Google lawsuit could be a fatal setback for Uber's self-drivingdreams

Accusations that an ex-Google engineer stole trade secrets andtook them to Uber may pose an existential threat in the race to getself-driving cars on the road

Uber has racked up victories against regulators, but now it’sgoing up against tech’s undisputed heavyweight champion: Google.Photograph: Bloomberg/Bloomberg via Getty Images

Julia Carrie Wong and Olivia Solon in San Francisco

Sat 25 Feb 2017 17.15 GMTLast modified on Sun 16 Jul 2017 22.30BST

When Anthony Levandowski loped on to the stage to accept the HotNew Startup award at an industry awards show this month, thetrucker hat perched on his head served as a cringeworthy nod to themillions of drivers his self-driving truck company is poised toleave jobless.

Three weeks later, it is the pioneering engineer of self-drivingcar technology whose job could be in jeopardy, and the lawsuit heis named in could pose an existential threat to an increasinglyvulnerable Uber.

With deep pockets and a $70bn valuation, Uber has racked up aseries of victories against regulators, taxi companies, and upstartcompetitors. But Uber will now go up against tech’s undisputedheavyweight champion – Google – while it is still on the ropesafter a consumer boycott campaign and allegations of a toxic workenvironment.

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A report by the New York Times that Uber misled the public byblaming a human driver for running a red light during the company’sshort-lived self-driving trial in San Francisco further damagedboth Uber’s and Levandowski’s credibility. The car was in factdriving itself when it ran the red light, according to two sourcesand internal documents obtained by the Times.

Levandowski, who runs Uber’s self-driving car program, is at thecenter of a blistering lawsuit against Uber that was filed Thursdayby his former employer, Google’s self-driving car project, Waymo.He is accused of brazenly stealing critical intellectual propertyand trade secrets and using them to start his own company, Otto.Uber’s $680m acquisition of Otto in August 2016 gave it access toWaymo’s secrets, the suit claims, which the ride sharing company isnow using to bypass Google’s seven years and many millions ofdollars worth of research and development.

Anthony Levandowski discusses Uber’s self-driving cars in SanFrancisco. An Otto truck can be seen in the background. Photograph:Eric Risberg/AP

Waymo claims to have significant evidence of the theft,including logs of downloads by Levandowski and other Otto recruits,an errant email from a vendor showing that Otto’s LiDAR system –the system that allows an autonomous vehicle to navigate – bears a“striking resemblance” to Waymo’s own design, and documents Ottofiled with the Nevada state government. The suit also alleges thatLevandowski met with “high-level executives” at Uber’s SanFrancisco headquarters while he still worked at Google – and oneday before he formed the company that would become Otto.

On Friday, Uber issued a blanket denial, saying in a statement:“We have reviewed Waymo’s claims and determined them to be abaseless attempt to slow down a competitor and we look forward tovigorously defending against them in court.” Levandowski did notrespond to a request for comment.

But if Google is able to prove its case, the cost to Uber couldbe significant. In addition to monetary damages, Waymo is seekingan injunction against Uber to bar it from using the allegedlystolen tech.

Google could win a “head-start” injunction against Uber,preventing the company from working on the disputed LiDARtechnology for as long as it took Google to develop, according toRobert Merges, an intellectual property expert at the University ofCalifornia, Berkeley law school. For Uber to “sit on the sideline”for three to five years while its competitors race to market wouldbe a “very significant setback”, Merges said.

Indeed, according to Uber’s own CEO, Travis Kalanick, such adelay could be fatal.

In August, Kalanick laid out the stakes of his competition withGoogle to Bloomberg: “The minute it was clear to us that ourfriends in Mountain View were going to be getting in theride-sharing space, we needed to make sure there is an alternative[self-driving car], because if there is not, we’re not going tohave any business.”

Building their own self-driving car “is basically existentialfor us”, he added.

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At the center of the current dispute is LiDAR, the system oflasers that allow an autonomous vehicle to build a 3D map of itsenvironment and “see” where it is going. Waymo claims that itsproprietary LiDAR is its secret sauce, but Merges cautioned that“it might not be as innovative as they make it seem”. If Waymo’sdesign is derived from public information, such as scientificpapers, then Otto and Uber could defend the alleged similarities indesign.

Still, experts questioned the speed at which Otto claimed tohave developed its own system. “It takes years to break intocommercialisation if you start with a blank sheet of paper,” saidRichard Wallace of the Center for Automotive Research. “Recreatingis a lot slower than ‘I already have it.’”

Wallace and others suggested that in the worst-case scenario –an injunction – Uber could simply purchase LiDAR from anothercompany, but it’s not the kind of technology that can be simplybought off the shelf.

According to Laszlo Kishonti, the CEO of AImotive, a driverlesscar company, the only LiDAR systems available for sale (at about$80,000 a pop) have long wait lists. Waiting is a risk, Kishontisaid, because once a LiDAR-equipped car is on the road, a companycan start building a precise 3D map of a city or neighborhood,cornering the local market.

“If someone else gets there first,” Kishonti said, “they cansteal whole cities and all the revenue.”

Waymo has also alleged that the theft went beyond the LiDARsystem’s specifications to include other trade secrets involvingthe company’s supply chain and vendors. And despite Levandowski’sclaim that the company was started “traditionally in a house inPalo Alto”, the company’s roots clearly point to Mountain View.

The four co-founders – Levandowski, Lior Ron, Claire Delaunay,and Don Burnette – all left jobs at Google to start Otto. Anadditional 28 Otto employees are Google alumni, according to areview of LinkedIn profiles, and 18 of them left jobs with Google’sself-driving car unit and joined Otto a month or two later. Manymoved into positions with the same or comparable job titles,including Sameer Kshirsagar, Google’s former manager for globalsupply management for self-driving cars who became Uber and Otto’sdirector of supply chain in July 2016, the same month he leftGoogle.

In the lawsuit, Waymo alleges that a “supply chain manager”downloaded “confidential supply chain information and otherconfidential manufacturing information” one month before resigningin July 2016 and going to work for Otto. Kshirsagar did notimmediately respond to a request for comment.

A Google self-driving prototype car at the Google campus inMountain View, California. Photograph: Tony Avelar/AP

The suit comes as Uber is being buffeted on multiple fronts. Thecompany has long appeared to enjoy its battles with state and localregulators and the taxi industry, but the company is now facingenemies closer to home.

For years, the company dominated the ride-hail market despitewidely discussed concerns about ethics. Customers seemed content toignore any moral qualms about Uber’s treatment of its drivers infavor of the service’s convenience.

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But the election of Donald Trump has changed the politicalclimate in the US. More than 200,000 customers reportedly deletedtheir accounts in February after a questionable tweet from Uberduring a New York airport taxi strike over the president’s travelban and Kalanick’s role on an economic advisory panel for Trumpproduced a maelstrom of #DeleteUber outrage.

Sunday’s publication of allegations of a workplace culture rifewith sexual harassment and gender discrimination by a former Uberengineer have intensified the crisis. While Uber has pledged toinvestigate and reform, a steady flow of leaks about companymeetings and other airings of dirty laundry suggest that someemployees are feeling significantly less loyal to their employer.The negative portrayal of Uber’s workplace could hamper its abilityto attract and retain top talent, and the fact that Uber hascrafted a special message to account deleters about the harassmentallegations suggests that customers continue to flee.

On Thursday, just hours before the Waymo suit dropped, Uber wasalso hit with a public rebuke from two of its earliest investors,Mitch and Freada Kapor. The pair lambasted “a culture plagued bydisrespect, exclusionary cliques, lack of diversity, and tolerancefor bullying and harassment of every form” and pointed out Uber’shabit of “responding to public exposure of bad behavior by holdingan all-hands meeting, apologizing and vowing to change, only toquickly return to aggressive business as usual”.

TASK:

Having been appointedas Marketing Manager of Uber, you are required to advise the boardon the most appropriate brand crisis management and provide arevised marketing strategy going forward to restore confidence inthe brand and prevent any further negative impact on the brand.You are required to research this incident and the companyin detail.

Your report should focus on the following issues:

1. Situation analysis: assess the situation that Uber was facing(at the time of the incident)
2. The impact the incident had on the brand (at the time of theincident)
3. Uber’s positioning strategy before and after the incident andassess how this situation had affected the positioning of the brandin the mind of the consumers.
4. Public Relations steps and approach to be taken.
5. Revised Marketing strategy GOING FORWARD.

Students must adhere to the format below:

1. Title page
2. Table of Contents & Problem statement (5)
3. Situation analysis (20)
4. Impact on Uber’s brand equity (15)
5. Positioning of the brand (15)
6. Revised Marketing strategy GOING FORWARD(25)
7. Your comment on how Uber handled the decline in sales and yourrecommendations to improve consumer confidence (10)
8. References and presentation (10)