Court Opinion

ID: 9803818
Source: CourtListenerOpinion
Date Created: 2023-08-31 16:05:41.333831+00
Date Added: 2024-06-11T10:03:29.066181
License: Public Domain

by Andrias, J.,
as follows: I respectfully disagree with the majority’s conclusion “that this case presents one of those rare instances in which we are compelled to substitute our discretion for that of the motion court.” Rather, the motion court providently exercised its discretion when it denied, as an unwarranted fishing expedition, plaintiffs’ motion to compel the production of additional source code created by defendants more than a year after the alleged misappropriation of plaintiffs’ source code took place, where there was only hope and speculation as to what the additional discovery would uncover. Accordingly, I dissent.
*1077In May 2011, plaintiffs commenced this action in which they allege that the individual defendants, while in plaintiffs’ employ, misappropriated trade secrets, to wit, the source code underlying several component technologies of their flagship multi-asset class (MAC) risk-analytics software product, and used those secrets to develop a competing MAC software product for defendant Axioma. Among other things, plaintiffs allege that from June to November 2010 the individual defendants developed a plan to take certain intellectual property that they developed while working for plaintiffs to launch a competing business, and that in January and February 2011 they took plaintiffs’ source code and algorithms with them to Axioma. Plaintiffs also allege that the individual defendants contemplated a nine-month time frame for building a valuation platform and that such a short time frame “would be impossible absent the misuse and misappropriation of [plaintiffs’] confidential and propriety information, including algorithms and source code.”
In September 2011, the parties negotiated and executed a confidentiality stipulation, so-ordered by the court (the CSO), which provided: “35. MSCI, Axioma and Jacob . . . shall deliver to [a neutral] two (2) full copies of the source code for each programs/products/components at issue in this action . . . [and] in development . . . [which] shall include all versions of such source code created from inception in buildable, runnable, native text format and in a file organization that retains the original directory structure of the code and any source code repository; and source code documentation.”
The CSO also provided that only the parties’ experts would receive or see the material deposited with the neutral.
Defendants subsequently moved to compel plaintiffs to affirmatively identify their trade secrets with sufficient particularity, as demanded in defendants’ interrogatories, and for a protective order relieving defendants of their obligation to produce Axioma’s source code until plaintiffs complied. A compliance conference order entered March 30, 2012, directed the parties to submit briefs on the trade secrets issue and directed Axioma to “deposit source code with [the neutral] as soon as reasonably possible.” On April 4, 2012, Axioma deposited with the neutral 5,552 unique historical versions of its source code that had been created or modified during the 14-month period between February 24, 2011 and April 3, 2012.
By orders entered April 23, 2012 and on or about July 9, 2012, the court directed plaintiffs to identify their trade secrets with reasonable particularity. By order entered on or about November 21, 2012, the court adopted the report of a court-appointed *1078expert stating that plaintiffs’ second supplemental interrogatory response, served on August 27, 2012, identified certain of their trade secrets with reasonable particularity, and was insufficient in other respects. Meanwhile, by so-ordered stipulation entered on or about September 27, 2012, the parties agreed that the neutral should release each side’s source code to the other’s expert, which was done on or about October 4, 2012.
In a compliance conference order entered March 21, 2013, the court directed plaintiffs, among other things, to deposit their source code in buildable and runnable form, as required by the CSO; identify those lines of the source code that they claimed Axioma had misappropriated; and respond to defendants’ outstanding document demands. Rather than comply, plaintiffs moved for a protective order and to compel Axioma to produce “all versions” of its source code. Defendants cross-moved to compel plaintiffs to fulfill their outstanding discovery obligations.
At oral argument, the court rejected plaintiffs’ contention that it was entitled to a continuous updating of Axioma’s source code for the life of the case as contrary to paragraph 35 of the CSO and as nothing more than a “fishing expedition.” Thus, the court found that defendants complied with their discovery obligations when Axioma deposited over 5,000 versions of its source code for a 14-month period — including the four-month period preceding the commencement of this lawsuit and the 10-month period thereafter.
The court then issued the order on appeal, entered August 15, 2013, in which it denied plaintiffs’ motion “in regard to directing Axioma to continue to turn over new code beyond the 14 months already turned over”; denied plaintiffs’ request for a stay of its discovery obligations; and granted defendants’ cross motion by requiring plaintiffs to deposit its source code in build-able, runnable format and to respond to defendants’ interrogatories and discovery requests, as required in the March 21, 2013 order. The court also issued a separate compliance conference order, requiring, among other things, that plaintiffs respond to the interrogatories and discovery requests by September 13, 2013, and turn over the buildable, runnable source code by September 30, 2013; that all depositions be completed by January 31, 2014; and that the note of issue be filed by April 4, 2014.
CPLR 3101 (a) provides that “[t]here shall be full disclosure of all matter material and necessary in the prosecution or defense of an action.” In determining when disclosure is appropriate, “[t]he test is one of usefulness and reason” (Allen v Crowell-Collier Publ. Co., 21 NY2d 403, 406 [1968]). “Although *1079the scope of discovery under CPLR 3101 is to be construed liberally, where discovery of trade secrets is sought, the party seeking disclosure must show that the information demanded appears to be indispensable to the ascertainment of truth and cannot be acquired in any other way” (Carecore Natl., LLC v New York State Assn. of Med. Imaging Providers, Inc., 24 AD3d 488, 489 [2d Dept 2005] [internal quotation marks omitted]). When viewed in light of these principles, I find that the motion court properly denied plaintiffs’ motion to compel the perpetual production of highly sensitive trade secret source code created by Axioma from April 4, 2012 through the life of this action, a time period beyond that alleged in the complaint, which identified the period of misappropriation as from June 2010 through March 2011.
Contrary to the majority’s view, the motion court reasonably concluded that paragraph 35 of the CSO required a single production of source code to the neutral, which was to include all of the code’s previous versions, and that it did not create a continuing obligation to produce every future iteration of the code. This interpretation is consistent with the court’s March 30, 2012 compliance order, which required Axioma to deposit source code with the neutral “as soon as reasonably possible.” Defendants complied with this obligation, producing 5,552 versions of its source code, as well as 24,391 “offline” source code documents.
Nor do I agree with the majority’s finding that defendants’ •expert affidavit established the need for production of all versions of defendants’ source code made until the date that Axioma’s MAC product is released to the market. In seeking additional discovery of source code, plaintiffs’ expert only speculated that “in the event Defendants altered Axioma’s source code in an effort to disguise its use of MSCI’s trade secrets,” those changes would appear in later versions of the code. Indeed, with respect to common code in the parties’ respective products, the expert acknowledged that his review to date revealed only that “some of these files were third-party created, ‘off the shelf,’ source code files.” The expert could only speculate that “there may also be source code files created and developed by Axioma’s employees outside of Axioma’s Subversion system, and then added into the system in final form,” and plaintiffs presented no evidence to suggest that this scenario had in fact occurred.
The majority finds that plaintiffs’ expert’s opinion is not speculative because “he states that the versions of the source code already deposited ‘strongly suggest[ ] that the majority of *1080development of Axioma’s MAC [p]roduct actually occurred in the versions of source code created or modified after April 3, 2012.’ ” However, the expert’s conclusion was based on the fact that “the first 140 ‘versions’ Defendants deposited include less than 200 source code files out of the total 2,167 unique source code files Axioma deposited [and] [t]he first 1700 versions contain less than half of all the source code files deposited.” Defendants produced 5,552 versions, and the expert did not address what the latter 3,852 versions contained.
Further, although the majority cites plaintiffs expert’s statement that the code produced by defendants was in its “nascent state,” defendants’ expert stated that his “initial analysis of Axioma’s Deposited Source Code indicates that it is a complete and usable source code repository that was created in the normal course of the actual software development at Axioma.” While defendants’ expert acknowledged that there were occasions where larger than average amounts of new source code were added to the Axioma project in a relatively short period of time, which could indicate that the source code originated in other places, he explained that “[u]pon further inspection, each of these periods of interest related to the introduction and use of third-party, off-the-shelf source code libraries.”
In sum, the motion court, which was intimately familiar with the discovery issues in the case, providently balanced plaintiffs’ need for production of additional source code against the need to protect defendants from a fishing expedition that would allow plaintiffs to monitor the development of Axioma’s new product, after it became apparent that discovery to date did not support plaintiffs’ misappropriation claims as alleged in the complaint. As the court stated at oral argument, plaintiffs’ theory that updated source code may provide evidence that Axioma somehow successfully concealed its misappropriation in the 5,552 versions of source code already deposited is “a great leap,” based upon mere speculation, without a factual predicate for the requested additional discovery (see Viacom Intl. Inc. v Youtube Inc., 253 FRD 256, 260 [SD NY 2008] [“YouTube and Google should not be made to place this vital asset in hazard merely to allay speculation. A plausible showing that YouTube and Google’s denials are false . . . should be required before disclosure of so valuable and vulnerable an asset is compelled”]).
The fact that the CSO calls for production to a neutral and review by plaintiffs does not justify continuous production of Axioma’s post-April 3, 2012 source code. Careful and extensive confidentiality provisions are “not as safe as nondisclosure [and] [t]here is no occasion to rely on them, without a preliminary *1081proper showing justifying production of the search code” (Viacom, 253 FRD at 260).
Accordingly, I would affirm the denial of plaintiffs’ motion to compel.