Trade Secret Defendant Cannot Compel Arbitration Based on an Employment Contract to Which It Is Not a Party

The Federal Circuit affirmed a decision by the U.S. District Court for the Northern District of California that Uber could not compel arbitration in a pending litigation filed by Waymo.  In its complaint, Waymo asserted patent and trade secret claims against Uber, alleging that Uber had obtained trade secrets from a Waymo ex-employee, Mr. Levandowski.  Both of Waymo’s employment contracts with Mr. Levandowski contained a mandatory arbitration clause.  In its complaint, Waymo referenced the contracts only to show that it had taken reasonable measures to safeguard its trade secrets. 

Although it was not a party to the employment contracts, Uber sought to rely on their arbitration clauses to compel arbitration in the litigation against Waymo.  Uber claimed that in view of Waymo’s reliance on the contracts, Waymo should be equitably estopped from avoiding their arbitration clauses.  Applying California law, the Federal Circuit concluded that Uber had not proven satisfied either prong of the two-part test for equitable estoppel.  First, Waymo did not assert any breach-of-contract claims, and therefore Waymo did not sufficiently rely on the terms of the contracts in asserting its claims against Uber.  Second, Waymo did not assert that Uber acted in concert with the contract signatory, Mr. Levandowski, to violate the contracts.