Case3:09-Cv-05535-EDL Document172 Filed04/12/11 Page1 of 126

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page1 of 126

(iREGORY P. STONE (SBN 078329) (ircgory.Stollc({l?mto.com 2 MUNGER, TOLLES & OLSON LLP 355 South Grand AVClluc 3 Thirty-Filth Floor 4 Los Angcles, CA 90071-1560 REDACTED-COMPLETE VERSION FILED Tclephonc: (213) 683-9100 UNDER SEAL 5 Facsimik: (213) 687-3702

6 IIOJOON IIWANG (SBN 184950) 7 [email protected] ROI-IIT K. SINGLA (SI3N 213057) 8 [email protected] JONATHAN H. I3LA VIN (SBN 23(269) 9 [email protected] MICHAEL J. MONGAN (SBN 250374) 10 Michael. [email protected] II MUNGER, TOLLES & OLSON LLP 560 Mission Street, 12 Twenty-Seventh Floor San Francisco, CA 94105-2907 13 Telephone: (415) 512-4032 Facsimile: (415)512-4077 14 Attorneys for Defendant 15 MICROSOFT CORPORATION 16 UNITED STATES DISTRICT COURT 17 NORTHERN DISTRICT OF CALIFORNIA 18 SAN FRANCISCO DIVISION 19 CASE NO. CV 09-5535 EDL 20 DA TEL HOLDINGS LTD. and DATEL DESIGN & DEVELOPMENT, INC., NOTICE OF MOTION AND MOTION OF 21 MICROSOFT CORPORATION FOR Plaintiffs and LEAVE TO FILE SECOND AMENDED 22 Counterclaimant ANSWER, AFFIRMATIVE DEFENSES AND 23 Defendants, COUNTERCLAIMS

24 VS. FILED UNDER SEAL

25 MICROSOFT CORPORATION, Date: TBD Time: TBD 26 Defendant and Courtroom: E, 15th Floor Counterclaimant. 27 MAG. JUDGE ELIZABETH D. LAPORTE

NOTICE OF MOT. AND MOT FOR LEAVE CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page2 of 126

1 NOTICE OF MOTION AND MOTION 2 TO PLAINTIFFS AND COUNSEL OF RECORD: PLEASE TAKE NOTICE that on a 3 date and time to be determined in Courtroom E of the above-captioned Court, located at 450 4 Golden Gate Avenue, San Francisco, California, 94102, Defendant Microsoft Corporation 5 (“Microsoft”) will and hereby does move for leave to amend its answer, affirmative defenses, and 6 counterclaims pursuant to Federal Rules of Civil Procedure 15(a) and 16(b). 7 This Motion is based upon this Notice of Motion and Motion; the Memorandum of Points 8 and Authorities set forth below; the accompanying Declarations of Rohit K. Singla and Dr. 9 Robert D. Wedig, and all exhibits thereto; all pleadings and documents on file in this action; and 10 such other materials or argument as the Court may properly consider prior to deciding this 11 motion. 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28

- 1 - NOTICE OF MOT. AND MOT. FOR LEAVE CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page3 of 126

1 TABLE OF CONTENTS

2 Page 3 I. INTRODUCTION AND SUMMARY OF ARGUMENT...... 1 4 II. BACKGROUND ...... 5 A. Datel Has Resisted Microsoft’s Efforts to Seek Discovery Relating to Datel’s 5 Reverse Engineering of the Xbox 360’s Authentication Scheme ...... 5 6 1. Microsoft’s initial document requests and the motion to compel...... 5 7 2. The testimony of Datel’s witnesses ...... 6 a. Michael Connors...... 6 8 b. Alex Edge ...... 6 9 c. Paul Armitt...... 8 10 3. Datel’s subsequently produced documents...... 9 11 B. Datel Has Resisted Discovery Into the Development of the Wireless Networking Adapter ...... 11 12 C. Microsoft’s Proposed Copyright Infringement and Misappropriate of Trade Secrets 13 Allegations...... 11 14 1. Copyright Infringement ...... 12 a. Substantially similar function names...... 13 15 b. Substantially similar structure of functions ...... 14 16 c. Substantially similar parameters and variables...... 15 17 2. Misappropriation of Trade Secrets ...... 16 18 III. ARGUMENT...... 17 19 A. Leave to Amend is Warranted Under Rule 15(a) ...... 17 B. “Good Cause” Exists to Amend the Scheduling Order Under Rule 16(b) ...... 20 20 IV. CONCLUSION ...... 22 21 22 23 24 25 26 27 28

i NOTICE OF MOT. AND MOT. FOR LEAVE CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page4 of 126

1 TABLE OF AUTHORITIES

2 Page 3 FEDERAL CASES 4 AccuImage Diagnostics Corp. v. Terarecon, Inc., 260 F. Supp. 2d 941 (N.D. Cal. 2003)...... 16 5 Asset Mktg. Sys., Inc. v. Gagnon, 6 542 F.3d 748 (9th Cir. 2008) ...... 7

7 Bd. of Trs. of the Auto. Indus. Welfare Fund v. Groth Oldsmobile/Chevrolet, Inc., 8 2010 WL 760452 (N.D. Cal. Mar. 4, 2010) ...... 19 9 Ciampi v. City of Palo Alto, 2010 WL 5174013 (N.D. Cal. Dec. 15, 2010)...... 18 10 Coleman v. Quaker Oats Co., 11 232 F.3d 1271 (9th Cir. 2000) ...... 20

12 CyberMedia, Inc. v. Symantec Corp., 13 19 F. Supp. 2d 1070 (N.D. Cal. 1998)...... 12 14 DCD Programs, LTD. v. Leighton, 833 F.2d 183 (9th Cir. 1987) ...... 17, 18 15 Ditto v. McCurdy, 16 510 F.3d 1070 (9th Cir. 2007) ...... 17

17 DSC Commc’ns Corp. v. DGI Techs., Inc., 898 F. Supp. 1183 (N.D. Tex. 1995) ...... 13 18 19 Esbin & Alter, LLP v. Zappier, 2010 WL 391830 (S.D.N.Y. Feb. 4, 2010)...... 14 20 eScholar, LLC v. Otis Educ. Sys., Inc., 21 2005 WL 2977569 (S.D.N.Y. Nov. 3, 2005)...... 15

22 First Beverages, Inc. of Las Vegas v. Royal Crown Cola Co., 612 F.2d 1164 (9th Cir. 1980) ...... 8 23 24 Fru-Con Constr. Corp. v. Sacramento Mun. Util. Dist., 2006 WL 3733815 (E.D. Cal. Dec. 15, 2006) ...... 19 25 Howey v. United States, 26 481 F.2d 1187 (9th Cir. 1973) ...... 17

27 Johnson v. Mammoth Recreations, Inc., 975 F.2d 604 (9th Cir. 1992) ...... 20 28

ii NOTICE OF MOT. AND MOT. FOR LEAVE CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page5 of 126

1 TABLE OF AUTHORITIES (continued) 2 Page

3 Kuschner v. Nationwide Credit, Inc., 4 256 F.R.D. 684 (E.D. Cal. 2009)...... 20, 21 5 Miller v. Rykoff-Sexton, Inc., 845 F.2d 209 (9th Cir. 1988) ...... 20 6 MiTek Holdings, Inc. v. Arce Eng’g Co., Inc., 7 89 F.3d 1548 (11th Cir. 1996) ...... 15

8 Mixt Greens v. Sprout Café, 2010 WL 2794388 (N.D. Cal. July 15, 2010) ...... 18 9 10 Morongo Band of Mission Indians v. Rose, 893 F.2d 1074 (9th Cir. Jan. 10, 1990)...... 18 11 Nordstrom Consulting, Inc. v. M & S Techs., Inc., 12 2008 WL 623660 (N.D. Ill. Mar. 8, 2008) ...... 12, 13

13 Pearl Music Co., Inc. v. Recording Indus. Ass’n of Am., 460 F. Supp. 1060 (C.D. Cal. 1978) ...... 1, 19 14 15 Progressive W. Ins. Co. v. Dallo, 2008 WL 2220408 (S.D. Cal. May 27, 2008) ...... 21 16 Samad Bros., Inc. v. Bokara Rug Co., Inc., 17 2010 WL 2835754 (S.D.N.Y. June 30, 2010) ...... 21

18 Sega Enters. Ltd. v. Accolade, Inc., 977 F.2d 1510 (9th Cir. 1992) ...... 12 19 Solomon v. N. Am. Life & Cas. Ins. Co., 20 151 F.3d 1132 (9th Cir. 1998) ...... 17 21 Szen Corp. v. Anderson, 22 2007 WL 1728717 (E.D. Wash. June 13, 2007)...... 14 23 Three Boys Music Corp. v. Bolton, 212 F.3d 477 (9th Cir. 2000) ...... 18 24 Tourgeman v. Collins Fin. Servs., Inc., 25 2010 WL 4817990 (S.D. Cal. Nov. 22, 2010)...... 17 26 Tyco Thermal Controls LLC v. Redwood Indus., 27 2009 WL 4907512 (N.D. Cal. Dec. 14, 2009)...... 18, 19 28

NOTICE OF MOT. AND MOT. FOR LEAVE iii CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page6 of 126

1 TABLE OF AUTHORITIES (continued) 2 Page

3 Ulin v. Lovell's Antique Gallery, 4 2010 WL 3745824 (N.D. Cal. Sept. 17, 2010)...... 21 5 Winding v. Allstate Insurance Co., 2011 WL 836442 (E.D. Cal. Mar. 3, 2011)...... 21 6 STATUTES AND RULES 7 Cal. Civ. Code § 3426.1(d)...... 16 8 Federal Rule of Civil Procedure 15(a)...... 4, 17-18 9 Federal Rule of Civil Procedure 16(b)...... 4, 20 10 11 OTHER AUTHORITIES 12 6A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1522.2 (2010)...... 21 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28

NOTICE OF MOT. AND MOT. FOR LEAVE iv CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page7 of 126

1 MEMORANDUM OF POINTS AND AUTHORITIES

2 I. INTRODUCTION AND SUMMARY OF ARGUMENT 3 Pursuant to Federal Rules of Civil Procedure 15(a) and 16(b), Microsoft respectfully seeks 4 leave to file a Second Amended Answer, Affirmative Defenses, and Counterclaims, attached 5 hereto as Exhibit 1,1 which asserts new affirmative defenses and counterclaims against Datel 6 based on infringements of Microsoft copyrights and misappropriation of Microsoft’s trade 7 secrets. Recent discovery has revealed (1) that the striking similarities between Datel’s source 8 code used in its Xbox 360 authentication chip and Microsoft’s source code 9 10 11 (3) that Datel’s wireless networking adapter is a 12 direct copy of Microsoft’s product down to a byte-for-byte copy of Microsoft’s copyright code 13 used in the networking adapter. 14 Like Microsoft’s DMCA claim, if Microsoft’s allegations are proven, they would serve as 15 a critical defense to Datel’s antitrust claims. As the Court explained in its order on Microsoft’s 16 bifurcation motion, if Datel’s devices are “unlawful” because they infringe Microsoft’s 17 intellectual property, then they should not have been sold in the first place and Datel can claim no 18 antitrust injury with respect to them. Dkt. No. 68 at 5-6 (citing and discussing Modesto Irrigation 19 Dist. v. Pac. Gas & Elec. Co., 309 F. Supp. 2d 1156, 1169-70 (N.D. Cal. 2004); RealNetworks, 20 Inc. v. DVD Copy Control Ass’n, 2010 WL 145098, at *6 (N.D. Cal. Jan. 8, 2010); First 21 Beverages, Inc. of Las Vegas v. Royal Crown Cola Co., 612 F.2d 1164, 1173 (9th Cir. 1980)). 22 See also Pearl Music Co., Inc. v. Recording Indus. Ass’n of Am., 460 F. Supp. 1060, 1068 (C.D. 23 Cal. 1978) (antitrust injury cannot be based on inability to sell products that infringe defendants’ 24 copyrights). Separately, these allegations are relevant to Microsoft’s unclean hands defense to 25 Datel’s claims under § 17200. These facts also undermine what Datel wants to tell the jury: that

26 1 For the Court’s convenience, Microsoft also attaches as Exhibit 2 a black-line comparison of the 27 First and Second Amended Answer and Counterclaims. Microsoft has not included the exhibits 28 to the Answer and Counterclaims, which are identical in the amended version, given their volume.

NOTICE OF MOT. AND MOT. FOR LEAVE - 1 - CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page8 of 126

1 through ingenuity and dint of hard work it “legitimately” reverse engineered the Xbox 360

2 authentication system. Finally, these allegations also form the basis for counterclaims that could 3 result in injunctions against the very products at issue in Datel’s antitrust claims and in significant 4 damages that could offset any potential antitrust damages. Unlike Microsoft’s DMCA claim, the 5 present claims cover all of the Datel products at issue in its antitrust claims: the memory unit 6 (MU), wireless and wired controllers, wireless headset, and wireless networking adapter. 7 Datel objects that Microsoft’s motion comes 10 days after the close of discovery. But this 8 is Datel’s own doing. Microsoft has been seeking the information on which these claims are 9 based since February 2010. Datel has resisted disclosure of this information at every turn, 10 delaying Microsoft’s ability to identify and analyze these defenses. Datel did not produce a 11 witness knowledgeable about the reverse engineering of the Xbox 360 authentication system until 12 February 15, 2011. Datel did not produce meaningful documents showing how it had actually 13 developed its authentication software until February 22 and March 2, after the depositions of the 14 key witnesses. 15 16 , not only by dragging its feet in producing the relevant 17 documents but by providing sworn testimony of its key witnesses that are contradicted by the 18 later-produced documents. When Microsoft deposed Datel’s CEO Michael Connors in late 19 January, he claimed that Datel had not received any help in its reverse engineering efforts or any 20 information from any third parties. When Microsoft in early February deposed Alex Edge, 21 Datel’s designated 30(b)(6) witness on its reverse engineering efforts, he likewise disclaimed the 22 involvement of any outside information. When Mr. Armitt was deposed, he initially stated that 23 he had received no outside help. He repeatedly explained away arbitrary names used in Datel’s 24 code — that bear a striking resemblance to the names used in Microsoft’s code — as essentially 25 coincidences. 26 27 28

NOTICE OF MOT. AND MOT. FOR LEAVE - 2 - CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page9 of 126

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Indeed, when considering the timing of this motion, it bears noting that Datel still has not 19 produced documents relating to its development of the wireless networking adapter or any of the 20 source code for that product even though it agreed to produce these documents in September 21 2010. Just two days ago, after Microsoft raised the issue with the Court in its March 18 motion 22 for a continuance, Datel finally agreed to produce these documents.2 Microsoft’s present 23 copyright allegations with respect to the networking adapter stem from the admissions of Datel’s 24 engineer Mr. Yuan in his deposition on March 12. 25 26

27 2 Datel’s documents, whenever they are produced and analyzed, may obviously lead Microsoft to 28 amend its allegations with respect to this product.

NOTICE OF MOT. AND MOT. FOR LEAVE - 3 - CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page10 of 126

1 Given Datel’s refusal until now to produce documents or

2 source code relating to its networking adapter, Microsoft cannot be blamed for not having learned 3 earlier that Datel copied Microsoft’s wireless networking adapter code. 4 Since Datel’s recent disclosures, Microsoft has been more than diligent. It has reviewed 5 the documents produced, had its consultant Dr. Robert Wedig evaluate the new source code and 6 evidence, retained an additional consultant to assist counsel’s analysis, interviewed its own 7 engineers, and researched and drafted new claims — all in less than a month, and while double 8 and triple tracking depositions for most of that time. 9 Datel would like all of this to be swept back under the rug and for the parties to charge full 10 speed ahead toward a trial on Datel’s claims, without providing Microsoft a chance to develop 11 legitimate and potentially dispositive defenses. That would not serve the interests of justice or 12 fairness. Leave to amend should be granted under the extremely liberal amendment policies of 13 Rule 15(a), which seek above all else to ensure that claims are litigated on the merits and that 14 parties have a fair opportunity to develop and assert claims and defenses. Microsoft would suffer 15 extreme prejudice if the Court were to deny leave to amend. Beyond the fact that Microsoft 16 would have to incur the burden and expense of filing and litigating a separate action against Datel 17 (an equal burden on Datel), denial of leave to amend would deprive Microsoft of critical defenses 18 to Datel’s antitrust claims. Likewise, good cause exists under Rule 16(b) to amend the scheduling 19 order to grant Microsoft leave to assert these defenses and counterclaims. Microsoft has acted 20 assiduously in seeking to develop and prosecute these issues and is acting in good faith in seeking 21 amendment. 22 Datel, by contrast, will not be unduly prejudiced by Microsoft’s proposed amendment. 23 Microsoft anticipates that discovery on these issues can be completed quickly, within the three 24 months that Microsoft already has asked the Court to push back the schedule. That extra time 25 will also give the parties time to resolve several other discovery issues relating to the existing 26 claims and defenses, as detailed in Microsoft’s motion for a continuance. Trial need only be 27 pushed back from October to January. 28

NOTICE OF MOT. AND MOT. FOR LEAVE - 4 - CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page11 of 126

1 For these reasons and those detailed below, the Court should permit Microsoft leave to 2 amend its defenses and counterclaims and adjust the schedule by three months to provide time for 3 discovery on these issues.

4 II. BACKGROUND

5 A. Datel Has Resisted Microsoft’s Efforts to Seek Discovery Relating to Datel’s 6 Reverse Engineering of the Xbox 360’s Authentication Scheme 7 1. Microsoft’s initial document requests and the motion to compel 8 On February 19, 2010, Microsoft served a document request seeking “[a]ll Documents 9 referring or relating to the development and implementation of Datel’s hardware and software for 10 interfacing with the Xbox 360 Authentication Scheme,” including “all technical specifications, 11 and all versions of software code, in executable (object code) and human-readable form (source 12 code), that interfaces with the Xbox 360 Authentication Scheme,” and “[a]ll Documents, 13 including but not limited to communications, referring or relating to Datel’s efforts to reverse 14 engineer any Microsoft software or hardware.” Dkt. No. 81, (“1/11/2011 Singla Decl.”), Ex. A 15 (Request Nos. 2, 6.). Datel essentially refused to produce any “technical specifications, 16 instructions,” “software code,” or related communications regarding any of its products. Id., Ex. 17 B, at 4-9, 17. 18 What followed were months of protracted meet and confer. See id. ¶¶ 3-5. On September 19 29, 2010, Datel finally agreed to produce technical documents relating to all of the Xbox and 20 Xbox 360 products it distributes, except for technical documents relating to how it hacked the

21 Xbox 360’s authentication system. See id., Ex. O, at 2. 22 After several additional weeks of meet and confer, during which Datel continued to shift 23 its positions, Datel finally confirmed on November 30, 2010 that it would not produce documents 24 relating to how it hacked the security system. See id., Ex. R. Datel eventually made its final 25 source code for the authentication software in its version of Microsoft’s Maxwell chip available 26 for inspection on December 22, 2010, but provided no technical specifications or communications 27 concerning the code, making analyzing and understanding it incredibly difficult. A paper copy 28 that Microsoft’s counsel and consultant could review in our offices was not provided until

NOTICE OF MOT. AND MOT. FOR LEAVE - 5 - CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page12 of 126

1 January 6, 2011. More importantly, Microsoft had no way at this stage of knowing how Datel

2 had developed this code or what explained the similarities between Datel’s code and Microsoft’s 3 code. 4 On January 11, 2011, Microsoft filed a motion to compel the production of Datel’s reverse 5 engineering documents to try to understand how Datel developed its code. On January 28, 2011, 6 the Court granted Microsoft’s motion. Because Datel’s CEO Michael Connors had testified that 7 only he and Mr. Armitt had been deeply involved in Datel’s reverse engineering efforts, 8 Microsoft limited its motion at the hearing to their emails. See Singla Decl. ¶ 2. Datel 9 interpreted the Court’s order to include only e-mails between Messrs. Connors and Armitt. Id. 10 On February 11, Datel produced 17 e-mails, most of which were heavily redacted on the basis of 11 “responsiveness.” Id.

12 2. The testimony of Datel’s witnesses

13 a. Michael Connors 14 On January 25-27, 2011, Microsoft deposed Michael Connors, Datel’s CEO and designee 15 on various 30(b)(6) topics. Mr. Connors testified that he and Mr. Armitt had been the primary 16 people involved in the reverse engineering of the Xbox 360 authentication system. Singla Decl., 17 Ex. 2 at 199:5-24. He testified that there was “[p]robably not” any emails between him and Datel 18 engineers, including Armitt, regarding that project, given that they were a “small team” and their 19 work was “undocumented” and “quite ad hoc in nature.” Id. at 227:17-25. 20 When asked if Datel spoke with any third parties for “help” in “terms of getting through 21 Maxwell,” Mr. Connors testified “No.” Id. at 228:3-7. When asked if Datel received “any 22 information from anyone or from anywhere that explained anything about the security chip or the 23 security protocol or anything,” Mr. Connors testified “Not that -- not that I recall.” Id. at 228:15- 24 18. 25 b. Alex Edge 26 On February 8 and 9, 2011, Microsoft deposed Alex Edge, Datel’s 30(b)(6) witness on its 27 “efforts to analyze, replicate, or interface with the Maxwell authentication scheme.” Singla Decl., 28

NOTICE OF MOT. AND MOT. FOR LEAVE - 6 - CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page13 of 126

1 Ex. 3 at 3-4 (Topic 4). Mr. Edge testified that Mr. Armitt disassembled the object (or “binary”)

2 code from an Xbox 360 console, and translated the binary code into human readable source code 3 in the C programming language.3 Id., Ex. 4 at 119:14-123:10; 125:25-126:13. Mr. Edge testified 4 that he took this source code from Mr. Armitt, made some limited “inversion” changes to make it 5 function on the accessory side rather than the console side (id. at 128:13-129:20, 138:19-25), but 6 otherwise left it alone. This became the final Datel code used in its security chips. 7 Mr. Edge explained that “[g]enerally because when you are decompiling, annotating code, 8 you try to stick as closely to the -- what you are looking at as possible,” i.e., “replicating” the 9 original source code. Id. at 132:5-133:23. Mr. Edge confirmed that other than those parts of the 10 code that he needed to “inverse,” he simply copied the code he received from Mr. Armitt, i.e., “in 11 terms of structure, variable names,” etc., he would “just leave it.” Id. at 138:19-139:18. When 12 asked “[w]hat else” Mr. Edge had to “guide” him, e.g., “any kind of specifications or documents 13 that showed how the encryption process, decryption process works,” Mr. Edge testified that he 14 15

16 3 Software is typically written in “high level” languages (such as C) that are easier to read and contain convenient commands and tools for complex tasks, such as repeating a series of steps or 17 managing memory. Programs written in such languages are called “source code.” See 18 Declaration of Dr. Robert G. Wedig in Support of Motion of Microsoft Corporation for Leave to File Second Amended Answer, Affirmative Defenses and Counterclaims (“Wedig Decl.”) ¶ 10. 19 One advantage of source code is that the same program written in a high level language can run on different kinds of computers. A compiler is used to translate the source code into the more 20 basic instructions that specific microprocessors can execute. Software in this compiled form is typically called “object code.” Id. ¶ 11. “Regardless of whether the computer program is in 21 object code or source code form, it is copyrightable and protectable.” Asset Mktg. Sys., Inc. v. 22 Gagnon, 542 F.3d 748, 755 n.5 (9th Cir. 2008). Object code is stored in a purely numeric (or “binary”) form. In this form it is also called 23 “machine code.” But such code can also be depicted using mnemonics (such as “MOV” to move 24 a value to a specific memory location, or “ADD” to add to numbers) that are easier for people to understand. This representation is often called “assembly code.” See Wedig Decl. ¶ 12. 25 Software code (whether in machine code format or assembly code format) written for one microprocessor will not run on a different microprocessor. An engineer, however, can use a 26 simple program called a “disassembler” to generate the assembly code from a program in machine code. See id. ¶¶ 12-13. She can then translate it into C (or another high level language) 27 and then use a different compiler to produce object code for the same program that will run on a 28 different microprocessor. See id.

NOTICE OF MOT. AND MOT. FOR LEAVE - 7 - CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page14 of 126

1 did not rely on any other materials, and that his code for Datel’s accessories was “purely” based

2 on Mr. Armitt’s code. Id. at 128:13-129:3.

3 c. Paul Armitt 4 On February 15, Microsoft deposed Paul Armitt. Armitt testified that he disassembled the 5 Microsoft binary code and from that generated source code in the C programming language. 6 Singla Decl., Ex. 5 at 63:9-24. He testified that he did not rely on “any other documentation 7 outside” of the assembly to write his C code. Id. at 66:11-13; 83:21-25 (agreeing that he did not 8 “have any documentation other than the assembly code that explained to you how the security 9 protocol, the Maxwell protocol worked between the console and accessories on the Xbox 360”). 10 This was the first discovery Microsoft had obtained on how Datel had developed its 11 authentication code — but it did not make sense. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

27 28

NOTICE OF MOT. AND MOT. FOR LEAVE - 8 - CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page15 of 126

2 3 4 5 6 7

8 9 10 11 12 13 14 15 16 17 18

19 20 21 22 23 24 25 26 27 28

NOTICE OF MOT. AND MOT. FOR LEAVE - 9 - CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page16 of 126

5 6 7 8 9 10 11 12 13

15 16

21 22

25 26 27 28

NOTICE OF MOT. AND MOT. FOR LEAVE - 10 - CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page17 of 126

1 B. Datel Has Resisted Discovery Into the Development of the Wireless Networking Adapter 2 As noted, on September 29, 2010, Datel finally agreed to produce technical documents 3 relating to all of the Xbox and Xbox 360 products it distributes, except for technical documents 4 relating to how it hacked the Xbox 360’s authentication system. See 1/11/2011 Singla Decl, Ex. 5 O, at 2. This agreement expressly included documents relating to the development of the 6 networking adapter and the source code for the networking adapter. But even after confirming 7 that it would produce these documents, Datel still has not. We, thus, have had almost no 8 information concerning the design and operation of the networking adapter. 9 During the March 12, 2011 deposition of one of Datel’s engineers, Naiwu Yuan, 10

16 17 That information from Mr. Yuan led us to initiate analyses of Datel’s wireless networking 18 adapter and the contents of the chips inside it. The networking adapter only came on the market 19 in late 2010, and we only acquired a sample from Datel in January. Our analysis shows that 20 Datel’s networking adapter contains an identical copy of the same copyrighted Microsoft code 21 that is contained in Microsoft’s networking adapter. 22 C. Microsoft’s Proposed Copyright Infringement and Misappropriate of Trade 23 Secrets Allegations 24 Based on all this recently disclosed information, Microsoft seeks leave to amend to assert 25 two new affirmative defenses and parallel counter-claims for (1) Datel’s infringement of 26 Microsoft’s copyrights in its code, and (2) Datel’s misappropriation of Microsoft’s trade secrets. 27 28

NOTICE OF MOT. AND MOT. FOR LEAVE - 11 - CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page18 of 126

1 1. Copyright Infringement 2 Microsoft can prove Datel’s infringement of copyrights in source code either by direct 3 evidence of copying or, by showing that (1) Datel had access to Microsoft’s copyrighted code and 4 (2) that Datel’s code is substantially similar to Microsoft’s copyrighted code. Sega Enters. Ltd. v. 5 Accolade, Inc., 977 F.2d 1510, 1524 (9th Cir. 1992). 6 With respect to the code used in Datel’s wireless networking adapter, Microsoft’s analysis 7 of Datel’s product and Mr. Yuan’s testimony establish that Datel’s products contain literally 8 copied Microsoft code. That code is identical to the code used in Microsoft’s networking adapter. 9 Although Datel will presumably argue that the copying was dictated by functional considerations, 10 Microsoft believes that Datel did not need to copy code verbatim to develop a networking adapter 11 product. Cf. 977 F.2d at 1524. 12 13 With respect to software code underlying the Xbox 360 authentication system, Mr. Armitt 14 testified that Datel had direct access to Microsoft’s code through its disassembly of the binary 15 code. 16 Because “direct evidence of copying 17 rarely is available” in software copyright cases, a plaintiff must usually establish in these cases 18 the “defendant’s access to the copyrighted work prior to the creation of the defendant’s work” 19 CyberMedia, Inc. v. Symantec Corp., 19 F. Supp. 2d 1070, 1077 (N.D. Cal. 1998). 20 Mr. Armitt’s testimony established also that Datel did not use any kind of clean room 21 process. Copyright infringement can be avoided by utilizing a “clean room,” i.e., disassembling a 22 program, studying it, and then having someone else independently recreate its unprotected 23 functionality. In a clean room, the programmers writing the new code are not exposed to the 24 original code.5 See Nordstrom Consulting, Inc. v. M & S Techs., Inc., 2008 WL 623660, at *7

25 5 A “clean room” procedure attempts to avoid violations of the copyright laws by using two 26 separate teams of developers to create a new product. The first team disassembles and studies the object code of the original product and then describes the functional aspects of the original 27 product to the second team in a written English-language specification; the second team then uses the specification to write new code untainted by exposure to the copyrighted elements of the 28 original code. See Wedig Decl. ¶ 15.

NOTICE OF MOT. AND MOT. FOR LEAVE - 12 - CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page19 of 126

1 (N.D. Ill. Mar. 8, 2008) (“If Defendants did indeed follow clean room procedures, then Plaintiffs

2 would be unable to make the necessary showing that Defendants had access to the copyrighted 3 work.”); DSC Commc’ns Corp. v. DGI Techs., Inc., 898 F. Supp. 1183, 1189 n.3 (N.D. Tex. 4 1995) (with a clean room process, “the alleged infringer can demonstrate that the programmer 5 who drafted the competing code had no access to the original copyrighted work. By showing no 6 access the alleged infringer could defeat the first requirement of a copyright infringement 7 action”). 8 Copyright in code is infringed, however, when — as happened here — an engineer 9 decompiles a competitor’s code and then essentially just translates it directly into a different 10 language to be used on a different microprocessor. Cf. Nordstrom Consulting, 2008 WL 623660, 11 at *7; DSC Communications, 898 F. Supp. at 1189 n. 3. 12 There is no claim of any clean room 13 process, ample evidence of direct access to Microsoft’s code and too many substantial similarities 14 between the Microsoft and Datel code that are not dictated by the functional requirements of the 15 algorithm to be performed, the limitations of the programming environment, or efficiency or good 16 programming considerations. For example:

17 a. Substantially similar function names 18 In spite of the almost limitless number of possible names that Datel could have chosen for 19 naming routines in its code, it chose to name many of the most central routines with identical or 20 substantially similar names as those used by Microsoft. See Wedig Decl ¶ 33. 21 Some of the naming similarities can be seen in the table below: 22 23 24 25 26 27 28

NOTICE OF MOT. AND MOT. FOR LEAVE - 13 - CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page20 of 126

1 Legitimate reverse engineering of the Microsoft object code would not have revealed

2 these names; 3 4 5 6 7 Similar function and routine names in source code are first and foremost evidence of 8 copying, but they are also themselves protectable copyrighted elements. See, e.g., Esbin & Alter, 9 LLP v. Zappier, 2010 WL 391830, at *5 (S.D.N.Y. Feb. 4, 2010), reversed and remanded on 10 other grounds, 2010 WL 5129135 (2d Cir. Dec. 17, 2010) (finding likelihood of success for 11 source code infringement claim where there was “identically matching identifiers with long, 12 complicated, uncommon names,” and noting that “names of elements are a creative decision by 13 the developer and not dictated by external restraints”); Szen Corp. v. Anderson, 2007 WL 14 1728717, at *1 (E.D. Wash. June 13, 2007) (finding likelihood of success for source code 15 infringement claim “[g]iven the rule that source code is copyrightable, and the absence of 16 precedent indicating that names and programmer comments in source code are not protected 17 elements”).

18 b. Substantially similar structure of functions 19 Microsoft chose to design its code in a particular manner to break out certain tasks in 20 separate functions (also called “procedures” or “routines”). The way in which a programmer 21 chooses to separate the tasks and divide up what work is performed in different modules is an 22 arbitrary choice which is part of the programmer’s original expression: “Copyright protection 23 may extend to both literal and non-literal elements of a computer program. . . . The non-literal 24 elements include the program’s structure and ‘the various steps a programmer employs prior to 25 actually writing the instructions or source code.’ . . . . Thus, a defendant may infringe a copyright 26 if he copies the plaintiff’s source or object code, or the program’s structure, including general 27 flow charts and the more specific organization of the program, including ‘inter-modular 28

NOTICE OF MOT. AND MOT. FOR LEAVE - 14 - CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page21 of 126

1 relationships, parameter lists, and macros.’” eScholar, LLC v. Otis Educ. Sys., Inc., 2005 WL

2 2977569, at *8 (S.D.N.Y. Nov. 3, 2005). 3 Datel’s code is structured in a substantially similar manner to perform the same functions 4 as Microsoft’s code. See Wedig Decl. ¶¶ 35-37. For example, Microsoft’s programmers chose to 5 break out some of the cryptographic operations into the five “functions” (or “procedures” or 6 “routines”) listed in the table above. Datel performs the same operations in the identically 7 structured, parallel set of five functions, also listed above. Id. ¶¶ 36-37. Had Datel worked 8 independently, it would have more likely than not come up with a different structure. Some of 9 these functions are, for example, always called together, and so could have been easily combined 10 into a single function. Id. Microsoft arbitrarily chose to separate these functions into two 11 routines, and Datel copied the same arbitrary choice. Id. This is but one example of where Datel 12 chose to use the same protectable routine structure expression as Microsoft. Id. 13 14 15

16 c. Substantially similar parameters and variables 17 Even within specific functions, Datel copied many of the same arbitrary choices as 18 Microsoft. Two programmers independently writing a function to perform a specific operation 19 will use different orders for parameters, variables, and the like. These are parts of the protectable, 20 arbitrary and original expression in software protected by copyright law. See, e.g., MiTek 21 Holdings, Inc. v. Arce Eng’g Co., Inc., 89 F.3d 1548, 1555 n.16 (11th Cir. 1996) (may be 22 infringing “substantial similarity (i.e., nonliteral copying) of nonliteral elements, namely 23 parameter lists, macros, and general flow charts”). In this area also, Datel slavishly copied many 24 arbitrary Microsoft coding decisions, such as the order of the parameters, the use of local 25 variables, and loop parameters. See Wedig Decl. ¶¶ 38-41. 26 27 28

NOTICE OF MOT. AND MOT. FOR LEAVE - 15 - CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page22 of 126

1 2. Misappropriation of Trade Secrets 2 Microsoft also seeks to assert a defense against Datel for misappropriation of its trade 3 secrets. Microsoft may establish trade secret misappropriation claim by satisfying “two primary 4 elements”: “(1) the existence of a trade secret, and (2) misappropriation of the trade secret.” 5 AccuImage Diagnostics Corp. v. Terarecon, Inc., 260 F. Supp. 2d 941, 950 (N.D. Cal. 2003) 6 (citing Cal. Civ. Code § 3426.1(b)). 7 Information relating to the Xbox 360’s security system, including the precise sequence of 8 algorithms and the derivation of the secret keys used by the system, constitutes Microsoft trade 9 secrets.6 This information is confidential and derives independent economic value by allowing 10 Microsoft to limit the use of untested and unauthorized accessories on the Xbox 360 console, 11 which among other things, protects Microsoft’s customers and game developers against cheating, 12 hacking, and piracy. 13 14 15 16 17 18 19 20 21 22 23 24 25 6 A “trade secret” is “information, including a formula, pattern, compilation, program, device, 26 method, technique, or process, that ... [d]erives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value 27 from its disclosure or use; and ... [i]s the subject of efforts that are reasonable under the 28 circumstances to maintain its secrecy.” Cal. Civ. Code § 3426.1(d).

NOTICE OF MOT. AND MOT. FOR LEAVE - 16 - CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page23 of 126

1 III. ARGUMENT

2 A. Leave to Amend is Warranted Under Rule 15(a) 3 Under Rule 15, “[t]he court should freely give leave [to amend] when justice so requires.” 4 Fed. R. Civ. Proc. 15(a)(2). The Ninth Circuit has held that the rule should be interpreted with 5 “extreme liberality.” DCD Programs, LTD. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987); 6 Howey v. United States, 481 F.2d 1187, 1190 (9th Cir. 1973). “Four factors are commonly used 7 to determine the propriety of a motion for leave to amend. These are: bad faith, undue delay, 8 prejudice to the opposing party, and futility of amendment.” Ditto v. McCurdy, 510 F.3d 1070, 9 1078-79 (9th Cir. 2007). “The party opposing amendment bears the burden of showing 10 prejudice.” DCD Programs, 833 F.2d at 187. Here, each of these factors militates in 11 Microsoft’s favor. 12 No Bad Faith: As demonstrated above, there is no bad faith on Microsoft’s part in filing 13 this motion. Microsoft has acted diligently in seeking discovery relating to Datel’s reverse 14 engineering of the Xbox 360’s security system, and promptly sought to assert its new answers and 15 counterclaims upon discovery of their factual bases. 16 No Undue Delay: Although courts tend to disfavor motions for leave to amend made at 17 or near the close of discovery, see Solomon v. N. Am. Life & Cas. Ins. Co., 151 F.3d 1132, 1139 18 (9th Cir. 1998), here, the “late hour” of Microsoft’s “motion for leave to amend does not reflect a 19 lack of diligence on [its] part.” Tourgeman v. Collins Fin. Servs., Inc., 2010 WL 4817990, at *5 20 (S.D. Cal. Nov. 22, 2010). Rather, it was Datel’s “obstreperousness in discovery that prevented 21 [Microsoft] from learning the facts that give rise to [its] proposed amendments. This fact 22 warrants an exercise of discretion in [Microsoft’s] favor.” Id. The critical facts that have 23 persuaded Microsoft to assert these new defenses and claims have only recently come to light. 24 25 26 Datel still has not produced documents relating to its development of the 27 28

NOTICE OF MOT. AND MOT. FOR LEAVE - 17 - CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page24 of 126

1 networking adapter; Microsoft has had to rely on the Mach 12 testimony of Mr. Yuan and the

2 analysis of Datel’s product that testimony inspired.7 3 Moreover, “[d]elay, by itself, is insufficient to justify denial of leave to amend.” DCD 4 Programs, 833 F.2d at 186. 5 No Prejudice: “To overcome Rule 15(a)’s liberal policy with respect to the amendment 6 of pleadings,” Datel’s “showing of prejudice must be substantial.” Tyco Thermal Controls LLC 7 v. Redwood Indus., 2009 WL 4907512, at *3 (N.D. Cal. Dec. 14, 2009). See also Morongo Band 8 of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir. Jan. 10, 1990). Datel will not suffer 9 any substantial undue prejudice by Microsoft asserting copyright infringement and trade secret 10 counterclaims at this time. As described in Microsoft’s March 18, 2011 motion for relief from 11 the existing scheduling order, Microsoft believes the case schedule need only be pushed back by 12 three months to accommodate these additional claims. See, e.g., Mixt Greens v. Sprout Café, 13 2010 WL 2794388, at *2 (N.D. Cal. July 15, 2010) (granting leave to amend near close of fact 14 discovery where amendment would not require “substantial new discovery” and a “brief 15 extension of discovery deadlines could cure any prejudice were the amendment allowed”); 16 Ciampi v. City of Palo Alto, 2010 WL 5174013, at *3 (N.D. Cal. Dec. 15, 2010) (granting leave 17 to amend near dispositive motion deadline where based “on the limited amendments to Plaintiff's 18 Complaint, the Court expects that the additional discovery required by the parties, if any, will be 19 extremely limited.”). 20 21 7 Datel has argued that Microsoft should have brought a copyright claim after receiving hard 22 copies of Datel’s code in early January. But, as noted, to bring a copyright infringement claim in the absence of “direct evidence of copying,” a plaintiff must not only show that the two works are 23 “substantially similar,” but also show that the defendant “had ‘access’ to the plaintiff’s work.” 24 Three Boys Music Corp. v. Bolton, 212 F.3d 477, 481 (9th Cir. 2000). As explained above, Microsoft also had to eliminate the possibility that Datel used a clean room process. 25

26 And Microsoft indisputably did not learn the 27 bases of its trade secret claim until Datel’s document production on March 2, and of its 28 infringement claim relating to the networking adapter until Mr. Yuan’s deposition on March 12.

NOTICE OF MOT. AND MOT. FOR LEAVE - 18 - CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page25 of 126

1 More importantly, “[n]either delay resulting from the proposed amendment nor the 2 prospect of additional discovery needed by the non-moving party in itself constitutes a sufficient 3 showing of prejudice.” Tyco Thermal, 2009 WL 4907512, at *3 . Likewise, the “fact that the 4 amended counterclaim may cause more work does not constitute prejudice.” Fru-Con Constr. 5 Corp. v. Sacramento Mun. Util. Dist., 2006 WL 3733815, at *5 (E.D. Cal. Dec. 15, 2006). See 6 also Bd. of Trs. of the Auto. Indus. Welfare Fund v. Groth Oldsmobile/Chevrolet, Inc., 2010 WL 7 760452, at *4 (N.D. Cal. Mar. 4, 2010) (though plaintiffs “may be prejudiced if the court grants 8 Groth’s motion to amend, as they have invested time and money into preparing and filing the 9 summary judgment motions” the “court does not think that the plaintiffs will be substantially 10 prejudiced if the motion is granted”). 11 Prejudice to Microsoft. Most importantly, “[p]rejudice to the opposing party if the court 12 grants leave to amend must be balanced against prejudice to the moving party if the court denies 13 leave to amend.” Id. Here, Microsoft would suffer substantial prejudice if the Court were to 14 deny leave to amend. Beyond the fact that Microsoft would have to incur the burden and expense 15 of filing and litigating a separate action against Datel (an equal burden on Datel), preventing 16 Microsoft from amending its answer to raise these issues would deprive Microsoft of a critical 17 defense to Datel’s antitrust claims. As the Court stated in its Order on Microsoft’s bifurcation 18 motion, to the “extent that litigation” of Microsoft’s counterclaims “reveals” that Datel’s devices 19 “are unlawful,” the law “may bar Plaintiffs’ antitrust claims” as to those devices. Dkt. No. 68 at 20 at 5-6 (citing and discussing Modesto Irrigation Dist. v. Pac. Gas & Elec. Co., 309 F. Supp. 2d

21 1156, 1169-70 (N.D. Cal. 2004); RealNetworks, Inc. v. DVD Copy Control Ass’n, 2010 WL 22 145098, at *6 (N.D. Cal. Jan. 8, 2010); First Beverages, Inc. of Las Vegas v. Royal Crown Cola 23 Co., 612 F.2d 1164, 1173 (9th Cir. 1980)). See also Pearl Music Co., Inc. v. Recording Indus. 24 Ass’n of Am., 460 F. Supp. 1060, 1068 (C.D. Cal. 1978) (antitrust injury cannot be based on 25 inability to sell products that infringe defendants’ copyrights). 26 If the Datel devices which are at issue in this litigation—namely, Datel’s MAX memory 27 cards, its wired and wireless “Wildfire” controllers, its wireless headset, and its wireless network 28 adapter—incorporate software code and cryptographic know-how that violates Microsoft’s

NOTICE OF MOT. AND MOT. FOR LEAVE - 19 - CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page26 of 126

1 copyrights or constitutes misappropriated Microsoft trade secrets, then those devices are illegal, 2 Microsoft could have sought and obtained an injunction barring their distribution, and they 3 “should not have been sold.” Dkt. No. 68 at 6. Precluding Microsoft from asserting this defense 4 now would substantially prejudice its rights. 5 No Futility of Amendment: “[A] proposed amendment is futile only if no set of facts can 6 be proved under the amendment to the pleadings that would constitute a valid and sufficient claim 7 or defense.” Miller v. Rykoff-Sexton, Inc., 845 F.2d 209, 214 (9th Cir. 1988). As detailed above, 8 there is a substantial legal and factual basis for Microsoft’s proposed copyright infringement and 9 trade secret claims. The proposed amendments are in no way “futile.”

10 B. “Good Cause” Exists to Amend the Scheduling Order Under Rule 16(b) 11 Where, as is the case here, the Court has set a deadline for amending the pleadings which 12 has passed, the party seeking amendment must also demonstrate “good cause” under Rule 13 16(b)(4) to amend the scheduling order. Coleman v. Quaker Oats Co., 232 F.3d 1271, 1294 (9th 14 Cir. 2000). Rule 16(b)’s “‘good cause’ standard primarily considers the diligence of the party 15 seeking the amendment.” Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 609 (9th Cir. 16 1992). A party may establish good cause by demonstrating that it was “unable to comply with the 17 scheduling order’s deadlines due to matters that could not have reasonably been foreseen at the 18 time of the issuance of the scheduling order, and that it was diligent in seeking an amendment 19 once it became apparent that the party could not comply with the scheduling order.” Kuschner v. 20 Nationwide Credit, Inc., 256 F.R.D. 684, 687 (E.D. Cal. 2009). 21 Since the outset of this litigation, Microsoft assiduously has sought discovery relating to 22 Datel’s reverse engineering of the Xbox 360 security system. It is Datel who has resisted and 23 thus delayed the production of this information. At the time that the Court entered the Case 24 Management and Pretrial Order on September 22, 2010 (Dkt. No. 67) and on the October 29 25 deadline under that Order to file a motion to amend the pleadings, Datel had yet to produce any 26 technical documents regarding its reverse engineering efforts. Microsoft clearly could not have 27 been in a position at those times to assert or even foresee its current proposed claims. Even since 28

NOTICE OF MOT. AND MOT. FOR LEAVE - 20 - CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page27 of 126

1 then, Datel has delayed production of relevant materials and Datel’s witnesses provided 2 misleading testimony that delayed Microsoft’s investigation and understanding of these issues. 3 Courts repeatedly have found “good cause” to exist in nearly identical circumstances. In 4 Winding v. Allstate Insurance Co., 2011 WL 836442, at *2 (E.D. Cal. Mar. 3, 2011), for example, 5 the court held that the defendant had “demonstrated good cause to amend its Answer to add 6 affirmative defenses and counterclaims” where the “facts giving rise to these defenses and 7 counterclaims were discovered during plaintiff’s deposition.” Id. Although, like Microsoft, the 8 defendant had “previously request[ed] documentation” relating to these defenses and claims 9 earlier in the case, “these documents and testimony” were “not provided until plaintiff's 10 deposition was taken.” Id. Likewise, in Kuschner v. Nationwide Credit, Inc., 256 F.R.D. 684, 11 688 (E.D. Cal. 2009), for example, the defendant likewise sought to add a counterclaim after the 12 deadline to amend the pleadings and near the close of fact discovery. The court held that it “is 13 apparent that defendant acted diligently” as he “was unaware of the possible basis of the 14 counterclaim” until a recent deposition of the plaintiff, and there was “nothing to indicate that 15 defendant should have been aware of the facts underlying the claim earlier.” Id. Numerous other 16 courts similarly have held.8 See also 6A Charles Alan Wright & Arthur R. Miller, Federal 17 Practice and Procedure § 1522.2 (2010) (collecting cases) (“modification” to the scheduling order 18 “is necessitated by acts of the opposing party or by the opponent’s failure to act . . . .”). 19 20

22 8 See, e.g., Progressive W. Ins. Co. v. Dallo, 2008 WL 2220408, at *3 (S.D. Cal. May 27, 2008) (counterclaimants’ “four month delay in asserting claims” not “unreasonable when viewed in 23 light of the protracted pleading stage of this lawsuit” and noting that “unremarkable that new 24 litigation strategies . . . would take shape”); Samad Bros., Inc. v. Bokara Rug Co., Inc., 2010 WL 2835754, at *3 (S.D.N.Y. June 30, 2010) (plaintiff “acted diligently in moving to amend its 25 complaint anew, after receiving, during the discovery phase of the litigation, additional relevant information . . . it did not possess previously, that provided [it] grounds for seeking to amend its 26 complaint, to include 15 additional Bokara rug designs Samad asserts infringe its copyrights”); Ulin v. Lovell's Antique Gallery, 2010 WL 3745824, at *3 (N.D. Cal. Sept. 17, 2010) (Laporte, 27 M.J.) (“Plaintiff has shown good cause for allowing some additional discovery, especially 28 because of the value that additional deposition testimony may have in resolving this case”).

NOTICE OF MOT. AND MOT. FOR LEAVE - 21 - CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page28 of 126

1 IV. CONCLUSION 2 For the foregoing reasons, the Court should grant the Motion. 3 DATED: March 25, 2011 Munger, Tolles & Olson LLP 4 5 6 By: /s/ Rohit K. Singla 7 ROHIT K. SINGLA 8 Attorneys for Defendant MICROSOFT CORPORATION 9 10 11 12 13 14 15 16 17 18 19 20

21 22 23 24 25 26 27 28

NOTICE OF MOT. AND MOT. FOR LEAVE - 22 - CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page29 of 126

Exhibit 1 Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page30 of 126

1 GREGORY P. STONE (SBN 078329) [email protected] 2 MUNGER, TOLLES & OLSON LLP 355 South Grand Avenue 3 Thirty-Fifth Floor Los Angeles, CA 90071-1560 4 Telephone: (213) 683-9100 Facsimile: (213) 687-3702 5 HOJOON HWANG (SBN 184950) 6 [email protected] ROHIT K. SINGLA (SBN 213057) 7 [email protected] JONATHAN H. BLAVIN (SBN 230269) 8 [email protected] MUNGER, TOLLES & OLSON LLP 9 560 Mission Street, Twenty-Seventh Floor 10 San Francisco, CA 94105-2907 Telephone: (415) 512-4032 11 Facsimile: (415) 512-4077 12 Attorneys for Defendant MICROSOFT CORPORATION 13 UNITED STATES DISTRICT COURT 14 NORTHERN DISTRICT OF CALIFORNIA 15 SAN FRANCISCO DIVISION 16 17 CASE NO. CV 09-5535 EDL 18 DATEL HOLDINGS LTD. and DATEL DESIGN & DEVELOPMENT, INC., DEFENDANT MICROSOFT 19 CORPORATION’S SECOND AMENDED Plaintiffs and ANSWER AND COUNTERCLAIMS 20 Counterclaim Defendants, 21 vs. 22 MICROSOFT CORPORATION, 23 Defendant and 24 Counterclaimant. 25 26 27 28

DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page31 of 126

1 Defendant Microsoft Corporation (“Microsoft”) hereby answers the allegations of Datel 2 Holdings Ltd. and Datel Design & Development, Inc. (jointly, “Datel”), contained in their 3 Complaint as follows: 4 INTRODUCTION 5 1. Microsoft admits that Datel sells “video game enhancement” products for the 6 Microsoft Xbox 360 and sells a product known as the “MAX” memory card. Microsoft does not 7 sell products at retail, but admits that a Microsoft 512 megabyte memory unit for the Xbox 360 8 sold at retail. Microsoft denies that its 512 megabyte memory unit for the Xbox 360 has or had a 9 “retail list price” of $39.99. Microsoft is without knowledge or information sufficient to form a 10 belief as to the truth of the remaining allegations in Paragraph 1 of the Complaint and on that 11 basis denies them. 12 2. Microsoft admits that in October 2009, it deployed a software update to the Xbox 13 360 known as a “dashboard update” that Xbox 360 users were required to download to access the 14 Xbox LIVE service, and which also was included in new games sold for the console. Except as 15 specifically admitted, Microsoft is without knowledge or information sufficient to form a belief as 16 to the truth of the allegations in Paragraph 2 of the Complaint and on that basis denies them. 17 3. Microsoft admits that the October 2009 dashboard update includes changes to the 18 Xbox 360 security and authentication algorithms that temporarily disabled Datel’s effort to hack 19 that system with its memory cards. Except as specifically admitted, Microsoft denies the 20 allegations of Paragraph 3.

21 4. Microsoft denies the allegations of Paragraph 4. 22 JURISDICTION AND VENUE 23 5. Microsoft admits that Datel has filed claims in this action pursuant to Sections 1 24 and 2 of the Sherman Act (15 U.S.C. §§1-2) and Section 3 of the Clayton Act (15 U.S.C. §14). 25 The remaining allegations of Paragraph 5 are legal conclusions to which no response is required. 26 To the extent that a response is required, Microsoft denies the allegations in Paragraph 5 of the 27 Complaint. 28

- 1 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page32 of 126

1 6. Microsoft admits that Datel has filed claims pursuant to the California Unfair 2 Competition Law (Cal. Bus. & Prof. Code §§17200 et seq.) and California common law. The 3 remaining allegations of Paragraph 6 are legal conclusions to which no response is required. To 4 the extent that a response is required, Microsoft denies the allegations in Paragraph 6 of the 5 Complaint. 6 7. Microsoft admits that Microsoft manufactures Xbox 360 units and related 7 products that are sold in the United States and throughout the world, and derives revenues from 8 interstate and global commerce. The remaining allegations of Paragraph 7 are legal conclusions 9 to which no response is required. To the extent that a response is required, Microsoft denies the 10 allegations in Paragraph 7 of the Complaint. 11 INTRADISTRICT ASSIGNMENT 12 8. Microsoft admits that, for purposes of Civil Local Rule 3-2(c), assignment over 13 this action is proper on a District-wide basis. 14 PARTIES 15 9. Microsoft admits that Datel Holdings Ltd. is a British corporation having its 16 principal place of business in Staffordshire, United Kingdom. Microsoft further admits that Datel 17 Design and Development Inc. is a United States corporation having its principal place of business 18 in Clearwater, Florida and is a wholly owned subsidiary of Datel Design and Development Ltd. 19 Except as specifically admitted, Microsoft denies the allegations of Paragraph 9. 20 10. Microsoft admits that it is a Washington corporation with its principal place of

21 business in Redmond, Washington. 22 FACTUAL BACKGROUND 23 11. Microsoft admits that it released the original Xbox video game console in 2001, 24 and released the second generation Xbox console, the Xbox 360, in 2005. Microsoft further 25 admits that there are various models of the Xbox 360 console offered at different price points by 26 independent retailers. Except as specifically admitted, Microsoft denies the allegations of 27 Paragraph 11. 28

- 2 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page33 of 126

1 12. Microsoft admits that it offers a subscription-based service for online multiplayer 2 gaming called “Xbox LIVE.” Microsoft further admits that as of May 2009, Microsoft had more 3 than 20 million active members of the Xbox LIVE online community. Microsoft further admits 4 that the Xbox 360 attracts users with innovative game playing and multiplayer functionality, and 5 the quality and variety of available games. Except as specifically admitted, Microsoft denies the 6 allegations of Paragraph 12. 7 13. Microsoft admits that Sony released the Playstation 3 video game console in 8 November 2006. Microsoft further admits that the Sony Playstation 3 competes with the Xbox 9 360 but so do many other products, including the Nintendo Wii. Microsoft further admits that in 10 January 2009 it reported worldwide sales of more than 28 million Xbox 360 consoles since 11 introducing the Xbox 360 console in November 2005, and in May 2009 reported worldwide sales 12 of more than 30 million Xbox 360 consoles since introducing the console in November 2005. 13 Except as specifically admitted, Microsoft is without knowledge or information sufficient to form 14 a belief as to the truth of the allegations in Paragraph 13 of the Complaint and on that basis denies 15 them. 16 14. Microsoft admits that there are accessories and add-ons which are sold for the 17 Xbox 360 separate and apart from Xbox 360 games. Except as specifically admitted, Microsoft is 18 without knowledge or information sufficient to form a belief as to the truth of the allegations in 19 Paragraph 14 of the Complaint and on that basis denies them. 20 15. Microsoft is without knowledge or information sufficient to form a belief as to

21 the truth of the allegations in Paragraph 15 of the Complaint and on that basis denies them. 22 16. Microsoft admits that Datel has announced the release of its “Joypad” controller. 23 Except as specifically admitted, Microsoft is without knowledge or information sufficient to form 24 a belief as to the truth of the allegations in Paragraph 16 of the Complaint and on that basis denies 25 them. 26 17. Microsoft is without knowledge or information sufficient to form a belief as to 27 Datel’s claim that it first released its MAX memory cards in May 2009, and on that basis denies 28 this allegation. Microsoft denies the remaining allegations in Paragraph 17.

- 3 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page34 of 126

1 18. Microsoft is without knowledge or information sufficient to form a belief as to 2 the truth of the allegations in Paragraph 18 of the Complaint and on that basis denies them. 3 19. Microsoft admits that it marketed a 512 megabyte memory unit for the Xbox 360 4 as of November 1, 2009, and admits that the quoted language from paragraph 19 of the Complaint 5 appeared on the xbox.com website. Except as specifically admitted, Microsoft denies the 6 allegations of Paragraph 19. 7 20. Microsoft admits that the quoted language in paragraph 20 appeared on the 8 “Major Nelson” blog post on or about October 16, 2009. Except as specifically admitted, 9 Microsoft denies the allegations of Paragraph 20. 10 21. Microsoft admits that the quoted language in paragraph 21 appeared in an 11 October 23, 2009 article on G4Tv.com. Except as specifically admitted, Microsoft denies the 12 allegations of paragraph 21 of the Complaint. 13 22. Microsoft is without knowledge or information sufficient to form a belief as to 14 the existence and content of comments in the “blogosphere” referenced in Paragraph 22 of the 15 Complaint and on that basis denies them. Microsoft further denies the truth of the purported 16 comments. 17 23. Microsoft denies the allegations of paragraph 23 of the Complaint. 18 24. Microsoft denies the allegations of paragraph 24 of the Complaint. 19 25. Microsoft admits that it modified the Xbox 360’s authentication protocol which 20 had the effect of disabling Datel’s unauthorized and unlicensed hack of the Xbox 360

21 authentication protocol. Except as specifically admitted, Microsoft denies the allegations of 22 paragraph 25 of the Complaint. 23 26. Microsoft denies the allegations of paragraph 26 of the Complaint. 24 27. Microsoft denies the allegations of paragraph 27 of the Complaint. 25 28. Microsoft admits that some accessories and add-ons for the Xbox 360 gaming 26 system are specifically designed for the Xbox 360. Except as specifically admitted, Microsoft 27 denies the allegations of paragraph 28 of the Complaint. 28 29. Microsoft denies the allegations of paragraph 29 of the Complaint.

- 4 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page35 of 126

1 30. Microsoft denies the allegations of paragraph 30 of the Complaint. 2 31. Microsoft denies the allegations of paragraph 31 of the Complaint. 3 32. Microsoft denies the allegations of paragraph 32 of the Complaint. 4 33. Microsoft admits that it has a successful third-party accessories licensing 5 program and states that the quoted language in Paragraph 33 refers to third parties who participate 6 in this program. Except as specifically admitted, Microsoft denies the allegations of paragraph 33 7 of the Complaint. 8 34. Microsoft states that the quoted language in Paragraph 34 speaks for itself. 9 Except as specifically admitted, Microsoft denies the allegations of paragraph 34 of the 10 Complaint. 11 35. Microsoft denies the allegations of paragraph 35 of the Complaint. 12 36. Microsoft denies the allegations of paragraph 36 of the Complaint. 13 37. Microsoft admits that some people have described the Xbox 360, the Sony 14 Playstation 3, and the Nintendo Wii as included in the “seventh generation” of video game 15 consoles. Except as specifically admitted, Microsoft denies the allegations of paragraph 37 of the 16 Complaint. 17 38. Microsoft denies the allegations of paragraph 38 of the Complaint. 18 39. Microsoft denies the allegations of paragraph 39 of the Complaint. 19 40. Microsoft states that the content of the alleged press releases speaks for 20 themselves. Except as specifically admitted, Microsoft denies the allegations of paragraph 40 of

21 the Complaint. 22 41. Microsoft admits that the pricing of the Xbox 360 line has influenced Sony’s 23 pricing of the Playstation 3 line, and vice versa, as well as other factors. Except as specifically 24 admitted, Microsoft denies the allegations of paragraph 41 of the Complaint. 25 42. Microsoft denies the allegations of paragraph 42 of the Complaint. 26 43. Microsoft states that the referenced sales reports speak for themselves. Except as 27 specifically admitted, Microsoft denies the allegations of paragraph 43 of the Complaint. 28

- 5 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page36 of 126

1 44. Microsoft states that the content of the referenced sales reports speak for 2 themselves. Except as specifically admitted, Microsoft denies the allegations of paragraph 44 of 3 the Complaint. 4 45. Microsoft admits that developing the Xbox 360 console and copyrighted video 5 game content for it entailed, and continues to entail, a significant investment. Except as 6 specifically admitted, Microsoft denies the allegations of paragraph 45 of the Complaint. 7 8 FIRST CLAIM FOR RELIEF 9 Violation of Section 2 of the Sherman Act (15 U.S.C. §2) 10 46. Microsoft repeats and incorporates its responses to the allegations contained in 11 Paragraphs 1 through 45 of the Complaint, as if fully set forth herein. 12 47. Microsoft denies the allegations of paragraph 47 of the Complaint. 13 48. Microsoft denies the allegations of paragraph 48 of the Complaint. 14 49. Microsoft denies the allegations of paragraph 49 of the Complaint. 15 50. Microsoft denies the allegations of paragraph 50 of the Complaint. 16 51. Microsoft denies the allegations of paragraph 51 of the Complaint. 17 52. Microsoft denies the allegations of paragraph 52 of the Complaint. 18 53. Microsoft denies the allegations of paragraph 53 of the Complaint. 19 54. Microsoft denies the allegations of paragraph 54 of the Complaint. 20 55. Microsoft denies the allegations of paragraph 55 of the Complaint.

21 56. Microsoft denies the allegations of paragraph 56 of the Complaint. 22 57. Microsoft denies the allegations of paragraph 57 of the Complaint. 23 58. Microsoft denies the allegations of paragraph 58 of the Complaint. 24 59. Microsoft denies the allegations of paragraph 59 of the Complaint.

25 SECOND CLAIM FOR RELIEF 26 Violation of Section 2 of the Sherman Act (15 U.S.C. §2) 60. Microsoft repeats and incorporates its responses to the allegations contained in 27 Paragraphs 1 through 59 of the Complaint, as if fully set forth herein. 28

- 6 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page37 of 126

1 61. Microsoft denies the allegations of paragraph 61 of the Complaint. 2 62. Microsoft denies the allegations of paragraph 62 of the Complaint. 3 63. Microsoft denies the allegations of paragraph 63 of the Complaint. 4 64. Microsoft denies the allegations of paragraph 64 of the Complaint. 5 65. Microsoft denies the allegations of paragraph 65 of the Complaint. 6 66. Microsoft denies the allegations of paragraph 66 of the Complaint. 7 67. Microsoft denies the allegations of paragraph 67 of the Complaint. 8 68. Microsoft denies the allegations of paragraph 68 of the Complaint. 9 69. Microsoft denies the allegations of paragraph 69 of the Complaint. 10 70. Microsoft denies the allegations of paragraph 70 of the Complaint. 11 12 THIRD CLAIM FOR RELIEF Violation of Sections 1-2 of the Sherman Act and 13 Section 3 of the Clayton Act (15 U.S.C. §§1-2, 14) 14 71. Microsoft repeats and incorporates its responses to the allegations contained in 15 Paragraphs 1 through 70 of the Complaint, as if fully set forth herein. 16 72. Microsoft denies the allegations of paragraph 72 of the Complaint. 17 73. Microsoft denies the allegations of paragraph 73 of the Complaint. 18 74. Microsoft denies the allegations of paragraph 74 of the Complaint. 19 75. Microsoft denies the allegations of paragraph 75 of the Complaint. 20 76. Microsoft denies the allegations of paragraph 76 of the Complaint.

21 77. Microsoft denies the allegations of paragraph 77 of the Complaint. 22 78. Microsoft denies the allegations of paragraph 78 of the Complaint. 23 79. Microsoft denies the allegations of paragraph 79 of the Complaint. 24 80. Microsoft denies the allegations of paragraph 80 of the Complaint. 25 81. Microsoft denies the allegations of paragraph 81 of the Complaint. 26 27 28

- 7 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page38 of 126

1 FOURTH CLAIM FOR RELIEF Unfair Competition (Cal. Bus. & Prof. Code §17200 et seq.) 2 82. Microsoft repeats and incorporates its responses to the allegations contained in 3 Paragraphs 1 through 81 of the Complaint, as if fully set forth herein. 4 83. Microsoft denies the allegations of paragraph 83 of the Complaint. 5 84. Microsoft denies the allegations of paragraph 84 of the Complaint. 6 85. Microsoft denies the allegations of paragraph 85 of the Complaint. 7 86. Microsoft denies the allegations of paragraph 86 of the Complaint. 8 9 FIFTH CLAIM FOR RELIEF Common Law Unfair Competition 10 87. Microsoft repeats and incorporates its responses to the allegations contained in 11 Paragraphs 1 through 86 of the Complaint, as if fully set forth herein. 12 88. Microsoft denies the allegations of paragraph 88 of the Complaint. 13 89. Microsoft denies the allegations of paragraph 89 of the Complaint. 14 90. Microsoft denies the allegations of paragraph 90 of the Complaint. 15 Microsoft denies that Datel is entitled to any of the relief which it seeks. 16 17 AFFIRMATIVE DEFENSES

18 First Affirmative Defense 19 (Estoppel) 20 Datel’s claims are barred, in whole or in part, by the doctrine of estoppel. Among

21 other things, upon information and belief Datel purchased an Xbox 360 console and subscribed to 22 the Xbox LIVE service, and agreed to contractual terms prohibiting the use of unauthorized 23 accessories, and any reverse engineering or unauthorized modifications to any Xbox 360 software 24 or hardware. Nonetheless, Datel breached that agreement, hacked, reverse engineered and 25 modified the Xbox 360 software and hardware without authorization, and unlawfully 26 circumvented the Xbox 360’s access and copy-protection technologies to develop and sell 27 unauthorized accessories for the Xbox 360. Microsoft also incorporates by reference the factual 28 allegations of its counterclaims.

- 8 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page39 of 126

1 Second Affirmative Defense 2 (Waiver) 3 Datel’s claims are barred, in whole or in part, by the doctrine of waiver. Among 4 other things, upon information and belief Datel purchased an Xbox 360 console and subscribed to 5 the Xbox LIVE service, and agreed to contractual terms prohibiting the use of unauthorized 6 accessories, and any reverse engineering or unauthorized modifications to any Xbox 360 software 7 or hardware. Nonetheless, Datel breached that agreement, hacked, reverse engineered and 8 modified the Xbox 360 software and hardware without authorization, and unlawfully 9 circumvented the Xbox 360’s access and copy-protection technologies to develop and sell 10 unauthorized accessories for the Xbox 360. Microsoft also incorporates by reference the factual 11 allegations of its counterclaims. 12 Third Affirmative Defense 13 (Patent Infringement) 14 Datel’s claims are barred, in whole or in part, because certain of its game 15 controllers for the Xbox 360 infringe Microsoft’s patents. Microsoft is the owner of all right, 16 title, and interest in U.S. Patent Nos. D521,015; D522,011; D547,763; D581,422; D563,480; and 17 D565,668 (collectively, “the Microsoft patents”), duly and properly issued by the U.S. Patent and 18 Trademark Office between May 16, 2006, and November 25, 2008. Copies of these patents are 19 attached hereto as Exhibits A through F. Datel infringed and/or induced others to infringe — 20 and/or would have infringed or/or induced others to infringe — each of these patents by making, 21 using, offering to sell or selling in the United States, or importing into the United States, game 22 controllers, including Datel’s “TurboFire” or “WildFire” game controllers, that embody or 23 incorporate the claims of each of Microsoft’s patents, as clearly illustrated below. 24 Datel’s claims are barred by the doctrines of unclean hands and illegality based on 25 its patent infringement. At a minimum, Datel’s recovery would be set off by any amounts 26 Microsoft could have recovered in an infringement suit. Datel, moreover, has no standing to 27 assert a claim based on the theory that Microsoft’s acts prevented Datel from selling an illegal 28

- 9 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page40 of 126

1 product that violated Microsoft’s intellectual property rights. Any acts by Microsoft that 2 prevented Datel from selling these controllers could not have been anticompetitive or had 3 anticompetitive effect because Datel had no right to sell these controllers. Datel also cannot 4 establish causation, injury or damages based on the inability to sell or the delay in selling a 5 product that infringes Microsoft’s patents and for which Datel would have been enjoined and/or 6 for which Microsoft would have recovered all of Datel’s profits. 7 Datel’s Controller D’015 Patent 8 9 10 11 12 13

14 D’763 Patent D’011 Patent 15 16 17 18 19 20

21 22 23 24 25 26 27 28

- 10 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page41 of 126

1 D’668 Patent D’422 Patent 2 3 4 5 6 7 8 D’480 Patent 9 10 11 12 13 14 15 Datel’s Controller D’015 Patent 16 17 18 19 20

21 22 23 24 25 26 27 28

- 11 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page42 of 126

1 D’763 Patent D’011 Patent 2 3 4 5 6

7 D’422 Patent D’480 Patent 8 9 10 11 12 13 D’668 Patent 14 15 16 17 18 19 20 Fourth Affirmative Defense 21 (Unclean Hands) 22 Datel’s claims are barred, in whole or in part, by the doctrine of unclean hands. 23 Among other things, upon information and belief Datel purchased an Xbox 360 console and 24 subscribed to the Xbox LIVE service, and agreed to contractual terms prohibiting the use of 25 unauthorized accessories, and any reverse engineering or unauthorized modifications to any Xbox 26 360 software or hardware. Nonetheless, Datel breached that agreement, hacked, reverse 27 engineered and modified the Xbox 360 software and hardware without authorization, unlawfully 28

- 12 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page43 of 126

1 circumvented the Xbox 360’s access and copy-protection technologies to develop and sell 2 unauthorized accessories for the Xbox 360, infringed Microsoft’s copyrights, and 3 misappropriated Microsoft’s trade secrets. Microsoft also incorporates by reference the factual 4 allegations of its Third Affirmative Defense and of its counterclaims.

5 Fifth Affirmative Defense 6 (Illegality) 7 Datel’s claims are barred, in whole or in part, because the conduct which Datel 8 alleges has been restrained by Microsoft is illegal under federal and state law. Microsoft 9 incorporates by reference the factual allegations of its Third Affirmative Defense and of its 10 counterclaims. By trafficking in its illegal devices, Datel has violated Microsoft and other game 11 developers’ rights under federal and state law and has induced Microsoft’s Xbox LIVE 12 subscribers to breach their contracts with Microsoft. Among other things, upon information and 13 belief Datel purchased an Xbox 360 console and subscribed to the Xbox LIVE service, and 14 agreed to contractual terms prohibiting the use of unauthorized accessories, and any reverse 15 engineering or unauthorized modifications to any Xbox 360 software or hardware. Nonetheless, 16 Datel breached that agreement, hacked, reverse engineered and modified the Xbox 360 software 17 and hardware without authorization, unlawfully circumvented the Xbox 360’s access and copy- 18 protection technologies to develop and sell unauthorized accessories for the Xbox 360, infringed 19 Microsoft’s copyrights, and misappropriated Microsoft’s trade secrets. 20

21 Sixth Affirmative Defense (Assumption of Risk) 22 Datel’s claims are barred, in whole or in part, by the doctrine of assumption of 23 risk. Among other things, Datel understood before it began developing its unauthorized Xbox 24 360 accessories that the Xbox 360 security model did not permit unauthorized accessories and 25 that Microsoft had an authorized accessory program in which Datel did not participate. 26 27 28

- 13 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page44 of 126

1 Seventh Affirmative Defense 2 (Mitigation of Damages) 3 Datel’s claims are barred, in whole or in part, by its failure to mitigate damages. Among 4 other things, Datel was aware that Microsoft had an authorized accessory program but did not 5 seek to obtain a license for any of its products. Datel also understood before it began developing 6 its unauthorized Xbox 360 accessories that the Xbox 360 security model did not permit 7 unauthorized accessories. 8 9 Eighth Affirmative Defense (Permissible Competitive Activity) 10 Datel’s claims are barred, in whole or in part, because Microsoft’s conduct 11 constitutes permissible competitive activity. Among other things, the incompatibility of Datel’s 12 products with the Xbox 360 is the result of a legitimate product improvement and design 13 innovation. Moreover, the procompetitive benefits of Microsoft’s conduct outweigh any 14 purported anticompetitive harms. 15 16 Ninth Affirmative Defense 17 (Statute of Limitations) 18 Datel’s claims are barred, in whole or in part, by the applicable statute of 19 limitations. 20 Tenth Affirmative Defense

21 (Laches) 22 Datel’s claims are barred, in whole or in part, by the doctrine of laches. 23 PRAYER FOR RELIEF 24 WHEREFORE, Microsoft prays for judgment: 25 1. Dismissing with prejudice Datel’s Complaint in its entirety; 26 2. Awarding Microsoft its costs, disbursements and reasonable attorney’s fees 27 incurred in defending against the Complaint plus interest on any sums awarded thereunder; and 28

- 14 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page45 of 126

1 3. Awarding Microsoft such other and further relief as this Court deems just

2 and proper, including but not limited to the relief sought in the Counterclaims pleaded below. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

- 15 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page46 of 126

21 360 will not recognize most unauthenticated — and thus untrustworthy — accessories, including 22 unauthenticated memory units. The Xbox 360 also is designed to prevent video game data from 23 being transferred to and from a personal computer (“PC”) (and thus to and from the Internet), to 24 prevent arbitrary, unauthenticated data (e.g., hacking software) from being transferred to the 25 console, and to prevent Xbox 360 data from being altered. On a PC, video game data can be 26 hacked, modified, and pirated, and users can download already hacked or modified game data 27 from the Internet. The Xbox did not have the kinds of security and authentication protections that 28 have been built into the Xbox 360, and was severely hacked through the use of “mod chips” and

- 16 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page47 of 126

1 other devices that let users, inter alia, play pirated discs and other applications on their consoles. 2 In part as a result of its strong security model, the Xbox 360 has enjoyed great success among 3 game developers and consumers. 4 4. Datel has responded by developing an entire line of products designed and 5 marketed to bypass and circumvent various security features of the Xbox 360. It has specifically 6 designed products, for example, that enable cheaters and hackers to transfer video game content 7 from the Xbox 360 to a PC, to hack some of the cryptographic protection on that content, to 8 exchange game content over the Internet, and to reload that content and other arbitrary, 9 unauthenticated data onto the Xbox 360. Datel’s products also permit hackers to directly access 10 and modify and manipulate data stored on Xbox 360 storage devices. As Datel admits in its 11 Complaint, it has made a “substantial investment in analyzing the security and authentication 12 techniques” of the Xbox 360 console. 13 5. Datel itself advertises its products as the “perfect” devices for users to copy, 14 transfer and manipulate copyrighted video “game saves” to and from the Xbox 360 console, PCs, 15 and the Internet. Datel also boasts that it distributes “professionally modified game saves that can 16 completely unlock a game, making extra levels, weapons and characters instantly available,” 17 without the permission of video game publishers, i.e., the copyright holders. 18 6. The Xbox 360’s security model and its protections against cheating have helped 19 make Xbox LIVE, Microsoft’s innovative online multiplayer gaming system, a success. Players 20 can use Xbox LIVE confident that others are not using cheating tools to gain an unfair advantage

21 against them. The Xbox 360 and Xbox LIVE also include an innovative “Achievements” point- 22 based scoring system in which players can earn a “Gamerscore” based on both their online and 23 offline game play. The Xbox 360 tracks the Achievements a player earns in offline play and then 24 transmits that information to the Xbox LIVE system. A high Gamerscore gives a user status in 25 the gaming community which fuels competition between players. These innovative features are 26 obviously undermined by cheating. Microsoft has included specific contractual provisions in its 27 Xbox LIVE Terms of Use (“TOU”) prohibiting players from cheating. Datel sells products that 28 are specifically and intentionally designed to induce players to breach these contractual

- 17 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page48 of 126

1 obligations. Moreover, by allowing arbitrary, unauthenticated data to be transferred to the Xbox 2 360 console, Datel’s devices threaten the Xbox 360’s system operating software and potentially 3 risk widespread game piracy. 4 7. Finally, Datel purposefully advertises and sells its products in a manner that 5 falsely and unfairly implies affiliation with the XBOX 360 brand and Microsoft, creating 6 consumer confusion over the source of origin of its products. Datel has used on its product 7 packaging the “XBOX 360” mark and imitated the distinctive color scheme and geometric 8 patterns of Microsoft’s packaging of Xbox 360 products to profit from Microsoft’s established 9 goodwill and reputation. Notably, with respect to many of its products, the Datel trademark or 10 logo appear nowhere on the packaging of the product, or appear only inconspicuously. 11 8. Datel’s conduct has caused and will continue to cause irreparable injury to 12 Microsoft. As a result of Datel’s conduct, Microsoft has spent significant amounts of money to 13 detect and disable Datel’s unlawful technologies and cheating products. Further, Microsoft has 14 lost immeasurable customers and sales as a result of Datel’s unlawful activities, and its reputation 15 and customer goodwill have been irreparably damaged. Microsoft is also entitled to its actual 16 damages, to Datel’s profits, and to substantial statutory damages as a result of Datel’s conduct. 17 THE PARTIES 18 9. Counterclaimant Microsoft is a Washington corporation having its principal place 19 of business at One Microsoft Way, Redmond, Washington 98052. 20 10. Founded in 1975, Microsoft is a worldwide leader in computer software, services

21 and solutions for businesses and consumers. Microsoft has a long history of technical and design 22 innovation in the software and hardware products it develops and distributes. These products 23 include successful and critically acclaimed video gaming systems such as the Xbox, Xbox 360, 24 accessories and devices for such systems, and copyrighted video games. 25 11. On information and belief, Counterclaim-defendant Datel Holdings Ltd. is a 26 British corporation organized and existing under the laws of the United Kingdom having a 27 principal place of business at Stafford Road, Stone, Staffordshire, ST15 ODG, United Kingdom. 28

- 18 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page49 of 126

21 Judicial District pursuant to 28 U.S.C. § 1391(b) because, inter alia, (a) Datel has filed suit in this 22 District in the present action; (b) Datel and/or its agents are doing business in this District; and 23 (c) a substantial part of the events or omissions giving rise to this lawsuit, as well as substantial 24 injury to Microsoft, have occurred or will occur in interstate commerce, in the State of California, 25 and in the Northern District of California as a result of Datel’s violations of the DMCA, the 26 Lanham Act, and state law, as alleged in detail below. Venue also is proper in this District 27 pursuant to 28 U.S.C. § 1400(a) in that Datel may be found in this District in light of its extensive 28 commercial activities here.

- 19 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page50 of 126

1 BACKGROUND FACTS 2 Microsoft’s Xbox 360 System, Xbox LIVE Service and Copyrighted Video Game Content 3 16. Microsoft released the original Xbox video game console in 2001 and released 4 the current version, the Xbox 360, in 2005. The Xbox and Xbox 360, like other contemporary 5 video gaming platforms, such as the Sony PlayStation 2, Sony PlayStation 3, and the Nintendo 6 Wii, are used for both individual game playing as well as multiplayer online gaming, i.e., playing 7 games over the Internet with an entire community of gamers. Microsoft offers consumers, on an 8 annual subscription basis, a service called “Xbox LIVE,” which is an online multiplayer gaming 9 service through which users can access web-based multiplayer gaming and digital media. The 10 Xbox 360 console contains copyrighted operating system software that resides on a file system in 11 the console. 12 17. Microsoft owns valid copyrights in some of the most successful and critically 13 acclaimed video games released in the United States and throughout the world, including the top- 14 selling “Halo” video game series. There are also many third-party Xbox 360 video game 15 publishers who develop, publish, and own valid copyrights in their own video games, such as 16 Activision, who has released the top-selling “Call of Duty” video game series. In developing 17 game software and content for the Xbox 360, third-party game publishers rely on the content 18 protection and security systems developed by Microsoft for the Xbox 360. The development, 19 production, and marketing of video games can cost Microsoft and its third-party partners tens of 20 millions of dollars per game.

21 18. Xbox 360 video games include many different kinds of copyrighted material, 22 including software code, the game’s visual and audio manifestations, such as graphics, character 23 animations, sound effects, and music, as well as the storyline of the video games and design of 24 the game environment. The visual and audio elements include graphics of environmental 25 surroundings (e.g., lakes, oceans, trees, mountains, castles, rain, etc.), sound effects (e.g., swords 26 clashing, the roar of monsters, battle cries, explosions, etc.), music played in different parts of the 27 game, and game player “avatars.” Avatars are graphical representations of players who may wear 28 different clothing and armor and possess a wide variety of weapons and equipment. The unique

- 20 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page51 of 126

1 layout of objects, creatures, and people in different “levels” or portions of a video game 2 environment also constitutes copyrighted material. Moreover, the underlying narratives, stories, 3 and concepts of Xbox 360 games constitute copyrighted material. 4 19. To access and experience the copyrighted dynamic game and its narrative 5 structure built from these various separate copyrighted components — i.e., the changing world of 6 a game, its environment, and other characters and players — a user must access and utilize the 7 game through accessories and devices connected to the Xbox 360 console, including video game 8 controllers. When users play games on the Xbox 360, they use the Xbox 360 extensively to cache 9 copyrighted video game content into memory, including audio and visual game content. 10 20. One innovative and novel feature of the Xbox 360 and Xbox LIVE service is the 11 “Achievements” point-based scoring system, in which players can earn a “Gamerscore” based on 12 both their online and offline game play. When playing offline, the Xbox 360 console tracks a 13 player’s Achievements and then reports them to Xbox LIVE. A player’s Achievements are 14 reflected in their “Gamerscore,” which is attached to the player’s unique Xbox LIVE username, 15 known as the player’s “Gamertag.” Achievements are awarded for the completion of game- 16 specific challenges, such as beating a level, killing a specific villain, locating an item of treasure, 17 amassing a specified number of wins against other players in Xbox LIVE matches, etc. 18 Achievements allow users to compare their game prowess with other players, and a user’s 19 Gamerscore reflects his or her gaming reputation within the gaming community. A high 20 Gamerscore gives a user status in the gaming community which fuels competition between

21 players, e.g., there is status in being the first person to earn all of the Achievements of a particular 22 game. The Xbox 360’s unique and innovative Achievements system is one of its most attractive 23 and popular features among video game players. Many Xbox 360 users invest significant time 24 and effort in earning and maintaining their Gamerscore. There are international Gamerscore 25 rankings of Xbox 360 players. Each retail game sold generally comes with a minimum of 1,000 26 Achievements to be earned. The desire to achieve a higher Gamerscore drives, in part, game 27 sales. 28

- 21 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page52 of 126

1 21. Users may permanently store game data, including their Achievements, in “game 2 saves” on an Xbox 360 hard drive or memory card. Game saves are files that can permanently 3 store, among other things, a copyrighted detailed description of the audiovisual display for a 4 saved game level, i.e., what goes where in a level, as well as containing copyrighted audio and 5 visual game files. The appearance and related narrative structure of the entire game universe can 6 be stored in a game save, including the location, appearance, and status of hundreds or thousands 7 of persons and objects. Game saves may also include a description of a player’s status, including 8 the avatar’s appearance, skills, health, and weapons. Although some game saves might not 9 contain any audio or visual files, they provide the game engine — the computer program running 10 the game — with instructions as to what particular sights and sounds to generate upon the playing 11 of a saved game. Each file has on it encrypted and protected data that associates the save with the 12 user’s console and unique Gamertag. Game saves effectively control a user’s access to a video 13 game’s copyrighted code and dynamic elements, e.g., the audio, visual, and narrative elements 14 accessible at a particular game level, and the associated Achievements available to the user. 15 22. For example, Halo 3 saves the entire state of a game. Halo 3 game saves, which 16 are roughly 8 megabytes in size, are comprised of multiple regions and store a substantial amount 17 of copyrighted game data. These regions include data about the various objects and players in the 18 game environment, including highly descriptive data regarding each object and player’s location, 19 visualization, sound, physical properties, and behavior. Below, for example, is an image 20 generated by the Xbox 360 and Halo 3 game software from the data contained in a game save.

21 The game save contains a representation of the image, including the location of each object, each 22 object’s appearance, velocity, and direction, what each object is carrying, and each object’s 23 behavior (e.g., whether it is guarding an entrance, searching, firing a weapon, etc.). 24 25 26 27 28

- 22 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page53 of 126

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 23. Microsoft does not sell, and has not licensed other entities to sell, devices that 17 allow users to transfer and copy individual game save files to other devices, such as a PC hard 18 drive. To the contrary, Microsoft has designed the Xbox 360 to prohibit consumers from 19 transferring game save files to or from a PC—and thus to or from the Internet. Copyrighted 20 material stored in game saves are intended to be shared though Xbox LIVE.

21 Xbox LIVE TOU and Video Game Software License Prohibitions 22 24. Copyrighted video games sold for the Xbox 360 are subject to contractual terms 23 permitting the authorized uses of games on the Xbox 360 and in the Xbox LIVE environment. 24 These agreements prohibit the unauthorized reproduction and alteration of the copyrighted video 25 game content and the use of unauthorized cheats and cheating devices. 26 25. The Xbox LIVE TOU (attached hereto as Exhibit G), which a user must agree to 27 prior to subscribing to and using the Xbox LIVE service, provide that a subscriber’s “use” of any 28 “software or content,” including “games,” “associated” with the Xbox LIVE service is subject to

- 23 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page54 of 126

1 “the terms of the license . . . presented to [a subscriber] for acceptance with that software,” and if 2 “there is no license presented” to a subscriber, then Microsoft grants the subscriber a “limited, 3 personal, non-exclusive, revocable license to use the software only for and during the authorized 4 use of this Service and/or the game or other product to which the software relates.” Ex. G at 8 5 (emphasis added). 6 26. Under the Xbox LIVE TOU, a subscriber “may not copy, download, modify or 7 create derivative works, publish, transmit, sell or attempt to sell or transfer, or otherwise use or 8 exploit any software unless [Microsoft or its] suppliers have expressly allowed you to do so . . . . 9 [Microsoft or its] suppliers, own the title, copyright, and other intellectual property rights in the 10 software and Service, and the software and Service are solely licensed and not sold. [Microsoft 11 and its] suppliers reserve all other rights to the software and Service that are not expressly granted 12 in this contract.” Id. (emphases added). The Xbox LIVE TOU further provide that a user may 13 not “use the Service or any material or information made available through the Service in any 14 manner that infringes any copyright, trademark, patent, trade secret, or other proprietary right of 15 us or any third party,” may not “disassemble, decompile, create derivative works of, reverse 16 engineer,” or “modify . . . any game, application, or other content available or accessible through 17 the Service, or any hardware or software associated with the Service or with an original Xbox or 18 Xbox 360,” and “may not . . . use or distribute unauthorized cheats, macros, or scripts.” Id. at 3, 19 8, 10 (emphasis added). 20 27. Some third-party game publishers include supplemental contractual terms in the

21 packaging of their games. For example, the top-selling game “Call of Duty: Modern Warfare 2,” 22 published and sold by Activision, includes a software license (attached hereto as Exhibit H) that 23 prohibits users from modifying or creating derivative works of the video game, and from 24 engaging in cheating in online multiplayer game settings, which result in an automatic 25 termination of the license and the right to use the game for any purpose: 26 YOU SHALL NOT: 27 * Reverse engineer, derive source code, modify, decompile, disassemble, or 28 create derivative works of this Program, in whole or in part.

- 24 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page55 of 126

1 . . . . *Hack or modify (or attempt to modify or hack) the Program, or create, develop, 2 modify, distribute or use any software programs, in order to gain (or allow others 3 to gain) advantage of this Program in any on-line multiplayer game settings. . . . . 4 Id. at 17-18 (emphases added). 5 The Xbox 360’s Access and Copy-Protection Mechanisms 6 28. In developing the next generation Xbox 360, Microsoft invested significant 7 amounts of money and resources to protect its and its third-party partners’ copyrighted video 8 game content. 9 29. The Xbox 360 employs several effective technological protection layers, 10 including an authentication and encryption scheme to prevent unauthorized, unapproved devices 11 from accessing, copying, transferring, modifying, or utilizing Xbox 360 content; Gamertags to 12 associate content with individual consumers; integrity hash systems to ensure that game content is 13 not modified or tampered with; and unique, unpublished file formats and electrical interfaces to 14 prevent unauthorized access to, modifying, transferring, and copying of copyrighted video game 15 content on PCs. 16 30. By effectively protecting copyrighted video game content against unauthorized 17 access, alteration, and reproduction, these measures prevent the infringement of copyrighted 18 video game works, hacking, piracy, and cheating that undermines the competitive online gaming 19 environment, and provide users with a consistent and positive gaming experience. These 20 measures further prevent against unauthorized access to, and potential attacks upon, the system 21 operating software of the Xbox 360 console. 22 31. In April 2010, Microsoft began to permit Xbox 360 game data to be stored on 23 USB flash memory units. The decision to permit the use of USB flash memory units was first 24 made in 2008. In connection with permitting USB flash memory devices, Microsoft implemented 25 a new, proprietary file container for game data. One benefit of that file container is that it 26 replaces, in part, the protection for game data provided by the Xbox 360’s unique electrical 27 28

- 25 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page56 of 126

1 interface and game data file format, and effectively protects against unauthorized access to, 2 alteration, and reproduction of copyrighted video game content within the meaning of the DMCA.

3 Microsoft’s Xbox 360 Trademark 4 32. Microsoft carefully protects its trademarks. 5 33. Microsoft owns common law rights in the “XBOX 360” mark. 6 34. Microsoft also is the owner of U.S. federal registration nos. 3573970, 3538652, 7 3538651, 3300210, and 3252556, for the “XBOX 360” mark, covering, inter alia, “interactive 8 video game devices comprised of computer hardware and software and accessories,” such as 9 “game consoles, game controllers and software for operating game controllers,” and “electronic 10 devices,” such as “computer hardware for accessing global computer and communication 11 networks; computer hardware and computer peripherals.” Copies of the certificates for these 12 federal trademark registrations are attached hereto as Exhibit I. 13 35. “XBOX 360” has been used in commerce by Microsoft since 2005. Microsoft’s 14 use has been substantially continuous and exclusive. 15 36. Microsoft has used the “XBOX 360” mark on the packaging of its console, 16 accessories and devices with a distinctive color scheme of white, lime green, and grey, with 17 curved green arcs. 18 19 20

21 22 23 24 25 26 27 28

- 26 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page57 of 126

1 37. Microsoft has attained strong name recognition in its famous “XBOX 360” mark, 2 which has come to be associated with Microsoft and identifies Microsoft as the source of various 3 Xbox 360 video gaming products offered in connection with the mark. 4 38. Microsoft has developed substantial goodwill in the “XBOX 360.” Microsoft has 5 spent millions of dollars marketing and promoting its Xbox 360 goods in connection with its 6 XBOX 360 mark, and considers its XBOX 360 mark to be an important and valuable asset. 7 Datel’s Circumvention and Cheating Products 8 39. As Datel explains on its website, Datel “creates the world’s best-selling 9 videogame cheat products, generating annual sales of over $150 [million] through a global 10 network of distribution and retail partners.”1 Codejunkies.com, “Datel’s consumer site,” employs 11 a “dedicated team of cheat code developers” to provide “cheat codes” and “game saves” for “the 12 latest games as soon as they are released.”2 On that site, Datel advertises and sells numerous 13 different kinds of circumvention and cheat products. 14 40. Datel’s unauthorized devices and accessories for the Xbox 360 by intent and 15 design circumvent and bypass some of the Xbox 360’s technological measures that effectively 16 protect against unauthorized access to, alteration, and copying of copyrighted video game content. 17 As Datel admits in its Complaint, through “substantial investment in analyzing the security and 18 authentication techniques” in the Xbox 360 console, Datel has “overcome,” i.e., circumvented and 19 hacked through some of Microsoft’s technological protection measures. Complaint ¶ 30. 20 41. Datel’s devices facilitate unauthorized access to, reproduction, alteration, and 21 dissemination of copyrighted video game code and other copyrighted video game content (e.g., 22 levels, characters, sounds, images, etc.). Once these copies are “in the clear” and in the hands of 23 others, repeated reproduction and distribution are possible. 24 42. Datel’s products, for example, allow users to copy, transfer and manipulate game 25 save files from the Xbox 360 console to their PCs, or transfer unauthorized modified game saves 26

27 1 http://www.datel.co.uk/pages/about_us.aspx (last visited May 28, 2010). 28 2 http://www.datel.co.uk/pages/codejunkies.aspx (last visited May 28, 2010).

- 27 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page58 of 126

1 found on the Internet to the Xbox 360 console. Datel admits that its “MAX” memory card is 2 marketed to allow users to “save vital game information from your Xbox 360 games,” such as 3 “levels” and “characters.” Id., ¶ 18. Unlike the official memory cards Microsoft sells for the 4 Xbox 360, Datel’s memory cards use SD cards and are sold with an SD reader that allows users to 5 transfer game saves from the SD card “straight into any free USB port on your PC.”3 As Datel 6 advertizes, the MAX memory card is the “perfect” card for users to “make use” of purportedly 7 “suitable game saves and content downloaded from the internet,”4 i.e., hacked or modified game 8 saves. 9 43. Similarly, Datel admits that its “XSATA” and “Xport” products are “devices for 10 transferring data between an Xbox 360 and a personal computer, allowing users to store Xbox 11 demos, game saves and other materials on a personal computer when they are not being used on 12 the Xbox 360.” Id., ¶ 15. Datel states on its website that with its “Xport” device a user can 13 “install files from your PC to your console’s hard drive, and inspect, modify and install files of 14 your own . . . .” 5 Likewise, Datel advertises its “Transfer Kit” device as allowing users to 15 “email” and “share your saves with friends from all over the world,” as long as the save itself is 16 “not locked to your own console or Xbox Live account,” 6 in other words, further protected by 17 additional Xbox 360 technological measures, such as Gamertags. Datel’s “Action Replay 18 360Powersaves,” as well as other pirating tools available on the Internet, allow users to crack that 19 extra layer of protection. 20 44. With Datel’s “Action Replay 360Powersaves,” Datel has cracked the encryption

21 scheme Microsoft employs to ensure that game saves are not modified or sold. The product 22 contains—as Datel itself boasts—“professionally modified game saves that can completely 23 unlock a game, making extra levels, weapons and characters instantly available.”7 The “Action

24 3 http://us.codejunkies.com/Products/XB360-MAX-Memory-4GB__EF000778.aspx (last visited May 28, 2010). 25 4 Id. 5 http://us.codejunkies.com/Products/XB360-Xport__EF000191.aspx (emphasis added) (last 26 visited May 28, 2010). 6 http://us.codejunkies.com/Products/XB360-Transfer-Kit__EF000188.aspx (last visited May 28, 27 2010). 7 http://uk.codejunkies.com/Products/XB360-Action-Replay-360Powersaves__EF000793.aspx 28 (emphasis added) (last visited May 28, 2010).

- 28 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page59 of 126

1 Replay 360 Powersaves” allows a user to “resign” (in Datel’s parlance) modified game saves, 2 tricking the Xbox 360 into believing that these are legitimate game saves earned by the user. Not 3 only do these game saves include copyrighted works or derivative works, but by using these 4 products, players can engage in authorized cheating by obtaining unearned Achievements, 5 immediately advancing to new levels and accumulating greater weapons and strengths than by 6 playing the game as the game publisher intended, to the detriment of other players. 7 45. Further, Datel’s accessories permit unauthorized access to and alteration of 8 copyrighted dynamic video game content, i.e., the devices modify the changing and active video 9 game environment, including the game’s intended narrative structure. By facilitating the hacking 10 of game saves, or directly hacking the saves themselves, Datel’s products give users unauthorized 11 access to game levels (including the level’s copyrighted audio, visual, and narrative components), 12 additional strength, lives, or weapons, and associated Achievements that users themselves have 13 not earned through playing the game. Not only do such modifications change the gaming 14 experience for players using Datel’s products through unauthorized cheating, they may also even 15 alter and frustrate the creative expression of the game for other non-cheating users. With hacked 16 game saves, users can skip multiple game levels, defeat adversaries with unearned strength or 17 weapons, and severely undermine the competitive online gaming environment. These devices 18 fundamentally change users’ interactions with the copyrighted dynamic video game environment 19 in ways that game publishers never intended. 20 46. Indeed, in describing the “Xport” product on its website, Datel states that users

21 can “[d]ownload fan-created files and enhance your games in ways Microsoft never intended. . . 22 Transfer game saves from the Internet to boost your achievements!”8 23 47. Upon information and belief, Datel has full knowledge of the infringement, 24 cheating, and other unauthorized conduct that players engage in through using Datel’s products, 25 Datel makes a direct and material contribution to such conduct, actively encourages such conduct, 26 and deliberately refrains from taking measures to prevent further damage to Microsoft’s and other

27 8 http://us.codejunkies.com/Products/XB360-Xport__EF000191.aspx (emphasis added) (last 28 visited May 28, 2010).

- 29 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page60 of 126

1 game developers’ copyrighted works. Moreover, Datel derives a direct financial benefit from end 2 users’ unauthorized conduct, while declining to exercise its right and ability to stop or limit that 3 conduct. 4 48. Through allowing users to cheat and gain unearned “Achievements,” Datel’s 5 products undermine the integrity and legitimacy of the entire Xbox LIVE service and its 6 Achievement system. Further, Datel’s products induce end users to breach the terms of the valid 7 and enforceable Xbox LIVE TOU and video game software licenses, as described above. Datel 8 actively sells and promotes the use of its products even though it knows that their use by gamers, 9 resulting in unauthorized access to, reproduction and alteration of copyrighted video game 10 content and cheating in the Xbox LIVE environment, violates the Xbox LIVE TOU and game 11 software licenses. Datel directly profits from the sale of its products knowing their uses may 12 directly breach Microsoft’s legitimate and substantial contractual rights, that this interference 13 causes Microsoft to expend substantial resources detecting cheating and enforcing its anti- 14 cheating policies while potentially losing subscribers and Xbox LIVE service revenue, and that 15 the use of these products upsets the carefully balanced competitive Xbox LIVE environment. 16 49. Datel’s devices also threaten the Xbox 360’s system operating software and 17 potentially risk widespread game piracy. Datel’s products, such as the “MAX” memory card with 18 its removable SD card and the “Transfer Kit,” permit hackers to transfer unauthenticated, 19 arbitrary data from editable environments such as a PC to the Xbox 360 console and/or to directly 20 modify data on Xbox 360 memory cards or hard drives. This poses a particular danger to the

21 Xbox 360 system operating software. Microsoft purposefully developed the Xbox 360 with 22 propriety memory slots protected by unique electrical interfaces and an authentication scheme, 23 one benefit of which is to preclude people in the ordinary course from loading arbitrary, 24 unauthenticated data (e.g., hacking software) onto an Xbox 360. Datel’s products remove one 25 security barrier protecting the Xbox 360’s system operating software and create a potential for 26 game piracy. 27 28

- 30 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page61 of 126

1 Datel’s Unauthorized Use of Microsoft’s XBOX 360 Trademark 2 50. Without any authorization or consent from Microsoft, Datel has used Microsoft’s 3 famous “XBOX 360” mark in commerce to sell its unlawful accessories and devices in a manner 4 likely to confuse consumers as to their association, affiliation, endorsement or sponsorship with 5 or by Microsoft. 6 51. After Microsoft acquired and perfected its rights in the “XBOX 360” mark, Datel 7 commenced advertising, offering for sale, and selling various products using the “XBOX 360” 8 mark, in the United States and throughout the world. Datel’s use of the “XBOX 360” mark 9 includes Datel’s display of the mark on the packaging of several of its products, including, but not 10 limited to, Datel’s “Xport” and “Xsata” products, whose names themselves bear a significant and 11 confusing similarity to “Xbox,” and Datel’s “MAX” memory cards and “MAX” battery charger 12 products. For example, Datel has even named its “Xport” product the “Xbox 360 Docking 13 Station,” which title appears on the packaging of the product and on the product itself. (Emphasis 14 added). Notably Datel’s own “Datel” mark appears either not at all or only inconspicuously on its 15 products. Datel also has imitated on its packaging the distinctive white, lime green, and grey 16 color scheme, even adding curved green arcs. 17 18 19 20

21 22 23 24 25 26 27

- 31 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page62 of 126

2 3 4 5 6 7 8 9

10 11 52. Indeed, Datel has used the trademarks of other video gaming platforms and 12 similarly imitated their packaging as well. For example, the packaging of Datel’s products for the 13 Nintendo Wii imitate the Wii’s distinct font and white, torquoise, and grey coloring scheme, and 14 its products for the Sony Playstation 3 mimic the Playstation 3’s red and black coloring scheme. 15 Nintendo Wii: Datel Wii Accessory: 16 17 18 19 20

21 22 23 24 25 26 27 28

- 32 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page63 of 126

1 Sony Playstation 3: Datel Playstation 3 Accessory: 2 3 4 5 6 7 8 9 10 11 53. Datel’s products and devices are not authorized, approved, endorsed, or 12 sponsored by, or associated, affiliated, or connected with Microsoft, and Datel’s use of the 13 “XBOX 360” mark is not authorized, approved, endorsed, or sponsored by, or associated, 14 affiliated, or connected with Microsoft. 15 54. Upon information and belief, in using the “XBOX 360” mark, Datel has willfully 16 and deliberately sought to profit from Microsoft’s established goodwill and reputation. Although 17 Datel is not licensed or otherwise sponsored by Microsoft, its products are sold in a manner that 18 falsely and unfairly implies affiliation with the “XBOX 360” brand and Microsoft, creating 19 consumer confusion over the source of origin of Datel’s products. Datel’s products also dilute 20 the distinctive quality of the “XBOX 360” mark, by both blurring and tarnishment. 21 22 Datel’s Infringement of Microsoft’s Copyrighted Software Code 55. The Xbox 360 authentication and security system prevents unauthenticated — 23 and therefore untrustworthy — accessories from functioning with the Xbox 360 console. The 24 security system within the Xbox 360 console issues a “challenge” to accessories that attempt to 25 connect with the Xbox 360 console. A computer chip contained in authorized accessories then 26 performs a complex series of calculations, using a precise sequence of algorithms and secret keys, 27 28

- 33 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page64 of 126

1 to compute its response to the challenge. Accessories are only authenticated if they return the 2 exact response expected by the Xbox 360 console. 3 56. Microsoft is the author and developer of software code for the Xbox 360 console 4 used during the authentication of peripheral devices to the Xbox 360 console (hereinafter, 5 “Authentication Code”). Microsoft is, and at all relevant times has been, the owner of all 6 copyrights in the Authentication Code, including in both the object code and the source code, and 7 holds, inter alia, the following certificates of registration granted by the Copyright Office: 8 TX0006839291 and TX0007196985. 9 57. Microsoft also is the author of copyrighted software code residing in Microsoft’s 10 Xbox 360 Wireless N Networking Adapter (hereinafter, “Adapter Code”). Microsoft is, and at all 11 relevant times has been, the owner of all copyrights in the Adapter Code, including in both the 12 object code and the source code. On March 25, 2011, Microsoft submitted to the U.S. Copyright 13 Office its application for a certificate of registration for the Adapter Code. 14 58. Microsoft is informed and believes that Datel had access to the source code of the 15 Authentication Code and the Adapter Code, and the ideas, structures, and principles underlying 16 them. 17 59. Microsoft is informed and believes that a security chip used in several Datel 18 products — including without limitation Datel’s MAX memory card, wired and wireless 19 controllers, wireless headset, and its wireless networking adapter — contain code that is identical 20 or substantially similar to Microsoft’s Authentication Code in its underlying logic, structure,

21 organization and sequence. The Datel security chip source code contains substantially similar 22 function names, routine structures, and code within routines, including but not limited to the order 23 of parameters, the use of local variables, and loop parameters. 24 60. Microsoft is informed and believes that Datel’s wireless networking adapter 25 contains code that is identical to Microsoft’s Adapter Code. Microsoft is informed and believes 26 that Datel copies Microsoft’s Adapter Code verbatim. 27 61. The similarities between Microsoft’s Authentication Code and Adapter Code and 28 Datel’s code are not dictated by the requirements of the functions to be performed, the limitations

- 34 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page65 of 126

1 of the programming environment, efficiency or good programming considerations, or other

2 external constraints, nor are they derived from the public domain. In other words, the elements of 3 the Microsoft’s code copied by Datel reflect Microsoft’s original, and therefore copyrighted, 4 expression.

5 Datel’s Misappropriation of Microsoft’s Trade Secrets 6 62. In the course of its business, Microsoft has invested substantial amounts of time 7 and money in the development of confidential and trade secret information related to the 8 technological security layers of the Xbox 360, including the Xbox 360’s authentication and 9 security system. Microsoft’s trade secret information includes, but is not limited to, the precise 10 sequence of algorithms and the derivation of keys used by its accessory security system. 11 63. Microsoft’s trade secret information derives independent economic value by 12 allowing Microsoft to limit the use of unproven and unauthorized accessories on the Xbox 360 13 console. This information is not generally known to the public or to persons who can obtain 14 economic value from its disclosure or use, and it gives Microsoft a competitive advantage over 15 competing videogame platform manufacturers such as Sony and Nintendo in its ability to prevent 16 untrustworthy accessories from functioning with the Xbox 360 console, and thereby protect its 17 customers and game developers against cheating, hacking, and piracy. Without access to the 18 precise sequence of algorithms and the secret keys used by Microsoft’s accessory security system, 19 it is substantially more difficult for individuals or companies to design unauthorized accessories 20 that may be used with an Xbox 360 console. 21 64. Microsoft uses a variety of reasonable means to protect the secrecy of its trade 22 secret information from public disclosure, including various security policies and technologies 23 limiting the number of people who can have access to trade secret information. 24 65. 25 26 27 28

- 35 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page66 of 126

1 66.

2 3 4 5 67. 6 7 8 68. 9 10 11 69. 12 13 Microsoft’s Injury As A Result of Datel’s Conduct 14 70. Datel’s devices and products, by design and operation, cause immediate and 15 irreparable harm to Microsoft and infringe upon Microsoft’s exclusive rights protected under 16 federal law and state law. 17 71. Through circumventing Microsoft’s technological protection measures, Datel’s 18 devices permit and threaten widespread unauthorized uses, alteration, dissemination, and piracy 19 of copyrighted video game content, diminishing the value of Microsoft’s and other game 20 developers’ copyrighted works. 21 72. Datel’s devices also undermine the carefully balanced competitive gaming 22 environment of the Xbox 360 by facilitating unauthorized cheating. Microsoft has spent 23 substantial sums of money attempting to detect and disable Datel’s unlawful circumvention 24 technologies, and to detect cheating occurring on the Xbox LIVE network through the use of 25 Datel’s illegal products. Microsoft has lost immeasurable numbers of customers and sales as a 26 result of Datel’s activities, and its reputation and customer goodwill have been damaged. 27 Moreover, Datel has and continues to directly infringe Microsoft’s copyrights, trademark rights, 28

- 36 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page67 of 126

1 and misappropriate Microsoft’s trade secrets. Datel seeks to profit from Microsoft’s investments, 2 established goodwill, and reputation. 3 73. All of these harms constitute irreparable injury. 4 FIRST CAUSE OF ACTION 5 (VIOLATION OF THE DIGITAL MILLENNIUM COPYRIGHT ACT, 6 17 U.S.C. §§ 1201, et seq.) 74. Microsoft incorporates by reference paragraphs 1 - 73 above as though fully set 7 forth herein. 8 75. Section 1201(a)(2) of the DMCA, 17 U.S.C. § 1201(a)(2), provides, in pertinent 9 part, that no person shall manufacture, import, offer to the public, provide, or otherwise traffic in 10 any technology, product, service, device, component, or part thereof, that (A) is primarily 11 designed for the purpose of circumventing a technological measure that effectively controls 12 access to a work protected under this title; (B) has only limited commercially significant purpose 13 or use other than to circumvent a technological measure that effectively controls access to a 14 work protected under this title; or (C) is marketed by that person or another acting in concert 15 with that person with that person’s knowledge for use in circumventing a technological measure 16 that effectively controls access to a work protected under this title. 17 76. Section 1201(b) of the DMCA, 17 U.S.C. § 1201(b) provides, in pertinent part, 18 that no person shall manufacture, import, offer to the public, provide, or otherwise traffic in any 19 technology, product, service, device, component, or part thereof, that (A) is primarily designed 20 for the purpose of circumventing protection afforded by a technological measure that effectively 21 protects a right of a copyright owner under this title in a work or a portion thereof; (B) has only 22 limited commercially significant purpose or use other than to circumvent protection afforded by 23 a technological measure that effectively protects a right of a copyright owner under this title in a 24 work or a portion thereof; or (C) is marketed by that person or another acting in concert with 25 that person with that person’s knowledge for use in circumventing protection afforded by a 26 technological measure that effectively protects a right of a copyright owner under this title in a 27 work or a portion thereof. 28

- 37 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page68 of 126

1 77. The various layers of technological protection Microsoft employs on the Xbox 2 360 console — including an authentication scheme to prevent unauthorized, unapproved devices 3 from accessing, copying, or utilizing Xbox 360 content; Gamertags to associate content with 4 individual consumers; integrity hash systems to ensure that game content is not modified or 5 tampered with; unique, unpublished file formats; and unique electrical interfaces to prevent 6 unauthorized access to copyrighted video game content and the Xbox 360 system software — 7 (a) effectively control access to works protected by the Copyright Act and (b) effectively protect 8 copyrighted material, including protecting Microsoft’s and other game developers’ reproduction 9 and derivative works rights, by controlling whether an end user can access, reproduce, alter, 10 manufacture, record, adapt, and/or distribute copies of Microsoft’s and other game developers’ 11 copyrighted works or portions thereof. 12 78. Datel offers to the public, provides, and/or otherwise traffics in accessories and 13 devices that (a) are primarily designed or produced for the purpose of circumventing the Xbox 14 360’s technological protection measures or the protection offered by such measures; (b) have 15 only limited commercially significant purpose or use other than to circumvent the Xbox 360’s 16 technological protection measures or the protection offered by such measures; and/or (c) are 17 marketed by Datel and/or others acting in concert with it with the knowledge that these 18 accessories and devices are used to circumvent the Xbox 360’s technological protection 19 measures or the protection afforded by such measures. 20 79. By circumventing its Xbox 360 accessories and devices and by offering to the

21 public and providing the services hereinabove alleged, Datel has violated 17 U.S.C. 22 §§ 1201(a)(2), and 1201(b). 23 80. As a direct and proximate result of the infringements by Datel, Microsoft is 24 entitled to damages and Datel’s profits in amounts to be proven at trial which are not currently 25 ascertainable. 26 81. Alternatively, at Microsoft’s election, it is entitled to an award of the maximum 27 statutory damages as permitted by the DMCA, 17 U.S.C. § 1203(c). Microsoft also is entitled to 28 Datel’s profits from its violations of 17 U.S.C. §§ 1201(a)(2), and 1201(b).

- 38 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page69 of 126

1 82. As a direct and proximate result of the foregoing acts and conduct, Microsoft has 2 sustained and will continue to sustain substantial, immediate and irreparable injury, for which 3 there is no adequate remedy at law. Pursuant to 17 U.S.C. § 1203, Microsoft is entitled to a 4 preliminary and permanent injunction prohibiting further violations of § 1201. 5 83. Microsoft is further entitled to its attorneys’ fees and full costs pursuant to 17 6 U.S.C. § 1203. 7 SECOND CAUSE OF ACTION 8 (FEDERAL TRADEMARK INFRINGEMENT, 9 15 U.S.C. §§ 1114 AND 1125(a)) 84. Microsoft incorporates by reference paragraphs 1 - 73 above, as though fully set 10 forth herein. 11 85. Microsoft owns U.S. federal registrations nos. 3573970, 3538652, 3538651, 12 3300210, and 3252556, for the “XBOX 360” mark. These registrations are in full force and 13 effect and are enforceable. 14 86. Datel’s use of the “XBOX 360” mark in interstate commerce, without the consent 15 or authorization of Microsoft, is likely to cause consumer confusion or to cause mistake or to 16 deceive as to the origin of the products and services offered and sold by Datel and as to their 17 affiliation, connection, or association with and/or endorsement or approval by Microsoft. 18 87. The foregoing acts of Datel constitute false designation of association, affiliation, 19 connection, endorsement and/or approval under 15 U.S.C. § 1125(a). 20 88. Datel’s actions also constitute the use in interstate commerce of a reproduction, 21 counterfeit, copy, or colorable imitation of a registered trademark of Microsoft in connection 22 with the sale, offering for sale, distribution, or advertising of goods or services on or in 23 connection with which such use is likely to cause confusion or mistake, or to deceive, in 24 violation of 15 U.S.C. § 1114. 25 89. Upon information and belief, Datel has engaged in such false designation of 26 origin, association, affiliation, connection, endorsement and/or approval knowingly, willfully, 27 28

- 39 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page70 of 126

1 deliberately, and in conscious disregard of Microsoft’s rights, making this an exceptional case 2 within the meaning of 15 U.S.C. § 1117. 3 90. Microsoft has been damaged and will continue to be damaged, and Datel has 4 been unjustly enriched, by such unlawful conduct in an amount to be proven at trial. 5 91. Alternatively, Microsoft is entitled to the maximum statutory damages with 6 respect to each type of goods or services sold that infringes Microsoft’s “XBOX 360” mark, or 7 for such other amounts as may be proper under 15 U.S.C. § 1117. 8 92. Microsoft is further entitled to recover its attorneys’ fees and full costs pursuant 9 to 15 U.S.C. § 1117. 10 93. In addition, Datel’s conduct described herein has caused and, if not enjoined will 11 continue to cause, irreparable damage to Microsoft’s rights in its marks, and to the business, 12 positive reputation and goodwill of Microsoft, which cannot be adequately compensated solely 13 by monetary damages. Microsoft therefore has no adequate remedy at law and seeks permanent 14 injunctive relief pursuant to 15 U.S.C. § 1116. 15 THIRD CAUSE OF ACTION 16 (FEDERAL DILUTION, 15 U.S.C. § 1125(c)) 17 94. Microsoft incorporates by reference paragraphs 1 - 73 above, as though fully set 18 forth herein. 19 95. Microsoft’s “XBOX 360” mark is extraordinarily famous and highly distinctive, 20 and became famous and highly distinctive before any of the unlawful conduct of Datel 21 complained of herein. 22 96. Datel’s aforesaid acts constitute trademark uses in commerce that are likely to 23 dilute the distinctive quality of the “XBOX 360” mark, by both blurring and tarnishment, in 24 violation of Section 43(c) of the Lanham Act, 15 U.S.C. § 1125(c). 25 97. Upon information and belief, Datel has engaged in such conduct willfully, 26 deliberately, and in conscious disregard of Microsoft’s rights, making this an exceptional case 27 within the meaning of 15 U.S.C. § 1117. 28

- 40 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page71 of 126

1 98. In addition, Datel’s conduct described herein has caused and, if not enjoined will 2 continue to cause, irreparable damage to Microsoft’s rights in its marks, and to the business, 3 positive reputation and goodwill of Microsoft, which cannot be adequately compensated solely 4 by monetary damages. Microsoft therefore has no adequate remedy at law and seeks permanent 5 injunctive relief pursuant to 15 U.S.C. § 1116. 6 FOURTH CAUSE OF ACTION 7 (COMMON LAW TRADEMARK INFRINGEMENT) 8 99. Microsoft incorporates by reference paragraphs 1 - 73 above, as though fully set 9 forth herein. 10 100. Microsoft owns common law rights in the “XBOX 360” mark that date back to at 11 least 2005. 12 101. The acts and conduct of Datel as alleged in the Second Cause of Action above 13 constitute trademark infringement under the common law of California and the substantially 14 similar common law of other states. 15 102. As a direct and proximate result of Datel’s conduct, Microsoft has been damaged 16 in an exact amount to be proven at trial. 17 18 FIFTH CAUSE OF ACTION (INDUCING BREACH OF CONTRACT) 19 103. Microsoft incorporates by reference paragraphs 1 - 73 above, as though fully set 20 forth herein. 21 104. The Xbox LIVE TOU constitute a valid and existing contract between Microsoft 22 and its Xbox LIVE users. 23 105. Datel had knowledge of the Xbox LIVE TOU and of the valid and existing 24 contract between Microsoft and its Xbox LIVE users created by the Xbox LIVE TOU. 25 106. Datel committed intentional and unjustified acts to induce Xbox LIVE users to 26 breach their contract with Microsoft. 27 28

- 41 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page72 of 126

1 107. Xbox LIVE Users who were sold and were induced to utilize Datel’s products 2 and devices did in fact breach the Xbox LIVE TOU by acts, including but not limited to 3 engaging in unauthorized cheating in the Xbox LIVE environment and creating unauthorized 4 reproductions and alterations of copyrighted Microsoft video game content through the use of 5 Datel’s products and devices. 6 108. These breaches of the Xbox LIVE TOU were caused by Datel’s unjustified and 7 wrongful conduct. Datel’s products and devices which caused Xbox LIVE users to breach the 8 Xbox LIVE TOU are independently illegal under federal law and violate established standards 9 of fair play within the online multiplayer video gaming environment. 10 109. Datel’s conduct has damaged Microsoft, and caused and continues to cause 11 irreparable and incalculable harm and injury to Microsoft. 12 110. Microsoft is entitled to injunctive relief, compensatory damages, attorneys’ fees, 13 costs and/or other equitable relief. 14 111. Microsoft is informed and believes that Datel’s conduct was undertaken with the 15 intent to injure Microsoft, or with a willful and conscious disregard of Microsoft’s rights, and 16 constitutes clear and convincing evidence of oppression, fraud and malice. As a result, 17 Microsoft is entitled to an award of punitive damages against Datel in an amount sufficient to 18 deter it from future misconduct. 19 SIXTH CAUSE OF ACTION 20 (INTENTIONAL INTERFERENCE WITH CONTRACTUAL RELATIONS) 21 112. Microsoft incorporates by reference paragraphs 1 - 73 above, as though fully set 22 forth herein. 23 113. The Xbox LIVE TOU constitute a valid and existing contract between Microsoft 24 and Xbox LIVE users. 25 114. Datel had knowledge of the Xbox LIVE TOU and of the valid and existing 26 contract between Microsoft and its Xbox LIVE users created by the Xbox LIVE TOU. 27 28

- 42 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page73 of 126

1 115. Datel committed intentional and unjustified acts designed to interfere with or 2 disrupt the contract between Microsoft and its Xbox LIVE users. 3 116. Datel caused actual interference with or disruption of relationship between 4 Microsoft and its Xbox LIVE users. Datel’s products and devices which interfered with or 5 disrupted the relationship between Microsoft and its Xbox LIVE users are independently illegal 6 under federal law and violate established standards of fair play within the online multiplayer 7 video gaming environment. 8 117. Datel’s conduct has damaged Microsoft, and caused and continues to cause 9 irreparable and incalculable harm and injury to Microsoft. 10 118. Microsoft is entitled to injunctive relief, compensatory damages, attorneys’ fees, 11 costs and/or other equitable relief. 12 119. Microsoft is informed and believes that Datel’s conduct was undertaken with the 13 intent to injure Microsoft, or with a willful and conscious disregard of Microsoft’s rights, and 14 constitutes clear and convincing evidence of oppression, fraud and malice. As a result, 15 Microsoft is entitled to an award of punitive damages against Datel in an amount sufficient to 16 deter it from future misconduct.

17 SEVENTH CAUSE OF ACTION 18 (COPYRIGHT INFRINGEMENT, 17 U.S.C. §§ 106 et seq. and 501) 19 120. Microsoft incorporates by reference paragraphs 1 - 73 above, as though fully set 20 forth herein. 21 121. Microsoft’s Authentication Code and Adapter Code contain a substantial amount 22 of original material, including, without limitation, object code and source code, structure, flow 23 charts, parameter lists, modules, data flow, and control flow, that is copyrightable subject matter 24 under the Copyright Act, 17 U.S.C. § 101 et seq. 25 122. Without consent, authorization, approval, or license, Datel knowingly, willingly, 26 and unlawfully copied, prepared, published, sold and distributed Microsoft’s copyrighted 27 Authentication Code and Adapter Code, portions thereof, or derivative works, and continues to 28

- 43 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page74 of 126

1 do so. Datel has directly infringed and continues to directly infringe Microsoft’s copyrights in 2 its Authentication Code and Adapter Code. 3 123. On information and belief, Datel’s infringement is and has been knowing and 4 willful. 5 124. By this unlawful copying, use, sale and distribution, Datel has violated 6 Microsoft’s exclusive rights under 17 U.S.C. § 106. 7 125. Datel has realized unjust profits, gains and advantages as a proximate result of its 8 infringement, and will continue to realize unjust profits, gains and advantages as a proximate 9 result of its infringement as long as such infringement is permitted to continue. 10 126. As a direct and proximate result of Datel’s willful copyright infringement, 11 Microsoft has suffered, and will continue to suffer, monetary loss to its business, reputation, and 12 goodwill. Microsoft is entitled to damages and any gains, profits, and advantages obtained by 13 Datel as a result of Datel’s acts of infringement and Datel’s use and publication of the copied 14 materials, 17 U.S.C. § 504(b). Alternatively, at Microsoft’s election, it is entitled to an award of 15 the maximum statutory damages as permitted by the Copyright Act, 17 U.S.C. § 504(c). 16 127. Microsoft has no adequate remedy at law for the injuries currently being suffered, 17 and the additional injuries that are threatened, because it would be impossible to quantify in 18 dollars the losses described above when this matter is finally adjudicated, and Datel will 19 continue to engage in its wrongful conduct and Microsoft will continue to suffer irreparable 20 injury that cannot be adequately remedied at law unless Datel is enjoined from engaging in any

21 further such acts of infringement. Microsoft is entitled to an injunction restraining Datel from 22 engaging in any further such acts in violation of the United States copyright laws. 23 EIGHTH CAUSE OF ACTION 24 (MISAPPROPRIATION OF TRADE SECRETS) 25 128. Microsoft incorporates by reference paragraphs 1 - 73 above, as though fully set 26 forth herein. 27 28

- 44 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page75 of 126

1 129. As alleged above, Microsoft has developed and maintained valuable trade secret

2 information related to its Xbox 360 accessory authentication system. Microsoft has made 3 reasonable efforts under the circumstances to preserve the confidentiality of its trade secrets. 4 Such information derives independent economic value from not being generally known to the 5 public or to other persons who can obtain economic value from its disclosure or use. 6 Accordingly, the above-described information constitutes “trade secrets.” 7 130. 8 9 131. 10 11 132. Datel used Microsoft’s trade secrets, including by employing the trade secret 12 information to assist its research and development related to the creation of products for the 13 Xbox 360. 14 133. 15 16 134. Datel’s actions constitute misappropriation of Microsoft’s trade secrets. 17 135. Datel’s wrongful conduct in misappropriating Microsoft’s trade secrets, unless 18 and until enjoined and restrained by order of this Court will cause great and irreparable harm to 19 Microsoft. Microsoft is threatened with losing its confidential and proprietary information, as 20 well as its competitive advantage over manufacturers of other video game platforms such as 21 Sony and Nintendo derived from its ability to prevent unauthorized accessories that contribute to 22 cheating, hacking, and piracy from functioning with the Xbox 360 console. Microsoft also is 23 threatened with losing control over its encryption system protecting the generation of master 24 security keys for all Xbox 360 consoles. 25 136. As a direct and proximate result of Datel’s misappropriation of Microsoft’s trade 26 secrets, Microsoft has suffered, and will continue to suffer, monetary loss to its business, 27 reputation, and goodwill. Microsoft is entitled to damages as a result of Datel’s 28 misappropriation of Microsoft’s trade secrets.

- 45 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page76 of 126

1 137. In addition, as a direct and proximate cause of Datel’s misappropriation of 2 Microsoft trade secrets, Datel has been unjustly enriched in an amount to be ascertained at trial. 3 138. Microsoft has no adequate remedy at law for the injuries currently being suffered, 4 and the additional injuries that are threatened, because it would be impossible to quantify in 5 dollars the losses described above when this matter is finally adjudicated, and Datel will 6 continue to engage in its wrongful conduct and Microsoft will continue to suffer irreparable 7 injury that cannot be adequately remedied at law unless Datel is enjoined from engaging in any 8 further such acts of misappropriation. Microsoft is entitled to an injunction restraining Datel 9 from engaging in any further such acts of misappropriation. 10 139. Each of the acts of misappropriation described herein was done willfully and 11 maliciously by Datel, with the deliberate intent to injure Microsoft’s business and improve 12 Datel’s own business and for financial gain, thereby entitling Microsoft to exemplary damages 13 and/or attorneys’ fees to be proven at trial. 14 PRAYER FOR RELIEF 15 WHEREFORE, Microsoft prays for judgment against Datel and against all of its 16 affiliates, agents, servants, employees, partners and all persons in active concert or participation 17 with it, for the following relief: 18 (a) Permanent injunctive relief enjoining Datel and all of its employees, 19 officers, directors, agents, servants, affiliates, attorneys, successors and 20 assigns, and all those acting directly or indirectly in concert or participation 21 with any of them, from violating Microsoft’s rights under the DMCA, the 22 Lanham Act, the Copyright Act, and state law, by selling, offering, 23 marketing or otherwise trafficking in its various Xbox 360 devices and 24 accessories, or any products with substantially similar functionality, that 25 circumvent access- and copy-protection mechanisms protecting 26 copyrighted video game content, use Microsoft’s “XBOX 360” mark 27 without any authorization, induce Xbox LIVE users to breach the LIVE 28

- 46 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page77 of 126

1 TOU or interfere with the contractual relationship between Microsoft and 2 its Xbox LIVE users, infringe Microsoft’s copyrights, or misappropriate 3 Microsoft’s trade secrets; 4 (b) An order directing that Datel file with the Court and serve upon counsel for 5 Microsoft within thirty (30) days after the entry of such order or judgment, 6 a report in writing and under oath setting forth in detail the manner and 7 form in which Datel has complied with the injunction; 8 (c) An award to Microsoft of damages it has sustained or will sustain by 9 reason of Datel’s conduct, all profits derived by Datel from such conduct, 10 or in lieu of any portion thereof, should Microsoft so elect, such statutory 11 damages as provided by law; 12 (d) Microsoft’s costs and reasonable attorneys’ fees; 13 (e) Prejudgment and post-judgment interest; and 14 (f) All such further and additional relief, in law or in equity, to which 15 Microsoft may be entitled or which the Court deems just and proper. 16 DEMAND FOR JURY TRIAL 17 Microsoft hereby demands a jury trial of all issues in these counterclaims which are triable 18 to a jury. 19 DATED: March 25, 2011 Munger, Tolles & Olson LLP 20

21 By: /s/ Rohit K. Singla ROHIT K. SINGLA 22 Attorneys for Defendant 23 MICROSOFT CORPORATION 24 25 26 27 28

- 47 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page78 of 126

Exhibit 2 Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page79 of 126

1 GREGORY P. STONE (SBN 078329) [email protected] 2 MUNGER, TOLLES & OLSON LLP 355 South Grand Avenue 3 Thirty-Fifth Floor Los Angeles, CA 90071-1560 4 Telephone: (213) 683-9100 Facsimile: (213) 687-3702 5 HOJOON HWANG (SBN 184950) 6 [email protected] ROHIT K. SINGLA (SBN 213057) 7 [email protected] JONATHAN H. BLAVIN (SBN 230269) 8 [email protected] MUNGER, TOLLES & OLSON LLP 9 560 Mission Street, Twenty-Seventh Floor 10 San Francisco, CA 94105-2907 Telephone: (415) 512-4032 11 Facsimile: (415) 512-4077 12 Attorneys for Defendant MICROSOFT CORPORATION 13 UNITED STATES DISTRICT COURT 14 NORTHERN DISTRICT OF CALIFORNIA 15 SAN FRANCISCO DIVISION 16 17 CASE NO. CV 09-5535 EDL 18 DATEL HOLDINGS LTD. and DATEL DESIGN & DEVELOPMENT, INC., DEFENDANT MICROSOFT 19 CORPORATION’S SECOND AMENDED Deleted: FIRST Plaintiffs and ANSWER AND COUNTERCLAIMS 20 Counterclaim Defendants, 21 vs. 22 MICROSOFT CORPORATION, 23 Defendant and 24 Counterclaimant. 25

26 27

28 Deleted: FIRST

DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page80 of 126

22 JURISDICTION AND VENUE 23 5. Microsoft admits that Datel has filed claims in this action pursuant to Sections 1 24 and 2 of the Sherman Act (15 U.S.C. §§1-2) and Section 3 of the Clayton Act (15 U.S.C. §14). 25 The remaining allegations of Paragraph 5 are legal conclusions to which no response is required. 26 To the extent that a response is required, Microsoft denies the allegations in Paragraph 5 of the 27 Complaint.

28 Deleted: FIRST

- 1 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page81 of 126

28 Deleted: FIRST

- 2 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page82 of 126

28 this allegation. Microsoft denies the remaining allegations in Paragraph 17. Deleted: FIRST

- 3 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page83 of 126

28 29. Microsoft denies the allegations of paragraph 29 of the Complaint. Deleted: FIRST

- 4 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page84 of 126

28 Deleted: FIRST

- 5 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page85 of 126

- 6 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page86 of 126

11 12 THIRD CLAIM FOR RELIEF Violation of Sections 1-2 of the Sherman Act and 13 Section 3 of the Clayton Act (15 U.S.C. §§1-2, 14) 14 71. Microsoft repeats and incorporates its responses to the allegations contained in 15 Paragraphs 1 through 70 of the Complaint, as if fully set forth herein. 16 72. Microsoft denies the allegations of paragraph 72 of the Complaint. 17 73. Microsoft denies the allegations of paragraph 73 of the Complaint. 18 74. Microsoft denies the allegations of paragraph 74 of the Complaint. 19 75. Microsoft denies the allegations of paragraph 75 of the Complaint. 20 76. Microsoft denies the allegations of paragraph 76 of the Complaint. 21 77. Microsoft denies the allegations of paragraph 77 of the Complaint. 22 78. Microsoft denies the allegations of paragraph 78 of the Complaint. 23 79. Microsoft denies the allegations of paragraph 79 of the Complaint. 24 80. Microsoft denies the allegations of paragraph 80 of the Complaint. 25 81. Microsoft denies the allegations of paragraph 81 of the Complaint. 26 27

28 Deleted: FIRST

- 7 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page87 of 126

17 AFFIRMATIVE DEFENSES

18 First Affirmative Defense 19 (Estoppel) 20 Datel’s claims are barred, in whole or in part, by the doctrine of estoppel. Among 21 other things, upon information and belief Datel purchased an Xbox 360 console and subscribed to 22 the Xbox LIVE service, and agreed to contractual terms prohibiting the use of unauthorized 23 accessories, and any reverse engineering or unauthorized modifications to any Xbox 360 software 24 or hardware. Nonetheless, Datel breached that agreement, hacked, reverse engineered and 25 modified the Xbox 360 software and hardware without authorization, and unlawfully 26 circumvented the Xbox 360’s access and copy-protection technologies to develop and sell 27 unauthorized accessories for the Xbox 360. Microsoft also incorporates by reference the factual

28 allegations of its counterclaims. Deleted: FIRST

- 8 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page88 of 126

- 9 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page89 of 126

14 D’763 Patent D’011 Patent

21 22 23 24 25 26 27

28 Deleted: FIRST

- 10 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page90 of 126

1 D’668 Patent D’422 Patent 2 3 4 5 6 7

8 D’480 Patent

15 Datel’s Controller D’015 Patent 16 17 18 19 20 21 22 23 24 25 26 27

28 Deleted: FIRST

- 11 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page91 of 126

1 D’763 Patent D’011 Patent

2 3

4 5 6

7 D’422 Patent D’480 Patent 8 9 10 11 12 13 D’668 Patent 14

16 17 18 19 20 Fourth Affirmative Defense 21 (Unclean Hands) 22 Datel’s claims are barred, in whole or in part, by the doctrine of unclean hands. 23 Among other things, upon information and belief Datel purchased an Xbox 360 console and 24 subscribed to the Xbox LIVE service, and agreed to contractual terms prohibiting the use of 25 unauthorized accessories, and any reverse engineering or unauthorized modifications to any Xbox 26 360 software or hardware. Nonetheless, Datel breached that agreement, hacked, reverse 27 Deleted: and engineered and modified the Xbox 360 software and hardware without authorization, unlawfully 28 Deleted: FIRST

- 12 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page92 of 126

15 engineering or unauthorized modifications to any Xbox 360 software or hardware. Nonetheless, 16 Datel breached that agreement, hacked, reverse engineered and modified the Xbox 360 software Deleted: and 17 and hardware without authorization, unlawfully circumvented the Xbox 360’s access and copy- 18 protection technologies to develop and sell unauthorized accessories for the Xbox 360, infringed 19 Microsoft’s copyrights, and misappropriated Microsoft’s trade secrets. 20 21 Sixth Affirmative Defense (Assumption of Risk) 22 Datel’s claims are barred, in whole or in part, by the doctrine of assumption of 23 risk. Among other things, Datel understood before it began developing its unauthorized Xbox 24 360 accessories that the Xbox 360 security model did not permit unauthorized accessories and 25 that Microsoft had an authorized accessory program in which Datel did not participate. 26 27

28 Deleted: FIRST

- 13 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page93 of 126

16 Ninth Affirmative Defense 17 (Statute of Limitations) 18 Datel’s claims are barred, in whole or in part, by the applicable statute of 19 limitations. 20 Tenth Affirmative Defense 21 (Laches) 22 Datel’s claims are barred, in whole or in part, by the doctrine of laches.

23 PRAYER FOR RELIEF 24 WHEREFORE, Microsoft prays for judgment: 25 1. Dismissing with prejudice Datel’s Complaint in its entirety; 26 2. Awarding Microsoft its costs, disbursements and reasonable attorney’s fees 27 incurred in defending against the Complaint plus interest on any sums awarded thereunder; and 28 Deleted: FIRST

- 14 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page94 of 126

1 3. Awarding Microsoft such other and further relief as this Court deems just 2 and proper, including but not limited to the relief sought in the Counterclaims pleaded below. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

28 Deleted: FIRST

- 15 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page95 of 126

1 COUNTERCLAIMS 2 Counterclaimant Microsoft Corporation (“Microsoft”), by and through its attorneys, for its 3 counterclaims against Datel Holdings Ltd. and Datel Design & Development, Inc. (jointly, 4 “Datel” or “Counterclaim-defendants”), alleges as follows: 5 NATURE OF THE ACTION 6 1. Datel is a major, if not the major, developer and distributor of unauthorized 7 cheating systems for all video gaming platforms, or as Datel euphemistically calls them, “video 8 game enhancement” devices. Datel’s products have been used for more than 20 years to hack 9 into video game systems and to copy and alter copyright video game content. In addition to 10 enabling some users to cheat at games by obtaining infinite levels of health or power, Datel has 11 long designed and sold products that enable the piracy of video games. Many of its most 12 famous hacking and cheating products have taken the form of memory cartridges or cards or 13 other accessory devices that plug into memory or other console ports. 14 2. Microsoft’s original video game console, the Xbox, was the target of Datel 15 products, including for example, its Action Replay system through which Datel distributed tens of 16 thousands of copies of copyrighted “game saves,” including modified game saves that were 17 designed for cheating. “Game saves” are copyrighted video game files that contain data 18 describing a saved game’s copyrighted audio, visual, and narrative elements. 19 3. When designing the Xbox 360, Microsoft implemented a number of 20 technological security layers to prevent cheating, hacking, and piracy. For example, the Xbox 21 360 will not recognize most unauthenticated — and thus untrustworthy — accessories, including 22 unauthenticated memory units. The Xbox 360 also is designed to prevent video game data from 23 being transferred to and from a personal computer (“PC”) (and thus to and from the Internet), to 24 prevent arbitrary, unauthenticated data (e.g., hacking software) from being transferred to the 25 console, and to prevent Xbox 360 data from being altered. On a PC, video game data can be 26 hacked, modified, and pirated, and users can download already hacked or modified game data 27 from the Internet. The Xbox did not have the kinds of security and authentication protections that 28 have been built into the Xbox 360, and was severely hacked through the use of “mod chips” and

- 16 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page96 of 126

28 are specifically and intentionally designed to induce players to breach these contractual Deleted: FIRST

- 17 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page97 of 126

28 Deleted: FIRST

- 18 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page98 of 126

1 12. On information and belief, Counterclaim-defendant Datel Design and 2 Development Inc. is a United States corporation organized and existing under the laws of Florida 3 and is a wholly owned subsidiary of Datel Design and Development Ltd. On information and 4 belief, Datel Design and Development Inc.’s principal place of business is 33 N. Garden Avenue, 5 Clearwater, Florida 33755. 6 13. For approximately 20 years Datel has been in the business of manufacturing and 7 selling devices that can be used to evade the security protections in video gaming systems, 8 including for Microsoft’s Xbox and Xbox 360 video gaming systems. On information and belief, 9 Datel offers its devices worldwide, including in the United States and in the greater San Francisco 10 metropolitan area, via its websites and the websites of Internet retail companies, and also via 11 retail stores such as Walmart, Best Buy and Target, among many others. Datel does business 12 within the Northern District of California. 13 JURISDICTION AND VENUE 14 14. The Court has subject matter jurisdiction over the Digital Millennium Copyright 15 Act (the “DMCA”) and Lanham Act causes of action pleaded herein pursuant to 28 U.S.C. 16 §§ 1331 (federal question), 28 U.S.C. §§ 1338(a) (any act of Congress relating to copyright), 17 17 U.S.C. §§ 1201, et seq. (the DMCA), and 15 U.S.C. §§ 1051, et seq. (the Lanham Act). The 18 Court has supplemental jurisdiction over the state law causes of action pleaded herein pursuant to 19 28 U.S.C. § 1367. 20 15. This Court has personal jurisdiction over Datel, and venue is proper in this 21 Judicial District pursuant to 28 U.S.C. § 1391(b) because, inter alia, (a) Datel has filed suit in this 22 District in the present action; (b) Datel and/or its agents are doing business in this District; and 23 (c) a substantial part of the events or omissions giving rise to this lawsuit, as well as substantial 24 injury to Microsoft, have occurred or will occur in interstate commerce, in the State of California, 25 and in the Northern District of California as a result of Datel’s violations of the DMCA, the 26 Lanham Act, and state law, as alleged in detail below. Venue also is proper in this District 27 pursuant to 28 U.S.C. § 1400(a) in that Datel may be found in this District in light of its extensive

28 commercial activities here. Deleted: FIRST

- 19 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page99 of 126

28 different clothing and armor and possess a wide variety of weapons and equipment. The unique Deleted: FIRST

- 20 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page100 of 126

28 Deleted: FIRST

- 21 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page101 of 126

28 Deleted: FIRST

- 22 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page102 of 126

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 23. Microsoft does not sell, and has not licensed other entities to sell, devices that 17 allow users to transfer and copy individual game save files to other devices, such as a PC hard 18 drive. To the contrary, Microsoft has designed the Xbox 360 to prohibit consumers from 19 transferring game save files to or from a PC—and thus to or from the Internet. Copyrighted 20 material stored in game saves are intended to be shared though Xbox LIVE.

28 “software or content,” including “games,” “associated” with the Xbox LIVE service is subject to Deleted: FIRST

- 23 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page103 of 126

- 24 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page104 of 126

28 Deleted: FIRST

- 25 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page105 of 126

1 interface and game data file format, and effectively protects against unauthorized access to, 2 alteration, and reproduction of copyrighted video game content within the meaning of the DMCA.

28 Deleted: FIRST

- 26 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page106 of 126

27 1 http://www.datel.co.uk/pages/about_us.aspx (last visited May 28, 2010). 2 28 http://www.datel.co.uk/pages/codejunkies.aspx (last visited May 28, 2010). Deleted: FIRST

- 27 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page107 of 126

14 your own . . . .” 5 Likewise, Datel advertises its “Transfer Kit” device as allowing users to 15 “email” and “share your saves with friends from all over the world,” as long as the save itself is 16 “not locked to your own console or Xbox Live account,” 6 in other words, further protected by 17 additional Xbox 360 technological measures, such as Gamertags. Datel’s “Action Replay 18 360Powersaves,” as well as other pirating tools available on the Internet, allow users to crack that 19 extra layer of protection. 20 44. With Datel’s “Action Replay 360Powersaves,” Datel has cracked the encryption 21 scheme Microsoft employs to ensure that game saves are not modified or sold. The product 22 contains—as Datel itself boasts—“professionally modified game saves that can completely

23 unlock a game, making extra levels, weapons and characters instantly available.”7 The “Action

- 28 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page108 of 126

22 Transfer game saves from the Internet to boost your achievements!”8 23 47. Upon information and belief, Datel has full knowledge of the infringement, 24 cheating, and other unauthorized conduct that players engage in through using Datel’s products, 25 Datel makes a direct and material contribution to such conduct, actively encourages such conduct, 26 and deliberately refrains from taking measures to prevent further damage to Microsoft’s and other

27 8 http://us.codejunkies.com/Products/XB360-Xport__EF000191.aspx (emphasis added) (last 28 visited May 28, 2010). Deleted: FIRST

- 29 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page109 of 126

28 Deleted: FIRST

- 30 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page110 of 126

1 Datel’s Unauthorized Use of Microsoft’s XBOX 360 Trademark 2 50. Without any authorization or consent from Microsoft, Datel has used Microsoft’s 3 famous “XBOX 360” mark in commerce to sell its unlawful accessories and devices in a manner 4 likely to confuse consumers as to their association, affiliation, endorsement or sponsorship with 5 or by Microsoft. 6 51. After Microsoft acquired and perfected its rights in the “XBOX 360” mark, Datel 7 commenced advertising, offering for sale, and selling various products using the “XBOX 360” 8 mark, in the United States and throughout the world. Datel’s use of the “XBOX 360” mark 9 includes Datel’s display of the mark on the packaging of several of its products, including, but not 10 limited to, Datel’s “Xport” and “Xsata” products, whose names themselves bear a significant and 11 confusing similarity to “Xbox,” and Datel’s “MAX” memory cards and “MAX” battery charger 12 products. For example, Datel has even named its “Xport” product the “Xbox 360 Docking 13 Station,” which title appears on the packaging of the product and on the product itself. (Emphasis 14 added). Notably Datel’s own “Datel” mark appears either not at all or only inconspicuously on its 15 products. Datel also has imitated on its packaging the distinctive white, lime green, and grey 16 Formatted: Font: 12 pt color scheme, even adding curved green arcs. 17 18 19 20 21 22 23 24 25 26 27

28 Deleted: FIRST

- 31 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page111 of 126

1 2 3 4 5 6 7 8 9

11 52. Indeed, Datel has used the trademarks of other video gaming platforms and 12 similarly imitated their packaging as well. For example, the packaging of Datel’s products for the 13 Nintendo Wii imitate the Wii’s distinct font and white, torquoise, and grey coloring scheme, and 14 its products for the Sony Playstation 3 mimic the Playstation 3’s red and black coloring scheme. 15 Nintendo Wii: Datel Wii Accessory: 16

28 Deleted: FIRST

- 32 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page112 of 126

1 Sony Playstation 3: Datel Playstation 3 Accessory: 2 3 4 5 6 7 8 9 10

11 53. Datel’s products and devices are not authorized, approved, endorsed, or 12 sponsored by, or associated, affiliated, or connected with Microsoft, and Datel’s use of the 13 “XBOX 360” mark is not authorized, approved, endorsed, or sponsored by, or associated, 14 affiliated, or connected with Microsoft. 15 54. Upon information and belief, in using the “XBOX 360” mark, Datel has willfully 16 and deliberately sought to profit from Microsoft’s established goodwill and reputation. Although 17 Datel is not licensed or otherwise sponsored by Microsoft, its products are sold in a manner that 18 falsely and unfairly implies affiliation with the “XBOX 360” brand and Microsoft, creating 19 consumer confusion over the source of origin of Datel’s products. Datel’s products also dilute 20 the distinctive quality of the “XBOX 360” mark, by both blurring and tarnishment. 21 22 Datel’s Infringement of Microsoft’s Copyrighted Software Code 55. The Xbox 360 authentication and security system prevents unauthenticated — 23 and therefore untrustworthy — accessories from functioning with the Xbox 360 console. The 24 security system within the Xbox 360 console issues a “challenge” to accessories that attempt to 25 connect with the Xbox 360 console. A computer chip contained in authorized accessories then 26 performs a complex series of calculations, using a precise sequence of algorithms and secret keys, 27

28 Deleted: FIRST

- 33 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page113 of 126

6 copyrights in the Authentication Code, including in both the object code and the source code, and 7 holds, inter alia, the following certificates of registration granted by the Copyright Office:

8 TX0006839291 and TX0007196985. 9 57. Microsoft also is the author of copyrighted software code residing in Microsoft’s 10 Xbox 360 Wireless N Networking Adapter (hereinafter, “Adapter Code”). Microsoft is, and at all 11 relevant times has been, the owner of all copyrights in the Adapter Code, including in both the

12 object code and the source code. On March 25, 2011, Microsoft submitted to the U.S. Copyright 13 Office its application for a certificate of registration for the Adapter Code. 14 58. Microsoft is informed and believes that Datel had access to the source code of the 15 Authentication Code and the Adapter Code, and the ideas, structures, and principles underlying 16 them.

17 59. Microsoft is informed and believes that a security chip used in several Datel 18 products — including without limitation Datel’s MAX memory card, wired and wireless 19 controllers, wireless headset, and its wireless networking adapter — contain code that is identical 20 or substantially similar to Microsoft’s Authentication Code in its underlying logic, structure, 21 organization and sequence. The Datel security chip source code contains substantially similar

22 function names, routine structures, and code within routines, including but not limited to the order 23 of parameters, the use of local variables, and loop parameters. 24 60. Microsoft is informed and believes that Datel’s wireless networking adapter 25 contains code that is identical to Microsoft’s Adapter Code. Microsoft is informed and believes 26 that Datel copies Microsoft’s Adapter Code verbatim.

27 61. The similarities between Microsoft’s Authentication Code and Adapter Code and

28 Datel’s code are not dictated by the requirements of the functions to be performed, the limitations Deleted: FIRST

- 34 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page114 of 126

1 of the programming environment, efficiency or good programming considerations, or other 2 external constraints, nor are they derived from the public domain. In other words, the elements of 3 the Microsoft’s code copied by Datel reflect Microsoft’s original, and therefore copyrighted, 4 expression.

12 allowing Microsoft to limit the use of unproven and unauthorized accessories on the Xbox 360 13 console. This information is not generally known to the public or to persons who can obtain 14 economic value from its disclosure or use, and it gives Microsoft a competitive advantage over 15 competing videogame platform manufacturers such as Sony and Nintendo in its ability to prevent 16 untrustworthy accessories from functioning with the Xbox 360 console, and thereby protect its

17 customers and game developers against cheating, hacking, and piracy. Without access to the 18 precise sequence of algorithms and the secret keys used by Microsoft’s accessory security system, 19 it is substantially more difficult for individuals or companies to design unauthorized accessories 20 that may be used with an Xbox 360 console.

21 64. Microsoft uses a variety of reasonable means to protect the secrecy of its trade 22 secret information from public disclosure, including various security policies and technologies 23 limiting the number of people who can have access to trade secret information. 24 65. 25 26

28 Deleted: FIRST

- 35 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page115 of 126

1 66. 2 3 4 5 67.

6 7

8 68. 9 10 11 69.

12 13 Microsoft’s Injury As A Result of Datel’s Conduct 14 70. Datel’s devices and products, by design and operation, cause immediate and 15 irreparable harm to Microsoft and infringe upon Microsoft’s exclusive rights protected under 16 federal law and state law. 17 71. Through circumventing Microsoft’s technological protection measures, Datel’s 18 devices permit and threaten widespread unauthorized uses, alteration, dissemination, and piracy 19 of copyrighted video game content, diminishing the value of Microsoft’s and other game 20 developers’ copyrighted works. 21 72. Datel’s devices also undermine the carefully balanced competitive gaming 22 environment of the Xbox 360 by facilitating unauthorized cheating. Microsoft has spent 23 substantial sums of money attempting to detect and disable Datel’s unlawful circumvention 24 technologies, and to detect cheating occurring on the Xbox LIVE network through the use of 25 Datel’s illegal products. Microsoft has lost immeasurable numbers of customers and sales as a 26 result of Datel’s activities, and its reputation and customer goodwill have been damaged. 27 Moreover, Datel has and continues to directly infringe Microsoft’s copyrights, trademark rights,

28 Deleted: FIRST

- 36 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page116 of 126

1 and misappropriate Microsoft’s trade secrets. Datel seeks to profit from Microsoft’s investments, 2 established goodwill, and reputation. 3 73. All of these harms constitute irreparable injury. 4 FIRST CAUSE OF ACTION 5 (VIOLATION OF THE DIGITAL MILLENNIUM COPYRIGHT ACT, 6 17 U.S.C. §§ 1201, et seq.) Field Code Changed 74. Microsoft incorporates by reference paragraphs 1 - 73 above as though fully set 7 forth herein. 8 75. Section 1201(a)(2) of the DMCA, 17 U.S.C. § 1201(a)(2), provides, in pertinent 9 part, that no person shall manufacture, import, offer to the public, provide, or otherwise traffic in 10 any technology, product, service, device, component, or part thereof, that (A) is primarily 11 designed for the purpose of circumventing a technological measure that effectively controls 12 access to a work protected under this title; (B) has only limited commercially significant purpose 13 or use other than to circumvent a technological measure that effectively controls access to a 14 work protected under this title; or (C) is marketed by that person or another acting in concert 15 with that person with that person’s knowledge for use in circumventing a technological measure 16 that effectively controls access to a work protected under this title. 17 76. Section 1201(b) of the DMCA, 17 U.S.C. § 1201(b) provides, in pertinent part, 18 that no person shall manufacture, import, offer to the public, provide, or otherwise traffic in any 19 technology, product, service, device, component, or part thereof, that (A) is primarily designed 20 for the purpose of circumventing protection afforded by a technological measure that effectively 21 protects a right of a copyright owner under this title in a work or a portion thereof; (B) has only 22 limited commercially significant purpose or use other than to circumvent protection afforded by 23 a technological measure that effectively protects a right of a copyright owner under this title in a 24 work or a portion thereof; or (C) is marketed by that person or another acting in concert with 25 that person with that person’s knowledge for use in circumventing protection afforded by a 26 technological measure that effectively protects a right of a copyright owner under this title in a 27 work or a portion thereof. 28 Deleted: FIRST

- 37 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page117 of 126

28 Datel’s profits from its violations of 17 U.S.C. §§ 1201(a)(2), and 1201(b). Deleted: FIRST

- 38 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page118 of 126

1 82. As a direct and proximate result of the foregoing acts and conduct, Microsoft has 2 sustained and will continue to sustain substantial, immediate and irreparable injury, for which 3 there is no adequate remedy at law. Pursuant to 17 U.S.C. § 1203, Microsoft is entitled to a 4 preliminary and permanent injunction prohibiting further violations of § 1201. 5 83. Microsoft is further entitled to its attorneys’ fees and full costs pursuant to 17 6 U.S.C. § 1203. 7 SECOND CAUSE OF ACTION 8 (FEDERAL TRADEMARK INFRINGEMENT, 9 15 U.S.C. §§ 1114 AND 1125(a)) Field Code Changed 84. Microsoft incorporates by reference paragraphs 1 - 73 above, as though fully set 10 forth herein. 11 85. Microsoft owns U.S. federal registrations nos. 3573970, 3538652, 3538651, 12 3300210, and 3252556, for the “XBOX 360” mark. These registrations are in full force and 13 effect and are enforceable. 14 86. Datel’s use of the “XBOX 360” mark in interstate commerce, without the consent 15 or authorization of Microsoft, is likely to cause consumer confusion or to cause mistake or to 16 deceive as to the origin of the products and services offered and sold by Datel and as to their 17 affiliation, connection, or association with and/or endorsement or approval by Microsoft. 18 87. The foregoing acts of Datel constitute false designation of association, affiliation, 19 connection, endorsement and/or approval under 15 U.S.C. § 1125(a). 20 88. Datel’s actions also constitute the use in interstate commerce of a reproduction, 21 counterfeit, copy, or colorable imitation of a registered trademark of Microsoft in connection 22 with the sale, offering for sale, distribution, or advertising of goods or services on or in 23 connection with which such use is likely to cause confusion or mistake, or to deceive, in 24 violation of 15 U.S.C. § 1114. 25 89. Upon information and belief, Datel has engaged in such false designation of 26 origin, association, affiliation, connection, endorsement and/or approval knowingly, willfully, 27

28 Deleted: FIRST

- 39 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page119 of 126

1 deliberately, and in conscious disregard of Microsoft’s rights, making this an exceptional case 2 within the meaning of 15 U.S.C. § 1117. 3 90. Microsoft has been damaged and will continue to be damaged, and Datel has 4 been unjustly enriched, by such unlawful conduct in an amount to be proven at trial. 5 91. Alternatively, Microsoft is entitled to the maximum statutory damages with 6 respect to each type of goods or services sold that infringes Microsoft’s “XBOX 360” mark, or 7 for such other amounts as may be proper under 15 U.S.C. § 1117. 8 92. Microsoft is further entitled to recover its attorneys’ fees and full costs pursuant 9 to 15 U.S.C. § 1117. 10 93. In addition, Datel’s conduct described herein has caused and, if not enjoined will 11 continue to cause, irreparable damage to Microsoft’s rights in its marks, and to the business, 12 positive reputation and goodwill of Microsoft, which cannot be adequately compensated solely 13 by monetary damages. Microsoft therefore has no adequate remedy at law and seeks permanent 14 injunctive relief pursuant to 15 U.S.C. § 1116. 15 THIRD CAUSE OF ACTION 16 (FEDERAL DILUTION, 15 U.S.C. § 1125(c)) Field Code Changed 17 94. Microsoft incorporates by reference paragraphs 1 - 73 above, as though fully set 18 forth herein. 19 95. Microsoft’s “XBOX 360” mark is extraordinarily famous and highly distinctive, 20 and became famous and highly distinctive before any of the unlawful conduct of Datel 21 complained of herein. 22 96. Datel’s aforesaid acts constitute trademark uses in commerce that are likely to 23 dilute the distinctive quality of the “XBOX 360” mark, by both blurring and tarnishment, in 24 violation of Section 43(c) of the Lanham Act, 15 U.S.C. § 1125(c). 25 97. Upon information and belief, Datel has engaged in such conduct willfully, 26 deliberately, and in conscious disregard of Microsoft’s rights, making this an exceptional case 27 within the meaning of 15 U.S.C. § 1117.

28 Deleted: FIRST

- 40 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page120 of 126

1 98. In addition, Datel’s conduct described herein has caused and, if not enjoined will 2 continue to cause, irreparable damage to Microsoft’s rights in its marks, and to the business, 3 positive reputation and goodwill of Microsoft, which cannot be adequately compensated solely 4 by monetary damages. Microsoft therefore has no adequate remedy at law and seeks permanent 5 injunctive relief pursuant to 15 U.S.C. § 1116. 6 FOURTH CAUSE OF ACTION 7 (COMMON LAW TRADEMARK INFRINGEMENT) Field Code Changed 8 99. Microsoft incorporates by reference paragraphs 1 - 73 above, as though fully set 9 forth herein. 10 100. Microsoft owns common law rights in the “XBOX 360” mark that date back to at 11 least 2005. 12 101. The acts and conduct of Datel as alleged in the Second Cause of Action above 13 constitute trademark infringement under the common law of California and the substantially 14 similar common law of other states. 15 102. As a direct and proximate result of Datel’s conduct, Microsoft has been damaged 16 in an exact amount to be proven at trial. 17 18 FIFTH CAUSE OF ACTION (INDUCING BREACH OF CONTRACT) 19 Field Code Changed 103. Microsoft incorporates by reference paragraphs 1 - 73 above, as though fully set 20 forth herein. 21 104. The Xbox LIVE TOU constitute a valid and existing contract between Microsoft 22 and its Xbox LIVE users. 23 105. Datel had knowledge of the Xbox LIVE TOU and of the valid and existing 24 contract between Microsoft and its Xbox LIVE users created by the Xbox LIVE TOU. 25 106. Datel committed intentional and unjustified acts to induce Xbox LIVE users to 26 breach their contract with Microsoft. 27

28 Deleted: FIRST

- 41 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page121 of 126

1 107. Xbox LIVE Users who were sold and were induced to utilize Datel’s products 2 and devices did in fact breach the Xbox LIVE TOU by acts, including but not limited to 3 engaging in unauthorized cheating in the Xbox LIVE environment and creating unauthorized 4 reproductions and alterations of copyrighted Microsoft video game content through the use of 5 Datel’s products and devices. 6 108. These breaches of the Xbox LIVE TOU were caused by Datel’s unjustified and 7 wrongful conduct. Datel’s products and devices which caused Xbox LIVE users to breach the 8 Xbox LIVE TOU are independently illegal under federal law and violate established standards 9 of fair play within the online multiplayer video gaming environment. 10 109. Datel’s conduct has damaged Microsoft, and caused and continues to cause 11 irreparable and incalculable harm and injury to Microsoft. 12 110. Microsoft is entitled to injunctive relief, compensatory damages, attorneys’ fees, 13 costs and/or other equitable relief. 14 111. Microsoft is informed and believes that Datel’s conduct was undertaken with the 15 intent to injure Microsoft, or with a willful and conscious disregard of Microsoft’s rights, and 16 constitutes clear and convincing evidence of oppression, fraud and malice. As a result, 17 Microsoft is entitled to an award of punitive damages against Datel in an amount sufficient to 18 deter it from future misconduct. 19 SIXTH CAUSE OF ACTION 20 (INTENTIONAL INTERFERENCE WITH CONTRACTUAL RELATIONS) Field Code Changed 21 112. Microsoft incorporates by reference paragraphs 1 - 73 above, as though fully set 22 forth herein. 23 113. The Xbox LIVE TOU constitute a valid and existing contract between Microsoft 24 and Xbox LIVE users. 25 114. Datel had knowledge of the Xbox LIVE TOU and of the valid and existing 26 contract between Microsoft and its Xbox LIVE users created by the Xbox LIVE TOU. 27

28 Deleted: FIRST

- 42 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page122 of 126

28 Deleted: FIRST

- 43 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page123 of 126

6 Microsoft’s exclusive rights under 17 U.S.C. § 106. 7 125. Datel has realized unjust profits, gains and advantages as a proximate result of its

8 infringement, and will continue to realize unjust profits, gains and advantages as a proximate 9 result of its infringement as long as such infringement is permitted to continue. 10 126. As a direct and proximate result of Datel’s willful copyright infringement, 11 Microsoft has suffered, and will continue to suffer, monetary loss to its business, reputation, and

12 goodwill. Microsoft is entitled to damages and any gains, profits, and advantages obtained by 13 Datel as a result of Datel’s acts of infringement and Datel’s use and publication of the copied 14 materials, 17 U.S.C. § 504(b). Alternatively, at Microsoft’s election, it is entitled to an award of 15 the maximum statutory damages as permitted by the Copyright Act, 17 U.S.C. § 504(c). 16 127. Microsoft has no adequate remedy at law for the injuries currently being suffered,

17 and the additional injuries that are threatened, because it would be impossible to quantify in 18 dollars the losses described above when this matter is finally adjudicated, and Datel will 19 continue to engage in its wrongful conduct and Microsoft will continue to suffer irreparable 20 injury that cannot be adequately remedied at law unless Datel is enjoined from engaging in any 21 further such acts of infringement. Microsoft is entitled to an injunction restraining Datel from

22 engaging in any further such acts in violation of the United States copyright laws. 23 EIGHTH CAUSE OF ACTION 24 (MISAPPROPRIATION OF TRADE SECRETS) 25 128. Microsoft incorporates by reference paragraphs 1 - 73 above, as though fully set 26 forth herein. 27

28 Deleted: FIRST

- 44 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page124 of 126

1 129. As alleged above, Microsoft has developed and maintained valuable trade secret 2 information related to its Xbox 360 accessory authentication system. Microsoft has made 3 reasonable efforts under the circumstances to preserve the confidentiality of its trade secrets. 4 Such information derives independent economic value from not being generally known to the 5 public or to other persons who can obtain economic value from its disclosure or use.

6 Accordingly, the above-described information constitutes “trade secrets.” 7 130.

8 9 131. 10 11 132. Datel used Microsoft’s trade secrets, including by employing the trade secret

12 information to assist its research and development related to the creation of products for the 13 Xbox 360. 14 133. 15 16 134. Datel’s actions constitute misappropriation of Microsoft’s trade secrets.

17 135. Datel’s wrongful conduct in misappropriating Microsoft’s trade secrets, unless 18 and until enjoined and restrained by order of this Court will cause great and irreparable harm to 19 Microsoft. Microsoft is threatened with losing its confidential and proprietary information, as 20 well as its competitive advantage over manufacturers of other video game platforms such as 21 Sony and Nintendo derived from its ability to prevent unauthorized accessories that contribute to

22 cheating, hacking, and piracy from functioning with the Xbox 360 console. Microsoft also is 23 threatened with losing control over its encryption system protecting the generation of master 24 security keys for all Xbox 360 consoles. 25 136. As a direct and proximate result of Datel’s misappropriation of Microsoft’s trade 26 secrets, Microsoft has suffered, and will continue to suffer, monetary loss to its business,

27 reputation, and goodwill. Microsoft is entitled to damages as a result of Datel’s

28 misappropriation of Microsoft’s trade secrets. Deleted: FIRST

- 45 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page125 of 126

6 continue to engage in its wrongful conduct and Microsoft will continue to suffer irreparable 7 injury that cannot be adequately remedied at law unless Datel is enjoined from engaging in any

8 further such acts of misappropriation. Microsoft is entitled to an injunction restraining Datel 9 from engaging in any further such acts of misappropriation. 10 139. Each of the acts of misappropriation described herein was done willfully and 11 maliciously by Datel, with the deliberate intent to injure Microsoft’s business and improve

12 Datel’s own business and for financial gain, thereby entitling Microsoft to exemplary damages 13 and/or attorneys’ fees to be proven at trial.

14 PRAYER FOR RELIEF 15 WHEREFORE, Microsoft prays for judgment against Datel and against all of its 16 affiliates, agents, servants, employees, partners and all persons in active concert or participation 17 with it, for the following relief: 18 (a) Permanent injunctive relief enjoining Datel and all of its employees, 19 officers, directors, agents, servants, affiliates, attorneys, successors and 20 assigns, and all those acting directly or indirectly in concert or participation 21 with any of them, from violating Microsoft’s rights under the DMCA, the 22 Lanham Act, the Copyright Act, and state law, by selling, offering, 23 marketing or otherwise trafficking in its various Xbox 360 devices and 24 accessories, or any products with substantially similar functionality, that 25 circumvent access- and copy-protection mechanisms protecting 26 copyrighted video game content, use Microsoft’s “XBOX 360” mark 27 Deleted: or without any authorization, induce Xbox LIVE users to breach the LIVE 28 Deleted: FIRST

- 46 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172 Filed04/12/11 Page126 of 126

16 DEMAND FOR JURY TRIAL 17 Microsoft hereby demands a jury trial of all issues in these counterclaims which are triable 18 to a jury. 19

20 DATED: March 25, 2011 Munger, Tolles & Olson LLP Deleted: August 26, 2010

22 By: /s/ Rohit K. Singla ROHIT K. SINGLA 23 Attorneys for Defendant 24 MICROSOFT CORPORATION

25 26 27

28 Deleted: FIRST

- 47 - DEFT’S SECOND AMENDED ANSWER & COUNTERCLAIMS, CV 09-5535 EDL

Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page1 of 94

(iRI-:(iORY P. STONI': (SBN 078329) (i regory.S tone(a}m to.com 2 MlJNGI':R, TOLLES & OLSON LLP 355 South (irand Avenue REDACTED-COMPLETE VERSION FILED 3 Thirty-Firth Floor UNDER SEAL I,os Angcles, CA 90071-1560 4 Telephol1e: (213)683-9100 Facsimile: (213) 687-3702 5 IIO.lOON IIWANG (SBN 184950) 6 [email protected] ROlin' K. SINGLA (SBN 213057) 7 [email protected] .I0NATIIAN II. BLA VIN (SBN 2302(9) 8 .Ionathan.l3lav in~l)mto.com MICIIAEL.I. MONGAN (SBN 250374) 9 [email protected] MUNGER, TOLLES & OLSON LLP 10 560 Mission Street, Twenty-Seventh Floor I I San Francisco, CA 94105-2907 Telephone: (415) 512-4032 12 Facsimile: (415)512-4077

13 Attorneys for Defendant MICROSOFT CORPORATION 14 UNITED STATES DISTRICT COURT 15 NORTHERN DISTRICT OF CALIFORNIA 16 SAN FRANCISCO DIVISION 17

18 CASE NO. CV 09-5535 EDL 19 DATEL HOLDINGS LTD. and DATEL DESIGN & DEVELOPMENT, INC., DECLARATION OF ROHIT K. SINGLA IN 20 SUPPORT OF MOTION OF MICROSOFT Plaintiffs and CORPORATION FOR LEAVE TO FILE 21 counterclaimant defendants SECOND AMENDED ANSWER, 22 AFFIRMATIVE DEFENSES AND vs. COUNTERCLAIMS 23 MICROSOFT CORPORATION, FILED UNDER SEAL 24 Defendant and Date: TBD 25 Counterclaimant Time: TBD Courtroom: E, 15th Floor 26 MAG. JUDGE ELIZABETH D. LAPORTE

28 SINGLA DECL. ISO MOT. FOR LEA VE CASE NO. CV 09-5535 EDL Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page2 of 94

1 I, Rohit K. Singla, hereby declare:

2 1. I am an attorney with the law firm Munger, Tolles & Olson LLP, counsel of record 3 for Defendant Microsoft Corporation (“Microsoft”) in the above-entitled action. I am licensed in 4 the State of California and admitted to practice before this Court. I make this declaration based 5 on my personal knowledge, and, if called upon as a witness, I could and would testify 6 competently as to the matters set forth below. 7 2. On January 11, 2011, Microsoft filed a motion to compel the production of Datel’s 8 reverse engineering documents. At the January 28, 2011 hearing on Microsoft’s motion, the 9 Court granted Microsoft’s motion. Because Datel’s CEO Michael Connors had testified that only 10 he and Datel engineer Paul Armitt had been deeply involved in the reverse engineering, I limited 11 our request at the hearing to the email files of Messrs. Connors and Armitt. (We have since 12 learned that Mr. Connor’s testimony on this point was not accurate.) Datel interpreted the Court’s 13 order to include only e-mails between Messrs. Connors and Armitt. On February 11, Datel 14 produced 17 e-mails, most of which were heavily redacted on the basis of “responsiveness.” 15 16 17 18 19 20 21 22 23 24 25 26 27 5. Attached hereto as Exhibit 1 are true and correct copies of documents bates 28 numbered DAT-SF00126894- DAT-SF00126895, DAT-SF00126896- DAT-SF00126897 and

- 1 - SINGLA DECL. ISO MOT. FOR LEAVE CASE NO. CV 09-5535 EDL Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page3 of 94

1 DAT-SF00127735- DAT-SF00127737 2 6. Attached hereto as Exhibit 2 is a true and correct copy of excerpts of the January 3 25, 2011 deposition transcript of Michael Connors. 4 7. Attached hereto as Exhibit 3 is a true and correct copy of Datel’s Responses and 5 Objections to Microsoft’s Notice of Deposition of Plaintiffs and Counterclaimant Defendants 6 Datel Holdings Ltd. and Datel Design & Development, Inc. Pursuant to Federal Rule of Civil 7 Procedure 30(b)(6), dated December 21, 2010. 8 8. Attached hereto as Exhibit 4 is a true and correct copy of excerpts of the February 9 8, 2011 deposition transcript of Alex Edge. 10 9. Attached hereto as Exhibit 5 is a true and correct copy of excerpts of the February 11 15, 2011 deposition transcript of Paul Armitt. 12 10. Attached hereto as Exhibit 6 is a true and correct copy of excerpts of the March 12, 13 2011 deposition transcript of Naiwu Yuan. 14 11. Attached hereto as Exhibit 7 is a true and correct copy of a document bates 15 numbered DAT-SF00070642- DAT-SF00070643. 16 I declare under penalty of perjury under the laws of the United States of America 17 and the State of California that the foregoing is true and correct. 18 Executed on March 25, 2011 at San Francisco, California. 19 /s/ Rohit K. Singla Rohit K. Singla 20

21 22 23 24 25 26 27 28

- 2 - SINGLA DECL. ISO MOT. FOR LEAVE CASE NO. CV 09-5535 EDL Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page4 of 94

Exhibit 1 Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page5 of 94

Highly Confidential - Attorneys' Eyes Only DAT -SF00126894 Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page6 of 94

Highly Confidential - Attorneys' Eyes Only DAT -SF00126895 Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page7 of 94

Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page8 of 94

Highly Confidential - Attorneys' Eyes Only DAT -SF00126896 Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page9 of 94

Highly Confidential - Attorneys' Eyes Only DAT -SF00126897 Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page10 of 94

Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page11 of 94

Highly Confidential - Attorneys' Eyes Only DAT -SF00127735 Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page12 of 94

Highly Confidential - Attorneys' Eyes Only DAT -SF00127736 Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page13 of 94

Highly Confidential - Attorneys' Eyes Only DAT -SF00127737 Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page14 of 94

Exhibit 2 Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page15 of 94

In The Matter Of:

DATEL HOLDINGS LTD., v. MICROSOFT CORPORATION ______

MICHAEL CONNORS - Vol. 1

January 25, 2011

______

HIGHLY CONFIDENTIAL

ATTORNEYS' EYES ONLY Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page16 of 94 MICHAEL CONNORS - 1/25/2011 HIGHLY CONFIDENTIAL - ATTORNEYS' EYES ONLY

Page 1 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION --o0o-- DATEL HOLDINGS LTD., and DATEL DESIGN & DEVELOPMENT, INC., Plaintiffs, vs. No. 09-CV-05535 EDL MICROSOFT CORPORATION Defendants. ______/

AND RELATED CROSS-ACTION. /

VIDEOTAPED DEPOSITION OF

MICHAEL CONNORS

______

January 25, 2011

VOLUME I, Pages 1 - 318

HIGHLY CONFIDENTIAL - ATTORNEYS' EYES ONLY

REPORTED BY: WENDY E. ARLEN, CSR #4355, CRR, RMR JOB 2001-433075

Merrill Corporation - San Francisco 800-869-9132 www.merrillcorp.com/law Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page17 of 94 MICHAEL CONNORS - 1/25/2011 HIGHLY CONFIDENTIAL - ATTORNEYS' EYES ONLY

Merrill Corporation - San Francisco 800-869-9132 www.merrillcorp.com/law Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page18 of 94 MICHAEL CONNORS - 1/25/2011 HIGHLY CONFIDENTIAL - ATTORNEYS' EYES ONLY

Merrill Corporation - San Francisco 800-869-9132 www.merrillcorp.com/law Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page19 of 94 MICHAEL CONNORS - 1/25/2011 HIGHLY CONFIDENTIAL - ATTORNEYS' EYES ONLY

Merrill Corporation - San Francisco 800-869-9132 www.merrillcorp.com/law Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page20 of 94 MICHAEL CONNORS - 1/25/2011 HIGHLY CONFIDENTIAL - ATTORNEYS' EYES ONLY

Merrill Corporation - San Francisco 800-869-9132 www.merrillcorp.com/law Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page21 of 94 MICHAEL CONNORS - 1/25/2011 HIGHLY CONFIDENTIAL - ATTORNEYS' EYES ONLY

Page 317 1 CERTIFICATE OF REPORTER 2 I, WENDY E. ARLEN, a Certified Shorthand 3 Reporter, hereby certify that the witness in the 4 foregoing deposition was by me duly sworn to tell the 5 truth, the whole truth and nothing but the truth in 6 the within-entitled cause; 7 That said deposition was taken down in 8 shorthand by me, a disinterested person, at the time 9 and place therein stated, and that the testimony of 10 the said witness was thereafter reduced to 11 typewriting, by computer, under my direction and 12 supervision. 13 That before completion of the deposition, 14 review of the transcript was requested. If 15 requested, any changes made by the deponent (and 16 provided to the reporter) during the period allowed 17 are appended hereto. 18 I further certify that I am not of counsel or 19 attorney for either or any of the parties to the said 20 deposition nor in any way interested in the event of 21 this cause and that I am not related to any of the 22 parties thereto. 23 DATED:______, 2011 24 ______25 WENDY E. ARLEN CSR, No. 4355

Merrill Corporation - San Francisco 800-869-9132 www.merrillcorp.com/law Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page22 of 94 Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page23 of 94

1 MARTIN R. GLICK (No. 40187) [email protected] 2 DANIEL B. ASIMOW (No. 165661) [email protected] 3 ROBERT D. HALLMAN (No. 239949) [email protected] 4 MICHELLE S. YBARRA (No. 260697) [email protected] 5 SEAN M. CALLAGY (No. 255230) [email protected] 6 HOWARD RICE NEMEROVSKI CANADY FALK & RABKIN 7 A Professional Corporation Three Embarcadero Center, 7th Floor 8 San Francisco, California 94111-4024 Telephone: 415/434-1600 9 FacsImile: 415/677 -6262 10 Attorneys for Plaintiffs and Counterc1aim-Defendants DATEL HOLDINGS LTD. and DATEL DESIGN & 11 DEVELOPMENT, INC.

12 UNITED STATES DISTRICT COURT

HOWARD 13 RICE NORTHERN DISTRICT OF CALIFORNIA NEMEROVSKI CA~W 14 SAN FRANCISCO DIVISION &RABKlN

A PmfC.~

16 DATEL HOLDINGS LTD. and DATEL No. 09-CV-05535 EDL DESIGN & DEVELOPMENT, INC., 17 Action Filed: November 20, 2009 Plaintiffs and Counterc1aim- 18 Defendants, DATEL'S RESPONSES AND OBJECTIONS TO MICROSOFT'S 19 v. NOTICE OF DEPOSITION OF PLAINTIFFS AND 20 MICROSOFT CORPORATION, COUNTERCLAIMANT DEFENDANTS DATEL HOLDINGS LTD. AND DATEL 21 Defendant and DESIGN & DEVELOPMENT, INC. Counterclaimant. PURSUANT TO FEDERAL RULE OF 22 CIVIL PROCEDURE 30(B)(6) 23 24 25 26 27 28

DATEL'S RESP. & OBJECTIONS TO 30(B)(6) DEPO NOTICE 09-CV-05535 EDL

VV03 122110-131100017~lO/1635821!F Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page24 of 94

1 Pursuant to Federal Rule of Civil Procedure 30(b)(6), Plaintiffs and Counterclaimant 2 Defendants DATEL HOLDINGS, LTD. and DATEL DESIGN & DEVELOPMENT, INC. 3 (collectively, "Datel") hereby submit the following responses and objections to the Notice of 4 Deposition of Plaintiffs and Counterclaimant Defendants Datel Holdings Ltd. and Datel 5 Design & Development, Inc. Pursuant to Federal Rule of Civil Procedure 30(b)(6) ("Notice 6 of Deposition") served in this litigation by Defendant and Counterclaimant Microsoft 7 Corporation ("Microsoft"). 8

9 GENERAL OBJECTIONS 10 Datel submits the following general objections to the Notice of Deposition. The 11 General Objections set forth below are incorporated, as appropriate, into each of Datel's 12 responses to the specific 30(b)(6) deposition Topics.

HOWARD 13 1. Datel objects to the Notice of Deposition to the extent that any Topic seeks R.ICE NEMEROVSKI CA~~i 14 information that is not relevant or material to any claims and! or defenses in this action, nor &R.ABKIN

APmfi",.,,"'Cmp<,ro<'m, 15 reasonably calculated to lead to the discovery of admissible evidence. Without conceding 16 the relevance of any other Topic, Datel specifically objects to any Topic as particularly 17 burdensome, time-consuming and lacking in relevance to the extent that such Topic seeks 18 information concerning or relating to the following: the methodology Datel used for reverse 19 engineering the Maxwell authentication chip and wireless protocol; sales in Europe or 20 outside of the United States that are unrelated to sales of accessories at issue in this case or 21 comparable accessories; future, planned, or forthcoming accessories; and other video game 22 platforms except as to comparable products and sales.' While witnesses are designated for 23 these Topics, Datel expects these questions to be limited and reserves its right to object and 24 curtail excursions into materials well outside the scope of the issues in this case. This is 25 particularly so since Microsoft has already indicated that it wishes to potentially extend the 26 witness time limits imposed by the rules and this should not be justified by filling up time 27 with extraneous matters. 28 2. Datel objects to the Notice of Deposition to the extent that any Topic seeks

DATEL'S RESP. & OBJECTIONS TO 30(B)(6) DEPO NOTICE 09-CV-05535 EDL W03 122110-131100017/U10116358211F -1- Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page25 of 94

1 infonnation and/or documents protected from discovery by any applicable privilege, 2 protection, immunity or other exemption from discovery under the California or United 3 States Constitutions, statutes or case law, including, without limitation, the attorney-client 4 privilege, attorney work-product doctrine, the right of privacy, trade secret protection, 5 confidential infonnation protection or other exemption from discovery. Nothing contained 6 in these responses is intended to be or should be considered a waiver of the attorney-client 7 privilege, attorney work-product doctrine, or other applicable privilege, immunity, the right 8 of privacy or other exemption from discovery. Datel expressly reserves its right to withhold 9 any responSIve infonnation, documents, or testimony protected by these or any other 10 privileges.

11 3. The fact that a witness or witnesses is or are designated on any Topic should not 12 be taken as an admission, or as a concession of the existence of any facts assumed by the

HOWARD l3 Topic, or that Datel's response to the Notice of Deposition constitutes evidence of any fact R.Ia NEMER.OVSKI CA~Pl 14 (or the existence of any fact) thus set forth or assumed. & R.ABKIN

A Pmfe.~<1(",af Cm'P"ral/(m 15 4. Datel has provided these designations in good faith to pennit Microsoft to plan 16 the depositions in this case and coordinate 30(b)(6) depositions with depositions of Datel 17 employees taken in the employees' individual capacities. The designations are based on the 18 best infonnation currently known to counsel. However, Datel reserves the right to amend or 19 supplement these designations. 20 5. Datel responds to the Notice of Deposition subject to and without waiving any of 21 the General Objections which are hereby expressly incorporated by reference into each 22 response below. 23

24 OBJECTIONS TO SPECIFIC DEPOSITION TOPICS 25 TOPIC 1: 26 The organizational structure and head count of Datel Holdings Ltd. and Date! Design 27 and Development, Inc., as well as any predecessor or successor companies. 28

DATEL'S RESP. & OBJECTIONS TO 30(B)(6) DEPO NOTICE 09-CV-05535 EDL W03 122110-131100017/U1O/16358211F -2- Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page26 of 94

1 RESPONSE TO TOPIC 1: 2 Datel incorporates the General Objections as if fully set forth herein. Subject to and 3 without waiving the foregoing objections, Datel designates Michael Connors and Kenneth 4 Tarolla to testify about this Topic. 5 TOPIC 2: 6 The corporate relationship between Datel and its various subsidiaries and/or affiliates. 7 RESPONSE TO TOPIC 2: 8 Datel incorporates the General Objections as if fully set forth herein. Subject to and 9 without waiving the foregoing objections, Datel designates Michael Connors to testify about 10 this Topic. 11 TOPIC 3: 12 The role of Datel and its vanous subsidiaries and/or affiliates in the design,

HOWARD 13 development, production, marketing and sale of Accessories for the Xbox 360 and Xbox 1. Ria NEMEROVSKI ~Pl 14 RESPONSE TO TOPIC 3: &RABKlN APmfi··'m~'Co_"""" 15 Datel incorporates the General Objections as if fully set forth herein. Subject to and 16 without waiving the foregoing objections, Datel designates Michael Connors to testify about 17 this Topic. 18 TOPIC 4: 19 Datel' s efforts to analyze, replicate, or interface with the Maxwell authentication 20 scheme. This includes, but is not limited to, DateI's circumvention of the Maxwell 21 authentication scheme and implementation of devices designed to operate with the Xbox 360 22 interface, including but not limited to all technical specifications, and all versions of 23 software code, in executable (object code) and human-readable form (source code), that 24 interfaces with the Maxwell authentication scheme. 25 RESPONSE TO TOPIC 4: 26 Datel incorporates the General Objections as if fully set forth herein. Datel further 27 objects to this Topic to the extent that it seeks information about technical specifications, 28 instructions, software code, or other Datel trade secrets, including reverse engineering

DATEL'S RESP. & OBJECTIONS TO 30(B)(6) DEPO NOTICE 09-CV-05535 EDL W03122110-131100017/UlO/16358211F -3- Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page27 of 94

1 processes, as irrelevant and not reasonably calculated to lead to the discovery of admissible 2 evidence. Subject to and without waiving the foregoing objections, Datel designates Alex 3 Edge to testify about this Topic. 4 TOPIC 5: 5 Datel' s distribution, sale, offers to license, licensing, advertising, and marketing of its 6 hardware, software or any other device or know-how for interfacing with the Xbox 360's 7 Maxwell authentication scheme, including but not limited to any communications or 8 dealings with Atomic and Big Ben. 9 RESPONSE TO TOPIC 5: 10 Datel incorporates the General Objections as if fully set forth herein. Datel further 11 objects to this Topic to the extent that it seeks information concerning activities, 12 transactions, or sales which took place entirely outside of the United States as irrelevant,

HOWARD 13 unduly burdensome, and not reasonably calculated to lead to the discovery of admissible RICE NEMEROVSKI CA~~Pl 14 evidence. Subject to and without waiving the foregoing objections, Datel designates &RABKlN A~f'·w".'Cm,",",'m' 15 Michael Connors to testify about this Topic.

16 TOPIC 6: 17 Microsoft's October 2009 dashboard update, including DateI's discovery of the update, 18 analysis of the update, and response to the update. 19 RESPONSE TO TOPIC 6: 20 Datel incorporates the General Objections as if fully set forth herein. Subject to and 21 without waiving the foregoing objections, Datel designates Michael Connors to testify about 22 this Topic. 23 TOPIC 7: 24 DateI's communications with its existing and potential consumers and customers, 25 including retail customers, regarding Microsoft's policy against the use of unauthorized 26 third-party Accessories, DateI's accessories for the Xbox 360, or actual or potential 27 Dashboard Updates that block the use of unauthorized accessories. 28

DATEL'S RESP. & OBJECTIONS TO 30(B)(6) DEPO NOTICE 09-CV-05535 EDL

W03 122110-131100017IUI0/16358211F -4- Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page28 of 94

1 RESPONSE TO TOPIC 7: 2 Datel incorporates the General Objections as if fully set forth herein. Datel further 3 objects to this Topic to the extent that it seeks information concerning activities, 4 transactions, or sales which took place entirely outside of the United States as irrelevant, 5 unduly burdensome, and not reasonably calculated to lead to the discovery of admissible 6 evidence. Subject to and without waiving the foregoing objections, Datel designates 7 Kenneth Tarolla to testify about this Topic. 8 TOPIC 8: 9 Datel's plans, development, and production of its Accessories for the Xbox 360, 10 including without limitation Memory Cards, the "Ready Action Max" for Xbox 360, the 11 Xsata, the Xport, the Transfer Kit, all Controllers, all headsets, wireless networking adapters, 12 all interfaces or adapters for the Xbox 360 Memory Cards or hard drives, and all Accessories

HOWARD 13 contemplated for the future. RICE NEMEROVSKI CA~~Pl 14 RESPONSE TO TOPIC 8: & RABKIN

"mfe.",",_'r.. p",,"'"" 15 Datel incorporates the General Objections as if fully set forth herein. Datel further 16 objects to this Topic to the extent that it seeks information concerning "Accessories 17 contemplated for the future" as irrelevant to the accessories actually at issue in this case and 18 therefore devoid of probative value. Datel further objects to this Topic to the extent that it 19 seeks commercially sensitive or confidential information as well as trade secrets. Subject to 20 and without waiving the foregoing objections, Datel designates Michael Connors and 21 Kenneth Tarolla to testify about this Topic. 22 TOPIC 9: 23 The design and functionality of Datel's Accessories for the Xbox 360, including 24 without limitation the MAX Memory Card, the Ready Action Max, the Xsata, the Xport, the 25 Transfer Kit, all Controllers, all headsets, wireless networking adapters. 26 RESPONSE TO TOPIC 9: 27 Datel incorporates the General Objections as if fully set forth herein. Subject to and 28 without waiving the foregoing objections, Datel designates Michael Connors to testify about

DATEL'S RESP. & OBJECTIONS TO 30(B)(6) DEPO NOTICE 09-CV-05535 EDL W03 122110-131 10001 7/u 101163582 11F -5- Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page29 of 94

1 this Topic. 2 TOPIC 10: 3 Datel's efforts, if any, to become a Microsoft licensed Xbox 360 or Xbox 1 Accessory 4 manufacturer and for non-Microsoft Video Gaming Platfonns. 5 RESPONSE TO TOPIC 10: 6 Datel incorporates the General Objections as if fully set forth herein. Datel further 7 objects to this Topic to the extent that it seeks infonnation concerning "non-Microsoft Video 8 Gaming Platfonns" as unduly burdensome, irrelevant to the accessories actually at issue in 9 this case and not reasonably calculated to lead to the discovery of admissible evidence. 10 Subject to and without waiving the foregoing objections, Datel designates Michael Connors 11 to testify about this Topic. 12 TOPIC 11:

HOWARD 13 Datel' s communications with Microsoft regarding Datel' s accessories for the Xbox RIa NEMEROVSKl CA~Pi 14 360. &RABKlN "",""'"".'0.,..,,,,,,, 15 RESPONSE TO TOPIC 11:

16 Datel incorporates the General Objections as if fully set forth herein. Subject to and 17 without waiving the foregoing objections, Datel designates Kenneth Tarolla to testify about 18 this Topic. 19 TOPIC 12: 20 Datel's business plans or strategies for Xbox 1 and Xbox 360 Accessories, including 21 any Accessory designed or intended to work with the Xbox 360 as well as with one or more 22 other Video Gaming Platfonns. 23 RESPONSE TO TOPIC 12: 24 Datel incorporates the General Objections as if fully set forth herein. Subject to and 25 without waiving the foregoing objections, Datel designates Michael Connors and Kenneth 26 Tarolla to testify about this Topic. 27 TOPIC 13: 28 Datel's sales, profits, sales expectations, and profit expectations for each of its Xbox

DATEL'S RESP. & OBJECTIONS TO 30(B)(6) DEPO NOTICE 09-CV-05535 EDL W03122110-131100017/u1O/16358211F -6- Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page30 of 94

1 360 Accessories in the United States and in Europe. 2 RESPONSE TO TOPIC 13: 3 Date1 incorporates the General Objections as if fully set forth herein. Subject to and 4 without waiving the foregoing objections, Date1 designates Michael Connors and Kenneth 5 Tarolla to testify about this Topic. 6 TOPIC 14: 7 Datel's marketing, advertising, or promotion, including without limitations discussions 8 with distributors and retailers, the dates of any such discussions, and any resulting sales or 9 purchase agreements, for each of its current and planned Xbox 360 Accessories in the 10 United States and in Europe. 11 RESPONSE TO TOPIC 14: 12 Datel incorporates the General Objections as if fully set forth herein. Datel further

HOWARD 13 objects to this Topic to the extent that it seeks information concerning "planned Xbox 360 Ria NEMEROVSKI CA~W 14 Accessories" as irrelevant to the accessories actually at issue in this case and therefore &RABKlN

APm/, .•,"""'Cm, .. mU",, 15 devoid of probative value. Datel further objects to this Topic to the extent that it seeks 16 commercially sensitive or confidential information as well as trade secrets. Date1 further 17 objects to this Topic to the extent that it seeks information concerning activities, 18 transactions, or sales which took place entirely outside of the United States as irrelevant, 19 unduly burdensome, and not reasonably calculated to lead to the discovery of admissible 20 evidence. Subject to and without waiving the foregoing objections, Datel designates 21 Michael Connors and Kenneth Tarolla to testify about this Topic. 22 TOPIC 15: 23 The potential uses of Datel's MAX Memory Cards for the Xbox 360, Xport, Xsata, and 24 Transfer Cable products including but not limited to any uses enabled by the ability to 25 transfer data from the Xbox 360 to a PC, and vice versa. 26 RESPONSE TO TOPIC 15: 27 Datel incorporates the General Objections as if fully set forth herein. Subject to and 28 without waiving the foregoing objections, Datel designates Michael Connors to testify about

DATEL'S RESP. & OBJECTIONS TO 30(B)(6) DEPO NOTICE 09-CV-05535 EDL W03122110-131100017IUIO/16358211F -7- Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page31 of 94

1 this Topic. 2 TOPIC 16: 3 The design, purpose, functionality, and development of "macro" and "turbo fire" 4 functionality on Xbox 360, Xbox 1 and other controllers designed and/or marketed by Date!' 5 RESPONSE TO TOPIC 16: 6 Datel incorporates the General Objections as if fully set forth herein. Datel further 7 objects to this Topic as vague and ultimately incomprehensible to the extent that it conflates 8 the Xbox 360 and Xbox 1 platforms with "other controllers designed and/or marketed by 9 Date!." Date1 further objects to this Topic to the extent that it seeks information concerning 10 non-Xbox 360 or non-Xbox 1 video gaming platforms as unduly burdensome, irrelevant to 11 the accessories actually at issue in this case and not reasonably calculated to lead to the 12 discovery of admissible evidence. Subject to and without waiving the foregoing objections,

HOWARD l3 Datel designates Michael Connors to testify about this Topic. RICE NEMEROVSKI ~W 14 TOPIC 17: &RABKlN

A Pm/,.",".wICm""mUm. 15 "PowerS aves" and "cheats" on the Datel Action Replay products for the Xbox 360 and

16 Xbox 1, including their design, purpose, and function. 17 RESPONSE TO TOPIC 17: 18 Datel incorporates the General Objections as if fully set forth herein. Datel further 19 objects to Microsoft's definition of "cheat" or "cheats" as encompassing "features that 20 provide the user with advantages not intended by the developer." Subject to and without 21 waiving the foregoing objections, Datel designates Michael Connors to testify about this 22 Topic. 23 TOPIC 18: 24 The development, implementation, and distribution of functionality to "re-sign" (or 25 analogous technology) or to otherwise change the content of "gamesaves" and other content 26 for the Xbox 360. 27 RESPONSE TO TOPIC 18: 28 Datel incorporates the General Objections as if fully set forth herein. Subject to and

DATEL'S RESP. & OBJECTIONS TO 30(B)(6) DEPO NOTICE 09-CV-05535 EDL

W03 122110-131100017!UI0/1635821/F -8- Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page32 of 94

1 without waiving the foregoing objections, Date1 designates Alex Edge to testify about this 2 Topic. 3 TOPIC 19: 4 The electrical and other interfaces between the Xbox 360 console and DateI's 5 Accessories for the Xbox 360. 6 RESPONSE TO TOPIC 19: 7 Datel incorporates the General Objections as if fully set forth herein. Subject to and 8 without waiving the foregoing objections, Datel designates Alex Edge to testify about this 9 Topic. 10 TOPIC 20: 11 DateI's analysis, reverse engineering, and implementation of the wireless protocol for 12 Xbox 360 accessories.

HOWARD 13 RESPONSE TO TOPIC 20: RICE NEMEROVSKI CAl-j:~Pi 14 Date1 incorporates the General Objections as if fully set forth herein. Datel further &RABKlN '~1",,'",~IC_m""" 15 objects to this Topic to the extent that it seeks information about technical specifications, 16 instructions, software code, or other Datel trade secrets, including reverse engineering 17 processes, as irrelevant and not reasonably calculated to lead to the discovery of admissible 18 evidence. Subject to and without waiving the foregoing objections, Datel designates 19 Michael Connors to testify about this Topic. 20 TOPIC 21: 21 DateI's performance and other testing for Xbox 360 Accessories. 22 RESPONSE TO TOPIC 21: 23 Date1 incorporates the General Objections as if fully set forth herein. Subject to and 24 without waiving the foregoing objections, Datel designates Alex Edge to testify about this 25 Topic. 26 TOPIC 22: 27 DateI's efforts to reverse engmeer and/or circumvent any Microsoft software or 28 hardware, including but not limited to (a) DateI's circumvention and/or reverse engineering

DATEL'S RESP. & OBJECTIONS TO 30(B)(6) DEPO NOTICE 09-CV-05535 EDL W03122110-131100017/u1O/16358211F -9- Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page33 of 94

1 of "hash" -based systems and identifiers, used to prevent the tampering or modification of 2 Xbox 360 video game content, including but not limited to "gamesave" content, and (b) 3 Datel's circumvention and/or reverse engineering of unpublished file formats or file systems 4 used by Microsoft or other game developers in the context of the Xbox 360. 5 RESPONSE TO TOPIC 22: 6 Datel incorporates the General Objections as if fully set forth herein. Datel further 7 objects to this Topic to the extent that it seeks information about technical specifications, 8 instructions, software code, or other Datel trade secrets, including reverse engineering 9 processes, other than the technical information specifically listed in this Topic, as irrelevant 10 and not reasonably calculated to lead to the discovery of admissible evidence. Subject to 11 and without waiving the foregoing objections, Datel designates Alex Edge to testify about 12 this Topic.

HOWARD 13 TOPIC 23: R.ICE NEMER.OVSKI CAl',/:~fI" 14 Datel's development of Accessories for the Xbox 1, including the certification, or lack & R.ABKIN

A Pm#'w",'Cwl"m"w, 15 thereof, of Datel's Xbox 1 Accessories for compliance with Microsoft's Xbox 1 Accessory 16 standards. 17 RESPONSE TO TOPIC 23: 18 Datel incorporates the General Objections as if fully set forth herein. Subject to and 19 without waiving the foregoing objections, Datel designates Michael Connors to testify about 20 this Topic. 21 TOPIC 24: 22 Datel' s plans, design, development, and production of Accessories for the Xbox 1, 23 including without limitation Memory Cards, the "Ready Action Max" for Xbox 1, all 24 Controllers, all headsets, all interfaces or adapters for the Xbox 1 Memory Cards or hard 25 drives. 26 RESPONSE TO TOPIC 24: 27 Datel incorporates the General Objections as if fully set forth herein. Subject to and 28 without waiving the foregoing objections, Datel designates Michael Connors to testify about

DATEL'S RESP. & OBJECTIONS TO 30(B)(6) DEPO NOTICE 09-CV-05535 EDL W03 122110-131100017!UI0I16358211F -10- Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page34 of 94

1 this Topic. 2 TOPIC 25: 3 DateI's sales, profits, sales expectations, and profit expectations for each of its Xbox 1 4 Accessories. 5 RESPONSE TO TOPIC 25: 6 Datel incorporates the General Objections as if fully set forth herein. Subject to and 7 without waiving the foregoing objections, Datel designates Michael Connors and Kenneth 8 Tarolla to testify about this Topic. 9 TOPIC 26: 10 Datel's communications with Microsoft regarding Datel's accessories for the Xbox 1. 11 RESPONSE TO TOPIC 26:

16 DateI's development, marketing, and sale of Cheat products for all Video Gaming 17 Platforms. 18 RESPONSE TO TOPIC 27: 19 Datel incorporates the General Objections as if fully set forth herein. Datel further 20 objects to Microsoft's definition of "cheat" or "cheats" as encompassing "features that 21 provide the user with advantages not intended by the developer." Datel further objects to 22 this Topic to the extent that it seeks information concerning "all Video Gaming Platforms" 23 as unduly burdensome, irrelevant to the accessories actually at issue in this case and not 24 reasonably calculated to lead to the discovery of admissible evidence. Subject to and 25 without waiving the foregoing objections, Datel designates Michael Connors and Kenneth 26 Tarolla to testify about this Topic. 27 TOPIC 28: 28 Licenses Datel has taken or certifications Datel has obtained for Accessories for any

DATEL'S RESP. & OBJECTIONS TO 30(B)(6) DEPO NOTICE 09-CV-05535 EDL W03 122110-131100017IUIO/16358211F -11- Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page35 of 94

1 Video Gaming Platfonn. 2 RESPONSE TO TOPIC 28: 3 Datel incorporates the General Objections as if fully set forth herein. Datel further 4 objects to this Topic to the extent that it seeks infonnation concerning "any Video Gaming 5 Platfonns" as unduly burdensome, irrelevant to the accessories actually at issue in this case 6 and not reasonably calculated to lead to the discovery of admissible evidence. Subject to 7 and without waiving the foregoing objections, Datel designates Michael Connors to testify 8 about this Topic. 9 TOPIC 29: 10 DateI's "Lite Blue Tool" for the Sony PSP, including any disputes or litigation relating 11 to the Tool. 12 RESPONSE TO TOPIC 29:

HOWARD 13 Datel incorporates the General Objections as if fully set forth herein. Datel further R.ICE NEMERDVSKI CA~1k 14 objects that this Topic concerns infonnation that is not reasonably calculated to lead to the & R.ABKIN

A Pm[,."'mw'Cm""m""" 15 discovery of admissible evidence inasmuch as it seeks infonnation concerning an accessory 16 that is not at'issue in this case for a video game platfonn that is not at issue in this case. The 17 potential probative value of such infonnation is marginal at best, and does not justify the 18 significant investment in resources for collection and review of materials that would be 19 required by a witness in order to testify about this Topic. Datel further objects to this Topic 20 to the extent that it seeks discovery of privileged infonnation. Based on the foregoing 21 objections, Datel will not be producing a witness on this Topic. 22 TOPIC 30: 23 DateI's sales, profits, sales expectations, and profit expectations for each of its memory 24 cards; controllers, headsets, networking adapters and cheating products for non-Microsoft 25 Video Gaming Platfonns for the past 10 years. 26 RESPONSE TO TOPIC 30: 27 Datel incorporates the General Objections as if fully set forth herein. Datel further 28 objects to Microsoft's definition of "cheat" or "cheats" as encompassing "features that

DATEL'S RESP. & OBJECTIONS TO 30(B)(6) DEPO NOTICE 09-CV-05535 EDL

W03 122110-131100017!UI0/16358211F -12- Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page36 of 94

1 provide the user with advantages not intended by the developer." Datel further objects to 2 this Topic to the extent that it seeks information concerning "non-Microsoft Video Gaming 3 Platforms" as unduly burdensome, irrelevant to the accessories actually at issue in this case 4 and not reasonably calculated to lead to the discovery of admissible evidence, except as to 5 comparable products and sales. Subject to and without waiving the foregoing objections, 6 Datel designates Michael Connors and Kenneth Tarolla to testify about this Topic. 7 TOPIC 31: 8 The video game platform market, including the differences and similarities between the 9 Xbox 360 and other Video Gaming Platforms. 10 RESPONSE TO TOPIC 31: 11 Datel incorporates the General Objections as if fully set forth herein. Subject to and 12 without waiving the foregoing objections, Datel designates Michael Connors to testify about

HOWARD l3 this Topic. RICE NEMEROVSKI CA~Pl 14 TOPIC 32: &RABKlN

'Pmf""'m./Cmporo""" 15 The interoperability of Datel's products, including DateI's Accessories, across different 16 Video Gaming Platforms. 17 RESPONSE TO TOPIC 32: 18 Datel incorporates the General Objections as if fully set forth herein. Subject to and 19 without waiving the foregoing objections, Datel designates Michael Connors to testify about 20 this Topic. 21 TOPIC 33: 22 DateI's practice of modifying, or ability to modify, Accessories, for one video gaming 23 console to work with another video gaming console. 24 RESPONSE TO TOPIC 33: 25 Datel incorporates the General Objections as if fully set forth herein. Subject to and 26 without waiving the foregoing objections, Datel designates Michael Connors to testify about 27 this Topic. 28

DATEL'S RESP. & OBJECTIONS TO 30(B)(6) DEPO NOTICE 09-CV-05535 EDL W03 122110-131100017!UlOI16358211F -13- Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page37 of 94

1 TOPIC 34: 2 DateI's knowledge of Microsoft's Xbox LIVE Terms of Use, Microsoft's Xbox 360 3 warranty, and any and all versions of the software license applicable to the Microsoft Xbox 4 360. 5 RESPONSE TO TOPIC 34: 6 Datel incorporates the General Objections as if fully set forth herein. Subject to and 7 without waiving the foregoing objections, Datel designates Michael Connors to testify about 8 this Topic. 9 TOPIC 35: 10 The use of Datel' s products and offerings to cheat at gamerscores and Achievements in 11 the context of the Xbox 360 and Xbox LIVE. 12 RESPONSE TO TOPIC 35:

HOWARD 13 Datel incorporates the General Objections as if fully set forth herein. Datel further RICE NEMEROVSKI CA~iK 14 objects to Microsoft's definition of "cheat" or "cheats" as encompassing "features that &RABKlN

A Pm/•. uw""Cmp",",'m. 15 provide the user with advantages not intended by the developer." Subject to and without 16 waiving the foregoing objections, Datel designates Alex Edge to testify about the use of 17 DateI's products and offerings in the context of the Xbox 360 and Xbox LIVE. 18 TOPIC 36: 19 DateI's end user license agreements, warranties, or other written materials provided to 20 Datel's customers at the time of purchase or on the Datel website. 21 RESPONSE TO TOPIC 36: 22 Datel incorporates the General Objections as if fully set forth herein. Subject to and 23 without waiving the foregoing objections, Datel designates Michael Connors to testify about 24 this Topic. 25 TOPIC 37: 26 Consumer and customer complaints and support requests for DateI's Xbox 360 and 27 Xbox 1 Accessories and Datel Accessories for any Video Gaming Platform. 28

DATEL'S RESP. & OBJECTIONS TO 30(B)(6) DEPO NOTICE 09-CV-05535 EDL W03 1221l0-131100017IUIO/16358211F -14- Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page38 of 94

1 RESPONSE TO TOPIC 37: 2 Date1 incorporates the General Objections as if fully set forth herein. Date1 further 3 objects to this Topic to the extent that it seeks information concerning "Accessories for any 4 Video Gaming Platform" as unduly burdensome, irrelevant to the accessories actually at 5 issue in this case and not reasonably calculated to lead to the discovery of admissible 6 evidence. Datel further objects to this Topic to the extent that it seeks information 7 concerning activities, transactions, or sales which took place entirely outside of the United 8 States as irrelevant, unduly burdensome, and not reasonably calculated to lead to the 9 discovery of admissible evidence. Subject to and without waiving the foregoing objections, 10 Datel designates Kim Philbrook and Jo Whipp to testify about this Topic. 11 TOPIC 38: 12 The development and design of the packaging of Datel's products for the Xbox 360,

HOWAR.D 13 induding but not limited to the packaging of the "MAX" Memory Card, the "Xsata," and the R.Ia NEMERDVSKI CA~BZ 14 "Xport." Ii! R.ABKIN '~if,,"mw'Cm1"m"'''' 15 RESPONSE TO TOPIC 38:

16 Datel incorporates the General Objections as if fully set forth herein. Subject to and 17 without waiving the foregoing objections, Datel designates Sara Raybould to testify about 18 this Topic. 19 TOPIC 39: 20 The development and design of the packaging of Datel's Accessories for the PS3, PSP, 21 Wii, and Nintendo DS. 22 RESPONSE TO TOPIC 39: 23 Datel incorporates the General Objections as if fully set forth herein. Datel further 24 objects to this Topic to the extent that it seeks information concerning "Accessories for the 25 PS3, PSP, Wii, and Nintendo DS" as unduly burdensome, irrelevant to the accessories 26 actually at issue in this case and not reasonably calculated to lead to the discovery of 27 admissible evidence. Based on the foregoing objections, Datel will not be producing a 28 witness on this improper Topic.

DATEL'S RESP. & OBJECTIONS TO 30(B)(6) DEPO NOTICE 09-CV-05535 EDL W03 1221l0-131100017/ulO/16358211F -15- Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page39 of 94

1 TOPIC 40: 2 The design and layout of the controls on Datel's Wildfire2 and Turbofire controllers 3 for the Xbox 360 and the PS3. 4 RESPONSE TO TOPIC 40: 5 Datel incorporates the General Objections as if fully set forth herein. The ITC

6 settlement allows Microsoft only to assert a defense regarding the Xbox 360 Wildfire 1 7 controller and not regarding the immunized Wildfire2 controller nor any controller design or 8 layout for the PS3. In addition, the ITC settlement precludes reference to or use of the fact 9 that the Turbofire 1 controller was redesigned. Subject to and without waiving the foregoing 10 objections, Datel designates Boris Hsing to testify on the Topic of the design and layout of

11 the Wildfirel controller for the Xbox 360. 12 TOPIC 41:

HOWARD 13 The redesign of layout of the controls for Datel's Turbofire and Wildfire2 controllers RICE NEMEROVSKI ~~Pl 14 in the wake of Microsoft's assertion of its design patents, including without limitation the EiJRABKIN "rofe.,,,,,,,,,'Cw,,,,""'"'' 15 planning and implementation of and motivation behind the redesign.

16 17 18 19 20 21 22 23 24 25 26 27 28

DATEL'S RESP, & OBJECTIONS TO 30(B)(6) DEPO NOTICE 09-CV-05535 EDL

W03122110-131100017IUI0/16358211F -16- Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page40 of 94

1 RESPONSE TO TOPIC 41: 2 Datel incorporates the General Objections as if fully set forth herein. The ITC 3 settlement allows Microsoft only to assert a defense regarding the Xbox 360 Wildfire 1 4 controller and not regarding the immunized Wildfire2 controller nor any controller design or 5 layout for the PS3. In addition, the ITC settlement precludes reference to or use of the fact 6 that the Turbofire 1 controller was redesigned. Subject to and without waiving the foregoing

7 objections, Datel designates Boris Hsing to testify on the Topic of the design and layout of

8 the Wildfire 1 controller for the Xbox 360. 9 DATED: December 21,2010. 10 MARTIN R. GLICK 11 DANIEL B. ASIMOW ROBERT D. HALLMAN 12 MICHELLE S. YBARRA SEAN M. CALLAGY HOWARD 13 HOWARD RICE NEMEROVSKI CANADY RICE NEMEROVSKI FAL RABKIN CANtPl 14 A Profes . Co orat" n &RABKIN A Pm}es:",,,,,,,1 Cwpumllrm 15

17 Attorneys for Plaintiffs and Counterclaim Defendants DATEL HOLDINGS LTD. and 18 DATEL DESIGN & DEVELOPMENT, INC. 19 20 21 22 23 24 25 26 27 28

DATEL'S RESP. & OBJECTIONS TO 30(B)(6) DEPO NOTICE 09-CV-05535 EDL W03 122110-131100017IUIO/16358211F -17- Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page41 of 94

Exhibit 4 Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page42 of 94

In The Matter Of:

DATEL HOLDINGS LTD.,

v. MICROSOFT CORPORATION

______

ALEX EDGE Vol. 1 ‐ February 8, 2011

______

HIGHLY CONFIDENTIAL - ATTORNEYS' EYES ONLY Case3:09-cv-05535-EDL Document172-1 Filed04/12/11 Page43 of 94