PLAINTIFF YARDI SYSTEMS, INC.’S MEMORANDUM OF CONTENTIONS OF FACT AND LAW CASE NO. 2:13-CV-07764-FMO (AGRX)
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Jason P. Gonzalez (SBN 178768) Robert A. Weikert (SBN 121146)Shawn G. Hansen (SBN 197033) NIXON PEABODY LLP 300 S. Grand Avenue, Suite 4100 Los Angeles, California 90071 Telephone: (213) 629-6019 Facsimile: (213) 629-6000 Email: [email protected]
[email protected] [email protected]
Jennifer Hayes (SBN 241533) NIXON PEABODY, LLP 2 Palo Alto Square 3000 El Camino Real Suite 500 Palo Alto, California 94306 Telephone: (650) 320-7725 Facsimile: (855) 780-9262 Email: [email protected]
Attorneys for Plaintiff YARDI SYSTEMS, INC.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
YARDI SYSTEMS, INC.
Plaintiff,
vs.
PROPERTY SOLUTIONS INTERNATIONAL, INC.
Defendant.
AND RELATED COUNTERCLAIM
Case No. 2:13-CV-07764-FMO (AGRx)
PLAINTIFF YARDI SYSTEMS, INC.’S MEMORANDUM OF CONTENTIONS OF FACT AND LAW
[Local Rule 16-4]
Date: December 16, 2016 Time: 10:00 a.m. Ctrm: 22
Pre-Trial Confer.: December 16, 2016 Trial Date: January 10, 2017
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PLAINTIFF YARDI SYSTEMS, INC.’S MEMORANDUM OF CONTENTIONS OF FACT AND LAW CASE NO. 2:13-CV-07764-FMO (AGRX)
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Plaintiff Yardi Systems, Inc. (“Yardi”) hereby submits its Memorandum of
Contentions of Fact and Law in accordance with Local Rule 16-4.
I. PLAINTIFF’S CLAIMS
Yardi will bring the following claims at trial, all of which relate to Defendant
Property Solutions International, Inc.’s (“Entrata”) wrongful use of Yardi’s
Voyager property management software application:
Claim 1: Defendant Entrata is liable for federal copyright infringement
under 17 U.S.C. § 101 et seq.
Claim 2: Defendant Entrata is liable for misappropriation of trade secrets
under California Civil Code §§ 3426-3426.11.
Claim 3: Defendant Entrata is liable for breach of contract for breaching
the 2006 NDA between Yardi and Entrata.
Claim 4: Defendant Entrata is liable for breach of contract for breaching
the implied-in-fact contract between Yardi and Entrata, created and manifested by
the parties’ course of conduct and the relationship of the parties. Under this implied
contract, all Yardi information Entrata obtained was to be kept confidential and
used only to resolve the specific technical issues for which the information was
provided. Entrata was prohibited from using this confidential information for any
other purpose, including to develop a competing property management accounting
system.
II. ELEMENTS OF YARDI’S CLAIMS
A. Claim 1: Copyright Infringement
Elements:
1. Yardi is the owner of each of the copyrights; and
2. Entrata copied original elements of the copyrighted works.
Authority: Ninth Circuit Manual of Model Civil Jury Instructions 17.0; 17 U.S.C.
§ 101 et seq.
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Selected Evidence in Support: Yardi owns each of the copyrights in the
Voyager software application, as evidenced by copyright registration certificates.
Yardi created the Voyager software application independently through original and
creative expression. The Yardi Voyager 5.0 and Yardi Voyager 6.0 computer
programs, including screen displays such as the Yardi Box Score, contain original
and copyrightable elements. This will be established by Yardi fact and expert
witnesses, as well as by screenshots of the displays themselves.
Testimony from Entrata’s own witnesses, along with email and other
documentary evidence, will show that Entrata illicitly and improperly obtained
copies of Yardi’s Voyager software application, including through deceptive means
from Yardi’s customers. Entrata copied the Voyager software application onto
Entrata servers and improperly provided access to hundreds of Entrata employees.
Entrata improperly copied and used its illicitly obtained copies of the Voyager
software application in hundreds of sales demonstrations for prospective Entrata
customers, thereby improperly gaining sales and profits.
Entrata copied protected elements of Yardi’s Voyager software application
and incorporated those elements into the Entrata Core software. There is
substantial similarity between the Yardi Voyager 5.0 and Yardi Voyager 6.0
computer programs, including the Yardi Box Score screen displays, and the Entrata
Core computer program and its Box Score screen displays. This will be established
by Yardi fact and expert witnesses, as well as by screenshots of the displays
themselves.
Entrata had no license, implied or otherwise, to use the Voyager software
application, as evidenced by among other things Entrata’s concealment of its
possession of the Voyager software application from Yardi, Entrata’s extensive
efforts to improperly obtain copies of the Voyager software application through
customers rather than through Yardi directly, and Entrata’s extensive campaign of
deception and concealment when Yardi began inquiring directly of Entrata whether
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Entrata in fact had obtained copies of the Voyager software application. This
deception and concealment also included Entrata’s CEO smuggling a server
containing a copy of the Voyager software application from Utah to India where the
vast majority of Entrata’s developers work. This will be established by testimony
from Entrata and Yardi fact witnesses, Entrata’s internal emails, and
communications between Yardi and Entrata in which Entrata repeatedly made
misrepresentations.
Yardi therefore is entitled to actual damages, including a hypothetical license
fee, disgorgement of Entrata’s profits, and/or statutory damages for Entrata’s
infringement of the Yardi Voyager 5.0 and Yardi Voyager 6.0 computer programs,
including screen displays such as the Yardi Box Score.
B. Claim 2: Misappropriation of Trade Secrets
Elements:
1. Yardi owns at least one of the alleged trade secrets (for purposes of
trial, Yardi is proceeding on trade secrets 1, 2, 3, 5, 8, 10, 25, and 27);
2. The Yardi trade secret was a trade secret at the time of the
misappropriation;
3. Entrata improperly acquired or used Yardi’s trade secret;
4. Yardi was harmed or Entrata was unjustly enriched; and
5. Entrata’s acquisition or use was a substantial factor in causing Yardi’s
harm or Entrata to be unjustly enriched.
Authority: CACI 4401; Civil Code § 3426-3426.11; Altavion, Inc. v. Konica
Minolta Sys. Lab., Inc., 226 Cal. App. 4th 26, 43 (2014).
Selected Evidence in Support: Yardi owned trade secrets 1, 2, 3, 5, 8, 10, 25,
and 27, and these trade secrets were not generally known in the trade. Yardi took
reasonable measures to protect the secrecy of these trade secrets, including but not
limited to by using license agreements, non-disclosure agreements, and username
and password protection. The trade secrets employed in the Voyager software
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program were unique and were considered trade secrets at the time of the
misappropriation. Yardi will present this information through Yardi fact and expert
witnesses.
Testimony from Entrata’s own witnesses, along with email and other
documentary evidence, will show that Entrata illicitly and improperly acquired
copies of Yardi’s Voyager software application, including through deceptive means
from Yardi’s customers. Entrata copied the Voyager software application onto
Entrata servers and improperly provided access to hundreds of Entrata employees,
including to Entrata’s developers. Internal Entrata emails, texts, development
documents, and handwritten notes from Entrata’s developers will show that
Entrata’s developers, including Entrata’s CEO, improperly acquired and used
Yardi’s Voyager software applications and the trade secrets they contained,
including by extensively viewing, studying, and analyzing the software during
Entrata’s development of Entrata Core, and by implementing Yardi’s trade secrets
into Entrata Core.
For the same reasons set forth in Section A, above, Entrata had no license,
implied or otherwise, to use the Voyager software application. Entrata’s use of
Yardi’s trade secrets, including the Yardi Voyager software application, resulted in
sales and revenue for Entrata. Yardi is entitled to actual damages, including
hypothetical license fee damages, and disgorgement of Entrata’s profits, for
Entrata’s willful misappropriation of Yardi’s trade secrets.
C. Claim 3: Breach of Express Contract
Elements:
1. Yardi and Entrata entered into the 2006 NDA contract;
2. All conditions required by the contract for Entrata’s performance had
occurred or were excused;
3. Entrata breached the contract; and
4. Yardi was harmed by that breach.
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Authority: CACI 303; Richman v. Hartley, 224 Cal. App. 4th 1182, 1186 (2014);
Brown v. Grimes, 192 Cal. App. 4th 265, 277-79 (2011) (dependence of covenants
is a matter of contract construction).
Selected Evidence in Support: The February 24, 2006 Non-Disclosure
Agreement between Yardi and Entrata is a valid express contract. In it, the parties
agreed, among other things, to preserve the confidentiality of Yardi’s software
programs and related intellectual property, and to not duplicate, reverse engineer, or
use Yardi’s software and intellectual property in competition with Yardi.
Testimony from Entrata’s own witnesses, along with email and other
documentary evidence, will show that Entrata breached this agreement by illicitly
and improperly acquiring copies of Yardi’s Voyager software application, including
through deceptive means from Yardi’s customers, and then duplicating and reverse
engineering it, and using it to create products that compete with Yardi’s. Entrata
copied the Voyager software application onto Entrata servers and improperly
provided access to hundreds of Entrata employees, including to Entrata’s
developers. Testimony from Entrata’s own witnesses, internal Entrata emails and
documents, and Entrata’s discovery responses will establish that Entrata improperly
copied and used its illicitly obtained copies of the Voyager software application in
hundreds of sales demonstrations for prospective Entrata customers of Entrata’s
“portal” products. Internal Entrata emails, texts, development documents, and
handwritten notes from Entrata’s developers will show that Entrata also improperly
used Yardi’s Voyager software applications, and the trade secrets and confidential
information they contained, including by extensively viewing, studying, and
analyzing the software during Entrata’s development of Entrata Core, and by
implementing Yardi’s trade secrets and confidential information into Entrata Core,
a competing product.
For the same reasons set forth in Section A, above, Entrata had no license,
implied or otherwise, to use the Voyager software application or Yardi’s
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intellectual property in this fashion. Entrata also was not excused from performing
under the contract, including in that Yardi did not breach the contract. Entrata’s
unlicensed use of Yardi’s trade secrets and confidential information, including the
Yardi Voyager software application, resulted in sales and revenue for Entrata,
causing Yardi damages.
D. Claim 4: Breach of Implied in Fact Agreement
Elements:
1. Yardi and Entrata entered into a contract based on the conduct and
relationship of the parties;
2. All conditions required by the contract for Entrata’s performance had
occurred or were excused;
3. Entrata did something that the contract prohibited it from doing; and
4. Yardi was harmed by that failure.
Authority: Judicial Council of California Civil Jury Instructions 303; Richman v.
Hartley, 224 Cal. App. 4th 1182, 1186 (2014); Brown v. Grimes, 192 Cal. App. 4th
265, 277-79 (2011) (dependence of covenants is a matter of contract construction);
Judicial Council of California Civil Jury Instructions 305; Civil Code § 1621;
Maglica v. Maglica, 66 Cal. App. 4th 442, 455 (1998); Div. of Labor Law
Enforcement v. Transatlantic Transportation Co., 69 Cal. App. 3d 268, 275 (1977).
Selected Evidence in Support: Yardi and Entrata entered into an implied
contract that all information Yardi provided to Entrata, including in the course of
Yardi’s offering technical support and assistance to Entrata in connection with the
servicing of mutual customers, was to be kept confidential by Entrata, and used
only for the purpose of resolving the specific technical issues for which the
information was provided. The implied contract did not allow Entrata to use
Yardi’s confidential information in competition with Yardi. Yardi will present
evidence of this implied contract through emails and other communications
between the parties, and through testimony of Yardi and Entrata witnesses.
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Testimony from Entrata’s own witnesses, along with email and other
documentary evidence, will show that Entrata breached this agreement by illicitly
and improperly acquiring copies of Yardi’s Voyager software application, including
through deceptive means from Yardi’s customers, and using Voyager to compete
with Yardi. Entrata copied the Voyager software application onto Entrata servers
and improperly provided access to hundreds of Entrata employees, including to
Entrata’s developers. Entrata improperly copied and used its illicitly obtained
copies of the Voyager software application in hundreds of sales demonstrations for
prospective Entrata customers of Entrata’s “portal” products. Internal Entrata
emails, texts, development documents, and handwritten notes from Entrata’s
developers will show that Entrata also improperly used Yardi’s Voyager software
applications, and the trade secrets and confidential information they contained,
including by extensively viewing, studying, and analyzing the software during
Entrata’s development of Entrata Core, and by implementing Yardi’s trade secrets
and confidential information into Entrata Core, a competing product.
For the same reasons set forth in Section A, above, Entrata had no license,
implied or otherwise, to use the Voyager software application or Yardi’s
intellectual property in this fashion. Entrata also was not excused from performing
under the contract, including in that Yardi did not breach the contract. Entrata’s
unlicensed use of Yardi’s trade secrets and confidential information, including the
Yardi Voyager software application, resulted in sales and revenue for Entrata.
Yardi therefore is entitled to damages.
III. ENTRATA’S AFFIRMATIVE DEFENSES
Yardi understands Entrata plans to pursue the following affirmative defenses
at trial:
Second Affirmative Defense: Yardi’s claims are barred due to waiver;
Tenth Affirmative Defense: Yardi is estopped from asserting the claims
alleged against Entrata due to an express and/or implied license;
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Eleventh Affirmative Defense: Yardi’s claims are barred, in whole or in
part, by the doctrines of fair use, nominative fair use, and/or descriptive use;
Thirteenth Affirmative Defense: Yardi’s claims are barred by the doctrine
of copyright misuse;
Fourteenth Affirmative Defense: Yardi’s claims are barred by the merger
doctrine;
Twenty-second Affirmative Defense: Yardi’s claims are barred, in whole or
in part, by the doctrine of unclean hands;
Twenty-third Affirmative Defense: Yardi’s claims are barred by applicable
statutes of limitations;
Thirty-first Affirmative Defense: Yardi’s implied contract claim is barred
by the statute of frauds, including provisions contained in Section 1624 of the
California Civil Code.
Entrata has indicated that the other defenses listed in its Answer (failure to
state a claim, no causation, non-infringement, no substantial similarity, failure to
identify trade secrets, independent development, readily ascertainable, inadequate
efforts to maintain secrecy, no misappropriation, no access to copyrighted work,
failure of condition precedent, lack of certainty, and lack of performance) will be
pursued “at trial based on Yardi’s inability to prove the required elements of its
claims,” and thus do not have elements separate from those set forth above.
IV. ELEMENTS REQUIRED TO ESTABLISH ENTRATA’S
AFFIRMATIVE DEFENSES AND YARDI’S KEY EVIDENCE IN
OPPOSITION [L.R. 16.4-1 (e), (f)]
Second Affirmative Defense: Waiver
Elements: To show waiver, Entrata has the burden of proving the following
elements by clear and convincing evidence:
1. That Yardi knew of its rights to assert its claims; and
2. Yardi voluntarily or intentionally relinquished those rights.
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Source: CACI 336; Hecht v. Harris, Upham & Co., 430 F.2d 1202, 1208
(9th Cir. 1970).
Key Evidence In Opposition: Entrata will not be able to satisfy its burden of
proof in support of this defense. Nonetheless, Yardi intends to offer documents and
testimony at trial, including testimony of Yardi employees, rebutting this defense.
This evidence will include, among other things, evidence showing that Yardi did
not know of Entrata’s misconduct, that Entrata undertook extensive efforts to
conceal its misconduct from Yardi, and that Entrata repeatedly made affirmative
misrepresentations to Yardi about Entrata’s conduct.
Tenth Affirmative Defense: Implied License
Elements: To show implied license, Entrata must prove the following
elements:
1. The defendant requested that the plaintiff create a work,
2. The plaintiff made that particular work and delivered it to the
defendant, and
3. The plaintiff intended that the defendant copy, distribute, use, modify,
or retain the plaintiff’s work.
Source: 17 U.S.C. §204; Reinicke v. Creative Empire LLC, 38 F.Supp.3d
1192, 1199 (S.D. Cal. 2014), aff'd, No. 14-56467, 2016 WL 5845734 (9th Cir. Oct.
6, 2016); Ninth Circuit Model Jury Instruction 17.24.
Key Evidence In Opposition: Entrata will not be able to meet its burden of
proof on this defense, as there is no evidence supporting it. Moreover, Yardi
intends to offer at trial evidence showing there was no express or implied license of
any kind, let alone one that would permit Entrata to use the stolen Voyager
application to market and sell Entrata products, or to develop a competing property
management software program. Yardi also will offer evidence to show that
Entrata’s conduct was inconsistent with Yardi giving Entrata any alleged license
including, among other things, evidence showing that Yardi did not know of
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Entrata’s misconduct, that Entrata undertook extensive efforts to conceal its
misconduct from Yardi, and that Entrata repeatedly made affirmative
misrepresentations to Yardi about Entrata’s conduct.
Eleventh Affirmative Defense: Fair Use
Elements: To establish fair use, Entrata must show it used the copyrighted
work in a reasonable way under the circumstances, without the consent of the
copyright owner, that would advance the public interest. Based on its discovery
responses, Entrata appears to contend its conduct was protected fair use “because
the amount of copying, if any, was minor; the expressive component of the
allegedly copyrighted work, if any, was minor; the copying, if any, had an
insubstantial effect on the market for the allegedly copyrighted work; and the
alleged copying, if any, was incidental to efforts to access functional elements
legitimately.” Entrata Interrogatory Response 19. Entrata has the burden of
proving this defense by clear and convincing evidence. In determining whether the
use made of the work was fair, the jury should consider the following:
1. The purpose and character of the use, including whether the use is of a
commercial nature or is for nonprofit educational purposes;
2. The nature of the copyrighted work;
3. The amount and substantiality of the portion used in relation to the
copyrighted work as a whole; and
4. The effect of the use upon the potential market for or value of the
copyrighted work.
As part of the analysis under the first element, Entrata must establish that its use of
the copyrighted work was the only way to gain access to the ideas and functional
elements embodied in a copyrighted computer program, and that there was a
legitimate reason for seeking such access.
Source: Ninth Circuit Model Jury Instruction 17.21; Sony Computer Entm’t,
Inc. v. Connectix Corp., 203 F.3d 596, 602 (9th Cir. 2000).
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Key Evidence In Opposition: Entrata has no evidence supporting this
defense, let alone any “clear and convincing” evidence. In opposition, Yardi will
show at trial that Entrata’s use of the Voyager application far exceeds the bounds of
the fair use doctrine. Entrata used stolen copies of the Voyager application to help
Entrata market and sell its products, without any legitimate reason for doing so.
Entrata also used stolen copies of the Voyager application to develop a property
management software program that competed directly with Yardi’s Voyager
application. Entrata’s secretive copying and use of Voyager, and Entrata’s removal
of the stolen copy to India where the majority of Entrata’s developers were located,
was undertaken for the illegitimate purpose of using Voyager to assist in the
development of a directly competing product. Moreover, Entrata has itself
repeatedly represented that a copy of the Voyager application was not necessary for
Entrata to perform its software development work. Instead, the evidence will show
that Entrata stole and used the Voyager application so that it would have an
improper and illegal “shortcut” to make its sales and development process easier.
Thirteenth Affirmative Defense: Copyright Misuse
Elements: To establish copyright misuse, Entrata must prove that Yardi used
its copyrights to secure an exclusive right or limited monopoly not granted by the
Copyright Office, such as to control areas or products not covered by Yardi’s
copyrights. In its discovery responses, Entrata claimed the copyright misuse
defense applies “for reasons that include Yardi’s attempt to use the copyrights that
correspond to its products to limit competition in the property management industry
in a way that is beyond the limited scope of Yardi’s copyrights.” Entrata Response
to Interrogatory No. 20.
Source: Comment to Ninth Circuit Model Jury Instruction 17.23, Practice
Management Information Corp. v. American Medical Association, 121 F.3d 516,
520 (9th Cir. 1997); Apple Inc. v. Psystar Corp., 658 F.3d 1150, 1157 (9th Cir.
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2011); Alcatel USA, Inc. v. DGI Technologies, Inc., 166 F.3d 772, 793 (5th Cir.
1999).
Key Evidence In Opposition: There is no evidence that Yardi used its
copyright for the Voyager application to secure an exclusive right or limited
monopoly in the area of property management software. If necessary, Yardi will
present evidence at trial showing Yardi’s extensive record of cooperation with other
software developers in the property management industry, including through
Yardi’s interface programs that allow numerous other vendors to create and sell
products that work with the Voyager application. Indeed, despite the evidence in
this case that shows Entrata’s illegal and improper use of the Voyager application,
Yardi thus far has continued to allow Entrata products to interface with the Voyager
application, subject to appropriate data security safeguards. Yardi also will be
prepared to offer evidence at trial of the extensive and vigorous competition in the
property management software industry.
Fourteenth Affirmative Defense: Merger
Elements: To show merger, Entrata must prove each of the following
elements:
1. That there is only one way to express each of the ideas contained in
Yardi’s copyrighted works; and
2. Entrata’s version of the content contained in Yardi’s copyrighted
works is not “nearly identical” to Yardi’s version of the content.
Source: Ninth Circuit Model Jury Jury Instruction 17.3 (Supplemental
Instruction); Apple Computer, Inc. v. Microsoft Corp., 35 F.3d 1435, 1444 (9th Cir.
1994); Ets-Hokin v. Skyy Spirits, Inc., 225 F.3d 1068, 1082 (9th Cir. 2000).
Key Evidence In Opposition: Yardi will oppose any claim of merger by
presenting fact and expert evidence that there are many different ways to express
the ideas contained in the Voyager application, including in the Yardi “Box Score”
summary report, such that the “idea and its expression” concerning the Box Score
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are different. Yardi will show that, in fact, other competitors in the industry have
conceptually similar summary reports that have significantly different expressions
than Yardi’s Box Score report. Entrata’s Box Score, however, is virtually identical
in its expression and appearance to Yardi’s.
Twenty-second Affirmative Defense: Unclean Hands
Elements: To show unclean hands, Entrata must prove each of the following
elements by a preponderance of the evidence:
1. Yardi engaged in inequitable conduct;
2. Yardi’s conduct violated conscience, good faith, or other equitable
principles; and
3. Yardi’s inequitable conduct relates directly to the transaction
concerning which the complaint was made, i.e., the conduct pertains to
the very subject matter involved and affects the equitable relations
between the litigants.
Source: Pom Wonderful LLC v. Welch Foods, Inc., 737 F.Supp.2d 1105,
1109 (C.D. Cal. 2010); Advanced Thermal Scis. Corp. v. Applied Materials, Inc.,
2010 WL 2015236, at *55 (C.D. Cal. May 18, 2010); Fuddruckers, Inc. v. Doc’s
BR Others, Inc., 826 F.2d 837, 847 (9th Cir. 1987); Fibreboard Paper Products.
Corp. v. East Bay Union of Machinists, Local 1304, 227 Cal.App.2d 675, 728, 39
Cal.Rptr. 64 (1964).
Key Evidence In Opposition: Yardi will oppose any claim of unclean hands.
As Yardi understands it, Entrata will claim that Yardi’s review and inspection of
the Entrata custom interface source code amounts to unclean hands sufficient to
deny Yardi’s claims. A motion in limine currently is pending on this issue. In
short, however, Yardi opposes the unclean hands defense in that Yardi was
permitted to inspect the custom interface source code pursuant to Entrata’s explicit
agreement and consent that Yardi could do so, including as a condition of Yardi’s
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agreeing to host the custom interface on the Yardi network, or “cloud.” Yardi had
to have the ability to inspect any code, including the custom interface code, that
would be directly placed into Yardi’s network, for data security reasons at a
minimum. Moreover, Yardi’s inspection of the custom interface – essentially, a
small (and relative to the Voyager application, microscopic), non-customer facing
utility program that acts only as a data translator – is entirely different in intent and
consequence than Entrata’s wrongful acquisition and use of Yardi’s flagship
Voyager application, including to develop a competing product. There also is no
evidence that Yardi did anything other than inspect Entrata’s code; Yardi created no
competing interface or otherwise used the code for any purpose whatsoever.
Entrata, on the other hand, copied, studied, analyzed, and/or used the Voyager
application nearly every business day for years, including to sell Entrata’s products
and to develop a competing property management software application. The
unclean hands defense is simply not relevant here.
Twenty-third Affirmative Defense: Statute of Limitations - Copyright
Elements: The statute of limitations for copyright claims affects the time
period of the damages Yardi may be awarded. Generally, the jury can consider
acts of infringement that occurred after October 21, 2010 (three years before Yardi
brought this action). If, however, Yardi did not know of the infringement until after
October 21, 2010, and that lack of knowledge was reasonable under the
circumstances, then the jury may include damages for acts of infringement that
occurred before October 21, 2010.
Source: 17 U.S.C. § 507(b); Polar Bear Prods., Inc. v. Timex Corp., 384
F.3d 700, 706 (9th Cir. 2004); Oracle USA, Inc. v. Rimini St., Inc., 2014 WL
3956271 (D. Nev. Aug. 13, 2014) (plaintiff cannot be charged with knowledge of
competitor’s infringement, where competitor gave assurances it was not violating
intellectual property rights); cf. Bernson v. Browning-Ferris Indus., 7 Cal. 4th 926,
931, 934 & n.3 (1994) (concealment prevents limitation period from running).
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Key Evidence In Opposition: Yardi will show at trial that it neither knew or
should have known of Entrata’s infringement until well after October 21, 2010, and
that Yardi’s lack of knowledge was reasonable under the circumstances. Yardi will
present evidence of, among other things, Entrata’s concealment of its possession of
the Voyager software application from Yardi, Entrata’s efforts to improperly obtain
copies of the Voyager software application through customers rather than through
Yardi directly, and Entrata’s extensive campaign of deception and concealment
when Yardi began inquiring directly of Entrata whether Entrata in fact had obtained
copies of the Voyager software application. This deception and concealment also
included Entrata’s CEO smuggling a server containing a copy of the Voyager
software application out of the country and to India where the vast majority of
Entrata’s developers work. Entrata’s developers also practiced deception during
their development of the competing Entrata Core product, including in their
interactions with third party competitors from whom Entrata developers were
seeking access to competitor information.
Twenty-third Affirmative Defense: Statute of Limitations –
Misappropriation of Trade Secrets
Elements: To succeed on a statute of limitations defense to trade secret
misappropriation, Entrata must prove that the claimed misappropriation of Yardi’s
trade secrets occurred before October 21, 2010. This defense fails, however, if
Yardi proves that before October 21, 2010, Yardi did not discover, nor with
reasonable diligence should have discovered, facts that would have caused a
reasonable person to suspect that Entrata had misappropriated Yardi’s information.
Source: CACI 4421.
Key Evidence In Opposition: Yardi will show at trial that it neither knew or
should have known of Entrata’s misappropriation until well after October 21, 2010,
and that Yardi’s lack of knowledge was reasonable under the circumstances. Yardi
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will present essentially the same evidence in support of its claims as is set forth
above in the “Statute of Limitations – Copyright” section.
Twenty-third Affirmative Defense: Statute of Limitations – Breach of
Contract (Express)
Elements: To succeed on a statute of limitations defense to Yardi’s breach
of contract claim, Entrata must prove that Yardi’s claimed harm occurred before
October 21, 2009. However, “the delayed discovery” rule allows filing of a lawsuit
beyond this limitations period if Yardi did not discover, and could not have
reasonably discovered, the misconduct at the time it occurred.
Source: CACI 338 and 455; and Gryczman v. 4550 Pico Partners, Ltd., 107
Cal. App. 4th 1, 5, 680, 681 (2003) (discovery rule may be applied to breaches of
contract which can be, and are, committed in secret and, moreover, where the harm
flowing from those breaches will not be reasonably discoverable by plaintiffs until
a future time).
Key Evidence In Opposition: Yardi will show at trial that it neither knew or
should have known of Entrata’s breach until well after October 21, 2009, and that
Yardi’s lack of knowledge was reasonable under the circumstances. Yardi will
present essentially the same evidence in support of its claims as is set forth above in
the “Statute of Limitations – Copyright” section.
Twenty-third Affirmative Defense: Statute of Limitations – Breach of
Contract (Implied In Fact)
Elements: To succeed on a statute of limitations defense to Yardi’s breach
of implied contract claim, Entrata must prove that Yardi’s claimed harm occurred
before October 21, 2011. However, “the delayed discovery” rule allows filing of a
lawsuit beyond this limitations period if Yardi did not discover, and could not have
reasonably discovered, the misconduct at the time it occurred.
Source: CACI 338; CACI 455; Gryczman v. 4550 Pico Partners, Ltd., 107
Cal. App. 4th 1, 5, 680, 681 (2003) (discovery rule may be applied to breaches of
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contract which can be, and are, committed in secret and, moreover, where the harm
flowing from those breaches will not be reasonably discoverable by plaintiffs until
a future time).
Key Evidence In Opposition: Yardi will show at trial that it neither knew or
should have known of Entrata’s breach until well after October 21, 2011, and that
Yardi’s lack of knowledge was reasonable under the circumstances. Yardi will
present essentially the same evidence in support of its claims as is set forth above in
the “Statute of Limitations – Copyright” section.
Thirty-first Affirmative Defense: Statute of Frauds
Elements: On the affirmative defense of statute of frauds, Entrata has the
burden of proving each of the following elements:
1. That the contract Yardi seeks to enforce, or some note or
memorandum thereof, was not in writing; and
2. By its terms, the contract Yardi seeks to enforce was not to be
performed within a year from the contract’s creation.
Source: Cal. Civ. Code § 1624.
Key Evidence In Opposition: Yardi will offer evidence at trial that it
partially performed under this implied contract, and also that Entrata is estopped
from denying the existence of this implied contract. This exempts the parties’
implied contract from the statute of frauds. Yardi’s partial performance included
Yardi’s providing Entrata confidential business and technical information from at
least October 2004 through the date Yardi filed this suit, to assist Entrata’s
development of its custom interface that would allow Entrata’s portal products to
work with the Voyager database. The implied contract included the agreement that
Entrata would not use Yardi’s confidential information to compete with Yardi,
including at a minimum a prohibition against Entrata’s using Yardi’s confidential
information to create a competing property management accounting software
product. Instead, Entrata was to use all Yardi information solely for the purpose of
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resolving the specific technical issues for which the information was provided.
This contract is manifested in the course of the parties’ interactions from October
2004 forward, including interactions in which the parties worked together to enable
Entrata’s portal products to interact with the Voyager database. Entrata’s conduct
in these interactions similarly estops it from denying the existence of this implied
contract and invalidates its claimed statute of frauds defense.
V. DEFENDANT’S COUNTERCLAIMS
A. Summary of Entrata’s Counterclaims [L.R. 16.4-1 (d)]
Yardi believes that Entrata plans to pursue the following counterclaims at
trial:
Counterclaim 1: Entrata seeks a declaratory judgment that Entrata did not
infringe any valid Yardi copyrights.
Counterclaim 2: Entrata seeks a declaratory judgment that Entrata did not
misappropriate any Yardi trade secrets.
B. Elements Required to Establish Entrata’s Counterclaims & Yardi’s Key
Evidence in Opposition [L.R. 16.4-1 (e), (f)]
Counterclaim 1: Declaratory Judgment - Copyright
Elements: To be entitled to declaratory relief, Entrata must prove the
following:
1. There is a justiciable controversy regarding the parties’ respective
rights;
2. This dispute is between parties whose interests are adverse, and the
issues are ripe for judicial determination and declaratory relief; and
3. Yardi does not have any valid and protectable copyrights, and/or
Entrata has not infringed any protectable expression under the
Copyright Act.
Source: 28 U.S.C. § 2201(a); 17 U.S.C. § 101 et seq.
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Key Evidence In Opposition: Entrata’s claim for declaratory judgment is, in
essence, a request that Court rule on Yardi’s copyright claim and Entrata’s defenses
to it. The evidence Yardi will present to defeat this request thus is the same Yardi
will present to prosecute its claim for copyright infringement, and to rebut Entrata’s
defenses to that claim.
Counterclaim 2: Declaratory Judgment – Misappropriation of Trade
Secrets
Elements: To be entitled to declaratory relief, Entrata must prove the
following:
1. There is a justiciable controversy regarding the parties’ respective
rights;
2. This dispute is between parties whose interests are adverse, and the
issues are ripe for judicial determination and declaratory relief; and
3. Entrata has not misappropriated any Yardi trade secrets, and/or Yardi
has not taken adequate steps to protect its alleged trade secrets.
Source: 28 U.S.C. § 2201(a); Judicial Council of California Civil Jury
Instructions 4401; Civil Code § 3426-3426.11; Altavion, Inc. v. Konica Minolta
Sys. Lab., Inc., 226 Cal. App. 4th 26, 43 (2014).
Key Evidence In Opposition: This claim for declaratory judgment is, in
essence, a request that the Court rule on Yardi’s trade secrets claim and Entrata’s
defenses to it. The evidence Yardi will present to defeat this request for declaratory
judgment thus is the same Yardi will present to prosecute its claim for trade secrets
misappropriation, and to rebut Entrata’s defenses to it.
VI. EXPECTED EVIDENTIARY ISSUES
The primary evidentiary issues anticipated by Yardi are set forth in Yardi’s
four motions in limine. Those four motions in limine address the following:
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1. Entrata should be prevented from offering testimony from Melissa A.
Bennis, CPA, Entrata’s damages expert, regarding disgorgement of
profits and unjust enrichment.
2. Entrata should be prevented from offering or eliciting legal conclusion
testimony from Anant Yardi regarding an alleged breach of 2006 NDA
contract, and ancillary and related evidence of Yardi’s alleged breach
of that contract.
3. Entrata should be prevented from arguing or offering evidence
concerning features of property management and other software
programs not produced during discovery.
4. Entrata should be prevented from arguing or offering evidence that (1)
Yardi has amended its trade secret designations, including by
withdrawing certain alleged trade secrets; and (2) the existence of the
previously alleged trade secrets, any misappropriation of those alleged
trade secrets, and any alleged discovery thereof.
Yardi also anticipates evidentiary issues associated with Entrata’s exhibits.
Yardi has objected to several Entrata exhibits as being irrelevant and/or wasting the
jury’s time and confusing the issues in violation of Federal Rule of Evidence 403.
In summary, the exhibits Yardi takes issue with include:
(a) Exhibits relating to routine communications between the parties
regarding Yardi’s implementation and troubleshooting of the Entrata custom
interface on Yardi’s cloud. Entrata has included numerous exhibits on this topic on
Entrata’s list and, in Yardi’s view, such a large number of exhibits on this topic will
waste the jury’s time, as these interactions are not relevant to Yardi’s contentions,
or to Entrata’s defenses. In particular, Yardi does not believe communications
regarding Entrata’s access to the Voyager database – something that is not at issue
in this case – is relevant. Yardi allowed Entrata to have access to Yardi databases,
pursuant to NDAs and the parties’ implied agreement, for the purpose of
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developing the custom interface. The exhibits at issue all appear to focus on that
aspect of the parties’ relationship.
(b) Exhibits relating to Yardi expressing competitive concerns about
Entrata’s portal business. Entrata has included numerous exhibits on this topic and,
in Yardi’s view, they will waste the jury’s time and confuse the issues. Whether
Yardi had competitive concerns regarding the portal business is not, in Yardi’s
view, relevant to the issue of whether Entrata violated Yardi’s copyrights,
misappropriated Yardi’s trade secrets, or breached the NDA and/or the parties’
implied contract that they would not misuse their confidential business and
technical information.
Regardless, Yardi will continue to work with Entrata in an effort to resolve
these concerns and to agree on the admissibility of as many exhibits as possible.
VII. EXPECTED LEGAL ISSUES
Yardi does not currently know of any specific legal issues relevant to trial,
other than those that will be addressed in the parties’ jury instructions.
VIII. BIFURCATION OF ISSUES
Yardi does not anticipate seeking bifurcation of any issues in this case that
are triable by right to the jury, and does not believe that bifurcation is necessary as
to any issues triable by right to the jury. For clarity’s sake, Yardi, does, however,
believe that the issues identified as not triable to a jury in Section IX, infra, should
be heard separately by the Court after the jury’s verdict is entered.
IX. JURY TRIAL
Both Yardi and Entrata have timely demanded a jury trial as provided by
Federal Rule of Civil Procedure 38 and Local Rule 38-1. All issues presented in
this case should be heard by the jury except: Yardi’s requests for injunctive relief;
any award of attorneys’ fees and costs; and Entrata’s assertions of bad faith or
inequitable conduct.
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X. ATTORNEYS’ FEES
Yardi seeks its attorneys’ fees and costs in this action, including pursuant to
17 U.S.C. § 505.
XI. NARROWING OF ISSUES
Yardi is pursuing at trial trade secrets 1, 2, 3, 5, 8, 10, 25, and 27. It is not
pursuing any of the remaining alleged listed trade secrets in its Fourth Amended
Trade Secret disclosure. Yardi also will focus its copyright claim on Entrata’s
literal copying of the Voyager application, including by running the Voyager
application in Entrata’s product demonstrations, and on the Box Score report in the
parties’ respective software programs.
Yardi does not know whether Entrata intends to withdraw any of its
affirmative defenses.
Dated: November 18, 2016 NIXON PEABODY LLP
By /s/Jason GonzalezJason P. Gonzalez Shawn G. Hansen Jessica N. Walker Neal J. Gauger Attorneys for Plaintiff YARDI SYSTEMS, INC.
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