Uber Suffers Blow in $1 Billion Trade Secrets Dispute

Recently, a jury decided that a California entrepreneur, Kevin Halpern, filed a timely trade secrets lawsuit against Uber.

Ruchi Gupta - Author

Sep. 4 2020, Updated 6:54 a.m. ET

uploads///Uber trade secrets

The trade secrets dispute between Uber Technologies (NYSE:UBER) and Waymo a few years ago became a big public discussion. Uber parted with about $245 million to settle the Waymo dispute. However, there’s another Uber trade secrets dispute that predates the Waymo dispute and could cost a fortune to settle.

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Uber trade secrets lawsuit cleared, exposing it to $1.0 billion fine

Recently, a jury decided that a California entrepreneur, Kevin Halpern, filed a timely trade secrets lawsuit against Uber, according to a report from the National Law Review. The jury’s verdict was a blow to Uber. The company wanted the court to dismiss the case. Uber argued that Halpern’s case was time-barred. However, the jury refused to buy Uber’s argument. Now, the Uber trade secrets case can progress.

The next phase in the dispute will be to determine whether Uber stole Halpern’s business idea. In 2015, Halpern sued the company, its cofounder and CEO Travis Kalanick, and some early Uber investors. He accused them of stealing his business concept about an app-based ride-hailing service.

According to Halpern, he shared his idea with Kalanick in 2006—years before Uber launched. Although he discussed his app-based taxi service idea with Kalanick, Halpern argues that he had an understanding that Kalanick needed to keep the information confidential. When Kalanick teamed up with others and launched Uber, Halpern felt that Kalanick had breached their contract. As a result, he decided to sue. He’s seeking $1.0 billion in damages.

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Uber faces a potentially significant financial blow at a time when its cash reserve is shrinking, its operations continue to make losses, and it needs to invest more to develop and expand its business. The company finished the fourth quarter of 2019 with $11.3 billion in cash reserve. The cash reserve fell from $12.7 billion in the third quarter. Overall, Uber’s operations continued to burn cash. The cash reserve was $13.7 billion in the second quarter.

Uber made a loss of $1.1 billion in the fourth quarter, which weighed on its finances.

Rides business is profitable, side businesses weigh on results

The Uber trade secrets lawsuit seeking $1.0 billion in damages targets the company’s star business. Uber’s ride-hailing business has been a profitable venture. The business turned a profit of $742 million in the fourth quarter compared to $195 million a year ago.

However, losses in Uber’s food delivery unit Uber Eats and other bets weighed on its overall results. Uber Eats made a loss of $461 million in the fourth quarter. The loss ballooned from $278 million a year ago. Still, the company aims to turn an overall profit this year. The trade secrets case is still a major overhang for the company.


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