Judge blocks top Uber engineer from working on key self-driving technology amid battle with Alphabet

One of Uber's top engineers will no longer be able to work on a key self-driving car technology, a federal judge ordered, adding a new hurdle in the ride-hailing company's race to get to market.

Uber will be able to continue working on its self-driving car technology, the judge said, but embattled engineer Anthony Levandowski must be removed from any work relating to a key technology called LIDAR, which helps cars "see."

Alphabet's (GOOGL) self-driving car unit, Waymo, has sued Uber, claiming that the ride-hailing start-up is using key parts of Waymo's self-driving technology.

The fight centers around Levandowski, who was deeply involved in Google's self-driving car initiative before leaving to found a start-up, Otto, which Uber later acquired. Waymo's lawyers have asserted that Levandowski stole documents from Alphabet, and that Levandowski was already negotiating with Uber before he left Alphabet.

"The evidence indicates that, during the acquisition, Uber likely knew or at least should have known that Levandowski had taken and retained possession of Waymo's confidential files," U.S. District Judge William Alsup in San Francsico wrote. "Waymo has also sufficiently shown ... that the 14,000-plus purloined files likely contain at least some trade secrets."

The judge ordered that Uber must use "the full extent of their corporate, employment, contractual and other authority" to compel Levandowski to return the documents by May 31 at noon.

The injunction on Levandowski's work is part of an order that was revealed on Thursday in sealed documents. Those documents were unsealed Monday morning.

The order also denied Uber's argument to move the lawsuit to private arbitration, and referred the case to the U.S attorney general. The result of the order "tips sharply in Waymo's favor," Alsup wrote, although some of Waymo's requests were also denied.

"Competition should be fueled by innovation in the labs and on the roads, not through unlawful actions. We welcome the order to prohibit Uber's use of stolen documents containing trade secrets developed by Waymo through years of research, and to formally bar Mr. Levandowski from working on the technology," a Waymo spokesperson told CNBC. "The court has also granted Waymo expedited discovery and we will use this to further protect our work and hold Uber fully responsible for its misconduct."

Levandowski has already said he would recuse himself from work related to the disputed technology. But an Uber engineer recently testified that Levandowski communicates with the new self-driving boss on a day-to-day basis.

The case comes at a time when the self-driving car business is fiercely competitive — and any setback could impact companies' abilities to test their cars on the road and beat rivals to market. Uber has called the case a "baseless attempt to slow down a competitor."

Indeed, although Alphabet is an Uber investor, Waymo poses challenges to Uber on several fronts. Waymo has also teamed up with Uber-rival Lyft to bolster self-driving car technology.

While Levandowski will no longer be able to work on one of the most important sensors for self-driving cars, an Uber spokesperson told CNBC that it is pleased it can continue on its overall technology.

"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," an Uber spokesperson told CNBC on Monday. "We look forward to moving toward trial and continuing to demonstrate that our technology has been built independently from the ground up."

Here's the full document:

Correction: William Alsup is a U.S. District Court judge. An earlier version mischaracterized his status.