Daniel Compton

The personal blog of Daniel Compton - Projects

Uber-Alphabet Lawsuit Updates

Since my post a few days ago on the Uber-Alphabet lawsuit, there have been a few new developments.

Levandowski consulting for Uber

In that post I wrote:

… no funding appears to have been taken from Uber, or any other company (If there turn out to be payments from Uber to Otto prior to the acquisition then that would be Very Bad for Uber).

Not long after, Johana Bhuiyan at Recode posted a story which suggests that Uber CEO Travis Kalanick hired Otto CEO Anthony Levandowski as a consultant for Uber’s self-driving car around February-March 2016. Even after reading the article several times and sleeping on it, I still can’t quite believe it.

Now, sources are adding more to that claim. Kalanick hired Levandowski as a consultant to Uber’s fledgling self-driving effort as early as February 2016, six months before Levandowski publicly got his company off the ground, according to three sources.

If this was a legitimate business arrangement, the timing makes no sense at all. Levandowski had just left Waymo weeks earlier. While it might have been difficult for Alphabet to bring a lawsuit on these grounds, the optics for Levandowski advising Uber are terrible. Additionally, Uber and Otto are competitors in the self-driving vehicle space, and Uber is famously aggressive. That a CEO of one company would be advising one of their direct competitors within months of forming their own self-funded startup is truly strange.

If this wasn’t a legitimate business arrangement, then it also doesn’t make much sense purely because it looks so suspicious, especially in light of Alphabet’s trade secrets lawsuit. It brings the start of Uber’s direct involvement with Otto to within weeks of Otto being formed. If the plan all along was for Otto to join Uber, then it does make some kind of twisted sense for him to be advising the Uber self-driving car team.

A little birdie tells me that we haven’t seen the last on this particular thread of the story.

Naked Capitalism on Uber

Hubert Horan has just published another article in his series on Uber and whether it can ever increase overall economic welfare.

The answer is that Uber is attempting to implement an innovative and disruptive strategy for achieving market control — a strategy radical different from every prior tech oriented startup — but those disruptive innovations have nothing to do with technology or the efficient production of urban car services.

Otto purchased another Lidar company

A reader sent me a link to this article by Reuters discussing an acquisition of Tyto LIDAR. The title is “Uber’s self-driving unit quietly bought firm with tech at heart of Alphabet lawsuit”. The title isn’t accurate, as it was Otto that acquired Tyto (for an undisclosed sum) in May 2016. Uber then acquired Otto/Tyto in August 2016.

Levandowski: “We did not steal any Google IP”

Forbes published an article on 28 February, 2017 which contains part of an interview they did with Levandowski in October 2016.

Q: The question is, Google has been working on this for however many years. You guys (Otto) are a year old or something like that.

A: We started in January. How did we catch up?

We did not steal any Google IP. Just want to make sure, super clear on that. We built everything from scratch and we have all of the logs to make that—just to be super clear.

But this is my fourth autonomy stack. I did the DARPA Grand Challenge.

I wonder if “we have all of the logs” is also going to be Alphabet counsel’s opening argument?

The Uber Bombshell About to Drop

If you’ve been following tech news over the last few weeks, you have probably seen several stories about Uber, all negative (bar this one about flying cars). I suspect that what is coming next will prove to be a far bigger story than all of the other incidents so far.

N.B. all of this article is sourced from filings and allegations that Alphabet has made, as well as reading between the lines. Uber will probably contest these claims in court.

Update: I’ve published some updates on the lawsuit. You can keep track of all the posts related to the Alphabet lawsuit here.

In the last few weeks Alphabet filed a lawsuit against Uber. Alphabet and Waymo (Alphabet’s self-driving car company) allege that Anthony Levandowski, an ex-Waymo manager, stole confidential and proprietary information from Waymo, then used it in his own self-driving truck startup, Otto. Uber acquired Otto in August 2016, so the suit was filed against Uber, not Otto.

This alone is a fairly explosive claim, but the subtext of Alphabet’s filing is an even bigger bombshell. Reading between the lines, (in my opinion) Alphabet is implying that Mr Levandowski arranged with Uber to:

  1. Steal LiDAR and other self-driving component designs from Waymo
  2. Start Otto as a plausible corporate vehicle for developing the self-driving technology
  3. Acquire Otto for $680 million

Below, I’ll present the timeline of events, my interpretation, and some speculation on a possible (bad) outcome for Uber. The timeline references section numbers from Waymo’s amended filing, so you can read the full context yourself. You can also read the original filing.

Timeline of events

The main timeline of important events is as follows:

Implications

From Waymo’s filings, it seems that they have Levandowski dead to rights on stealing their LiDAR designs. That alone should be enough to bring Uber’s self-driving car program to a halt and cause some big problems for Levandowski. California’s Trade Secrets law is weaker than other states, but if successful, Waymo will be able to seek an injunction, damages, and attorney’s fees. Because all law is securities law, the SEC may also be able to bring a case against Uber (similarly to their case against Theranos).

I’m guessing, but I think the reason that Alphabet hasn’t directly accused Uber of conspiring with Levandowski is that they don’t have enough evidence. When they get to discovery, they will be looking for it. You would think that no-one would be dumb enough to send emails like that, but you would be wrong.

Several things suggest Otto’s intent to be acquired by Uber:

There is no smoking gun email (yet), but there is a strong implication that Uber and Otto planned this from the start.

(Possible) Consequences

If this is true and can be proved in court, then it would be a massive blow to Uber. The worst case for Uber would be:

This is admittedly the very worst case scenario for Uber, and there are lots of places along this downward trajectory that they could pull up from. If it’s proven that Uber intended to acquire Otto while Levandowski was at Google (this might be established more concretely in discovery), then it’s hard to see how Uber’s CEO Travis Kalanick could keep his job. Uber has had a bad month, and it doesn’t look like things are going to be getting better any time soon.

Postscript

This post is made up of a mix of filings from Waymo, reading between the lines, and some speculation. Keep in mind these are all allegations and haven’t been proven in court. Please let me know if I’ve made any mistakes, and I’ll correct them.

I’d encourage you to go over the filings yourself, as they are very readable, and give a lot more context to the story than I was able to here.

Appendix

I originally posted that Uber was only charging 41% of the cost of the trips, based on this article which I misread. The 41% number is the total cost of the trip including driver compensation as well as corporate expenses.

Alyssa Vance sent me the calculations you would make to work out the farebox ratio:

Farebox ratio = fares / total cost of operations Total cost of operations = fares - profits Farebox ratio = fares / (fares - profits)

For 1H2015: Farebox ratio = 3,661 / (3,661 - -987) = 3661 / 4648 = 78.8%.