Uber’s Biggest Problem Is In Court
It’s been just five days since a boardroom coup ousted Travis Kalanick from Uber, and the leadership sweepstakes is in full swing with some big names being floated as possible successors. The board’s top choice reportedly is Facebook Chief Operating Officer Sheryl Sandberg, whose name comes up any time there is a high-profile opening in Silicon Valley and who is said not to be interested. Even so, Sandberg is a lot likelier to replace Kalanick than another candidate being promoted by people who probably should know better: Travis Kalanick himself.
On Friday, the best-selling biographer Walter Isaacson told CNBC that he thought Kalanick could come back because—well, it was hard to tell exactly why he thinks so, but his argument sounds like “because America.” Isaacson was joined by several other take- havers, as well as more than 1,000 of Kalanick’s employees, who signed a petition demanding that Uber’s board reinstate the company's founder. “Uber is TK,” the petition read. “And TK is Uber,” referring to Kalanick by his initials. The statement is indisputably true—and also the very reason that the board fired him. Kalanick is not a possible solution to Uber’s problems. He is, at least at the moment, the source of them.
Maybe those pushing the comeback narrative haven’t bothered to look closely at Uber’s dispute with Waymo, the former Google driverless car division. The lawsuit, which has proven to be just as spectacular as the former chief executive officer's psychodrama, represents the biggest threat to Uber’s continued survival and the biggest impediment to Kalanick’s rehabilitation.
To catch you up: In February, Waymo filed a lawsuit alleging that Anthony Levandowski, a pioneering driverless car engineer who sold a driverless trucking company to Uber, stole trade secrets, taking design files with him shortly before leaving a job at Google. The lawsuit claims Uber and Levandowski worked together to steal the technology underlying Google’s Lidar sensors—a key autonomous vehicle component. Levandowski left Waymo in January 2016. He started a new company, Otto, in May 2016, then sold the company to Uber in August for around $700 million.
Waymo's allegations, which include cinematic details about secret meetings and clandestine document dumps, were explosive when they first emerged, and when I first wrote about the case for Bloomberg Businessweek in March, I assumed Uber would find some way to counter Google’s narrative. Though Uber has maintained that its Lidar technology is original, it hasn’t done much to cast doubt on the lawsuit's claims. Levandowski, who would be the person best positioned to defend the company, has refused to testify, citing his Fifth Amendment rights.
Uber has tried to argue that this is all Levandowski’s problem. The company has distanced itself further from the engineer since firing him in late May. But last Wednesday, new details released as part of a Waymo court filing could further complicate that argument. According to the filing, a motion by Waymo asking the judge to hold Uber in contempt of court for not turning over the allegedly stolen documents, Kalanick knew that Levandowski had taken files from Google as early as March 2016, months before he agreed to buy Levandowski's company. The motion cites a newly released Uber filing in which the company disclosed that Levandowski had admitted to taking the files and had been told by Kalanick to destroy them. Uber has said that Kalanick's behavior was appropriate.
My colleague Joel Rosenblatt on Friday reported that Uber and Levandowski had signed a “Bad Acts” agreement in which Uber promised to pay Levandowski's legal bills if he were sued for stealing confidential information that he’d kept in his head. According to Rosenblatt's sources, the agreement is unusual and adds some heft to Waymo’s suggestion of a calculated theft. An Uber spokesman told Bloomberg that the agreement "shows how serious we were about preventing any Waymo trade secrects from ever coming to Uber."
The lawsuit still could end with a settlement between Google and Uber. But, in the meantime, the almost daily disclosures continue to damage Uber's already sullied brand and weaken arguments that the company is capable of turning over a new leaf. The federal judge in the case, William Alsup of federal district court in San Francisco, has ordered depositions of senior Google and Uber executives—including Chief Executive Officer Larry Page and Kalanick--to begin July 10. The case is scheduled to go to trial in October.
In the meantime, Alsup has referred Waymo’s allegations to the U.S. attorney’s office. Uber was already under law enforcement scrutiny in connection with “Greyball,” a program designed to keep regulators from keeping tabs on the app. Given the negative press Uber has attracted in recent months and the seriousness of these allegations, it’s hard to imagine that this won’t eventually turn into a criminal investigation—if it hasn't already. The U.S. Attorney's office hasn't commented one way or the other.
So the rumor-mongering around who will lead Uber is somewhat beside the point. The company could use a Sheryl Sandberg if she were willing, and if he existed, I suppose Uber could make do with a Travis 2.0. But for the time being, any reforms will be overshadowed by what’s happening in court.