Once upon a time, engineer Anthony Levandowski was a valuable employee who played an instrumental role in the development of self-driving technology company, Waymo, a subsidiary of Google’s parent company, Alphabet.

This changed in 2016, when he veered off course and began his destination towards federal prison. He resigned without notice, but not before downloading approximately 14,000 files to a personal device, giving him unfettered access to development schedules, product designs and other confidential information.

Levandowski then set up his own self-driving vehicle startup, Ottomotto. Subsequently, when Uber acquired Levandowski’s company for just short of $700 million, Waymo promptly sued Uber for use of its trade secrets.

A settlement

In February 2018, Waymo secured roughly $245 million by way of settlement at the US District Court for the Northern District of California.

In August 2019, David Anderson, attorney for the US District Court for the Northern District of California, proceeded to file a criminal complaint against Levandowski. A year later, in the same court, Judge William Alsup sentenced Levandowski to 18 months imprisonment, plus financial penalties.

Trade secrets are often considered to be a US phenomenon, but the reality is different. The UK has always protected trade secrets according to its laws on confidential information. This protection has developed through both equitable principles and the evolution of common law.

In the UK, the equitable principle is premised on the following: when information is exchanged that is expressed as “secret”, or which should be understood to be secret, equity will act on the conscience of the recipient to prevent them from disclosing or using the information without authorisation.

This is embodied in Coco v AN Clark (Engineers) (1968), which introduced three requirements for confidentiality:

• The information itself must have the necessary quality of confidence;
• It must have been conveyed in circumstances importing an obligation of confidence; and
• There must be unauthorised use of that information, to the detriment of the rights holder.

The EU Trade Secrets Directive was implemented into UK law by the Trade Secrets (Enforcement, etc) Regulations 2018. This European legislation introduced the first statute-based definition of a trade secret, which serves to operate in parallel with the UK’s existing body of case law. It defines a trade secret as:

• A secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question;
• It has commercial value because it is secret; and
• It has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.

The directive’s definition of a trade secret resonates with the definition in the US Economic Espionage Act 1996 (as amended by the Defend Trade Secrets Act 2016), under which the Levandowski case was brought. Nevertheless, the directive does not provide for a criminal offence, a key divergence between US and UK law. The US Espionage Act is part of the federal criminal code which facilitates prosecution.

An unexpected twist

We often see headlines about the dangers of third-party hackers or foreign governments seeking to steal valuable trade secrets, but a business’ biggest risk is, arguably, theft by a devious and sophisticated employee.

All businesses using trade secrets to protect their most valuable information should have safeguarding procedures in place. Measures a business should consider include:

• Maintaining a register of trade secrets, subject to ongoing review;
• Making an employee’s obligations regarding the treatment of confidential information clear in contracts of employment and non-disclosure agreements, and ensuring any contractual limitations are performed in practice;
• Limiting risk by confining access to trade secrets to those who need it;
• Protecting trade secrets using reliable IT security systems, bearing in mind the International Organization for Standardization’s standards;
• Enforcing a clear “exit” process, involving the return of confidential information, instant access removal and a final interview to discuss the employee’s ongoing confidentiality obligations; and
• Monitoring competitors to check for the implementation of trade secrets, including checking competitor patent applications.

A clear message

Google’s Waymo has sent a clear message to those tempted to steal its proprietary information after successfully brokering a huge settlement and ensuring its former employee faces jail.

However, despite its success, Google will no doubt be asking serious questions about how it can better protect its trade secrets in the future.

Levandowski’s imprisonment will not compensate its loss nor negate the technological springboard provided to Uber and other competitive onlookers.

This case would have been similarly catastrophic for Google in the UK, because once a trade secret has been revealed, the court’s discretionary remedies cannot necessarily restore the value of what has been lost.

Oliver Laing is a partner in the litigation and licensing team at law firm Potter Clarkson. He can be contacted at: oliver.laing@potterclarkson.com

Christie Batty is a trainee in the litigation and licensing team at Potter Clarkson. She can be contacted at: christie.batty@potterclarkson.com

Image: Shutterstock.com / maxuser