Intellectual Property

Aiming At Uber

It is hard to see Uber disappearing, even if it loses soundly on each legal front it is currently fighting on.

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(Photo by Justin Sullivan/Getty Images)

It seems that for every person who celebrates Uber’s role in democratizing transportation (both as a rider and as a source of income for drivers), there is at least another person who believes the company has outlived its usefulness and causes more harm than good. While I fall in neither category, it is hard not to think that Uber is at an inflection point, and facing severe challenges that are suggestive of a devil-may-care approach to respect for the rule of law. At the forefront of Uber’s challenges is the ongoing saga playing out in the Northern District of California, where Uber’s high-stakes trade secret case against Google’s Waymo continues to present a perhaps mortal threat to the company’s ability to develop a self-driving car program — which has already been acknowledged as a necessary component of Uber’s long-term viability. Making matters worse, the referral of aspects of the case to the U.S. Attorney’s Office — which I wrote about in my first IP-centric column — has borne poisoned fruit from Uber’s perspective, with the Department of Justice confirming that it is investigating the company’s alleged theft of trade secrets.

Uber’s trade secret woes have further metastasized, with news that a Delaware shareholder complaint was recently filed as well. The complaint alleges that Uber’s board failed to properly vet Uber’s acquisition of Otto, the self-driving car technology outfit whose founder allegedly stole Waymo’s trade secrets from. Claiming that Uber has a long history of flouting laws in its quest for ride-sharing dominance, the complaint fingers key Uber executives as having knowledge of Otto’s misdoings, but proceeding with the acquisition undeterred. While it is unclear whether these bombshell allegations will stand up to a motion to dismiss, the filing of yet another legal action alleging serious violations by Uber surrounding the Otto acquisition further adds to the bad news surrounding the company. One can only imagine the impact on morale at Uber, especially for rank-and-file employees who find themselves working at an increasingly unpopular company under legal assault.

At the same time, this recent run of bad news is nowhere near a guarantee that Uber’s position is a hopeless one. For one, the criminal probe is an ongoing one, and appears heavily influenced so far by a witness interview on an ex-Uber employee who has provided information regarding secretive Uber practices that could have helped cover up trade secret theft. But this same witness has already walked back some of his more explosive claims during his testimony in the pending trade secret case. Moreover, the witness has already acknowledged accepting a substantial payout from Uber for his prior silence regarding his allegations. This background, coupled with the fact that Uber is managing at least four other criminal investigations that have failed to sink the company as yet, suggests that perhaps Uber will be able to squeeze its way out of this bind without too much lasting damage.

While the criminal probe may provide for flashy headlines but not much of a mortal risk to Uber, the ongoing trade secret case continues to warrant close watch as the proverbial main event. Trial has already been delayed twice to account for discovery anomalies on Uber’s end, and even though the damages threat to the company has been mitigated a bit by recent statements from the court, the case still harbors plenty of bad news potential for Uber. Google has proven a dogged adversary, willing to press any advantage that presents itself, and while the money may not be material in the case from Google’s perspective, the chance to set back Uber’s competing self-driving program back to ground zero surely is. To a neutral observer, it does seem like Uber took some liberties with respect to its attempts to accelerate its catch-up efforts in the area of self-driving technology. But there is a still long way to go in terms of evaluating how a jury might react to the story it actually hears, and what the consequences may be for Uber in the event it fails to exonerate itself from Google’s charges. What is clear, however, is that this saga proves to other companies the importance of patiently investing in innovation, while resisting the temptation to take shortcuts because of a perceived disadvantage relative to a competitor.

Perhaps the hardest case to gauge in terms of threat level is the shareholder derivative suit that was just filed. As an IP lawyer, these types of cases are outside my ambit, and while the filed complaint makes for juicy reading if you are an Uber-denigrator, I have no real way of estimating what Uber’s true exposure is. At the same time, the narrative around the company continues to skew negative, with resultant reputational effects on board members, investors, and employees. Whether that negativity has impacted the company’s bottom line in terms of lost market share is an open question; it is clear, however, that Uber could benefit from ongoing efforts towards reputational rehabilitation.

To a sports fan, Uber can be analogized to a franchise in decline, beset by poor decision-making and a lack of self-awareness. Turning things around, therefore, often must start by changing the corporate culture — which usually means firing the coach and the general manager, or their business world equivalents. Dramatic changes are only the first step, and must be followed by day-to-day pursuit of a new path — and an understanding that rehabilitation efforts of this type take time. Understandably, Uber’s recent and significant executive restructuring efforts were taken with an eye towards fostering a new culture at the company, and helping to prevent additional criminal probes in the future.

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Ultimately, it is hard to see Uber disappearing, even if it loses soundly on each legal front it is currently fighting on. But the fact that we can even imagine the possibility of Uber collapsing under the weight of its manifold legal troubles is itself newsworthy. It is hard to imagine that such a revolutionary company has come under such criticism, or that its internal failures are manifesting themselves so publicly in such a negative light. There are undoubtedly good people at the company, just as Uber has good people as customers who remain willing to patronize the company even during this period of intense criticism. When many others are taking aim, Uber has to hope that those employees and customers provide its brand the wherewithal it needs to carry on.

Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.

Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.

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