Uber Technologies Inc. has had, and continues to have, its fair share of legal problems. Recently, two women have filed a lawsuit claiming they were sexually assaulted by Uber drivers. Additionally, a federal judge recently ordered Uber to turn over any information that suggests that a competitor, and not hackers, were responsible for a data breach that potentially compromised the personal information of 50,000 Uber drivers. Furthermore, Uber plans on appealing a federal judge’s certification in a high profile class action lawsuit brought by three drivers who argue that they are employees and not contractors. While these legal issues are in the fields of criminal law, information technology law, and employment law, Uber’s legal woes also included intellectual property matters.
In May of 2015, a California entrepreneur filed a lawsuit in San Francisco Superior Court accusing Uber of building its $41 billion company off of his stolen idea.
Kelvin Halpern, a filmmaker and a yogi, founded Celluride Wireless Inc. in 2002 as a means of connecting limo and black car drivers to passengers. Halpern designed Celluride as a peer-to-peer service that allowed passengers to hail drivers, and track the drivers using GPS. This concept, he claims, is the premise that Uber’s co-founders Travis Kalanick and Garret Camp used to create Uber, the premier company in a booming transportation network industry.
According to the complaint, Halpern met Kalanick in 2006. At the time, Kalanick was the CEO of a peer-to-peer file sharing service that had secured investment from Dallas Mavericks owner Mark Cuban. Halpern says he was impressed by Kalanick’s ability to secure big investments, and sought his advice on developing and financing a startup. After making Kalanick promise to keep his trade secrets confidential, Halpern’s suit alleges that he revealed the entire Celluride concept to Kalanick, including a working cellphone demo and interface sketches. Halpern also met Bill Trenchard, a partner at venture capital firm First Round Capital and another named defendant in the suit, in 2007 and shared with him the same information about Celluride.
Overtime, Halpern continued to trust Kalanick and Trenchard, and shared more information about his business concept. In 2008 at a major technology conference in Hawaii called the Lobby, according to the suit, Kalanick, Trenchard, and Camp, along with First Round Capital, conspired to create the app without Halpern. Uber was ultimately founded in 2009.
Halpern’s complaint attacks Uber’s version of its origin story. According to Uber, Kalanick and Camp were hanging out in Paris when Camp came up with the idea of a “limo timeshare service,” which led to the development of Uber. Halpern calls Uber’s story a “stark contrast to the actual genesis of the conspiracy on the warm sandy beaches of the Lobby conference.”
Halpern hired Christopher Dolan to represent him in his claims against Uber. Dolan held a news conference to announce the suit, where he said that Halpern could “no longer stomach watching this company, that he had been the creator of the idea, continue to flourish.” Halpern, however, did not attend the news conference. Instead, he posted a video on YouTube about the case, entitled Grand Theft Uber, in which he tells his story of how to his dismay, he trusted Kalanick with his idea. The video also contains soundbites of Peter Thiel, PayPal founder and Lyft (Uber competitor) investor, describing Uber as “the most ethically challenged company in Silicon Valley.”
On May 13, Halpern filed suit in California state court, bringing claims of misappropriation of trade secrets, conversion, and breach of contract. Uber removed the case to federal court on May 29, claiming that federal jurisdiction applied because the case involves issues under the Copyright Act. In June, Halpern said his case involves trade secret issues, and therefore does not belong in federal court. Uber filed a motion to dismiss, claiming that Halpern sat on his claim for at least four years, and described the case as one “brought by a man who did not come up with the idea for Uber, and never said that he did until Uber was a highly valued company.” In late July, a judge sent the case back to state court, saying it was preempted by the Copyright Act.
Dolan specializes in personal injury cases, and this is not the first time he has been involved in a suit with Uber. Last year, he sued Uber for wrongful death after an Uber driver hit and killed a six-year old girl in San Francisco. Dolan has also been a vocal advocate of the need for more regulation in the transportation network industry, and was involved in efforts to force drivers to have $300,000 insurance policies.
Recently, Halpern’s case suffered a major setback. Due to what Dolan describes as “an irreparable and complete breakdown in communication,” this past September, Dolan filed a motion to be relieved as Halpern’s counsel. This came just one month before an October 21 scheduled hearing of the case, and raises major questions of its future vitality, especially considering that in Dolan’s initial news conference, he seemed enthusiastic about helping Halpern in his suit. Dolan has not revealed other details about why he is asking to be removed as Halpern’s lawyer. However, it should also be noted that in 2009, Halpern unsuccessfully sued Anu Shukla, founder of Offerpal (now called Tapjoy), after claiming that he helped to create the company only to have Shukla cut him out before it was formally founded. The state judge in in the case against Shukla sanctioned Halpern for not complying with discovery requests. Halpern refused to pay these sanctions, failed to show up for a schedule deposition, and the court ultimately granted termination sanctions due to Halpern’s “clowning around.”
Despite Halpern’s questionable claims against Uber, and his less-than-stellar litigious past, his claims raise questions of how would-be entrepreneurs can protect their ideas. Can business developers trust potential business partners with their ideas? At what point in the business development process should contracts be drafted to protect trade secrets? How can one prove as a matter of fact that someone stole their business idea? Unfortunately, it seems that entrepreneurs not only have to deal with the struggles of finding investors for their company, but also with the threat that these would-be investors may appropriate entrepreneurs’ business ideas as their own.
Sarah Higgins is a J.D. candidate, 2017, at NYU School of Law.