Free Reply in Support of Motion - District Court of Arizona - Arizona

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Peter D. Baird (001978) [email protected] Robert H. McKirgan (011636) [email protected] Richard A. Halloran (013858) [email protected] Kimberly A. Demarchi (020428) [email protected] Lewis and Roca LLP 40 North Central Avenue Phoenix, Arizona 85004-4429 Facsimile (602) 734-3746 Telephone (602) 262-5311 Attorneys for POST Integrations, Inc., et al. George C. Chen (019704) [email protected] Bryan Cave LLP Two North Central Avenue, Suite 2200 Phoenix, AZ 85004-4406 Tel: (602) 364-7367 Fax: (602) 364-7070 Attorneys for Lexcel, Inc. and Lexcel Solutions, Inc.

William McKinnon [email protected] 800 East Ocean Boulevard, Unit 501 Long Beach, California 90802-5449 Nicholas J. DiCarlo (016457) [email protected] DiCarlo Caserta & Phelps PLLC 6750 East Camelback Road, Suite 100-A Scottsdale, Arizona 85251 Attorneys for Plaintiff MTSI and Third Party Defendant Gene Clothier

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA ) ) Plaintiff, ) vs. ) ) Nelcela, Inc., et al., ) Defendants. ) ) ) And Related Counterclaims, Cross-Claims, ) and Third-Party Claims. ) ) Merchant Transaction Systems, Inc., No. CIV 02-1954-PHX-MHM POST, LEXCEL, AND MTSI PARTIES' REPLY IN SUPPORT OF MOTION FOR COURT APPOINTMENT OF TECHNICAL ADVISOR

Nelcela's Response to the Motion for Technical Advisor spends considerable time rehashing arguments that the Nelcela parties previously made and lost on summary judgment. Nelcela avoids, however, responding to the merits of the actual Motion for Technical Advisor. Specifically, Nelcela offers no reasons why the Court should not appoint a technical advisor. And, Nelcela does not dispute that the redline comparison submitted along with the Motion for Technical Advisor shows that the 2001 Lexcel software is substantially similar to and derived from the 94/95 Lexcel software. Accordingly, the Court should grant the Motion, and either (1) look at the two versions of Lexcel Software to determine if there is any real dispute as to whether the Lexcel 2001
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software is substantially similar, derivative of or an update of Lexcel's 94/95 software, or (2) appoint a technical advisor to advise the Court whether there is any genuine factual dispute regarding whether the Lexcel 2001 software is substantially similar, derivative of or is an update of Lexcel's 94/95 software. I. THE REDLINE COMPARISON ADDRESSES THE SPECIFIC QUESTION RAISED BY THE COURT ON THE ISSUE OF OWNERSHIP Nelcela's assertion that the Motion for Technical Advisor "compared data not at issue in this litigation" is difficult to understand. (Response at 1, ln. 25 (emphasis omitted)). The redline comparison submitted by the joint parties compares the 94/95 Lexcel software against the 2001 Lexcel software. Nelcela put the relationship between this software at issue by contending that "[t]he `'94-`95 Lexcel code bears no resemblance to the 2001 CD that they produced in this litigation." (Trans. at 80:4-6 (Dckt. 382)). The Court then ruled that the relationship between Lexcel's 94/95 software and Lexcel's 2001 software is one of the few remaining questions of fact at issue in the current Phase of this action. Order at 28, lns. 21-24 (Dckt. 383) ("The Joint Parties argue that there can be no other reasonable conclusion other than that Lexcel, Inc., owns the software based upon the relationship between Lexcel's 94/95 software and 2001 software. However, the Court finds there presently to be an issue of fact as to this relationship."). Specifically, the Court articulated the factual dispute remaining for resolution on the issue of whether Lexcel owns the "Nelcela Software" as follows: At trial, if it is determined that the Lexcel 2001 software is substantially similar, derivative of or is an update of Lexcel's 94/95 software then it appears that a conclusion can be made; Lexcel, Inc., is the owner of the software as its software predates any other version. Order at 28, lns. 24-27. The redline comparison offered by the joint parties directly addresses this issue, and shows that the 2001 Lexcel software was derived from the 94/95 Lexcel software. Neither Nelcela nor its expert witness question the accuracy of the redline comparison of the Lexcel software. Likewise, neither Nelcela nor its expert dispute that
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nearly all of the more than 400 pages of the Lexcel 94/95 software appears verbatim in the Lexcel 2001 software. As stated in our opening Motion, we believe the relationship between the Lexcel 94/95 and 2001 software is a matter of undisputable fact which can be confirmed by the Court through a visual inspection of the redline comparison. Accordingly, the joint parties request that the Court review the redline; confirm that the Lexcel 2001 software is substantially similar, derivative of or an update of Lexcel's 94/95 software; and enter partial summary judgment declaring Lexcel to be the owner of the "Nelcela Software." Alternatively, the joint parties request that the Court appoint a technical advisor to advise the Court whether there is any genuine factual dispute regarding whether the Lexcel 2001 software is substantially similar, derivative of or is an update of Lexcel's 94/95 software. II. NELCELA'S EFFORTS TO REARGUE THE SUMMARY JUDGMENT MOTIONS SHOULD BE DISREGARDED Rather than responding to the Motion for Technical Advisor, Nelcela has sought instead to reargue many of the issues addressed and resolved on summary judgment. To the extent these arguments are intended by Nelcela to seek reconsideration of the summary judgment ruling, they are untimely, unfounded, and should be disregarded by the Court. E.g., LRCiv 7.2(g). To the extent Nelcela's arguments are actually directed at the Motion for Technical Advisor, they are irrelevant. For example, Nelcela argues at length about the expert reports of POST's expert witness, Robert Zeidman. Not only does Nelcela misstate Mr. Zeidman's findings and conclusions, but Mr. Zeidman's reports have nothing to do with the Motion for Technical Advisor. The Motion for Technical Advisor is not based on Mr. Zeidman's reports, contains no expert opinion, and introduces no new evidence. Rather, the Motion for Technical Advisor involves a simple redline comparison of just the actual text of the Lexcel 94/95 and 2001 software. Likewise, Nelcela tries to argue that only its "merchant" software was at issue in the summary judgment motions. To the contrary, ownership of all of the software that
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Nelcela misappropriated from Lexcel is at issue in this lawsuit, including the authorization system in which Nelcela copied word-for-word parts of the Lexcel 94/95 software. See, e.g., Trans. of Summary Judgment Hearing at 43:11 ­ 46:4 (Dckt. 382)(seeking summary judgment that Lexcel owns both Nelcela's authorization system and merchant system because they were both derived from the Lexcel software); Joint Parties' Reply to Motion for Summary Judgment at 4-5 (Dckt. 358) (quoting some of Nelcela's "authorization system" that was copied word-for-word from the Lexcel 94/95 software). More importantly, Nelcela's argument is beside the present point because the Motion for Technical Advisor is directed at a comparison of the 94/95 and 2001 Lexcel software, not the Nelcela software. III. CONCLUSION Nelcela's failure to respond to the merits of the Motion for Technical Advisor is telling. Nelcela does not, and cannot, dispute the accuracy of the redline comparison of the Lexcel software. Nor can Nelcela dispute that the redline establishes that the Lexcel 2001 software is substantially similar, derivative of or an update of Lexcel's 94/95 software. Accordingly, there is no genuine dispute on this issue, so the Court should find "that a conclusion can be made; Lexcel, Inc., is the owner of the software as its software predates any other version." Order at 28, lns. 26-27 (Dckt. 383). /// ///

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RESPECTFULLY SUBMITTED November 14, 2006. BRYAN CAVE LLP By s/ George C. Chen George C. Chen Attorneys for Lexcel, Inc. and Lexcel Solutions, Inc. LAW OFFICES OF WILLIAM McKINNON William McKinnon and DICARLO CASERTA & PHELPS PLLC By s/ Nicholas J. DiCarlo Nicholas J. DiCarlo Attorneys for Merchant Transaction Systems, Inc., Gene Clothier, and Tone Clothier LEWIS AND ROCA LLP By s/ Richard A. Halloran Peter D. Baird Robert H. McKirgan Richard A. Halloran Kimberly A. Demarchi Attorneys for POST Integrations, Inc., Ebocom, Inc., Mary L. Gerdts, and Douglas McKinney

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CERTIFICATE OF SERVICE I hereby certify that on November 14, 2006, I electronically transmitted the attached document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Merrick B. Firestone [email protected] Veronica L. Manolio [email protected] RONAN & FIRESTONE, PLC 9300 East Raintree Drive, Suite 120 Scottsdale, Arizona 85260 Attorneys for Defendants Nelcela Incorporated, Alec Dollarhide, and Len Campagna

s/ Diana Clauser

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