Free Response to 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 Merchant Transaction Systems, Inc., ) ) Plaintiff, ) vs. ) ) Nelcela, Inc., et al., ) Defendants. ) ) ) And Related Counterclaims, Cross-Claims, ) and Third-Party Claims. ) ) No. CIV 02-1954-PHX-MHM THE JOINT PARTIES' RESPONSE TO NELCELA'S MOTION FOR RECONSIDERATION

The Nelcela Parties' Motion for Reconsideration should be denied because the Court properly declined to consider the "April 28, 1995 `System Ownership and License'" document offered by Nelcela when ruling on the parties' cross-motions for summary judgment. The document was correctly excluded from consideration because (1) the Lexcel, POST, and MTSI parties (the "Joint Parties") raised a genuine question as to the authenticity of the document, which still has not been rebutted by Nelcela, (2) Nelcela has never produced the original of the questioned document, and (3) the document is irrelevant to the matters resolved in the Court's summary judgment ruling.
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I.

THE DOCUMENT OFFERED BY NELCELA IS NOT AUTHENTIC The joint parties challenged the authenticity of the "April 28, 1995" document

offered by Nelcela because expert analysis has shown that the document is not genuine. The document offered by Nelcela is a photocopy; Nelcela has never come forth with the original document. In support of our challenge, we submitted the report of William J. Flynn, showing that the photocopy offered by Nelcela is the result of alteration of the original document. Specifically, Mr. Flynn's analysis shows that Paragraphs 1 and 2 of the photocopy offered by Nelcela are not part of the same original document; rather, the second paragraph was added at some point in time after the original document was printed. (See Report of William J. Flynn at p.1 & 2 (Dckt. 352, Ex. 7)). Nelcela has to this day failed to rebut Mr. Flynn's analysis or otherwise establish the authenticity of the document. And, Nelcela has failed to produce the original of the document. Accordingly, the Court properly declined to consider the document when ruling on the summary judgment motions. FED.R.EVID. 1002, 1003.1 II. THE DOCUMENT IS IRRELEVANT Nelcela evidently offers the "April 28, 1995" document to show that Credit Card Service Ltd. ("CCS") somehow conveyed to Alec Dollarhide ownership of the Lexcel software in April 1995. The document ­ even if it were genuine ­ could not convey such ownership. An assignor cannot convey rights the assignor does not have. Under the copyright laws, an assignment of ownership can be made only "by the owner of the rights conveyed or such owner's duly authorized agent." 17 U.S.C. § 204(a); Radio Television Espanola S.A. v. New World Entertainment, Ltd., 183 F.3d 922, 926 (9th Cir. 1999) (assignment invalid unless in writing and signed by copyright owner). Lexcel never assigned its rights in its software to Nelcela, and CCS had no rights in the Lexcel software to assign. In April 1995, CCS did not own the Lexcel software. In addition to Mr. Flynn's analysis, other questions exist regarding the document's authenticity, including the fact that there is no evidence of the existence of the document prior to its production in this lawsuit by Nelcela. For example, the document was not included in the list of existing contracts in 1996 when Gene Clothier purchased a majority interest in Credit Card Services, Ltd.
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To the contrary, months earlier in 1994 when CCS hired Lexcel to create the custom credit card processing computer software, CCS and Lexcel agreed in their written contract that Lexcel "shall at all times own said system." (See License/Use Agreement p.6, § VIII (Dckt. 334, Ex. 1)). In July 1995, Lexcel and CCS reaffirmed that Lexcel owned the software, and that Lexcel would own "all changes or modifications" CCS made to the software. (See Settlement Agreement p.2, ¶ 4 (Dckt. 334, Ex. 5)). Hence, in April 1995, Lexcel, not CCS, owned the system, so CCS could not assign ownership of the software to Mr. Dollarhide. 17 U.S.C. § 204(a). Thus, even if the document offered by Nelcela was authentic (it is not), the document is irrelevant. Lexcel never conveyed ownership of its software to Nelcela or Dollarhide, and CCS could not do so without Lexcel's consent. The document therefore has no bearing on Lexcel's claim that Nelcela wrongfully copied Lexcel's software. Likewise, the document has no bearing on POST's claim that the POST software was not derived from the Nelcela software. Accordingly, the document is irrelevant to the matters before the Court in Phase I of this action. RESPECTFULLY SUBMITTED November 8, 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 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

24 DICARLO CASERTA & PHELPS PLLC 25 26 27 28 By __s/ Nicholas J. DiCarlo__________ Nicholas J. DiCarlo Attorneys for Merchant Transaction Systems, Inc., Gene Clothier, and Tone Clothier
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Case 2:02-cv-01954-MHM

CERTIFICATE OF SERVICE I hereby certify that on November 8, 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] I further certify that on November 8, 2006, I caused the attached document to be handdelivered to the following recipients: Merrick B. Firestone Veronica L. Manolio 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

Document 395

Filed 11/08/2006

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