By Dan Levine and Heather Somerville
SAN FRANCISCO (Reuters) - Uber Technologies Inc must promptly return stolen confidential files to Alphabet Inc's Waymo self-driving car unit, a federal judge ruled, while stopping short of shutting down the ride-services company's autonomous car programme.
The judge wrote that Uber knew, or should have known, that an ex-Waymo engineer it later hired had taken Waymo files potentially containing trade secrets, and that some of the intellectual property had "seeped into" Uber's own development efforts.
The ruling by U.S. District Judge William Alsup in San Francisco, unsealed on Monday, marked a blow to Uber, which is engaged in a battle with Waymo to dominate the fast-growing field of self-driving cars expected to revolutionise the automotive industry.
Alsup referred the case to the U.S. Department of Justice for investigation of possible trade secret theft on Thursday, when the ruling was released under seal. He also ruled against Uber's private arbitration request that would have kept much of the case out of the public eye.
Uber was also ordered to keep engineer Anthony Levandowski away from work involving Lidar, a key sensor technology in self-driving cars that is the crux of the current litigation.
The case hinges on files that Waymo alleges Levandowski stole before leaving the company. Waymo claims the information made its way into Uber's Lidar system.
Levandowski left Waymo in January 2016 and started Otto, a self-driving truck startup that Uber bought for $680 million in August. He had until last month run Uber's self-driving car division, before stepping aside from those responsibilities pending the court case.
"The bottom line is the evidence indicates that Uber hired Levandowski even though it knew or should have known that he possessed over 14,000 confidential Waymo files likely containing Waymo's intellectual property," Alsup wrote.
Alsup said Waymo "has shown compelling evidence that its former star engineer" downloaded the documents from Waymo's computers before leaving the company.
Alsup ordered Uber to prevent Levandowski and all other employees from using the materials and return them to Waymo by May 31.
Levandowski, who is not a defendant in the civil case, has asserted his Fifth Amendment privilege against self-incrimination and has refused to testify.
Alsup also ruled that Uber must by next month complete an investigation into the downloaded Waymo documents and provide Waymo with a comprehensive log of written and spoken communication between Uber and Levandowski regarding Lidar.
Waymo said on Monday it welcomed the ruling. "Competition should be fuelled by innovation in the labs and on the roads, not through unlawful actions," Waymo spokesman Johnny Luu said.
However, the judge said "few" of Waymo's alleged trade secrets have been traced to Uber's self-driving car technology, and that Waymo's patent claims against Uber have proved meritless. Not all of Waymo's 121 asserted trade secrets indeed qualify as trade secrets, he added.
The ruling did not shut down Uber's self-driving car lab entirely, which would likely have been a major blow as the company is betting its current ride services network will eventually rely on self-driving cars.
"We are pleased with the court's ruling that Uber can continue building and utilizing all of its self-driving technology, including our innovation around LiDAR," Uber spokeswoman Chelsea Kohler said.
Amid the legal battle, Waymo has aligned itself with Lyft, Uber's chief U.S. ride-hailing competitor. On Sunday, Waymo and Lyft announced a partnership on self-driving car pilots, an opportunity for both companies to accelerate their autonomous efforts.
(Additional reporting and writing by Alexandria Sage; Editing by Meredith Mazzilli)