
Although Kalanick allegedly instructed Levandowski to destroy the discs because Uber did not need them, it does prove that Kalanick was aware of the stolen files all along, and could be part of the reason why Uber acquired Otto for the princely sum of $680 million a few months after launch.
Did Uber Steal Google’s Intellectual Property?
For a long time, Uber has been trying to paint Google’s lawsuit as a total crap shoot — a disingenuous attempt by GOOGL to slow down a worthy competitor. The latest filing, though, might be enough to prove that Uber has been in contempt of court for repeatedly violating U.S. District Judge William Alsup’s orders to turn over the stolen information.
The original suit by Waymo alleged that Anthony Levandowski had stolen Waymo’s proprietary LiDAR (Light Detection and Ranging) sensor technology before he left Google to co-found Otto. The technology might have finally found its way to Uber when the company acquired Otto.
Google says that an email intended for Uber — but sent to Google in error — included various schematics that bore a striking resemblance to Waymo’s LiDAR sensors. Google filed suit against Uber a few weeks after receiving the email.
The case features several intriguing twists and turns that might end up indicting Uber. Google has argued that Uber had initially developed a LiDAR prototype nicknamed Spider, which was very similar to its own, before switching to its current version, Fuji — allegedly in an attempt to cover up its tracks.
In a rebuttal to Google’s claims, Uber has said that its current LiDAR system, Fuji, is different from Spider, and that a non-working prototype does not constitute a violation of patent law if it has already been sidelined and was never placed in a car.
Google’s lawyers will, of course, be keen to prove that Uber lured Levandowski to join the ride-sharing company in a bid to jump-start its own self-driving efforts by copying Google’s proprietary designs.
Scuttled Efforts
There are several possible outcomes in this case, including jail time for any Uber or Google employees (up to 10 years) found to have conspired with Levandowski, as well as hefty fines for Uber for intellectual property theft. The most damaging, though, would be if the judge forced the company to abandon its current self-driving car designs.
Uber is the best-known ride-hailing company on the planet and has little trouble getting business. The company pulled in an impressive $6.8 billion in revenue in 2016, good for 26% year-over-year growth. That’s outstanding for a company that’s been around for only eight years, and it’s a shade below Tesla Inc’s (NASDAQ:TSLA) 2016 take of $7 billion. Tesla is regarded as one of the companies at the forefront of the autonomous car revolution, thanks to the fully functional, yet controversial, Autopilot feature in its Model 3 and Model X vehicles.
Bringing in the profits though has been a different matter altogether. Uber reported an operating loss of $2.8 billion, nearly four times Tesla’s $773 million over the period. It’s important also to note that the company’s net revenue came to only $1.7 billion. It’s clear, then, that costs and expenses vastly outweigh revenue.
Uber has been tinkering with ways to grow the bottom line, including increasing its cut (by decreasing the drivers’ portions), but this, as expected, has backfired.
With nearly 80% of gross revenue going to remunerate its fleet of drivers, one concept is almost comically obvious: remove human drivers from the equation and the company becomes instantly profitable! It’s no wonder the company is so interested in developing first-rate autonomous vehicle technology. Self-driving cars have been viewed as Uber’s best bet toward reeling in those elusive profits.
If Google ends up victorious, however, Uber might be forced to wind back the clock on its self-driving dreams by at least a couple of years. Meanwhile, it’s going to become increasingly difficult for management to convince Uber’s army of 77 private investors to continue playing along. Not with Uber currently valued at a hefty $68 billion, and now this.
Morale and Talent Loss for Uber
Ultimately, a long, drawn out battle against Alphabet might end up draining morale and crucial talent even before the case draws to a close.
Battle lines have already been drawn and the first casualties have already been claimed: Uber has fired Anthony Levandowski, and CEO/co-founder Travis Kalanick has resigned, apparently due to incessant calls from a big group of investors.
Overall, this just doesn’t look good for Uber, and we might be forced to forget about what was shaping up as one of the biggest IPOs in recent memory: an Uber IPO. At least for now, anyway.
As of this writing, Brian Wu did not hold a position in any of the aforementioned securities.
