Waymo & Uber: A Truce That Will Not Last

The surprise settlement of Waymo’s trade-secrets lawsuit against Uber last week may have saved both companies from the harsh glare of the spotlight, but it probably won’t determine who supplies your first driverless ride.

Waymo accused Uber of using its trade secrets to develop Lidar sensing systems for self-driving cars and sought as much as $1.8 billion in damages. But last Friday, the companies announced a settlement in which Waymo will get a small stake in Uber, worth about $245 million, and a commitment from the ride-hailing giant not to use Waymo’s confidential hardware or software.

The settlement, which the companies reached late on February 8 after only four days in court, ended a trial that was expected to last three weeks. A federal jury and a media throng had already heard unsettling tales of take-no-prisoners culture that Uber is trying to put behind it. Waymo ran the risk, like any litigant, of losing its case.

The deal may allow the companies to take another shot at a partnership they had discussed several times since 2013: Waymo — then known as Google’s Project Chauffeur — had driverless cars, and Uber had a popular ride-hailing service. When the planned partnership never actually took shape, Uber started developing its own autonomous technology and the two companies ended up on a collision course.

But this wasn’t a clash between full-fledged rivals in a mature business, like the years-long smartphone litigation between Apple and Samsung. So far, the self-driving car industry is essentially a set of experiments. That’s why all eyes are on the basic technologies — for now.

“Early on, it’s going to be about technology leadership. But later on, it’s going to be about business models and supply chains,” said Bob O’Donnell, president of market research and consulting firm Technalysis Research.

If Uber was using stolen Waymo designs — which Uber denies — the settlement may cost the company some time in its quest to make cars drive themselves, which ultimately affects its bottom line and market value, O’Donnell said. “The entire business model of Uber is based on the fact that eventually they aren’t going to have to pay anybody.”

But by 2030, when various forecasts predict autonomous cars will perform many of our trips – as much as 95% of all miles driven – last week’s settlement may be a nothing more than a footnote.

“It’s important now, but in 12 years, the market dynamics will also have changed a lot,” O’Donnell said. The sky’s the limit on what could happen by then. Uber might have acquired Waymo, or vice versa. And everyone in today’s car business, including both automakers and component suppliers like Bosch and Continental, is looking for a piece of the business.

“There’s not going to be one winner. Even if Waymo has a head start now, that’s not the end of the story,” O’Donnell said.

What’s more, all the winners will need partners to succeed. The whole car industry is a complex web of manufacturers and suppliers. Even Tesla relies on third parties for some of its technology.

There’s a good chance Waymo will eventually be a technology supplier to Uber, Lyft — where it’s already invested $1 billion — and other mobility providers, O’Donnell said. Just because Waymo will soon be able to pick you up in a driverless SUV in a few cities doesn’t mean it wants to break into the ride-hailing business for good.

What may seem like an epic battle for the streets in a San Francisco courtroom is really a fringe fight to most consumers, O’Donnell said. “There’s the Silicon Valley view of the world, and then there’s the actual world.”

A Technalysis survey of 1,000 US consumers last year found that 57% had never used a ride-hailing service and another 23% had only done it once or twice. So what was imminently at stake here wasn’t personal transportation in the suburbs and midsized cities of America. It was reputation, the most valuable commodity in Silicon Valley — after coding skills and a killer funding round.

— Stephen Lawson is a freelance writer based in San Francisco. Follow him on Twitter @sdlawsonmedia.

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