executed plaintiff declaration
DESCRIPTION
DefendantsTHE PEAK ORGANIZATION, INC.,PEAK COUNSEL, INC, PEAK DISCOVERY, INC., RICHARD EICHENBERG, ARNOLD SCHLANGER, MICHAEL DALEWITZ, and PHILIP GREENBERGPaid Plantiff Settelemt DamagesTRANSCRIPT
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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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ARGENTTO SYSTEMS, INC. and :
NICK SANTINO, :
:
Plaintiffs, :
:
-v.- :
:
THE PEAK ORGANIZATION, INC., :
PEAK COUNSEL, INC., PEAK :
DISCOVERY, INC., RICHARD :
EICHENBERG, ARNOLD SCHLANGER, :
MICHAEL DALEWITZ, and PHILIP :
GREENBERG, :
:
Defendants. :
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No.: 09 Civ. 2615 (LLS)(AJP)
ECF Case
DECLARATION OF
NICK SANTINO
IN SUPPORT OF
PRELIMINARY
INJUNCTION AND
EXPEDITED DISCOVERY
NICK SANTINO, under penalty of perjury, declares as follows:
1. I am the President and Founder of Argentto Systems, Inc. (“ASI”). As the
owner of the copyright to the legal review metrics software at issue in this action (the
“Performance Metrics Software”), I am also a Plaintiff. I make this declaration pursuant
to 28 U.S.C. § 1746 in support of Plaintiffs’ application for a preliminary injunction and
expedited discovery.
BACKGROUND
2. I have been an independent software developer and consultant since 1994.
In 2001, as my business grew, I founded and incorporated ASI. ASI is a software
development and consulting company that develops, customizes and provides computer
software solutions to businesses ranging from law firms to investment banks to computer
manufacturers. ASI offers a full suite of software programs, from accounting enterprise
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systems, to oil trading software platforms, securities portfolio management software,
legal case management software, and various interactive web applications. In addition,
ASI provides information technology (“IT”) consulting and support services to its clients.
Since its founding, ASI has employed approximately fifteen software programmers.
3. As a leading developer of software based on proven Microsoft
technologies, ASI has developed unique intellectual property unparalleled in its industry,
including multi-company accounting software that permits entities with multiple business
units to consolidate their general ledgers into a single database, investment portfolio
management software, and interactive web-based job posting software that integrates the
needs of job candidates, staffing services, and potential employers. Starting in 2002, I
have applied for and/or obtained copyright registrations for these and other software
packages developed for licensing to clients.
4. Attached hereto as Exhibit A is a true and correct copy of ASI’s current
marketing catalog, which ASI provides to current and prospective customers to describe
and offer its software for licensing. The Performance Metrics Software at issue in this
action appears on page 14 of the catalog.
5. As part of its customer relationships, ASI inevitably adapts its software
packages to the needs of a particular customer. That customization work, and ongoing
support of the software once the customer has implemented it, constitutes a major portion
of ASI’s workload and revenue generation. In any event, ASI does not permit its
customers access to the proprietary source code for such software, to ensure the security
of ASI’s intellectual property.
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THE PERFORMANCE METRICS SOFTWARE
6. In 2006 and early 2007, I realized that that no one in the e-discovery
industry had been able to find a solution to the problem of quality control and efficiency
management in the context of litigation discovery document review. I decided to
develop, with the investment of considerable expense and programmer time, a unique and
proprietary software system to analyze and chart the progress and performance of large-
scale review of documents in the course of complex legal proceedings. This software,
which no one in the e-discovery or document review industries had previously been able
to create, provides unprecedented control over the document review process in large
litigations.
7. Successful discovery management requires complex metrics, or
measurement of the performance and efficiency of each document reviewer. The
Performance Metrics Software enables supervisors to manage effectively the progress,
accuracy, and efficiency of individual reviewers and the review team as a whole. The
metrics include: (1) documents per hours and averages; (2) pages per hours and averages;
(3) hours logged by reviewers; (4) documents reviewed; (5) documents re-reviewed; (6)
documents with no tags; (7) pages reviewed; (8) tags made; (9) tags at the first, second
and QC level; (10) additional tags added at the first-level review; (11) document review
costs at issue level.
8. The Performance Metrics Software (1) is platform agnostic, meaning it
can be used on any document review platform; (2) enables a user to manage multiple
projects simultaneously; (3) is web-based, so it is easy to use and secure; and (4) provides
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graphical displays of individual as well as group performance. The Performance Metrics
Software is written in the 16-bit .NET programming language.
9. With the Performance Metrics Software, supervisors can (1) access a
consolidated history of individual reviewer skills for use on future projects; (2) identify
under-performing reviewers; (3) identify inaccurate coders; (4) share performance data
with the review team, providing an incentive to achieve; and (5) export data into
spreadsheets for storage and internal use.
10. The implementation of these features was and is unprecedented in the e-
discovery industry. An IT specialist at one top New York law firm, upon first viewing
the software, told me that that law firm had been trying for seven years, without success,
to create this document review management and metrics functionality. Although it is
based on proven Microsoft technologies such as the SQL Server 2005 database software
and the .NET programming language and framework in Microsoft Visual Studio, the user
interface, data algorithms, data tables, drivers, and database structure of the Performance
Metrics Software consist of numerous original constituent elements. The Performance
Metrics Software contains over 950,000 lines of software source code. Over 6,000 hours
of ASI programmer time, over a period of 28 months, were required to write the
Performance Metrics Software.
11. When the Performance Metrics Software was completed in late November
2007, I sent a copyright application and the required fee to the U.S. Copyright Office, as I
had done for other software ASI developed. Attached hereto as Exhibit B is a true and
correct copy of the copyright application I submitted, along with a copy of the check and
the source code deposit that I sent to the U.S. Copyright Office with the application.
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12. I obtained a U.S. Copyright Certificate of Registration for the
Performance Metrics Software (called “Legal Review Metrics”), Registration Number
TX 6-901-797, effective December 3, 2007. A copy of this Certificate of Registration is
attached hereto as Exhibit C. I exclusively licensed the Performance Metrics Software to
ASI, so that ASI could license it to clients.
13. I am not aware of any competing software package in the e-discovery
industry. Our implementation of the Performance Metrics software is unique, and offers
a huge competitive advantage to whoever markets it to prospective law firm and other
legal clients.
ASI’S EFFORTS TO PROTECT THE PERFORMANCE METRICS SOFTWARE
TRADE SECRET
14. ASI maintains the confidentiality of its trade secrets, including its
proprietary source code, in many ways.
15. First, all ASI employees and contractors are required to sign strict
confidentiality, work for hire, and non-disclosure agreements.
16. Second, ASI’s programmers who develop, test, maintain and upgrade its
source code are the only individuals at ASI who have access to the source code through
password-protected computers. ASI provides each programmer with a user name and
password without which the programmer cannot access the system on which the source
code resides. Only I have the password to directly access the server containing and
running the Performance Metrics Software source code.
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17. Third, ASI programmers are prohibited from working on ASI software,
including the source code, outside the office. At the office, ASI programmers are
permitted access only to their own workstations and computers.
18. Fourth, ASI’s offices, including the servers on which its software source
code resides, are locked, secured, and protected by guard dog.
19. Finally, while ASI provides its actual and prospective customers and
licensees with access to its software user interfaces to view its form and functionality,
and may offer limited access to underlying data to the extent the customer or licensee
requires such access for daily use, absolutely no one other than ASI’s own computer
programmers has access to the source code embodying that software.
20. The Performance Metrics Software source code was always maintained
and run on servers belonging to ASI. Neither Peak nor any third party was ever
permitted access to the source code for the Performance Metrics Software or any other
source code.
THE RELATIONSHIP BETWEEN ASI AND PEAK
21. Frank Barone, Peak’s newly-hired controller, first contacted me to work
with Peak in 2002. Mr. Barone introduced me to Richard Eichenberg, Peak’s President
and Founder. Peak needed help with its accounting systems. Although Peak had been in
existence for decades, its accounting systems and other IT systems were in a shambles.
For example, even though Peak had invested hundreds of thousands of dollars in its
accounting systems over the years, it still did not have a means to write accounts-payable
checks to clients.
22. In June 2002, Peak engaged ASI to provide one of ASI’s existing software
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solutions for accounts payable, general ledger, and certain other accounting functions.
With the success of these first initiatives, Peak then requested that ASI provide software
for accounts receivable, payroll, and additional accounting functions. In January 2003,
ASI provided a “live payroll” software system, finally bringing Peak’s payroll
capabilities into the 21st century. We consistently provided this software ahead of
schedule and under budget.
23. ASI’s accounting systems, including its innovative “multi-company”
system permitting consolidation of the accounting for Peak’s multiple divisions, were
proprietary and unique. ASI ran the accounting software, and maintained the “data
tables” for the underlying databases. Peak and ASI agreed that ASI would have
exclusive access and administrative control over the accounting server, which was
separate from all of Peak’s existing network, and housed in a separate building. With
that agreement, I installed the accounting database on that server. To the best of my
knowledge, no one other than Frank Barone and me ever accessed that server, for the
following six years, until June 2008.
24. In the summer of 2003, I realized that Peak was still using paper time slips
and fax machines to keep track of the hours its temporary employees were working; this
system caused Peak’s billing, accounting, and payroll functions to be slow, disconnected,
and inefficient. I began developing a “beta” version of a web-based solution for timecard
entry and approval. Despite Richard Eichenberg’s apprehension, I demonstrated the beta
system to him, and Peak ultimately adopted the use of this web-based solution as
“PeakInteractive.net” in February 2004. The ability of Peak’s temporary employees, and
their supervisors at client companies, to report and approve hours using a web-based
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interface catapulted Peak to a leading position among staffing services. Because of the
strong promotional benefit of this innovative software solution, Richard and other
executives asked me to accompany Peak executives in sales calls to prospective clients.
In numerous instances, I was aware that new staffing client companies cited Peak’s web-
based timecard entry and approval system as the primary reason for their choosing Peak
for their staffing needs.
THE AGREEMENTS BETWEEN ASI AND PEAK
25. ASI had an agreement with Peak with respect to the use and ownership of
all software licensed by ASI to Peak, including the Performance Metrics Software,
throughout the companies’ relationship. This agreement is reflected in various
documents.
26. First, in late June 2002, when ASI began providing accounting and related
software to Peak, Peak and ASI entered into a Confidentiality Agreement designed to
protect Peak’s proprietary information, effective June 28, 2002. Attached hereto as
Exhibit D is a true and correct copy of this Confidentiality Agreement. This agreement
specifically stated that software copyrights did not constitute part of Peak’s Confidential
Information, and that “ASI Systems, Inc. will retain all software intellectual property and
copyrights.” See Exhibit D ¶ 1.A., III.
27. On or about November 20, 2003, ASI and Peak entered into a
Confidentiality Agreement effective January 8, 2002, intended to replace the older
Confidentiality Agreement and to cover the entire period of the companies’ relationship.
Attached hereto as Exhibit E is a true and correct copy of this Confidentiality Agreement.
In this Confidentiality Agreement, the parties also expressly agreed and reaffirmed that
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ASI would own all intellectual property rights in any software produced or provided in
the context of the parties’ relationship, as follows:
III OWNERSHIP. As between The Peak Organization,
Inc. and ASI Systems, Inc., all rights, titles, and interest,
including copyright interests and any other intellectual
property, in and to the Software produced or provided by
ASI Systems, Inc. under this Agreement shall be the
property of ASI Systems, Inc. To the extent of any interest
of The Peak Organization, Inc. therein, The Peak
Organization, Inc. agrees to assign and, upon its creation,
automatically assigns to ASI Systems, Inc. the ownership of
such Software, including copyright interests and any other
intellectual property therein, without the necessity of any
further consideration. (Exhibit E ¶ III)
28. In addition, as understood and intended by the parties, the agreement again
specifically stated and reaffirmed that software copyrights did not constitute part of
Peak’s Confidential Information. See Exhibit E ¶ I.A.
29. The agreement between Peak and ASI was also reflected in the “Terms
and Conditions” printed on each and every invoice provided by ASI to Peak in
connection with its software sales, service and support, including the Performance
Metrics Software.
30. Attached hereto as Exhibit F are the Terms & Conditions as they appeared
on the back of each invoice sent by ASI to Peak.
31. Section 5.1 of the Terms and Conditions of the agreement between ASI
and Peak provides:
OWNERSHIP RIGHTS
5.1 Ownership. As between Client and ASI Systems, Inc.,
except as set forth below in this Section 6, all right, title,
and interest, including copyright interests and any other
intellectual property, in and to the Software produced or
provided by ASI Systems under this Agreement shall be the
property of ASI Systems, Inc.. To the extent of any interest
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of Client therein, Client agrees to assign and, upon its
creation, automatically assigns to ASI Systems the
ownership of such Software, including copyright interests
and any other intellectual property therein, without the
necessity of any further consideration.
32. Section 6.1 of the Terms and Conditions provides:
RESPONSIBILITIES OF Client FOR SOFTWARE
6.1 Limitations on Use. Client may not use, copy, or
modify the Software, or any copy, adaptation, transcription,
or merged portion thereof, except as expressly authorized
by ASI Systems hereunder. Client's rights may not be
transferred except to a successor in interest of Client's
entire business who assumes the obligations of this
Agreement. No service bureau work, multiple-user license,
or time-sharing arrangement is permitted. If Client uses,
copies, or modifies the Software or transfers possession of
any copy, adaptation, transcription, or merged portion of
the Software to any other party in any way not expressly
authorized hereunder, Client's license is automatically
terminated.
33. Section 7.1 and 7.2 of the Terms and Conditions provide:
PROPRIETARY INFORMATION
7.1 Trade Secrets. Client acknowledges that in order to
perform the services called for in this Agreement, it shall
be necessary for ASI Systems to disclose to Client certain
Trade Secrets that have been developed by ASI Systems at
great expense and that have required considerable effort of
skilled professionals. Client further acknowledges that the
Software will of necessity incorporate such Trade Secrets.
Client agrees that it shall not disclose, transfer, use, copy,
or allow access to any such Trade Secrets to any employees
or to any third parties, excepting those who have a need to
know such Trade Secrets in order to give effect to Client's
rights hereunder and who have bound themselves to respect
and protect the confidentiality of such Trade Secrets. In no
event shall Client disclose any such Trade Secrets to any
competitors of ASI Systems, Inc..
7.2 Scope of Restriction. As used herein, the term “Trade
Secrets” shall mean any scientific or technical data,
information, design, process, procedure, formula, or
improvement that is commercially valuable to ASI Systems
and not generally known in the industry.
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34. These Terms and Conditions were essential terms in the agreement
between ASI and Peak. It was always my intention that ASI would keep control of the
software, to market and sell it to other clients. As set forth in the Terms and Conditions
and agreed between the companies, all intellectual property and proprietary trade secret
rights to the Performance Metrics Software belonged to ASI, and Peak’s license to use
the software was expressly contingent on ASI’s authorization.
35. Peak was well aware of these Terms and Conditions and of the fact that
they applied to the Performance Metrics Software, and all other software licensed by ASI
to Peak, with the exception of the Staffing Management System software described
below. On several occasions, I sent an extra copy of the Terms and Conditions printed on
ASI’s invoices and set forth above to various Peak executives, including Defendants
Richard Eichenberg, Michael Dalewitz, and Philip Greenberg.
36. In fact, I specifically recall that, in late 2003 or early 2004, around the
time that the Staffing Management System Software Agreement described below was
being discussed, Richard Eichenberg noticed the Terms and Conditions printed on the
back of an ASI invoice when he was in the process of paying it, and he telephoned me
and asked me to email him a copy in a larger and darker font. I did so. Attached hereto
as Exhibit G are the Terms and Conditions in the form that I sent to Mr. Eichenberg by
email. Later that day, Mr. Eichenberg telephoned me and expressed certain opinions and
concerns about the wording of the Terms and Conditions. I responded that these Terms
and Conditions reflected the terms of the agreement between ASI and Peak, that I
understood that Peak had been abiding by the Terms and Conditions since the beginning
of the relationship between our companies more than a year earlier, during which time
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ASI had provided extensive accounting software and other software to Peak, and that
therefore there was no possibility of changing the Terms and Conditions of the
Agreement with respect to future software licensing. Mr. Eichenberg assented to my
statements and accepted the Terms and Conditions.
37. In 2004, separately from the licensing of ASI’s software, Peak engaged
ASI in our consulting capacity to manage Peak’s entire network, including e-mail. Peak
asked me to become an “outsourced CIO” (chief information officer). From that point
until June 2008, I helped Peak to administer its e-mail, network and enterprise servers,
and I worked with Peak’s own personnel to solve issues relating to individual
workstations and peripherals.
38. In late 2005, I proposed that Peak should consolidate its job posting
website with ASI’s web-based staffing software, which allows potential job candidates to
post availability and check listings, staffing companies to post listings and monitor needs,
and potential client companies to post needs and check on job candidates. I pointed out
that incorporating a separate subsystem into the Peak website to perform these functions
would reduce costs, reduce errors and increase efficiency exponentially; ASI’s software
was capable of fulfilling exactly what Peak needed. Peak agreed to adopt ASI’s web
interface, which I intended to market to staffing companies, job websites such as
Monster.com, and other, similar, customers. The web program became hugely popular
with Peak’s own employees, as well as Peak’s clients and staffing job candidates.
THE LICENSING OF THE PERFORMANCE METRICS SOFTWARE
39. In 2006, Richard Eichenberg told me that his “dream” for Peak was to
become successful in the rapidly growing e-discovery field, which, he told me; Peak had
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previously tried and failed to do in 1999. Peak sought to re-launch its efforts with a new
e-discovery subsidiary, Defendant Peak Discovery, Inc. Peak intended to sell its e-
discovery services alongside the temporary legal staffing services offered by its existing
subsidiary Peak Counsel, Inc., and thereby increase revenues from both.
40. I began researching IT solutions in the document review and e-discovery
industries, and realized that no one had ever created software to monitor the performance
of document review, to measure individual reviewers’ and teams’ accuracy, speed and
efficiency. I saw that the significant variability in these areas was a major flaw in the
cost-efficiency of the entire e-discovery and document review process.
41. ASI then independently embarked upon development of the Performance
Metrics Software. When I demonstrated a “beta” version of the software to Richard
Eichenberg in early 2007, he was extremely enthusiastic.
42. In January 2008, without my prior knowledge or pre-approval, Peak
announced that it was offering the Performance Metrics Software as its “proprietary
software tool,” “Peak Review Metrics,” which formed the centerpiece of its e-discovery
and temporary legal document review services. Indeed, in Peak’s promotional materials,
the “Performance and Accuracy Metrics” software was frequently listed as the most
important benefit of engaging Peak to provide document review and e-discovery services.
Peak demonstrated the Performance Review Software at the annual American Bar
Association LegalTech event in February 2008, and utilized these demonstrations to gain
numerous new clients for Peak’s e-discovery and document review services.
43. Richard Eichenberg and other Peak executives repeatedly asked me to
assist Peak in promoting the Performance Review Metrics software in sales calls to
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prospective clients. Numerous potential clients commented that they had never seen this
capability offered by any e-discovery or document review provider. The Performance
Metrics Software gave Peak a unique edge in the e-discovery and document review
markets, and Peak received numerous engagements based on potential clients’ interest in
the software’s capabilities. Based on statements made to me by Peak executives,
salespeople and clients, I believe that clients retained Peak primarily because of the
performance metrics capability of the Performance Metrics Software that Peak now
claims to own.
44. It was always understood and agreed between Peak and ASI that ASI
would be the sole and exclusive provider of support and data migration for the
Performance Metrics Software. It is a critical component of ASI’s business model to
derive revenues from such service and support, and I would never have permitted Peak to
use ASI’s software without such an agreement and understanding.
THE STAFFING MANAGEMENT SYSTEM SOFTWARE AGREEMENT
45. I understand that Peak is now contending that the license terms of the
Performance Metrics Software, and indeed all software ever licensed by ASI to Peak,
were governed by an “Alliance and Licensing Agreement Pertaining to Staffing
Management System” between the companies, dated December 17, 2003 (“the Staffing
Management System Agreement”). Any such argument totally contradicts the realities of
the licensing agreements and the understanding that both the Defendants and I had of the
companies’ relationship, as set forth below.
46. For many years, since the early 1990s and continuing at least through June
2008, the computer software that Peak utilized to manage its staffing operations has been
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the “PC Hunter Recruiting Management System,” a software package licensed by Peak
from Micro J Systems. In late 2003, I proposed that Peak could adopt and assist in the
development of a modified and customized version of ASI’s 32-bit desktop Staffing
Enterprise System to replace or supplement PC Hunter. See ASI Catalog, Exhibit A at
12. This software allows staffing specialists, recruiters, or human resources (“HR”)
personnel to organize and categorize job candidates and existing employees by
availability, skills, education and work experience. In addition, companies can log job
listings and monitor needs for staffing, then cross-reference such listings or requests with
the candidates’ or employees’ files to fill these job needs.
47. With great skepticism, Peak agreed to explore utilizing this 32-bit desktop
application, which I intended to market to staffing companies like Peak, or to HR
departments of any large organizations wishing to search and categorize their own
employees’ qualifications and skill sets. This Staffing Management System would permit
such companies to manage employee profiles and search for specific skill sets,
educational background, or experience among a database of employees, and match them
with specific client requests. When Peak resisted my proposals, I suggested that Peak
could participate in any income generated from licensing the Staffing Management
software to third parties, and that Peak could have a perpetual license to use the software.
In keeping with this, and unlike all other ASI software licensed to Peak, I agreed to
provide a copy of the Staffing Management software source code to an escrow agent, to
be released to Peak under certain conditions.
48. Because the contemplated Staffing Management System project was to be
governed by terms different from all the other projects, services and licenses between
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ASI and Peak, including specifically the proceeds and term of the software license, Peak
and I agreed to enter into an “Alliance and Licensing Agreement Pertaining to Staffing
Management System” (the “Staffing Management System Agreement”), which I signed
in December 2003, and which Richard Eichenberg signed in early January 2004. A true
and correct copy of the Staffing Management System Agreement is attached hereto as
Exhibit H.
49. The Staffing Management System Software was very different from the
Performance Metrics Software ASI would later license to Peak. The Staffing
Management Software was written in 32-bit VBA computer code and was intended to
interface with ASI’s accounting and billing software, which Peak had already licensed
and which was also written in 32-bit VBA code. By contrast, the Performance Metrics
Software was written in 16-bit .NET code atop a SQL Server 2005 database, and was
intended to be “platform-agnostic.” If Peak had adopted it, the Staffing Management
System Software would have been designed to encompass Peak’s entire recruiting and
placement business, for temporary workers and potential permanent hires. The
Performance Metrics Software does not relate to staffing, recruiting or placement
systems. Instead, it is narrowly focused on providing detailed reports on document
reviewers’ performance in large e-discovery litigation, and is primarily designed to
benefit law firms.
50. The Staffing Management System would have generated data belonging to
Peak, including the job candidates’ profiles, the clients’ staffing needs, and so on. The
Staffing Management System Agreement itself addresses this issue by providing that, if
Peak were to sell one of its divisions that had licensed the Staffing Management System,
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the buyer would have the option of either keeping the Staffing System or just taking the
“pertinent data.” (Exhibit H ¶ e.) The Performance Metrics Software does not generate
data belonging to Peak’s divisions, but instead reports reviewer performance information
to law firms and other Peak clients based on those clients’ data.
51. ASI even invoiced Peak for the Staffing Management System software
project and for the Performance Metrics Software project on separate invoices, even
when work was performed on both projects in the same day. (In fact, ASI provided at
least six different categories of invoices for various separate projects in the same time
periods.)
52. Unfortunately, despite the promise of mutual gain for both ASI and Peak
from the Staffing Management System Agreement, the software was never completed
before the termination of the relationship between ASI and Peak, and only existed in
“beta” demonstration format. Although the project was never completed, in 2004 I
provided a disk containing “beta” Staffing Management System software source code to
Peak’s attorney as the “escrow” referenced in the Staffing Management System
Agreement. This was the only time I voluntarily provided Peak with source code for any
ASI software. In any event, as far as I know, Peak still uses PC Hunter Recruiting
Management System for its staffing management system needs.
53. Peak clearly understood that the Staffing Management System Agreement
was designed to cover only the Staffing Management System project software. The
Terms and Conditions continued to be printed on every invoice I sent to Peak. Also, my
exchange with Mr. Eichenberg concerning the Terms and Conditions of our agreement
with respect to all other software, set forth in Paragraph 34 above, took place in the same
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months as the discussions concerning the Staffing Management System Agreement, and I
provided extra copies of the Terms & Conditions to various Peak executives, reaffirming
their applicability to software licensed by ASI to Peak, on several occasions after the
execution of the Staffing Management System Agreement.
THE THEFT OF ASI’S SOFTWARE AND TERMINATION OF THE
RELATIONSHIP BETWEEN ASI AND PEAK
54. As part of my duties as outside CIO, I also acted as a “Chief Security
Officer” for Peak. Peak began to have many problems with certain Peak executives who
did not comply with proper email security practices and web usage. I undertook to
investigate these problems. In the course of my investigation, I came across an email
from James Bandes, who was then Executive Director of Peak Off-Site, Inc. (the
predecessor of Defendant Peak Discovery, Inc.), to Richard Eichenberg on November 27,
2007. In that email, Bandes suggested, “There are many developers out there that could
reverse engineer what [Santino] has written especially if you have the source code and
even if you don't it can be done.” Because of this direct threat to ASI’s and my
intellectual property, I copied the text of this email and saved it. A true and correct copy
of this document is attached hereto as Exhibit I.
55. I promptly contacted Richard Eichenberg and Michael Dalewitz, informed
them that I had seen Mr. Bandes’s communication, stated my objections to his
suggestion, and emphatically reminded them of ASI’s copyright and other intellectual
property and trade secret rights under the companies’ agreements. I later sent Mr.
Dalewitz a copy of the Terms and Conditions printed on ASI’s invoices and pointed out
the provisions prohibiting the course of conduct that Mr. Bandes had suggested.
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56. The relationship between Peak and ASI began to unravel in the spring and
summer of 2008.
57. In May 2008, I was working on a project late in the evening at Peak.
When he left the office in the evening, I accidentally left behind a flashlight, a
screwdriver, and a CD case with several CD-ROMs containing, among other files, the
source code for the Performance Metrics Software.
58. The next day, the items were not where I left them. When I inquired about
the location of my property, the flashlight and screwdriver were returned to me, but the
CD case was not. I made numerous inquiries, but the CD case and the CD-ROMs within
were never returned.
59. Shortly thereafter, in June 2008, Peak purported to terminate ASI’s
services, and I was removed from my position as “outsourced CIO.” With this
termination, consistent with the terms and conditions of the agreements between ASI and
Peak, all licenses of ASI software to Peak, including the Performance Metrics Software,
were terminated.
60. At the time of the termination, Peak owed ASI $30,000 in fees for
consulting and network administration services.
61. After the termination, I mailed all of Peak’s web information and images
to Richard Eichenberg and his counsel. I did this without being asked by anyone,
because I wanted to make sure that Peak had the images, text and information contained
in its website that I believed belonged to Peak. Peak’s current website, at peakorg.com,
contains the images, text and information that I provided at that time, although it is no
longer interactive and utilizes a different underlying web design.
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62. Peak asked me, and I agreed, to maintain Peak’s data on ASI’s servers for
another three months, until September 2008, so that Peak could utilize new contractors to
extract its accounting, payroll and other data from the ASI databases.
63. In September 2008, when ASI’s accounting system and web interface
were replaced by another system and Peak’s contractors were no longer accessing the
ASI databases; I closed down Peak’s access to ASI’s servers. Peak still owed ASI
$21,004 in fees.
64. In the summer and fall of 2008, Peak repeatedly requested and demanded
that I provide the source code for ASI’s proprietary software. I refused to give up ASI’s
and my intellectual property and proprietary trade secrets.
65. In August 2008, Defendant Michael Dalewitz, the head of Defendant Peak
Discovery, Inc., told me that he and Peak viewed the Performance Metrics Software
project as terminated and that Peak no longer wished to use the Performance Metrics
Software.
66. After the termination of the Peak-ASI relationship, Peak replaced its ASI
accounting software with other software packages. Similarly, without the right to use the
ASI software, Peak replaced the interactive web site, “PeakInteractive.Net,” and began
utilizing a system from TempWorks for time card entry. As I mentioned above, the
“peakorg.com” web site now runs with non-interactive HTML pages. These changes are
not surprising, because ASI strictly controlled access to its source code, and Peak lacked
such source code after Peak terminated the relationship.
67. In stark contrast, as I have now learned, Peak has continued to use,
distribute, market, and promote the Performance Review Software, since before the
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termination of the ASI-Peak relationship. Each law firm or other client that engages Peak
to provide services including Performance Metrics receives its own exclusive application
of the Performance Metrics Software user interface. The user interface screens contained
in the promotional materials distributed by Peak are virtually identical to ASI’s
Performance Metrics Software, with minor modifications. These modifications and
distributions of my software are entirely without my authorization. In other words, the
only software package that Peak has continued to use is the software for which Peak had
illicitly acquired the source code.
68. Although I believe that numerous individuals have participated in the
misappropriation and infringement of the Performance Review Metrics software,
including Defendants Arnold Schlanger and Michael Dalewitz, as indicated more fully
below, I believe that Defendant Richard Eichenberg has been chiefly responsible, and
that he has taken an active and direct role both in his dealings with me and in the choice
to misappropriate the software.
PEAK’S INFRINGEMENT AND MISAPPROPRIATION
69. In the first week of February 2009, the American Bar Association held its
annual LegalTech convention in New York City. Peak had made a surprise
announcement of the Performance Metrics Software at the LegalTech convention one
year earlier.
70. Later that month, I learned from a friend who attended the LegalTech
conference that Peak had been promoting the “Peak Review Metrics” software using
paper handouts and a slide show at the LegalTech conference itself. If prospective clients
showed interest in the software, Peak would then schedule “private demonstrations” of
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the software. This behavior suggested that Peak was trying to keep the user interface and
other aspects of the Peak Review Metrics software from being revealed to the public and,
more importantly, ASI and me.
71. In the month since the LegalTech show, Peak and its e-discovery
subsidiary, Defendant Peak Discovery, Inc., has more openly promoted the “Peak Review
Metrics” software on its website and in brochures. True and correct copies of materials I
downloaded from the Internet from Peak Discovery concerning Performance Metrics are
attached hereto as Exhibit J. For example, through an acquaintance, I learned of a
presentation prepared by Defendant Michael Dalewitz to promote Peak Discovery to
potential customers. I understand that this presentation may be the “slide show” that was
used at the LegalTech conference. I reviewed and downloaded the presentation, which
was available on the Internet, and noted that on the page entitled “About Us,” the top
element of the “pyramid” of qualities describing the company, and thus the most
important and prominent element, was “Performance and Accuracy Metrics Software.”
A true and correct copy of screenshots of the presentation, downloaded from the website
slideshare.com, is attached hereto as Exhibit K.
72. I believe that Defendant Arnold Schlanger, who is Michael Dalewitz’s
father-in-law, is also intimately involved in the misuse of the Performance Metrics
Software to enhance Peak’s revenues. Mr. Schlanger is in charge of Peak Counsel, Inc.,
the provider of temporary legal personnel, which benefits directly whenever Peak gets a
new engagement from a law firm to provide document review services; those
engagements, in turn, depend in large part on the fact that Defendant Peak Discovery
offers Performance Review Metrics as part of its e-discovery services.
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73. I believe it would be impossible for Peak to have independently created its
own Performance Metrics Software in the months since ASI’s relationship with Peak
terminated. It would take a team of programmers many months, at great cost, to write a
program capable of the Performance Metrics Software functions, whether they were
working “from scratch” or through “reverse engineering.” The Performance Metrics
Software remains unique in the industry.
74. Therefore, I believe that the Defendants are continuing to infringe ASI’s
and my valuable intellectual property, and to misappropriate ASI’s and my proprietary
trade secrets, in the Performance Metrics Software.
75. As a result of Defendants’ infringement and misappropriation, ASI is
being substantially harmed. ASI seeks customers to whom we can provide software and
services. We benefit from favorable publicity – such as the favorable reception being
given to the Performance Metrics Software – and Peak’s false representations that it owns
or has the rights to this otherwise unique software seriously undermines any true claim
ASI might make as to the uniqueness or originality of the Performance Metrics Software.
76. Peak’s infringing use of the Performance Metrics Software directly
competes with ASI’s efforts to market the software to potential customers. See Exhibit
A. It also deprives ASI of the profits that would be gained from licensing the software.
This is particularly damaging to ASI because ASI is a relatively small company with
relatively fewer sources of income. Having been deprived of the benefits of possibly our
most unique software, ASI has nearly been driven out of business. By contrast, Peak has
13 different divisions offering various temporary staffing and permanent employment
services. Although the Performance Metrics Software has clearly helped Peak achieve
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extraordinary growth and profit, Peak’s continued existence does not depend on the
Performance Metrics Software.
PEAK’S STATE COURT COMPLAINT
77. Earlier this month, when I had already retained counsel to prepare to file
this lawsuit and application for preliminary injunction, I received a call from someone
wishing to assist ASI in connection with an action that had apparently been filed by Peak
against ASI in the New York State Supreme Court for New York County. I had not been
aware of the lawsuit filed by Peak, and I had not been served with any papers. As a result
of learning about Peak’s state court action (the “State Court Action”), I instructed my
counsel to file a notice of removal of that complaint to this Court.
78. As we will show at the appropriate time, Peak’s allegations in the State
Court Action are utterly meritless. But the allegations also show that Peak really has no
defense to this action whatsoever. A true and correct copy of Peak’s Verified Complaint
in the State Court Action is attached hereto as Exhibit L.
79. The State Court Action makes clear that Peak has copied the Performance
Metrics Software in violation of copyright law and ASI’s and my other rights. Under the
terms of ASI’s agreement with Peak, Peak’s usage of the Performance Metrics Software
is a clear-cut act of infringement and misappropriation of our trade secrets.
80. Peak seems to be claiming (Exhibit L ¶¶ 10-14) that all software licensed
by ASI to Peak, including the accounting software and the Performance Metrics
Software, was covered by the Staffing Management System Agreement. But as Peak
well knows, for the reasons set forth above in Paragraphs 39 to 53, the Staffing
Management System software project was different from, and not related to, the
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Performance Metrics Software. The companies agreed to the Staffing Management
System Agreement specifically because Peak was not sure it wanted ASI’s Staffing
Management System software and it would only invest in the development of the
enhanced Staffing Management System software on terms different from the normal
licensing relationship between ASI and Peak. As indicated above, the Staffing
Management System project did not progress beyond the “beta” stage. I provided the
“escrow” copy of the software source code called for under the Staffing Management
System Agreement, and I was never asked to provide any additional “escrow” deposits
until I read Peak’s Complaint. (Exhibit L ¶ 35.) Also, Peak’s Complaint seems to
suggest that the Staffing Management System Agreement was intended to cover
accounting software based on Peak’s UA software license; UA is an accounting software
program that has nothing to do with the Performance Metrics Software.
81. At the same time, the Complaint itself appears to recognize that the
Performance Metrics Software was not part of the Staffing Management System
Agreement, because it alleges, “In addition, Peak also retained Argentto as a work for
hire to develop the PPM software.” (Exhibit L ¶ 13.) That actually contradicts the
express wording of the Staffing Management Systems agreement, in which Peak agrees
that ASI “shall be entitled to any claim for intellectual property and copyrights relating to
any enhancements to software adapted for use pursuant to this agreement . . . ” (Exhibit
H). Of course, neither ASI nor Peak ever contemplated that the Performance Review
Software was to be a “work for hire.” It was always understood that ASI owned the
copyright to the software – as Peak actually admits elsewhere in its Complaint. (Exhibit
L ¶ 11.)
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82. All of these allegations suggesting that Peak now owns the copyright or
has other rights to the Performance Metrics Software, to the extent that I can understand
them, are completely false. I have always ensured that ASI owns all of its intellectual
property and proprietary trade secrets free and clear. Every ASI customer understands
this, because, among other reasons, our invoice “Terms and Conditions” make this crystal
clear, as set forth above. Also, I know that as an independent contractor under the
copyright laws, ASI’s work is not presumed to be “work for hire.” ASI owns what it
writes and develops, and ASI controls the use of its software closely, frequently by
hosting it ourselves for clients’ use. When the relationship terminates, the client’s license
terminates.
83. In any event, every invoice I ever sent Peak in connection with the
Performance Metrics Software contained the Terms & Conditions set forth above. On
various occasions, I sent the Terms & Conditions to Richard Eichenberg, Philip
Greenberg, Michael Dalewitz, and others, to reaffirm their commitment to following
those terms. My conversation with Richard Eichenberg, during the period when the
Staffing Management System Agreement was being considered to cover that special
project, confirmed Peak’s understanding of our agreement with respect to all other
software and services.
84. For all these reasons, the Staffing Management System Agreement had
nothing to do with the Performance Metrics Software. Peak knows that there is no
excuse for its conduct, and this effort to fabricate an excuse flies in the face of what both
I and the Defendants all know to be true. Instead, in my eyes, by filing this complaint, all