Non-Compete Agreements and the Race for Self-Driving Technology

Lindsey Mattila (CMC ’17)

Non-compete agreements, or the lack thereof, have played an instrumental role in the quick growth and innovation of Silicon Valley. Non-compete agreements, which are generally built into employment contracts, require employees to wait a year, or some other designated amount of time, before joining a competitor. In theory, these agreements should indirectly decrease competition between competitors because each is less aware of the development and innovations that are being made. This legal tool has played a large role in creating job competitiveness and, in turn, spurring innovation. California, however, is one of the few states that refrains from enforcing this legal tool. Now, a new legal conflict may force the courts to draw a line on the transfer of skills, and most importantly, knowledge, from one job to the next.

In late March this year, Google’s self-driving focused company, Waymo, sued Uber for using technology that is too similar to their own. Legal battles over emerging technology are relatively common. When Apple was breaking into the mobile phone industry, the company sued other competitors, such as Samsung, for having too similar to the design of their smartphones. However, a similar design is insufficient to prove that the other mobile companies stole and replicated Apple’s design. In these cases, even though Apple won relatively small amounts of money, the court was essentially signaling that the similarities were not complete replicas because they ended in settlements. In other words, it could not be proven that one company was trying to steal an idea from the other.

The Waymo-Uber case may end up being different. Even one of the California federal judges overseeing the case noted that it is the strongest case he has seen in his 42 years. The implications could change the way that employment law works in Silicon Valley. The background of the case is that Waymo hired an engineer named Anthony Levandowski to head their projects on self-driving cars. Developments in self-driving technology and projects occurred during his time there, and in 2016 he left to begin a new start-up for self-driving technology. Levandowski’s company was then acquired by Uber. It is important to note that this is not all that uncommon in Silicon Valley– there is a constant shifting in top talent between different competitors, mostly due to California not enforcing the non-compete agreements. Waymo is claiming, however, that Levandowski did more than simply transfer his specialized engineering knowledge to Uber. The company is claiming that Levandowski acquired confidential data in his last few days at Waymo and maintained access to them during his time at Uber. Furthermore, Waymo believes that this inside intel is what enabled Levandowski to produce a similar design in his company’s self-driving technology.

In a federal court filing submitted last Friday, Uber denied Waymo’s accusations and added that a significant part of their technology had been created before Levandowski’s arrival at Uber. Proving that Uber is not in possession of confidential Waymo files has been difficult, however, since Levandowski has hired his own private attorney and is using his Fifth Amendment right to avoid releasing any self-incriminating evidence.

Regardless of the files, the court’s ruling could possibly affect non-compete agreements which could potentially change the landscape of Silicon Valley employment. If the files are not found, and the court finds that there are similarities between the two self-driving technologies, the court could draw a hard line on what information, knowledge, and skills are appropriate to bring from one job to the next–a vital component of what makes Silicon Valley such an innovative and competitive space. Though non-compete agreements are still unlikely to be strictly enforced in California, this case could lead to stricter scrutiny for employees that move around competitors in Silicon Valley.

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