UPDATECOM, INC. v. FirstBank Puerto Rico, Inc.

Filing 412

ORDER granting 373 Motion for Leave to File; granting in part and denying in part 374 Motion for Partial Summary Judgment; denying 376 Motion for Summary Judgment; holding in abeyance 378 Motion Requesting Order; granting 380 Motion fo r Leave to File Excess Pages; noted 385 Informative Motion; granting 403 Motion for Leave to File. Trial remains set for Monday, February 3, 2014. By 12:00 p.m. on that day, (1) UpdateCom shall, consistent with the attached Opi nion and Order, SHOW CAUSE why its liability expert's report should not be struck in its entirety, and its liability expert should not be precluded from testifying; and (2) FirstBank shall, consistent with the attached Opinion and Order, SHOW CAUSE why the jury should not be given a limited adverse inference instruction. Signed by US Magistrate Judge Silvia Carreno-Coll on 1/30/2014. (NBB)

IN THE UNITED STATES COURT
FOR THE DISTRICT OF PUERTO RICO

UPDATECOM, INC.,
Plaintiff,
v.

CIV. NO.: 10-1855(SCC)

FIRSTBANK P.R., INC.,
Defendant.

OPINION AND ORDER
We have reviewed the motions for summary judgment filed
in this case, Docket Nos. 374, 376, and, as we explain below,
conclude that they must be denied in large part. As such, this
case will proceed to trial on February 3, 2014. Nonetheless, the
motions allow us to circumscribe the scope of that trial in
certain regards. We explain below.

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Page 2

I. Infringement1
A. Background
At the heart of this case is Plaintiff UpdateCom’s allegation
that a piece of software created by Defendant FirstBank called
ATM Transaction Broker (“AAB”) infringed on the copyright
for a piece of software owned by UpdateCom called End2End.
We note, first of all, that there is an issue of material fact as to
the actual ownership of End2End. According to UpdateCom,
End2End was created exclusively by UpdateCom employees
and was licensed to FirstBank; according to FirstBank, however, UpdateCom only acted on a consultative basis, and the
software that became End2End was created for FirstBank,
which jointly or solely authored it. As this matter is contested,
it can only be decided by a trial after weighing the parties’
evidence.
A second matter of dispute is the date on which AAB went
into effect. According to FirstBank, End2End was removed
from use, and version 1.0 of AAB was installed, on September
15, 2010. UpdateCom’s expert, however, states that according
to his investigation, version 1.0 of AAB was not compiled until

1.

Assuming the parties’ counsels familiarity with the law, we omit a
discussion of the basic summary judgment standards.

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October 10, 2012, and therefore it could not have been in use
before that date. See Docket No. 379, at 28. Thus, UpdateCom
implies, from September 15, 2010, until at least October 10,
2012, either End2End or an End2End-like software predating
the AAB version 1.0 was being used.2 Given this dispute, we
cannot, without a trial, conclude when AAB version 1.0 was
put into use.
But UpdateCom did inspect AAB version 1.0, as well as its
subsequent versions, and its expert produced a report regarding whether that copied End2End. After reviewing that report,
we are convinced that no reasonable factfinder could conclude
that AAB versions 1.0 and later infringe upon End2End’s
copyright, if that copyright is indeed owned by UpdateCom.
B. The Law of Software Copyright
There are two essential elements to a claim of copyright
infringement. First, the plaintiff must show “ownership of a
valid copyright”; second, he must show “copying of constituent elements of the work that are original.” Feist Publ’ns, Inc. v.
Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991). The copying

2.

This is in part the basis for UpdateCom’s related spoliation motion.

UPDATECOM v. FIRSTBANK

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inquiry has, in turn, two components.3 First, the plaintiff must
show that his work was “actually copied,” either by “direct
evidence of copying or by indirect evidence, including access
to the copyrighted work, similarities that are probative of
copying between the works, and expert testimony.” Laureyssens
v. Idea Grp., Inc., 964 F.2d 131, 140 (2d Cir. 1992). Once actual
copying is shown, the plaintiff must also demonstrate that the
copying was actionable, “by showing that the second work
bears ‘substantial similarity’ to protected expression in the
earlier work.” Castle Rock Entm’t v. Carol Publ’g Grp., 150 F.3d
132, 137 (2d Cir. 1998).
In the context of software cases, “access is either conceded
or easily proved,” and so the most important question is
whether the two works are “substantially similar.” 4 NIMMER
ON COPYRIGHT § 13.03[F]. This is because even where copying

is admitted, “no legal consequences will follow from that fact
unless the copying is substantial.” Newton v. Diamond, 388 F.3d
1189, 1193 (9th Cir. 2004). In analyzing whether two software
works are substantially similar, we must also distinguish
between the literal and nonliteral elements of those works. The

3.

As we’ve said, the first of the ownership element is in dispute, and so
we will focus here only on copying.

UPDATECOM v. FIRSTBANK

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term “literal elements” refers to a program’s “source and object
codes,” that is, the text, in various programming or machine
languages, in which the program is written by programmers or
read by a computer. See Computer Assocs. Int’l, Inc. v. Altai, Inc.,
982 F.2d 693, 702 (2d Cir. 1991). The term “nonliteral elements,” by contrast, refers to the program’s architecture and
organization, including, for example, “general flow charts as
well as the more specific organization of inter-modular
relationships, parameter lists, and macros.” Id.
We must also distinguish between literal and nonliteral
copying. Literal copying is the exact copying of elements from
an original work to the derivative work, and in analyzing this
sort of copying we are guided by the First Circuit’s opinion in
Lotus Dev. Corp. v. Borland Int’l, Inc., 49 F.3d 807 (1995). Nonliteral copying, by contrast, “is copying that is paraphrased or
loosely paraphrased rather than word for word.” Id. at 814. We
analyze nonliteral according to Altai’s Abstraction-FiltrationComparison analysis.
Regardless of the type of element or the type of copying
alleged, however, we are guided by a few basic principles.
Chief among these is that “copyright does not protect an idea,
but only the expression of the idea.” Altai, 982 F.2d at 703

UPDATECOM v. FIRSTBANK

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(citing Baker v. Selden, 101 U.S. 99 (1879)); see also 17 U.S.C.
¶ 102(b). In this vein, we must confront the fact that computer
programs are “essentially utilitarian” works that “combine[]
creative and technical expression.” Altai, 982 F.2d at 704
(internal quotations omitted). This matters because the
processes described by a utilitarian work cannot be copyrighted. Id. Moreover, “those aspects of a work, which ‘must
necessarily be used as incident to’ the idea, system or process
that the work describes, are also not copyrightable.” Id.
(quoting Baker, 101 U.S. at 104); see also id. at 705 (“[T]hose
elements of a computer proram that are necessarily incidental
to its function are . . . unprotectable.”). Essentially, this is an
application of the merger doctrine, which holds that “[w]hen
there is . . . only one way to express an idea, the idea and its
expression are inseparable.” Concrete Machinery Co. v. Classic
Lawn Ornaments, Inc., 843 F.2d 600, 606 (1st Cir. 1988). This is
important in the software context because “[w]hile, hypothetically there might be a myriad of ways in which a programmer
may effectuate certain functions within a program . . . efficiency concerns may so narrow the practical range of choice as
to make only one or two forms of expression workable options.” Altai, 982 F.2d at 708. Thus, “the fact that two programs

UPDATECOM v. FIRSTBANK

Page 7

contain the same efficient structure may as likely lead to an
inference of independent creation as it does to one of copying.”
Id. Following these principles, courts have concluded that
software algorithms cannot be copyrighted because they only
describe uncopyrightable methods of operation. See, e.g., Torah
Soft Ltd. v. Drosnin, 136 F. Supp. 2d 276, 291 (S.D.N.Y. 2001)
(“An algorithm, however, is clearly a method of operation
which cannot be protected.”).
Software cases also apply the scenes a faire doctrine, which
“denies copyright protection to elements of a work that are for
all practical purposes indispensable, or at least customary, in
the treatment of a given subject matter.” Coquico, Inc. v.
Rodriguez-Miranda, 562 F.3d 62, 68 (1st Cir. 2009). In the
computer science arena, this doctrine is used to account for the
fact that “in many instances, it is virtually impossible to write
a program to perform particular functions in a specific computing environment without employing standard techniques.” 4
NIMMER § 13.03[F][3]. These external factors include hardware
and software standards, design standards, the practices of the
target industry, and general programming practices. Id.; see also
Altai, 982 F.2d at 709–10 (noting that “a programmer’s freedom
of choice is often circumscribed by extrinsic considerations”).

UPDATECOM v. FIRSTBANK

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Where features are necessitated by such considerations, they
cannot be copyrighted.
C. UpdateCom’s Analysis of AAB
UpdateCom’s expert4 analyzed the source code of four
versions of AAB, and he produced a report concluding that
they were copied from End2End. See Docket No. 379. UpdateCom’s expert alleges literal and nonliteral copying of literal
and nonliteral elements. In essence, though, UpdateCom’s
expert makes two claims: first, that AAB copies End2End’s
general architecture; and second, that AAB copies specific
portions of End2End’s source code. We will deal with these
two claims separately.
1. Alleged Copying of Source Code
UpdateCom’s expert’s report gives four examples of short
sections of code (totaling 11 or 13 lines depending on how one
counts) found in AAB version 1.0 that it says are “identical” to
sections of code found in End2End. See Docket No. 379, at

4.

We note that UpdateCom’s expert, Angel Figueroa-Cruz, who identifies
himself in his report as a “senior software developer” at “Update
Computer Solutions,” Docket No. 379, at 3, is in fact UpdateCom’s
“[p]resident and stockholder,” VERIFIED COMPLAINT, Docket No. 1, ¶ 11.
We find this oversight in his curriculum vitae curious and potentially
problematic.

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36–40. FirstBank focuses on this small amount of alleged
copying, arguing that even if those lines were directly copied,
it would be de minimis and not actionable. UpdateCom responds by claiming that its expert did not say that these were
the only lines of code that were copied. Docket No. 386, at 2
(“Contrary to defendant’s allegations, FirstBank illegally
copied or used thousands of lines from End2End’s source code,
not just 11 lines.”). The problem for UpdateCom, however, is
that its expert report gives no support whatsoever to the claim
that AAB copied more than, at most, the short sections of code
listed at pages 36 through 40 of its expert report.5 These
supposed thousands of lines of copied code are completely
unmentioned, and therefore we will not consider any claims
regarding them. And even if it were established that these lines
had been directly—and “identically”—copied, we would
conclude

that

they—11

lines

of

5,000,

or

about

0.22%—constituted de minimis copying in the absence of other

5.

Seeking application of Rule 26, FirstBank pointed out this failing.
See Docket No. 391, at 2. UpdateCom responded that “[c]learly, Plaintiff
Expert’s Report specifically identified where to find the rest of the
source code lines that were ‘copied or used without’ authorization.”
Docket No. 403-1, at 2. But it did not cite to that portion of the expert
report, nor can we find it.

UPDATECOM v. FIRSTBANK

Page 10

evidence. See On Davis v. The Gap, Inc., 246 F.3d 152, 172 (2d
Cir. 2001) (“[W]here unauthorized copying is sufficiently
trivial, ‘the law will not impose legal consequences.’” (quoting
Ringgold v. Black Entm’t Television, Inc., 126 F.3d 70, 74 (2d Cir.
1997))); cf. MiTek Holdings, Inc. v. Arce Eng’g Co., Inc., 864 F.
Supp. 2d 1568, 1575, 1585 (S.D. Fla. 1994) (finding a similarity
of, at most, 2% to be de minimis), aff’d, 89 F.3d 1548 (11th Cir.
1996).
But UpdateCom’s problems do not stop here. The few
examples of “identical” source code that it has identified are
not, in fact, identical; at best, they are merely similar. This is
not itself a problem, as UpdateCom is entitled to allege the
nonliterael copying of its source code. However, its expert
report fails to make any such a showing. Figure 23, on page 37
of the expert report, and its accompanying explanation, is a
representative example. In the figure, some five lines of what
is said to be AAB code are compared with five lines of End2End code. There are superficial similarities between the compared lines (e.g., the first line of each code uses the phrase
“byte[] RawData = new byte”), but there are also differences
(e.g., after “new byte,” the first line of the AAB code says
“[messageLength],”

while

the

End2End

code

says

UPDATECOM v. FIRSTBANK

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“[state.length]”). What the report fails to do is explain the
significance of the similarities and differences. Instead, it gives
a cursory explanation of what the code does (but no explanation of the specific lines) and concludes that the sections are
“identical.” Nothing in the report, with regard to this or the
other examples, attempts to explain why the similarities are
significant, and not, for example, similarities required by
efficiency or external constraints. In this sense, the report
determines that the AAB code infringes End2End in a purely
conclusory manner. Consequently, we cannot help but find
that the report’s comparison of the programs’ source code at
pages 36 through 40 fails to meet the requirements of Federal
Rule of Civil Procedure 26(a)(2)(B), which requires expert
reports to state the basis and reasoning behind their opinions.
Moreover, because trial is set to begin in mere days, the only
available remedy is striking this portion of the expert report.6
See Santiago-Diaz v. Laboratorio Clinico y de Referencia del Este,
456 F.3d 272, 276 (1st Cir. 2006) (affirming district court’s
striking of a conclusory expert report, and holding that the
“baseline” sanction for such a failure is preclusion of the

6.

Necessarily, then, UpdateCom’s expert will be precluded from
testifying on these matters at trial.

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Page 12

evidence); Salgado v. Gen. Motors Corp., 150 F.3d 735, 742 n.6
(7th Cir. 1998) (“Expert reports must not be sketchy, vague, or
preliminary in nature.”); Kerlinisky v. Sandoz Inc., 783 F.
Supp. 2d 236, 242 (D. Mass. 2011) (striking expert report that
failed to “provide with any reasonable degree of specificity the
basis and reasons for [the expert’s] opinions”); Elder v. Tanner,
205 F.R.D. 190 (E.D. Tex. 2001) (striking report under Rule 26
for failing to discuss the expert’s reasoning and thought
process, and under Daubert for making “conclusory statements” that lacked “any elaboration or reasoning”); Fidelity
Nat’l Title Ins. Co. of N.Y. v. Intercounty Nat’l Title Ins. Co., Civ.
No. 00-5658, 2001 WL 789218, at *3 (N.D. Ill. July 12, 2001)
(“Rule 26(a) requires that the expert report contain the basis for
each opinion.”).7l
For all of these reasons, we find that no issue of material
fact exists with regard to FirstBank’s AAB version 1.0's alleged
copying of literal elements from End2End.

7.

A final problem with these examples is that, even according to the
expert report and the expert’s own deposition testimony, the relevant
sections of code each seem to accomplish rather specific tasks (such as
communicating with another vendor’s software), and, as such, are
likely uncopyrightable under the merger doctrine or as mere
algorithms.

UPDATECOM v. FIRSTBANK

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2. Alleged Copying of Architectural Elements
UpdateCom also alleges that AAB version 1.0 copies
End2End’s architecture. It does this in two ways. First, the
report provides a diagram of AAB’s architecture. Docket No.
379, at 25. This diagram, which notably is completely unexplained in the report’s text, shows, in an extremely general way,
what AAB does. AAB, which is identified by a single box,
seems to communicate with various other pieces of software,
including Evertec’s ATH network and the bank’s financial
software. See id. Though the report fails to actually make this
comparison, the diagram is similar (though not identical) to a
basic diagram of End2End’s functions elsewhere in the report.
See id. at 9. In both instances, there is only a single box representing the software at issue. No detail is provided as to how
the software accomplishes any task; instead, the diagrams
merely show that End2End and AAB allow interactions
between other, disparate pieces of software. Given that the
programs are not described at all, beyond their function, it
hardly even seems right to refer to these diagrams as “architectural.” More to the point, UpdateCom cannot possibly be
claiming to have a copyright of this highly generalized
architecture, which is really nothing more than an idea for a

UPDATECOM v. FIRSTBANK

Page 14

piece of software, and therefore uncopyrightable. The diagram,
then, is neither evidence nor explanation for the report’s claim
that the AAB architecture “follows the same path as the
End2End Software Architecture.” Id. at 25.
Second, UpdateCom’s expert relies on a table, supported by
three confusing and non-contextualized images, see id. at 26–27,
which it says shows that the AAB “architecture is identical to
the End2End Architecture,” id. at 26. The table shows eight
items under the heading “Description” that it says are identical
between End2End and AAB. See id. Or at least that’s what we
think it shows; in fact, the table goes unelaborated upon. To
show why this matters, we will give one example. Under
“Description,” one item is “Mainframe Queue Name,” and, for
both End2End and AAB, it is said to be “FB.LX.QMI.” But
without knowing what “Mainframe Queue Name” refers to,
we cannot determine whether it is an important or relevant
piece of the software’s architecture (or a part of the architecture
at all). And, of course, the meaning of “FB.LX.QMI” is far from
apparent; the report makes it impossible to determine whether
such a name is, for example, required by the tasks that the
software both perform. Ultimately, the report’s discussion of
the programs’ architecture is nothing more than unexplained,

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unsupported conclusions. As such, we must strike the section
of the report dealing with the architecture comparison, and we
must conclude that no issue of fact exists as to whether version
1.0 of AAB’s architecture is substantially similar to End2End’s.
Moreover, because these are the only sections of the report
that deal with whether AAB versions 1.0 and later are substantially similar to End2End, we must conclude that no material
issue of fact exists with regard to those programs’ substantial
similarity. We therefore conclude, as a matter of law, that the
programs are not substantially similar. As such, and without
regard to whether any actual copying occurred, we conclude
that AAB versions 1.0 and later do not infringe any copyright
that UpdateCom has in End2End.
3. When did AAB Version 1.0 Go Into Effect?
To determine the effect of our conclusion that AAB version
1.0 does not infringe End2End, it is necessary to know when,
exactly, AAB version 1.0 went into production. According to
FirstBank’s statement of uncontested material facts, that date
was September 15, 2010. See Docket No. 375, ¶¶ 25 (version 1.0
was the first version of AAB), 19 (AAB installed on September
15, 2010). Relying on its expert’s report and its most recent
spoliation motion, Docket No. 378, UpdateCom disputes this

UPDATECOM v. FIRSTBANK

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date. Docket No. 387, ¶¶ 19, 25. To determine whether
UpdateCom has successfully opposed FirstBank’s proposed
fact, we must look at the treatment of AAB’s production date
in UpdateCom’s expert report and spoliation motion.
a. UpdateCom’s Fourth Motion Regarding Spoliation
For some time now, UpdateCom has been arguing that
FirstBank has willfully destroyed the evidence that would
prove its liability to UpdateCom. In June 2013, we denied
UpdateCom’s first spoliation motion, which we found to lack
support, but ordered FirstBank to produce to UpdateCom all
versions of the AAB source code. Docket No. 276. UpdateCom
then sought reconsideration of our Order. Docket No. 279. We
denied reconsideration because we found that it requested
relief that should have been requested in the first motion, but
which was not. Docket No. 282. UpdateCom then filed a
purported “second” motion regarding spoliation, Docket No.
290; it, too, was denied, because it repeated the arguments of
the first motion and the reconsideration of that motion’s denial,
and it was, in that sense, a motion for reconsideration of our
denial of reconsideration. Docket No. 306. UpdateCom raised
spoliation issues again during a status conference held on
August 7, 2013; at that time, the Court made clear that it would

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only consider arguments based on evidence that was not
available when the previous several motions were filed. Docket
No. 325, at 5.
With that background in mind, we take up UpdateCom’s
most recent spoliation motion. Docket No. 378. As stated in the
motion, UpdateCom’s belief is that on September 15, 2010,
FirstBank did not implement AAB; instead, it implemented a
slightly modified version of End2End that incorporated certain
changes required by federal regulations. See id. at 3. UpdateCom contends that this modified software infringed on its
copyright. See id. What prompted its motion, though, was
newly-acquired evidence suggesting that early versions of
AAB either still exist or were destroyed very late in this
litigation.
The basis for this belief is UpdateCom’s deposition, on
September 4, 2013, of Omar Cruz-Salgado, formerly the project
manager in charge of developing AAB for FirstBank. See
Docket No. 378-1. After testifying that AAB began production
in April 2010 and first went into production on September 15
of that year, id. at 33, Cruz testified that he would save preproduction drafts of the software onto his work laptop as well
as on FirstBank’s version control system, id. at 34. Furthermore,

UPDATECOM v. FIRSTBANK

Page 18

he testified that those drafts might still exist on FirstBank’s
computers—and that he believed that they existed at least
through when he left the Bank, in October 2012, two years after
this litigation began. Id. at 43–44. After these revelations,
FirstBank’s counsel promised to look into whether these preproductions drafts still existed, but none, apparently, were
ever turned over.
To be sure, these facts call into question whether FirstBank
has diligently and fully complied with its discovery obligations
in this case.8 Their potential for impact on this portion of the
case’s substance, however, is much smaller. This is because the
new evidence relates solely to the existence pre-production
copies of AAB. Cruz’s deposition testimony does not suggest
that any of these pre-production versions were ever implemented, and, to the contrary, it fully supports FirstBank’s
position that AAB version 1.0 was implemented on September
15, 2010. And given our conclusion that the production version
of AAB did not actionably infringe any copyright that might be
held by UpdateCom, we do not see how this new evidence can
support the remedies that UpdateCom seeks. To the contrary,

8.

We take up this matter in more detail below.

UPDATECOM v. FIRSTBANK

even

if

these

pre-production

Page 19

versions—essentially,

drafts—contained substantial, literal copying of End2End’s
source code, that would only be evidence of actual copying.9
UpdateCom’s claim would still fail the substantial similarity
prong for the reasons explained above, and, accordingly, so
would its infringement claim. Therefore, we find that no
spoliation remedies are warranted with respect to this claim,10

9.

See, e.g., Walker v. Time Life Films, Inc., 784 F.2d 44, 52 (2d Cir. 1986)
(“[E]arly drafts might be useful to show that defendants had gained
access to plaintiff’s work, borrowed from it, and later made changes in
order to conceal that borrowing. . . . However, since we conclude as a
matter of law that . . . no substantial similarity exists between the
protectible portions of the final versions the works, any error in the
exclusion of the early drafts was harmless.”); Quirk v. Sony Pictures
Entm’t Inc., Civ. No. 11-3773, 2013 WL 1345075 (N.D. Cal. Apr. 2, 2013)
(finding early drafts irrelevant where only issue was substantial
similarity); Flaherty v. Filardi, Civ. No. 03-2167, 2009 WL 749570, 11*
(S.D.N.Y. Mar. 20, 2009) (“[T]he contents of screenplay drafts that are
not reflected in the finished motion picture are not relevant to the
substantial similarity analysis . . . .”), aff’d, 460 F. App’x 66 (2d Cir.
2012); Flaherty v. Filardi, Civ. No. 03-2167, 2007 WL 2734633, *4
(S.D.N.Y. Sept. 19, 2011) (holding that because the defendant’s ultimate
work was not substantially similar to the plaintiff’s, “the drafts
prepared in the course of . . . development and production constitute
interim drafts of a published non-infringing work, and are not
actionable under the Copyright Act”).

10. As another piece of evidence in support of its motion, UpdateCom
alleges that another FirstBank employee, Eric Lopez, testified during his

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Page 20

and we deny UpdateCom’s motion in this regard.11
b. The Expert Report
Apart from an inference based on spoliation, the only basis
for UpdateCom’s denial that AAB was implemented on
September 15, 2010, is found in its expert report. Specifically,
UpdateCom refers to a two-page passage in the report that
discusses a “Software Design Document” dated September 20,
2010. See Docket No. 379, at 44–45. According to UpdateCom,
this passage supports the proposition that “[o]n September 15,
2010, FirstBank started the Design of [AAB] and was finished
on September 20, 2010.” Docket No. 387, ¶ 19 (emphasis
added). This is, in fact, quite contrary to what the report
actually states. In fact, the report says simply that software

deposition that he was not sure whether AAB was placed into
production on September 15, 2010. Docket No. 378, at 19. However, in
the very portion of the deposition that UpdateCom cites for this
proposition, Lopez testified that he personally installed AAB on that
date. Docket No. 378-3, at 30. As a last piece of evidence, the motion
cites the portion of expert report that we discuss in the next section.
11. A large portion of the motion concerns purported new evidence that
FirstBank did not inform its employees of their duty to preserve
evidence. Again, this could be the proper subject of sanctions, but given
the evidence that is missing, we do not think it would warrant the
remedies that UpdateCom requests.

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design documents generally provide “guidance for the
development team,” but that in this case, the document “was
not used as guidance” because “it was created after” September 15, 2010. Docket No. 379, at 44. The report does not purport
to conclude, based on this document, that the development of
AAB began on September 15, 2010. Indeed, elsewhere the report
concludes that work on AAB began at least as early as March
2010. See id. at 31 (“The FirstBank development of [AAB]
source code started at least on March 25 2010 . . . .”).12
For this reason alone, we should deem admitted FirstBank’s
proposed fact that AAB was implemented on September 15,
2010. However, for the sake of completeness we will deal
briefly with the expert report’s other suggestion that AAB was
not implemented on September 15, 2010. At two different
points, the report suggests that AAB version 1.0 could not have
been implemented on September 15, 2010, because it was not
compiled until October 10, 2012. See Docket No. 379, at 28, 35.
Compiling is the process of turning source code, which is

12. UpdateCom’s also claims that Cruz’s deposition testimony supports the
fact that development of AAB began on September 15, 2010. See Docket
No. 387, ¶ 19. In reality, Cruz testified to exactly the opposite point: that
the design document was created after AAB was implemented. Docket
No. 378-1, at 86.

UPDATECOM v. FIRSTBANK

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written by a human, to another language, like object code, that
can be read by a computer. To support his contention that AAB
version 1.0 was not compiled until October 10, 2012, UpdateCom’s expert relies completely on two figures. Each figure
seems to be an image of a Windows file manager. On the left
side of each figure is an extensive hierarchy of file folders; on
the right are the contents of a specific folder, showing other
files and file folders. In each case, certain specific files are
surrounded by a drawn box, and these files have, according to
the file manager, a modified and created date of October 10,
2012, or later. See id. at 29–30, 35. The problem, though, is that
the report fails to explain why these file folders and these files
are significant in any respect. Moreover, it fails to explain why
the creation date, as registered by the Windows file manager,
matters—or even whether it is an appropriate basis on which
to determine the date that AAB was compiled. In short, this
section of the report suffers from precisely the same failing that
do the sections we’ve previously discussed: it reaches conclusions without giving any real description of the expert’s
thought process or reasoning. And as with the other sections,
not only can these conclusions not create an issue of fact as to
the date that AAB was implemented, the entire section must be

UPDATECOM v. FIRSTBANK

Page 23

struck as in violation of Rule 26.
4. Wrapping Up: Does AAB Infringe End2End?
For all of these reasons we conclude that AAB version 1.0
was implemented on September 15, 2010, and that it does not
infringe any copyright that UpdateCom has in End2End. For
all of the same reasons, we deem unopposed the fact that up
until September 15, 2010, FirstBank was running an unmodified version of End2End. See Docket No. 375, ¶ 17 (proposed
fact); Docket No. 387, ¶ 17 (repeating the substance of the
objection to fact number 19).
D. Other Infringement Claims
UpdateCom alleges that it is the sole author of End2End, in
which it granted a non-exclusive license to FirstBank. We find
that there is a genuine issue of material fact as to authorship
and, therefore, also as to the existence of such a license. For this
reason, summary judgment is not possible regarding UpdateCom’s claims that FirstBank infringed its copyright by using
End2End inconsistently with the license agreement. We note,
however, that contrary to FirstBank’s arguments that such
claims sound only in contract, we find such use, if proved at
trial, might constitute infringement. We are not convinced,
though, that all violations of a licensing agreement constitute

UPDATECOM v. FIRSTBANK

Page 24

actionable infringement. For example, while use of the product
after the cancellation of the license, and perhaps certain
copying in violation of the agreement is actionable, reverse
engineering may not be. See, e.g., Davidson & Assocs., Inc. v.
Internet Gateway, Inc., 334 F. Supp. 2d 1164, 1180 (E.D. Mo.
2004) (“Reverse engineering as fair use is firmly established.”).13
We also think that a fact issue remains as to UpdateCom’s
infringement allegations related to the IVR software. As we
understand UpdateCom’s allegations, FirstBank used IVR
software until at least October 2011, when the bank replaced it
with a new piece of software developed in-house. UpdateCom
does not seem to claim that FirstBank infringed a copyright on
IVR; instead, its contention seems to be that if IVR ran until
October 2011, so must have at least some portion of End2End,
because End2End provided—and AAB did not—the backend
that allowed IVR to communicate with other software, includ-

13. Of course, “private parties are free to contractually forego the limited
ability to reverse engineer a software product under the exemptions of
the Copyright Act.” Bowers v. Baystate Techs., Inc., 320 F.3d 1317,
1325–26 (Fed. Cir. 2003) (applying First Circuit law). But this does not
mean that the reverse engineering would be actionable infringement
rather than breach of contract.

UPDATECOM v. FIRSTBANK

Page 25

ing Evertec’s and FirstBank’s mainframes. See Docket No. 393,
at 8–9. Issues of fact exist as to whether IVR requires End2End
to function, as well as when IVR was removed from use.14
II. Other Claims
UpdateCom also makes claims under two state-law causes
of action. First, it claims that FirstBank violated Puerto Rico’s
moral rights statute, P.R. Laws Ann. tit. 31, § 1401. Second,
UpdateCom makes a claim for collection of monies allegedly
owed to it by First Bank. See P.R. Laws Ann. tit. 31, ¶ 3373.
Both of these claims are related to the matters of authorship
and license, and, as such, summary judgment would be
inappropriate. As such, these claims will go to trial.
We note, moreover, that we believe that some of the
allegedly spoliated evidence—especially the previous drafts of
AAB—may have some relevance to all of these claims insofar

14. That said, we have serious doubts about whether UpdateCom’s expert’s
report’s opinions regarding the necessity of End2End for IVR to
function are anything more than conclusory. Indeed, the passages that
UpdateCom cites only state bald conclusions, without any indication of
how they were reached. See, e.g., Docket No. 376, at 18 (citing Docket
No. 379, at 4, 6). We find it unnecessary to decide this matter here in
this opinion, but we nonetheless reserve the right to strike this portion
of the report and preclude UpdateCom’s expert’s testimony on this
subject.

UPDATECOM v. FIRSTBANK

Page 26

as it might have shed light on whether FirstBank had reverseengineered End2End or had otherwise copied it, thus violating
the license agreement. We are therefore considering giving the
jury a limited adverse inference instruction. Before we decide
whether such an instruction is warranted, however, we require
that FirstBank directly answer certain questions: Do preproduction drafts of AAB still exist? If so, have they been
turned over? (And if not, why not?15) If they do not, when were
they deleted, both from the version control system and the
programmers’ laptops? And how did this occur after legal hold
letters were sent? In addition, FirstBank should provide any
other relevant factual information about its destruction or
withholding of this and related evidence. An informative
motion on this subject shall be filed before the start of trial.
III.

Other Factual Matters

In order to streamline the upcoming trial, and based on the
parties’ factual submissions at the summary judgment stage,
we make the following factual findings which, pursuant to

15. We read certain language in FirstBank’s filings as suggesting that it
believed it was not required to produce anything but production
versions of AAB. See Docket No. 392, at 4–5. We are inclined to think
that this would constitute a willful misreading of our previous
discovery orders.

UPDATECOM v. FIRSTBANK

Page 27

Rule 56(g), shall govern this case.
It is undisputed that on December 10, 2007, version 1.0 of
End2End went live in FirstBank’s systems. Docket No. 375, at
¶ 6; Docket No. 387, at ¶ 6. Subsequently, other versions were
produced between July 2008 and February 2010. Docket No.
375, ¶ 12; Docket No. 387, ¶ 12. The last of these, called
“Version 2.8 (TISA/TILA),” was installed by UpdateCom in
February 2010. Docket No. 375, ¶ 13; Docket No. 387, ¶ 13.16
Then, on April 21, 2010, UpdateCom delivered to FirstBank the
source code for that version of End2End. Docket No. 375, ¶ 14;
Docket No. 387, ¶ 14. FirstBank’s personnel were unable to
compile this version of End2End. Docket No. 375, ¶ 15.17
Subsequently, Angel Figueroa of UpdateCom send FirstBank
a guide to compiling the source code for Version 2.8

16. UpdateCom purports to deny this fact, but fails to actually controvert
the fact’s substance. Instead, UpdateCom’s putative denial simply adds
other, additional facts. See Docket No. 387, ¶ 13. We therefore deem the
fact admitted.
17. UpdateCom purports to deny this fact, but its denial is merely an
allegation that the attempt to compile End2End violated the purported
license. See Docket No. 387, ¶ 15. As such, it fails to controvert the
proposed fact’s substance, and the proposed fact is deemed admitted.

UPDATECOM v. FIRSTBANK

Page 28

(TISA/TILA). Docket No. 375, ¶ 16.18
In its statement of uncontested material facts in support of
its own motion for summary judgment, UpdateCom proposes
that it “fulfilled its part of the Agreement with FirstBank and
performed all tasks that were required by FirstBank and 3 of
the pending 4 invoices, are overdue for more than four (4)
years. One invoice is overdue around 3 years.” Docket No. 377,
¶ 29. Furthermore, it claims that FirstBank owes it $108,750,
plus interest. Id. ¶ 30. FirstBank purports to deny these facts,
but it does so only through quotations from its counterclaim
and answer to the complaint. See Docket No. 383, ¶¶ 29–30. But
“pleadings are not evidence properly considered on motions
for summary judgment.” In re Rezulin Liability Litig., Civ. No.
00-2843(LAK), 2005 WL 713331, at *1 (S.D.N.Y. Mar. 29, 2005);

18. UpdateCom purports to deny this fact, but its denial is merely an
argument that the guide was sent for reasons other than helping
FirstBank compile Version 2.8 (TISA/TILA). See Docket No. 387, ¶ 16.
That argument, moreover, is not supported by the exhibits on which
UpdateCom relies. Moreover, in its own statement of material fact in
support of its motion for summary judgment, UpdateCom proposes
substantially the same fact. Docket No. 377, ¶ 21 (“Figueroa of
Updatecom provided instructions to FirstBank on how to compile the
source code of version 2.8 of End2End and asserted that there should
not be a problem with compiling the End2End source code if FirstBank
followed those instructions.”). The fact is deemed admitted.

UPDATECOM v. FIRSTBANK

Page 29

see also Heggem v. Kenney, Civ. No. 08-437(RAJ), 2009 WL
2486136, at *2 (W.D. Wash. Aug. 12, 2009) (“Conclusory
allegations in pleadings are not evidence, and cannot by
themselves create a genuine issue of material fact.” (citing
Project Release v. Prevost, 722 F.2d 960, 969 (2d Cir. 1983))). We
therefore deem these facts admitted.19
IV.

Conclusion

For all of the reasons stated above, UpdateCom’s motion
for summary judgment, Docket No. 376, is DENIED, and
FirstBank’s motion, Docket No. 374, is GRANTED IN PART
and DENIED IN PART consistent with this opinion.
As we see it, none of UpdateCom’s claims are dismissed in
their entirety. Nonetheless, the parties are forbidden from
offering any evidence or argument at trial inconsistent with
this Order’s findings. See Fed. R. Civ. P. 56(g) (permitting a
court to “enter an order stating any material fact . . . that is not
genuinely in dispute and treating the fact as established in the
case”). Specifically, we conclude:

19. We do not believe that these admitted facts are, themselves, sufficient
to permit the court to enter summary judgment on any claims.
Moreover, we are not concluding that FirstBank “owes” any amount in
a legal sense.

UPDATECOM v. FIRSTBANK

Page 30

1. Pursuant to Rules 26 and 37, the following portions of
UpdateCom’s expert report are stricken: pages 25
through 27, regarding AAB’s architecture; pages 28
through 30 and page 35, regarding AAB’s creation date;
and pages 36 through 40, comparing AAB’s and
End2End’s source codes. UpdateCom’s expert is precluded from testifying about any of these matters. Moreover, because of the substantial failings we have identified in the expert report, UpdateCom must SHOW
CAUSE why its expert’s report should not be stricken,
and its expert’s testimony precluded, in its entirety.
2. End2End version 1.0 was installed on FirstBank’s
systems on December 10, 2007. Between July 2008 and
February 2010, subsequent versions were also installed.
3. In February 2010, UpdateCom installed on FirstBank’s
systems End2End version 2.8 (TISA/TILA). The source
code for this version was delivered to FirstBank by
UpdateCom on April 21, 2010.
4. FirstBank’s personnel could not compile End2End
version 2.8. Subsequently, Angel Figueroa of UpdateCom provided FirstBank with a guide to compiling that
version of End2End.

UPDATECOM v. FIRSTBANK

Page 31

5. FirstBank installed version 1.0 of AAB on September 15,
2010.
6. Before September 15, 2010, FirstBank was running an
un-modified version of End2End.
7. AAB versions 1.0 and later do not copy any literal
elements from End2End.
8. AAB versions 1.0 and later do not copy End2End’s
architecture in an actionable way.
9. AAB versions 1.0 and later are not substantially similar
to End2End.
10. AAB versions 1.0 and later do not infringe any copyright FirstBank might hold in End2End.
11. UpdateCom performed all services required by its
agreement with FirstBank, and it has four pending,
unpaid invoices. Three of these have been overdue for
more than four years; one has been overdue for more
than three years. The total amount of money owed on
these invoices is $108,750.
IT IS SO ORDERED.
In San Juan, Puerto Rico, this 30th day of January, 2014.
S/ SILVIA CARREÑO-COLL
UNITED STATES MAGISTRATE JUDGE