Case Name: OptumSoft, Inc. v. Arista Networks, Inc.
Case No.: 2014-1-CV-263257

This action for breach of contract and trade secret misappropriation arises from a license agreement between plaintiff OptumSoft, Inc. and defendant Arista Networks, Inc. regarding OptumSoft’s TACC computer software. Currently before the Court is OptumSoft’s motion to compel the production of source code following Phase I of the trial.

I. Factual and Procedural Background

TACC is a platform for developing modular or distributed applications and systems. (Complaint, ¶ 8.) According to OptumSoft, when the parties entered into the subject license agreement on November 30, 2004, TACC was still a work in progress, and the parties anticipated that Arista personnel would write code that would include improvements, corrections, modifications, and/or derivative works. (Id. at ¶ 9.) Arista agreed that OptumSoft would own such “TACC-Related Work” and associated intellectual property rights, and, in exchange, OptumSoft provided a royalty-free license to TACC. (Id. at ¶¶ 11-13.) OptumSoft alleges that Arista breached the parties’ agreement in multiple ways, including by refusing to acknowledge OptumSoft’s ownership of TACC-Related Work and associated intellectual property. (Id. at ¶ 16.)

On April 4, 2014, OptumSoft filed this action for (1) breach of contract, (2) misappropriation of trade secrets, and (3) declaratory relief. Arista filed a cross-claim for declaratory relief. Following several case management conferences, the Court bifurcated the action into two phases for purposes of discovery, dispositive motion practice, and trial. (January 8th, 2015 Order re: Case Management, p. 2.) The first phase addressed the ownership of 19 specific source code modules identified by OptumSoft, and all other discovery was stayed while this phase was resolved. (Ibid.) The second phase of the trial will address the remainder of the parties’ claims, including the ownership of any remaining disputed property, alleged breaches related to the improper disclosure of OptumSoft’s confidential information, and OptumSoft’s claim for trade secret misappropriation. (Id. at p. 3.)

Phase I was tried to the Court in September and October of 2015, and the Court’s final statement of decision issued on March 23, 2016. The Court found that Arista had indeed agreed to deliver all TACC improvements, corrections, modifications, and derivative works to OptumSoft upon request in exchange for a perpetual, non-revocable, and non-exclusive license to use TACC. (Final Statement of Decision Following Phase I Trial, pp. 5-6, 9-11.) However, it disagreed with OptumSoft’s broad interpretation of the scope of ownership in TACC “improvements” to include any code that could potentially increase the functionality of TACC or aid a TACC programmer in developing programs with TACC. (Id. at p. 11.) The Court held that “improvements” meant “actual changes or modifications to actual TACC files, directories, or source code,” and found that none of the 114 disputed files at issue in Phase I were owned by OptumSoft under this definition. (Id. at pp. 12-14.) The Court also found that the location of any files encompassed by the agreement did not impact OptumSoft’s ownership rights, and stated that “[t]he fact that Optumsoft does not have immediate access to Arista’s file directories should not prejudice its right to claim ownership of those files” and “Optumsoft should be assured that they are receiving all of the files to which they are entitled and the Court will address this further with the parties during the next phase of litigation.” (Id. at p. 13.)

In their joint case management statement filed on April 29, 2016, the parties discussed their continuing dispute over the production of Arista’s source code beyond the 19 modules at issue in Phase I. This motion followed.

II. Analysis

OptumSoft moves to compel further responses to its requests for production (“RPD”s) nos. 6 and 7, which were served on September 18, 2014. The RPDs seek all source code created by Arista, “including any source code development history or other metadata associated with the source code.” On December 3, 2014, Arista served its first amended responses to the RPDs, objecting to the requests at issue and stating that it would not produce all source code, but had produced the source code for the 19 modules at issue in Phase 1 in accordance with the Court’s October 24th, 2014 case management order. The Court’s order staying discovery regarding additional source code followed.

OptumSoft now renews its request for the production of all Arista source code and development history for review by its expert, contending there is no other way for it to determine what (if any) source code written by or for Arista belongs to OptumSoft. Arista opposes OptumSoft’s motion on the grounds that OptumSoft failed to adequately meet and confer before filing it; OptumSoft fails to establish good cause supporting its requests; and the requests are unduly burdensome, both with respect to the amount of code at issue and because the source code is Arista’s most valuable proprietary asset and OptumSoft is a direct competitor.

As an initial matter, the Court finds that good cause supports OptumSoft’s request. Arista does not deny that source code derived from TACC may be intermixed with its other source code and appears to concede that some form of review of the source code is appropriate. Furthermore, Arista does not meet its burden to demonstrate that producing the source code would be unduly burdensome with respect to the time or expense involved. (See Code Civ. Proc., § 2031.310, subd. (d) [upon a motion to compel the production of electronically stored information, the party opposing production “shall bear the burden of demonstrating that the information is from a source that is not reasonably accessible because of undue burden or expense”]; West Pico Furniture Co. v. Superior Court (Pacific Finance Loans) (1961) 56 Cal.2d 407, 417-418 [because “some burden is inherent in all demands for discovery,” a party claiming that requested discovery is unduly burdensome must make a particularized showing of facts demonstrating hardship, including evidence showing the quantum of work required to respond].)

However, the Court is not inclined to grant OptumSoft’s expert access to all of Arista’s source code. Contrary to OptumSoft’s argument, it is not only proper but necessary for the Court to consider the risk to Arista’s proprietary source code in crafting a discovery order. (See Code Civ. Proc., § 2017.020, subd. (a) [“The court shall limit the scope of discovery if it determines that the burden, expense, or intrusiveness of that discovery clearly outweighs the likelihood that the information sought will lead to the discovery of admissible evidence.”]; see also Code Civ. Proc., § 2031.060, subd. (b)(5) [court may issue a protective order providing “[t]hat a trade secret or other confidential research, development, or commercial information not be disclosed, or be disclosed only to specified persons or only in a specified way”].) Here, the Court finds the review proposed by OptumSoft to be intrusive in light of Arista’s interest in its confidential source code and the parties’ competitive status. Furthermore, given OptumSoft’s failure to establish ownership of any of the 19 software modules at issue in Phase I and the lack of evidence that any other aspect of Arista’s source code that has not been delivered to OptumSoft is owned by OptumSoft, the Court deems the likelihood that review of the source code will yield admissible evidence of code owned by OptumSoft to be relatively low.

In addition, Arista’s argument that OptumSoft has failed to show adequate efforts to meet and confer on this issue is well-taken. (See Code Civ. Proc., § 2031.310, subd. (b)(2) [party moving to compel a further response to a request for production must file a meet and confer declaration].) In particular, OptumSoft does not address Arista’s proposal to have a neutral expert review the source code. The Court is inclined to adopt this approach, but believes that the parties themselves are best equipped to address the details of that process through meet and confer. Notably, neither party has yet presented the Court with a complete proposed review methodology. The Court hesitates to impose a particular technological solution, such as the use of MOSS, but expects that the parties will consider a number of options in order to control costs and ensure that the review methodology is clear, objective, rational, and neutral.

In accordance with the above, the hearing on this matter is CONTINUED TO AUGUST 26, 2016 to enable the parties to meet and confer regarding the manner of inspection. Specifically, the parties should discuss the following issues regarding the use of a neutral expert to conduct the inspection: (1) who the expert will be, (2) what methodology he or she will employ to review Arista’s source code and source code development history for code potentially owned by OptumSoft and how any such code will be delivered to OptumSoft, (3) whether modifications to the protective order in this action are necessary in order to protect Arista’s source code, and (4) how the parties will share the costs of the review. By August 15, the parties shall file (1) a proposed stipulated order for a neutral inspection or for an alternative manner of inspection agreeable to both of them and/or (2) supplemental briefing, not to exceed 10 page in length for each party, addressing any remaining points of disagreement and outlining the parties’ respective proposals on each point.