Chris Ponder and Harper Batts Chris Ponder and Harper Batts

In Part One of our article, we focused on lessons gleaned from the Waymo v. Uber trial on how to be better prepared to protect a company’s trade secrets. In this part, we focus on lessons from the trial that can help companies litigating trade secrets claims, as a plaintiff or a defendant.

Lesson #6:  When You Think a Theft Has Happened, Pick Up the Phone

A notable aspect of the Waymo trial was the evidence concerning an email between a Waymo engineer and a Waymo lawyer discussing Waymo’s internal investigation just days before the lawsuit was filed. In that email, a Waymo hardware engineer told Waymo’s lawyer that the files that the former star engineer (Levandowski) downloaded from Waymo’s systems were “low-value enough that [Waymo] had even considered hosting it off of Google infrastructure.” For reasons that are not entirely clear, the email was produced and shown to the jury during opening statements. Waymo’s lead lawyer tried to downplay the importance of the email by claiming that the engineer only meant that the files did not contain confidential personal information regarding Waymo users. Uber’s lead lawyer commented on the fact that Waymo wouldn’t have brought it up in the opening statement if it wasn’t worried by the evidence.

This embarrassing gaffe likely could have been avoided if the engineer was interviewed by telephone instead of by email, and is a good reminder that lawyers should not always assume that the attorney-client privilege or the work product doctrine will shield communications from the light of day. There can be any number of reasons that a court may find that a privilege has been waived, and in some instances, a client’s best option may be to waive privilege. For this reason, it is a good idea to conduct interviews by telephone or in-person when possible.

Lesson #7: Plaintiffs Should be Prepared to Identify Trade Secrets Early On

Several jurisdictions, including California, require a trade secret plaintiff to identify the contours its trade secrets with specificity before any discovery is permitted. The justification given for the rule is that a plaintiff should not be permitted to go on a “fishing” expedition, and then tailor its trade secret identification based upon what was found in the defendant’s possession. For a plaintiff, the trade secret definition is a critical step, and is analogous in some ways to asserting a patent claim. If the plaintiff is too conservative and defines the trade secret narrowly, it may fail to prove misappropriation. On the other hand, if the plaintiff construes the trade secret too broadly, it will be easier for the defendant to prove that at least some significant portion of the trade secret is in the public domain.

Once a plaintiff has defined its trade secrets, the plaintiff’s witnesses (technical and nontechnical) must be prepared to answer at least basic questions about the trade secrets, and know how to avoid giving careless answers that undermine the plaintiff’s case. The old adage that familiarity breeds contempt very much applies to a trade secret case. It is important to help remind witnesses that the reason that company’s trade secret information may seem ordinary or unimportant is that they are authorized users of the information. Be sure to point out that a rational defendant would not spend the time or effort trying to uncover the plaintiff’s trade secrets if it was easily available from the public domain. The Waymo engineer’s comment that the files downloaded by Levandowski were “low-value” may very well have resulted from the engineer’s everyday access to the materials.

Unfortunately for us observers, trade secret definitions and the evidence of misappropriation are typically under seal in a trade secret trial, and it can be hard to assess whether the plaintiff has done a good job of defining its trade secrets or whether the defendant has done a good job attacking those definitions.  However, the public record in Waymo suggests that there may have been problems with Waymo’s definition of trade secrets.  Waymo started its case with over one hundred identified trade secrets, and went to trial on only eight trade secrets. And even then Uber confidently claimed during opening argument that Waymo had failed to find any evidence that Waymo’s trade secrets were used in Uber’s self-driving cars despite having inspected Uber’s environment several times. Waymo may have telegraphed a potential concern that its evidence of use was weak because it sought a jury instruction to the effect that a damages award can be based merely upon acquisition of a misappropriated trade secret, and not just based upon actual use of the trade secret, which brings us to the next lesson.

Lesson #8: Proving Damages Isn’t Easy—Seek Damages for Acquiring the Trade Secrets in Addition to Damages for Use or Disclosure

Another challenge when dealing with trade secret misappropriation is measuring damages.  Many trade secret plaintiffs (including Waymo) primarily seek damages flowing from the defendant’s use of the trade secrets, and may overlook seeking unjust enrichment damages for the defendant’s improper acquisition of the trade secrets.

For damages based upon the defendant’s use of trade secrets, juries frequently want to see hard evidence that the plaintiff’s “secret recipe” was used by the defendant, which can be incredibly hard to show when a bad actor is covering his tracks. This leaves a plaintiff, like Waymo, arguing that an acceleration in product development or some other improvement must be the result of trade secret misappropriation. While superficially appealing, this argument of causation can be difficult to prove when the plaintiff’s employees have been hired by the defendant: the defendant may convincingly argue that the employees were hired for their personal skills and expertise (which are not trade secrets) and that those skills and expertise caused the defendant’s advancement.

In Waymo, the parties agreed that unjust enrichment damages can be awarded for the acquisition, use, or disclosure of misappropriated trade secrets. However, Judge William Alsup found that Waymo failed to timely disclose a damages theory based only upon acquisition of trade secrets, and stated that he would instruct the jury that Waymo was precluded from receiving such damages. This failure to properly plead all of its available damages theories left Waymo with a damages case that would be much harder to prove.

Lesson #9: Don’t Ignore the Results of Your Pre-Deal Diligence

When looking at acquiring a business or hiring new employees, companies primarily risk making two types of mistakes: not conducting an adequate investigation into potential trade secret issues or failing to carefully review and consider the results of the investigation during a rush to close the deal or get the new hire in the door.

These types of issues were evident in the Waymo trial. Former Uber board member Bill Gurley testified that Uber’s board had not seen the report prepared by Uber’s investigators, which indicated the potential for trade secret misappropriation. Uber was portrayed at the trial as having been in such a rush to make the deal happen, that it ignored the apparent red flags raised by the diligence investigation conducted by from a third-party forensic firm that Uber itself commissioned.

Lesson #10: Jurors Are Wary of Employers Seeking to Prevent Employees from Taking Different Jobs

The idea that an employee’s specialized skills and expertise are not protectable trade secrets generally resonates with jurors. Jurors are also wary of efforts to prevent employees from going to work for a competitor. They may also wonder whether the plaintiff is a good actor itself, and whether it properly protected what it now contends is a trade secret.

Former Uber CEO Travis Kalanick attempted to convey such a theme to the jury at the Waymo trial, recounting a conversation with Waymo’s executive, “He said, ‘You’re taking our people, you’re taking our IP.’ I said, ‘We are taking your people. They’re free to work where they want. Your people are not your IP.’” Plaintiffs and defendants should keep in mind that the jury may apply a form of the golden rule in deciding the case—how would they want to be treated if they were the employee that tried to change jobs?

Concluding Thoughts

The sudden (and seemingly low amount) settlement of Waymo v. Uber raises the interesting question of Waymo’s true motivations for bringing the lawsuit. For one, Waymo was able to obtain significant media attention for its autonomous driving project and simultaneously generate negative coverage of Uber. In addition, the trial appeared to reveal potential weaknesses in Waymo’s case, including the automated downloads scheduled by the Waymo server, the Waymo engineer’s statement that the materials were “low-value,” and the apparent inability of Waymo to point to a specific aspect of Uber’s materials that proved one of the eight remaining trade secrets in questions was actually being used by Uber. In any case, the trial provided valuable lessons for plaintiffs and defendants alike.

Harper Batts is an intellectual property litigation partner in the Palo Alto office of Baker Botts.

Chris Ponder is a senior associate in the office who focuses on complex patent and business litigation.