Uber Technologies had hoped to work out its trade secret suit with Alphabet's (GOOGL) - Get Report Waymo behind closed doors, but instead the company will have to contend with an open trial and possible federal criminal investigation.
Waymo's suit alleges that a former employee, Anthony Levandowski, stole 14,000 files full of self-driving car trade secrets when he moved on to found his own self-driving car company, Otto, which Uber later acquired for $680 million.
Levandowski, who now works for Uber, has sought to put forward a Fifth Amendment defense against being compelled to testify.
San Francisco U.S. District Court Judge William Alsup on Thursday denied Uber's motions for arbitration and referred the case to the U.S. Attorney's office.
"The Court takes no position on whether a prosecution is or is not warranted, a decision is entirely up to the United States Attorney," Alsup said in his order.
Whether a criminal investigation gets underway, the mere possibility is bad press Uber hardly needs at this point.
In a separate order on the arbitration issues, Alsup wrote that Uber has tried to compel arbitration based on Waymo's attempts to arbitrate with Levandowski in an unrelated dispute.
"The gravamen of those proceedings is Waymo's allegations of employee poaching by Levandowski. Neither proceeding has anything to do with Waymo's claims of trade secret misappropriation against defendants here," the order said.
The judge was not favorably impressed by Uber's arguments.
"In their reply brief, defendants unfairly and for the first time identify 'an entire body of case law holding that a nonsignatory may compel a signatory to arbitrate its claims.' Every decision cited by defendants, however, is inapposite or readily distinguishable," according to the order.
If the case goes to trial, it could pose at least two problems for Uber.
An open trial would add to the list of publicly aired problems afflicting the company, including sexual harassment claims, immature management, and gripes from both drivers and passengers.
At the same time, a trial by jury, which Waymo has requested, could leave some of the decisions on damages in the hands of jury, and juries present a wildcard risk that a professional arbitrator does not.