Non-Competes Can Cost You More Than A Job

05 June 2017 Labor & Employment Law Perspectives Blog
Author(s): Kevin E. Hyde

Normally in this space we write about case developments after the case is decided.  This time, though the story involves a mid-case development which led to a company firing an employee it fought hard to keep.

The high profile case at issue, Waymo LLC v. Uber Technologies, Inc., is currently pending in the United States District Court for the Northern District of California (Case No. 17-00939).  The matter  involves Anthony Levandowski, a former employee of Google (d/b/a Waymo) who was later hired by Uber.  Mr. Levandowski had formerly worked for Google in its efforts to develop a driverless car.  Mr. Levandowski left Google to start his own self-driving technology company, Otto, which was acquired last August by Uber for $680M.  Waymo then sued Uber for trade secret misappropriation, patent infringement and unfair competition.

As you might expect, the case is being heavily litigated. In an order dated May 11, 2017, the court found that Waymo “has shown compelling evidence that its former engineer, Anthony Levandowski, downloaded over 14,000 confidential files from Waymo immediately before leaving employment there.”  The court went on to say that Uber likely knew, or should have known, that Mr.  Levandowski had taken and retained possession of Waymo’s confidential files.  Finally, the court ordered that Uber take all steps necessary to ensure Levandowski was screened from using any of the downloaded files, that he be removed from any involvement in the particular project where the trade secrets were implicated, and that the downloaded material be returned to Waymo or the court by noon on May 31, 2017.

There is also an interesting twist involving Mr. Levandowski. At one point he pleaded the Fifth Amendment privilege against self-incrimination, involving a due-diligence report Waymo had done regarding its acquisition of Otto.  Additionally, the court, on its own initiative, referred the case “to the Unites States Attorney for investigation of possible theft of trade secrets…”

Fast forward to May 26, 2017. Uber sent a letter to Mr. Levandowski that day  notifying him that his employment was being terminated “for cause” for failure to cooperate with Uber’s efforts to comply with the court’s May 11 order, requiring return of material.  Uber also gave Mr. Levandowski until June 15, 2017 to fully cooperate and reserved the right to rescind the termination of employment.

So what does all of this mean for employers? The obvious lesson is that trade secrets – even if not involving such new and novel technology like that involving driverless cars – are valuable and subject to a great deal of protection.  When the stakes are high the court may look at all remedies, including a review of possible criminal activity.  Employers must be cautious in hiring employees subject to a non-compete, and take care in determining  what steps, if any, the employee may have taken to obtain confidential material of the prior employer.

Turning a blind eye is not enough – as the court, in ordering the return of material and disclosures by Uber, based its determination that Uber likely knew, or at least should have known, of the likelihood of material having been taken. Finally, when confronted with an employee’s refusal to cooperate – even a valuable employee like Mr. Levandowski – the employer must be willing to act.  Not all cases will require termination but the employer must, nonetheless, be prepared to ensure compliance with a court order.

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