Inside the abrupt end of Silicon Valley's biggest trial
The behind-the-scenes negotiations, recounted by people familiar with the case, show why both companies took the unusual step of ending the fight in the midst of a trial.
As former Uber chief Travis Kalanick prepared to take the stand this week in a courtroom battle that’s gripped Silicon Valley, Waymo lawyer Kevin Vosen privately made a late settlement offer: Would the ride-hailing startup pay $500 million in stock and let an outside monitor review its autonomous-vehicle software?
Only days later, Waymo accepted half that amount, abruptly halting a case that had rocked the emerging driverless car industry and slowed the progress of two leaders in the field. The behind-the-scenes negotiations, recounted by people familiar with the case, show why both companies took the unusual step of ending the fight in the midst of a trial.
On Tuesday, when Waymo’s $500 million request came in, Uber Technologies Inc. Chief Executive Officer Dara Khosrowshahi, along with attorney Tony West, thought it was a pretty good deal. In October, the Alphabet Inc. unit had demanded $1 billion. This wasn’t the new management team’s battle. They were cleaning up Kalanick’s mess. They’d just given new investor SoftBank Group Corp. a major discount on stock, so another tiny slice of equity was a small price to expunge another embarrassing episode from Uber’s past.
Defending Uber against allegations it stole trade secrets from Waymo could have dragged on in public for years. Khosrowshahi didn’t want the legal risk when the startup files for an initial public offering next year. So he and West took the proposal to Uber’s board Tuesday evening asking for their support.
Uber’s board rejected the deal. Kalanick, still a board member, wanted to let the case proceed. He told the other directors he was ready to defend himself. Kalanick has long insisted he would be vindicated in court.
Furthermore, Uber’s board had seen no major surprises from Waymo’s arguments in court; Uber hadn’t even begun its defense, and Uber’s lawyers thought the case was going well.
Kalanick testified on Wednesday, and Waymo’s lawyers failed to get under his skin. When Waymo’s outside attorney Charlie Verhoeven tried to embarrass Kalanick over saying that he wanted self-driving car "cheat codes," Kalanick had a ready explanation. When Verhoeven showed a video of the Wall Street "Greed is Good" speech that Kalanick had received via text message, Kalanick smiled and said he thought he’d seen the clip and the movie.
Two of the jurors said Friday after the the case was dismissed that they were impressed with Kalanick’s composure on the witness stand.
"He answered every question, cool and calm,” said Miguel Posados, an optician.
Steve Perazzo, a truck driver, said Kalanick “really seemed like a good guy,” and also “a guy who took this idea and was pretty aggressive with it and wanted to be the best in the world.”
After Kalanick’s testimony, negotiations continued. There was one looming certainty for Waymo’s parent company: If the case continued, Alphabet CEO Larry Page, known for avoiding the limelight, would be called to testify.
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Waymo’s lawyers also wanted Uber to extend any settlement agreement to pledge not to use any Waymo software -- not just hardware (the focus of much of the case). And the Alphabet unit demanded an independent review to ensure Uber wouldn’t use its technology. Alphabet, with billions of dollars in profit, cared more about this than the money.
On Thursday night, the day before Waymo’s legal team planned to dig into more of the technical details of its case, the two sides came to an agreement. Waymo would get its independent review and a 0.34 percent stake in Uber. The sum amounted to a fraction of Alphabet’s existing stake of about 4 percent. The value of the shares ranges from $153 million to $245 million, depending on how you value Uber, a privately-held company.
After a week of trial, both sides had a reason to settle, said Eric Goldman, a professor at Santa Clara University’s law school.
"Waymo was having difficulty establishing the key elements of its case," he said. "On the other hand, Uber was already coming into the trial with lots of baggage, and the revelations at trial weren’t doing Uber any favors."
The two jurors sounded disappointed the trial ended so quickly. They wanted to hear from Anthony Levandowski, the one-time Waymo engineer whom the company accused of working with Kalanick to steal thousands of proprietary files.
Based on the evidence he heard before the settlement was announced, Posados said he is “leaning toward" believing that Levandowski stole Waymo’s trade secrets and that Kalanick knew about it.
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What the jury hadn’t been told by the judge was that Levandowski has refused through most of the case to cooperate, asserting his constitutional right against self-incrimination, and that he was expected to do the same on the witness stand.
In the end, juror Perazzo said he was relieved at not having to choose between the Silicon Valley giants.
“Both companies are amazing and I was kind of torn as the trial went on,”’ he said. “I didn’t want to choose either side. I think I’m enjoying the fact that they have settled and I don’t have to pick either one.”