It's all over: Why the Waymo v. Uber self-driving settlement makes sense

On Friday morning, Waymo and Uber settled their trade secrets lawsuit, setting the stage for self-driving marketplace competition rather than a legal battle.

After a drawn-out struggle both in a court of law and the court of public opinion, a settlement is the outcome that makes the most sense for both parties. To borrow a phrase that came out during trial from Uber’s ex-CEO, Travis Kalanick, the deal “minimizes risk, minimizes pain.”

Waymo gets what it wants: Uber agreed to ensure that none of Waymo’s “confidential information” would end up in hardware or software produced by Uber’s self-driving division, known as the Advanced Technologies Group. Waymo also will receive a sizeable 0.34 percent equity share of Uber, worth over $244 million. No money has actually changed hands: it’s an all-equity arrangement, which means Waymo is financially invested to some degree in Uber’s future. (The New York Times reported Friday that Uber’s board had initially offered 0.68 percent, but that proposal was yanked prior to trial. After Thursday’s fourth day of trial, settlement talks resumed.)

Meanwhile, Uber also gets what it wants: respectability. The new chief executive, Dara Khosrowshahi, has been trying to clean house in the wake of the mess that Kalanick left behind. His primary objective now is to take the company public in 2019, refresh the company’s tarnished image, and hold its own against Waymo, GM, and others in the self-driving space.

Uber’s job now will be to show—particularly since Waymo has actual driverless cars on the road in Arizona as we speak (Level 4, in industry parlance)—that it can best its rivals fair and square.

Heating up

As Ars has reported, Waymo already has a big lead in driverless cars. It’s been pursuing the project for nearly a decade now. It has a secretive testing facility in central California. It has cars on the road in the Phoenix metro area right now.

But Waymo isn’t the only game in town—this has become an increasingly crowded space, with automakers, Tier 1s, and startups all conducting autonomous driving programs. GM, which purchased the Cruise startup in 2016, said just a few months ago that the company was “quarters, not years” away from having cars on the road with no humans behind the wheel.

Had Waymo been able to prove its case that Uber stole and misused its trade secrets, that likely would have been a heavy blow to the San Francisco-based rival. Uber, after all, already pioneered the ridesharing platform. The company has “cheat codes,” as Kalanick further described, in the way of its app on the smartphones of drivers all over the world, an “elegant solution” to grappling with the state of traffic in major cities worldwide at any given time.

Having invested $1 billion last year, Uber is rapidly ramping up its self-driving ability. Potentially armed with Waymo’s “sauce,” Uber could have been a formidable opponent to Waymo.

The settlement insures, at least in theory, that Uber will have to compete fairly—Waymo appears to be confident that it will win under such circumstances.

Thorns on all sides

This lawsuit, Waymo v. Uber, was a major element in 2017, Uber’s annus horribilis. In addition to facing an existential threat in the form of Waymo’s or GM’s potentially looming rideshare service, Uber also faced public accusations of the company tolerating internal sexual harassment and misconduct. After an inquiry lead by former attorney general Eric Holder, the company agreed to hold itself to a higher standard.

Uber also faced plenty of other issues: there were ongoing lawsuits over the employment status of its drivers, allegedly leaks of medical information, millions in fines from state and federal agencies, a poor hiring record of women and minorities, and aggressive efforts to evade regulators. The result? Travis Kalanick was booted from the company’s top job. (He retains a seat on the 17-person board of directors.)

By November, Khosrowshahi disclosed that during the ancien régime, the company had sustained a major data breach. (Even more lawsuits followed!) Finally, in late December, the top court in the European Union ruled that Uber could be regulated just like taxi companies.

At $244 million (or 0.34 percent of the company), Uber essentially got off relatively cheaply. The company can now focus on its new Softbank investment and its expected initial public offering. But don’t forget: one result of this lawsuit is that the federal criminal probe is still pending.

Righting the ship

New CEO Khosrowshahi was described to Ars by someone close to the settlement as the “adult at the table” who could put aside any animosity or bad blood believed to exist between Kalanick and Google co-founder Larry Page. (Waymo and Google share the same parent company, Alphabet.)

On the stand earlier this week, Kalanick described how Google initially invested in Uber and how he saw Google as a “big brother.” But once Kalanick started to learn that Google was exploring ridesharing, he was hurt. He characterized the impetus to move to self-driving technology as largely due to a lack of communication on Google’s part.

Essentially, the arrangement as Kalanick understood it was that Google was nurturing Uber’s development. But by May 2014, something changed: he and his colleagues at Uber began hearing “rumors” that Google wanted to directly compete with Uber in ridesharing. Somehow Uber couldn’t seem to get a straight answer from Google, and yet, as Kalanick told it, he pressed Google to strike a deal.

“We do the rideshare thing, and you do [the] self-driving thing, and we can put those together,” he said. “We were figuring out a way to partner.”

In May 2014, Sergey Brin, Google’s other co-founder, publicly told a tech conference about Google’s self-driving cars that lacked steering wheels and driver’s seats, noting that eventually they could become part of a “service” that could be summoned by customers.

Another way to see it, however, is that both sides wanted to cooperate but were ready to backstab the other should it become necessary.

Now, Uber’s next move will be to actually prove that it can capitalize on the research currently being done by its ATG Group and teams in Pittsburgh, Toronto, and San Francisco. Its YouTube channel is surprisingly light: no new videos have been released in four months.

Apparently, its new “Xenon” generation of 200 Volvos is expected to come out soon.

Days before the blockbuster San Francisco trial began, Uber outlined its vision for Otto, the self-driving trucking company founded by Anthony Levandowski, the ex-Waymo engineer who kicked off the entire case.

“At Uber, we’re investing in both self-driving trucks and Uber Freight, a free app that matches carriers and their drivers with loads to haul,” Uber wrote. “Late last year we shared our vision for the future of trucking: a mixed-fleet system where truck drivers and self-driving trucks work alongside one another, connecting long and local haul routes. We think this model could mean more growth in truck freight, an increase in better truck driving jobs, and more affordable goods for everyone.”

Clearly, Uber is in it for the long-haul.