U.S. District Judge William Alsup, Northern District of California (Jason Doiy)
Uber Technologies Inc. and Anthony Levandowski drove their defense of Google Inc.’s trade secret claims to the U.S. Court of Appeals for the Federal Circuit on Friday, but didn’t seem to get much traction.
Judges Pauline Newman, Evan Wallach and Kara Stoll seemed largely skeptical of Uber’s claim that the case belongs in arbitration because of a provision in Levandowski’s employment contract. “There’s no representation of disadvantage as far as I can tell, in the district court, as to making your case,” Newman told Uber’s counsel, Boies Schiller Flexner partner Hamish Hume.
The judges sounded generally uninterested in a second appeal in which Levandowski objects to the production of a due diligence report that might contain evidence of trade secret theft. The judges indicated they haven’t read the report compiled by risk management firm Stroz Friedberg. Two of the judges were under the mistaken impression that Stroz Friedberg is the name of an attorney.
“Stroz Friedberg is a very large forensic and investigative firm,” Levandowski’s attorney, Miles Ehrlich, politely explained.
Uber and Google’s driverless car subsidiary, Waymo, have been waging war for the last six months before U.S. District Judge William Alsup and Magistrate Judge Jacqueline Corley of San Francisco. Google alleges that Levandowski, who once managed Google’s driverless car division, illegally downloaded 14,000 files before leaving the company and forming his own autonomous vehicle company, Otto Trucking. Uber then bought that company for $680 million.
Alsup ordered Levandowski to turn over any of the files in his possession last spring. Levandowski instead invoked his Fifth Amendment right not to incriminate himself, prompting Uber to terminate him. Corley and Alsup have also ordered the production of the Stroz Friedberg report, which Uber and Otto ordered up as due diligence ahead of the acquisition.
Uber has argued since March that the case should be in arbitration because of a broadly worded arbitration clause in Levandowski’s employment contract. Under the doctrine of equitable estoppel, Google should not be allowed to arbitrate claims against Levandowski, as it’s been doing since last fall, while suing Uber in federal court, the company said.
“If you look at the [arbitration] agreements, they explicitly govern the subject matter at issue here,” Hume stressed during his argument.
Google argues that it has agreed to drop all of its contract claims and instead rely on Levandowski’s common-law duty of loyalty—unless Uber opens the door by putting the contract at issue. Stoll suggested that would solve the problem, but Hume called it “gamesmanship.”
If Uber argued at trial that Google had taken no steps to protect its trade secrets, Google could then spring the contracts on them. “They get the benefit of that because we can’t stand up and make that argument,” Hume said.
“Because it’s not true,” Stoll said.
“It would be false,” Wallach agreed.
“Correct,” said Hume. “That gives them the benefit of the contract.”
Wallach had another issue on his mind. “Let me ask you a fact question,” he said to Hume. “Do you agree he downloaded those 14,000-something documents?”
Hume said that “to be honest with you, no one knows what really happened.” Hume noted that Levandowski hasn’t denied the conduct. Hume also pointed to evidence that Levandowski may have downloaded the files merely to ensure Google’s payment of a promised bonus.
In the other appeal, Levandowski attorney Ehrlich, of Ramsey & Ehrlich, argued that the Stroz Friedberg due diligence report should be privileged because it was created under a common defense agreement between Uber and Otto in anticipation of litigation by Google.
Levandowski shouldn’t be penalized for answering Stroz’s questions truthfully, he argued. The common interest doctrine “promotes the underlying social good of encouraging full and frank disclosure about potential legal risk and compliance with the law, even when there is partial adversity between the parties,” Ehrlich told the court.
Like Alsup and Corley, the Federal Circuit judges questioned whether a common defense agreement can by itself give rise to an attorney-client privilege.
But Newman sounded somewhat sympathetic. “The whole idea of obtaining the Stroz report,” she told Google attorney Charles Verhoeven, was “the legal consequences of what may or may not have transpired.”
“Absolutely, your honor,” replied Verhoeven, a Quinn Emanuel Urquhart & Sullivan partner.
“So why isn’t that privileged?” Newman asked.
Verhoeven argued that any common interest privilege didn’t attach until April 2016—after much of the Stroz Friedberg work was done—when Uber and Otto signed a formal indemnification agreement.
In any event, the court is reviewing Alsup and Corley’s rulings on a mandamus basis, which means they can be reversed only if “clearly erroneous” and the errors can’t be remedied after trial. “Neither of those elements,” he said, “can be met in this case.”
Scott Graham writes about intellectual property and the U.S. Court of Appeals for the Federal Circuit. Contact him at email@example.com. On Twitter: @scottkgraham