Trade Secret Litigation: Waymo V. Uber and Lessons on Departing Employees

Trade Secret Litigation: Waymo V. Uber and Lessons on Departing Employees

Minami Tamaki’s Consumer and Employee Rights Group specializes in trade secret litigation, a growing area of technology law in Silicon Valley and throughout the San Francisco Bay Area.  Our attorneys represent both employees in defense of their development of skills and talent, and employers seeking to protect their proprietary and confidential information.

The ongoing Waymo LLC v. Uber Technologies litigation has highlighted the complex legal issues involved in trade secret cases. Waymo (a self-driving car project owned by Google parent company Alphabet) filed suit in February 2017 accusing Uber of committing legal violations related to theft of trade secrets.  Waymo alleges that its former senior employee Anthony Levandowski took Waymo proprietary information when he left the company to co-found his own self-driving vehicle company, Otto.

Uber purchased Otto in 2016 for a reported $680 million and made Levandowski the head of Uber’s self-driving technology division.  Waymo alleges that Levandowski then began using Waymo’s proprietary information at Uber in violation of trade secret law and agreements that he entered into while employed at Waymo.

After filing suit in February 2017, Waymo sought provisional relief to stop Uber from using the technology it claimed Levandowski had stolen.  In ruling on Waymo’s motion, Northern District of California Judge William Alsup stated that Waymo presented compelling evidence that Levandowski “downloaded over 14,000 confidential files from Waymo immediately before leaving his employment there.”

Levandowski allegedly spent eight hours downloading data from his work laptop onto a personal data storage device, and then reformatted his work laptop with a new operating system, wiping it clean.  The Order stated that the evidence indicated that Uber likely knew or should have known that Levandowski had taken Waymo’s confidential files, as Uber engaged a digital forensics firm to perform “due diligence” on the data.

Judge Alsup ordered the Defendants to return the downloaded materials to Waymo and provide detailed accountings of meetings and messages in which the self-driving car technology Light Detection and Ranging (LiDAR) was discussed.  A trial in the case is set for October 2017.

Trade Secret Law in California

Under California law, everything that an employee acquires by virtue of his or her employment (other than compensation for services) belongs to the employer.  Labor Code § 2860.  This includes the employer’s trade secrets.  A trade secret is defined as information, including a formula, pattern, compilation, device, method, technique, or process that (1) derives independent economic value from not being generally known to the public, and (2) is the subject of reasonable efforts to maintain its secrecy.

Misappropriation of the employer’s trade secrets is an intentional tort under both the common law and the Uniform Trade Secrets Act.  Civil Code § 3426.1.  Trade secret cases commonly deal with a former employer’s customer lists, but other employer property, such as plans and designs for the former employer’s products, may be considered trade secrets.

Companies bringing trade secrets allegations argue that they have spent substantial time and money developing proprietary technology and information, and that the departing employee absconding with this information must be immediately enjoined.  Employees counter that they have taken only their general knowledge and talent to their new employers, not their former employers’ trade secrets.

An employee may point to California law that supports the contention that an employee cannot be expected to wipe his or her memory clean in joining a new employer.  Morlife Inc. v. Perry, 56 Cal.App.4th 1514 (1997).  Trade secret cases are hard fought and the issue of what constitutes a trade secret is often heavily litigated.

Non-Compete and Non-Solicitation Agreements

“Non-compete clauses” (also known as “covenants not to compete”) provide that an employee agrees not to enter into a similar profession or trade in competition against his or her employer.  While most people have heard of non-compete clauses, they may not know that non-compete clauses are generally void and unenforceable in California.  Business & Professions Code § 16600.

Under California law, individuals have the right to compete with former employers, provided that such competition is fairly and legally conducted.  Reeves v. Hanlon, 33 Cal.4th 1140 (2004).  California courts have consistently declared that the public policy of the state is to ensure that citizens retain the right to pursue any lawful employment and enterprise of their choice.  Edwards v. Arthur Anderson LLP, 44 Cal.4th 937 (2008). The sentiment behind this public policy is that technology and progress flourish where individuals are free to leave a company with all of their knowledge and skills, and to pursue any vocation that they wish.

The California policy against non-compete agreements extends to agreements not to solicit a former employer’s customers.  Such agreements are also generally invalid under Business & Professions Code § 16600.  Restrictions on soliciting customers are allowable only when they protect trade secrets or confidential proprietary information.  Thompson v. Impaxx, Inc., 113 Cal.App.4th 1425 (2003).

While it is well-established that non-compete agreements and customer non-solicitation agreements are unenforceable in California, the law takes a different view when it comes to employee non-solicitation agreements.  A former employer may generally enforce an agreement prohibiting a former employee from actively soliciting the former employer’s other workers to join a new employer.  Loral Corp. v. Moyes, 174 Cal.App.3d 268 (1985).

However, while the employee may be restricted from soliciting his or her former co-workers, this does not prevent these former co-workers from voluntarily seeking out new employment.  California public policy deems the mobility and betterment of employees as paramount to the competitive business interests of the employer.  Metro Traffic Control, Inc. v. Shadow Traffic Network, 22 Cal.pp.4th 853 (1994).  Thus, an agreement that an individual (and his or her new employer) refrain from hiring a former employer’s workers may be deemed unenforceable, and could give rise to liability under antitrust laws.

Protecting Your Rights

Minami Tamaki defends employees against accusations of misappropriation of trade secrets, and also advises employees in fighting overbroad agreements that improperly restrict competition. Our attorneys also counsel employers on protecting their trade secrets and preventing unfair business practices by departing employees.

Best practices for employers may include drafting agreements that require employees to return company property upon separation of employment, drafting personnel policies regarding assignment of inventions and confidentiality, imaging and forensic analysis of employee computers and storage devices, and pursuing injunctive relief in the event of misappropriation of trade secrets.

Whether you are an employee or an employer, the attorneys at Minami Tamaki are available to discuss with you at (415) 788-9000 or through our online form.  We look forward to the opportunity to review your trade secret or unfair competition matter with you.