Jason P. Gonzalez (SBN 178768) Robert A. Weikert (SBN ... · used Yardi’s Voyager software...

PLAINTIFF YARDI SYSTEMS, INC.’S MEMORANDUM OF CONTENTIONS OF FACT AND LAW CASE NO. 2:13-CV-07764-FMO (AGRX)

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Jason P. Gonzalez (SBN 178768) Robert A. Weikert (SBN 121146)Shawn G. Hansen (SBN 197033) NIXON PEABODY LLP 300 S. Grand Avenue, Suite 4100 Los Angeles, California 90071 Telephone: (213) 629-6019 Facsimile: (213) 629-6000 Email: [email protected]

[email protected] [email protected]

Jennifer Hayes (SBN 241533) NIXON PEABODY, LLP 2 Palo Alto Square 3000 El Camino Real Suite 500 Palo Alto, California 94306 Telephone: (650) 320-7725 Facsimile: (855) 780-9262 Email: [email protected]

Attorneys for Plaintiff YARDI SYSTEMS, INC.

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

YARDI SYSTEMS, INC.

Plaintiff,

vs.

PROPERTY SOLUTIONS INTERNATIONAL, INC.

Defendant.

AND RELATED COUNTERCLAIM

Case No. 2:13-CV-07764-FMO (AGRx)

PLAINTIFF YARDI SYSTEMS, INC.’S MEMORANDUM OF CONTENTIONS OF FACT AND LAW

[Local Rule 16-4]

Date: December 16, 2016 Time: 10:00 a.m. Ctrm: 22

Pre-Trial Confer.: December 16, 2016 Trial Date: January 10, 2017

Case 2:13-cv-07764-FMO-AGR Document 215 Filed 11/18/16 of 23 Page ID #:6357


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Plaintiff Yardi Systems, Inc. (“Yardi”) hereby submits its Memorandum of

Contentions of Fact and Law in accordance with Local Rule 16-4.

I. PLAINTIFF’S CLAIMS

Yardi will bring the following claims at trial, all of which relate to Defendant

Property Solutions International, Inc.’s (“Entrata”) wrongful use of Yardi’s

Voyager property management software application:

Claim 1: Defendant Entrata is liable for federal copyright infringement

under 17 U.S.C. § 101 et seq.

Claim 2: Defendant Entrata is liable for misappropriation of trade secrets

under California Civil Code §§ 3426-3426.11.

Claim 3: Defendant Entrata is liable for breach of contract for breaching

the 2006 NDA between Yardi and Entrata.

Claim 4: Defendant Entrata is liable for breach of contract for breaching

the implied-in-fact contract between Yardi and Entrata, created and manifested by

the parties’ course of conduct and the relationship of the parties. Under this implied

contract, all Yardi information Entrata obtained was to be kept confidential and

used only to resolve the specific technical issues for which the information was

provided. Entrata was prohibited from using this confidential information for any

other purpose, including to develop a competing property management accounting

system.

II. ELEMENTS OF YARDI’S CLAIMS

A. Claim 1: Copyright Infringement

Elements:

1. Yardi is the owner of each of the copyrights; and

2. Entrata copied original elements of the copyrighted works.

Authority: Ninth Circuit Manual of Model Civil Jury Instructions 17.0; 17 U.S.C.

§ 101 et seq.



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Selected Evidence in Support: Yardi owns each of the copyrights in the

Voyager software application, as evidenced by copyright registration certificates.

Yardi created the Voyager software application independently through original and

creative expression. The Yardi Voyager 5.0 and Yardi Voyager 6.0 computer

programs, including screen displays such as the Yardi Box Score, contain original

and copyrightable elements. This will be established by Yardi fact and expert

witnesses, as well as by screenshots of the displays themselves.

Testimony from Entrata’s own witnesses, along with email and other

documentary evidence, will show that Entrata illicitly and improperly obtained

copies of Yardi’s Voyager software application, including through deceptive means

from Yardi’s customers. Entrata copied the Voyager software application onto

Entrata servers and improperly provided access to hundreds of Entrata employees.

Entrata improperly copied and used its illicitly obtained copies of the Voyager

software application in hundreds of sales demonstrations for prospective Entrata

customers, thereby improperly gaining sales and profits.

Entrata copied protected elements of Yardi’s Voyager software application

and incorporated those elements into the Entrata Core software. There is

substantial similarity between the Yardi Voyager 5.0 and Yardi Voyager 6.0

computer programs, including the Yardi Box Score screen displays, and the Entrata

Core computer program and its Box Score screen displays. This will be established

by Yardi fact and expert witnesses, as well as by screenshots of the displays

themselves.

Entrata had no license, implied or otherwise, to use the Voyager software

application, as evidenced by among other things Entrata’s concealment of its

possession of the Voyager software application from Yardi, Entrata’s extensive

efforts to improperly obtain copies of the Voyager software application through

customers rather than through Yardi directly, and Entrata’s extensive campaign of

deception and concealment when Yardi began inquiring directly of Entrata whether



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Entrata in fact had obtained copies of the Voyager software application. This

deception and concealment also included Entrata’s CEO smuggling a server

containing a copy of the Voyager software application from Utah to India where the

vast majority of Entrata’s developers work. This will be established by testimony

from Entrata and Yardi fact witnesses, Entrata’s internal emails, and

communications between Yardi and Entrata in which Entrata repeatedly made

misrepresentations.

Yardi therefore is entitled to actual damages, including a hypothetical license

fee, disgorgement of Entrata’s profits, and/or statutory damages for Entrata’s

infringement of the Yardi Voyager 5.0 and Yardi Voyager 6.0 computer programs,

including screen displays such as the Yardi Box Score.

B. Claim 2: Misappropriation of Trade Secrets

Elements:

1. Yardi owns at least one of the alleged trade secrets (for purposes of

trial, Yardi is proceeding on trade secrets 1, 2, 3, 5, 8, 10, 25, and 27);

2. The Yardi trade secret was a trade secret at the time of the

misappropriation;

3. Entrata improperly acquired or used Yardi’s trade secret;

4. Yardi was harmed or Entrata was unjustly enriched; and

5. Entrata’s acquisition or use was a substantial factor in causing Yardi’s

harm or Entrata to be unjustly enriched.

Authority: CACI 4401; Civil Code § 3426-3426.11; Altavion, Inc. v. Konica

Minolta Sys. Lab., Inc., 226 Cal. App. 4th 26, 43 (2014).

Selected Evidence in Support: Yardi owned trade secrets 1, 2, 3, 5, 8, 10, 25,

and 27, and these trade secrets were not generally known in the trade. Yardi took

reasonable measures to protect the secrecy of these trade secrets, including but not

limited to by using license agreements, non-disclosure agreements, and username

and password protection. The trade secrets employed in the Voyager software



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program were unique and were considered trade secrets at the time of the

misappropriation. Yardi will present this information through Yardi fact and expert

witnesses.


documentary evidence, will show that Entrata illicitly and improperly acquired

copies of Yardi’s Voyager software application, including through deceptive means

from Yardi’s customers. Entrata copied the Voyager software application onto

Entrata servers and improperly provided access to hundreds of Entrata employees,

including to Entrata’s developers. Internal Entrata emails, texts, development

documents, and handwritten notes from Entrata’s developers will show that

Entrata’s developers, including Entrata’s CEO, improperly acquired and used

Yardi’s Voyager software applications and the trade secrets they contained,

including by extensively viewing, studying, and analyzing the software during

Entrata’s development of Entrata Core, and by implementing Yardi’s trade secrets

into Entrata Core.

For the same reasons set forth in Section A, above, Entrata had no license,

implied or otherwise, to use the Voyager software application. Entrata’s use of

Yardi’s trade secrets, including the Yardi Voyager software application, resulted in

sales and revenue for Entrata. Yardi is entitled to actual damages, including

hypothetical license fee damages, and disgorgement of Entrata’s profits, for

Entrata’s willful misappropriation of Yardi’s trade secrets.

C. Claim 3: Breach of Express Contract

Elements:

1. Yardi and Entrata entered into the 2006 NDA contract;

2. All conditions required by the contract for Entrata’s performance had

occurred or were excused;

3. Entrata breached the contract; and

4. Yardi was harmed by that breach.



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Authority: CACI 303; Richman v. Hartley, 224 Cal. App. 4th 1182, 1186 (2014);

Brown v. Grimes, 192 Cal. App. 4th 265, 277-79 (2011) (dependence of covenants

is a matter of contract construction).

Selected Evidence in Support: The February 24, 2006 Non-Disclosure

Agreement between Yardi and Entrata is a valid express contract. In it, the parties

agreed, among other things, to preserve the confidentiality of Yardi’s software

programs and related intellectual property, and to not duplicate, reverse engineer, or

use Yardi’s software and intellectual property in competition with Yardi.


documentary evidence, will show that Entrata breached this agreement by illicitly

and improperly acquiring copies of Yardi’s Voyager software application, including

through deceptive means from Yardi’s customers, and then duplicating and reverse

engineering it, and using it to create products that compete with Yardi’s. Entrata

copied the Voyager software application onto Entrata servers and improperly

provided access to hundreds of Entrata employees, including to Entrata’s

developers. Testimony from Entrata’s own witnesses, internal Entrata emails and

documents, and Entrata’s discovery responses will establish that Entrata improperly

copied and used its illicitly obtained copies of the Voyager software application in

hundreds of sales demonstrations for prospective Entrata customers of Entrata’s

“portal” products. Internal Entrata emails, texts, development documents, and

handwritten notes from Entrata’s developers will show that Entrata also improperly

used Yardi’s Voyager software applications, and the trade secrets and confidential

information they contained, including by extensively viewing, studying, and

analyzing the software during Entrata’s development of Entrata Core, and by

implementing Yardi’s trade secrets and confidential information into Entrata Core,

a competing product.


implied or otherwise, to use the Voyager software application or Yardi’s



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intellectual property in this fashion. Entrata also was not excused from performing

under the contract, including in that Yardi did not breach the contract. Entrata’s

unlicensed use of Yardi’s trade secrets and confidential information, including the

Yardi Voyager software application, resulted in sales and revenue for Entrata,

causing Yardi damages.

D. Claim 4: Breach of Implied in Fact Agreement

Elements:

1. Yardi and Entrata entered into a contract based on the conduct and

relationship of the parties;

2. All conditions required by the contract for Entrata’s performance had

occurred or were excused;

3. Entrata did something that the contract prohibited it from doing; and

4. Yardi was harmed by that failure.

Authority: Judicial Council of California Civil Jury Instructions 303; Richman v.

Hartley, 224 Cal. App. 4th 1182, 1186 (2014); Brown v. Grimes, 192 Cal. App. 4th

265, 277-79 (2011) (dependence of covenants is a matter of contract construction);

Judicial Council of California Civil Jury Instructions 305; Civil Code § 1621;

Maglica v. Maglica, 66 Cal. App. 4th 442, 455 (1998); Div. of Labor Law

Enforcement v. Transatlantic Transportation Co., 69 Cal. App. 3d 268, 275 (1977).

Selected Evidence in Support: Yardi and Entrata entered into an implied

contract that all information Yardi provided to Entrata, including in the course of

Yardi’s offering technical support and assistance to Entrata in connection with the

servicing of mutual customers, was to be kept confidential by Entrata, and used

only for the purpose of resolving the specific technical issues for which the

information was provided. The implied contract did not allow Entrata to use

Yardi’s confidential information in competition with Yardi. Yardi will present

evidence of this implied contract through emails and other communications

between the parties, and through testimony of Yardi and Entrata witnesses.



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documentary evidence, will show that Entrata breached this agreement by illicitly

and improperly acquiring copies of Yardi’s Voyager software application, including

through deceptive means from Yardi’s customers, and using Voyager to compete

with Yardi. Entrata copied the Voyager software application onto Entrata servers

and improperly provided access to hundreds of Entrata employees, including to

Entrata’s developers. Entrata improperly copied and used its illicitly obtained

copies of the Voyager software application in hundreds of sales demonstrations for

prospective Entrata customers of Entrata’s “portal” products. Internal Entrata

emails, texts, development documents, and handwritten notes from Entrata’s

developers will show that Entrata also improperly used Yardi’s Voyager software

applications, and the trade secrets and confidential information they contained,

including by extensively viewing, studying, and analyzing the software during

Entrata’s development of Entrata Core, and by implementing Yardi’s trade secrets

and confidential information into Entrata Core, a competing product.


implied or otherwise, to use the Voyager software application or Yardi’s

intellectual property in this fashion. Entrata also was not excused from performing

under the contract, including in that Yardi did not breach the contract. Entrata’s

unlicensed use of Yardi’s trade secrets and confidential information, including the

Yardi Voyager software application, resulted in sales and revenue for Entrata.

Yardi therefore is entitled to damages.

III. ENTRATA’S AFFIRMATIVE DEFENSES

Yardi understands Entrata plans to pursue the following affirmative defenses

at trial:

Second Affirmative Defense: Yardi’s claims are barred due to waiver;

Tenth Affirmative Defense: Yardi is estopped from asserting the claims

alleged against Entrata due to an express and/or implied license;



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Eleventh Affirmative Defense: Yardi’s claims are barred, in whole or in

part, by the doctrines of fair use, nominative fair use, and/or descriptive use;

Thirteenth Affirmative Defense: Yardi’s claims are barred by the doctrine

of copyright misuse;

Fourteenth Affirmative Defense: Yardi’s claims are barred by the merger

doctrine;

Twenty-second Affirmative Defense: Yardi’s claims are barred, in whole or

in part, by the doctrine of unclean hands;

Twenty-third Affirmative Defense: Yardi’s claims are barred by applicable

statutes of limitations;

Thirty-first Affirmative Defense: Yardi’s implied contract claim is barred

by the statute of frauds, including provisions contained in Section 1624 of the

California Civil Code.

Entrata has indicated that the other defenses listed in its Answer (failure to

state a claim, no causation, non-infringement, no substantial similarity, failure to

identify trade secrets, independent development, readily ascertainable, inadequate

efforts to maintain secrecy, no misappropriation, no access to copyrighted work,

failure of condition precedent, lack of certainty, and lack of performance) will be

pursued “at trial based on Yardi’s inability to prove the required elements of its

claims,” and thus do not have elements separate from those set forth above.

IV. ELEMENTS REQUIRED TO ESTABLISH ENTRATA’S

AFFIRMATIVE DEFENSES AND YARDI’S KEY EVIDENCE IN

OPPOSITION [L.R. 16.4-1 (e), (f)]

Second Affirmative Defense: Waiver

Elements: To show waiver, Entrata has the burden of proving the following

elements by clear and convincing evidence:

1. That Yardi knew of its rights to assert its claims; and

2. Yardi voluntarily or intentionally relinquished those rights.



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Source: CACI 336; Hecht v. Harris, Upham & Co., 430 F.2d 1202, 1208

(9th Cir. 1970).

Key Evidence In Opposition: Entrata will not be able to satisfy its burden of

proof in support of this defense. Nonetheless, Yardi intends to offer documents and

testimony at trial, including testimony of Yardi employees, rebutting this defense.

This evidence will include, among other things, evidence showing that Yardi did

not know of Entrata’s misconduct, that Entrata undertook extensive efforts to

conceal its misconduct from Yardi, and that Entrata repeatedly made affirmative

misrepresentations to Yardi about Entrata’s conduct.

Tenth Affirmative Defense: Implied License

Elements: To show implied license, Entrata must prove the following

elements:

1. The defendant requested that the plaintiff create a work,

2. The plaintiff made that particular work and delivered it to the

defendant, and

3. The plaintiff intended that the defendant copy, distribute, use, modify,

or retain the plaintiff’s work.

Source: 17 U.S.C. §204; Reinicke v. Creative Empire LLC, 38 F.Supp.3d

1192, 1199 (S.D. Cal. 2014), aff'd, No. 14-56467, 2016 WL 5845734 (9th Cir. Oct.

6, 2016); Ninth Circuit Model Jury Instruction 17.24.

Key Evidence In Opposition: Entrata will not be able to meet its burden of

proof on this defense, as there is no evidence supporting it. Moreover, Yardi

intends to offer at trial evidence showing there was no express or implied license of

any kind, let alone one that would permit Entrata to use the stolen Voyager

application to market and sell Entrata products, or to develop a competing property

management software program. Yardi also will offer evidence to show that

Entrata’s conduct was inconsistent with Yardi giving Entrata any alleged license

including, among other things, evidence showing that Yardi did not know of



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Entrata’s misconduct, that Entrata undertook extensive efforts to conceal its

misconduct from Yardi, and that Entrata repeatedly made affirmative

misrepresentations to Yardi about Entrata’s conduct.

Eleventh Affirmative Defense: Fair Use

Elements: To establish fair use, Entrata must show it used the copyrighted

work in a reasonable way under the circumstances, without the consent of the

copyright owner, that would advance the public interest. Based on its discovery

responses, Entrata appears to contend its conduct was protected fair use “because

the amount of copying, if any, was minor; the expressive component of the

allegedly copyrighted work, if any, was minor; the copying, if any, had an

insubstantial effect on the market for the allegedly copyrighted work; and the

alleged copying, if any, was incidental to efforts to access functional elements

legitimately.” Entrata Interrogatory Response 19. Entrata has the burden of

proving this defense by clear and convincing evidence. In determining whether the

use made of the work was fair, the jury should consider the following:

1. The purpose and character of the use, including whether the use is of a

commercial nature or is for nonprofit educational purposes;

2. The nature of the copyrighted work;

3. The amount and substantiality of the portion used in relation to the

copyrighted work as a whole; and

4. The effect of the use upon the potential market for or value of the

copyrighted work.

As part of the analysis under the first element, Entrata must establish that its use of

the copyrighted work was the only way to gain access to the ideas and functional

elements embodied in a copyrighted computer program, and that there was a

legitimate reason for seeking such access.

Source: Ninth Circuit Model Jury Instruction 17.21; Sony Computer Entm’t,

Inc. v. Connectix Corp., 203 F.3d 596, 602 (9th Cir. 2000).



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Key Evidence In Opposition: Entrata has no evidence supporting this

defense, let alone any “clear and convincing” evidence. In opposition, Yardi will

show at trial that Entrata’s use of the Voyager application far exceeds the bounds of

the fair use doctrine. Entrata used stolen copies of the Voyager application to help

Entrata market and sell its products, without any legitimate reason for doing so.

Entrata also used stolen copies of the Voyager application to develop a property

management software program that competed directly with Yardi’s Voyager

application. Entrata’s secretive copying and use of Voyager, and Entrata’s removal

of the stolen copy to India where the majority of Entrata’s developers were located,

was undertaken for the illegitimate purpose of using Voyager to assist in the

development of a directly competing product. Moreover, Entrata has itself

repeatedly represented that a copy of the Voyager application was not necessary for

Entrata to perform its software development work. Instead, the evidence will show

that Entrata stole and used the Voyager application so that it would have an

improper and illegal “shortcut” to make its sales and development process easier.

Thirteenth Affirmative Defense: Copyright Misuse

Elements: To establish copyright misuse, Entrata must prove that Yardi used

its copyrights to secure an exclusive right or limited monopoly not granted by the

Copyright Office, such as to control areas or products not covered by Yardi’s

copyrights. In its discovery responses, Entrata claimed the copyright misuse

defense applies “for reasons that include Yardi’s attempt to use the copyrights that

correspond to its products to limit competition in the property management industry

in a way that is beyond the limited scope of Yardi’s copyrights.” Entrata Response

to Interrogatory No. 20.

Source: Comment to Ninth Circuit Model Jury Instruction 17.23, Practice

Management Information Corp. v. American Medical Association, 121 F.3d 516,

520 (9th Cir. 1997); Apple Inc. v. Psystar Corp., 658 F.3d 1150, 1157 (9th Cir.



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2011); Alcatel USA, Inc. v. DGI Technologies, Inc., 166 F.3d 772, 793 (5th Cir.

1999).

Key Evidence In Opposition: There is no evidence that Yardi used its

copyright for the Voyager application to secure an exclusive right or limited

monopoly in the area of property management software. If necessary, Yardi will

present evidence at trial showing Yardi’s extensive record of cooperation with other

software developers in the property management industry, including through

Yardi’s interface programs that allow numerous other vendors to create and sell

products that work with the Voyager application. Indeed, despite the evidence in

this case that shows Entrata’s illegal and improper use of the Voyager application,

Yardi thus far has continued to allow Entrata products to interface with the Voyager

application, subject to appropriate data security safeguards. Yardi also will be

prepared to offer evidence at trial of the extensive and vigorous competition in the

property management software industry.

Fourteenth Affirmative Defense: Merger

Elements: To show merger, Entrata must prove each of the following

elements:

1. That there is only one way to express each of the ideas contained in

Yardi’s copyrighted works; and

2. Entrata’s version of the content contained in Yardi’s copyrighted

works is not “nearly identical” to Yardi’s version of the content.

Source: Ninth Circuit Model Jury Jury Instruction 17.3 (Supplemental

Instruction); Apple Computer, Inc. v. Microsoft Corp., 35 F.3d 1435, 1444 (9th Cir.

1994); Ets-Hokin v. Skyy Spirits, Inc., 225 F.3d 1068, 1082 (9th Cir. 2000).

Key Evidence In Opposition: Yardi will oppose any claim of merger by

presenting fact and expert evidence that there are many different ways to express

the ideas contained in the Voyager application, including in the Yardi “Box Score”

summary report, such that the “idea and its expression” concerning the Box Score



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are different. Yardi will show that, in fact, other competitors in the industry have

conceptually similar summary reports that have significantly different expressions

than Yardi’s Box Score report. Entrata’s Box Score, however, is virtually identical

in its expression and appearance to Yardi’s.

Twenty-second Affirmative Defense: Unclean Hands

Elements: To show unclean hands, Entrata must prove each of the following

elements by a preponderance of the evidence:

1. Yardi engaged in inequitable conduct;

2. Yardi’s conduct violated conscience, good faith, or other equitable

principles; and

3. Yardi’s inequitable conduct relates directly to the transaction

concerning which the complaint was made, i.e., the conduct pertains to

the very subject matter involved and affects the equitable relations

between the litigants.

Source: Pom Wonderful LLC v. Welch Foods, Inc., 737 F.Supp.2d 1105,

1109 (C.D. Cal. 2010); Advanced Thermal Scis. Corp. v. Applied Materials, Inc.,

2010 WL 2015236, at *55 (C.D. Cal. May 18, 2010); Fuddruckers, Inc. v. Doc’s

BR Others, Inc., 826 F.2d 837, 847 (9th Cir. 1987); Fibreboard Paper Products.

Corp. v. East Bay Union of Machinists, Local 1304, 227 Cal.App.2d 675, 728, 39

Cal.Rptr. 64 (1964).

Key Evidence In Opposition: Yardi will oppose any claim of unclean hands.

As Yardi understands it, Entrata will claim that Yardi’s review and inspection of

the Entrata custom interface source code amounts to unclean hands sufficient to

deny Yardi’s claims. A motion in limine currently is pending on this issue. In

short, however, Yardi opposes the unclean hands defense in that Yardi was

permitted to inspect the custom interface source code pursuant to Entrata’s explicit

agreement and consent that Yardi could do so, including as a condition of Yardi’s



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agreeing to host the custom interface on the Yardi network, or “cloud.” Yardi had

to have the ability to inspect any code, including the custom interface code, that

would be directly placed into Yardi’s network, for data security reasons at a

minimum. Moreover, Yardi’s inspection of the custom interface – essentially, a

small (and relative to the Voyager application, microscopic), non-customer facing

utility program that acts only as a data translator – is entirely different in intent and

consequence than Entrata’s wrongful acquisition and use of Yardi’s flagship

Voyager application, including to develop a competing product. There also is no

evidence that Yardi did anything other than inspect Entrata’s code; Yardi created no

competing interface or otherwise used the code for any purpose whatsoever.

Entrata, on the other hand, copied, studied, analyzed, and/or used the Voyager

application nearly every business day for years, including to sell Entrata’s products

and to develop a competing property management software application. The

unclean hands defense is simply not relevant here.

Twenty-third Affirmative Defense: Statute of Limitations - Copyright

Elements: The statute of limitations for copyright claims affects the time

period of the damages Yardi may be awarded. Generally, the jury can consider

acts of infringement that occurred after October 21, 2010 (three years before Yardi

brought this action). If, however, Yardi did not know of the infringement until after

October 21, 2010, and that lack of knowledge was reasonable under the

circumstances, then the jury may include damages for acts of infringement that

occurred before October 21, 2010.

Source: 17 U.S.C. § 507(b); Polar Bear Prods., Inc. v. Timex Corp., 384

F.3d 700, 706 (9th Cir. 2004); Oracle USA, Inc. v. Rimini St., Inc., 2014 WL

3956271 (D. Nev. Aug. 13, 2014) (plaintiff cannot be charged with knowledge of

competitor’s infringement, where competitor gave assurances it was not violating

intellectual property rights); cf. Bernson v. Browning-Ferris Indus., 7 Cal. 4th 926,

931, 934 & n.3 (1994) (concealment prevents limitation period from running).



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Key Evidence In Opposition: Yardi will show at trial that it neither knew or

should have known of Entrata’s infringement until well after October 21, 2010, and

that Yardi’s lack of knowledge was reasonable under the circumstances. Yardi will

present evidence of, among other things, Entrata’s concealment of its possession of

the Voyager software application from Yardi, Entrata’s efforts to improperly obtain

copies of the Voyager software application through customers rather than through

Yardi directly, and Entrata’s extensive campaign of deception and concealment

when Yardi began inquiring directly of Entrata whether Entrata in fact had obtained

copies of the Voyager software application. This deception and concealment also

included Entrata’s CEO smuggling a server containing a copy of the Voyager

software application out of the country and to India where the vast majority of

Entrata’s developers work. Entrata’s developers also practiced deception during

their development of the competing Entrata Core product, including in their

interactions with third party competitors from whom Entrata developers were

seeking access to competitor information.

Twenty-third Affirmative Defense: Statute of Limitations –

Misappropriation of Trade Secrets

Elements: To succeed on a statute of limitations defense to trade secret

misappropriation, Entrata must prove that the claimed misappropriation of Yardi’s

trade secrets occurred before October 21, 2010. This defense fails, however, if

Yardi proves that before October 21, 2010, Yardi did not discover, nor with

reasonable diligence should have discovered, facts that would have caused a

reasonable person to suspect that Entrata had misappropriated Yardi’s information.

Source: CACI 4421.


should have known of Entrata’s misappropriation until well after October 21, 2010,

and that Yardi’s lack of knowledge was reasonable under the circumstances. Yardi



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will present essentially the same evidence in support of its claims as is set forth

above in the “Statute of Limitations – Copyright” section.

Twenty-third Affirmative Defense: Statute of Limitations – Breach of

Contract (Express)

Elements: To succeed on a statute of limitations defense to Yardi’s breach

of contract claim, Entrata must prove that Yardi’s claimed harm occurred before

October 21, 2009. However, “the delayed discovery” rule allows filing of a lawsuit

beyond this limitations period if Yardi did not discover, and could not have

reasonably discovered, the misconduct at the time it occurred.

Source: CACI 338 and 455; and Gryczman v. 4550 Pico Partners, Ltd., 107

Cal. App. 4th 1, 5, 680, 681 (2003) (discovery rule may be applied to breaches of

contract which can be, and are, committed in secret and, moreover, where the harm

flowing from those breaches will not be reasonably discoverable by plaintiffs until

a future time).


should have known of Entrata’s breach until well after October 21, 2009, and that

Yardi’s lack of knowledge was reasonable under the circumstances. Yardi will

present essentially the same evidence in support of its claims as is set forth above in

the “Statute of Limitations – Copyright” section.

Twenty-third Affirmative Defense: Statute of Limitations – Breach of

Contract (Implied In Fact)

Elements: To succeed on a statute of limitations defense to Yardi’s breach

of implied contract claim, Entrata must prove that Yardi’s claimed harm occurred

before October 21, 2011. However, “the delayed discovery” rule allows filing of a

lawsuit beyond this limitations period if Yardi did not discover, and could not have

reasonably discovered, the misconduct at the time it occurred.

Source: CACI 338; CACI 455; Gryczman v. 4550 Pico Partners, Ltd., 107

Cal. App. 4th 1, 5, 680, 681 (2003) (discovery rule may be applied to breaches of



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contract which can be, and are, committed in secret and, moreover, where the harm

flowing from those breaches will not be reasonably discoverable by plaintiffs until

a future time).


should have known of Entrata’s breach until well after October 21, 2011, and that

Yardi’s lack of knowledge was reasonable under the circumstances. Yardi will

present essentially the same evidence in support of its claims as is set forth above in

the “Statute of Limitations – Copyright” section.

Thirty-first Affirmative Defense: Statute of Frauds

Elements: On the affirmative defense of statute of frauds, Entrata has the

burden of proving each of the following elements:

1. That the contract Yardi seeks to enforce, or some note or

memorandum thereof, was not in writing; and

2. By its terms, the contract Yardi seeks to enforce was not to be

performed within a year from the contract’s creation.

Source: Cal. Civ. Code § 1624.

Key Evidence In Opposition: Yardi will offer evidence at trial that it

partially performed under this implied contract, and also that Entrata is estopped

from denying the existence of this implied contract. This exempts the parties’

implied contract from the statute of frauds. Yardi’s partial performance included

Yardi’s providing Entrata confidential business and technical information from at

least October 2004 through the date Yardi filed this suit, to assist Entrata’s

development of its custom interface that would allow Entrata’s portal products to

work with the Voyager database. The implied contract included the agreement that

Entrata would not use Yardi’s confidential information to compete with Yardi,

including at a minimum a prohibition against Entrata’s using Yardi’s confidential

information to create a competing property management accounting software

product. Instead, Entrata was to use all Yardi information solely for the purpose of



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resolving the specific technical issues for which the information was provided.

This contract is manifested in the course of the parties’ interactions from October

2004 forward, including interactions in which the parties worked together to enable

Entrata’s portal products to interact with the Voyager database. Entrata’s conduct

in these interactions similarly estops it from denying the existence of this implied

contract and invalidates its claimed statute of frauds defense.

V. DEFENDANT’S COUNTERCLAIMS

A. Summary of Entrata’s Counterclaims [L.R. 16.4-1 (d)]

Yardi believes that Entrata plans to pursue the following counterclaims at

trial:

Counterclaim 1: Entrata seeks a declaratory judgment that Entrata did not

infringe any valid Yardi copyrights.

Counterclaim 2: Entrata seeks a declaratory judgment that Entrata did not

misappropriate any Yardi trade secrets.

B. Elements Required to Establish Entrata’s Counterclaims & Yardi’s Key

Evidence in Opposition [L.R. 16.4-1 (e), (f)]

Counterclaim 1: Declaratory Judgment - Copyright

Elements: To be entitled to declaratory relief, Entrata must prove the

following:

1. There is a justiciable controversy regarding the parties’ respective

rights;

2. This dispute is between parties whose interests are adverse, and the

issues are ripe for judicial determination and declaratory relief; and

3. Yardi does not have any valid and protectable copyrights, and/or

Entrata has not infringed any protectable expression under the

Copyright Act.

Source: 28 U.S.C. § 2201(a); 17 U.S.C. § 101 et seq.



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Key Evidence In Opposition: Entrata’s claim for declaratory judgment is, in

essence, a request that Court rule on Yardi’s copyright claim and Entrata’s defenses

to it. The evidence Yardi will present to defeat this request thus is the same Yardi

will present to prosecute its claim for copyright infringement, and to rebut Entrata’s

defenses to that claim.

Counterclaim 2: Declaratory Judgment – Misappropriation of Trade

Secrets

Elements: To be entitled to declaratory relief, Entrata must prove the

following:

1. There is a justiciable controversy regarding the parties’ respective

rights;

2. This dispute is between parties whose interests are adverse, and the

issues are ripe for judicial determination and declaratory relief; and

3. Entrata has not misappropriated any Yardi trade secrets, and/or Yardi

has not taken adequate steps to protect its alleged trade secrets.

Source: 28 U.S.C. § 2201(a); Judicial Council of California Civil Jury

Instructions 4401; Civil Code § 3426-3426.11; Altavion, Inc. v. Konica Minolta

Sys. Lab., Inc., 226 Cal. App. 4th 26, 43 (2014).

Key Evidence In Opposition: This claim for declaratory judgment is, in

essence, a request that the Court rule on Yardi’s trade secrets claim and Entrata’s

defenses to it. The evidence Yardi will present to defeat this request for declaratory

judgment thus is the same Yardi will present to prosecute its claim for trade secrets

misappropriation, and to rebut Entrata’s defenses to it.

VI. EXPECTED EVIDENTIARY ISSUES

The primary evidentiary issues anticipated by Yardi are set forth in Yardi’s

four motions in limine. Those four motions in limine address the following:



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1. Entrata should be prevented from offering testimony from Melissa A.

Bennis, CPA, Entrata’s damages expert, regarding disgorgement of

profits and unjust enrichment.

2. Entrata should be prevented from offering or eliciting legal conclusion

testimony from Anant Yardi regarding an alleged breach of 2006 NDA

contract, and ancillary and related evidence of Yardi’s alleged breach

of that contract.

3. Entrata should be prevented from arguing or offering evidence

concerning features of property management and other software

programs not produced during discovery.

4. Entrata should be prevented from arguing or offering evidence that (1)

Yardi has amended its trade secret designations, including by

withdrawing certain alleged trade secrets; and (2) the existence of the

previously alleged trade secrets, any misappropriation of those alleged

trade secrets, and any alleged discovery thereof.

Yardi also anticipates evidentiary issues associated with Entrata’s exhibits.

Yardi has objected to several Entrata exhibits as being irrelevant and/or wasting the

jury’s time and confusing the issues in violation of Federal Rule of Evidence 403.

In summary, the exhibits Yardi takes issue with include:

(a) Exhibits relating to routine communications between the parties

regarding Yardi’s implementation and troubleshooting of the Entrata custom

interface on Yardi’s cloud. Entrata has included numerous exhibits on this topic on

Entrata’s list and, in Yardi’s view, such a large number of exhibits on this topic will

waste the jury’s time, as these interactions are not relevant to Yardi’s contentions,

or to Entrata’s defenses. In particular, Yardi does not believe communications

regarding Entrata’s access to the Voyager database – something that is not at issue

in this case – is relevant. Yardi allowed Entrata to have access to Yardi databases,

pursuant to NDAs and the parties’ implied agreement, for the purpose of



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developing the custom interface. The exhibits at issue all appear to focus on that

aspect of the parties’ relationship.

(b) Exhibits relating to Yardi expressing competitive concerns about

Entrata’s portal business. Entrata has included numerous exhibits on this topic and,

in Yardi’s view, they will waste the jury’s time and confuse the issues. Whether

Yardi had competitive concerns regarding the portal business is not, in Yardi’s

view, relevant to the issue of whether Entrata violated Yardi’s copyrights,

misappropriated Yardi’s trade secrets, or breached the NDA and/or the parties’

implied contract that they would not misuse their confidential business and

technical information.

Regardless, Yardi will continue to work with Entrata in an effort to resolve

these concerns and to agree on the admissibility of as many exhibits as possible.

VII. EXPECTED LEGAL ISSUES

Yardi does not currently know of any specific legal issues relevant to trial,

other than those that will be addressed in the parties’ jury instructions.

VIII. BIFURCATION OF ISSUES

Yardi does not anticipate seeking bifurcation of any issues in this case that

are triable by right to the jury, and does not believe that bifurcation is necessary as

to any issues triable by right to the jury. For clarity’s sake, Yardi, does, however,

believe that the issues identified as not triable to a jury in Section IX, infra, should

be heard separately by the Court after the jury’s verdict is entered.

IX. JURY TRIAL

Both Yardi and Entrata have timely demanded a jury trial as provided by

Federal Rule of Civil Procedure 38 and Local Rule 38-1. All issues presented in

this case should be heard by the jury except: Yardi’s requests for injunctive relief;

any award of attorneys’ fees and costs; and Entrata’s assertions of bad faith or

inequitable conduct.



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X. ATTORNEYS’ FEES

Yardi seeks its attorneys’ fees and costs in this action, including pursuant to

17 U.S.C. § 505.

XI. NARROWING OF ISSUES

Yardi is pursuing at trial trade secrets 1, 2, 3, 5, 8, 10, 25, and 27. It is not

pursuing any of the remaining alleged listed trade secrets in its Fourth Amended

Trade Secret disclosure. Yardi also will focus its copyright claim on Entrata’s

literal copying of the Voyager application, including by running the Voyager

application in Entrata’s product demonstrations, and on the Box Score report in the

parties’ respective software programs.

Yardi does not know whether Entrata intends to withdraw any of its

affirmative defenses.

Dated: November 18, 2016 NIXON PEABODY LLP

By /s/Jason GonzalezJason P. Gonzalez Shawn G. Hansen Jessica N. Walker Neal J. Gauger Attorneys for Plaintiff YARDI SYSTEMS, INC.


Jason P. Gonzalez (SBN 178768) Robert A. Weikert (SBN ... · used Yardi’s Voyager software...

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