Digital Envoy Inc., v. Google Inc.,

Filing 261

MOTION for Summary Judgment Google Inc.'s Notice of Motion and Motion for Partial Summary Judgment Regarding Digital Envoy, Inc.'s Damages Claims; Memorandum in Support Thereof filed by Google Inc.,, Google Inc.,. Motion Hearing set for 9/21/2005 09:30 AM in Courtroom #4, 5th Floor, San Jose. (Attachments: # 1 Proposed Order)(Kramer, David) (Filed on 8/17/2005)

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Digital Envoy Inc., v. Google Inc., Doc. 261 Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 1 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DAVID H. KRAMER, State Bar No. 168452 (dkramer@wsgr.com) DAVID L. LANSKY, State Bar No. 199952 (dlansky@wsgr.com) WILSON SONSINI GOODRICH & ROSATI Professional Corporation 650 Page Mill Road Palo Alto, CA 94304-1050 Telephone: (650) 493-9300 Facsimile: (650) 565-5100 Attorneys for Defendant/Counterclaimant Google Inc. UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION DIGITAL ENVOY, INC., Plaintiff/Counterdefendant, v. GOOGLE INC., Defendant/Counterclaimant. ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) CASE NO.: C 04 01497 RS GOOGLE INC.'S NOTICE OF MOTION AND MOTION FOR PARTIAL SUMMARY JUDGMENT REGARDING DIGITAL ENVOY, INC.'S DAMAGES CLAIMS; MEMORANDUM IN SUPPORT THEREOF Judge: Courtroom: Date: Time: Hon. Richard Seeborg 4, 5th Floor September 21, 2005 9:30 a.m. 2692762_4.DOC GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS Dockets.Justia.com Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 2 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 IV. B. III. TABLE OF CONTENTS Page NOTICE OF MOTION AND MOTION ........................................................................................ 1 MEMORANDUM OF POINTS AND AUTHORITIES ................................................................ 1 I. II. INTRODUCTION...............................................................................................................1 BACKGROUND.................................................................................................................3 The Parties' Agreement.......................................................................................................3 Google's Understanding of the Agreement.........................................................................5 Google's Advertising Programs .............................................................................. 6 AdWords ..................................................................................................... 6 AdSense.......................................................................................................7 ARGUMENT ...................................................................................................................... 8 A. Digital Envoy's Damages Claims Are Barred and/or Severely Circumscribed by the Limitation of Liability Clauses in the License Agreement. .............................................................................................................. 8 1. 2. Digital Envoy Is Precluded from Recovering Damages in This Case Because It Cannot Show Willful Misconduct by Google ........................... 9 To the Extent Digital Envoy Is Permitted Any Recovery, It Is Limited to Amounts Paid by Google to Digital Envoy Under the License Agreement....................................................................................10 Digital Envoy Cannot Establish the Requisite Causal Nexus Between Google's Supposed Misuse of Digital Envoy's Trade Secrets and Any Loss It Suffered or Gain that Google Supposedly Enjoyed...........................................13 1. 2. Digital Envoy Cannot Establish Any Actual Loss Caused by Google's Supposed Misappropriation.......................................................15 Digital Envoy Cannot Establish Any Unjust Enrichment Caused by Google's Supposed Misappropriation.......................................................18 a. b. Google Did Not Earn Any Direct Revenue from Digital Envoy's Data. ................................................................................ 18 Digital Envoy Cannot Trace Any of Google's AdSense Revenue to Google's Use of Digital Envoy's Data.......................18 CONCLUSION ................................................................................................................. 20 2692762_4.DOC GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS -i- Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 3 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Page(s) CASES Cambridge Elecs. Corp. v. MGA Elecs., Inc., 227 F.R.D. 313 (C.D. Cal. 2004) .........................17 Celotex Corp. v. Catrett, 477 U.S. 317 (1986)................................................................................8 Cline v. Industrial Maint. Eng'g & Contracting Co., 200 F.3d 1223 (9th Cir. 2000) .................... 8 Computer Sciences Corp. v. Computer Assocs. Int'l, Inc., Nos. CV 98-1374 WMB SHX, CV 98-1440-WMB SHX, 1999 WL 675446 (C.D. Cal. Aug. 12, 1999) .................. 14 Fedders Corp. v. Haier Am. Trading, LLC, No. 00 Civ. 5583(JSM), 2002 WL 519733 (S.D.N.Y. Apr. 14, 2002) ..................................................................................... 15 Gillespie v. Rawlings, 49 Cal. 2d 359 (1957)..................................................................................9 Hoopai v. Civil Serv. Comm'n, 106 Hawaii 205 (2004) ............................................................... 11 In re Bennett, 298 F.3d 1059 (9th Cir. 2002) .................................................................................. 8 In re Kinoshita & Co., 287 F.2d 951 (2d Cir. 1961) .....................................................................12 Inamed Corp. v. Kuzmak, 275 F. Supp. 2d 1100 (C.D. Cal. 2002)...............................................17 Lundin/Weber Co. LLC v. Brea Oil Co., 117 Cal. App. 4th 427 (2004).........................................8 Manetti-Farrow, Inc. v. Gucci Am., Inc., 858 F.2d 509 (9th Cir. 1988).......................................13 Mediterranean Enters., Inc. v. Ssangyong Corp., 708 F.2d 1458 (9th Cir. 1983) .................. 11, 12 Merrill v. Navegar, Inc., 26 Cal. 4th 465 (2001) .......................................................................... 15 Murphy Elecs., Inc. v. K.R. Anderson Co., 102 Wash. App. 1029, No. 45172-3-I, 2000 WL 1279302 (Wash. App. Sept. 11, 2000) .............................................................. 14 Name.Space, Inc. v. Network Solutions, Inc., 202 F.3d 573 (2d Cir. 2000)....................................4 National Micrographics Sys., Inc. v. Canon U.S.A., Inc., 825 F. Supp. 671 (D.N.J. 1993)..................................................................................................................................12 Picken v. Minuteman Press Int'l, Inc., 854 F. Supp. 909 (N.D. Ga. 1993).............................12, 13 Saelzler v. Advanced Group 400, 25 Cal. 4th 763 (2001).............................................................15 Sargent Fletcher, Inc. v. Able Corp., 110 Cal. App. 4th 1658 (2003) .......................................... 14 State Farm Fire and Cas. Co. v. Geary, 699 F. Supp. 756 (N.D. Cal. 1987) ................................. 8 Terra Int'l, Inc. v. Mississippi Chem. Corp., 119 F.3d 688 (8th Cir. 1997) ........................... 12, 13 Unilogic, Inc. v. Burroughs Corp., 10 Cal. App. 4th 612 (1992) ................................................. 18 GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS 2692762_4.DOC -ii- Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 4 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Warnaco Inc. v. VF Corp., 844 F. Supp. 940 (S.D.N.Y. 1994) ....................................................13 Wiz Tech., Inc. v. Coopers & Lybrand LLP, 106 Cal. App. 4th 1 (2003).....................................15 Woodson v. Everson, 61 Cal. App. 2d 204 (1943) .......................................................................... 9 STATUTES Cal. Civ. Proc. Code 1856............................................................................................................8 Cal. Civ. Code 3426.1(b)(2)(B)(ii).............................................................................................10 Cal. Civ. Code 3426.1(d) ........................................................................................................... 11 Cal. Civ. Code 3426.3(a)............................................................................................1, 14, 18, 20 RULES Fed. R. Civ. P. 26(a)......................................................................................................................17 Fed. R. Civ. P. 26(e)(1) ................................................................................................................. 17 Fed. R. Civ. P. 26(e)(2) ................................................................................................................. 17 Fed. R. Civ. P. 37(c)(1) ................................................................................................................. 17 Fed. R. Civ. P. 56 ............................................................................................................................ 1 Fed. R. Civ. P. 56(c)........................................................................................................................8 Fed. R. Civ. P. 56(d)........................................................................................................................8 MISCELLANEOUS WEBSTER'S NINTH NEW COLLEGIATE DICTIONARY 54 (1988)......................................................11 2692762_4.DOC GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS -iii- Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 5 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I. NOTICE OF MOTION AND MOTION PLEASE TAKE NOTICE that on September 21, 2005 at 9:30 a.m., defendant/counterclaimant Google Inc. ("Google") will move this Court pursuant to Fed. R. Civ. P. 56 for partial summary judgment in favor of Google: (1) that Digital Envoy, Inc.'s ("Digital Envoy") damages claims are barred and/or circumscribed by the limitation of liability clauses in the license agreement entered into between Google and Digital Envoy on November 30, 2000 and subsequently amended (the "License Agreement"); and (2) that Digital Envoy cannot establish the requisite causal nexus between Google's supposed misuse of Digital Envoy's trade secrets and any loss it suffered or gain that Google supposedly enjoyed and that Digital Envoy therefore is not entitled to any recovery under Cal. Civ. Code 3426.3(a). Google's motion is supported by the following memorandum, the accompanying declarations of David H. Kramer, Mark Rose, Susan Wojcicki, the argument of counsel and any other matters properly before the Court. MEMORANDUM OF POINTS AND AUTHORITIES INTRODUCTION In November 2000, Google and Digital Envoy entered into a relatively modest contract under which Google received the right to use Digital Envoy's geolocation data throughout its business in exchange for a few thousand dollars a month. Today, the parties have spent far more litigating over the interpretation of that contract than Google was required to pay in license fees during its four-year term. The reason for this extravagant litigation campaign is simple: Digital Envoy wrongly seeks to parlay its minor contract with Google into an enormous financial windfall. Based upon a made-for-litigation contract interpretation, Digital Envoy charges that Google violated the parties' agreement by using Digital Envoy's data to enhance the 2692762_4.DOC GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS -1- Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 6 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 geotargeting capabilities in Google's AdSense advertising program. Citing this alleged violation, Digital Envoy claims entitlement to untold millions of dollars either as compensation for its imagined loss of business, or to prevent Google's supposed unjust enrichment. These damages claims, however, suffer from two fatal deficiencies. First, Digital Envoy's claims are barred or greatly constrained by the two limitation of liability clauses in the parties' contract. Second, Digital Envoy cannot establish the required causal nexus between Google's alleged contract violation and the damages Digital Envoy claims. The Court is already familiar with the causation problems that pervade Digital Envoy's lost profits claim. Asked in interrogatories to provide evidence of the link between Google's alleged contractual violation and any lost licensing revenue, Digital Envoy came up with nothing. Not surprisingly, the Court recently held that Digital Envoy had failed to offer evidence of the requisite causal connection. Digital Envoy's inability to supply such evidence is no accident there is none; its theory is impossibly speculative. The same is true with respect to Digital Envoy's claim that Google was unjustly enriched by its supposed contractual violation. While Google has undoubtedly profited from its AdSense program, there is no way to attribute any portion of its profits from that program to the use of Digital Envoy's data. Indeed, Digital Envoy again failed to offer evidence of any such link in response to Google's interrogatories. Moreover, given the way in which Google used Digital Envoy's data solely to prevent ads from being shown Digital Envoy's theory makes no sense. Digital Envoy simply cannot demonstrate that any advertisement that Google displayed and earned revenue from was shown or clicked upon because of Digital Envoy's data. It thus cannot show that "but for" use of the data, Google would have earned lower profits. Digital Envoy's inability to establish causation dooms its claims for actual damages and unjust enrichment. But no matter what damages claim it puts forth, Digital Envoy cannot overcome two limitation of liability clauses in the parties' contract. These clauses were included in the agreement to address the circumstances presented here; one party seeking to take advantage of the other through litigation. 2692762_4.DOC GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS -2- Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 7 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The first contractual clause precludes the imposition of any liability against a party except in cases of that party's "willful misconduct." As applied, the provision bars any recovery to Digital Envoy absent a showing that Google knew it was engaged in misconduct in its use of Digital Envoy's data. As prior proceedings in this case have shown, Digital Envoy cannot possibly make such a showing. Google's representatives have testified that they always believed the company's use of the data was licensed, and there is no evidence whatsoever to suggest they knew Google was violating the contract, assuming that Google ever was. The second contractual clause limits Google's liability in "any lawsuit or other action" "brought under" the contract to amounts actually paid by Google during the term of the contract. That provision certainly applies to Digital Envoy's claim which is predicated upon Google's supposed breach of the parties' contract, would not exist but for the contract, and stands or falls on the contract's ultimate interpretation. Courts examining similar language in forum selection clauses have routinely held that it covers tort claims that are based upon the contractual relationship. The provision is by no means restricted in application to claims styled as "breach of contract" as Digital Envoy seems to believe. It would have been a simple matter to word such a restrictive clause. Instead, the parties used the expansive phrase "any lawsuit or other action" to reflect their intent that the limitation not be circumvented through the dodge of artful pleading. Given the applicable limitations of liability and the causation problems endemic to Digital Envoy's case, Google requests that the Court grant partial summary judgment to Google barring or substantially circumscribing Digital Envoy's claims for damages. II. BACKGROUND The Parties' Agreement Google and Digital Envoy entered into the License Agreement at the heart of this dispute in November 2000. Declaration of David H. Kramer ("Kramer Decl."), Ex. A. Google negotiated for and obtained the right to make unlimited use of the data in Digital Envoy's IP 2692762_4.DOC GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS -3- Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 8 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Address/Physical Location database 1 in Google's business, specifically including Google's advertising programs. See Court's Order, May 20, 2005. 2 In exchange for these expansive rights, Google agreed to pay Digital Envoy $3,000 a month, reflecting the commoditized nature of the data and the limited relationship of the parties. Kramer Decl., Ex. A. As further evidence that the parties did not intend to share either the risks or rewards of their relationship, their contract contains a host of limitation of liability clauses dramatically circumscribing the parties' rights to claim damages from one another: It is mutually acknowledged that data entry, communication and storage are subject to a possibility of human and machine errors, omissions, delays, and losses, including inadvertent loss of data or damage to media, which may give rise to loss or damage. Neither party hereto undertakes any liability to the other for any such errors, omissions, delays, or losses. EXCEPT AS STATED ABOVE, LICENSOR MAKES AND LICENSEE RECEIVES NO WARRANTIES, EXPRESS, IMPLIED, STATUTORY, OR IN ANY OTHER PROVISION OF THIS AGREEMENT OR ANY OTHER COMMUNICATION, REGARDING THE PRODUCT, THE DATABASE LIBRARIES AND THE SERVICES, AND LICENSOR SPECIFICALLY DISCLAIMS ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. NEITHER PARTY UNDERTAKES OR ACCEPTS ANY LIABILITY WHATSOEVER TO THE OTHER FOR ERRORS, OMISSIONS, DELAYS, INTERRUPTIONS, OR LOSSES UNLESS CAUSED BY THEIR WILLFUL MISCONDUCT. EXCEPT FOR INDEMNIFICATION UNDER SECTION 7.5, IN NO EVENT SHALL EITHER PARTY'S DAMAGES IN ANY LAWSUIT OR OTHER ACTION BROUGHT UNDER THIS AGREEMENT EXCEED THE AMOUNTS PAID BY LICENSEE HEREUNDER. Digital Envoy is one of several companies that generates data that can help users make an educated guess about the approximate geographic location of a visitor to a website. Specifically, Digital Envoy's data attempts to match the unique IP addresses assigned to the computers of individual Internet users to particular countries, regions or metropolitan areas. Declaration of Mark Rose ("Rose Decl.") at 2. Name.Space, Inc. v. Network Solutions, Inc., 202 F.3d 573, 576 (2d Cir. 2000) (describing concept of IP address). 2 The License Agreement, which was repeatedly extended and expired in January 2005, authorized Google to use Digital Envoy's data in Google's "Business" broadly defined as "the business of producing and maintaining information search technology." Kramer Decl., Ex. A (whereas clause defining "Business"). Google was expressly authorized to use the data at any of its "offices and data centers" and to "develop indices, services, or applications that are provided to third parties." Id. at 3. 2692762_4.DOC 1 GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS -4- Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 9 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Id. at 8 (underlining added). This provision was drafted by Digital Envoy, with Google's only relevant contribution consisting of an edit to make reciprocal the last sentence. Kramer Decl., Ex. B at 8 (redline of license agreement showing addition of mutuality). Google's Understanding of the Agreement The language of the License Agreement and the parties' negotiations made plain to Google's representatives that Google's right to use Digital Envoy's technology was expansive. Indeed, from the time they negotiated the contract to this day, Google's representatives have always understood that Google had the right to use Digital Envoy's data as Google saw fit, subject only to the limitation that it not distribute or resell the data to third parties. For example, Matthew Cutts, who negotiated the contract with Digital Envoy and then implemented Google's use of Digital Envoy's technology in Google's advertising program, testified under cross-examination: Q. So your understanding is that -- at that point in time, your understanding was that you could use the data in any way you wanted except for giving the complete code to another third-party? A. I believe that's correct. *** Q: My question is, that understanding, did you have that understanding consistently from the time of entering into the relationship with Digital Envoy to today, that you had the ability to use the information for whatever you wanted, except for moving the whole database to a third-party? A. I believe I did have that understanding. Kramer Decl., Ex. C (Cutts Dep.) at 54:3-7; 64:6-16; see also Kramer Decl., Ex. D (Schimmel Dep.) at 103:8-11, 105:18-106:5; Kramer Decl., Ex. E (Rana Dep.) at 8:15-10:16, 20:2-14. Based on the understanding of its representatives, Google openly used Digital Envoy's data to support its advertising programs for years without any objection whatsoever from Digital Envoy. Kramer Decl., Ex. F (Friedman Dep.) at 213:2-6. Specifically, Google used Digital Envoy's data in its advertising programs first in AdWords, and later in AdSense. 2692762_4.DOC GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS -5- Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 10 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Google's Advertising Programs AdWords The advertising program that Google offers to advertisers is known as AdWords. AdWords permits hundreds of thousands of advertisers to display their messages to Internet users all over the world. If a user "clicks" on a given advertising message, the sponsoring advertiser pays Google for that click. Declaration of Susan Wojcicki ("Wojcicki Decl.") at 2. To implement the AdWords program, Google analyzes the content of advertisers' messages and stores them in an indexed database. When called upon to display a message to an end-user, Google searches this database to find what it believes is the most relevant commercial information using a highly complex, weighted algorithm that takes dozens of factors into consideration. Rose Decl. at 3. One of the most important factors Google uses to locate advertisements to display to a user is the user's demonstrated interest in a particular subject. Thus, for example, when a visitor queries Google's web index for "basketball," Google will search its inventory for a basketballrelated advertisement to match the user's interest. But the user's demonstrated interest is only the first of dozens of factors used in the search process. Others include, for example, the "clickthrough" rate for a particular advertisement, and the amount of money that an advertiser is willing to pay for a user's click. 3 Wojcicki Decl. at 3, 4. In some cases, another factor used in Google's search for a relevant advertisement is the perceived geographic location of the Internet user. Google uses this factor to prevent the display In the Google AdWords program, Google's advertisers inform Google of the "keywords" to which they want display of their advertisements connected (e.g., display only when users search for the term "basketball"). Advertisers also select the maximum amount they are willing to pay Google each time a user "clicks" on their message (e.g., $.50 per click). Where two advertisers are interested in the same keywords, one advertiser can generally increase its chance of having its message displayed by setting a higher maximum payment per click than another. But because Google is interested in locating advertisements that users find relevant, the advertiser offering the highest maximum cost per click will not necessarily have its message displayed. Users may find another advertiser's message more appealing and thus "click" on that message more often. Google uses the comparative "clickthrough rates" of competing messages as one of the factors in its analysis of which message to display. Wojcicki Decl. at 4. 2692762_4.DOC 3 GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS -6- Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 11 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 of advertisements outside the geographic area selected by an advertiser (e.g., where the advertiser asks to display its messages only to users in Nebraska). Id. at 5. And for a time, until shortly after this lawsuit was filed, as one step in estimating a user's geographic location, Google often used information from Digital Envoy's IP Address/Location database. Rose Decl. at 4. To be clear, Google does not actually utilize geotargeting or Digital Envoy's data to select the particular ads it ultimately displays to end users. Rather, to the extent Google can ascertain a user's geographic location, it uses that information to exclude advertisements from the selection process. For example, if Google determines that a user searching for "basketball" is in California, Google would drop from its selection process the messages of any advertiser that wanted its ads shown only to those in Nebraska. Google would continue its search for the appropriate advertising messages from the remaining pool of candidate-advertisements using its complex multi-factored algorithm. Rose Decl. at 6. It would then send the selected advertisements back to the user's computer. In many, but not all cases, the ads ultimately displayed would be those from the remaining advertiser that offered the highest amount per click for the word "basketball." Wojcicki Decl. at 4. AdSense In 2002, Google formally launched its AdSense program. The program allows Google to display advertisements to users visiting the web sites of participating third-party publishers who comprise the Google Network. If a user clicks on a message displayed on a third-party site, the advertiser pays Google, and Google shares a portion of that payment with the third-party publisher. Wojcicki Decl. at 6. The mechanical process by which Google searches for the advertising messages to display to users visiting third-party sites is identical, in relevant part, to the process used to locate advertising messages to display to users visiting Google's own site. Indeed, the process of selecting advertising messages is run by the same computers using virtually identical multifactored and weighted algorithms. Google uses geotargeting and used Digital Envoy's data in 2692762_4.DOC GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS -7- Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 12 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 AdSense just as it used them in AdWords solely to exclude ads from the selection process and prevent them from being displayed. Rose Decl. at 7-9. III. ARGUMENT A party is entitled to summary judgment as a matter of law where the pleadings and evidence show that there is no genuine issue of material fact on the claim in question. Fed. R. Civ. P. 56(c). Where the moving party does not have the burden of proof on a particular issue, it need not introduce evidence to obtain a summary judgment. Rather, it need only show the Court that there is an absence of evidence to support the nonmoving party's case. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Cline v. Industrial Maint. Eng'g & Contracting Co., 200 F.3d 1223, 1229 (9th Cir. 2000). 4 A. Digital Envoy's Damages Claims Are Barred and/or Severely Circumscribed by the Limitation of Liability Clauses in the License Agreement. The lengthy limitation of liability provision in the License Agreement contains two clauses at issue here. The first clause prevents Digital Envoy from recovering any damages absent a showing of willful misconduct; the second caps any recovery by Digital Envoy under any circumstances at $308,600, the total amount paid by Google to Digital Envoy under the License Agreement. See Wojcicki Decl. at 5. The parties' License Agreement is integrated and, according to Digital Envoy, unambiguous. Kramer Decl., Ex. A at 13 (integration clause); Kramer Decl., Ex. G (interrogatory responses) at Nos. 5, 6 (Digital Envoy admitting contract is unambiguous). The interpretation of the limitation of liability clauses is therefore a question of law for the Court. In re Bennett, 298 F.3d 1059, 1064 (9th Cir. 2002); Lundin/Weber Co. LLC v. Brea Oil Co., 117 Cal. App. 4th 427, 433 (2004) (contract interpretation is essentially judicial function); Cal. Civ. Proc. Even if summary judgment or summary adjudication of an entire claim is not warranted, Federal Rule of Civil Procedure 56(d) allows a court to grant partial summary judgment, thereby reducing the number of facts at issue in a case. Fed. R. Civ. P. 56(d); State Farm Fire and Cas. Co. v. Geary, 699 F. Supp. 756, 759 (N.D. Cal. 1987). If for any reason the Court believes that summary judgment is unavailable, Google respectfully requests that the Court grant it partial summary judgment with respect to the specific issues raised herein. 2692762_4.DOC 4 GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS -8- Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 13 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Code 1856. Because the meaning of these clauses is clear, the Court should enforce them as written, barring and/or appropriately limiting Digital Envoy's claims for damages. 1. Digital Envoy Is Precluded from Recovering Damages in This Case Because It Cannot Show Willful Misconduct by Google Google and Digital Envoy agreed that neither party would be liable to the other except in cases of "willful misconduct." See Kramer Decl., Ex. A at 8 ("Neither party undertakes or accepts any liability whatsoever to the other for errors, omissions, delays, interruptions, or losses unless caused by their willful misconduct."). The phrase "willful misconduct" is described as being much more than mere negligence or even gross negligence, and as involving conduct of a quasi-criminal nature. See Woodson v. Everson, 61 Cal. App. 2d 204, 208 (1943) (finding that defendant was liable for negligence but not for willful misconduct). While gross negligence constitutes merely such a lack of care as to indicate a passive and indifferent attitude toward results, willful misconduct involves a positive intent actually to harm another or to do an act with a positive, active, and absolute disregard of its consequences. Id. at 209. Further, willful misconduct involves deliberate conduct in doing acts, with "knowledge or appreciation of the fact" that harm is likely to result. Id. at 208 (emphasis added). Thus, to constitute willful misconduct there must be "actual knowledge, or that which in the law is deemed to be the equivalent of actual knowledge" of the probability of injury to another. Id. at 209. To demonstrate willful misconduct, it is plainly not enough for a plaintiff to show that a defendant intended to act in a manner that is later shown to have been wrongful. See Gillespie v. Rawlings, 49 Cal. 2d 359, 367 (1957). The plaintiff must show that the defendant acted with either knowledge that serious injury would result, or a wanton and reckless disregard of the possible results. Id. (finding that defendant was not liable for willful misconduct because defendant was neither aware of nor reckless with respect to probable injury). Accordingly, to recover damages at all in this case, Digital Envoy must show that in utilizing Digital Envoy's Database Libraries, Google knew that it was breaching the License Agreement and intended to breach its terms to the detriment of Digital Envoy. Digital Envoy 2692762_4.DOC GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS -9- Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 14 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 cannot possibly make such a showing. There simply is no evidence that Google knew or believed that it was engaging in improper sharing or disclosure of Digital Envoy's data or violating the parties' contract. There is no evidence suggesting that Google did not honestly believe that it was authorized to use the data as it did. 5 In fact, all of the evidence is to the contrary, as each of Google's representatives testified that he believed the contract authorized Google's use of the data in AdSense. Accordingly, by the plain terms of the License Agreement, Digital Envoy is not entitled to recover damages from Google. 2. To the Extent Digital Envoy Is Permitted Any Recovery, It Is Limited to Amounts Paid by Google to Digital Envoy Under the License Agreement. From the start, this has been a contract case masquerading as a claim for trade secret misappropriation. Digital Envoy would have no trade secret claim against Google but for the parties' License Agreement, and its claim stands or falls based upon the contract's ultimate interpretation. Accordingly, the claim falls squarely within the second limitation of liability clause of the contract capping Digital Envoy's recovery in "any lawsuit or other claim brought under th[e] Agreement" to the amount paid by Google during the contract term. Kramer Decl., Ex. A at 8. Digital Envoy's trade secret claim depends entirely upon its License Agreement with Google. Its sole theory of misappropriation is that Google misused its trade secrets while under a duty to limit their use. See Cal. Civ. Code 3426.1(b)(2)(B)(ii); Amended Complaint, 2728, 40, 46. That claim simply would not exist absent the License Agreement, as the License Agreement is the sole basis for the use-limitation duty upon which Digital Envoy's claim rests. 6 In a prior Order, the Court indicated that a jury could find that Google's use of Digital Envoy's data in AdSense was a violation of the License Agreement. See Court Order, May 20, 2005, at 10:11-14. It further indicated that a jury could find that Google's interpretation of the License Agreement was unreasonable. Id. at 10:20-23. But the Court did not find that Google acted in willful violation of the contract. Nowhere did the Court suggest that Google did not actually hold an interpretation of the License Agreement allowing it to use the data as it did. Digital Envoy has not offered and cannot offer evidence upon which such a finding could be based. 6 As the Court has seen first hand, Digital Envoy' claim turns entirely upon the interpretation of the License Agreement either Google was entitled to use the data as it did, or (continued...) 2692762_4.DOC 5 GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS -10- Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 15 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Digital Envoy thus seeks to enforce rights that owe their existence to the parties' contract. 7 Accordingly, its action is one brought under the agreement and it is subject to the limitation of liability clause in that contract. An analysis of the language of the clause confirms this interpretation. The term "action" is commonly understood to mean "a proceeding in a court of justice by which one demands or enforces one's right." WEBSTER'S NINTH NEW COLLEGIATE DICTIONARY 54 (1988). "Brought," as the past tense of bring, means "to institute." Id. at 182, 180. "Under" is commonly understood to mean "subject to the authority, control, guidance, or instruction of." Id. at 1285. Thus, an action "brought under the agreement" is a court proceeding instituted subject to the authority, control, guidance or instruction of the parties' agreement. It is difficult to see how Digital Envoy's claim is not one instituted subject to the control, guidance or instruction of the License Agreement, since the rights at issue arise from the contract and the entire case turns upon the ultimate interpretation of the contract. There is virtually no case authority interpreting the precise language at issue. But see Hoopai v. Civil Serv. Comm'n, 106 Hawaii 205, 222 (2004) (contract clause covering "complaints with respect to ... matters under the collective bargaining agreements" as covering "complaints related to matters covered under collective bargaining agreements") (emphasis added). The Ninth Circuit has passed upon similar language in an arbitration clause in a contract which was applicable to claims "arising hereunder." Mediterranean Enters., Inc. v. Ssangyong Corp., 708 F.2d 1458, 1464 (9th Cir. 1983). Noting that the clause was not as broad as one covering claims "arising out of or relating to" the contract, the court nevertheless held the (...continued from previous page) it violated some use prohibition in the License Agreement and thus might have committed misappropriation (assuming it acted with the requisite intent). Indeed, as if to highlight the essential nature of the contract to its case, Digital Envoy recently filed a motion for summary judgment the outcome of which turns entirely upon interpretation of language in the contract. 7 Digital Envoy's claim that its data actually is a trade secret is also entirely dependent upon the License Agreement, as Digital Envoy must invoke the confidentiality provisions of the License Agreement to establish the supposed confidentiality of the data in the first instance. See Cal. Civ. Code 3426.1(d) (requiring that "trade secrets" be subject to reasonable efforts to maintain their secrecy). 2692762_4.DOC GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS -11- Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 16 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 language was broad enough to cover all "disputes and controversies relating to the interpretation of the contract and matters of performance." Id., citing In re Kinoshita & Co., 287 F.2d 951, 953 (2d Cir. 1961) (when clause "refers to disputes or controversies `under' or `arising out of' the contract," arbitration governs "disputes and controversies relating to the interpretation of the contract and matters of performance..."). Notably, the Ssangyong court held that the clause covered the plaintiff's claim for breach of fiduciary duty because the duty itself was created by the parties' contract. Id. Other courts have likewise interpreted such language to include all claims dependent upon an agreement, including tort claims that rest upon the parties' contractual relationship. See Terra Int'l, Inc. v. Mississippi Chem. Corp., 119 F.3d 688, 692 (8th Cir. 1997) (while forum selection covering "disputes arising between the parties hereunder" was limited to disputes "arising under the license agreement," it covered plaintiff's negligence and strict liability claims because such claims would not have existed but for the agreement); National Micrographics Sys., Inc. v. Canon U.S.A., Inc., 825 F. Supp. 671, 677-78 (D.N.J. 1993) (forum selection clause in contract applying to "any and all causes of action hereunder by and between the parties hereto" covered tort claims). Digital Envoy seems to believe the clause in question applies only to claims styled as "breach of contract" claims. But if the parties had intended for the clause to be so restricted, they could easily have crafted one which applied only to "claims for breach of contract." They did not. Instead they used broader language covering "any lawsuit or other action brought under th[e] agreement." In so doing, the parties made clear that if their contract was at the heart of a dispute, their agreed upon limitation of liability would operate regardless of one party's creative efforts to plead around their agreement. As Digital Envoy's home district has explained: Reading the word "hereunder" to apply only to a pure breach of contract claim between the parties would be unduly crabbed and narrow. "Hereunder" refers to the relations that have arisen as a result of th[e] contract. To read otherwise would mean that the mere recitation of a form of action would dictate the enforceability of a forum selection clause. Such a restrictive reading would frustrate commercial reliance on such clauses which are encouraged. 2692762_4.DOC GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS -12- Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 17 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Picken v. Minuteman Press Int'l, Inc., 854 F. Supp. 909, 911-12 (N.D. Ga. 1993) (contract clause applicable to claims "hereunder" not limited to claims styled as breach of contract and covers claims for fraud and deceit); Warnaco Inc. v. VF Corp., 844 F. Supp. 940, 947-49 (S.D.N.Y. 1994) (finding tort claims covered by forum selection clause reading, "[a]ny dispute or issue arising hereunder..."). Moreover, it simply makes no sense that the parties would have agreed upon limits for breach of contract claims but not for tort claims dependent on that contract when it is the tort claims that present a far greater risk of unexpected liability. According to the Eighth Circuit, a court should not permit a party to use "[s]trategic or artfully drawn pleadings . . . to circumvent an otherwise applicable" contractual provision. See Terra Int'l, Inc., 119 F.3d at 695 (refusing to elevate pleading form over substance of parties' forum selection clause applicable to disputes arising under the contract); see also ManettiFarrow, Inc. v. Gucci Am., Inc., 858 F.2d 509, 514 (9th Cir. 1988) (interpretation of clause depends not on a party's artful pleading but on whether "resolution of the claims relates to interpretation of the contract"; forum selection clause applying to claims regarding "interpretation" or "fulfillment" of contract applies to plaintiff's tort claims); Picken, 854 F. Supp. at 911-12 (mere recitation of a form of action should not dictate the enforceability of contractual clause). That is precisely what Digital Envoy hopes to do here. Its efforts should be rejected. The limitation of liability provision caps Digital Envoy's potential recovery in this case at the amount Google paid to Digital Envoy under the contract. It is undisputed that Google paid Digital Envoy $308,600 under the contract. Wojcicki Decl. at 5. Accordingly, Google is entitled to a partial summary judgment order barring Digital Envoy from recovering more than $308,600 in this action. B. Digital Envoy Cannot Establish the Requisite Causal Nexus Between Google's Supposed Misuse of Digital Envoy's Trade Secrets and Any Loss It Suffered or Gain that Google Supposedly Enjoyed. Limitations of liability aside, discovery has made clear that Digital Envoy cannot establish claims for damages based upon either its own alleged losses, or Google's supposed 2692762_4.DOC GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS -13- Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 18 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 unjust enrichment. In both cases, Digital Envoy's claims are entirely speculative, and it cannot prove any causal connection between Google's supposed misappropriation and its damages. Google is thus entitled to partial summary judgment barring Digital Envoy from seeking a recovery under Section 3426.3(a) of California Civil Code. Civil Code Section 3426.3(a) part of California's enactment of the Uniform Trade Secrets Act ("USTA") provides: A complainant may recover damages for the actual loss caused by misappropriation. A complainant also may recover for the unjust enrichment caused by misappropriation that is not taken into account in computing damages for actual loss. Cal. Civ. Code 3426.3(a) (emphasis added). Thus, as part of its prima facie case, a party claiming actual damages must show that its supposed damages were caused by the defendant's alleged trade secret misappropriation. Likewise, a party seeking to recover for a defendant's alleged unjust enrichment may only recover for enrichment caused by the alleged misappropriation. Id.; see also Sargent Fletcher, Inc. v. Able Corp., 110 Cal. App. 4th 1658, 1666 (2003) (listing elements of UTSA claim, including damages, and noting that plaintiff bears burden on each element of claim). Courts that have had occasion to consider the UTSA's causation requirement in the summary judgment context have strictly enforced it. See, e.g., Murphy Elecs., Inc. v. K.R. Anderson Co., 102 Wash. App. 1029, No. 45172-3-I, 2000 WL 1279302 (Wash. App. Sept. 11, 2000) (granting summary judgment to trade secret defendant on damages where plaintiff failed to show its lost sales were caused by defendant's alleged misuse of customer list; plaintiff failed to offer evidence from customers indicating they would have remained plaintiff's customers but for alleged misappropriation); Computer Sciences Corp. v. Computer Assocs. Int'l, Inc., Nos. CV 98-1374 WMB SHX, CV 98-1440-WMB SHX, 1999 WL 675446 (C.D. Cal. Aug. 12, 1999) (granting summary judgment to trade secret defendant on damages highlighting requirement that a defendant's wrongful acts be a "but for" cause of plaintiff's damage and noting plaintiff failed to show that defendant would not have undertaken a tender offer against which plaintiff had to 2692762_4.DOC GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS -14- Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 19 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 defend absent alleged misuse of supposed secrets); Fedders Corp. v. Haier Am. Trading, LLC, No. 00 Civ. 5583(JSM), 2002 WL 519733 (S.D.N.Y. Apr. 14, 2002) (granting summary judgment to trade secret defendant on damages where plaintiff failed to show that defendant's alleged misuse of competitive bid information caused injury to plaintiff in process; plaintiff offered only speculation as to what would have happened in the competitive process absent supposed misappropriation). These trade secret decisions are in accord with California law which precludes any recovery of damages where a plaintiff fails to offer concrete, admissible evidence that a defendant's alleged misconduct caused its injury. See, e.g., Saelzler v. Advanced Group 400, 25 Cal. 4th 763, 767, 775-76 (2001) (granting summary judgment to defendant where plaintiff failed to present evidence that breach of duty of care caused plaintiff's harm). As the California Supreme Court has made clear, summary judgment on a claim for damages is warranted where the plaintiff's evidence is little more than guesswork "in the realm of mere speculation and conjecture." Merrill v. Navegar, Inc., 26 Cal. 4th 465, 490 (2001) (citation omitted); see also Wiz Tech., Inc. v. Coopers & Lybrand LLP, 106 Cal. App. 4th 1, 4 (2003) (granting summary judgment on damages claims where plaintiff failed to offer admissible evidence of causal connection between defendant's allegedly improper resignation as plaintiff's accountants and a host of claimed injuries). Here, even assuming that Google was not licensed to use Digital Envoy's data in connection with its AdSense program, and even assuming such use constitutes trade secret misappropriation, Digital Envoy cannot show that such use caused it any actual loss or that Google was unjustly enriched because of such use. 1. Digital Envoy Cannot Establish Any Actual Loss Caused by Google's Supposed Misappropriation In its initial disclosures, Digital Envoy claimed: "Google's wrongful actions have caused Digital Envoy to suffer actual damages, including lost income, licensing and business 2692762_4.DOC GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS -15- Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 20 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 opportunities." 8 Kramer Decl., Ex. H (Digital Envoy, Inc.'s Rule 26(a)(1) Disclosures) at 7. Tellingly, Digital Envoy acknowledged the speculative nature of its claim even then. Id. ("To the extent sufficient specificity of this category of damages cannot be achieved, Digital Envoy will claim recovery [through disgorgement].") Digital Envoy has since had ample opportunity to provide evidence in support of its actual damages theory. But as the Court has already recognized, Digital Envoy has offered nothing to suggest that its theory is anything other than speculation: Digital has failed to establish any link between its claims that Google exceeded the scope of its License and discovery regarding Google's agreements, revenue, negotiations, and communications with Google Network members. Rather, Digital must establish a causal relationship between such members and itself, such as an allegation that a Google Network member told Digital that, but for Google's inclusion of geo-targeting technology in its package, that member would have licensed the technology from Digital . . . . Court Order, July 15, 2005, at 6. Not only did Digital Envoy fail to establish the requisite causal nexus in prior proceedings, it refused to do so in response to Google's discovery requests. Specifically, Google asked Digital Envoy to identify any publisher that it believed would have licensed Digital Envoy's data but for Google's supposed misuse of the data. Kramer Decl., Ex. I (Response to Interrogatory No. 17). 9 While Digital Envoy is surely in the best position to know of any lost business, Digital Envoy did not identify a single publisher in response to the interrogatory. Having refused to supply the information as requested in discovery, Digital Envoy may not now According to Digital Envoy, "potential customers of Digital Envoy ... instead entered into a sharing relationship with Google." See Digital Envoy's Motion to Compel, April 29, 2005, at 11. It claims that Google "[ate] Digital Envoy's market...." Id. at 9. As Google has previously noted, Digital Envoy's actual damages claim is highly suspect from the start. Even before it licensed Google, Digital Envoy licensed the then-leading Internet advertising network in the country, Advertising.com, to use its data to run advertisements across a network of publisher sites - - precisely the use it complains about in this case - - for a flat fee of a few thousand dollars a month. Advertising.com and a host of other Digital Envoy licensees have been and remain free to use Digital Envoy's data to display advertisements on publishers' websites and thereby "eat" the supposed market in which Digital Envoy claims to have suffered loss. 9 Having failed to identify any such publisher in response to Google's first interrogatory, Digital Envoy then elected not to answer Google's next interrogatory asking it to explain the basis for any contention that a publisher would have licensed its data. Kramer Decl., Ex. I (Response to Interrogatory No. 18). 2692762_4.DOC 8 GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS -16- Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 21 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 come forward with the evidence in the hopes of forestalling summary judgment. Fed. R. Civ. P. 37(c)(1) ("[a] party that without substantial justification fails to disclose information required by Rule 26(a) or 26(e)(1), or to amend a prior response to discovery as required by Rule 26(e)(2), is not, unless such failure is harmless, permitted to use as evidence at trial, at a hearing, or on a motion any witness or information not so disclosed."); see also Cambridge Elecs. Corp. v. MGA Elecs., Inc., 227 F.R.D. 313, 323-34 (C.D. Cal. 2004) (plaintiff that failed to supply information in responses may not rely on undisclosed information to raise a triable issue of fact in opposition to summary judgment); Inamed Corp. v. Kuzmak, 275 F. Supp. 2d 1100, 1118 (C.D. Cal. 2002) (same). It is not enough for Digital Envoy to assert incessantly that publishers participating in Google's AdSense program (i.e. Google's network) are Digital Envoy's "potential customers." Rather, to establish the causation required to recover for its supposed actual loss, Digital Envoy must show that but for Google's alleged misappropriation these "potential customers" would have become actual customers for Digital Envoy. Given that Digital Envoy has not shown (and indeed, now cannot show) that a single publisher would have become a Digital Envoy licensee but for Google's alleged misappropriation, Digital Envoy's causation theory fails as a matter of law. 10 Accordingly, Google is entitled to partial summary judgment with respect to Digital Envoy's claim for actual damages. In order to establish a causal connection that would be anything other than speculation, Digital Envoy would have to show that a website publisher cared enough about receiving geotargeting ads to have acted differently if Google had been unable to supply them. Digital Envoy has made no such showing. Accordingly, there is no reason to believe that publishers would have sought out an alternative means of geo-targeting advertisements that appeared on their sites. Further, Digital Envoy has failed to show that any publisher that believed geo-targeting of advertisements on its site was important would have sought geo-targeting capability from Digital Envoy directly instead of using a host of other options, most notably alternative advertising networks who offer geo-targeting. Given the presence of other advertising networks offering geo-targeting, there is simply no way Digital Envoy could show that a website publisher would have itself become a Digital Envoy licensee if it were unable to obtain geo-targeted advertisements from Google in the AdSense programs. 2692762_4.DOC 10 GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS -17- Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 22 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2. Digital Envoy Cannot Establish Any Unjust Enrichment Caused by Google's Supposed Misappropriation Digital Envoy's unjust enrichment theory fares no better. According to Digital Envoy, Google unjustly earned profits by making unlicensed use of Digital Envoy's data to enhance the geotargeting capabilities offered to advertisers in Google's AdSense program. Again, Digital Envoy must offer evidence demonstrating causation that but for Google's allegedly unlicensed use of the data, Google would not have earned the profits it did from its AdSense program. Cal. Civ. Code 3426.3(a); Unilogic, Inc. v. Burroughs Corp., 10 Cal. App. 4th 612 (1992). Again, Digital Envoy cannot possibly make that showing. a. Google Did Not Earn Any Direct Revenue from Digital Envoy's Data. Google does not and has never charged advertisers for the ability to target their messages to a particular geographic location. Wojcicki Decl. at 5. Likewise it has never charged advertisers for (or allowed advertisers to have) use of or access to Digital Envoy's data. Id.; Rose Decl. at 8-9. Accordingly, Google has not earned any revenue that can be directly attributed to the use of Digital Envoy's data in its AdSense program. b. Digital Envoy Cannot Trace Any of Google's AdSense Revenue to Google's Use of Digital Envoy's Data. Because it cannot establish any direct connection to any portion of Google's AdSense profits, Digital Envoy claims that Google would have earned less from AdSense advertisers if Google had not enhanced its geo-targeting capabilities using Digital Envoy's data. But this theory, like the others, is nothing but pure speculation. Digital Envoy has not made and cannot make a showing that Google would have earned less money but for the use of Digital Envoy's data as part of the geo-targeting process in AdSense. In discovery, Google specifically asked Digital Envoy to identify any advertiser that would not have advertised with Google or would have paid Google less but for Google's use of the data in its AdSense program. Digital Envoy could not identify a single entity and has offered 2692762_4.DOC GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS -18- Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 23 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 no evidence that an advertiser would have acted differently. Kramer Decl., Ex. I (Response to Interrogatory Nos. 11-14). 11 As noted, Google earns revenue from its AdSense program when its ads are displayed on third party sites and then clicked on by end users. Thus, to show some connection between use of its data and revenues earned by Google, Digital Envoy would have to show, at the very least, that its data was used to select the particular ads that Google displayed to end users. But Google never used its own geo-targeting capabilities or Digital Envoy's data to select the ads it displayed. Instead, it used geo-targeting and Digital Envoy's data solely to exclude advertisements from the selection process. Rose Decl. at 9. The distinction is critical. It means that Digital Envoy could never show that Google's use of the data caused the display of an advertisement upon which a user clicked to generate revenue for Google. The best that Digital Envoy could ever hope to show is that but for the use of Digital Envoy's data to exclude ads from possible selection, Google would, as a theoretical matter, have had a larger group of ads to select from and thus might have displayed a different advertisement. Id. There is simply no way, however, for Digital Envoy to show that there would have been any difference in the ads that Google actually selected to display (much less the extent of any difference) had Google not used Digital Envoy's data. Id. For all anyone knows, Google's use of the data had no impact at all on the selection process - - the ads selected for display, the clicks on those ads, and the revenues generated from them could have been the same without use of Digital Envoy's data. Further, Digital Envoy has repeatedly conceded that Google was licensed to use Digital Envoy's data in the process of selecting advertising messages in its AdWords program (for display on Google's own web sites). During the relevant time period, the AdWords program was significantly larger than AdSense as every advertiser necessarily participated in it (in contrast to their selective participation in AdSense). Declaration of David DiNucci in Support of Google's Motion for Summary Judgment (filed 6/1/2005) at 2. Under the circumstances, it would do Digital Envoy no good to show that an advertiser was attracted to Google because of its geotargeting capabilities. To the extent an advertiser even cared about geotargeting, Google was perfectly entitled to attract such advertisers to the vastly more prominent AdWords program. What Digital Envoy would have to show in this case is that an advertiser participated in the allegedly unlicensed AdSense program (and would not otherwise have) solely because Google offered geotargeting using Digital Envoy's data in AdSense. Digital Envoy has not and could not possibly make such a showing. 2692762_4.DOC 11 GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS -19- Case 5:04-cv-01497-RS Document 261 Filed 08/17/2005 Page 24 of 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 As a result, Digital Envoy cannot show any causal connection between Google's AdSense revenues and its use of Digital Envoy's data to enhance its geotargeting capabilities. While the analysis need go no further, the causation problems in Digital Envoy's unjust enrichment theory are actually even more insurmountable. Even if one were to assume that absent use of Digital Envoy's data, Google might have displayed a different advertisement to a user, there is simply no way to know whether or how often the user would have clicked on that different advertisement so as to generate revenue for Google. Again, Digital Envoy cannot show what might have happened in this alternate universe. 12 It thus cannot establish a "but for" causal connection between Google's use of Digital Envoy's data and Google's AdSense revenues. Accordingly, Digital Envoy's unjust enrichment claim fails as a matter of law. IV. CONCLUSION For the foregoing reasons, Google respectfully requests that the Court grant it partial summary judgment barring Digital Envoy from recovering damages from Google in this action, or in the alternative limiting any such recovery to $308,600, the amount paid by Google to Digital Envoy under the License Agreement. Google further requests that the Court grant partial summary judgment barring Digital Envoy from seeking damages for Google's alleged trade secret misappropriation under California Civil Code Section 3426.3(a). Respectfully Submitted, Dated: August 17, 2005 WILSON SONSINI GOODRICH & ROSATI Professional Corporation By: /s/ David H. Kramer David H. Kramer Attorneys for Defendant/Counterclaimant Google Inc. It is quite possible that absent use of Digital Envoy's data to exclude ads from the selection process, Google would have been better off. Use of the data conceivably excluded advertisers from the process who had offered Google a greater amount per click than that offered for the ad that Google actually displayed. If such ads had been selected for display instead of being excluded, clicks on those ads would have made Google more money than Google actually made. Rose Decl. at 9. 2692762_4.DOC 12 GOOGLE INC.'S NOTICE, MOTION AND MEMO ISO MOTION FOR PARTIAL SUMMARY JUDGMENT RE DIGITAL ENVOY INC.'S DAMAGES CLAIMS - CASE NO.: 04 01497 RS -20-

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