michael a. jacobs (ca sbn 111664) …€¦ · san francisco, california 94105-2482 ... v. property...

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MEMORANDUM OF POINTS AND AUTHORITIES Case No. 2:13-cv-07764 FMO (CWx)

sd-658098

MICHAEL A. JACOBS (CA SBN 111664)[email protected] Morrison & Foerster LLP 425 Market Street San Francisco, California 94105-2482 Telephone: 415.268.7000 Facsimile: 415.268.7522

ERIC M. ACKER (CA SBN 135805)[email protected] CHRISTIAN G. ANDREU-VON EUW (CA SBN 265360) [email protected] JOHN R. LANHAM (CA SBN 289382) [email protected] Morrison & Foerster LLP 12531 High Bluff Drive San Diego, California 92130-2040 Telephone: 858.720.5100 Facsimile: 858.720.5125 Attorneys for Defendant/Counterclaimant PROPERTY SOLUTIONS INTERNATIONAL, INC.

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

YARDI SYSTEMS, INC.,

Plaintiff,

v.

PROPERTY SOLUTIONS INTERNATIONAL, INC.,

Defendant.

Case No. 2:13-CV-07764-FMO-CW

MEMORANDUM OF POINTS AND AUTHORITIES ON MOTION FOR SUMMARY JUDGMENT (JOINT INTEGRATED BRIEF)

PROPERTY SOLUTIONS INTERNATIONAL, INC.,

Counterclaimant,

v.

YARDI SYSTEMS, INC.,

Counterdefendant.

Date: May 21, 2015 Time: 10:00 a.m. Ctrm: 22

Judge: Honorable Fernando M. Olguin

Pretrial Conference: Trial Date:

Case 2:13-cv-07764-FMO-CW Document 106-1 Filed 04/15/15 of 60 Page ID #:1714

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TABLE OF CONTENTS

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i MEMORANDUM OF POINTS AND AUTHORITIES Case No. 2:13-cv-07764 FMO (CWx)

I. PROPERTY SOLUTIONS INTRODUCTION .............................................. 1

II. YARDI INTRODUCTION ............................................................................. 2

III. PROPERTY SOLUTIONS FACTUAL BACKGROUND ............................ 4 A. Property Solutions’ Early Business Model ........................................... 4 B. Property Solutions Obtains Access to Voyager and Voyager

Databases, with Yardi’s Knowledge ..................................................... 5 C. Yardi’s CEO Has Property Solutions’ Custom Integration

Decompiled to Review Its Source Code ............................................... 8 IV. TRADE SECRETS ........................................................................................ 10

A. Yardi’s Trade Secrets Claim Is Time-Barred ..................................... 10 1. Yardi’s Trade Secret Claim Is Subject to a Three-Year

Statute of Limitations ............................................................... 10 2. Yardi Was on Notice of Its Trade Secrets Claim More

Than Three Years Before Bringing This Lawsuit .................... 11 B. Yardi Response: The Statute of Limitations Does Not Bar

Yardi’s Claim For Misappropriation of Trade Secrets. ...................... 14 1. The Statute of Limitations Began to Run When PSI

Released Entrata in 2012. ......................................................... 15 2. Yardi Did Not Have Reason to Discover Its Claim Before

2011 .......................................................................................... 16 3. PSI’s Fraudulent Concealment Prevents the Statute of

Limitations from Running Under the Doctrines of Tolling and Estoppel .............................................................................. 20

C. Property Solutions Has Not Acquired or Used Yardi’s Alleged Trade Secrets ....................................................................................... 24 1. California Law Requires Access to a Trade Secret Itself,

Not Merely Software Containing a Trade Secret ..................... 24 2. Property Solutions Never Accessed the Voyager Source

Code .......................................................................................... 24 D. Yardi Response: PSI Had all of the Tools Needed to Access the

Trade Secrets Embedded in Yardi’s Voyager Program and Used Those Tools to Access and Misappropriate Them.............................. 25

E. “The Voyager Software Program in Its Entirety” Cannot Be a Trade Secret ........................................................................................ 27

F. Yardi Response: The Voyager Program Is a Protected Trade Secret ................................................................................................... 29

V. INTENTIONAL INTERFERENCE WITH CONTRACT ........................... 31 A. Yardi’s Intentional Interference Claim Is Preempted by the

California Uniform Trade Secrets Act ................................................ 31


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TABLE OF CONTENTS (continued)

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ii MEMORANDUM OF POINTS AND AUTHORITIES Case No. 2:13-cv-07764 FMO (CWx)

1. The California Uniform Trade Secrets Act Preempts Civil Remedies Based on the Same Nucleus of Facts ....................... 31

2. Yardi’s Intentional Interference With Contractual Relations Claims Is Based on the Same Facts as Its Trade Secret Claim .............................................................................. 32

B. Yardi Response: Yardi’s Intentional Interference Claim is Not Preempted. ........................................................................................... 33

C. Yardi’s Intentional Interference Claim Is Time-Barred ..................... 36 1. Yardi’s Intentional Interference Claim Is Subject to a

Two-Year Statute of Limitations .............................................. 36 2. Yardi Was on Notice of Its Intentional Interference Claim

More Than Two Years Before Bringing This Lawsuit ............ 37 D. Yardi Response: Yardi’s Claim For Intentional Interference with

Contract Is Not Barred by the Statute of Limitations. ........................ 37 VI. IMPLIED CONTRACT ................................................................................ 38

A. Yardi’s Breach of Implied Contract Claim Is Time-Barred ............... 38 1. Yardi’s Claim for Breach of Implied-in-Fact Contract Is

Subject to a Two-Year Statute of Limitations .......................... 38 2. Yardi Was on Notice of Its Implied Contract Claim More

than Two Years Before Bringing This Lawsuit ....................... 38 B. Yardi Response: Yardi’s Claim For Breach of Implied Contract

Is Not Barred by the Statute of Limitations. ....................................... 39 VII. COPYRIGHT ................................................................................................ 40

A. Yardi Cannot Recover Damages for Actions Outside of the Limitations Period ............................................................................... 40 1. Supreme Court Law Insulates Activities Outside of a

Three-Year Window ................................................................. 40 2. Yardi Was on Notice of Its Copyright Claim More Than

Three Years Before Bringing This Lawsuit ............................. 40 B. Yardi Response: Yardi May Recover Damages for All PSI

Copyright Violations. .......................................................................... 41 VIII. DIGITAL MILLENIUM COPYRIGHT ACT .............................................. 43

A. Yardi Cannot Prove Violation of the DMCA ..................................... 43 1. Yardi’s DMCA Claim Requires Proof of

“Circumvention” ....................................................................... 43 2. Property Solutions Did Not Engage in “Circumvention” ........ 45

B. Yardi Response: PSI Engaged in Circumvention ............................... 46 C. Yardi Cannot Recover Damages for Actions Outside of the

Limitations Period ............................................................................... 48


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TABLE OF CONTENTS (continued)

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iii MEMORANDUM OF POINTS AND AUTHORITIES Case No. 2:13-cv-07764 FMO (CWx)

D. Yardi Response: Yardi May Recover Damages for All DMCA Violations. ........................................................................................... 49

IX. CONCLUSION ............................................................................................. 49

X. YARDI CONCLUSION ............................................................................... 50


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JOINT TABLE OF AUTHORITIES

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iv MEMORANDUM OF POINTS AND AUTHORITIES Case No. 2:13-cv-07764 FMO (CWx)

CASES

321 Studios v. MGM Studios, Inc., 307 F. Supp. 2d 1085 (N.D. Cal. 2004) ........................................................ 44, 47

Actuate Corp. v. IBM, 2010 U.S. Dist. LEXIS 33095 (N.D. Cal. Apr. 5, 2010).............................. 44, 47

Actuate Corp. v. Int’l Bus. Machines Corp., 09-CV-5892, 2010 WL 1340519 (N.D. Cal. Apr. 5, 2010) ......................... 46, 47

Alamar Biosciences, Inc. v. Difco Labs., Inc., 40 U.S.P.Q.2D (BNA) 1437 (E.D. Cal. Oct. 12, 1995) ..................................... 11

Alamar Biosciences, Inc. v. Difco Labs., Inc., 94-CV-1856, 1996 WL 648286 (E.D. Cal. Oct. 13, 1995) ................................ 16

Altavion, Inc. v. Konica Minolta Sys. Lab. Inc., 226 Cal. App. 4th 26 (2014) ............................................................................... 30

Angelica Textile Servs., Inc. v. Park, 200 Cal. App. 4th 495 (2013) ....................................................................... 34, 35

April Enterprises, Inc. v. KTTV, 147 Cal. App. 3d 805 (1983) .............................................................................. 36

Ashou v. Liberty Mutual Fire Ins. Co., 138 Cal. App. 4th 748 (2006) ............................................................................. 14

AT&T Commc’ns of Cal., Inc. v. Pac. Bell, 238 F.3d 427 (9th Cir. 2000) .............................................................................. 30

Bernson v. Browning-Ferris Indus., 7 Cal. 4th 926 (1994) .......................................................................................... 21

Cadence Design Sys., Inc. v. Avant! Corp., 29 Cal. 4th 215 (2002) .................................................................................. 11, 12

Carruth v. Fritch, 36 Cal. 2d 426 (1950) ......................................................................................... 23


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JOINT TABLE OF AUTHORITIES (continued)

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v MEMORANDUM OF POINTS AND AUTHORITIES Case No. 2:13-cv-07764 FMO (CWx)

Cleveland v. Internet Specialties W., Inc., 171 Cal. App. 4th 24 (2009) ............................................................................... 16

Compuware Corp. v. Health Care Serv. Corp., No. 01 C 0873, 2002 U.S. Dist. LEXIS 5434 (N.D. Ill. Mar. 29, 2002) ........... 28

Cypress Semiconductor Corp. v. Superior Court, 163 Cal. App. 4th 575 (2008) ....................................................................... 10, 13

DISH Network L.L.C. v. World Cable Inc., 893 F. Supp. 2d 452 (E.D.N.Y. 2012) .......................................................... 44, 45

Dish Network LLC v. Dimarco, 11-CV-1962, 2012 WL 917812 (D. Nev. Mar. 14, 2012).................................. 46

Egilman v. Keller & Heckman, LLP, 401 F. Supp. 2d 105 (D.D.C. 2005) ............................................................. 43, 45

Fahmy v. Jay-Z, 835 F. Supp. 2d 783 (C.D. Cal. 2011) ................................................................ 13

Forcier v. Microsoft Corp., 123 F. Supp. 2d 520 (N.D. Cal. 2000) .................................................... 11, 13, 36

Fox v. Ethicon Endo-Surgery, Inc., 35 Cal. 4th 797 (2005) ........................................................................................ 15

Gabriel Techs. Corp. v. Qualcomm Inc., 857 F. Supp. 2d 997 (S.D. Cal. 2012) .................................................... 10, 13, 16

Glue-Fold, Inc. v. Slautterback Corp., 82 Cal. App. 4th 1018 (2000) ............................................................................. 11

Ground Zero Museum Workshop v. Wilson, 813 F. Supp. 2d 678 (D. Md. 2011) ................................................................... 43

I.M.S. Inquiry Mgmt. Sys. v. Berkshire Info. Sys., 307 F. Supp. 2d 521 (S.D.N.Y. 2004) .............................................. 43, 44, 45, 47

IDX Sys. Corp. v. Epic Sys. Corp., 285 F.3d 581 (7th Cir. 2002) ........................................................................ 27, 28


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vi MEMORANDUM OF POINTS AND AUTHORITIES Case No. 2:13-cv-07764 FMO (CWx)

In re Napster, Inc. Copyright Litig., 04-CV-3004, 2005 WL 289977 (N.D. Cal. Feb. 3, 2005) ................................. 42

In re Providian Credit Card Cases, 96 Cal. App. 4th 292 (2002) ............................................................................... 31

Integrated Cash Mgmt. Servs. v. Digital Transactions, Inc., 920 F.2d 171 (2d Cir. 1990) ............................................................................... 29

Jolly v. Eli Lilly & Co., 44 Cal. 3d 1103 (1988) ................................................................................. 11, 39

K.C. Multimedia, Inc. v. Bank of Am. Tech. & Ops, Inc., 171 Cal. App. 4th 939 (2009) ................................................................. 32, 33, 34

Kourtis v. Cameron, 419 F.3d 989 (9th Cir. 2005) .............................................................................. 38

Kwikset Corp. v. Superior Court, 51 Cal. 4th 310 (2011) ........................................................................................ 24

Mattel, Inc. v. MGA Entm't, Inc., 782 F. Supp. 2d 911 (C.D. Cal. 2010) ................................................................ 32

Mattel, Inc. v. MGA Entm’t, Inc., No. 04-CV-9049, 2011 WL 3420571 (C.D. Cal. Aug. 4, 2011) ........................ 31

MDY Indus., LLC v. Blizzard Entm’t, Inc., 629 F.3d 928 (9th Cir. 2010) ........................................................................ 43, 46

MedioStream, Inc. v. Microsoft Corp., 869 F. Supp. 2d 1095 (N.D. Cal. 2012) .............................................................. 32

Microsoft Corp. v. EEE Bus., Inc., 555 F. Supp. 2d 1051 (N.D. Cal. 2008) ........................................................ 44, 47

Musick v. Burke, 913 F.2d 1390 (9th Cir. 1990) ............................................................................ 27

Navistar, Inc. v. New Balt. Garage, Inc., 2012 U.S. Dist. LEXIS 134369 (N.D. Ill. Sept. 20, 2012) ................................. 44


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vii MEMORANDUM OF POINTS AND AUTHORITIES Case No. 2:13-cv-07764 FMO (CWx)

Norgart v. Upjohn Co., 21 Cal. 4th 383 (1999) ........................................................................................ 15

O’Connor v. Boeing N. Am., Inc., 311 F.3d 1139 (9th Cir. 2002) ............................................................................ 42

Oracle USA, Inc. v. Rimini St., Inc., No. 10-CV-106, 2014 WL 3956271 (D. Nev. Aug. 13, 2014) .......................... 42

Pacific Gas & Electric Co. v. Bear Stearns & Co., 50 Cal. 3d 1118 (1990) ....................................................................................... 32

Petrella v. MGM, 134 S. Ct. 1962 (2014) ........................................................................... 40, 48, 49

Point 4 Data Corp. v. Tri-State Surgical Supply & Equip., Ltd., 2013 U.S. Dist. LEXIS 109298 (E.D.N.Y. Aug. 2, 2013) ................................. 48

Polar Bear Prods. v. Timex Corp., 384 F.3d 700 (9th Cir. 2004) (reprinted as amended at 2004 U.S. App. LEXIS 22131) ......................................................................................... 40, 41, 49

Pyro Spectaculars North, Inc. v. Souza, 861 F. Supp. 2d 1079 (E.D. Cal. 2012) .............................................................. 29

R.C. Olmstead, Inc. v. CU Interface, LLC, 657 F. Supp. 2d 878 (N.D. Ohio 2009) .............................................................. 43

Real View, LLC v. 20-20 Techs., Inc., 789 F. Supp. 2d 268 (D. Mass. 2011) ................................................................. 43

Realnetworks, Inc. v. DVD Copy Control Ass’n, 641 F. Supp. 2d 913 (N.D. Cal. 2009) .................................................... 44, 47, 48

Richardson v. Allstate Ins. Co., 117 Cal. App. 3d 8 (1981) .................................................................................. 36

Rita M. v. Roman Catholic Archbishop, 187 Cal. App. 3d 1453 (1986) ............................................................................ 13


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viii MEMORANDUM OF POINTS AND AUTHORITIES Case No. 2:13-cv-07764 FMO (CWx)

Roley v. New World Pictures, Ltd., 19 F.3d 479 (9th Cir. 1994) ................................................................................ 41

Seelenfreund v. Terminix of Northern Cal., Inc., 84 Cal. App. 3d 133 (1978) ................................................................................ 38

Silvaco Data Systems v. Intel Corp., 184 Cal. App. 4th 210 (2010) ...................................................................... passim

Sims v. Viacom, Inc., No. 11-CV-675, 2012 WL 280609 (W.D. Pa. Jan. 31, 2012) ............................ 49

Snyder v. Boy Scouts of Amer., Inc., 205 Cal. App. 3d 1318 (1988) ............................................................................ 21

Spring Design, Inc. v. Barnesandnoble.com, LLC, No. C 09–05185, 2010 WL 5422556 (N.D. Cal. Dec. 27, 2010) ....................... 33

Taylor v. Sturgell, 553 U.S. 880 (2008) ........................................................................................... 38

TMX Funding, Inc. v. Impero Techs., Inc., 10-CV-202, 2010 WL 2509979 (N.D. Cal., June 17, 2010) .............................. 31

United States Liab. Ins. Co. v. Haidinger-Hayes, Inc., 1 Cal. 3d 586 (1970) ........................................................................................... 14

United States v. One 1986 Chevrolet Monte Carlo, 817 F. Supp. 729 (N.D. Ill. 1993) ....................................................................... 19

United States v. Shaltry, 232 F.3d 1046 (9th Cir. 2000) ............................................................................ 14

United States v. Suibin Zhang, No. 05-CR-00812, 2012 WL 1932843 (N.D. Cal. May 29, 2012) .................... 31

Univ. Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518 (5th Cir. 1974) .............................................................................. 29

Universal City Studios v. Corley, 273 F.3d 429 (2d Cir. 2001) ................................................................... 44, 45, 47


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Van’t Rood v. Cnty. of Santa Clara, 113 Cal. App. 4th 549 (2003) ............................................................................. 19

Ward v. Westinghouse Can., Inc., 32 F.3d 1405 (9th Cir. 1994) .............................................................................. 14

Whyte v. Schlage Lock Co., 101 Cal. App. 4th 1443 (2002) ........................................................................... 31

STATUTES

17 U.S.C. § 507(b) ......................................................................................................... 40, 48 § 1201 ........................................................................................................... 43, 44

Cal. Civ. Code § 3426.1(d) .................................................................................................... 27, 29 § 3426.6 .................................................................................................. 10, 11, 12 § 3426.7 .................................................................................................. 31, 33, 35

Cal. Civ. Proc. Code § 339(1) ............................................................................................. 36, 37, 38, 39

OTHER AUTHORITIES

CACI 4421 ............................................................................................................... 10

CORP. COUNSEL’S GUIDE TO INTEL. PROP. § 10:27 .................................................. 29

H.R. REP. 105-551(I), 17-18 (1998) ....................................................................... 48


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1 MEMORANDUM OF POINTS AND AUTHORITIES Case No. 2:13-cv-07764 FMO (CWx)

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I. PROPERTY SOLUTIONS INTRODUCTION1

This case is an attempt by the dominant and incumbent company in the

property management software industry, Yardi Systems, Inc. (“Yardi”), to quash

competition from a young and growing property management software company,

Property Solutions International, Inc. (“Property Solutions”). For years, beginning

in 2004, Yardi worked cooperatively with Property Solutions to allow it to integrate

its portal and add-on software products with Yardi’s widespread Voyager

accounting software. However, once Property Solutions began to take market share

from Yardi in the portal and add-on market, and announced in 2012 that it was

taking to market Entrata Core, its own accounting software, Yardi reversed course.

Yardi then claimed for the first time that it did not know Property Solutions had

access to the Voyager software, despite overwhelming evidence of that knowledge,

and filed this action to stifle Property Solutions in the marketplace. The evidence

presented at trial will show that Property Solutions’ Entrata Core accounting

software was independently developed and that Yardi’s claims of infringement are

meritless. But, as shown below, many of Yardi’s claims still fail as a matter of law

on undisputed facts and thus are properly resolved before trial.

Yardi knew by June 2006 that Property Solutions had obtained access to

Yardi’s Voyager software and databases from mutual Yardi-Property Solutions

customers; in fact, Yardi had consented to that access. But Yardi delayed bringing

claims based on these facts for seven years, until October 2013. Thus, Yardi’s

claims for misappropriation of trade secrets, intentional interference with

contractual relations, and breach of implied-in-fact contract are time-barred, and its

copyright claims are subject to a limited damages period. And even if Yardi’s trade

secrets claim was timely, Yardi cannot recover based on the theory that a

1 Pursuant to the Court’s direction in its Order Re Summary Judgment, D.I. 34, this Joint Brief does not include a procedural history or a statement of the general standard for summary judgment.


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commercially available software package “in its entirety” is a trade secret.

Moreover, Property Solutions’ access to Voyager went no further than using

login information and license files to obtain user-level access and access to the

Voyager database, and never had access to Voyager source code. Yardi’s founder

and CEO admitted that Property Solutions could not have possibly acquired Yardi’s

alleged trade secrets with this kind of access.

These facts also establish that Property Solutions did not “circumvent” digital

walls as required to violate the Digital Millennium Copyright Act (“DMCA”).

Finally, Yardi’s claim for intentional interference with contractual relations is

preempted because it is based on exactly the same facts underlying its claim under

the California Uniform Trade Secrets Act.

II. YARDI INTRODUCTION

This case is unusual because PSI’s senior management admitted during their

depositions that for a long time period before this case was filed, they lied to Yardi

about the events at issue in this case. PSI’s conspiracy of deception was

orchestrated to conceal from Yardi the misconduct PSI now criticizes Yardi for not

discovering earlier. Given its past deceptions, the irony of PSI’s arguments is

profound.

PSI’s protestation that Yardi’s actions were motivated by competitive

concerns is a smoke-screen to conceal the following: (1) PSI wanted to fast-track

the development of a property management software program, it lacked the

expertise and resources to do so, and decided at the company’s highest level to steal

Yardi’s intellectual property as a shortcut to success; (2) PSI misled Yardi about its

intentions and signed nondisclosure agreements to gain access to Yardi’s

intellectual property; (3) PSI used Yardi clients to gain unlawful access to Yardi’s

intellectual property; and (4) PSI used Yardi’s intellectual property to develop its

core software program, thus violating the nondisclosure agreements and the law.


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PSI’s misconduct did not end there. Its senior management devised a scheme

to conceal its systemic misconduct from Yardi. The scheme’s defining moment

occurred when David Bateman, PSI’s CEO, stuffed a computer server containing a

pirated copy of Yardi’s Voyager software into a briefcase, boarded an airplane, and

left the country with the illegally-obtained software. The scheme culminated in a

series of blatant misstatements by PSI’s senior executives that were intended to

cover-up their corporate misconduct.

In this action, PSI’s senior management was forced to produce documents

that proved they had lied to Yardi. Finally, under oath, during their depositions,

they had no choice but to reveal the details of their deception. This produced yet

another revealing example of the irony of PSI’s position in this case and in its

summary judgment motion. After concealing from Yardi for years that it had a

copy or copies of Yardi’s Voyager software program, once it was caught red-

handed, PSI flip-flopped and argued “we had Voyager for years and Yardi knew

about it.” This fiction is the underpinning of PSI’s defenses in this litigation and its

arguments on summary judgment.

Yardi alleges PSI gained improper access to Yardi’s Voyager property

management software and used that access, contrary to non-disclosure agreements,

to help develop a competing product called Entrata. PSI used Voyager in creating

Entrata even as it repeatedly assured Yardi that it did not possess the Voyager

software and it was not building a competing product, assurances it now admits

were deliberate falsehoods. In seeking summary judgment, PSI does not dispute

these key facts. Instead, it primarily argues that Yardi’s claims are time-barred or

limited because Yardi should have known of its claims by 2009, despite PSI’s false

assurances to Yardi, and even though PSI did not even announce its competing

property management software system until 2012. PSI’s argument at best raises a

factual issue as to when Yardi knew or should have known of the basis for its

claims.


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PSI’s other arguments are specific to individual claims and none of them

establishes any basis for summary judgment. First, PSI seeks to dismiss Yardi’s

entire trade secret claim, asserting that Yardi’s President admitted at deposition that

PSI did not have sufficient access to acquire Yardi’s trade secrets. The deposition

testimony states no such thing. Second, PSI seeks to dispose of one specific trade

secret, the Voyager program in its entirety, contending that an entire computer

program cannot be a trade secret. But this position is contrary to the statutory

language and extensive legal authority. Third, PSI argues that the Uniform Trade

Secrets Act preempts Yardi’s claim for intentional interference with contract, but

this argument ignores the nature of Yardi’s claim, which is distinct from the trade

secrets claim. Finally, PSI contends that Yardi cannot state a claim under the

Digital Millennium Copyright Act, because unauthorized access to software does

not constitute “circumvention” under that Act, but the relevant case authority in this

circuit holds squarely to the contrary.

III. PROPERTY SOLUTIONS FACTUAL BACKGROUND

A. Property Solutions’ Early Business Model

Property Solutions was founded by three students at Brigham Young

University in 2003, with the initial goal of designing a new property management

accounting software product. (D1; D2; D3; Bateman Tr. 13:13-14:2, 19:9-11,

Zimmer Tr. 19-20; Ex. 12 at 31.) Property management software allows managers

of multiple rental units to perform accounting and management tasks, including

organizing and storing resident information, processing applications to rent

properties, and processing payments. Property Solutions’ property management

software was branded as ResidentWorks in 2004. (D4; Bateman Tr. 11:9-23.)

However, for several years after its founding, Property Solutions turned its

primary business model to the development of add-ons and portal products for

existing property management software, such as Yardi’s Voyager software. (D6;

Ex. 12 at 31.) Property Solutions’ initial add-on products were ResidentPay®,


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ProspectPortal®, and ResidentPortalTM. (D8; Hanna Tr. 12:16-24.) These portals

enhanced the capabilities of existing property management software packages and

enabled features like online rent payment, online rental applications, and online

submission of work orders. (D9; D10; D11; Hanna Tr. 27:14-21.) Property

Solutions developed custom integration tools that allow its add-on and portal

products to work with several core property management systems. (D12; Hanna Tr.

27:9-28:7.) These custom integration tools function by moving data into and out of

the third-party property management application and the application’s database.

(D13; Bateman Tr. 124:14-18.)

B. Property Solutions Obtains Access to Voyager and Voyager Databases, with Yardi’s Knowledge

Yardi develops, markets, and sells database and application software for the

property management industry. (D14; Am. Compl., ECF 46, ¶ 14.) Yardi’s

principal product is a core property management accounting system branded as

Yardi Voyager. (D15; Am. Compl. ¶¶ 1, 15.) For years, Yardi encouraged

developers, such as Property Solutions, to create specialized add-on and portal

products for its property management software. (D16; Am. Compl. ¶ 17.) Yardi

profits from these add-on products, as it charges clients a $2,500 annual fee to use a

third-party integration. (D17; Beane Tr. 44:24-46:7; Yardi 12/11/14 Tr. 57:22-

58:2.)

In 2004, some of Yardi’s property management customers, including

Western National Group (“WNG”), began to express interest in using Property

Solutions’ portal products with their Yardi accounting systems. (D18; Ex. 12 at 31;

Shoemaker Tr. 10:16-14:8; Yardi 12/11/14 Tr. 8:5-9:10; Bateman Tr. 63:1-67:7.)

Property Solutions reached out to Yardi to obtain, among other things, Yardi’s


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database schema2 and a Voyager test system to facilitate development of this

integration. (D19; Ex. 12 at 31-32; Shoemaker Tr. 15:13-16:19; Yardi 12/11/14 Tr.

9:11-10:10; Bateman Tr. 63:1-67:7.) Following Property Solutions’ request, Yardi

provided a license file that allowed Property Solutions to install and operate Yardi

Genesis. (D22; D23; Ex. 1; Millar Tr. 15:19-17:19; Shroff Tr. 82:18-83:1;

Shoemaker Tr. 28:23-29:3, 44:22-25; Yardi 12/11/14 Tr. 20:8-12.) Genesis was the

desktop application version of Voyager. (D21; Millar Tr. 18:6-19:14.)

In June 2006, Property Solutions was preparing to launch its custom add-on

and portal integration with Voyager for WNG. (D26; Ex. 2 at 4; Bateman Tr. 63:2-

65:25, 112:8-20.) Prior to launch, Property Solutions contacted Yardi Vice

President Bryant Shoemaker to confirm that WNG could provide Property

Solutions with “another copy of its database so we can test on it.” (D27; D32; Ex.

2 at 4; Shoemaker Tr. 6:10-7:7, 37:12-42:20; Yardi 11/12/14 Tr. 16:12-18:21;

Bateman Tr. 63:2-65:25; 112:8-20.) Mr. Shoemaker confirmed that WNG could

provide Property Solutions with a current copy of its Voyager database. (D28; Ex.

2 at 4; Yardi 12/11/14 Tr. 18:17-21; Bateman Tr. 64:21-65:25; Shoemaker Tr.

38:12-41:18.) Mr. Shoemaker admitted that he would have discussed this request

with Yardi’s legal group prior to responding. (D29; Shoemaker Tr. 41:10-42:20.)

Moreover, Yardi’s founder and CEO Anant Yardi has made clear that Yardi’s

clients were free to send their Voyager databases to whomever they wanted since at

least 2004 to 2005. (D30; Yardi 12/11/14 Tr. 188:2-5.)3

Just days after Mr. Shoemaker provided his consent to Property Solutions

obtaining the Voyager database, a WNG employee copied Mr. Shoemaker on an

2 According to Yardi, a database schema “is a technique for organizing the

database, the different elements in the database, including tables and columns. And it captures how they are stored.” (D20; Yardi 12/11/14 Tr. at 9:20-24.)

3 Yardi has in fact withdrawn its contention that the Voyager database schema is a Yardi trade secret. (D31; compare Ex. 24 ¶ 18 with Ex. 25 ¶ 18.)


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email explaining that WNG was going to provide Property Solutions with a “new

license file” for the Yardi Voyager software. (D33; Ex. 13; Shoemaker Tr. 42:21-

44:24; Yardi 12/11/14 Tr. 19:9-21:2; Bateman Tr. 63:1-65:25.) Yardi raised no

objection to WNG providing Property Solutions with a Voyager license file. WNG

then sent its license file for Voyager to Property Solutions. (D34; Ex. 14;

Shoemaker Tr. 47:18-24, 48:9-15; Yardi Tr. 24:2-9; Bateman Tr. 64:21-65:25.)

Receiving this license file allowed Property Solutions to install and operate the

Voyager application to develop and test its custom integration. (D35; Shoemaker

Tr. 44:22-24; Yardi 12/11/14 Tr. 20:8-15.)

Subsequent interactions between Yardi and Property Solutions repeatedly

made clear that Property Solutions had access to Voyager and Voyager databases:

In August 2008, Jason Alfano, a Yardi systems analyst and member of the

application service provider (“ASP”) team (D36; Alfano Tr. 9:16-11:7),

instructed a Yardi account manager that Property Solutions should work directly

with mutual clients to set up and maintain the Property Solutions integration

with Voyager. (D37; Ex. 5; Alfano Tr. 22:15-23.)

No later than September 2008, Property Solutions provided Yardi with

instructions for installing the Property Solutions integration utility with

Voyager. (D38; Ex. 6; Ex. 7; Alfano Tr. 24:25-25:11.) These instructions listed

specific tables used in the Voyager database, evidencing that Property Solutions

had access. (D39; Ex. 7 at 20-21; Alfano Tr. 27:5-28:18.)

In November 2008, Yardi provided Property Solutions personnel with a login

for both the interface and the database of the Voyager development site. (D41;

Ex. 3; Millar Tr. 29:2-33:3.) This development site was a sandbox version of

Voyager provided for the purpose of validating standard interfaces. (D42; Yardi

12/11/14 Tr. 58:12-59:1.)

In January 2009, Mr. Alfano again instructed Yardi client services employees

that they should simply provide mutual Yardi-Property Solutions clients with a


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URL to the Property Solutions integration to Voyager, and then Yardi could

“close the case” because “this is for them [the mutual client] to work with the

third party [Property Solutions] on.” (D43; D44; Ex. 8; Alfano Tr. 35:22-

38:19.)

In February 2009, Mr. Yardi personally approved setting up a Property

Solutions custom integration on a test Voyager database for a mutual customer

to allow Property Solutions to test its custom integration. (D45; Ex. 9 at 25;

Alfano Tr. 44:17-45:18; Shroff Tr. 56:8-57:4, 98:1-12.)

In May 2009, a mutual customer contacted Yardi and noted that “[w]e’ve signed

a Property Solutions-Yardi addendum to start the integration with them awhile

[sic] ago. They mentioned that they already have access to our database.”

(D46; Ex. 21 at 56; Yardi 12/11/14 Tr. 240:1-241:6.)

In October 2009, a mutual customer contacted Yardi about “the issue with our

integration with PSI that I called you about.” The customer told Yardi that “I set

them up already in Yardi Voyager and their user id is psiintegration.” (D47; Ex.

21 at 57; Yardi 12/11/14 Tr. 241:22-242:7.)

In November 2009, a mutual client reported that Property Solutions needed the

database owner login and password for a Voyager test database. Mr. Alfano

confirmed that the responsibility for updating the credentials for the Voyager

test database was up to Property Solutions and the client. (D48; D49; Ex. 10;

Alfano Tr. 69:7-72:3.)

In September 2010, Mr. Alfano directed a Property Solutions employee to

obtain a Voyager database password from a mutual client. (D50; Ex. 11; Alfano

Tr. 77:11-80:7.)

C. Yardi’s CEO Has Property Solutions’ Custom Integration Decompiled to Review Its Source Code

By 2008, Yardi had lost multiple large clients for its portal and add-on

products to Property Solutions. (D51; Ex. 15; Ex. 16; Yardi 12/11/14 Tr. 69:10-


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72:13.) As Mr. Yardi explained, Yardi was “losing” to Property Solutions. (D52;

Yardi 12/11/14 Tr. 69:22-70:6.) In November 2009, Mr. Yardi ordered his

software developers to decompile the Property Solutions custom integration to

obtain Property Solutions’ source code (that is, the code that formed the basis of the

software). (D53A; D53B; Ex. 17; Ex. 18; Yardi 12/11/14 Tr. 124:10-125:13,

126:13-127:10.) Mr. Yardi admits that decompiling the Property Solutions code

violated a non-disclosure agreement entered into by the parties. (D54; Yardi

12/11/14 Tr. 51:22-52:4.)

In December 2009, one month after reviewing Property Solutions’ source

code, and nearly four years before filing this lawsuit, Mr. Yardi told Gordon

Morrell (a “senior member” of Yardi) and Terri Dowen (Yardi’s head of sales):

We need a statement from our consultants that they will not help our competitors.

I puzzle over how Property Solutions was able to figure out so much about our data structure and programming nuances.

They had access to somebody who know [sic] our system They had access to our system for debugging

Don’t see how else they could have written the program.

(D55; D56; D57; Ex. 20 (emphasis added); Yardi 12/11/14 Tr. 34:19-22, 134:16-

134:25, 197:24-198:1.) Mr. Yardi testified that, as of December 2009, he had a

“suspicion” that Property Solutions had access to a copy of the Voyager

application. (D58; Yardi 12/11/14 Tr. 136:6-18.)

Jay Shobe, one of Yardi’s key software developers, also reviewed the

decompiled code for Property Solutions’ custom integration. (D59; D60; Ex. 19;

Yardi 12/11/14 Tr. 128:9-129:3, 133:1-4.) Mr. Shobe reported the results of his

review to Mr. Yardi, Mr. Morrell, and John Pendergast (a Yardi Senior Vice

President) on December 3, 2009. (D61; D62; D63; Ex. 19; Yardi 12/11/14 Tr.

132:8-134:13.) Mr. Shobe believed that Property Solutions was running “our


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program,” i.e., Voyager and that Property Solutions was “reverse engineering”

Yardi code. (Id.) Mr. Shobe recommended telling Property Solutions that Yardi

was studying the Property Solutions source code to “give them something to think

about.” (Id.)

IV. TRADE SECRETS

A. Yardi’s Trade Secrets Claim Is Time-Barred

1. Yardi’s Trade Secret Claim Is Subject to a Three-Year Statute of Limitations

An action for misappropriation under the California Uniform Trade Secrets

Act (“CUTSA”) must be brought within three years after the misappropriation is

discovered, or by the exercise of reasonable diligence should have been discovered.

Cal. Civ. Code § 3426.6.4 The limitations period begins “‘when [plaintiff] has

reason at least to suspect a factual basis for its elements.’” Cypress Semiconductor

Corp. v. Superior Court, 163 Cal. App. 4th 575, 586 (2008) (quoting Fox v. Ethicon

Endo-Surgery, Inc., 35 Cal. 4th 797, 807 (2005)). The statute of limitations begins

to run regardless of whether “plaintiff can unassailably establish a legal claim for

trade secret misappropriation” because to do otherwise “would effectively

eviscerate the statute of limitations in all cases in which the plaintiff never

discovers ‘smoking gun’ evidence of misappropriation.” Id. (quoting Chasteen v.

UNISIA JECS Corp., 216 F.3d 1212, 1218 (10th Cir. 2000)).

For example, California courts have found that limitations periods were

triggered when a plaintiff “suspected” defendant’s product was a “rip-off”, Gabriel

Techs. Corp. v. Qualcomm Inc., 857 F. Supp. 2d 997, 1004 (S.D. Cal. 2012), when

a plaintiff stated that a defendant’s trade show demonstration “looks like” it was

4 Defendant need only point to the date of the alleged misappropriation, then

plaintiff bears the burden of proving that it “did not discover, nor with reasonable diligence should have discovered, facts that would have caused a reasonable person to suspect” within the statutory period. CACI 4421.


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using plaintiff’s technique, Alamar Biosciences, Inc. v. Difco Labs., Inc., 40

U.S.P.Q.2D (BNA) 1437 (E.D. Cal. Oct. 12, 1995), or when a plaintiff suspects that

“someone has done something wrong to [it]” even without being aware of specific

underlying facts to support its claim. Jolly v. Eli Lilly & Co., 44 Cal. 3d 1103, 1110

(1988) (discovery rule generally). As the California Supreme Court has explained,

“[s]o long as a suspicion exists, it is clear that the plaintiff must go find the facts;

she cannot wait for the facts to find her.” Id. at 1111.

In interpreting the statute of limitations for the CUTSA, the California

Supreme Court has also held that “a plaintiff’s claim for misappropriation of a trade

secret against a defendant arises only once, when the trade secret is initially

misappropriated, and each subsequent use or disclosure of the secret augments the

initial claim rather than arises as a separate claim.” Cadence Design Sys., Inc. v.

Avant! Corp., 29 Cal. 4th 215, 227 (2002). “The first discovered (or discoverable)

misappropriation of a trade secret … commences the limitation period.” Glue-Fold,

Inc. v. Slautterback Corp., 82 Cal. App. 4th 1018, 1026 (2000).

A continuing misappropriation constitutes a single claim. Cal. Civ. Code

§ 3426.6. Likewise, misappropriation claims accrue at the same time for all related

trade secrets that were shared with defendant during the same time period, “even if

there have not yet been any acts of misappropriation of the other trade secrets.”

Forcier v. Microsoft Corp., 123 F. Supp. 2d 520, 525 (N.D. Cal. 2000).

2. Yardi Was on Notice of Its Trade Secrets Claim More Than Three Years Before Bringing This Lawsuit

Yardi’s trade secrets case is based upon the allegation that Property Solutions

acquired Yardi’s alleged trade secrets with knowledge or reason to know that they

were acquired by improper means through, among other things, the following

conduct: copying the Voyager software without authorization; inducing mutual

clients of Yardi and Property Solutions to disclose trade secret information; and

accessing the Voyager software through access that Yardi granted its clients


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pursuant to license agreements and/or confidentiality agreements. (D65; D66; D67;

Am. Compl. ¶ 56.) Yardi claims that the proprietary, confidential, and/or trade

secret software or other information accessed by Property Solutions included

Voyager and Genesis.5 (D68; Ex. 26.) Yardi subsequently disclosed various

functionalities in Voyager as trade secrets and claiming that the “Voyager software

program in its entirety” is a trade secret. (D69; Ex. 25 at ¶ 23.)

The evidence, however, establishes that Yardi knew Property Solutions had

acquired access to the Voyager program and database from mutual clients as early

as 2006. For example, Yardi knew that mutual customer WNG was providing

Property Solutions a “new license file” for Voyager as well as access to a Voyager

database. (D28; D33; D34; Ex. 2 at 4; Ex. 13; Ex. 14; Shoemaker Tr. 38:12-41:18,

42:21-44:24, 47:18-24, 48:9-15; Yardi 12/11/14 Tr. 18:17-21,19:9-21:2, 24:2-9;

Bateman Tr. 63:1-65:25.) A license file allows a user to install and operate

Voyager. (D35; Shoemaker Tr. 44:22-24; Yardi 12/11/14 Tr. 20:8-15.)

Thus as of June 2006, Yardi knew of the basis for its trade secrets claim—

namely, that Property Solutions had access to a copy of Voyager and the license file

necessary to use it, was obtaining access to Voyager and Voyager databases from

mutual customers, and was using the access provided by Yardi to those mutual

customers, i.e., the customer license file. The statute of limitations therefore began

to run in June 2006 and expired in June 2009, years before Yardi filed its complaint

in October 2013. Cal. Civ. Code § 3426.6. Any subsequent conduct or alleged

misappropriation by Property Solutions merely augmented this initial claim.

Cadence, 29 Cal. 4th at 227. Likewise, this limitations period applies to all alleged

trade secrets, because these alleged trade secrets were shared at the same time, in

connection with the same relationship, and all concerned Yardi’s Voyager software.

5 As discussed in the factual background, the undisputed evidence in this case shows that Yardi itself provided Property Solutions with a copy of Genesis. Yardi no longer appears to be pursuing any Genesis-based trade secrets claim.


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Forcier, 123 F. Supp. 2d, 526.

Moreover, in late 2009, Yardi executives and software developers reviewed

Property Solutions’ source code in violation of the parties’ non-disclosure

agreement. (D53A; D53B; D54; Ex. 17; Ex. 18; Yardi 12/11/14 Tr. 51:22-52:4,

124:10-125:13, 126:13-127:1.) After reviewing the code, Yardi’s key software

developer sent an email to Yardi’s senior executives, explaining his belief that

Property Solutions was running a copy of Voyager and was “reverse engineering”

Yardi code.6 (D60; D62; Ex. 19; Yardi 12/11/14 Tr. 132:8-134:13.) Mr. Yardi

likewise expressed his belief that Property Solutions had access to Voyager. (D57;

Ex. 20; Yardi 12/11/14 Tr. 134:16-134:25.) Mr. Yardi confirmed at his deposition

that he had a “suspicion” in 2009 that Property Solutions had access to a copy of

Voyager. (D58; Yardi 12/11/14 Tr. 136:6-18); Cypress, 163 Cal. App. 4th, 586

(claim for misappropriation accrues when plaintiff has reason to “suspect” its

elements). As with the evidence regarding June 2006, these facts are more than

sufficient to trigger a limitations period that expired prior to Yardi’s October 2013

complaint. See Gabriel Techs., 857 F. Supp. 2d at 1004.

Yardi has contended that Property Solutions denied having access to Voyager

when confronted by Yardi with potential legal action in 2012. Yardi’s contention

has no effect on when the limitations period began to run. Concealment does not

toll a statute of limitations, “whatever the lengths to which a defendant has gone to

conceal the wrongs, if a plaintiff is on notice of a potential claim.” Rita M. v.

Roman Catholic Archbishop, 187 Cal. App. 3d 1453, 1460 (1986) (quoting Hobson

v. Wilson, 737 F.2d 1, 35 (D.C. Cir. 1984)); Fahmy v. Jay-Z, 835 F. Supp. 2d 783,

791 (C.D. Cal. 2011) (no concealment tolling where plaintiff had actual or

constructive knowledge his cause of action).

6 As discussed below, Property Solutions has never actually viewed Yardi’s

software code.


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Nor can Yardi avail itself of equitable estoppel. This doctrine requires, inter

alia, that “the party asserting the estoppel must be ignorant of the true state of

facts” and that it “must rely upon [defendant’s] conduct to his injury.” Ashou v.

Liberty Mutual Fire Ins. Co., 138 Cal. App. 4th 748, 767 (2006). But Yardi has

admitted that “[n]otwithstanding Property Solutions’ carefully worded denials [in

2012], Yardi continued to suspect that Property Solutions was accessing its

confidential and proprietary information and copyrighted software.” (D92; Am.

Compl. ¶ 34.) Yardi further admits that Property Solutions never denied having

access to Voyager in the past. (D93; Am. Compl. ¶ 33.) It also not possible for

Yardi to have detrimentally relied on Property Solutions’ comments in 2012,

because the statute of limitations began to run in June 2006 and expired in June

2009. See United States v. Shaltry, 232 F.3d 1046, 1053 (9th Cir. 2000) (no reliance

when statement made after deadline had passed). Yardi cannot prove that equitable

estoppel could apply to the statute of limitations.

B. Yardi Response: The Statute of Limitations Does Not Bar Yardi’s Claim For Misappropriation of Trade Secrets.

When a limitation period accrues is a question of fact. Ward v. Westinghouse

Can., Inc., 32 F.3d 1405, 1408 (9th Cir. 1994); United States Liab. Ins. Co. v.

Haidinger-Hayes, Inc., 1 Cal. 3d 586, 597 (1970). PSI’s assertion that this Court

may decide the issue as a matter of law is wrong for three independent reasons.

First, the statute of limitations did not begin to run until PSI released its Entrata

product incorporating certain Yardi trade secrets in 2012, thereby causing Yardi’s

harm. The discovery rule can only extend this limitation period; it cannot shorten

it. Second, even if the discovery rule could be invoked to shorten the limitation

period, Yardi did not have reason to discover its cause of action until 2011 at the

earliest. Third, even if PSI were correct that Yardi should have known of its claim

by 2009, PSI’s fraudulent concealment of its wrongdoing tolled the statute of

limitations, and PSI is estopped from asserting a limitations defense.


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1. The Statute of Limitations Began to Run When PSI Released Entrata in 2012.

The gravamen of Yardi’s trade secret claim is that PSI improperly acquired

and used Yardi’s Voyager software and the trade secrets embodied in it to develop

PSI’s competing Entrata software, thereby causing Yardi harm. See First Amended

Complaint, Docket No. 41, ¶¶ 56-59. That claim accrued when PSI began selling

Entrata Core (“Entrata”) in approximately June 2012. (D5, Ex. 32 at 265, ¶ 126.)

PSI’s contention that Yardi should have seen through PSI’s deceptions and

discovered that PSI had acquired Voyager much sooner misses the point. Yardi did

not have a claim to assert for misappropriation of trade secrets until June 2012. It

then had three years to bring that claim. The discovery rule can only extend that

limitation period; it cannot reduce it.

“The general rule for defining the accrual of a cause of action sets the date as

the time when the cause of action is complete with all of its elements.” Norgart v.

Upjohn Co., 21 Cal. 4th 383, 389 (1999). This does not require complete

knowledge as to every element of a claim; rather, the statement refers to the

“generic” elements of wrongdoing, causation, and harm. Id. at 397. For a claim to

accrue, a plaintiff must have reason to “suspect that a type of wrongdoing has

injured [him].” Fox v. Ethicon Endo-Surgery, Inc., 35 Cal. 4th 797, 807 (2005).

The fundamental flaw in PSI’s analysis is that it focuses only on the generic

element of wrongdoing. PSI ignores the remaining elements of causation and harm.

PSI’s wrongdoing translated to direct harm to Yardi when PSI launched its

competing software product in June 2012. (D5, Ex. 32 at 265, ¶ 126.) Thus,

Yardi’s claim accrued no earlier than June 2012.

PSI insists that, based on Yardi’s suspicions, Yardi should have investigated

and discovered that PSI had acquired Voyager well before June 2012. That would

be irrelevant, even if true. “[T]he discovery rule may extend the statute of

limitations, but it cannot decrease it, and a statute of limitations does not accrue


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until a cause of action is ‘complete with all of its elements,’ including injury.”

Cleveland v. Internet Specialties W., Inc., 171 Cal. App. 4th 24, 32 (2009)

(emphasis added) (quoting Norgart, 21 Cal. 4th at 389).

In Cleveland, the trial court ruled that the plaintiff should have discovered

the wrongdoing, which ultimately caused him to lose his investment, by mid-1996.

The Court of Appeals reversed, holding that, entirely aside from the discovery rule,

the causes of action could not have accrued by mid-1996, because the plaintiff had

not yet suffered his alleged injury. The defendant had not even started doing

business until 1997, so it could not have owed the plaintiff any returns on his

investment until then.7 Id. at 31-32. By the same reasoning, Yardi could not have

sued PSI for misusing trade secrets in Entrata before the product even reached the

market. PSI’s contrary interpretation of the discovery rule would have the absurd

result of allowing a limitation period to expire before the plaintiff’s claim for relief

ever accrues. This is contrary to law, logic, and basic principles of fairness.

Yardi was first able to assert a claim for relief for misappropriation of its

trade secrets into Entrata when PSI began selling Entrata in June of 2012, and Yardi

then timely commenced its action in October of 2013.

2. Yardi Did Not Have Reason to Discover Its Claim Before 2011.

Even if it were possible for the discovery rule to shorten the limitation

period, so that it might commence before PSI caused Yardi’s injuries, that would at

best create a question of fact for the jury whether Yardi should have discovered its

7 In contrast, PSI relies on decisions turning on when the plaintiffs

discovered injuries that had long since occurred. Compare Gabriel Techs. Corp. v. Qualcomm Inc., 857 F. Supp. 2d 997, 1003 (S.D. Cal. 2012) (“[I]t is undisputed that the alleged misappropriation of trade secrets took place outside the limitations period[.]”); Alamar Biosciences, Inc. v. Difco Labs., Inc., 94-CV-1856, 1996 WL 648286 (E.D. Cal. Oct. 13, 1995) (plaintiff observed trade show presentations of defendant’s product using its trade secrets, which defendant had already developed and was marketing).


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(future) injuries sooner. Discovery in this matter indicates that Yardi did not have

reason to know of or to investigate PSI’s misappropriation of trade secrets until

2011. PSI asserts that Yardi knew much earlier that it had access to some of

Yardi’s software, but that access was limited for an approved purpose subject to a

non-disclosure agreement—a far cry from knowledge that PSI had obtained the

Voyager program itself to create a competing product. Nothing in PSI’s statement

of facts could have suggested to Yardi that PSI, with which it had a strong working

relationship, had actually pirated the Voyager software. Similarly, PSI emphasizes

that Yardi’s President questioned how PSI had developed its portal and add-on

products. This does not constitute knowledge of the development of Entrata, and

even if it might have raised suspicions, PSI assuaged such suspicions with its

blatant misrepresentations to Yardi.

Suspicions in 2011–12 Yardi began to suspect that PSI might be

misappropriating the trade secrets embodied in Voyager in 2011, when Yardi first

heard that PSI was developing a property management software system, a system to

compete directly with Voyager. (D85, Ex. 26 at 179-81, Rog 13.) In 2012, Yardi

learned another competitor, RealPage, had obtained a copy of Voyager, thus

deepening Yardi’s suspicion that PSI might also possess a copy, which could

explain how PSI was so knowledgeable about Voyager. (P144, Ex. 72 at 871-873

[Yardi Tr. 195:12-197:19].) Until that point, Yardi “had assumed that [PSI] did not

have a copy” of the Voyager software. (Id. at 194:1-8, P148.) Yardi was

“completely confounded” that RealPage had copies of Voyager and immediately

thereafter began to question PSI to ascertain whether PSI also had a copy. (Id. at

191:10-14, 195:23-196:10, P150, P151.) Another company having a copy of

Voyager was a “huge concern” to Yardi (id. at 190:19-191:5, P149), contrary to

PSI’s assertion that Yardi knew or suspected that PSI had a copy of the Voyager

software in 2009 but took no action.


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Yardi began investigating in 2012, shortly after it came to suspect PSI had a

copy of the Voyager software. (P151, Ex. 72 at 867 [Yardi Tr. 191:3-5].) This

investigation was thwarted by PSI’s concealment of the fact it had obtained a copy

of Voyager, as discussed below. But even if PSI had not concealed its possession

of Voyager, Yardi timely asserted its claim against PSI by October 2013.

Access to Voyager Database from 2006. PSI argues that Yardi should have

known as early as 2006 of PSI’s possession of the Voyager program, because in

2006 Yardi VP Bryant Shoemaker gave PSI permission to obtain access to the

Voyager database from a mutual client, WNG, and was later copied on an email

mentioning transfer of a “license file.”8 For at least four reasons, this did not give

Yardi constructive notice of PSI’s misappropriation of the Voyager program.

First, the approval was only to provide access to the Yardi database, not to

the Voyager software program itself. (P118, Ex. 2 at 4, Ex. 64 at 693 [Declaration

of Anant Yardi (“Yardi Decl.”) ¶ 10]; see also P119, P120, Ex. 72 at 835 [Yardi Tr.

20:9-12 (“A license file is something that enables . . . the pointer system to

communicate with the databases.”)].) Second, as PSI acknowledges, the access was

only for the purpose of allowing PSI to launch a customer add-on and portal

integration. Motion, PSI Factual Background, § B (citing D26; Ex. 2 at 4; Ex. 66 at

735-737 & 746 [Bateman Tr. 63:2-65:25, 112:8-20]). This approved purpose did

nothing to put Yardi on notice that PSI might acquire and use the Voyager program

to create a competing product. (Ex. 64 [Yardi Decl. ¶ 20.) Third, Shoemaker

lacked authority even to grant PSI access to the Voyager database (D29, Ex. 70 at

805-807 [Shoemaker Tr. 40:6-42:20], Ex. 72 at833-834 [Yardi Tr. 18:17-19:2]), let

8 This is a litigation-born argument. For thirteen months after Yardi filed this

lawsuit, PSI swore under oath that it did not know how or when PSI first received a copy of the Voyager software. (P197, Ex. 59 at 389-91, Rog 1.) Mr. Bateman only “remembered” that Yardi had “known for years” that PSI had a copy of Voyager when preparing for his deposition on December 4, 2014. (Ex. 66 at 735-739 & 746 [Bateman Tr. 63:1-67:7, and 112:8-20].)


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alone a license file, because a license file is intended only for the specific client that

has licensed the Voyager software (Ex. 64 at 695 [Yardi Decl. ¶ 19]). Without

authority, his knowledge cannot be imputed to Yardi. See Van’t Rood v. Cnty. of

Santa Clara, 113 Cal. App. 4th 549, 573 (2003) (“[T]he knowledge imputed to a

principal is limited to that acquired by the agent within the scope of his authority.”);

United States v. One 1986 Chevrolet Monte Carlo, 817 F. Supp. 729, 734 (N.D. Ill.

1993). Fourth, and perhaps most importantly, any access provided by Shoemaker

was subject to non-disclosure agreements forbidding PSI from using the Voyager

software in any improper way. (P107, P108, P109, Ex. 44 at 341, Ex. 52 at 352.)

Because Yardi had no reason in 2006 to believe PSI would not honor its contractual

obligations, PSI’s access to the database gave Yardi no notice of PSI wrongdoing of

any kind.

For the same reasons, PSI’s list of interactions with Yardi from 2008 to 2010,

all in the course of performing PSI custom integrations of its approved portal and

add-on products, does nothing to provide constructive notice of PSI’s wrongdoing.

PSI asserts that Yardi personnel may have observed PSI personnel log on to

Voyager when the parties were in online meetings, but this is sheer speculation. PSI

cannot “provide the names of which Yardi employees were involved in these

support calls and has provided no evidence of what the Yardi employees would

have seen.” (P198, Ex. 60 at 469, ¶ 13.) PSI has failed to show how any of these

hypothetical employees’ knowledge could be imputed to Yardi. See Van’t Rood,

113 Cal. App. 4th at 573. Furthermore, based on the URL that PSI used to log in to

the Voyager software,9 Yardi’s employees would not have been able to ascertain

9 “PSI commonly referenced the PSI voyager instance” by a URL with a

private IP address. (P141, 60 at 469, ¶¶ 10–11, ¶¶ 414, 415, Ex. 7 ].) A private IP address is “not directly connected to the Internet, so the addresses don’t have to be unique. In today’s world, these private address ranges are often used for the protected network behind network translation devices.” (P142, EX. 60 at 469, ¶ 11 (citing http://whatismyipaddress.com/private-ip).)


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that any copy of Voyager used was in PSI’s possession as opposed to that of a

mutual client. (P143, Ex. 60 at 469, ¶ 12.)

Yardi 2009 Email. Finally, PSI asserts that Yardi should have known PSI

was misappropriating its trade secrets by 2009, when its President sent an email

asking how PSI “was able to figure out so much about [Yardi’s] data structure and

programming nuances.” (D57, Ex. 20 at 51.) But Mr. Yardi explained in

deposition that this was a “rhetorical question,” probing whether PSI had better

programmers than Yardi. (P139, Ex. 72 at 861-862 [Yardi Tr.135:19-136:11.])10

Although Mr. Yardi speculated whether PSI might have spoken to someone with

knowledge of Voyager or accessed a client interface, he did not suggest any

specific basis for believing PSI had acquired the Voyager program itself or that it

was otherwise misappropriating Yardi’s trade secrets.

The evidence belies PSI’s assertion that Yardi knew or should have known of

PSI’s misconduct more than three years before bringing suit. At best, PSI’s

argument creates an issue for the jury to decide at trial.

3. PSI’s Fraudulent Concealment Prevents the Statute of Limitations from Running Under the Doctrines of Tolling and Estoppel.

Finally, even if PSI were correct that Yardi should have discovered PSI’s

misappropriation by 2009, PSI’s concealment of its own wrongdoing defeats its

argument under the statute of limitations. It is beyond dispute that PSI repeatedly

lied to Yardi and acted to conceal PSI’s actions. This pattern of concealment tolls

the limitation period and estops PSI from relying on the statute of limitations.

A defendant’s fraud in concealing a cause of action tolls the applicable

10 Similarly, the December 2009 email from Jay Shobe cited by PSI does not

indicate knowledge that PSI was misappropriating trade secrets. Rather, the portion of the email cited by PSI contains suggested talking points for use in a possible email to PSI, including reminding PSI not to run Yardi software, not that Yardi had installed copies of the Voyager software on its servers. (P194, Ex 19 at 49.)


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statute of limitations. Snyder v. Boy Scouts of Amer., Inc., 205 Cal. App. 3d 1318,

1323 (1988). This doctrine applies “whenever the defendant intentionally prevents

the plaintiff from instituting suit.” Bernson v. Browning-Ferris Indus., 7 Cal. 4th

926, 931 n.3 (1994). A plaintiff’s “suspicion of wrongdoing does not foreclose

application of the fraudulent concealment doctrine.” Id. at 984.

In this case, as discussed above, Yardi began to suspect PSI might be

misappropriating its trade secrets in 2011, when Yardi heard PSI was developing a

property management system. (D85, Ex. 26, at 179-81, Rog 13.) Prior to that

point, PSI had actively concealed its possession of Voyager. For example, an

internal PSI email shows that in February 2011, a PSI employee combed through

his emails to ensure that no communications with Yardi revealed that PSI had

installed a version of Yardi’s software. (P190, P191 Ex. 56 at 378.)

During a February 13, 2012 telephone conference between Mr. Zimmer, Mr.

Bateman, and Yardi representatives, Mr. Yardi asked Mr. Zimmer and Mr.

Bateman, “Do you know if . . . [Voyager] is installed today [on a PSI server?]”

(P154, P156, P157, Ex. 45 [Audio Recording at 46:16-46:47], Ex. 61 at 679.) Mr.

Bateman responded, “I do not know.” (Id.) Mr. Bateman later conceded, however,

that PSI “would have known that PSI had a copy of the Voyager Software” in

February of 2012. (P155, Ex. 66 at 740-741 [Bateman Tr. 69:20-70:3].) Similarly,

on another occasion in February 2012, Yardi representatives met with Ben Zimmer,

the president of PSI, and asked if PSI had a copy of Voyager. (P152, Ex. 39 at 320,

Ex. 74 at 906 [Zimmer Tr. 51:10-12]; Ex. 72 at 867 [Yardi Tr. 191:3-5].) Mr.

Zimmer replied that he did not think that PSI had a copy. (P153, Ex. 74 at 906

[Zimmer Dep. Tr. 81:8–11].)

These were deliberate misstatements. Mr. Bateman now openly admits that

he lied in 2012. He knew at the time that PSI had at least one copy of Voyager

installed on a server. (P155, Ex. 66 at 740-741 & 743 [Bateman Tr. 69:20-

70:3,75:10-17].) PSI was consciously “trying to give [Yardi] no information,”


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because it “didn’t want to volunteer any information [Yardi] could use to sue [PSI]

and trap [PSI].” (Id. 74:19-75:9, P158.) Mr. Bateman admits that he was

“purposefully vague,” that PSI was “trying to give [Yardi] no information,” that

PSI “didn’t want to volunteer any information that [PSI] didn’t need to volunteer,”

and that he “should have been more forthright and more direct in [his] response.”

(Id. at 177:7-23; 74:19–75:9, P158, P159.)

PSI’s deceptions and cover-up continued. In a February 23, 2012 letter,

PSI’s principals explicitly represented that “[PSI] does not have any copies of Yardi

Voyager software in its possession and is not accessing Yardi Voyager Software”

and “[PSI’s] personnel are not logging into the Yardi Voyager software or client

test environments.” (P163, Ex. 40 at 323.) PSI’s senior management even

involved their outside counsel in their scheme to conceal their wrongdoing. On

May 15, 2012, presumably having been misinformed by their client, PSI’s outside

counsel repeated PSI’s lies to Yardi: Property Solutions has already confirmed in writing that it does not have any copies of Yardi Voyager software in its possession, is not accessing Yardi Voyager software, is not logging into the Yardi Voyager software or client test environments and does not have any Yardi technical manuals or user guides in its possession. . . . . Property solutions is not interested in discussing this matter further.

(P166, P167, P168, P169, Ex. 51 at 350.)

At times, PSI’s cover-up resembled the plot of a “B” movie. As Yardi was

inquiring about PSI’s possession of Voyager, PSI’s CEO David Bateman packed up

a server containing a copy of Voyager, and personally spirited the server out of the

country to Pune, India, where he concealed it at D.B. Xento, a PSI affiliate that Mr.

Bateman owns. (P170, P171, P172, Ex. 66 at 733 & 735-737 [Bateman Tr. 51:4-

12; 53:20-23; 54:5-55:9]; Ex. 38 at 311-37, Rog 25; EX. 59 at 461-64, App’x A.)

D.B. Xento performed much of the labor of designing PSI’s Entrata software.

PSI’s outside counsel, presumably unwittingly, continued to repeat PSI’s

falsehoods for another ten months. (P176, P177, Ex. 42 at 337 (“[PSI] reiterates


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that it does not . . . use any other means of inappropriately accessing Yardi

proprietary information to test changes to [PSI’s] custom interface.”)¸ Ex. 43 at 339

(confirming that PSI’s statement that it was not accessing or in possession of a copy

of Voyager “remains true today.”) In the face of all these contrary representations,

PSI personnel continued to log on to Voyager through May 24, 2012, and D.B.

Xento personnel logged on through January 2013. (P174, EX. 59 at 397-400, 461-

64, App’x A.)

Based on this repeated and willful pattern of deception, PSI’s statute of

limitations argument cannot be taken seriously. Having gone to every effort to

conceal its use of Voyager from Yardi, PSI should not be heard to complain, like

the upperclassman in the film Animal House, “You [messed] up—you trusted us!”

See Animal House (Universal Pictures et al. 1978).

In addition to tolling the statute of limitations, PSI’s misrepresentations also

equitably estop PSI from asserting its limitation argument. Under the doctrine of

equitable estoppel, “[o]ne cannot justly or equitably lull his adversary into a false

sense of security, and thereby cause his adversary to subject his claim to the bar of

the statute of limitations, and then be permitted to plead the very delay caused by

his course of conduct as a defense to the action when brought.” Carruth v. Fritch,

36 Cal. 2d 426, 433 (1950). Here, PSI actively concealed its possession of

Voyager, directly and through outside counsel. (P153, P157, P164, P166, P170,

P171, P172, P176, P177, P190, P191; Ex. 42 at 337-38, Ex. 43 at 339, Ex. 51 at

350, Ex. 56 at 378.) PSI did this for the very purpose of preventing Yardi from

uncovering the basis of this lawsuit. (P158, Ex. 66 at 742-743 & 750 [Bateman Tr.

77:7-23, 74:19-75:9 (“[W]e were trying to give [Yardi] no information. We didn’t

want to volunteer any information they could use to sue us and trap us.”)].) Having

successfully delayed this lawsuit, PSI may not avoid liability by invoking the

statute of limitations.


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C. Property Solutions Has Not Acquired or Used Yardi’s Alleged Trade Secrets

1. California Law Requires Access to a Trade Secret Itself, Not Merely Software Containing a Trade Secret

To recover under the CUTSA, a plaintiff must prove “(1) possession by the

plaintiff of a trade secret; (2) the defendant's misappropriation of the trade secret,

meaning its wrongful acquisition, disclosure, or use; and (3) resulting or threatened

injury to the plaintiff.” Silvaco Data Systems v. Intel Corp., 184 Cal. App. 4th 210,

220-21 (2010), disapproved of on other grounds, Kwikset Corp. v. Superior Court,

51 Cal. 4th 310 (2011). As the Silvaco court instructed, “acquisition” under the

CUTSA “implies more than passive reception.” Id. at 223. Running a software

program that contains trade secret source code, for example, does not allow one to

“acquire the requisite knowledge of any trade secrets embodied in that code.” Id. at

216. Similarly, one does not “use” a trade secret “when the conduct consists

entirely of possessing, and taking advantage of, something that was made using the

secret.” Id. at 224. In sum, when the trade secret components of a piece of

software reside in portions of that software to which a defendant never had access,

then the defendant could not have misappropriated the trade secret. See id. at 227.

2. Property Solutions Never Accessed the Voyager Source Code

Yardi has disclosed its founder and CEO, Mr. Yardi, as an expert witness in,

among other things, “[t]he nature of Yardi’s trade secrets and other confidential

information at issue in this litigation” and “the misappropriation of Yardi’s trade

secrets by Property Solutions International, Inc.” (D70; D71; Ex. 27 at ¶¶ 3-4.) At

his expert deposition, Mr. Yardi admitted—for the first time and contrary to Yardi’s

position since the beginning of this case—that it would be impossible to acquire

Yardi’s alleged trade secrets through user-level access to the Voyager program and

access to the Voyager database schema. (D72; D73; Yardi 3/12/15 Tr. 90:17-91:5.)

Mr. Yardi has also admitted that Yardi’s clients were free to send their Voyager


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databases to whomever they wanted. (D30; Yardi 12/11/14 Tr. 188:2-5.)

Because Property Solutions’ only access was user-level access to the

Voyager program and access to the Voyager database, Yardi cannot prove

misappropriation of trade secrets. (D74; Ex. 28; Hanna Tr. 130:11-14, 141:23-

142:6) In fact, the Voyager login credentials that Property Solutions used only

provided front-end or user access to the Voyager user interface. (D77; Hanna Tr.

145:22-146:5.) Property Solutions never had access to the Voyager software code

and never attempted to decompile Voyager to obtain that access. (D75; D76; Ex.

29; Bateman Tr. 128:11-14; Shroff Tr. 100:15-22; Hanna Tr. 198:1-12.) Because

Yardi’s own CEO has testified that it would be impossible to recreate the Voyager

trade secrets through user-level access to the Voyager program and access to the

database schema, Yardi cannot prove that Property Solution ever acquired its

alleged trade secrets and thus cannot prove misappropriation.

D. Yardi Response: PSI Had all of the Tools Needed to Access the Trade Secrets Embedded in Yardi’s Voyager Program and Used Those Tools to Access and Misappropriate Them.

Having argued at length that Yardi should have known long ago that PSI was

misusing its trade secrets, PSI next does an about face and contends that it never did

acquire or use the trade secrets embodied in the Voyager software, because it

lacked the tools to do so. PSI’s argument proceeds entirely from a plain misreading

of one short segment of deposition testimony of Yardi’s President. Reading his

testimony accurately, and considering the extensive evidence that PSI for years had

direct access to the Voyager program and its trade secrets, the argument becomes

untenable.

PSI’s argument is based on a scant eight lines of testimony in Mr. Yardi’s

March 12, 2015 deposition:

Q. It sounds like you’re saying just having user interface access and user access to the Voyager application wouldn’t be enough to recreate the Yardi Voyager trade secrets?


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A. That’s correct. Q. You also seem to be saying that having user level access to the Yardi

Voyager application and access to the schema wouldn’t be enough to recreate the Yardi Voyager alleged trade secrets, correct?

A. That’s correct.

(Ex. 73 at 898-899 [Yardi 3/12/05 Tr. 90:17–91:5].) This testimony simply

confirms, in response to a yes-or-no question, that every Voyager user does not

learn Yardi’s trade secrets simply by employing the program’s user interface.

Elsewhere in his deposition, Mr. Yardi explained that to replicate Yardi’s

trade secrets would also require access to the Voyager program itself (not just the

user interface) and the Voyager database:

You would need access to the program. You would need access to the database. You would need to see how the program interacted with the database. You would need to see the processes that surrounded this particular function. You would need to see the work flows. And you would have to analyze all of this.

So the source code we don’t think is a key part of it. It is the interaction between the program, between the database, between all of the processes. And there is no way that a simple log in would allow that. There’s no way that just access to the database schema would explain that. You need all of these pieces together. And this is the reason that they had to get a copy of our program.

(Id. 31:25-32:2); see also (Ex. 72 at 864 [Yardi 12/11/2014 Tr. 165:19-25) (“When

you start looking at other people’s programs and get access to it to exercise

processes and work flows, and then if you get access to their database and begin to

see how the user interface interacts with the databases, you begin to understand the

logic and you have access to this program, then we say it’s clearly not okay”); Ex.

64 [Yardi Decl. ¶¶ 13, 14].)

The evidence here easily supports a finding that PSI had exactly that sort of

access to the Voyager program and database:

A copy of entire Voyager software

A valid license file for the Voyager software;


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A Voyager database; and

A Voyager User Manual (including the Voyager Training Materials and User’s Guide).

(P178, Ex. 32 at 243, Ex. 35 at 289, Ex. 38 at 304-08, 310-17, Ex. 46 at 343, Ex. 47

at 344, Ex. 48 at 345-47, Ex. 49 at 348, Ex. 50 at 349, Ex. 59 at 389-92.)

As a result, PSI had full access not only to the Voyager user interface, but could

also inspect the live database to determine how transactions entered through the

user interface would be written to the database—which tables would be written to,

what columns would be updated, how many entries would hit each table, etc.

(P189, Ex. 59 at 399.) All of this access, in combination, was sufficient to allow

PSI to replicate Yardi’s trade secrets. ( P179, P 173, Ex. 73 at 894-897 [Yardi

3/12/05 Tr. 32:22–35:22], Ex. 64 [Yardi Decl. ¶ 15]; Ex. 60 at 469–70, ¶¶ 14–16.)

Moreover, PSI’s internal communications evidence that PSI deliberately set out to

do just that. (See, e.g., Ex. 63 at 688 (“We need to find out how Yardi does this so

you can duplicate it.”); Ex. 62 at 687 (“I’m not sure we want to make these changes

[to Entrata]. It sounds like we are copying Yardi, just to copy Yardi.”).)

Mr. Yardi’s testimony proves that PSI had access to everything it needed to

replicate Yardi’s trade secrets. PSI has thus not met its burden of showing the

“absence of evidence” to prove an element of Yardi’s case, see Musick v. Burke,

913 F.2d 1390, 1394 (9th Cir. 1990), and its motion must be denied.

E. “The Voyager Software Program in Its Entirety” Cannot Be a Trade Secret

In order to constitute a trade secret, the information must (1) derive

independent economic value from not being generally known to the public or to

other persons who can obtain economic value from its disclosure or use, and (2) be

the subject of efforts that are reasonable under the circumstances to maintain its

secrecy. Cal. Civ. Code. § 3426.1(d). Claiming an entire software platform as

trade secret fails on both counts. IDX Sys. Corp. v. Epic Sys. Corp., 285 F.3d 581,


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584 (7th Cir. 2002). In IDX, the Seventh Circuit held that designating an entire

software package as a trade secret is improper because it simply “invite[s] the court

to hunt through the details in search of items meeting the statutory definition” of a

trade secret and involves “self-revealing” information and “readily observable

material.” Id. Similarly, running a computer program cannot constitute

misappropriation of a trade secret because “[t]o the extent the mere use of a

program does disclose ‘how it works,’ the program is in no sense ‘secret’ and

therefore fails the most basic test for protection under CUTSA.” Silvaco, 184 Cal.

App. 4th at 229; see also Compuware Corp. v. Health Care Serv. Corp., No. 01 C

0873, 2002 U.S. Dist. LEXIS 5434 (N.D. Ill. Mar. 29, 2002) (report and

recommendation holding claim of software programs “in their entirety” as trade

secrets was “untenable”).

Here, Yardi claims that “the Voyager software program in its entirety” is a

trade secret. (D69; Ex. 25 at ¶ 23.) But Yardi’s CEO admits that some portions of

Voyager, such as over a dozen user interface screens, are not trade secrets. (D78;

Ex. 22; Yardi 12/11/14 Tr. 275:12-278:3.) Indeed, some visual aspects of Voyager

are publicly available from Yardi’s own website. (D79; Ex. 22; Yardi 12/11/14 Tr.

273:25-275:8.) The indisputable evidence in this case therefore shows that

Voyager contains non-trade secret elements, precluding “Voyager in its entirety”

from being a trade secret. IDX, 285 F.3d at 584 (software not a trade secret because

it contained “self-revealing” and “readily observable” material). Yardi also admits

that Voyager is used by around 100,000 to 250,000 people every day. (D81; Yardi

3/12/15 Tr. 110:19-25.) Yardi cannot establish that “Voyager in its entirety”

derives economic value from not being known or is subject to reasonable efforts to

maintain secrecy. See IDX, 285 F.3d at 584; Silvaco, 184 Cal. App. 4th at 229.


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F. Yardi Response: The Voyager Program Is a Protected Trade Secret.

PSI contends the Voyager program in its entirety cannot be a trade secret. Its

argument has two aspects: first, as a general rule, PSI argues, a software program

can never be a trade secret; and second, Voyager specifically is not a trade secret,

because portions of it have been made available to third parties. PSI is wrong on

both points.

The Uniform Trade Secrets Act expressly defines the term “trade secret” to

include a compilation or program. Cal. Civ. Code § 3426.1(d) (“‘Trade secret’

means information, including a formula, pattern, compilation, program, device,

method, technique, or process” that derives economic value from not being

generally known and is the subject of reasonable efforts to maintain secrecy).

Under this definition, “a trade secret can exist in a combination of characteristics

and components, each of which, by itself, is in the public domain, but the unified

process and operation of which, in unique combination, affords a competitive

advantage and is a protectable secret.” Integrated Cash Mgmt. Servs. v. Digital

Transactions, Inc., 920 F.2d 171, 174 (2d Cir. 1990) (holding that software

program constituted trade secret) (quoting Imperial Chem. Indus. Ltd. v. Nat’l

Distillers & Chem. Corp., 342 F.2d 737, 742 (2d Cir.1965)).

This statutory language is clear that even if computer software is comprised

of unprotected elements, the combination of all those elements is still entitled to

protection. Id.; see also Univ. Computing Co. v. Lykes-Youngstown Corp., 504

F.2d 518, 534 (5th Cir. 1974) (computer programs are clearly protectable under the

rubric of trade secrets, if the other elements are also proven); Pyro Spectaculars

North, Inc. v. Souza, 861 F. Supp. 2d 1079, 1089 (E.D. Cal. 2012) (compilation of

publicly available information constituted trade secret); CORP. COUNSEL’S GUIDE TO

INTEL. PROP. § 10:27 (“Software programs become trade secrets as soon as they are

created and remain protected by trade secret law as long as that secrecy is


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maintained.”). PSI’s assertion that Voyager cannot be a trade secret because some

portions of it are publicly available is thus invalid as a matter of law. The law does

not require that every aspect of Voyager be protectable for the program as a whole

to be protected.

PSI also asserts that a computer program can never be a trade secret because

the operation of a program is self-revealing and readily observable. PSI quotes

Silvaco Data Sys. v. Intel Corp., 184 Cal. App. 4th 210, 229 (2010), for the

proposition that “[t]o the extent the mere use of a program does disclose ‘how it

works,’ the program is in no sense ‘secret.’” But Silvaco does not stand for the

proposition that a computer program may never be a trade secret; to the contrary,

the reasoning of Silvaco is consistent with extending trade secret protection to a

program the workings of which are maintained as confidential: Although Silvaco supports the proposition that disclosed software design concepts are not trade secrets, “A potent distinction exists between a trade secret which will be disclosed if and when the product in which it is embodied is placed on sale, and a ‘trade secret’ embodied in a product which has been placed on sale, which product admits of discovery of the ‘secret’ upon inspection, analysis, or reverse engineering.” (1 Milgrim on Trade Secrets, § 1.05[4].) Consistent with that proposition, cases have extended trade secret protection to computer programs and aspects of computer programs that the plaintiffs kept confidential.

Altavion, Inc. v. Konica Minolta Sys. Lab. Inc., 226 Cal. App. 4th 26, 60 (2014)

(emphasis added) (citing Integrated Cash Mgmt., and multiple other cases).

As discussed at II.D supra, the design concepts of the Voyager software are

not ascertainable simply by using the software, but require access to the program

and the database and an analysis of their interactions. (Ex. 73 at 896-897 [Yardi

3/12/05 Tr. 34:8–35:14].) Moreover, Yardi has taken reasonable efforts to protect

the confidentiality of its software. See AT&T Commc’ns of Cal., Inc. v. Pac. Bell,

238 F.3d 427, at *2 (9th Cir. 2000) (UTSA requires “reasonable efforts” to protect a

secret). “Reasonable efforts” means measures to keep trade secrets from becoming


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public knowledge or falling into competitors’ hands. Whyte v. Schlage Lock Co.,

101 Cal. App. 4th 1443, 1454 (2002); In re Providian Credit Card Cases, 96 Cal.

App. 4th 292, 304 (2002). Yardi did this by (i) licensing its product to select

consumers pursuant to a license agreement which limited the software’s use; and

(ii) password-protecting the software so only licensed users could use it. (P98, P99,

P100, Ex. 64 at 692-93, Ex. 33 at 275, Ex. 64 at 692 [Yardi Decl.¶¶ 8, 9].) See

Mattel, Inc. v. MGA Entm’t, Inc., No. 04-CV-9049, 2011 WL 3420571, at *3 (C.D.

Cal. Aug. 4, 2011) (trade secrets adequately protected when plaintiff “required

everyone who entered the showroom to sign a nondisclosure agreement”); United

States v. Suibin Zhang, No. 05-CR-00812, 2012 WL 1932843, at *5 (N.D. Cal.

May 29, 2012) (system of password protection adequately protected trade secrets

disclosed to numerous existing and potential customers); TMX Funding, Inc. v.

Impero Techs., Inc., 10-CV-202, 2010 WL 2509979, at *4 (N.D. Cal., June 17,

2010) (software’s secrecy maintained by requiring anyone with access to sign

confidentiality agreement and utilize computer log-in procedures).

Voyager cannot be bought at Best Buy or Amazon.com like general off-the-

shelf software. (Ex. 64 at 692 [Yardi Decl. ¶ 7].) It is licensed to individual clients

directly by Yardi pursuant to written license agreements that limit use and require

confidentiality. (Id. ¶¶ 7, 8.) PSI emphasizes how many clients use Voyager on a

daily basis, but these are all clients who pay to license the software and agree not to

disclose it. This only underscores that Voyager derives economic value from not

being generally known and is the subject of reasonable efforts to maintain secrecy,

which is just what makes the program a trade secret.

V. INTENTIONAL INTERFERENCE WITH CONTRACT

A. Yardi’s Intentional Interference Claim Is Preempted by the California Uniform Trade Secrets Act

1. The California Uniform Trade Secrets Act Preempts Civil Remedies Based on the Same Nucleus of Facts

It is well established that Section 3426.7 of the CUTSA “implicitly preempts


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alternative civil remedies based on trade secret misappropriation.” K.C.

Multimedia, Inc. v. Bank of Am. Tech. & Ops, Inc., 171 Cal. App. 4th 939, 954

(2009) (quoting Trade Secrets Practice in Cal. (Cont.Ed.Bar 2d ed. 2008) Litigation

Issues, § 11.35). The CUTSA therefore “provides the exclusive civil remedy for

conduct falling within its terms . . . .” Silvaco, 184 Cal. App. 4th 210, 236.

Because intentional interference with contractual relations is a tort claim, not a

contractual remedy, it falls within the scope of CUTSA preemption. Pacific Gas &

Electric Co. v. Bear Stearns & Co., 50 Cal. 3d 1118, 1126 (1990) (intentional

interference with contractual relations is a tort); MedioStream, Inc. v. Microsoft

Corp., 869 F. Supp. 2d 1095, 1114 (N.D. Cal. 2012) (collecting examples of

common law claims preempted by the CUTSA, including intentional interference

with contractual relations). CUTSA preemption exists wherever the civil remedy

stems from the same nucleus of fact as the trade secrets claim. K.C. Multimedia,

Inc., 171 Cal. App. 4th at 962. Even civil claims involving confidential information

that does not meet the statutory definition of a trade secret are subject to

preemption, if they are related to the same core facts. See Mattel, Inc. v. MGA

Entm't, Inc., 782 F. Supp. 2d 911, 987 (C.D. Cal. 2010); Silvaco, 184 Cal. App. 4th

at 239 n.22.

2. Yardi’s Intentional Interference With Contractual Relations Claims Is Based on the Same Facts as Its Trade Secret Claim

Yardi bases its intentional interference with contractual relations claim on

precisely the same nucleus of facts as its trade secrets claim. As discussed above,

Yardi alleges that Property Solutions acquired its trade secrets with knowledge or

reason to know that the trade secrets were acquired by improper means when,

among other things, Property Solutions “induced mutual clients of Yardi and

Property Solutions to disclose trade secret information to Property Solutions in

violation of their license agreements and/or confidentiality agreements with Yardi”

and “improperly accessed the Voyager software without authorization through


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access that Yardi granted its clients pursuant to license agreements and/or

confidentiality agreements.” (D66; D67; Am. Compl. ¶ 56.) Yardi has also taken

the position that “[e]very time that Property Solutions requested and obtained

access to the Voyager software or confidential Yardi information from Yardi

clients, Property Solutions interfered with and caused a breach of that client’s

contract with Yardi.” (D82; Ex. 30.)

Yardi’s intentional interference therefore is premised upon the “same

nucleus” of alleged facts that it employs in its trade secrets claim, specifically, that

Property Solutions obtained access to Voyager or confidential Yardi information

from mutual clients who were subject to a confidentiality obligation to Yardi. See

K.C. Multimedia, Inc., 171 Cal. App. 4th at 958. Indeed, all of Yardi’s alleged

trade secrets are based upon functionalities present in Voyager, including the claim

that Voyager itself is a trade secret. (D69; Ex. 25 at ¶ 23.) Yardi’s intentional

interference claim thus is preempted and superseded by the CUTSA. K.C.

Multimedia, Inc., 171 Cal. App. 4th at 958; Silvaco, 184 Cal. App. 4th 210, 236.

B. Yardi Response: Yardi’s Intentional Interference Claim is Not Preempted.

PSI asserts that Yardi’s intentional interference claim is preempted under

Section 3426.7 of the California Civil Code, because the claim is based on the same

facts as Yardi’s claim for misappropriation of trade secrets. As an initial matter,

this is flatly inconsistent with PSI’s request for summary judgment on the trade

secret claim. In the unlikely event the Court grants summary judgment against

Yardi’s trade secret claim, this would render PSI’s argument on intentional

interference moot—there would no longer be a trade secret claim to preempt

alternative remedies. See Spring Design, Inc. v. Barnesandnoble.com, LLC, No. C

09–05185, 2010 WL 5422556, *10 (N.D. Cal. Dec. 27, 2010) (“[I]f the confidential

information is not a trade secret, then preemption would not apply because the

claim would seek a civil remedy not based on the misappropriation of a trade


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secret.”). Assuming the Court does not enter summary judgment as to Yardi’s trade

secrets, PSI’s preemption argument still fails, because the intentional interference

claim is of a distinct nature and proceeds from different operative facts.

A claim will be preempted only if it amounts to “restating a trade secrets

claim as something else.” Silvaco Data Sys., 184 Cal. App. 4th at 240 (2010)

(unfair competition claim not based on acquisition of trade secrets held not

preempted). “The determination of whether a claim is based on trade secrets is

largely factual.” K.C. Multimedia, Inc. v. Bank of Amer. Tech. & Ops., Inc., 171

Cal. App. 4th 939, 954 (2009). A claim will not be preempted if it is “independent

and based on facts distinct from the facts that support the misappropriation claim,”

even if the claim is “related to a trade secret misappropriation.” Angelica Textile

Servs., Inc. v. Park, 200 Cal. App. 4th 495, 506 (2013). In Angelica, the court

specifically found that claims against an employee for interference with his

employer’s customer relationships “have a basis independent of any

misappropriation of a trade secret,” and were therefore not preempted. Id. at 507.

Yardi’s interference claim arises from the license agreements between Yardi

and its customers, the terms of which protect the confidentiality of Yardi’s

proprietary and copyrighted information. (P101, Ex. 30, at 221-29, Rog 8, 9, 10;

Ex. 34 [License Agreement with Jones & Jones Management Group] (“Client may

only exercise the Software License granted under this Agreement through its

Designated Users.”); Ex. 33 [License Agreement with Triton Investments]

(“Agreement does not grant a license or right to Use the Licensed Program on any

computer or computer system other than those owned by Client or in Client’s

possession and control, or authorized by Client to serve as an application host.”);

Ex. 54 [License Agreement with Alliance Residential] .)

PSI induced multiple Yardi customers to breach these license agreements.

(D82, D83, Ex. 30 at 221-23, 228-29.) At PSI’s urging, some customers provided

full installation disks for the Yardi Voyager software, (P110, Ex. 30, at 221-29, Rog


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8, 9, 10; Ex. 37 at 298), while others provided passwords to PSI so that PSI could

access the protected Yardi systems and software, (P110 Ex. 30 at 221-29, Rog 8, 9,

10); Ex. 36 at 293; Ex. 57 at 380; Ex. 48 at 346-47). The record supports an

inference that PSI deliberately pressured Yardi’s clients, knowing they were

reluctant to disregard their confidentiality obligations to Yardi:

I sent Peggy, from Jones and Jones, an email yesterday and asked her if she could get a copy of her database and an installation disk for Yardi 6.0. So she called me last night and she asked me if we have asked our contacts at Yardi for the installation disk. And I said well . . . . Yardi keeps on putting us off and it might take 6 months to get it. I continued, so we are trying to get it from our clients. She said, unenthusiastically, that she will see what she can do.

(P126, Ex. 37 at 298.)

Yardi’s tortious interference claim is “independent and based on facts distinct

from the facts that support the misappropriation claim.” Angelica, 200 Cal. App.

4th at 506. PSI interfered with license and confidentiality agreements Yardi has

with its customers by inducing them to provide PSI with access to Yardi’s

intellectual property and proprietary information, despite contractual obligations not

to disclose that information. By interfering with Yardi’s contracts, PSI undermined

the security measures Yardi put in place to protect both its trade secrets and its

copyrighted and proprietary information. These actions also put improper strain on

the relationships between Yardi and its customers, and the resulting damages to

Yardi stand independent of the claimed misappropriation. This falls squarely

within the holding of Angelica that Section 3426.7 “does not displace noncontract

claims that, although related to a trade secret misappropriation, are independent and

based on facts distinct from the facts that support the misappropriation claim.” Id.

PSI’s intentional interference disrupted Yardi’s customer relationships.

Yardi also has a legal interest in the integrity of its license agreements, and in the

passwords and license files that effectuate those agreements. PSI’s interference

served to erode the efficacy of those agreements. Preempting the interference claim


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would leave Yardi no means of preserving the integrity of its security measures

except to pursue its own customers for breach of their license agreements. Yardi

should not have to sue its own customers to redress the damage PSI has done to

Yardi’s license agreements and the interests that those agreements protect.

Because this issue involves a different theory and different facts than the

misappropriation of trade secrets claim, it is not preempted.

C. Yardi’s Intentional Interference Claim Is Time-Barred

1. Yardi’s Intentional Interference Claim Is Subject to a Two-Year Statute of Limitations

A cause of action for intentional interference with contractual relations is

governed by a two-year limitations period. Richardson v. Allstate Ins. Co., 117

Cal. App. 3d 8, 12 (1981); Cal. Code Civ. Proc. § 339.1. Generally, the cause of

action begins to run on the date of the wrongful act but no later than the date the

breach actually occurred. Forcier, 123 F. Supp. 2d at 530 (citing Trembath v.

Digardi, 43 Cal. App. 3d 834 (1974)).

California courts recognize an exception to this general standard in the

“discovery rule.” See Forcier, 123 F. Supp. 2d, at 530. In order to benefit from the

discovery rule, a plaintiff bears the burden of proving “facts showing that he was

not negligent in failing to make the discovery sooner and that he had no actual or

presumptive knowledge of facts sufficient to put him on inquiry.” April

Enterprises, Inc. v. KTTV, 147 Cal. App. 3d 805, 833 (1983) (quoting Hobart v.

Hobart Estate Co., 26 Cal. 2d 412, 437 (1945)). If the plaintiff proves that the

discovery rule applies, then the statute of limitations begins to run on the date that

the plaintiff “discovered, or had reason to discover, the cause of action.” Forcier,

123 F. Supp. 2d at 531 (quoting Norgart v. Upjohn Co., 21 Cal. 4th 383, 397

(1999)). “[A] party ‘discovers’ its claims, for statute of limitations purposes, when

it suspects or has reason to suspect a factual basis for the elements of the claim.”

Id. (quoting Norgart, 21 Cal. 4th at 397-98).


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2. Yardi Was on Notice of Its Intentional Interference Claim More Than Two Years Before Bringing This Lawsuit

Here, the outcome is the same regardless of whether the statute of limitations

runs from allegedly wrongful act or whether the discovery rule applies: Yardi

brought its claim too late. As discussed at length above, the evidence in this case

shows that, as of June 2006, Yardi knew that Property Solutions was requesting and

obtaining access to the Voyager software or confidential Yardi information from

Yardi clients. (D28; D33; D34; Ex. 2 at 4; Ex. 13; Ex. 14; Yardi 12/11/14 Tr.

18:17-21, 19:9-21:2, 24:2-9; Bateman Tr. 63:1-65:25; Shoemaker Tr. 38:12-41:18,

42:21-44:24, 47:18-24, 48:9-15.) Yardi was repeatedly reminded over the

following years that mutual clients were providing Property Solutions with access

to Voyager. (See, e.g., D47; Ex. 21 at 57; Yardi 12/11/14 Tr. 241:22-242:7 (mutual

client informing Yardi in 2009 that client had set up Property Solutions with

Voyager and a Voyager user ID).) This is exactly the conduct underlying Yardi’s

claim for intentional interference with contractual relations. Yardi contends that

“[e]very time that Property Solutions requested and obtained access to the Voyager

software or confidential Yardi information from Yardi clients, Property Solutions

interfered with and caused a breach of that client’s contract with Yardi.” (D82; Ex.

30.) Because Yardi knew of this conduct as early as June 2006 and did not file

until October 2013, its claim is time-barred.11

D. Yardi Response: Yardi’s Claim For Intentional Interference with Contract Is Not Barred by the Statute of Limitations.

Like the statute of limitations for misappropriation of trade secrets, the

California discovery rule has been codified in the statute of limitations for

intentional interference with contract. See Cal. Civ. Proc. Code § 339(1).

11 As discussed above, equitable tolling and equitable concealment based on

conduct by Property Solutions in 2012 cannot apply.


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Accordingly, Yardi’s analysis in Section II.B. supra, regarding the limitation period

as to Yardi’s claim for misappropriation of trade secrets, applies here as well.

Yardi did not have cause to know of PSI’s misconduct in obtaining the Voyager

program before 2012, and even then PSI actively sought to conceal its actions,

tolling the limitation period and estopping it from raising a limitation defense.

Moreover, even when it learned generally of PSI’s misconduct, Yardi did not know

the elements of an interference claim existed until its subsequent investigation

uncovered that PSI had induced clients to breach their confidentiality obligations

(D82, D83, Ex. 30 at 221-23, 228-29), well within two years of when it brought this

lawsuit.

VI. IMPLIED CONTRACT

A. Yardi’s Breach of Implied Contract Claim Is Time-Barred

1. Yardi’s Claim for Breach of Implied-in-Fact Contract Is Subject to a Two-Year Statute of Limitations

Under California law, claims for breach of an implied contract are subject to

a two-year statute of limitations. Cal. Civ. Proc. Code § 339(1); Kourtis v.

Cameron, 419 F.3d 989, 1000 (9th Cir. 2005), abrogated on other grounds, Taylor

v. Sturgell, 553 U.S. 880 (2008). Unlike copyright claims, there is no “continuing

violation” theory that can preserve an implied contract claim based on repeated

breaches. Kourtis, 419 F.3d at 1000-1001. Ordinarily, implied contract claims

accrue at the time of breach, regardless of whether any damage is apparent or

ascertainable. Id. (citing Menefee v. Ostawari, 228 Cal. App. 3d 239 (1991)).

Some California courts have recognized that the “discovery rule,” discussed above,

can apply to implied contracts. Seelenfreund v. Terminix of Northern Cal., Inc., 84

Cal. App. 3d 133, 136 (1978).

2. Yardi Was on Notice of Its Implied Contract Claim More than Two Years Before Bringing This Lawsuit

Yardi’s claim is again time-barred regardless of whether the claim accrued


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upon the alleged wrongful act or upon discovery, because Yardi admits that it had a

reason to suspect the basis for its claim more than two years before filing its

complaint. Yardi’s breach of implied contract claim is premised on the allegation

that “Property Solutions breached the parties’ implied contract by using information

that Yardi provided it in confidence for the sole purpose of resolving specified

technical issues to develop Entrata,” the Property Solutions property management

system. (D84; Am. Compl. ¶ 77.) Yet Yardi admits that it began to suspect that

Property Solutions “might be misappropriating its trade secrets beginning in

mid-2011 when it first heard that [Property Solutions] might be developing a

property management system.” (D85; Ex. 26.) Because Yardi suspected that

Property Solutions was using Yardi confidential information to develop its Entrata

accounting software as of mid-2011, the limitations period for its implied contract

claim expired in mid-2013. Yet Yardi did not file its complaint until October 21,

2013. As with the causes of action discussed above, Yardi’s delay bars its claim—

once Yardi had a suspicion of wrongful conduct, it could not wait for the “facts to

find [it]” but “must go find the facts.” Jolly, 44 Cal. 3d at 1111.12

B. Yardi Response: Yardi’s Claim For Breach of Implied Contract Is Not Barred by the Statute of Limitations.

Like the statute of limitations for both misappropriation of trade secrets and

intentional interference with contract, the California discovery rule has been

codified in the statute of limitations for breach of implied contract as well. See Cal.

Civ. Proc. Code § 339(1). Accordingly, Yardi’s analysis in Section II.B. supra,

regarding the limitation period as to Yardi’s claim for misappropriation of trade

secrets, applies here as well. Yardi did not have cause to know of PSI’s misconduct

in obtaining the Voyager program before 2012, and even then PSI actively sought

12 As discussed above, equitable tolling and equitable concealment based on

conduct by Property Solutions in 2012 cannot apply.


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to conceal its actions, tolling the limitation period and estopping it from raising a

limitation defense.

VII. COPYRIGHT

A. Yardi Cannot Recover Damages for Actions Outside of the Limitations Period

1. Supreme Court Law Insulates Activities Outside of a Three-Year Window

The Copyright Act provides that “[n]o civil action shall be maintained under

the provisions of this title unless it is commenced within three years after the claim

accrued.” 17 USC § 507(b). The Supreme Court has recognized that a copyright

holder’s suit is typically timely with respect to acts within three years before the

complaint, “but untimely with respect to prior acts of the same or similar kind.”

Petrella v. MGM, 134 S. Ct. 1962, 1970 (2014). In its holding, the Supreme Court

made clear that “the infringer is insulated from liability” for infringements of the

same work outside of the three-year period. Id. at 1969. The Ninth Circuit has also

recognized “the general rule that ‘[a] plaintiff's right to damages is limited to those

suffered during the statutory period for bringing claims . . . .’” Polar Bear Prods. v.

Timex Corp., 384 F.3d 700, 706 (9th Cir. 2004) (reprinted as amended at 2004 U.S.

App. LEXIS 22131) (quoting Los Angeles News Serv. v. Reuters Television Int’l,

Ltd., 149 F.3d 987, 992 (9th Cir. 1998)). The limitations period is tolled until

plaintiff learned or by reasonable diligence could have learned that it had a cause of

action. Id.

2. Yardi Was on Notice of Its Copyright Claim More Than Three Years Before Bringing This Lawsuit

It cannot genuinely be disputed that Yardi knew of the factual basis for its

copyright claim before October 21, 2010—three years before this suit was filed.

Yardi’s copyright claim is based on the allegation that Property Solutions

“knowingly and intentionally [copied] and [used] the Voyager software without

Yardi’s authorization and without a license to do so.” (D86; Am. Compl. ¶ 45.)


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Yardi’s damages expert opines that copyright damages began to accrue when

Property Solutions allegedly “first possessed, copied, accessed or used Voyager

software” and explicitly based his damages calculation from July 21, 2006, “the

first date that [Property Solutions] admitted that it could verify its employees or

agents had access to the Voyager software.” (D88; D89; Ex. 31 at 233, 235.)

Yet, as of 2006, Yardi already knew that Property Solutions had obtained the

license file that would allow it to install and operate Voyager. (D33; D35; Ex. 13;

Shoemaker Tr. 42:21-44:24, 44:22-24; Yardi 12/11/14 Tr. 19:9-21:2, 20:8-15;

Bateman Tr. 63:1-65:25.) Even more tellingly, as of 2009, Yardi’s CEO had a

“suspicion” that Property Solutions had a copy of the Voyager application and

Yardi’s key software developer flatly asserted that Property Solutions was running

a copy of Voyager on its own server. Because Yardi was on notice that Property

Solutions was using a copy of Voyager prior to October 21, 2010, it may not

recover damages for conduct before that date. Polar Bear Prods., 384 F.3d at 706.

B. Yardi Response: Yardi May Recover Damages for All PSI Copyright Violations.

PSI contends that Yardi cannot collect damages incurred more than three

years before it initiated this action. The Ninth Circuit has rejected this argument

and held that “the statute of limitations does not prohibit recovery of damages

incurred more than three years prior to the filing of suit if the copyright plaintiff

was unaware of the infringement, and that lack of knowledge was reasonable under

the circumstances.” Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700, 706 (9th

Cir. 2004) (“Because Polar Bear did not discover Timex’s infringement until within

three years of filing suit, Polar Bear may recover damages for infringement that

occurred outside of the three-year window.”). Under that standard, there is no

limitation on the damages Yardi may recover for copyright infringement.

“A cause of action for copyright infringement accrues when one has

knowledge of a violation or is chargeable with such knowledge.” Roley v. New


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World Pictures, Ltd., 19 F.3d 479, 481 (9th Cir. 1994). The Ninth Circuit has

“reject[ed] an interpretation of the federal discovery rule that would commence

limitations periods upon mere suspicion of the elements of a claim.” O’Connor v.

Boeing N. Am., Inc., 311 F.3d 1139, 1148 (9th Cir. 2002). Thus, to limit Yardi’s

copyright damages, PSI must show that Yardi had knowledge of its infringement,

not a mere suspicion.

There is no evidence that Yardi was on notice of PSI’s infringement before

2011. (D85, Ex. 26, at 179-81, Rog 13; see also Section II.B.2 supra.) Until this

point, Yardi “had assumed that [PSI] did not have a copy” of the Voyager software.

(P148, Ex. 72 at 870 [Yardi Tr. 194:1-8].) Yardi’s lack of knowledge was

reasonable because Yardi had executed non-disclosure agreements with PSI.

(P107, P108, P109, Ex. 44 at 341, Ex. 52 at 352.) Even if Yardi knew that PSI had

a copy of the Voyager software, Yardi had an expectation that PSI would not

“copy” the software in violation of both its NDAs and the copyright laws.

Yardi’s lack of knowledge was also reasonable because PSI took elaborate

steps to conceal its possession and infringement of the Voyager software both

before and after Yardi began its investigation of PSI, as discussed at length above.

See Oracle USA, Inc. v. Rimini St., Inc., No. 10-CV-106, 2014 WL 3956271 (D.

Nev. Aug. 13, 2014) (“Where a defendant expressly assures competitors that it is

not violating the competitor's intellectual property rights, a plaintiff cannot be

charged with knowledge of the infringing conduct.”). In light of PSI’s pattern of

deception, even if Yardi had begun investigating PSI prior to 2012, Yardi would

not have been on notice that potentially infringing conduct had occurred. See In re

Napster, Inc. Copyright Litig., 04-CV-3004, 2005 WL 289977, at *4 (N.D. Cal.

Feb. 3, 2005) (“A claim for copyright infringement accrues on the date that a

reasonable investigation would have put the rights holder on notice that potentially

infringing conduct has occurred.”).

Under Polar Bear Products, because Yardi did not discover PSI’s


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infringement until within three years of filing suit, Yardi is permitted to recover all

of its damages for copyright infringement.

VIII. DIGITAL MILLENIUM COPYRIGHT ACT

A. Yardi Cannot Prove Violation of the DMCA

1. Yardi’s DMCA Claim Requires Proof of “Circumvention”

The DMCA provides that “[n]o person shall circumvent a technological

measure that effectively controls access to a work protected under this title.” 17

U.S.C. § 1201(a). “Circumvent” has a narrow and carefully-tailored definition: “to

descramble a scrambled work, to decrypt an encrypted work, or otherwise to avoid,

bypass, remove, deactivate, or impair a technological measure, without the

authority of the copyright owner.” MDY Indus., LLC v. Blizzard Entm’t, Inc., 629

F.3d 928, 945 (9th Cir. 2010) (quoting 17 U.S.C. § 1201(a)(3)(A)).

The substantial weight of authority holds that using a password or security

code to access a copyrighted work, even without authorization, does not constitute

“circumvention.” Ground Zero Museum Workshop v. Wilson, 813 F. Supp. 2d 678,

692 (D. Md. 2011) (use of password to access websites not circumvention); R.C.

Olmstead, Inc. v. CU Interface, LLC, 657 F. Supp. 2d 878, 889 (N.D. Ohio 2009)

(using the “approved methodology” to access software is not circumvention, even if

it involved use of another’s credentials); Egilman v. Keller & Heckman, LLP, 401

F. Supp. 2d 105, 113 (D.D.C. 2005) (unauthorized use of valid credentials is not

circumvention); I.M.S. Inquiry Mgmt. Sys. v. Berkshire Info. Sys., 307 F. Supp. 2d

521, 532-533 (S.D.N.Y. 2004) (using a password issued by plaintiff to another

entity is not circumvention); Real View, LLC v. 20-20 Techs., Inc., 789 F. Supp. 2d

268, 274-275 (D. Mass. 2011) (noting that courts have held unauthorized use of

valid login credentials is not circumvention under the DMCA).

The I.M.S. decision explains that the DMCA requires circumventing a

“deployed technological measure in the measure’s gatekeeping capacity.” I.M.S.,


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307 F. Supp. 2d at 532. Put differently, “the DMCA targets the circumvention of

digital walls guarding copyrighted material.” Universal City Studios v. Corley, 273

F.3d 429, 443 (2d Cir. 2001) (emphasis in original). Unauthorized access alone

does not circumvent these walls. I.M.S., 307 F. Supp. 2d at 532. Circumvention

instead occurs where a defendant sidesteps or removes access security measures

altogether. Realnetworks, Inc. v. DVD Copy Control Ass’n, 641 F. Supp. 2d 913,

933 (N.D. Cal. 2009) (circumvention where product permitted access to DVD

content without going through system’s protection steps).

A minority of cases, from a single judicial district, have held that

unauthorized use of login information or software keys information can constitute

circumvention under the § 1201(a)(2) and (b)(1) anti-trafficking provisions of the

DMCA. See Actuate Corp. v. IBM, 2010 U.S. Dist. LEXIS 33095 (N.D. Cal. Apr.

5, 2010) (Spero, M.J.); Microsoft Corp. v. EEE Bus., Inc., 555 F. Supp. 2d 1051,

1059 (N.D. Cal. 2008); 321 Studios v. MGM Studios, Inc., 307 F. Supp. 2d 1085,

1098 (N.D. Cal. 2004). Each of the minority rule cases focused on the

unauthorized nature of the access, but the pertinent question for the DMCA is

whether the narrow standard for “circumvention” is met. I.M.S., 307 F. Supp. 2d at

532. The rationale of these cases therefore “contravenes the plain language of the

statute, which is focused on the method of entry.” DISH Network L.L.C. v. World

Cable Inc., 893 F. Supp. 2d 452, 466 (E.D.N.Y. 2012) (discussing Actuate Corp.);

see also Navistar, Inc. v. New Balt. Garage, Inc., 2012 U.S. Dist. LEXIS 134369,

*10-14 (N.D. Ill. Sept. 20, 2012) (expressly rejecting argument based on 321

Studios, EEE Bus., and Actuate that unauthorized use of a password is

“circumvention”).

Instead, circumvention requires that defendant “affirmatively performs an

action that disables or voids the measure that was installed to prevent them from

accessing the copyrighted material.” DISH, 893 F. Supp. 2d at 466. Mere “use” of

a technological measure without the authority of the copyright owner appears


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nowhere in the DMCA definition of circumvention. Egilman, 401 F. Supp. 2d at

113. Thus, the substantial weight of authority holds that “circumvention” requires

more than unauthorized use of a valid technological measure.

2. Property Solutions Did Not Engage in “Circumvention”

Here, Yardi has alleged that Property Solutions “obtained log-in credentials

and/or license files issued to Yardi clients, and used such log-in credentials and/or

license files to access the Voyager software without authorization.” (D90; Am.

Compl. ¶ 83.) And, the evidence establishes that the only ways that Property

Solutions accessed Yardi software or databases were through login/password

combinations, or through license files that were provided either by mutual Yardi-

Property Solutions clients or by Yardi itself. (D91; Ex. 14; Ex. 28; Shroff Tr.

98:21-100:3; Hanna Tr. 130:11-14, 141:23-142:6; Shoemaker Tr. 47:18-24, 48:9-

15, Yardi Tr. 24:2-9, Bateman Tr. 64:21-65:25.) Likewise, as discussed above,

Property Solutions obtained a license file to Voyager from a mutual customer,

WNG, with the full knowledge of Yardi. (D33; D35; Ex. 13; Shoemaker Tr. 42:21-

44:24; Yardi 12/11/14 Tr. 19:9-21:2; Bateman Tr. 63:1-65:25.)

There is no allegation, much less any evidence, that Property Solutions

accessed Yardi software other than through user login credentials, or license files

originally generated by Yardi. Nor is there evidence that Property Solutions

disabled or voided access controls or that Property Solutions intruded upon “digital

walls” created to protect Voyager. See Universal City Studios, 273 F.3d at 435;

DISH Network L.L.C., 893 F. Supp. 2d at 466. Rather, Property Solutions simply

used the methodology that Yardi had built into its software to access Voyager and

Voyager databases in exactly the same fashion as a Yardi property management

customer. I.M.S., 307 F. Supp. 2d at 532 (no circumvention where defendant

accessed software like customer). Because Property Solutions never

“descramble[d] a scrambled work, [] decrypt[ed] an encrypted work, or otherwise []


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avoid[ed], bypass[ed], remove[d], deactivate[d], or impair[ed] a technological

measure,” Yardi’s claim under the DMCA fails.

B. Yardi Response: PSI Engaged in Circumvention.

For purposes of its DMCA argument, PSI does not dispute that it used license

and log-in information obtained from third parties to gain access to Voyager

without Yardi’s authorization. Instead, PSI merely raises the legal question of

whether such unauthorized access constitutes “circumvention” under the DMCA.

PSI’s argument ignores the unanimous line of case law in the Ninth Circuit holding

otherwise, as well as the fundamental purpose of the DMCA: to preclude

unauthorized access to copyrighted material when the copyright owner has utilized

technological measures to prevent such access.

PSI acknowledges that the Ninth Circuit has defined “circumvention” under

the DMCA to include any means of “avoid[ing]” or “bypass[ing]” technological

measures meant to protect copyrighted work. MDY Indus. v. Blizzard Entm’t, Inc.,

629 F.3d 928, 945 (9th Cir. 2010) (quoting 17 U.S.C. § 1201(a)(3)(A)). PSI insists

that this does not encompass unauthorized use of security passwords or security

codes, but no court in this circuit has taken that view. In Dish Network LLC v.

Dimarco, 11-CV-1962, 2012 WL 917812 (D. Nev. Mar. 14, 2012), the District

Court for the District of Nevada stated that the focus should be on whether the user

was authorized to circumvent the technological security measure. The court held

that the use of an adapter and extended warranty codes to access the plaintiff’s

encrypted signals constituted “circumvention.” The court rejected the argument

that use of warranty codes did not “descramble” or “decrypt” the plaintiff’s

protected work, explaining that use of the codes to intercept satellite cable feeds

was “circumvention,” because they were “almost certainly designed to ‘otherwise

avoid, bypass, etc.’ effective technological security measures.” Id. at *5.

In Actuate Corp. v. Int’l Bus. Machines Corp., 09-CV-5892, 2010 WL

1340519 (N.D. Cal. Apr. 5, 2010), the Northern District of California found that the


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distribution of passwords and usernames falls within the DMCA’s definition of

“circumvention.” The court expressly declined to follow I.M.S. Inquiry Mgmt. Sys.,

Ltd. v. Berkshire Info. Sys., Inc., 307 F. Supp. 2d 521 (S.D.N.Y. 2004), relied upon

by PSI. Moreover, the court correctly pointed out that the result of I.M.S. was

contrary to the Second Circuit’s reasoning in Universal City Studios, Inc. v. Corley,

273 F.3d 429 (2d Cir. 2001), also relied upon by PSI:

[U]nauthorized distribution of passwords and usernames avoids and bypasses a technological measure in violation of sections 1201(a)(2) and (b)(1). The Court does not find persuasive the reliance of the I.M.S. court on Universal Studios to justify the distinction it draws between passwords that are issued by a plaintiff and other types of technologies. The Court notes, in particular, that in Universal Studios, the Second Circuit analogized the DeCSS technology at issue in that case with a “skeleton key” or a “combination that can open a locked door.” 273 F.3d at 453. The reasoning of the I.M.S. court—that a password somehow does not fall within this description, is not well-founded. Rather, a combination to a lock appears to be essentially the same as a password. Nor does the Court find support in the statute itself for drawing a distinction between passwords and other types of code that might be used for decryption. Therefore, the Court rejects Defendants' position. Unauthorized use of a password may constitute circumvention under the DMCA.

Actuate, 2010 WL 1340519, *9. The Northern District reached the same

conclusion in Microsoft Corp. v. EEE Business Inc., 555 F.Supp. 2d 1051 (N.D.

Cal. 2008), and 321 Studios v. MGM Studios, Inc., 307 F.Supp. 2d 1085 (N.D. Cal.

2004), both of which were cited with approval in the Actuate decision.

PSI cites Realnetworks, Inc. v. DVD Copy Control Ass’n, 641 F. Supp. 2d

913 (N.D. Cal. 2009), in support of its view that the DMCA requires a particular

type of sidestepping or removal of security measures. PSI’s reliance on

Realnetworks is misplaced. In that case, the Northern District of California

explained that, contrary to PSI’s view, the DMCA “is not, as [defendant] asserts,

solely intended to thwart hackers. Rather, it provides broad statutory protection


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against circumvention of technological measures that protect the interests of

copyright owners. This includes any form of unauthorized use—not just

“breaking”—of [security] technology.” 641 F. Supp. 2d at 934 (emphasis added).

This natural interpretation of “circumvention” also comports with the

legislative intent underlying the DMCA. As stated by the House of

Representatives’ report on the DMCA:

Subsection (a) applies when a person has not obtained authorized access to a copy or a phonorecord of a work for which the copyright owner has put in place a technological measure that effectively controls access to his or her work.… Paragraph (a)(1) establishes a general prohibition against gaining unauthorized access to a work by circumventing a technological protection measure put in place by the copyright owner.

H.R. REP. 105-551(I), 17-18 (1998) (emphasis added).

As the other district courts in this circuit to consider the issue have agreed,

the DMCA protects against unauthorized circumvention of security access to

software by any means, including the use of stolen passcodes.

C. Yardi Cannot Recover Damages for Actions Outside of the Limitations Period

The DMCA shares the same three-year statutory limitations period as a

traditional copyright claim. 17 USC § 507(b) (setting limitations for “provisions of

this title”); Point 4 Data Corp. v. Tri-State Surgical Supply & Equip., Ltd., 2013

U.S. Dist. LEXIS 109298, *118 n.56 (E.D.N.Y. Aug. 2, 2013) (noting that three-

year statute of limitations under § 507(b) applies to DMCA). While little case law

exists for the DMCA statute of limitations, the Supreme Court has broadly held that

the separate-accrual rule, discussed above, “attends the copyright statute of

limitations,” of § 507(b). Petrella, 134 S. Ct. at 1969. Accordingly, as with

traditional copyright, when the defendant has engaged in a series of discrete acts,

the copyright holder’s suit is timely with respect to acts within the three-year


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window but untimely with respect to prior acts of the same kind. Id. at 1970.

Here, Yardi knew or with reasonable diligence could have learned that prior

to October 21, 2010, Property Solutions had obtained customer license files and

login credentials that would allow it access to Voyager and the Voyager database.

(D28; D33; D35; Ex. 2 at 4; Ex. 13; Yardi 12/11/14 Tr. 18:17-21, 19:9-21:2, 20:8-

15; Bateman Tr. 63:1-65:25; Shoemaker Tr. 38:12-41:18, 42:21-44:24.) This is

particularly indisputable, given that Yardi’s employees were actually instructing

mutual clients to give Property Solutions this information. (D37; D44; D49; D50;

Ex. 5; Ex. 8; Ex. 10; Ex. 11; Alfano Tr. 22:15-23, 35:22-38:19, 69:7-72:3, 77:11-

80:7.) This conduct forms the basis of Yardi’s DMCA claim. (D90; Am. Compl. ¶

83.) Accordingly, Yardi’s knew of Property Solutions’ conduct prior to the

limitations period that began October 21, 2010, and Yardi should not recover any

damages relating to this period. See Polar Bear Prods, 384 F.3d at 706.

D. Yardi Response: Yardi May Recover Damages for All DMCA Violations.

DMCA causes of action are subject to the same statute of limitations

requirements as traditional copyright causes of action. See Sims v. Viacom, Inc.,

No. 11-CV-675, 2012 WL 280609, at *5 (W.D. Pa. Jan. 31, 2012). Accordingly,

Yardi’s analysis in Section V.B supra, regarding the recovery of all damages for

copyright infringement, applies with equal force to its DMCA cause of action.

IX. CONCLUSION

For the reasons stated above, Property Solutions respectfully requests that the

Court enter summary judgment in its favor on Yardi’s claims for misappropriation

of trade secrets, intentional interference with contractual relations, implied breach

of contract, and violation of the DMCA. Property Solutions further respectfully

requests summary judgment that Yardi cannot recover copyright or DMCA

damages, if any are ultimately proven, for conduct prior to October 21, 2010.


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X. YARDI CONCLUSION

The Court should deny PSI’s motion for summary judgment in its entirety.

Dated: April 15, 2015

Respectfully submitted,

MORRISON & FOERSTER LLP

By: /s/ Eric M. Acker Eric M. Acker

Attorneys for Defendant/Counterclaimant PROPERTY SOLUTIONS INTERNATIONAL, INC.

BROWNSTEIN HYATT FARBER SHREK, LLP By: /s/ Michael D. Hoke

Michael D. Hoke

Attorneys for Plaintiff/Counterclaim Defendant YARDI SYSTEMS, INC.


michael a. jacobs (ca sbn 111664) …€¦ · san francisco, california 94105-2482 ... v. property...

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