Digital Envoy Inc., v. Google Inc.,

Filing 294

Memorandum in Opposition re 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 byDigital Envoy,Inc.,. (Blackman, Brian) (Filed on 9/1/2005)

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4 Case 5:04-cv-01497-RS Document 294 [ C 9 S Page 1 of 29 Filed 09/01/2005 P . CRAIG CARDON, Cal . Bar No. 168646 BRIAN R. BLACKMAN, Cal . Bar No . 196996 2 KENDALL M . BURTON, Cal . Bar No . 228720 SHEPPARD, MULLIN, RICHTER & HAMPTON LLP 3 Four Embarcadero Center, 17th Floo r San Francisco, California 94111-4106 4 Telephone : 15-434-9100 Facsimile : 15-434-394 7 I 5 TIMOTHY H . KRATZ (Admitted Pro Hac Vice) LUKE ANDERSON (Admitted Pro Hac Vice) 7 MCGUIRE WOODS, L .L. P 1170 Peachtree Street, N.E., Suite 2100 8 Atlanta, Georgia 3030 9 Telephone : 404 .443 .5500 9 Facsimile : 404 .443 .575 1 6 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 V. Attorneys for DIGITAL ENVOY, INC . UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION DIGITAL ENVOY, INC ., Plaintiff/Counterdefendant, ase No. C 04 01497 RS REDACTED VERSION] OPPOSITION TO GOOGLE'S MOTION FOR PARTIAL SUMMARY JUDGMENT RE : DIGITAL ENVOY, INC .' S DAMAGES CLAIMS Date : eptember 21, 2005 Time : :30 a.m. Courtroom : 4, 5th Floo r The Honorable Richard Seeborg GOOGLE, INC ., Defendant/ Counterclaimant . W 02-SF :5BB\61467342 .1 OPPOSITION TO GOOGLE'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON DAMAGE ISSUE S A B I C G S Case 5:04-cv-01497-RS Document 294 Filed 09/01/2005 Page 2 of 29 I TABLE OF CONTENTS Page(s) 2 3 1. 4 II . 5 6 7 8 9 10 I 12 13 14 15 16 NTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 ACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 A. B. The License Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Google's Advertising Programs and Their Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 III . RGUMENT AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 A. B. oogle Is Not Entitled to Partial Summary Judgment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ection 8 Of The License Agreement Does Not Limit Google's Liabilit y For Misappropriating Digital Envoy's Trade Secrets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1. Google's interpretation of Section 8 is incorrect as a matter o f California contract law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Google's proffered interpretation of the limitation provision violates California law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 Google's misappropriation of Digital Envoy's trade secrets wa s willful, in the ordinary and plain meaning of that term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2. 3. C. 17 18 19 20 21 22 23 24 25 26 27 28 oogle Is Not Entitled To Summary Judgment On Digital Envoy' s Damages Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 1. The Uniform Trade Secrets Act authorizes the recovery that Digita l Envoy seeks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 The record evidence establishes that Google achieved revenues through its sale of a product that incorporated Digital Envoy's trad e secret . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 8 The evidence, including Google's own admissions, demonstrates that geo-targeting was a valuable component in Intern et advertising . . . . . . . . . 2 1 2. 3. IV . ONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 -iW02-SF :5 BB\61467342 .1 OPPOSITION TO GOOGLE'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON DAMAGE ISSUE S Case 5:04-cv-01497-RS Document 294 Filed 09/01/2005 Page 3 of 29 I TABLE OF AUTHORITIE S Page(s ) 2 3 4 5 FEDERAL CASES Anderson v . Liberty Lobby, 477 U.S . 242 (1986) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Carnival Cruise Lines Inc . v . Shute , 499 U.S . 585, 111 S . 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App . 3d 1463 (1987) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 4 Nunes Turfgrass, Inc . v . Vaughan-Jacklin Seed Company, Inc . , 200 Cal . App . 3d 1518 (1988) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 3 PMC Inc . v. Kadisha, 78 Cal . App . 4th 1368 (2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 Philippine Airlines, Inc . v . McDonnell Douglas Corp . , 189 Cal. App . 3d 234 (1987) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 2 W02-SF :5BB161460337 .1 MEMO . of P&A ISO DIGITAL ENVOY'S MOTION FOR PARTIAL SUMMARY JUDGMENT O N CONTRACT ISSUES 1 . 1 1 Case 5:04-cv-01497-RS Document 294 Filed 09/01/2005 Page 5 of 29 I 2 3 4 5 6 7 8 9 10 Schroeder v . Auto Driveway Co . , 11 Cal . 3d 908 (1974) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 7 Stott v . Johnston , 36 Cal . 2d 864 (1951) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 USM Corp . v . Marson Fastener Corp . , 467 N .E .2d 1271 (Mass . 1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 Unilogic, Inc . v. Burroughs Corp . , 0 Cal. App . 4th 612 (1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 Woodson v . Everson , 61 Cal . App . 2d 204 (1943) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 ,,1 5 14 DOCKETED CAS E RiLoro, Inc . v. Tumanian , Case No . B171371, 2005 WL. 1120087 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 3 STATE STATUTE S California Civil Cod e 1636 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,10 1664 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1668 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12, 13-14 3426.1(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 3426.3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16-17 9 3426.3(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 California Vehicle Cod e 403 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 5 I 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 W02-SF :5BB\61460337 .1 MEMO . of P&A ISO DIGITAL ENVOY'S MOTION FOR PARTIAL SUMMARY JUDGMENT O N CONTRACT ISSUE S m P I Case 5:04-cv-01497-RS Document 294 Filed 09/01/2005 Page 6 of 29 I 2 3 4 5 1. NTRODUCTIO N In the latest of its string of summary judgment motions, Google now contends that it is entitled to "partial summary judgment barring Digital Envoy from recovering damages from Google in this action ." Google Memorandum at 20 . However, Google relies on a isinterpretation of the License Agreement and a convoluted and incorrect assessment of Digital Envoy's basis for damages in support of its motion - neither of which entitle Google to the relief it seeks . More impo rt antly, Google's Motion is premature . To date : (i) Google has not yet completed its compli ance with the Court' s Order requi ri ng production of additional documents and information directly related to revenues it achieved from incorporating Digital Envoy's propri etary technology into its AdSense products ; (ii) Google has not produced corporate witnesses knowledgeable to testify regarding the topics of Google's use of Digital Envoy's technology or revenues derived from that use as called for in Digital Envoy's Rule 30(b)(6) deposition notice ; and (iii) pursuant to the Co u rt 's case man agement order, the parties has not even start ed expert designations or discovery. To seek summary judgment on the issue of damages p ri or to the completion of the factual record or the proffering of expert opinion is unjustifiable attempt to sho rt- circuit the legal process . Neve rt heless, on the basis of its own arguments, Google's motion must fail . First, Google urges the Cou rt to adopt an illegal interpretation of the pa rties' Agreement that would insulate Google from damages resulting from Google's intentional to rtious conduct, in violation of Califo rnia law and in plain contradiction of the purpose of the limited license agreement . Second, despite indisputable evidence that Google incorporated Digital Envoy's propri etary technology into its wildly profitable AdSense product, Google asse rt s that Digital Envoy cannot recover Google's unjust enrichment . Yet Google cites not a single authority that denies an aggrieved party recovery where the misappropriating defendant used that party's trade secret in a marketed 6 7 8 9 10 I 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -1W02-SF : 5BB\61467342 . I rior to filing this Motion, Google requested, and Digital Envoy granted, an extension to produce the documents and information required by the Cou rt' s Order . 1 OPPOSITION TO GOOGLE'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON DAMAGE ISSUE S T Case 5:04-cv-01497-RS Document 294 O Filed 09/01/2005 Page 7 of 29 I 2 3 4 5 6 7 8 9 10 I 12 13 14 15 16 17 18 19 20 21 22 product that achieved substantial revenue. Google instead attempts to rely on the purported complexity of the AdSense product to suggest that ascertaining the value of Digital Envoy's contribution to AdSense's success would be too difficult to permit Digital Envoy to recover . (Any ambiguity that might exist would be due to the manner in which Google used Digital Envoy's proprietary technology and Google's own records (or lack of records) regarding that use ambiguities that must be resolved against Google, not Digital Envoy .) Google's position is unsupported by the law or the facts in this case . For the reasons set forth below, Google's motion must be denied . H. A. he License Agreemen t Digital Envoy and Google both acknowledge that they were parties to the November 2000 Product and Electronic Database Evaluation and License Agreement, as amended (the "License Agreement") . See Google Inc .'s Notice of Motion and Motion for Partial Summary Judgment Regarding Digital Envoy's Damages Claims; Memorandum in Support Thereof ("Googl e Memorandum") at l ; Declaration of David H . Kramer ("Kramer Declaration"), Ex . A . However, despite Google's assertion that the License Agreement grants Googl e REDACTED " BACKGROUND Google Memorandum at 3-4, the License Agreement, in fact, was plainly limited in scope : First, the License Ag reement restricted Google's use of Digital Envoy's proprietary technology to use in Google's Business . Kramer Declaration, Ex . A ., Preamble; Second, the License Agreement expressly prohibits Google from Digital Envoy's proprietary technology Krame r Declaration, Ex . A ., 3 .1 ; an 23 24 25 26 27 Third, the License Agreement provides that REDACTE D Kramer Declaration, Ex . A ., 7.2 . That Digital Envoy's license to Google was limited (and not unlimited) is consistent with the part ies' communications both during and after the negotiations and execution of the Licens e -2W02-SF :5BB161469342 .1 PPOSITION TO GOOGLE'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON DAMAGE ISSUE S 28 U A G Case 5:04-cv-01497-RS Document 294 rR Filed 09/01/2005 Page 8 of 29 S I Agreement during which time Digital Envoy expressly communicated the limited nature of the license . See Declaration of Robert J. Waddell, Jr . ("Waddell Declaration"), 1 2, Ex. A. Further, Google itself confirmed to a potential investor in Digital Envoy that the License Agreement di d not permit Google Ex . B. Google's assertion that it ` is also not supported by the evidence . It was not until February 2004, in response to a REDACTED ee id., 3 , 2 3 4 5 6 8 9 10 direct inquiry from Digital Envoy, that Google finally admitted that it used Digital Envoy's proprietary technology in its AdSense programs2 approximately two years after Google began doing so. Perhaps more telling is the fact that Google's own employees who were most involved in the Digital Envoy-Google relationship did not know that Google had incorporated D i Envoy's proprietary technology into the AdSense program until they conducted an investigation in response to Digital Envoy's inquiry . See, e .g ., Waddell Declaration, 3, Ex . B . 3, the same Google employee who confirmed the limited scope of the license to the potential Digital Envoy investor, first (naturally) presumed that Google was honoring the limitations in th e license, writing : REDACTED See Waddell Declaration, 13, Ex . B . Ultimately, I 12 13 14 15 16 17 18 19 20 21 22 23 Google did confirm to Digital Envoy that Google was using Digital Envoy's proprietary technology in AdSense . See id., 2, Ex . A . B. oogle's Advertising Programs and Their Marketin g Google markets two advertising products : AdWords and AdSense . Google Memorandum at 6 . As Google explains : " EDACTED 2 dSense is the product through which Google licenses its advertising program third-party 24 web sites thereby permitting the third-party site to display advertisements, including advertisements that are targeted based on the content of the third-party site or visitor-input search 2 5 terms and the geographic location of the visitor . See, e.g., Rose Declaration, 7 . 26 27 3 pon information and belief efers to himself as "googleguy" on Internet message boards and often speaks knowledgeably and authoritatively about Google on such message boards . -3OPPOSITION TO GOOGLE'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON DAMAGE ISSUE S 28 W02-SF :5BB\61467342 .1 2 Case 5:04-cv-01497-RS Document 294 Filed 09/01/2005 Page 9 of 29 I REDACTED ,, Google Memorandum at 2 . Google earns revenue when a user "clicks" on a displayed advertisement and the advertiser pays Google for that click . See id. Through AdWords, advertisements are displayed on Google's own web sites . See id. at 6. In AdSense, Google displays advertisements on third-party web sites . Google Memorandum at 7 . Google earns revenue in AdSense REDACTE D See id. In AdSense, Google 8 See id. 9 10 11 12 13 14 15 16 17 18 19 0 21 22 23 24 25 For both advertising products, Google markets its ability to display an advertiser's advertisements that are relevant to the Internet user . See, e .g., Waddell Declaration,' 4, Ex . C . In setting up their advertising campaigns, advertisers are provided the opportunity to select (i) "key words" to be associated with their advertisements on which content relevance can be determined ; and (ii) the geographic locations (e.g., country, state, or region) in which they want thei r advertisements to be displayed . See id. Advertisements are thus targeted based on the interests of the user (based on, for example, the content of the third-party web site and/or user-input search terms) and, where possible, the geographic location of the user . Google Memorandum at 6 . Google marketed its ability to serve targeted advertising . In particular, Google marketed the geotargeting capabilities of its advertising programs . See, e .g ., Waddell Declaration, T 8, Ex . G. REDACTED Id.,' 9, Ex. H, h ttp ://www .google .co .uk/services/adsens e tour/page4 .htm1 , Id., T 10, Ex . 1, h ttp ://www .google .conVadsense/ourhometown , REDACTE D 26 27 28 -4W02-SF :5BB161467342 .1 d., 1 11 , Ex . J, h ttp ://www .goo g ] e . com/adsense/wifinde r ' OPPOSITION TO GOOGLE'S MOTION FOR PARTIAL SUMMARY JU DGMENT ON DAMAGE ISSUE S T G . Document 294 _ a Filed 09/01/2005 ) o Case 5:04-cv-01497-RS Page 10 of 29 REDACTE D 2 3 4 5 11 In addition, Internet advertisers and publishers also have stated the importance of geotargeting . See, e .g., Id., T 5, Ex . D, http ://searchenginewtach .com/searchdU/article /""Php/3099591 REDACTED Id., T 6, Ex . 6 i. 7 8 9 10 11 E, h ttp ://siliconvalley .iiitemet .com/news/article .ph-p/309843 1 REDACTED Id., 7, Ex. F, http ://volokh .blogspot .com/2004/10/bellsouths-alliance-with-g-o o le .html REDACTED 12 13 1 4 It 15 As Google admits, Digital Envoy's proprietary technology was "often used" in a Google Memorandum at 6-7. During the period in which Google incorporated Digital Envoy's proprietary technology in AdSense, Google achieved revenues from the AdSense product i n excess of $ 5 See Waddell Declaration, 15, Ex . N . Therefore, it is undisputed tha t 16 17 18 4 oogle's use of Digital Envoy's proprietary technology in AdSense was outside of the scope of the License Agreement, because, in AdSense, Google effectively provided llowin g 20 REDACTED 19 21 5 o date, Google has provided extremely limited information or support for its revenue numbers . Pursuant to the Court's July 15, 2005 Order, Google is required to produce additional information, including the revenue received by Google for 23 22 REDACTED 24 25 26 27 28 Order at 5 ( . Based n Google's representations that it needed additional time to gather and produce the required information, Digital Envoy granted Google an extension by which to produce this additional information . In addition, Google now claims that costs associated with its AdSense product further reduce the profits AdSense generated . To date, however, Google has provided no explanation for or description of these "costs" or any supporting documentation thereof . Digital Envoy assumes that Google's supplemental production will supply this critical, but missing, information . Also, despite Digital Envoy's pending Rule 30(b)(6) Deposition Notice, Google ha s -5OPPOSITION TO GOOGLE'S MOTION FOR PARTIAL SUMMARY JU DGMENT ON DAMAGE ISSUE S W02-SF :51313\61467342 .1 y o "I Ro O i , a Case 5:04-cv-01497-RS Document 294 Filed 09/01/2005 Page 11 of 29 I 2 3 4 5 6 7 8 9 10 Google achieved substantial revenues from a product that incorporated Digital Envoy's proprietary technology. Nevertheless, Google asserts that Digital Envoy is not entitled to damages, even if it can establish that Google misappropriated Digital Envoy's trade secrets . To support this contention, Google offers a complex description of its advertisement selection process contending that Google uses Digital Envoy's data to EDACTED Google Memorandum at 7-8 . Thus, according to Google, an advertiser who selects to have its advertisements displayed only in a particular geographic location would have REDACTE D I 12 13 14 Google Memorandum at 6-7 . Even accepting Google's description at face value, it is difficult to see what relevance Google sees in its emphatic emphasis on this distinction . Whether advert isements are ultimatel y r the result is the same : Google's process is aimed at and that process, as it relates utilizes Digital 15 ; 16 17 Envoy's proprietary technology to achieve the desired result and, thus, the display of th e ndeed, according to Google's own logic, its advertising selectio n process (whether described as ` determination of,,. r s absolutely dependent on the nd Google uses 18 i 19 20 21 22 23 24 25 Digital Envoy's technology to make that determination . See, e .g., Deposition of Mark Rose, at 26, 45,50-51 . et to provide a witness to testify on behalf Google on the topics of (i) how Google used Digital Envoy's data in its AdSense programs ; or (ii) the nature and amount of revenue Google achieved 2 7 from AdSense . At Google's request, Digital Envoy has communicated to Google the deficiencies in its Rule 30(b)(6) response, to which Google has not yet responded . 26 28 -6W02-SF :5BB\61467342 .] PPOSITION TO GOOGLE'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON DAMAGE ISSUE S Case 5:04-cv-01497-RS Document 294 Filed 09/01/2005 Page 12 of 29 III . ARGUMENT AND AUTHORITY A. Google Is Not Entitled to Partial Summary Judgment . For purposes of summary judgment, "all evidence must be construed in the light most favorable to the party opposing summary judgment ." Anderson v. Liberty Lobby, 477 U.S . 242, 5 6 7 8 9 10 n .2 (1986); T. W. Elec . Serv. v. Pacific Elec. Contractors Assn, 809 F.2d 626, 631 (9th Cir. 1987) . The "party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact ." Celotex Corp . V. Catrett, 477 U .S . 317, 323 (1986) (emphasis added) . Thus, the non-moving party - here, Digital Envoy - is only obliged to produce evidence when the moving party has discharged its initial responsibility of showing "the absence of a genuine issue concerning any material fact ." Id. at 325 . Such a dispute is "genuine" if "a reasonable jury could return a verdict for the non-moving party ." 477 U.S . at 248 . As set forth in greater detail below, Google attacks Digital Envoy's theory of recovery based on Google's own flawed damages theory . In relying on such a flawed theory of damages, Google's proffered facts are not material to the proper theory of damages . As such, Google has failed utterly to meet its initial burden of showing the Court that there is an absence of a genuine issue of material fact . In contrast, Digital Envoy provides evidentiary support that directly connects Google's AdSense profits to the use of Digital Envoy's proprietary technology . In other words, despite Google's failure to meet its initial burden, Digital Envoy sets forth the specific facts that show the direct causal link between Google's AdSense profits and Google's wrongful use of Digital Envoy's proprietary technology . Google's motion must therefore be denied . B. Section 8 Of The License Agreement Does Not Limit Google's Liability For Misappropriating Digital Envoy's Trade Secrets . In a attempt to escape liability for its misappropriation of Digital Envoy's trade secrets, Google argues that a provision of the License Agreement that limited damages arising as a resul t W02-SF :5BB\61 467342 .1 I 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -7OPPOSITION TO GOOGLE'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON DAMAGE ISSUE S W G Document 294 Filed 09/01/2005 Page 13 of 29 Case 5:04-cv-01497-RS 1 2 3 4 5 6 7 8 9 10 of a party's performance of its duties under the License Agreement shields Google from liability for its commission of the intentional tort of misappropriation of trade secrets . Google's proffered interpretation of this provision is contrary to both California law and the intent of the parties as expressed in the License Agreement. Accordingly, this Court should reject Google's interpretation . 1. oogle's interpretation of Section 8 is incorrect as a matter of California contract law. The License Agreement contains a section whereby both parties disclaimed certain warranties and accepted liability for certain acts. Section 8 of the License Agreement reads as follows : I 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -8OPPOSITION TO GOOGLE'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON DAMAGE ISSUE S REDACTE D REDACTED Kramer Dec . Ex. A, 8 (capitalization in original) . ith one exception, this is a typical seller's warranty . The provider of services - Digital Envoy - issued certain warranties, disclaimed all other warranties, and then limited its liability for any claim brought under the License Agreement . What makes this section unusual, however, i s W02-SF :5BB\61467342 .1 " Case 5:04-cv-01497-RS Document 294 s I u . R Page 14 of 29 Filed 09/01/2005 REDACTED I that Google insisted America, 6 See Badie v. Bank of 2 3 4 5 6 7 8 67 Cal . App . 4th 779, 782 (1998) (citing Cal . Civ . Code 1664 for the proposition that ambiguities in contracts are construed against the drafter . ) The subject matter of the initial sentences in Section 8 make clear that the last sentenc e was meant to apply to claims such as sentence, Digital Envoy warrants tha t In the second sentence, both parties acknowledg e REDACTE D In the first In the third sentence , n the fourth sentence, Digital Envo y 9 10 II both parties REDACTED . In the fifth 12 13 4 15 sentence, both partie s These five sentences serve as a prelude to the limitation in the sixth sentence . That limitation reads : REDACTE D 16 17 i 18 19 20 21 22 Kramer Declaration, Ex . A, 8 . The parties intended thi s limitation to apply in situations wher e Based on the clear language of Section 8, the parties did not intend EDACTE D Contracts are to be interpreted "so as to give effect to the intention of the parties as it existed at the time of the contract, so far as the same is ascertainable ." Continental Manufacturing Corp . v. Underwriters at Lloyds London, 185 Cal. App . 2d 545, 549 (1960) (citing Cal . Civ. Code 23 24 25 6 Section 8 expressly refers to These types of harm may be more directl y 26 (I applicable to Digital Envoy's performance under the License Agreement ; nevertheless, Google that drafted ; eeking, presumably, 27 nder the License Agreement . Google Memorandum at 5 . 28 -9OPPOSITION TO GOOGLE'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON DAMAGE ISSUE S W02-SF:5BB\61467342 .1 2 T D Case 5:04-cv-01497-RS Document 294 _ T Page 15 of 29 Filed 09/01/2005 1 2 3 4 5 6 7 8 1636). "The language of the contract governs its interpretation if the language is clear." Id. (citing Cal . Civ. Code 1638) . "In determining the meaning of a contract, the court may take into consideration the circumstances under which it was made and the matter to which it relates ." Id. (citing Cal . Civ. Code 1647) . "To determine what the parties meant by one clause of [a] contract, the whole contract must be examined, and other clauses of the contract may be considered in interpreting the meaning of the one in question." Id. (citing Cal . Civ. Code 1641). Applying these rules to Section 8, it is clear the parties intended it to address on y FEDACTED 9 10 Under Google's interpretation of Section 8, it coul d REDACTE D 12 13 14 15 under the License Agreement. The rules of contract construction, as well as common sense, dictate that this result is not one the parties intended when they negotiated and drafted the License Agreement . Indeed, Google's interpretation of the limitation essentially guts the purpose of the License Agreement . The License Agreement allowed Google to hav e REDACTED 6 17 18 19 20 21 21 23 24, 25 .7 Under Google's interpretation, Google ould be allowed 8 The interpretation and result urged by Google renders, as farce, the parties' careful negotiations about the scope of the license and the price to be paid . 7 espite its contention that it believed it could u ; Google has acknowledged that at the time of execution it was awar e See Schimmel Deposition at 106-10 8 ) . Thus, Mr. Schimmel admits that Googl e In light of thi s awareness at the time of execution that there were-, Google's current argument that it coul d strains credulity . 26 27 28 8 his is because under Google's interpretation, its liability for anything it does with Digital Envoy's herefore, Google could -10OPPOSITION TO GOOGLE'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON DAMAGE ISSUE S W02-SF :5BB\61467342 .1 Case 5:04-cv-01497-RS Document 294 Filed 09/01/2005 Page 16 of 29 I Digital Envoy's claim is not brought pursuant to the License Agreement . It is not brought based on any rights granted to it in the License Agreement . Digital Envoy's claim is, by definition, ex delicto . Cal . Civ. Code 3426 .1(b)(2)(13)(h) provides : (b) Misappropriation means . . . (2) Disclosure or use of a trade secret of another without express or implied consent by a person who : . . .(B) At the time of the disclosure or use, knew or had reason to know that his or her knowledge of the trade secret was : . . . (ii) Acquired under circumstances giving rise to a duty to maintain its secrecy of limit its use . In order for Digital Envoy to prevail on its trade secret claim, it must prove that Google's use of its technology was beyond the scope of the License Agreement . Logically, any claim brought against Google for its acts outside License Agreement is not brought "UNDER THE AGREEMENT ." Indeed, Digital Envoy's claim is hinged entirely to the fact that Google is operating outside the bounds of the License Agreement . To support its contention that Section 8 applies to Digital Envoy's trade secret, Google cites a series of federal cases which it contends support its claim that Digital Envoy's claim is brought "UNDER THIS AGREEMENT ." However, each case Google cites is clearly distinguishable . The cases cited by Google can be divided into one of two categories : (i) cases analyzing the scope of arbitration clauses under the liberality standard of the Federal Arbitration Act, see Mediterranean Enters., Inc. v. Ssangyong Corp., 708 F.2d 1458, 1464 (9th Cir . 1983) ; In re Kinoshita & Co., 287 F.2d 951, 953 (2nd Cir . 1961) (both holding that claims arose under the contract for purposes of the arbitration agreement) ; and (ii) cases analyzing the scope of forum selection clauses under federal law, see Terra Int'l, Inc. v. ]Mississippi Chem . Corp., 119 F .3d 688, 692 (8th Cir . 1997) ; National Micrographics Sys ., Inc. v. Canon USA, Inc., 825 F . Supp . 671, 67778 (D.N.J. 1993) ; Picken v. Minuteman Press Intl, Inc ., 854 F. Supp . 909, 911-12 (N .D . Ga. 1993) ; Farrow, Inc . v. Gucci Am ., Inc., 858 F.2d 509, 514 (9th Cir. 1988) (all holding that claims arise under the contract for purposes of forum selection clauses) . 2 3 4 5 6 7 8 9 10 I 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 completely ignore the License Agreement' s limitations and hav e 28 W02-SF :5BB\61467342 .1 -11OPPOSITION TO GOOGLE'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON DAMAGE ISSUE S G Case 5:04-cv-01497-RS Document 294 Filed 09/01/2005 Page 17 of 29 The contexts in which Google's cases were decided were unique, and their reasoning does not apply to Google's invocation of Section 8 as a bar to Google's liabilit y cf Philippine Airlines, Inc. v. McDonnell Douglas Corp., 189 Cal. App. 3d. 234, 237 (1987) . (California law requires courts to narrowly construe contract provisions that limit a party's liability.) In direct contrast to California's rule that purported "limitation of liability" provisions 6 7 8 9 must be construed narrowly against the party invoking their protection, the Supreme Court of the United States has ruled that forum selection clauses and arbitration provisions are to be given broad interpretations and to be generally enforced . See Carnival Cruise Lines, Inc. v. Shute, 499 U .S . 585, 589, 111 S . Ct. 1522 (1991) ; MIS Bremen v. Zapata Off-Shore Co., 407 U.S . 1, 15 (1972) (both holding that forum selection clauses are presumptively valid and should be enforced) ; see also Moses H. Cone Mem I Hosp . v. Mercury Const. Corp., 460 U.S . 1, 23, n. 7 (1983) ; Shearson/American Express, Inc. v. McMahon, 482 U.S. 220,220 (1987) (both holding that federal law requires a liberal reading of arbitration agreements) . Accordingly, when interpreting such provisions, courts are to construe liberally whether claims are brought under such agreements . These cases, therefore, are inapposite to the question of whether Google's misappropriation is covered under Section 8 of the License Agreement . As Google concedes, there is no case that stands for the proposition that misappropriation claims arise under the License Agreement . See Google Memorandum at 11 (noting that "[t]here is virtually no case authority interpreting the precise language at issue."). 2. oogle's proffered interpretation of the limitation provision violates California law . Moreover, Google's interpretation of Section 8 renders it unenforceable under California law . Cal . Civ. Code 1668, entitled "Contracts contrary to policy of law," provides as follows : CERTAIN CONTRACTS UNLAWFUL . All contracts which have for their object, directly or indirectly, to exempt anyone from responsibility for his own fr aud, or willful inju ry to the person or prope rty of another, or violation of law, whether willful or negligent, are against the policy of the law. As Google itself has noted "[t]rade secret misappropriation is an intentional tort ." See Google, Inc .'s Supplemental Brief in Support of its Motion for Summary Judgment at 1 (citing PMC, Inc. -12W02-SE 51313\61467342.1 10 I 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 OPPOSITION TO GOOGLE'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON DAMAGE ISSUES T Case 5:04-cv-01497-RS a Document 294 Filed 09/01/2005 Page 18 of 29 I v. Kadisha, 78 Cal . App. 4th 1368, 1382 (2000) ; Del Monte Fresh Produce Co. v. Dole Food Co., Inc ., 148 F . Supp . 2d 1326, 1338 (S .D . Fla. 2001)(both holding that misappropriation of trade 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 secrets is an intentional tort) . Accordingly, any provision in the License Agreement that purports to limit liability for an intention tort, such as the misappropriation of trade secrets, would be invalid pursuant to California Civil Code Section 1668 . California courts consistently have held that exculpatory clauses that purport to limit damages for a party's willful, wanton, or intentional acts are invalid as a matter of law . "[C]ontractual releases of future liability for fraud and other intentional wrongs are invariably invalidated ." Farnham v. Sequoia Holdings, Inc., 60 Cal . App . 4th 69, 71 (1997) . Prospective limitations on damages resulting from intentional torts are invalid as a matter of law . See RiLoro, Inc. v. Tumanjan, Case No . B171371, 2005 WL 1120087 (Cal. App . 2d Dist. May 12, 2005) (holding that liquidated damages clause limiting liability to $103,750 did not apply to plaintiff's fraud claim since Cal . Civ . Code 1668 invalidated any prospective limitation on damages for an intentional tort) ; see also Ting v. AT&T, 182 F. Supp . 2d 902 (N .D . Cal . 2002) (holding that a limitation on liability for an intentional tort is invalid pursuant to California Civil Code 1668) ; Klein v. Asgrow Seed Co ., 246 Cal . App . 2d 87,100-101 (1966) (same) ; Nunes Turfgrass, Inc . v. Vaughan-Jacklin Seed Company, Inc ., 200 Cal . App. 3d 1518, 1535 (1988) (recognizing that Klein holds that limitations on liability for intentional torts are void as against public policy) . 9 Clearly, the parties intended for th e such as REDACTED 21 22 23 24 25 The parties clearly did not intend fo r the However, even accepting Google's interpretation, such an interpretation amounts to a prospective limitation nd would be invalid under Califo rn ia Civil Code 9 he Farnham court held that a "limitation of liability" provision that insulated directors of company from liability for the corporation's intentional torts, and permitted full recovery from the 2 7 corporation, was not per se illegal because the plaintiff retained the right to seek redress for the total amount of his loss from the corporation . 60 Cal . App . 4th at 77 . 26 28 W02-SF :5BB\61467342 .1 -13OPPOSITION TO GOOGLE'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON DAMAGE ISSUE S C A G Document 294 O Case 5:04-cv-01497-RS Filed 09/01/2005 Page 19 of 29 I 1668 . Accordingly, this Court should reject Google's interpretation of the limitation provision or invalidate the provision in tote s 3. oogle's misappropriation of Digital Envoy's trade secrets was willful, in the ordinary and plain meaning of that term . Further, Google's assertion that Digital Envoy must prove that Google "intended" to harm Digital Envoy is unsupported by the plain language of the License Agreement and California law . Google attempts to raise again essentially the same issue already decided by this Court in ruling on Google's motion on the so-called "mens rea" issue. See Supplemental Order Denying Google's Motion on the Trade Secret Claim, at 3 ("Accordingly, if it is ultimately found that Google exceeded the scope of its License, then a trier of fact may also conclude that Google knew or should have known that its use of Digital's proprietary technology in its AdSense program was a misappropriation of Digital's trade secrets .") . Once again, Google is wrong. As the Court noted in its Supplemental Order, "liability in a trade secret case lies only in the wrongful acquisition of a trade secret, but also in the unauthorized disclosure or use of the proprietary information ." Supplemental Order at 3 . (citing Clark v. Bunker, 453 F.2d 1006, 1008, n . 2 (9th Cir. 1972) . Whether or not Google intended to misappropriate Digital Envoy's trade secrets is quite beside the point for purposes of determining whether Google's use was "unauthorized" under the License Agreement . As Digital Envoy has previously argued, bad faith is not an element of a violation of California Civil Code 3426 .1(b)(2)(B)(ii) .1 0 Google cites Woodson v. Everson, 61 Cal . App .2d 204, 208 (1943), for the proposition that "willful misconduct" is conduct "of a quasi-criminal nature ." Google Memorandum, at 9 . However, the Woodson court expressly stated that its was interpreting the phrase willfu l 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 to party need only intentionally "use" "disclose" the trade secret in order to be liable under this section of CUTSA . It need not do so with knowledge that it is breaching its duty to maintain its secrecy or limit its use . In this regard, subsection (b)(2)(B)(ii) is similar to the tort of trespass. 25 To be liable for trespass, a party need not know it is crossing onto another's property - he need . . National Broadcasting 2 6 only cross onto another's property of his own volition See Miller v ompany, 187 Cal . App . 3d 1463, 148 (1987) (trespass actions are "characterized as intentional 27 torts, regardless of the actor's motivation.") . 24 28 -14W02-SF :5BB\61467342 .] PPOSITION TO GOOGLE'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON DAMAGE ISSUES S Case 5:04-cv-01497-RS Document 294 R T I Filed 09/01/2005 Page 20 of 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 misconduct "as that term is used in Section 403 of the Vehicle Code ." 61 Cal . App. 2d at 207. Google next cites Gillespie v. Rawlings, 49 Ca1.2d 359 (1957) for the proposition that in order to show "willful misconduct" 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 ." Google Memorandum, at 9 . Just like Woodson, Gillespie involved an interpretation of "willful misconduct" as that term is used in Section 403 of the California Vehicle Code . Id. at 363 . As such, the Woodson and Gillespie interpretations of the phrase "willful misconduct" are not relevant to meaning of the phrase as it was used in the License Agreement . The phrase as it appears in the License Agreement is to be given its ordinary meaning. See Coast Plaza Doctor's Hospital v. Blue Cross of California, 83 Cal . App. 4th 677, 684 (2000) . It is on this point that Gillespie provides a relevant holding . In discussing the meaning of the phrase, the Court noted that "[i]f we were to use the words in their ordinary sense, they would mean simply the indulging in wrongful conduct by conscious choice . Such conduct might consist of doing something that ought not to be done or in failing to do something that ought to be done ." 49 Cal . 2d at 367. Thus, "willful," in its ordinary sense, does not imply a heightened standard of Google's intention to do Digital Envoy harm or to violate the terms of the License Agreement . This is precisely what the phrase means it the License Agreement . "Willful," as that term is used in Section 8, refers to Google's Section 8 expressly the fourth sentence, EDACTE D actions, not its intentions .] l The second sentence in n 22 23 24 '. 25 26 27 28 hus used in Section 8, simply describe : REDACTE D as that term is 11 ee BLACK'S LAw DICTIONARY 1593 (7th ed . 1999) (defining "willful" as "voluntary and intentional, but not necessarily malicious .") . W02-SE51313\61467342 .1 -15OPPOSITION TO GOOGLE'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON DAMAGE ISSUE S G T Document 294 Filed 09/01/2005 Page 21 of 29 Case 5:04-cv-01497-RS I 2 3 4 REDACTE D C. 1. oogle Is Not Entitled To Summary Judgment On Digital Envoy's Damages Claims . he Uniform Trade Secrets Act authorizes the recovery that Digital Envoy seeks . Google continues to caricature and misrepresent the bases for Digital Envoy's claim for damages . Through its enactment of the Uniform Trade Secrets Act ("UTSA"), California has 9 10 11 12 13 14 15 16 17 18 19 20 recognized the inherent difficulty for a plaintiff to ascertain and prove damages resulting from the misappropriation of its trade secrets and, thus, provides multiple avenues for recovery to serve the overarching goal of making the plaintiff whole . See Telex Corp . v. Int'1 Bus. Machines Corp., 510 F .2d 894, 931 (10th Cir. 1975) (recognizing that underlying purpose of UTSA's damage provisions is to make the plaintiff whole and awarding damages for unjust enrichment as well as compensatory damages) ; cf. Computer Assocs. Int'l, Inc . v. American Fundware, Inc., 831 F. Supp . 1516, 1518 (D . Colo . 1993) (recognizing that measure of damages for misappropriation of trade secrets can be elusive) . Specifically, the California Trade Secrets Act ("Section 3426.3") authorizes the following recovery : (a) A complainant may recover damages for the actual loss caused by misappropriation . A complainant may also recover for the unjust enrichment caused by misappropriation that is not taken into account i n computing damages for actual loss . If neither damages nor unjust enrichment caused by misappropriation are provable, the court may order payment of a reasonable royalty for no longer than the period of time use could have been prohibited . If willful and malicious misappropriation exists, the court may award exemplary damages in an amount not exceeding twice any award made under subdivision (a) or (b) . (b) 21 22 (c) 23 24 12 See, e.g., Supplemental Order Denying Google's Motion for Summary Judgment on the Trade Secret Claim, at 2-3 ("Nonetheless, Digital pointed out that the License contained limits prohibiting Google from 2( Digital also noted that, prior to the execution of the License, it clarified with Google the meaning of that 2 7 clause . informinp, Google that it would not be permitted to 25 28 -16OPPOSITION TO GOOGLE'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON DAMAGE ISSUE S WOMF :51313\61467342 .1 p Case 5:04-cv-01497-RS Document 294 Filed 09/01/2005 Page 22 of 29 I See Cal . Civ . Code 3426 .3 . 2 3 4 5 6 7 8 9 10 Although Google acquired a limited license from Digital Envoy fo r and used that technology in products that achieved substantial revenue, Google now contends that rovided no enhancement at all to its advertising programs - including its AdSense programs . See Google Memorandum at 19 . Further, Google's incredulity aside, every third-party web site with which Google shared (or licensed) Digital Envoy's geo-targeting technology was a potential licensee of Digital Envoy, and that Google's unauthorized provision of Digital Envoy's technology to "hundred of thousands" of web sites significantly and detrimentally impacted the market for Digital Envoy's technology to other advertising networks - all of which were potential licensees of Digital Envoy's technology . Nevertheless, Google continues to devote its critique of Digital Envoy's damage theories 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 to the actual loss prong of recovery, thereby ignoring the fact that Section 3426 .3 authorizes Digital Envoy to recover Google's unjust enrichment resulting from its unauthorized use of Digital Envoy's technology . See Cal . Civ. Code 3426 .3(a) ; University Computing Co. v. LykesYoungstown Corp., 504 F.2d 518, 536 (5th Cir. 1974) (an appropriate measure of damages for misappropriation of a trade secret are "the benefits, profits, or advantages gained by the defendant in the use of the trade secret") . In its Motion for Partial Summary Judgment, Google has taken aim at the alleged difficulty of establishing the amount of Digital Envoy's damages and Google's unjust enrichment . Cf. Telex Corp. v. Int'l Bus . Mach. Corp., 510 F .2d 894, 932 (10th Cir. 1975) ("The fact that [damages for trade secret misappropriation] are difficult to pin down should not militate in favor of the wrongdoer .") . California courts are clear : Certainty about the existence, not the amount of damages, is controlling. See, e.g., Stott v. Johnston, 36 Cal . 2d 864, 875 (1951) ; see also Brawthen v. H & R Block, Inc., 52 Cal . App. 3d 139, 148 (1975) ("Once plaintiff has established the basis for a loss of anticipated profits with reasonable certainty, then any other uncertainties that necessarily arise in calculating the amount of anticipated profits should be resolved against the [defendant] .") ; Schroeder v . Auto Driveway Co ., 11 Cal . 3d 908, 921 (1974) ("Liability cannot be evaded because damages cannot be ascertained with exactness") ; cf. Electro-Miniatures Corp . v. W02-SF :5BB\61467342 .1 -17OPPOSITION TO GOOGLE'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON DAMAGE ISSUES T Case 5:04-cv-01497-RS Document 294 Filed 09/01/2005 R Page 23 of 29 I Wendon Co ., 771 F .2d 23, 27 (2d Cir . 1985) (holding in trade secret misappropriation case, 2 3 4 5 6 7 8 9 10 "[w]here . . . there is a clear showing of injury that is not susceptible to exact measurement because of the defendant's conduct, the jury has some latitude to `make a just and reasonable estimate of the damages based on relevant data."'). Under the UTSA, the defendant - here, Google - bears the burden of establishing both (1) the costs and expenses to be deducted from revenues derived from the misappropriated trade secret ; and (ii) the amount, if any, of the defendant's own contribution to the value of the product or service containing the misappropriated trade secret . See, e.g., USM Corp. v. Marson Fastener Corp ., 467 N .E .2d 1271, 1276 (Mass . 1984) ("Once a plaintiff demonstrates that a defendant made a profit from the sale of products produced by improper use of a trade secret, the burden shifts to the defendant to demonstrate those costs properly to be offset against its profit and the portion of its profit attributable to factors other than the trade secret . If a defendant cannot meet its burden as to costs and profits, the defendant must suffer the consequences .") ; see also Electro-Miniatures Corp., 771 F .2d at 27 (holding that for equipment depending upon the ability to use the smaller I 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 component embodying the trade secret, it could be proper to compute damages based on the sales of all equipment including the secret component); Jet Spray Cooler, Inc. v. Crampton, 385 N.E.2d 1349, 1358 (Mass. 1979) (holding that the defendant's net profits from sales were the proper basis for recovery where the defendant's product "incorporated" the trade secret) ; Carter Products, Inc. v . Colgate-Palmolive Co ., 214 F. Supp. 383, 397 (D . Md . 1963) (holding that once the plaintiff proves that profits were achieved due to the sale of products incorporating the proprietary information, the burden shifts to the defendant to show what part of the profit is attributable to features other than the proprietary information) . 2. he record evidence establishes that Google achieved revenues through its sale of a product that incorporated Digital Envoy's trade secret . In this case, it is undisputed that : Google's AdSense products incorporated and utilized Digital Envoy's proprietary technology allowing ! EDACTE D Indeed, as Google admits, Google W02-SF :5BB\61467342 .1 -18OPPOSITION TO GOOGLE'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON DAMAGE ISSUE S DS R dR Document 294 Filed 09/01/2005 Page 24 of 29 S Case 5:04-cv-01497-RS .7 REDACTED 1 2 3 4 5 6 7 Declaration of Mark Rose in upport of Google Inc.'s Motion for Partial Summary Judgment Regarding Digital Envoy, Inc .'s Damages Claims ("Rose Declaration"),' 7 ; see also Declaration of Susan Wojcicki in Support of Google Inc .'s Motion for Partial Summary Judgment Regarding Digital Envoy, Inc .'s Damap-es Claims ("Wojicki Declaration"), 5 ( ` Google's AdSense products achieved significant revenues from the licensing of AdSense . 1 3 See Waddell Declaration, T 15, Ex . N. Therefore, once Digital Envoy establishes that Google's use of Digital Envoy's technology in AdSense was unauthorized, Google's unauthorized use would constitute misappropriation for which Digital Envoy is entitled to recover. See Cal . Civ . Code 3426 .3 . Furthermore, based on Google's own admissions, Digital Envoy's technology was a necessary factor 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 1 1 26 27 28 W02-SF:5BB\6 ] 467342 . I The logical analysis o f Google's own statements is simple: o See Wojcicki Declaration, T 4-5 . 0 EDACTE D REDACTED Rose Declaration, TT 6, 9. 0 EDACTE D ee See, e.g., Rose Declaration, Tt6, 9 . 0 See Rose Declaration,~j 6, 7 . REDACTE D 0 See Rose Declaration, ~ 7 . The conclusion is obvious : If Google achieved revenue from then Digital Envoy' s 13 uring the relevant time period, based on information Google provided to Digital Envoy, Google achieved revenues in excess of $ ollars . See Waddell Declaration, ~ 15, Ex . N. -19OPPOSITION TO GOOGLE'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON DAMAGE ISSUES d Case 5:04-cv-01497-RS Document 294 S Filed 09/01/2005 Page 25 of 29 Envoy's proprietary technology. Whether in the alternative universe Google proposes, Google could have created a different product with different capabilities (e .g. , ) that might have achieved different revenues is of no matter . 14 See, e.g., Carter Products, 214 F. Supp . at 396-97 (rejecting the defendant's argument that it could have produced its product without the trade secret and achieved the same success noting that the efendant nevertheless chose to market the product containing the trade secret) . Here, in the real world, Google did use Digital Envoy's proprietary technology in its AdSense product, which did achieve substantial revenues . Digital Envoy does not and never has contended that its proprietary technology was the sole factor in the success of the AdSense product, but it undoubtedly was a necessary factor, thereby directly contributing to Google's actual revenue . The only case Google cites in support of its assertion that Digital Envoy cannot recover Google unjust enrichment is Unilogic, Inc. v. Burroughs Corp., 10 Cal . App . 4th 612 (1992) . However, Unilogic does not apply to the facts in this case . The Unilogic court held that summary judgment was proper where the trade secret plaintiff failed to adduce evidence that the defendant was unjustly enriched by the use of the plaintiff's trade secret, where (i) the product containing the trade secret was never marketed and the defendant earned no profits, and (ii) the only evidence of enrichment was the plaintiff's unsupported testimony of the purchase price of the trade secret many years prior to the misappropriation . Unilogic, 12 Cal . App . 4th at 627-28 . Here, in stark contrast, there is no doubt that the very product that incorporated Digital Envoy's trade secret was marketed on the basis of the enhancement that trade secret provided, was sold , 14 Google's Mark Rose states in his declaration that " ." Rose Declaration, 9 . However, Rose's assertion is rank speculation, because Google did use Digital Envoy's technology to ee id., T 7. -24\\COM\535716 . 1 G Case 5:04-cv-01497-RS Document 294 Filed 09/01/2005 U Page 26 of 29 1 2 3 4 5 6 7 8 9 10 I 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 proprietary technology was a necessary factor system that Google chose to employ, REDACTED nder the through the use of Digital Envoy's proprietary technology . Whether in the alternative universe Google proposes, Google could have created a different product with different capabilities (e .g. ;. ) that might have achieved different revenues is of n o matter. 14 See, e.g., Carter Products, 214 F . Supp. at 396-97 (rejecting the defend an t's argumen t that it could have produced its product without the trade secret and achieved the same success noting that the defendant nevertheless chose to market the product containing the trade secret) . Here, in the real world, Google did use Digital Envoy's proprietary technology in its AdSense product, which did achieve substantial revenues . Digital Envoy does not and never has contended that its proprietary technology was the sole factor in the success of the AdSense product, but it undoubtedly was a necessary factor, thereby directly contributing to Google's actual revenue . The only case Google cites in support of its assertion that Digital Envoy cannot recover Google unjust enrichment is Unilogic, Inc . v. Burroughs Corp., 10 Cal . App. 4th 612 (1992) . However, Unilogic does not apply to the facts in this case. The Unilogic court held that summary judgment was proper where the trade secret plaintiff failed to adduce evidence that the defendant was unjustly enriched by the use of the plaintiff's trade secret, where (i) the product containing the trade secret was never marketed and the defendant earned no profits, and (ii) the only evidence of enrichment was the

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