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26 ORDER – 1

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

AT SEATTLE

VERITAS OPERATING CORPORATION, a

Delaware corporation,

Plaintiff,

v.

MICROSOFT CORPORATION, a Washington

corporation,

Defendant.

________________________________________

MICROSOFT CORPORATION, a Washington

corporation,

Counterclaim Plaintiff,

v.

VERITAS OPERATING CORPORATION, a

Delaware corporation, and VERITAS

SOFTWARE CORPORATION, a Delaware

corporation,

 Counterclaim Defendants.

 CASE NO. C06-0703-JCC

 ORDER

 

 

 

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This matter comes before the Court on Defendant/Counterclaim Plaintiff Microsoft Corporation

(Microsoft)’s Motion for Summary Judgment on Counts I, III-V, VII (Dkt. No. 212), Veritas Operating

Corporation (Veritas)’s Response opposing the motion (Dkt. No. 289), and Microsoft’s Reply (Dkt. No.

332). The Court has carefully considered these papers and their supporting declarations and exhibits and

has determined that oral argument is not necessary. The Court hereby GRANTS IN PART and DENIES

IN PART the motion and rules as follows.

I. BACKGROUND

The facts pertinent to this motion overlap with those summarized in the Court’s Order of January

24, 2008 (Dkt. No. 398). Accordingly, the Court will not recount them here except as necessary to

explain its decision.

II. APPLICABLE STANDARD

Summary judgment is appropriate “if the pleadings, the discovery and disclosure materials on file,

and any affidavits show that there is no genuine issue as to any material fact and that the movant is

entitled to judgment as a matter of law.” FED. R. CIV. P. 56(c). “A ‘material’ fact is one that is relevant to

an element of a claim or defense and whose existence might affect the outcome of the suit.” T.W. Elec.

Serv., Inc. v. Pac. Elec. Contractors Ass’n, 809 F.2d 626, 630 (9th Cir. 1987). The moving party bears

the initial burden of showing that no genuine issue of material fact exists. Matsushita Elec. Indus. Co. v.

Zenith Radio Corp., 475 U.S. 574, 586 (1986). If the moving party meets this initial burden, then the

party opposing the motion must set forth facts showing that there is a genuine issue for trial. See T.W.

Elec. Serv., Inc., 809 F.2d at 630. The party opposing the motion must “do more than simply show that

there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co., 475 U.S. at 586.

“In response to a summary judgment motion, . . . the plaintiff can no longer rest on . . . mere allegations,

but must set forth by affidavit or other evidence specific facts, . . . which for the purposes of the summary

judgment motion will be taken to be true.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992);

FED. R. CIV. P. 56(e). If the nonmoving party fails to establish the existence of a genuine issue of material

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 Veritas claims that Microsoft:

improperly used and publicly disclosed certain Veritas trade secrets that Veritas had

disclosed to Microsoft in accordance with the Agreement. Microsoft used Veritas trade

secrets in order to develop and include in Windows NT and subsequent operating system

products certain features that were reserved exclusively to Veritas under the Agreement.

Microsoft also misappropriated Veritas trade secret information by using such information

to create and incorporate LVM, VDS and VSS into Microsoft’s operating system

products. Microsoft also improperly used and publicly disclosed certain Veritas trade

secrets by incorporating them into the patent applications that issued as the Microsoft

Patents.

(Compl. ¶ 56 (Dkt. No.1 at 21).) 

ORDER – 3

fact, “the moving party is entitled to judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S.

317, 323–24 (1986). 

III. ANALYSIS

A. Trade Secret Misappropriation

Microsoft seeks to dismiss Veritas’ claim of trade secret misappropriation1

 under the Washington

Uniform Trade Secrets Act (“WUTSA”), WASH. REV. CODE § 19.108.010, et seq., on grounds that: 1)

Microsoft’s actions were entirely consistent with its contractual obligations regarding Veritas’

confidential information, and therefore, Microsoft could not have engaged in trade secret

misappropriation; 2) the allegedly misappropriated information is not a “trade secret” under WUTSA; and

3) Washington’s Economic Loss Rule precludes Veritas from bringing its trade secret misappropriation

claim because the parties contracted for remedies in the event of a breach of the obligation not to disclose

confidential information. (Def.’s Mot. 4–10 (Dkt. No. 212 at 5–11).) The Court is not persuaded, at this

stage, by any of these arguments.

1. Whether Microsoft’s Actions Were Within the Scope of Its Original Licenses

or Its Rights under the April 2004 Buy-Out

The Court has already found that it is unclear at this stage whether Microsoft developed Logical

Volume Manager (LVM), Virtual Disk Service (VDS) and Volume Shadow Copy Service (VSS) in

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accordance with Microsoft’s contractual obligations, in light of the Agreement’s arguable restrictions on

Microsoft’s use of Veritas’ confidential information. (Order of Jan. 24, 2008 (Dkt. No. 398).) Whether

LVM, VDS and VSS contain or were designed with the use of Veritas’ confidential information hinges

on a highly technical examination of code and requires the weighing of expert testimony. Because the

Court cannot rule on summary judgment whether Microsoft breached the Agreement, the Court cannot

determine whether a lack of breach indicates that Microsoft did not engage in trade secret

misappropriation in developing LVM, VDS and VSS.

2. Whether the Alleged Misappropriations Involve “Trade Secrets”

To succeed on its trade secret claim, Veritas must prove the existence of a “trade secret” within

the statutory definition. A “trade secret” is:

information, including a formula, pattern, compilation, program, device, method,

technique, or process that: (a) Derives independent economic value, actual or potential,

from not being generally known to, and not being readily ascertainable by proper means

by, other persons who can obtain economic value from its disclosure or use; and (b) Is the

subject of efforts that are reasonable under the circumstances to maintain its secrecy.

WASH. REV. CODE § 19.108.010(4). The Complaint does not specify precisely which trade secrets

allegedly were used to create and incorporate LVM, VDS and VSS into Microsoft’s operating systems.

However, Microsoft focuses on the “common interface” technology of the VDS and VSS products and

argues that the allegedly misappropriated source code constituting such technology in VDS and VSS 

was generally known and was readily ascertainable by proper means (i.e., not novel). (Def.’s Mot. 7 (Dkt.

No. 212 at 8).) Further, according to Microsoft, Veritas did not engage in reasonable efforts to keep such

information confidential. (Id.) Moreover, Microsoft argues, there are no other possible trade secrets in

VSS or VDS beyond the common interface technology. (Def.’s Mot. 9 (Dkt. No. 212 at 10).) 

Veritas argues that the LDM source code contains numerous trade secrets that have never been

publicized by Veritas and that have been misappropriated by Microsoft. (Pl.’s Resp. 9 (Dkt. No. 289 at

15).) In particular, Veritas points to its supplemental answers to Microsoft’s First Set of Interrogatories,

in which Veritas identifies twenty-five algorithms and code sequences that it argues qualify as confidential

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information that Microsoft allegedly used in developing LVM. (Supplemental Answer to Interrog. No. 4

(Dkt. No. 293-3 at 10–15).) Furthermore, Veritas argues, Microsoft’s motion mischaracterizes Veritas’

trade secret claims; Veritas is not arguing that the “common interface” feature of the VDS and VSS

products are trade secrets. (Pl.’s Mot. 11 (Dkt. No. 289 at 17).) Rather, Veritas’ claim against the

VDS/VSS framework is that Microsoft’s use of Veritas’ proprietary and private interfaces and related

confidential information in the development of VDS and VSS was a misappropriation and competes with

Veritas’ Add-on products. (Pl.’s Resp. 11 (Dkt. No. 289 at 17).) Veritas supports this claim with the

expert testimony of Dr. Jeffrey Chase, a Computer Science Professor at Duke University, who states in

part that the VSS/VDS code “makes some use of Veritas’ proprietary on-disk structure and proprietary

interfaces for manipulating such structures.” (Chase Report at ¶ 19 (Dkt. No. 296-3 at 13).) Dr. Chase

also states that “the implementation of these interfaces [in VSS] access functions from LDM, and

exposed those functions as a programmatic management API for a product that competes with Veritas

add-on products.” (Id. ¶ 163 (Dkt. No. 296-3 at 90).) Dr. Chase’s report contains some technical analysis

supporting Veritas’ claim that VSS code and VDS code were developed using confidential LDM source

code information. (Dkt. No. 296-3 at 89–95).) 

The Court is not persuaded at this stage by Microsoft’s arguments regarding the absence of trade

secrets in LVM, VSS, and VDS. Because Veritas does not claim that the common interface technology

of VDS and VSS is protected by trade secret law, the Court sees no need to address Microsoft’s specific 

arguments regarding the alleged lack of novelty or publication of that technology. Additionally, based on

the expert testimony that Veritas has put forward to substantiate its claims that VDS and VSS do contain

trade secrets, the Court finds that genuine issues of material fact exist. The Court is not persuaded by

Microsoft’s argument that neither VDS nor VSS contains any possible Veritas trade secrets other than

the concept of a common interface, since Veritas has provided sufficient evidence to withstand summary

judgment that Veritas’ private interfaces and other information in LDM were trade secrets. Moreover,

“the determination in a given case whether specific information is a trade secret is a factual question.” Ed

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Nowogroski Ins., Inc. v. Rucker, 971 P.2d 936, 941 (Wash. 1999). The Court finds that whether the

private interfaces and other information were trade secrets is properly left for the jury to decide.

3. Whether Veritas’ Statutory Trade Secret Misappropriation Claim Is Barred

by the Economic Loss Rule

Microsoft argues that, regardless of the merits of the misappropriation issue, Veritas cannot bring

both breach of contract and trade secret misappropriation claims for economic loss because under

Washington law, the so-called “economic loss rule” precludes recovery for losses that are redressable by

contract remedies. (Def.’s Mot. 10 (Dkt. No. 212 at 11).) The Court is not persuaded that the economic

loss rule applies here. 

Under Washington law, the economic loss rule sometimes applies:

to hold parties to their contract remedies when a loss potentially implicates both tort and

contract relief. . . . The rule prohibits plaintiffs from recovering in tort economic losses to

which their entitlement flows only from contract because tort law is not intended to

compensate parties for losses suffered as a result of a breach of duties assumed only by

agreement.

Alejandre v. Bull, 153 P.3d 864, 867–68 (Wash. 2007) (internal quotations omitted). The rule generally

provides that “when the damages complained of are ‘purely economic’ (that is, there is no property

damage or personal injury), and the parties either allocated the risk of loss between them, or had the

opportunity to do so, the plaintiff is limited to contract remedies rather than tort remedies.” 16 DAVID K.

DEWOLF & KELLER W. ALLEN, WASH. PRAC., TORT LAW AND PRACTICE § 0.16 (3d ed. 2007) (citing

Alejandre, 153 P.3d at 864). 

However, “the economic loss rule does not automatically preclude all tort claims simply because a

contract existed between the parties.” Davis v. Wells Fargo Home Mortgage, No. 34136-1-II, 2007 WL

2039077, at *4 (Wash. Ct. App. July 17, 2007). The Washington Court of Appeals has explained that the

judicially created economic loss rule: 

evolved in [an arena] in which the legislature had not spoken. Where the legislature has

acted to create rights and remedies, courts cannot enlarge or restrict those rights or

remedies unless the statute is unclear and we are confident our interpretation is consistent

with legislative intent.

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 Under Washington law, “[t]here is in every contract an implied duty of good faith and fair

dealing. This duty obligates the parties to cooperate with each other so that each may obtain the full

benefit of performance.” Badgett v. Sec. State Bank, 807 P.2d 356, 360 (Wash. 1991). 

ORDER – 7

Park Ave. Condo. Owners Ass’n. v. Buchan Devs., LLC, 71 P.3d 692, 698 (Wash. Ct. App. 2003); see

also, e.g., Ruebel v. Camano Island Realty, Inc., No. 58533-9-I, 2007 WL 2823285, at *7 n.8 (Wash.

Ct. App. Oct. 1, 2007) (noting that where a statutory-based remedy allowed a plaintiff to recover

damages, the economic loss rule did not apply).

The Court has not found any Washington cases explicitly addressing whether the economic loss

rule may apply to bar a statutory trade secret misappropriation claim; however, the Court agrees with the

sound reasoning of at least one other jurisdiction that has held that the rule does not bar such a claim. See

New Lenox Indus., Inc. v. Fenton, 510 F.Supp. 2d 893, 909 (M.D. Fla. 2007) (holding that a FUTSA

claim was not barred by the economic loss rule, even though the claim was indistinguishable from a

breach of contract claim, because under Florida law, the economic loss rule does not bar statutory causes

of action). The Washington cases cited above suggest that similarly, under Washington law, the economic

loss rule would not bar Plaintiff’s statutory WUTSA claim. Accordingly, the Court will not dismiss

Plaintiff’s trade secret misappropriation claim on this basis. 

B. Breach of the Implied Covenant of Good Faith and Fair Dealing

Microsoft argues that Veritas’ claim for breach of the implied covenant of good faith and fair

dealing2 is precluded for two reasons: 1) the claim merely duplicates Veritas’ breach of contract claim;

and 2) Veritas fails to allege a failure to act in good faith. (Def.’s Mot. 11 (Dkt. No. 212 at 12).) 

The Court is unpersuaded by Microsoft’s arguments because Veritas not only claims that

Microsoft breached its contractual obligations but also that it did so surreptitiously, with a deliberate

intention to mislead Veritas and thereby deny Veritas the benefit of its bargain. (Compl. ¶ 1, 36, 37 (Dkt.

No. 1).) In its Response, Veritas provides some evidence that Microsoft intentionally breached the

Agreement and that “Microsoft engaged in a concerted, multi-year effort to conceal its unlawful actions

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on multiple fronts by withholding critical evidence of its misconduct from Veritas.” (Pl.’s Resp. 17 n.73

(Dkt. No. 289 at 23).) For example, a 1998 email from Microsoft’s Kevin Phaup states that Felipe

Cabrera, one of Microsoft’s managers of the LDM project: 

admitted that his intention is to eventually get [Veritas] out of the box because he believes

we should not rely on any 3rd party for core components. . . . He also says he doesn’t care

a damn about the contract because he wasn’t involved, and we should just lie to them that

we are doing this for performance reasons[.]

(Phaup Email Jan. 15, 1998 (Dkt. No. 296 at 5).) In another example, a 2001 email from Microsoft’s

general manager Ben Fathi states that “[w]e should be clear amongst ourselves that Veritas is a

competitor. We will work with them as opportunities arise, but opening our kimono is out of the

question.” (Fathi Email Feb. 19, 2001 (Dkt. No. 296 at 76).) 

Additionally, some evidence supports Veritas’ allegation that Microsoft deliberately included

“blocking” code to conceal its inclusion in LVM of certain features that may have been reserved for

Veritas’ Add-on Products. (Chase Report ¶ 79–82 (Dkt. No. 296-3 at 50–51); Teodorescu Dep.

37:11–38:2 (Dkt. No. 296 at 116–17).) Moreover, Veritas offers some evidence that Microsoft denied

Veritas access to design documents and version histories for VSS and VDS, in an attempt to conceal its

contractual breaches. For example, one of the LVM design documents includes information regarding the

inclusion and blocking of certain features arguably reserved for Veritas Add-on Products, and states that

the document “should not be disclosed to any vendor (including Veritas) at this time.” (Microsoft

Document “Volmgmt Driver” (Dkt. No. 296-2 at 2).) In addition, a 2002 email from Veritas’ Eric

Burneger memorializes that Veritas repeatedly asked Microsoft for, and was denied, access to source

code for what would become Windows 2003 Server, which was to include LDM code. (Burgener Email

Oct. 7, 2002 (Dkt. No. 293 at 4).) Under the Agreement, Microsoft was obligated to provide Veritas

with modified source code so that Veritas could maintain compatibility with its Add-on Products.

(Agreement § 3.5 (Dkt. No. 211-2 at 7).) Building an Add-On Products business was Veritas’ express

objective in entering the Agreement in the first place. (Agreement Recitals (Dkt. No. 211-2 at 2).)

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 Contrary to Microsoft’s assertion that only the first two allegations remained after this Court’s

October 31, 2006, Order (Dkt. No. 60), the Order dismissed only that portion of the unfair competition

claim regarding “other obligations.” 

4

 The common law regarding unfair competition for misappropriation of a trade secret has been

displaced by WUTSA. WASH. REV. CODE § 19.108.900(1); Petters v. Williamson & Assoc., Inc., No.

49236-5-I, 2003 WL 457823, at *11 (Wash. Ct. App. 2003) (affirming dismissal of a misappropriationbased common law unfair competition claim as not appropriate as an independent basis for liability). 

ORDER – 9

Veritas has raised at least a genuine issue of material fact as to whether Microsoft breached the

implied duty of good faith and fair dealing. Moreover, the Court will not hold the economic loss rule to

bar a claim for breach of the implied duty of good faith and fair dealing. It would defy logic to find that

this type of claim is precluded by the existence of a contract, given the fact that Washington law clearly

recognizes the duty and requires the existence of a valid contract in order for it to apply. See Badgett,

807 P.2d at 360 (“The duty to cooperate exists only in relation to performance of a specific contract

term.”).

C. Unfair Competition

Microsoft argues that Veritas cannot prove its unfair competition claim because there is no

evidence that Microsoft deceptively “passed off” Veritas’ products as its own. (Def.’s Mot. 13 (Dkt. No.

212 at 14).) Veritas’ common law unfair competition claim is based not on “passing off,” however, but

rather on allegations that Microsoft: (1) included features in its operating system products that are

exclusively reserved for Veritas under the Agreement; (2) failed to provide Veritas with information and

code updates; and (3) failed to comply with its contractual obligations to respect the confidentiality of

Veritas’ trade secret and confidential information.3 (Compl. ¶ 70 (Dkt. No. 1).) 

Veritas has not identified, nor has the Court found, controlling precedent under Washington law

upholding a common law unfair competition claim based, like Plaintiff’s claim, on breach of contract.4

The most relevant authority that this Court has found is a footnote in a 1973 Washington Supreme Court

case stating that “[t]here can also, at common law, be an action for unfair competition based upon breach

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of contract.” Seaboard Sur. Co. v. Ralph Williams’ Nw. Chrysler Plymouth, Inc., 504 P.2d 1139, 1141

n.2 (Wash. 1973). Additionally, in an unreported Washington Court of Appeals opinion, the court held

that a breach of contract claim was sufficient to support a common law unfair competition claim, and

pointed to the Restatement (Third) of Unfair Competition, Section 38, for the proposition that “[o]ne

who causes harm to the commercial relations of another by appropriating the other’s intangible trade

values is subject to the other for such harm only if: . . . (c) the appropriation . . . is actionable as a breach

of contract[.]” Wade Cook Seminars, Inc. v. Mellon, No. 42054-2-I, 1999 WL 211831, at *5 (Wash. Ct.

App. Apr. 12, 1999). 

Microsoft, by contrast, points to an unreported order in this district that finds that under

Washington law, “common law unfair business competition claims are limited to what was referred to in

England as claims for ‘passing off.’” Childers v. Sagem Morpho, Inc., No. C06-0060, 2006 WL

3734151, at *5 (W.D. Wash. Dec. 15, 2006) (citing Ivan’s Tire Serv. Store, Inc. v. Goodyear Tire &

Rubber Co., 517 P.2d 229, 122 (Wash. Ct. App. 1974) (describing the common law concept of unfair

competition as “passing off” one’s goods as those of a competitor)). In such a case, the damages that

could be recovered included:

lost profits, losses due to reduction in prices occasioned by the competition, harm to

reputation, and expenditures reasonably made by the plaintiff to prevent prospective

customers from being misled by the defendant’s conduct.

Ivan’s Tire Serv. Store, Inc. v. Goodyear Tire & Rubber Co., 517 P.2d 229, 126 (Wash. Ct. App. 1974).

Veritas makes no allegation that it has suffered these kinds of damages from “passing off.”

It is not entirely clear how Veritas articulates and supports its unfair competition claim. Other

than identifying the breach of contract-related unfair competition claims in its Complaint, Veritas

addresses its unfair competition claim only to the extent that it opposes Microsoft’s argument that the

economic loss rule precludes the tort claim. (Pl.’s Resp. 29 (Dkt. No. 289 at 35).) Veritas states that

Washington recognizes the common law tort of unfair competition to “guard the standards of fairness and

morality in commercial transactions,” but refers the Court only generally to the Restatement (Third) of

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 Veritas identified the allegedly infringed code portion in its Third Supplemental Answers to

Microsoft’s First Set of Interrogatories (Dkt. No. 213-2 at 37–38). Due to its complexity, the Court will

not reproduce the code portion here.

ORDER – 11

Unfair Competition for guidance in construing the claim. (Pl.’s Resp. 29–30 (Dkt. No. 289 at 35–36).) It

does not appear that Veritas is claiming that Microsoft “passed off” Microsoft’s goods as those of

Veritas. Rather, Veritas explains that its claim is based upon Microsoft’s purposeful deception in

breaching its contractual obligations. (Pl.’s Resp. 30 (Dkt. No. 289 at 36).) Veritas states that “[e]ven

sophisticated parties to a commercial contract have the right to expect the other party to act in good

faith[.]” However, Veritas already has the potential to recover for such an alleged wrong under its claim

for breach of the duty of good faith and fair dealing. Lacking clear substantive Washington case law on

breach of contract-based common law unfair competition claims, and finding Veritas’ explanation of its

claims somewhat vague and duplicative of its breach of good faith duty claim, the Court hereby

DISMISSES Veritas’ unfair competition claim.

D. Unjust Enrichment

In its Response, Veritas states that it will “not go forward on the unjust enrichment claim as a

separate cause of action.” (Pl.’s Resp. 30 n.112 (Dkt. No. 289 at 36).) Accordingly, the Court

DISMISSES Veritas’ unjust enrichment claim.

E. Copyright Infringement

Veritas claims that Microsoft:

infringed Veritas’s Registered Copyright Nos. TXu1272637 and TXu1272638 by

developing, copying, making, using, offering for sale or selling various operating systems

products incorporating LVM. . . . LVM contains code segments that constitute copies of

portions of Veritas’s copyrighted code.

(Compl. ¶ 84 (Dkt. No. 1).) Apparently, the only portion of the LDM code that Veritas has specifically

identified as having been infringed5

 consists of 54 lines of code, comprising approximately 0.03 percent of

a code base of almost 160,000 lines. (Def.’s Mot. 25 (Dkt. No. 212 at 26).) With the possible exception

of two lines, Microsoft did not copy verbatim this code section; rather, Microsoft changed the code “by

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 The Court addresses the timeliness issue in Section III.F below.

ORDER – 12

removing the legacy UNIX programming conventions and by upgrading the programming language to

C++ from the older C language in which Veritas wrote it[.]” (Def.’s Mot. 25 (Dkt. No. 212 at 26).) 

Microsoft argues that Veritas’ copyright claim cannot survive summary judgment because

Microsoft was licensed to use the code and, after the 2004 “buy-out,” was effectively the owner of the

code. (Def.’s Mot. 24 (Dkt. No. 212 at 25).) Additionally, according to Microsoft, the code section

identified by Veritas is not protected by copyright law because it is functional, in the public domain, and

de minimis. (Def.’s Mot. 25 (Dkt. No. 212 at 26).) Microsoft also argues that Veritas has not put forth

evidence demonstrating that the two code sections are substantially similar. (Def.’s Mot. 27 (Dkt. No.

212 at 28).) Finally, Microsoft argues that Veritas’ copyright claim is untimely.6

 (Def.’s Mot. 30 (Dkt.

No. 212 at 31).) Each of these arguments is addressed in turn, below.

1. Whether Microsoft is Licensed to Use the Code or Is Its Effective Owner

Microsoft concedes that when a party exceeds the scope of a license, it can be held liable for

copyright infringement. (Def.’s Mot. 25 (Dkt. No. 212 at 26) (citing Sun Microsys., Inc. v. Microsoft

Corp., 188 F.3d 1115, 1121 (9th Cir. 1999).) The Court has already found that whether or not

Microsoft’s actions were within the scope of the Agreement is a fact question that remains for the jury.

Accordingly, it will not grant Microsoft’s motion for summary dismissal of the copyright claim on this

basis. 

2. Whether the Code at Issue is Protected by Copyright Law

To succeed on its copyright infringement claim, Veritas will have to prove that Microsoft “copied

protected elements of [Veritas’] work.” Three Boys Music Corp. v. Bolton, 212 F.3d 477, 481 (9th Cir.

2000), cert. denied, 531 U.S. 1126 (2000). Absent direct evidence of copying, such as an admission that

defendant copied the work at issue, this factor is normally proven by circumstantial evidence of

defendant’s access to plaintiff’s work and substantial similarity between the works. Id. Before the Court

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reaches the substantial similarity analysis, however, the Court must first filter out any non-protected

material from the purportedly protected expression. Computer Assoc. Int’l, Inc. v. Altai, Inc., 982 F.2d

693, 710 (2d Cir. 1992). As to whatever “golden nugget” of protected expression in the LDM code

remains, the Court will then consider whether it is substantially similar to the allegedly infringing LVM

code. Id. 

i. Non-Protected Elements

The section of code allegedly infringed, by both parties’ accounts, is a “transaction macro.”

(Def.’s Mot. 26 (Dkt. No. 212 at 27), Pl.’s Resp. 26 (Dkt. No. 289 at 32).) Veritas’ expert Dr. Chase

describes transaction processing as a “transactional update and recovery in the implementation of

configuration changes to disk groups or packs.” (Chase Report ¶ 102 (Dkt. No. 296-3 at 61).) As best

the Court can determine, the transaction macro essentially works to preserve data and prevent its loss in

the event of a range of hardware or software failures. Dr. Chase opines that “[t]his core code to store,

update, and recover disk group configurations safely is crucial to the value of the software in an

enterprise setting.” (Id.)

Under copyright law, even as to software code, “functional elements and elements taken from the

public domain do not qualify for copyright protection.” Computer Assoc. Int’l, Inc. v. Altai, Inc., 982

F.2d 693, 714 (2d Cir. 1992). Microsoft argues that the transaction macro was “required to maintain

functionality with the Defined Interface, as required by the Agreement,” and as such, constitutes a

functional, non-protected element of the allegedly infringed work. (Def.’s Mot. 26 (Dkt. No. 212 at 27).)

However, Veritas’ expert Dr. Chase states that copying the transaction macro “was not necessary to

maintain compatibility with the LDM on-disk structures.” (Chase Report ¶ 96 (Dkt. No. 296-3).) As a

result, whether the transaction macro is a functional element is a disputed material fact. 

Additionally, Microsoft argues that similar transaction macros have been in the public domain for

decades, and that therefore the transaction macro at issue is not protected by copyright. (Def.’s Mot. 26

(Dkt. No. 212 at 27).) Veritas’ expert, however, has stated that the transaction macro was a proprietary

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feature that was developed by Veritas over many years. (Chase Report ¶ 103 (Dkt. No. 296-3 at 62).)

Even Microsoft’s expert, Dr. Gary Nutt, recognizes that the transaction macro is crucial to the value of

the product and stated that he was not aware of the publication of the macro:

Q: I am asking you whether you are aware of any publication by Veritas or anyone

else of the unique implementation details associated with the transactions

technology in LDM?

. . . 

A: I would repeat that I am unaware of any source code being published, any of

Veritas’ LDM source code appearing in publication.

(Nutt Dep. 51:3–13, 145:4–7 (Dkt. No. 296-4 at 15, 41).) It may be that similar transaction macros were

common in computer science, as Microsoft contends, (Def.’s Mot. 26 (Dkt. No. 212 at 27)), but there is

at least a genuine issue of material fact on this issue.

Finally, Microsoft’s argument that the alleged copying is de minimis is unpersuasive:

 [E]ven a quantitatively small amount of copied material may be sufficiently important to

the operation of plaintiff’s program to justify a finding of substantial similarity. For

instance, a small portion of the structure or code of a program may nonetheless give it

distinctive features or may make the program especially creative or desirable. In such a

case, a finding of substantial similarity would be appropriate.

4 MELVILLE B. NIMMER & DAVID NIMMER, NIMMER ON COPYRIGHT § 13.03(F)(5). In the instant case, as

noted above, Veritas’ expert has opined that the transaction macro at issue makes the disputed

technology more “desirable” because it is “robust against a range of adverse events that might occur” and

“is crucial to the value of the software in an enterprise setting.” (Chase Report ¶ 102 (Dkt. No. 296-3 at

61).) Microsoft’s expert agrees with that characterization. (Nutt Dep. 145:5–7 (Dkt. No. 296-4 at 41).

Accordingly, the Court will not dismiss the copyright claim on de minimis grounds.

ii. Substantial Similarity

Finding no reason at this stage to filter out any of the allegedly infringed material as nonprotected, the Court must consider whether Microsoft infringed Veritas’ copyrighted LDM code by

copying it in LVM. “[P]roof of infringement involves fact-based showings that the defendant had ‘access’

to the plaintiff’s work and that the two works are ‘substantially similar.’” Three Boys Music Corp. v.

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Bolton, 212 F.3d 477, 481 (9th Cir. 2000), cert. denied, 531 U.S. 1126 (2000) (quoting Smith v.

Jackson, 84 F.3d 1213, 1218 (9th Cir. 1996)). In the instant case, it is undisputed that Microsoft had

access to Veritas’ LDM source code. (Def.’s Contract Mot. 2 (Dkt. No. 210 at 3); Compl. ¶ 18 (Dkt.

No. 1 at 7).) “Where a high degree of access is shown, [the Ninth Circuit] require[s] a lower standard of

proof of substantial similarity.” Swirsky v. Carey, 376 F.3d 841, 844 (9th Cir. 2004). Accordingly,

Veritas’ burden of proof of substantial similarity is lowered. 

The Ninth Circuit has explained that: 

In determining whether two works are substantially similar, we employ a two-part

analysis: an objective extrinsic test and a subjective intrinsic test. For the purposes of

summary judgment, only the extrinsic test is important because the subjective question of

whether works are intrinsically similar must be left for the jury. . . . The extrinsic test

considers whether two works share a similarity of ideas and expression as measured by

external, objective criteria. . . . The extrinsic test requires analytical dissection of a work

and expert testimony.

Id. at 845 (internal citations omitted). The Court may find that Veritas has satisfied the extrinsic test if it

has provided “indicia of a sufficient disagreement concerning the substantial similarity of the two works.”

Id. at 846 (internal citation and brackets omitted). 

Microsoft posits that Veritas has “offered no evidence at all—let alone expert testimony—to

substantiate its copyright infringement claim.” (Def.’s Mot. 29 (Dkt. No. 212 at 30).) The Court

disagrees. Veritas’ expert Dr. Chase opined, after analyzing the code sections at issue, that:

The transaction macro code in the Microsoft LVM code (Build 5245) is nearly identical in

syntax, code sequence and structure compared to the transaction macro code in the

Veritas LDM code. The macro definition and usage are idiosyncratic, so it is unlikely that

this occurred by chance. On further analysis of earlier versions of the source code (in

MSM-VRTS 030) shortly after the macros were introduced in change version 025706

dated 10/4/2001, it becomes apparent that these transaction macros were copied from the

Veritas code with very minor changes. The more significant differences in the LVM

transaction macros were introduced much later in change version 124809 dated

12/8/2004, and were related to the disk quorum recovery scheme that Microsoft

introduced into LVM.

(Chase Report ¶ 121 (296-3 at 70).) Further, Microsoft’s expert Dr. Nutt stated that the changes to the

transaction code from LDM to LVM were “not major.” (Nutt. Dep. 116:2–3 (Dkt. No. 296-4 at 28).)

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 Trade secret misappropriation claims must be brought “within three years after the

misappropriation is discovered or by the exercise of reasonable diligence should have been discovered.”

WASH. REV. CODE § 19.108.060. Likewise, a three-year limitations period applies to claims for breach of

the duty of good faith and fair dealing. See Steinberg v. Seattle-First Nat’l Bank, 832 P.2d 124, 125 n.4

(Wash. Ct. App. 1992). Additionally, claims for copyright infringement must be brought within three

years after the claim accrued. 17 U.S.C. § 507(b). Accrual begins when a potential plaintiff “has

knowledge of a violation or is chargeable with such knowledge.” Roley v. New World Pictures, Ltd., 19

F.3d 479, 481 (9th Cir. 1994).

ORDER – 16

Dr. Nutt identified similarities between the two sets of code, including:

the same basic structure. They are both macros that start out #define, it’s a programming

language construct. They then interloop in the two macros and do search and work. In the

LVM case there is an explicit allocation of the abort variable. There is in both. There is a

pointer to a client transaction in the LDM case that’s different, but there is still the front

half of a loop . . . . 

(Id. at 117:13–24.) Bearing in mind Veritas’ lowered burden of proof given Microsoft’s high degree of

access, the Court is persuaded that Veritas has satisfied the extrinsic test to survive summary judgment.

F. Whether Veritas’ Trade Secret Misappropriation Claim, Claim for Breach of the

Duty of Good Faith and Fair Dealing, or Copyright Claim is Barred by the ThreeYear Statute of Limitations and the Related Equitable Doctrines of Estoppel,

Waiver, and Laches 

Microsoft argues that Veritas’ claims for misappropriation, breach of the duty of good faith and

fair dealing, and copyright infringement are untimely7 because “undisputed evidence shows that Veritas

knew or should have known of Microsoft’s now-accused activities many years before filing suit[.]”

(Def.’s Mot. 15 (Dkt. No. 212 at 16).) Specifically, Microsoft asserts that Veritas should have known by

Spring 2000 that Microsoft intended to “reintegrate LDM in a way that retained Veritas’ ‘IP.’” (Id. at

17.) Additionally, according to Microsoft, Veritas should have known by 2001 all of the facts giving rise

to Veritas’ misappropriation claims relating to VDS and VSS. (Id. at 18–19.) Microsoft also argues that

Veritas should have known of any copyright infringement in 2000, “when Microsoft first informed

Veritas that Microsoft was creating a new version of the volume manger using LDM code.” (Def.’s Mot.

30 (Dkt. No. 212 at 31).) Veritas filed this lawsuit on May 18, 2006. (Compl. (Dkt. No. 1).) 

The Court finds that Veritas has raised sufficient evidence to survive summary judgment on all of

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 Interrogatory Number 6 asks Microsoft to “[i]dentify any and all source code and source code

sections from LDM that remain a part of, are in some way included in, or that were relied upon or

utilized by Microsoft in the development of, LVM, VDS and/or VSS.” (Microsoft’s Second

Supplemental Resp. to Veritas’ Interrog. No. 6 (Dkt. No. 296-6 at 38).) 

ORDER – 17

the timeliness issues. Veritas’ Complaint and Response tell the story of a ten-year disintegrating business

relationship, involving years of alleged deception and obfuscation of the true facts. According to Veritas,

it did not discover, and could not have discovered, any of Microsoft’s improper conduct until after it

received the latest version of Microsoft’s Windows operating system code at WinHEC in early 2004.

(Compl. ¶ 27 (Dkt. No. 1).) Even then, Microsoft allegedly denied Veritas access to the Vista source

code that would have allowed Veritas to confirm its concerns that Vista included code implementing

ostensibly reserved features in violation of Microsoft’s contractual obligations regarding Veritas’

confidential information. (Id. at ¶ 31.) It was not until October 2004 that Microsoft gave Veritas a

version of the Vista volume management source code (LVM) that, according to Veritas, confirmed for

Veritas the extent of Microsoft’s misconduct. (Id. at ¶ 32.) 

Veritas supports its version of the facts with evidence including a December 31, 2004, email from

Veritas’ Vice President of Intellectual Property, Joseph Fitzgerald, to Microsoft’s Craig Fielden,

indicating that in spite of Veritas’ understanding that Microsoft was to give Veritas periodic, quarterly

code updates, Microsoft delayed giving Veritas the LVM code for approximately 18 months, until after

much discussion, negotiations, and numerous letters. (Dkt. No. 296-6 at 52).) Mr. Felden’s email

indicates that Veritas did not receive the LVM code until sometime near the end of 2004. Veritas explains

in its Response that access to the LVM code was necessary for determining whether LVM contains any

code or trade secrets from LDM. (Pl.’s Resp. 19 (Dkt. No. 289 at 25).) In fact, Microsoft’s own answer

to Veritas’ Interrogatory Number 68

 indicates that “a definitive answer to [the question of how much

LDM code was used to develop LVM] can be provided only after making a line-by-line comparison of

LDM and LVM code.” (Microsoft’s Second Supplemental Resp. to Veritas’ Interrog. No. 6 (Dkt. No.

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296-6 at 44).) If Veritas did not receive the LVM code until near the end of 2004, Veritas could not

reasonably have been aware of its potential claims until that time. 

Microsoft identifies allegedly undisputed material facts to show that:

Veritas knew, in the spring of 2000, everything it needed to know to file its LVM-based

claims, including that (1) Microsoft intended to develop the next version of the Embedded

Product using developers who had been exposed to LDM source code, and was taking

responsibility for implementing large numbers of bug fixes and other modifications

designed to eliminate the many problems that plagued the original Embedded Product, and

(2) this project necessarily required the use of the LDM source code on which the original

Embedded Product was based. 

(Def.’s Mot. 16 (Dkt. No. 212 at 17).) However, one of the main issues in this case is whether Microsoft

merely developed an improved Embedded Product, or whether it actually created a Supplanting Product,

and whether the developments Microsoft performed were just bug fixes and other modifications designed

to eliminate problems. 

It is not clear to the Court that communications between Microsoft and Veritas were sufficiently

explicit to give Veritas reason for concern that its confidential information was being misused. The

exhibits Microsoft puts forward to show that there were problems with LDM during the 1997–1999 time

period are not sufficient to prove as a matter of law that Veritas should have known the extent to which

Microsoft was going to change or supplant the Embedded Product. (Def.’s Mot. 16 n.12 (Dkt. No. 212

at 17).) Further, Microsoft developer Catherine Van Ingen’s May 16, 2002, email to Veritas’ Peter

Benoit characterizes Microsoft’s planned developments as a “reintegration” of the Embedded Product, a

“re-engineering to improve such things as PNP interactions.” (Van Ingen Email (Dkt. No. 213-5 at 20).)

The email specifically states that the planned “reintegration is not a rewrite[.]” (Id.) This communication

does not suggest to the Court that Veritas should have known Microsoft was creating a Supplanting

Product, or that it was using Veritas’ confidential information to do so. 

Microsoft points also to Frank Artale’s deposition testimony that Veritas received regular updates

on the reintegration from Peter Benoit, based on his conversations with Van Ingen. (Def.’s Mot. 17 (Dkt.

No. 212 at 18).) However, if Peter Benoit was not receiving full disclosure from Van Ingen about the

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extent of the “reintegration,” then whether or not Mr. Benoit gave Veritas regular updates is immaterial. 

Moreover, Veritas alleges that Microsoft concealed its plans to compete with Veritas’ Add-on

Products by developing the various VDS/VSS components in secrecy and by releasing them at different

points in time, while withholding from Veritas key design specifications and source code files. (Pl.’s

Resp. 20 (Dkt. No. 289 at 26).) Specifically, Veritas alleges that Microsoft concealed the critical user

interface (or GUI, or UI or MMC) component of VDS/VSS. (Id. at 21.) Veritas alleges that Microsoft

represented to Veritas that the VDS/VSS technology under development would be limited to an API,

while it secretly developed the user interface under the codename “Doppler” in order to compete with

Veritas’ Add-on Products, including SANPoint Control. (Pl.’s Resp. 21 (Dkt. No. 289 at 27).) Veritas

supports these contentions in part with a Microsoft internal document dated November 5, 2002, that

describes VDS specifications and explicitly states that “Competition” includes “Veritas

SANPointControl.” (Virtual Disk Service Requirements Specification 7 (Dkt. No. 293-2 at 8).) 

Microsoft argues that Veritas knew or should have known all the facts giving rise to its claims

relating to VDS by 2001, in part because in 1999 Veritas obtained an 86-page VDS specifications

document, which allegedly provided Veritas with in-depth knowledge of the purpose, functionality,

structure, and source code of VDS. (Def.’s Mot. 18 (Dkt. No. 212 at 19).) However, Veritas counters

that this document at most involved only an early, unsuccessful, and later abandoned, API prototype, and

did not reveal the actual design plans and code for the VDS/VSS framework. (Pl.’s Mot. 22 (Dkt. No.

289 at 28).) Additionally, Microsoft argues that Veritas received a VDS software development kit in May

2002 (Def.’s Mot. 18 n.15 (Dkt. No. 212 at 19).) However, Veritas argues that the “so-called ‘software

developer kits’ or ‘code files’ that Microsoft identifies for VDS/VSS, at most, were incomplete and

misleading pieces of the entire VDS/VSS framework and did not contain any reference to the secret user

interface component[.]” (Pl.’s Resp. 22–23 (Dkt. No. 289 at 28–29).) Veritas also argues that Microsoft

never shared with Veritas the entire source code and design documents for the VSS/VDS framework,

and cites an 2002 email from Eric Burgener summarizing Veritas’ source code access concerns. (Dkt.

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No. 293 at 4.) 

Reviewing the evidence the parties have put forward at this stage, the Court is not persuaded that

there are no genuine issues of material fact as to what Veritas knew, and when. Whether Veritas could

have discovered before 2004 Microsoft’s misconduct in developing LVM and VSS/VDS is an intensely

disputed factual issue that is properly left for the jury to decide. Likewise, the Court will not now hold

laches, estoppel, or waiver to apply to Veritas’ claims. For laches to apply, Microsoft must show that

Veritas had “knowledge or reasonable opportunity to discover . . . that [it] has a cause of action against

[Microsoft].” Buell v. City of Bremerton, 495 P.2d 1358, 1361 (Wash. 1972). For the reasons described

above, the Court is not persuaded at this time that Veritas had such reasonable opportunity to discover its

causes of action until 2004. Further, without reason to know that Microsoft may have been violating the

Agreement before 2004, Veritas could not have “intentionally and voluntarily relinquished a known right”

such that waiver might apply. Jones v. Best, 950 P.2d 1, 6 (Wash. 1998). Moreover, Microsoft has not

proven at this stage that Veritas made an admission, statement, or act that was inconsistent with its

present claims such that equitable estoppel should apply. Carillo v. City of Ocean Shores, 94 P.3d 961,

970 (Wash. Ct. App. 2004) (stating that “[e]quitable estoppel is not favored, and the party asserting

estoppel must prove each of its elements by clear, cogent, and convincing evidence.”). The Court will not

hold Veritas equitably estopped from asserting its claims merely because of statements it made about

marketing or endorsing the anticipated product before it had access to the product’s code and

documentation. Accordingly, the Court DENIES Microsoft’s motion to the extent that it seeks to bar

Veritas’ claims on timeliness issues.

IV. CONCLUSION

For the foregoing reasons, as to Defendant Microsoft Corporation’s Motion for Summary

Judgment on Counts I, III–V, VII (Dkt. No. 212), the Court hereby:

DENIES IN PART the motion as to Veritas’ claims of trade secret misappropriation, breach of

the duty of good faith and fair dealing, and copyright infringement; and

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GRANTS IN PART the motion insofar as Veritas’ claims of unfair competition and unjust

enrichment are hereby DISMISSED.

DATED this 4th day of February, 2008.AJohn C. Coughenour

UNITED STATES DISTRICT JUDGE

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