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Ajaxo, Inc. v. Bank of America Technology and Operations

December 19, 2008

AJAXO, INC., A DELAWARE CORPORATION; K.C. MULTIMEDIA, INC., A DELAWARE CORPORATION, PLAINTIFFS,
v.
BANK OF AMERICA TECHNOLOGY AND OPERATIONS, INC., A DELAWARE CORPORATION; BANK OF AMERICA CORPORATION, A DELAWARE CORPORATION; BANK OF AMERICA NATIONAL ASSOCIATION; AND ALLEN TAM, AN INDIVIDUAL, DEFENDANTS.



The opinion of the court was delivered by: Garland E. Burrell, Jr. United States District Judge

ORDER

Pending are six motions for summary adjudication and/or summary judgment concerning Plaintiffs' claims of copyright infringement. Plaintiffs Ajaxo, Inc. ("Ajaxo") and K.C. Multimedia, Inc. ("KCM") each seek summary adjudication on three of Defendant Bank of America's affirmative defenses; and each Plaintiff seeks summary adjudication on its claims against Defendant Allen Tam ("Tam"). Bank of America seeks partial summary judgment on two claims, arguing they are time barred, and on Plaintiffs' claims of continuing and ongoing copyright infringement of the source codes at issue in this litigation, arguing they are not substantially similar to Bank of America's current code. Tam seeks summary judgment on all copyright infringement claims arguing they are all time barred.

BACKGROUND

In 1998, Bank of America entities entered into a contractual relationship with Sing Koo ("Koo"), the founder and principal of both Ajaxo and KCM, for the purpose of developing Bank of America's online banking applications. (Simmons Decl., Ex. 1.) In November 2000, the parties agreed to extend the arrangement and entered into a second agreement, the "Technical Contract Labor Services Agreement." (Simmons Decl., Ex. 3.) The parties now dispute the scope of these agreements; specifically, Plaintiffs and Defendants dispute the terms of the agreements and whether the source codes involved in this litigation were developed for Bank of America under these agreements.

Tam was an employee at KCM from 1999 until 2001, and as an employee, worked on development of Bank of America's online banking applications. (Simmons Decl., Ex. 6 and 13.) On May 4, 2001, KCM terminated Tam's employment. Koo conducted an exit interview three days later and gave deposition testimony that Tam confessed to stealing information from KCM in exchange for employment with Bank of America in his exit interview. (Simmons Decl. Ex. 6.) On May 14, 2001, Bank of America terminated its relationship under the 2000 agreement with Koo and KCM. (Simmons Decl. Ex. 16.) On May 17, 2001, Bank of America offered Tam employment. (Van Berkum Decl., Ex. A.)

As an employee of KCM, Tam was provided a laptop. (Simmons Decl., Ex. 6.) Tam returned the laptop to Koo on May 8, 2001. (Id.) Koo gave deposition testimony that he had difficulty turning on the laptop after it was returned to him. (Id.) KCM turned the laptop over to the FBI for forensic examination and the results of this examination were released on January 2006. (Ajaxo Exs. 29 and 64.) The results found that 11,000 files had been deleted from the laptop, including the source codes involved in this litigation. (Ajaxo Exs. 64 and 30.)

On June 5, 2001, KCM filed a trade secret action against Bank of America and Tam in California state court. (Simmons Decl. Ex. 18.) On June 21, 2001, Bank of America rescinded its offer of employment to Tam. (Van Berkum Decl. ¶ 3.) However, Bank of America agreed that it would pay Tam's legal fees in defending himself for the trade secret action; however the agreement would be null and void if it was determined Tam did misappropriate KCM's trade secrets. (Monsoorian Decl., Ex. B.) In April 2006, the jury in the trade secret action returned a verdict against KCM, finding that Bank of America owned the relevant software involved in that case. (Simmons Decl., Ex. 21.) The trade secret action is now on appeal in the Court of Appeal for the State of California, Sixth Appellate District. (Simmons Decl., Ex. 22.)

On March 28, 2006, a grand jury in the United States District Court for the Northern District of California indicted Tam. (Schecter Decl., Ex. M.) A superseding indictment was filed against Tam on May 2, 2006, indicting Tam for one count of Conspiracy to Commit Mail Fraud and Wire Fraud, four counts of Mail Fraud and Aiding and Abetting, and five counts of Wire Fraud and Aiding and Abetting. (Schecter Decl., Ex. N.) On April 30, 2008, Tam entered a plea agreement, pleading guilty to Counts Six and Seven of the superseding indictment. (Schecter Decl., Ex. O.)

On May 17, 2007, Ajaxo filed separate Complaints against Tam and Bank of America, alleging copyright infringement of its copyrighted "wirelessproxy" and "cacheParser" source codes. On July 9, 2007, KCM filed separate Complaints against Tam and Bank of America, alleging copyright infringement of its copyrighted "proxyssl" and "sso.login.controller" source codes. The cases have been consolidated in the instant action.

DISCUSSION*fn1

Plaintiffs' Motions for Summary Adjudication Against Bank of America

Ajaxo seeks summary adjudication on Bank of America's fifteenth, sixteenth, and twenty-third affirmative defenses. These affirmative defenses are based upon the 1998 and 2000 agreements formed between KCM and Bank of America. (Simmons Decl., Exs. 2 and 3.) Ajaxo argues Bank of America cannot base its affirmative defenses against Ajaxo's infringement claims of wirelessproxy and cacheParser upon these agreements since Ajaxo was not a party to these agreements.

Bank of America counters, providing evidence that it is disputed whether Ajaxo or KCM is the owner of wirelessproxy and cacheParser, citing to evidence from the state trade secret action. The Complaint filed by KCM in the state trade secret action claimed that KCM owned the wirelessproxy source code. (Simmons Decl., Ex. 25.) Bank of America further provides Koo's deposition testimony from the trade secret case in which he stated Ajaxo did not own cacheParser. (Simmons Decl., Ex. 55.) Bank of America also provides evidence that Ajaxo is the alter ego of KCM and therefore bound by any contracts KCM entered into with Bank of America; including evidence that Koo is the sole shareholder of Ajaxo and KCM, and that Ajaxo and KCM have an identical Board of Directors. (Simmons Decl., Exs. 8, 18.) Since it is disputed whether KCM or Ajaxo owns the source codes at issue and whether Ajaxo is the alter ego of KCM, Ajaxo's motion for summary adjudication is denied.

KCM seeks summary adjudication of Bank of America's sixteenth, seventeenth, and twenty-third affirmative defenses which are based on the 1998 and 2000 agreements between Bank of America and KCM. KCM provides evidence that the 1998 agreement was between Bank of America National Trust and Savings Association ("NTSA") and KCM, rather than the current Bank of America defendants. (KCM Ex. 88.) Additionally, KCM provides evidence that the 2000 agreement was formed between Bank of America Technologies and Operations ("BATO"), rather than the current Bank of America defendants. ...


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