Trade Secret Complaint Against Google

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COMPLAINT FOR DAMAGES AND INJ UNCTIVE RELIEF: - CASE NO.
LAW OFFICESOF
WALKUP, MELODIA, KELLY
& SCHOENBERGER
A PROFESSIONAL CORPORATION
650 CALIFORNIA STREET
26TH FLOOR
SAN FRANCISCO, CA 94108
(415) 981-7210
Plaintiffs, MAX SOUND CORPORATION, VSL COMMUNICATIONS LTD., AND
VEDANTI SYSTEMS LIMITED, by their undersigned counsel, allege as follows:
INTRODUCTION
1. This case arises out of the theft by Google, Inc. (Google), YouTube, LLC
(YouTube), On2 Technologies, Inc. (On2), and Does 1-100 (collectively Defendants) of
proprietary video transmission technology developed by VSL Communications Ltd. and Vedanti
Systems Limited (together VSL) (the VSL Trade Secrets, which are defined at 63-78,
below) and Defendants incorporation of that technology into products and encoding and decoding
codec programs provided to the public around the world by Google, including, but not
limited to, VP8, VP9, WebM, YouTube, Google AdSense, Google Play, Google TV,
Chromebook, Google Drive, Google Chromecast, Google Play-per-view, Google Glasses, Google
+, Googles Simplify, Google Maps, and Google Earth. In short, Defendants theft of VSLs
Trade Secrets pervades virtually every website and product offered by Defendants.
2. Despite Googles well-publicized Code of Conduct Dont be Evil which it
explains is about doing the right thing, following the law, and acting honorably, Google in
fact has an established pattern of conduct that is the exact opposite. Google time and time again
has taken the intellectual property of others without offering to compensate the owners of that
intellectual property. This case is yet another of the many occasions on which Google has
unlawfully taken, rather than developed for itself or paid for, valuable technology that is core to
the functioning of its many businesses and products.
3. During the early 2000s, VSL developed a proprietary digital video codec (the VSL
Codec).
4. The VSL Codec uses proprietary methods and algorithms to dramatically reduce
the volume or size of multi-media content and data files during encoding and decoding, enabling
the shrinking of those data files, resulting in proportionally greater speed of transfer of such files
without a concomitant diminution in visual or audio quality.
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LAW OFFICESOF
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5. VSL patented some of its technologies in the United States and in other countries
around the world, while other VSL technology related to the VSL Codec remained proprietary
trade secrets.
6. Google, ostensibly to ascertain the scope of potential applications of the VSL
Codec and other VSL Trade Secrets to Googles products and websites, and purportedly with the
ultimate goal of purchasing the VSL Trade Secrets from VSL or acquiring VSL outright, induced
VSLs principals to disclose the proprietary VSL Codec and other VSL Trade Secrets not in the
public domain that explained the inner workings of the VSL Codec and data transmission
technology.
7. From April to December 2010, VSL disclosed the VSL Codec and other Trade
Secrets to Google pursuant to a nondisclosure agreement executed by VSL and Google in April
2010 and effective from April 2, 2010 (the NDA). The stated purpose of the NDA was to
[allow Google to] evaluate [VSLs technology] and possibly enter into a business transaction
with VSL.
8. The NDA explicitly prohibited Google from using any of VSLs Confidential
Information for any purpose other than a potential business transaction and required Google, as
the party receiving VSLs Confidential Information, to protect it for a period of five years
following VSLs disclosure of VSLs Confidential Information to Google.
9. After several follow-up communications to determine the status of the negotiations,
VSLs management reached the conclusion, on VSLs behalf, that Google had no interest in
acquiring VSLs technology or purchasing VSL, and so, on December 13, 2010, VSL requested
that Google return all documents and information VSL had disclosed pursuant to the NDA,
including those containing the VSL Trade Secrets.
10. In December 2010, after Google received the VSL Trade Secrets and VSL Codec,
all substantive negotiations with VSL regarding the acquisition of its technology terminated.
11. On December 16, 2010, Google shipped back to VSL materials that VSL had
provided to Google pursuant to the NDA. Google included a cover letter that provided an
itemized list of documents and other things being returned to VSL.
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LAW OFFICESOF
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12. After communications between the companies terminated, VSL had no practicable
means of obtaining from Google further information about Googles actual, but secret, use of the
Codec and other VSL Trade Secrets or of otherwise investigating the same. VSL assumed that
Google was in compliance with the NDA.
13. In mid to late-August 2011, VSL observed in an article, for the first time, that
certain video compression technology that Google was using for the dissemination of video
content, referred to as WebM/VP8, had improved significantly in quality.
14. On May 19, 2014, VSLs parent company entered into a Representation
Agreement with Max Sound Corporation (Max Sound), whereby Max Sound was granted the
exclusive rights to enforce VSLs intellectual property rights against Google. Pursuant to the
agreement, VSL remains the owner of the VSL Trade Secrets, while Max Sound has the exclusive
right to file claims related thereto.
15. In J une of 2014, VSL Engineers reviewed the publicly available source code for
WebM/VP8 and discovered that methods that had been proprietary and unique to the VSL Codec
at the time of the disclosure of the VSL Trade Secrets to Google were now present in the Google
code.
16. Plaintiffs bring this Complaint against Defendants to seek redress for their
misappropriation of the VSL Trade Secrets, for breach of the NDA, and for other violations of law
arising out of Defendants unlawful use of the VSL Trade Secrets that were disclosed to Google
pursuant to the NDA.
PARTIES, JURISDICTION, AND VENUE
17. Plaintiff Max Sound Corporation is a corporation organized under the laws of the
State of Delaware, with its principal place of business at 2902A Colorado Avenue, Santa Monica,
California 90404. Among other products, Max Sound sells an audio process that restores lost
compressed harmonics and brings high-definition (HD) sound to digital media. The MAX-D
process can create HD audio from a compressed audio source, such as MP3, while maintaining the
original file size and format.
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LAW OFFICESOF
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18. Plaintiff VSL Communications, Ltd. is a British corporation, with its principal
place of business at 84 Brook Street, Mayfair, London, United Kingdom W1K 5EH. VSL owns
100% of the shares of Vedanti Systems Limited.
19. Plaintiff Vedanti Systems Limited is a limited company organized and registered in
the United Kingdom, with its principal place of business at 84 Brook Street, Mayfair, London,
United Kingdom W1K 5EH. Vedanti Systems Limited has owned the VSL Trade Secrets, and
related VSL technology, since the inception of Vedanti Systems Limited in or around 2001.
20. Defendant Google, Inc. is a corporation organized under the laws of the State of
Delaware, and has a principal place of business at 1600 Amphitheatre Parkway, Mountain View,
California 94043, and/or is conducting business through an affiliate located at this address.
Google may be served through its registered agent for service of process, Corporation Service
Company, at 2710 Gateway Oaks Dr., Ste. 150N, Sacramento CA 95833.
21. On information and belief, YouTube is a limited liability company organized under
the laws of the State of Delaware, and headquartered in San Bruno, California. YouTube is a
wholly-owned subsidiary of Google. YouTube is in the business of the sharing and display of
user-generated and corporate media video. Available content on YouTube includes video clips,
TV clips, music videos, and other content such as video blogging, short original videos, and
educational videos. YouTube may be served through its registered agent for service of process,
Corporation Service Company, at 2710 Gateway Oaks Dr., Ste. 150N, Sacramento CA 95833.
22. On information and belief, On2 is a corporation organized under the laws of the
State of Delaware, and has a principal place of business in Clifton Park, New York. On2 is
wholly-owned subsidiary of Google. On2, formerly known as The Duck Corporation, engaged in
the business of developing video compression technologies known as codecs. In February 2010,
Google acquired On2 for an estimated $124.6 million. On2 claims the authorship of a number of
video codecs, including video codecs known as VP8 and VP9. On2 may be served through its
registered agent for service of process, Corporation Service Company, at 2711 Centerville Road,
Suite 400, Wilmington, Delaware 19808.
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23. Defendants sued herein as Does 1 through 100 are other participants in the conduct
alleged herein whose identities have yet to be ascertained. Such unnamed defendants include, but
are not limited to: (a) officers and/or directors who misappropriated the VSL Trade Secrets,
breached the NDA, and/or otherwise acted in concert with Defendants against Plaintiffs; (b) other
entities affiliated with Defendants that misappropriated the VSL Trade Secrets, breached the NDA
to Plaintiffs; and (c) individuals or entities with whom Google shared the VSL Trade Secrets
and/or otherwise acted in concert with Defendants against Plaintiffs. Plaintiffs reserve the right to
name such Does as discovery from Defendants reveal their identities.
24. Defendants are engaged in the business of developing, using, and selling a variety
of video computer programs, including those commonly referred to as the VP8, VP9, H.264, and
WebM video codecs. Defendants embed these codecs into other products that Defendants make,
use, and sell, such as the Android operating system used in many mobile phones and tablet
computers. These products are used and sold in the County of Santa Clara and in the rest of the
world. Defendants also use the codecs to deliver video content from their websites and products,
such as VP8, VP9, WebM, YouTube.com, Google AdSense, Google Play, Google TV,
Chromebook, Google Drive, Google Chromecast, Google Play-per-view, Google Glasses, Google
+, Googles Simplify, Google Maps and Google Earth (collectively the Websites and Products).
Defendants also distribute software such as the Chrome web browser that implements the codecs
(collectively the Software).
25. On information and belief, Defendants directly and/or indirectly import,
manufacture, use, offer for sale, and/or sell the codecs, Android operating system, Websites and
Products, and Software described in the preceding paragraph, which incorporate and depend upon
one or more of the VSL Codec and/or the VSL Trade Secrets that VSL disclosed to Google
pursuant to the NDA, within the State of California, including in the County of Santa Clara.
26. Because the obligations and liabilities resulting from Googles unlawful and
improper acts arose in the County of Santa Clara and because the parties agreed that claims
regarding breach of the NDA must be brought in the County of Santa Clara, venue in this Court is
proper under California Code of Civil Procedure Section 395.5.
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LAW OFFICESOF
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FACTUAL ALLEGATIONS COMMON TO ALL CAUSES OF ACTION
A. The VSL Codec
27. During the early 2000s, VSL developed a proprietary digital video codec and
related data transmission techniques that utilized proprietary methods and algorithms to reduce the
size of digital video and audio files without a significant loss of video or audio quality. This
technology reduces multi-media content and data files by ninety-seven percent without a
discernible diminution in visual quality. Thus, for example, the VSL Codec can reduce a video
file from 3.5 gigabytes to 98.5 megabytes, thus markedly enhancing video-streaming speed, while
also maintaining video image quality comparable to that of the original file. The VSL Codec is
solely the invention of VSL and its principals.
28. Development of the VSL Codec began in 2001, when VSL sought a solution for
pushing large data files through a narrow Internet bandwidth because they wanted to launch a new
Internet subscription service for providing and showing musical concerts online via the Internet.
29. None of the Internet digital video technologies available from the early through the
late 2000s such as MPEG-1, H.262/MPEG-2, H.263, and MPEG-4 Simple Profile/Advanced
Simple Profile (SP/ASP) provided the level of video quality VSL believed would be necessary
to launch this service. The then-existing video standards resulted in jittery, low quality video and
sound when applied to large sized video files.
30. For reduction of data volume, those available technologies relied solely on
compression, i.e., the encoding of digital information by identifying and deleting unnecessary bits
(lossy compression). Compressing a data file reduces its size or volume, thus allowing for the
storage of a greater number of files on a hard drive or for faster downloading and streaming of
files downloaded from the Internet.
31. VSL began to develop a proprietary method of optimizing data transmissions that
implements, in lieu of compression, methods of partitioning, slice, and pixel selection to
significantly reduce the volume of digital video files, while minimizing any resulting loss of video
quality.
32. Between 2001 and 2003, VSL developed the proprietary VSL Codec.
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LAW OFFICESOF
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33. The word Codec is derived from the words coder-decoder or compressor-
decompressor. A codec is a computer program capable of encoding or decoding a digital data
stream or signal. A codec can both encode a data stream for transmission or storage, and decode
the data stream for playback.
34. With the right tools, a codec can be reverse engineered to re-create the underlying
source code, i.e., the collection of computer instructions (often with comments) written using
some human-readable computer language.
35. The VSL Codec was not lossy compression, but instead employed proprietary
partitioning, slice, and pixel selection systems to analyze data. Using only a small
percentage of the original data, this process could create a resulting video file significantly smaller
than the original but with superior video image quality obtained in a lossless manner.
36. In the partitioning process used with the VSL Codec, a video file is analyzed and
broken up (i.e., partitioned) into key frames. In the slice process, a key frame is analyzed and
broken into smaller portions (slices) for pixel selection analysis.
37. Although some of these general concepts were known in the industry, VSLs
specific implementation of these techniques in the VSL Codec was proprietary, consisting of
analysis of one to eight regions (partitions) of a video frame; encoding the region to create a
matrix with three planes in the regions (the slices); analyzing the slices to determine the amount of
pixel detail; and then, using VSLs proprietary algorithm, reducing the amount of data based upon
the analysis of the amount of pixel detail found.
B. Video Is Crucial To Googles Operations
38. During the mid to late 2000s, video content and video streaming technology had
become integral to Google products, including but not limited to the YouTube.com website, the
Chrome web browser, and the Android mobile device operating system.
39. Given the inherent limitations in bandwidth for users of the Internet on computers
and on mobile devices, reducing the amount of data (i.e. the size of data files) to be transmitted
over the Internet has been critical to Google and others in the industry. Google sought out video
compression technologies to support its video streaming and downloading services.
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40. Google and Google products began implementing a video compression standard
known as H.264. H.264 serves as a core for many video standards. It is used by such streaming
video websites as YouTube, iTunes, Vimeo, Adobe Flash, Microsoft Silverlight, and various
HDTV broadcasts. Applications that rely on or employ H.264 or its successor, H.265, include
online movies, Internet Protocol television, cable, wireless, cellular, streaming music, online
concerts, cloud services, surveillance, data streaming and storage, and satellite content expansion.
The first version of the H.264 codec was completed in 2003 by a standardization committee called
the J oint Video Team, which was formed by the Video Coding Experts Group and the Moving
Pictures Experts Group.
41. The first version of H.264 was completed in 2003. H.264 is not a single video
codec; it is a family of codecs with some shared shortcuts grouped into several sets of profiles and
levels of constraints. By the 2009-2010 timeframe, the H.264 family of standards was in wide
use.
42. MPEG LA, LLC, is a firm based in Colorado that licenses patent pools that cover
essential patents necessary for use in various video codec standards. MPEG LA is not related to
the Moving Pictures Experts Group.
43. MPEG LA was initially founded in the late 1990s by several international
companies that owned patents necessary to practice the MPEG-2 video standard in order to pool
those patents under a single entity for purposes of granting pooled licenses to those patents and to
generate patent royalties. Since that time, MPEG LA has asserted that multiple video standards,
including H.264, require a license to its pooled patents, and hundreds of companies have obtained
licenses from MPEG LA for the rights to the H.264 patent pool.
44. For many years Google refused to obtain a license from MPEG LA to cover its
implementations of the H.264 standard, despite multiple requests from MPEG LA that Google
obtain a license.
45. In response to the MPEG LAs requests for Google to obtain a license for its H.264
implementations, Google decided instead to seek to implement in its products an alternative to
H.264 that would not require paying royalties to MPEG LA.
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LAW OFFICESOF
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46. As of September 2008, MPEG LA had not established a patent pool that covered
the VP8 codec, a video compression codec developed by On2 Technologies (On2).
47. In August 2009, Google targeted VP8 as a potential alternative to H.264 and
offered to acquire On2. Google wanted access to On2s video compression technology to support
Googles video streaming and downloading services, such as YouTube, because it did not want to
pay patent royalties required to use H.264, and because Googles business model is to provide
free open source products to the web.
48. In February 2010, Google completed its acquisition of On2. Through this
acquisition, Google obtained ownership of the VP8 codec and On2s patents and pending patent
applications covering the VP8 codec, thus simultaneously acquiring a technology that might
permit it to avoid paying licensing royalties to MPEG LA.
49. In May 2010, Google announced that its new WebM video file format would
incorporate the VP8 codec. WebM quickly became a popular video standard. It is free and it is
open source, meaning that new development changes can happen rapidly. YouTube now utilizes
WebM video and has committed to encoding its entire portfolio of videos to WebM. WebM was
enabled in Google Android operating system in late 2010. Entities that support a free and open
Internet have pushed for wide use and support of WebM.
50. After the release of WebM/VP8 by Google, however, numerous reviews by the
public concluded that the video quality of WebM/VP8 was significantly weaker than the quality
produced by H.264.
C. Google Induces VSL To Disclose Its VSL Codec and Other Trade Secrets
51. In March 2010, the available versions of both the H.264 and just-released royalty-
free VP8 that Google acquired were lossy video-compression technologies. Compared with either
format, VSLs Codec offered significantly better video quality.
52. In March 2010, with the understanding that WebM/VP8 was in desperate need of
improvement, Google Chief Business Officer Nikesh Arora contacted Alpesh Patel, who was then
VSLs Chief Executive Officer, to discuss the acquisition of the VSL Codec, or a potential sale of
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VSL to Google, based on the VSL Codecs superiority to VP8 and other available technologies for
video compression.
53. To induce VSL to disclose the VSL Trade Secrets, Google proposed, drafted, and,
in April 2010, executed with VSL the NDA (attached as Exhibit 1). Mr. Patel signed the NDA on
behalf of VSL, and Megan S. Smith, Googles Vice President of New Business Development,
signed on behalf of Google.
54. The express purpose of the NDA was to enable Google to evaluate and possibly
enter into a business transaction with VSL, i.e., the acquisition by Google of the VSL Codec
pursuant to a purchase agreement to be executed at a later date or alternatively the acquisition of
VSL by Google.
55. The NDA further provided that Google could use Confidential Information only
for th[is] Purpose and imposed on Google the duty to protect VSLs Confidential Information
for five years following its disclosure.
56. The NDA states that it is governed by California law, excluding conflict-of-laws
principles, and designates Santa Clara County, California, as the exclusive venue for any dispute
relating to the NDA.
57. As a condition of Googles consideration of any purchase agreement with VSL,
Google not only demanded that VSL disclose specific VSL Trade Secrets, but also that VSL
create documents, comparing and explaining the VSL Trade Secrets in relation to existing
technologies. These documents are described below.
58. VSL honored each of Googles requests to provide to Google working versions of
the VSL Codec and other documents containing VSL Trade Secrets and disclosed all such
information to Google pursuant to the NDA, including but not limited to descriptions of how to
implement VSLs data transmission technology, claim charts that compared H.264 to VSLs data
transmission technology, and explanations of VSLs data transmission technology that were not
disclosed in VSLs patent portfolio.
59. While some of the information that Google requested and that VSL disclosed to
Google was public, much of it remained secret and undisclosed to the public, i.e., VSLs own
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proprietary information and know-how for implementing its proprietary partitioning, slice and
pixel selection based systems, including core concepts, details, and refinements that were not in
the public domain, unpublished international patent applications, claim charts, and the working
VSL Codec itself.
60. After executing the NDA, representatives of both companies met at Google and
exchanged multiple phone conversations and emails to discuss the VSL Trade Secrets and their
applicability to Googles business and products.
61. Throughout negotiations of a possible sale of VSL, VSL representatives met and
communicated primarily with Laura Majerus and with J ack Ancone, Googles Senior Director of
New Business Development.
62. In a series of emails, telephone calls, meetings and transmission of data and
documents from May to August 2010, VSL disclosed to Google representatives the inner
workings of their proprietary process, which, as collectively described in the paragraphs below,
constitute VSLs Trade Secrets.
63. Specifically, in May 2010, VSL provided to Google CD-ROMs containing, inter
alia, its proprietary, revolutionary algorithm for Non-Vector Quantization. The standard at the
time was Vector Quantization. Vector Quantization is a classical quantization technique from
signal processing that allows the modeling of probability density functions by the distribution of
prototype vectors. It was used for lossy data compression. It can also be used for lossy data
correction and density estimation.
64. By contrast, the VSL Codec employed Non-Vector Quantization. This is achieved
by not sending the original file, but instead selecting certain pixels and frames or data and sending
only that data. In addition to including it on the CD-ROMs, VSL described to Google and
demonstrated how to transmit data without loss or use of Vector Quantization.
65. The CD-ROMs VSL sent to Google in May 2010 pursuant to the NDA also
contained VSL CODEC Implementation Instructions a document that set forth the VSL Codec
in specific and meticulous detail, including: (a) the base description of the algorithm; (b) a guide
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to implementation of the algorithm; (c) the file structure definition; (d) functions with input/output
parameters; and (e) instructions on how to compile and install the HG1 Video Codec.
66. At this time, practically all published video coding standards were discrete cosine
transformed (DTC) based. A DCT expresses a finite sequence of data points in terms of a sum
of cosine functions oscillating at different frequencies. DCTs are important to numerous
applications in science and engineering, from lossy compression of audio (e.g. MP3) and images
(e.g. J PEG) (where small high-frequency components can be discarded), to spectral methods for
the numerical solution of partial differential equations.
67. The VSL Codec instead offered a proprietary Non-DCT methodology.
68. In May 2010, Google received three CDs from VSL containing working versions of
the VSL Codec.
69. In J une 2010, VSL sent to Ms. Majerus a package via Federal Express that
contained more than 400 files and photocopies containing VSL Trade Secrets.
70. In a J une 8, 2010 email, VSL informed Ms. Majerus that they had sent the Federal
Express package and, in explaining what was contained therein, set forth in detail the VSLs
proprietary concepts of Set and Sets, which were integral to the method for reducing data
without compressing and with low encode and low decode, in a key frame design. VSL further
revealed to Google key details regarding these concepts within the email.
71. Ms. Majerus replied via email that same day that she had received the materials.
72. In J une 2010, VSL also disclosed to Google in conversations pursuant to the NDA
how to use its proprietary use of key frames to properly implement the VSL Codec.
73. In J uly 2010, VSL, Ms. Majerus, and Mr. Ancone exchanged several emails about
the pending negotiations. Google requested that VSL disclose claim charts that compared the
technology behind the VSL codec with H.264 in order to demonstrate how VSLs codec worked.
74. In accordance with Googles request, VSL promptly retained patent counsel (at
great expense) to draft the claim charts, which disclosed in great detail the proprietary methods
inherent in the VSL Codec. VSL disclosed the claim charts to Google pursuant to the NDA in
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August of 2010. These claim charts contained trade secrets that were essential to understanding
how the VSL Codec worked.
75. In J uly 2010, Google requested that VSL also provide a working version of the
VSL Codec to Google. Google claimed to need the VSL Codec for purposes of understanding
how it would benefit them.
76. Additionally, VSL disclosed to Google several documents that had been filed with
international patent authorities, but which were not in the public domain, that contained
information essential to understanding the VSL Codec and constituted part of the VSL Trade
Secrets.
77. Because Google failed to reach a purchase agreement with VSL, and, further,
because Google also failed to identify further information needed in order for it to decide whether
to reach such an agreement, in September 2010, VSL contacted Mr. Ancone at Google to find out
whether Google was still interested in acquiring VSLs technology or purchasing VSL. Google
refused to commit to either.
78. By December 2010, Google had, over the prior eight months, requested and
received numerous documents and other information from VSL pursuant to the NDA, including:
(a) the concepts and algorithms detailed above; (b) the claim charts detailing the how the VSL
Codec worked; (c) a working version of the VSL Codec; and (d) multiple documents from
unpublished foreign patent applications.
79. VSL relying on the plain language of the NDA and believing that Google would
honor its NDA obligations and comply with the NDAs stated Purpose fulfilled each of
Googles disclosure requests and, in some cases, created the requested documents containing the
requested proprietary information Google claimed to require for purposes of assessing VSLs
technology for acquisition.
80. After eight months of discussions, however, Google still had not agreed to pursue
an agreement with VSL, or indicate any reason for the delay in stating its intentions.
81. Thus, on December 13, 2010, VSL asked that Google return the documents and
information VSL had disclosed to Google pursuant to the NDA.
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82. On December 16, 2010, Ms. Majerus shipped back to VSL some, but not all, of the
materials that VSL had provided to Google pursuant to the NDA. The items returned included the
CD-ROMs with the VSL Codec and other documents containing VSL proprietary information that
VSL had provided to Google during the previous eight months. Ms. Majerus included a cover
letter that provided an itemized list of documents and other things that Google was returning to
VSL pursuant to the NDA. Included with the materials were a collection of Post-It notes
apparently written by Google personnel.
83. The list referenced the proprietary documents pertaining to the foreign patent
applications and the CD-ROMs containing the VSL Codec, but did not identify the claim charts as
being among the documents disclosed or returned, and the claim charts were not in fact returned.
84. The Post-It notes included the following:
Suggestions that engineers should be discouraged from digging deep and should
close eyes to existing IP;
Emails should try to be destroyed;
Google needed to obtain a non-infringement opinion from outside counsel;
Google should be concerned regarding the recklessness of its conduct;
Google should evaluate the risk of getting sued if Googles products are money
making;
Google is possibly infringing VSLs then-pending patent;
Google should keep an eye on VSLs technology and should get our own
patent on VSLs technology;
Google should invoke interferences in any patenting process to try to destroy
VSLs intellectual property rights;
Handwritten descriptions of VSLs Trade Secrets; and
Discussions regarding various Google products in which VSLs technology might
be utilized.
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LAW OFFICESOF
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85. On December 23, 2010, VSL, at Googles request, signed a letter acknowledging
VSLs receipt of the materials Google had enclosed with the letter from Ms. Majerus dated
December 16, 2010.
86. Thereafter, VSL assumed that Google would comply with the NDA. Little did
VSL know that behind the scenes, Google had devised a scheme to steal the VSL Trade Secrets
and incorporate them into Googles own products without compensating VSL for their use.
D. Googles Misappropriation of the VSL Trade Secrets
87. On information and belief, at some point in 2010 or thereafter, and known only to
Google at that time, Google planned to breach the NDA and to misappropriate VSLs Trade
Secrets without compensating VSL for their appropriation and use and without otherwise
informing VSL of Googles intent to do so.
88. Google implemented its plans to misappropriate the VSL Trade Secrets, to deprive
VSL and its principals of the economic benefits of their labor and inventions, and to appropriate
for Google the economic benefits of the VSL Trade Secrets that VSL had disclosed to Google
pursuant to the NDA.
89. On information and belief, in May 2010 and known only to Google at that time,
Google filed an amendment to a pre-existing J apanese patent application originally filed by On2,
which added to the patent application proprietary information VSL disclosed to Google pursuant
to the NDA.
90. On information and belief, after VSL disclosed the VSL Trade Secrets to Google
pursuant to the NDA and known only to Google at that time, Google began to incorporate VSL
Trade Secrets into improvements made to Googles WebM/VP8 codec, Googles Android
operating system, and other Google software, programs, and products.
pursuant to the NDA and known only to Google at that time, Google began to amend other pre-
existing patent applications and to file new patent applications to incorporate proprietary
information VSL disclosed to Google pursuant to the NDA.
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pursuant to the NDA and known only to Google at that time, Google otherwise made the VSL
Codec and other VSL Trade Secrets available to third parties not authorized to receive such
documentation and information.
93. Throughout 2012, VSL observed on several occasions that Googles Android
operating system for cell phones and tablets, as well as other Google software/systems for the
dissemination of video content, had improved significantly in quality.
94. After VSL completed its agreement with Max Sound Corporation on May 19,
2014, it began reviewing Googles publicly available source code and discovered that methods
that had been proprietary and unique to the VSL Codec at the time of the disclosure of the VSL
Codec and VSL Trade Secrets to Google were now present in the Google products.
95. Throughout J une 2014, members of the staff of VSL analyzed the publicly
available source code for WebM/VP8, and VSL discovered, for the first time, that coding both
similar and nearly identical to that underlying the VSL Codec that were unique to VSL when VSL
disclosed the VSL Trade Secrets to Google in 2010 were, in fact, present in the code of Android,
VP8, and WebM.
96. Through subsequent investigation, VSL learned that Google has continued and
continues to develop new products into which Google has incorporated the VSL Trade Secrets,
thus misappropriating VSLs proprietary information and know-how for its own benefit at VSLs
expense.
97. As an example, Google applied for a U.S. patent called Lossless Intra-Prediction
Video Coding on October 8, 2012 (Pub. No. US 2014/0098854 A1, Pub. Date April 10, 2014),
which describes and relies upon the VSL Codec and, specifically, the VSL Trade Secrets that VSL
disclosed to Google in 2010, pursuant to the NDA.
98. Google had express and implied obligations to VSL to use its Confidential
Information, including the VSL Trade Secrets, only in support of a potential acquisition agreement
and not for any other purpose.
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99. On information and belief, instead of negotiating a legitimate acquisition as had
been discussed, Google chose instead to surreptitiously acquire the VSL Trade Secrets and to
misappropriate them in order to avoid paying any compensation to VSL.
100. Google has, for its own benefit, thus intentionally misappropriated VSLs Trade
Secrets and violated the terms of the NDA.
101. On information and belief, as a result of Googles misappropriation and subsequent
release to the public of open source code that it derived from VSLs Trade Secrets and other
proprietary information, other potential licensors have no reason to license the technology. As
such, Google has frustrated and effectively terminated VSLs ability to further develop and to
commercialize the VSL Codec.
CAUSES OF ACTION
FIRST CAUSE OF ACTION
(Misappropriation of Trade Secrets under Cal. Civ. Code 3426.6)

102. Plaintiffs reallege, and incorporate herein by reference, as though fully set forth,
paragraphs 1 to 101 inclusive.
103. The VSL Codec and VSL Trade Secrets that VSL disclosed to Google revealed the
proprietary method by which the volume of video and multi-media files can be reduced to enable
rapid streaming of video without a concomitant detraction in visual quality.
104. VSL, at all relevant times, made reasonable efforts to maintain the secrecy of its
confidential and proprietary information, including the VSL Trade Secrets, including the
execution of the NDA with Google. VSL has not shared this information with third parties, except
in the course of confidential business communications.
105. The VSL Trade Secrets and all intellectual property and proprietary information
related thereto derive independent economic value and competitive advantages from the fact of not
being generally known.
106. Google is subject to both express and implied contractual obligations to maintain
the secrecy of the confidential and proprietary information disclosed pursuant to the NDA and
particularly the VSL Trade Secrets.
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LAW OFFICESOF
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107. Google willfully and maliciously misappropriated the VSL Trade Secrets by,
among other acts, incorporating and using them in Googles Android, WebM/VP8, YouTube,
and/or other programs and products, and by sharing the VSL Trade Secrets with third parties,
whether or not Google profited as a result.
108. By reason of Googles conduct, VSL has suffered and will continue to suffer great
and irreparable harm and damage, the extent of which will be difficult to ascertain, and VSL is
without an adequate remedy at law.
109. Plaintiffs are thus entitled to an injunction restraining Google from further
misappropriation.
110. As a result of Googles misappropriation, Plaintiffs have been damaged, and
Google has been unjustly enriched, in an amount to be determined at trial.
SECOND CAUSE OF ACTION
(Unfair Competition under Cal. Bus. & Prof. Code 17200, et seq.)

112. California Business & Professions Code 17200, et seq. forbids unlawful, unfair,
and fraudulent business practices in the State of California.
113. Defendants wrongful acts, including, without limitation, misappropriating the
VSL Trade Secrets, constitute unfair, unlawful, and fraudulent business practices under California
Business and Professions Code 17200, et seq.
114. Defendants conduct violates the California Business & Professions Code in at least
the following way: (a) By fraudulently conveying and representing that the purpose of the NDA
was to consider a transaction with VSL when the actual purpose was to misappropriate the use of
VSL technology and intellectual property.
115. VSL has a property interest in the VSL Codec and other VSL Trade Secrets.
Google has deprived VSL of that property interest by misappropriating its intellectual property.
VSL has suffered injury in fact and has lost money or property as a result of the unlawful, unfair,
and fraudulent business acts or practices alleged above.
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116. Googles unlawful, unfair, and fraudulent business practices, as described above,
present a continuing threat to VSL. If Google is allowed to continue its wrongful acts, VSL will
suffer further immediate and irreparable injury and loss.
117. As a result of Googles conduct, Plaintiffs are entitled to damages and to injunctive
relief, including directing Google to stop using the information for the benefit of Google and third
parties.
THIRD CAUSE OF ACTION
(Conversion)

119. Notwithstanding VSLs ownership of the intellectual property that constitutes the
VSL Trade Secrets, Google has exercised dominion over such property in derogation of VSLs
rights.
120. Among other acts, Google continues to incorporate the VSL Trade Secrets into
Googles products, including but not limited to the YouTube website, the Chrome web browser,
and the Android mobile device operating system, without a license agreement or other
compensatory arrangement. Google has also disclosed VSL Trade Secrets to third parties.
121. The intellectual property that Google converted, in the manner alleged here, is of
value in enabling it to further develop and to commercialize its various video streaming and other
programs.
122. Plaintiffs have been damaged by Googles conversion of the VSL Trade Secrets
because VSL has been denied the exclusive rights to develop and to commercialize the VSL
Codec, VSL Trade Secrets, and other proprietary information and know-how, in an amount to be
determined at trial.
FOURTH CAUSE OF ACTION
(Declaratory Relief)

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124. VSL, as the owner of the VSL Trade Secrets disclosed to Google, has an interest in
the intellectual property rights under the NDA. Specifically, VSL owns the VSL Codec, VSL
Trade Secrets, other proprietary information, and know-how that it brought to Google.
125. Google has created a controversy regarding the VSL Codec, VSL Trade Secrets
and related proprietary information and know-how by incorporating and by continuing to
incorporate this intellectual property into products developed or distributed by Google, despite the
NDAs explicit prohibitions against such disclosure.
126. Plaintiffs seek a declaration that: (a) VSL owns the VSL Codec and the other VSL
Trade Secrets that it disclosed to Google pursuant to the NDA; (b) VSL has the exclusive right to
license this intellectual property; and (c) Google had express and implied obligations to VSL to
protect the Confidential Information, including the VSL Codec and the other VSL Trade Secrets,
from use or disclosure by Google or others, given that VSL disclosed that intellectual property to
Google pursuant to the NDA agreeing that the disclosure to Google was solely for purposes of
entering into a potential acquisition agreement whereby Google would compensate VSL for any
use or disclosure of the Confidential Information.
FIFTH CAUSE OF ACTION
(Breach of Contract)

128. The NDA is an enforceable contract.
129. VSL has performed all conditions, covenants, and promises required on its behalf
to be performed in accordance with the terms and conditions of the NDA, or the performance by
VSL has been excused by virtue of Googles conduct.
130. Google has breached the NDA by engaging in the conduct alleged herein,
including, without limitation, disclosing and using such information provided by VSL and using
such information for the purpose of pursuing business ventures other than an agreement with VSL.
131. As a result of Googles breaches of its agreement with VSL, Plaintiffs have
suffered damages in an amount to be proven at trial.
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132. In addition, Plaintiffs have suffered and will suffer harm that cannot be remedied in
damages, and that will require equitable relief.
SIXTH CAUSE OF ACTION
(Common Law Fraud)

134. At the time that VSL and Google were negotiating the NDA, and, in particular, the
definition of the term Purpose within that NDA, Google specifically represented to VSL that the
NDA was needed for Google to evaluate whether or not to engage in a transaction with VSL.
135. Googles representation that the NDA was needed for Google to evaluate whether
or not to engage in a transaction with VSL was a false representation.
136. This misrepresentation was deliberately intended to mislead VSL regarding
Googles interest in misappropriating from VSL what it learned through the NDA without any
intention of purchasing VSL or acquiring VSLs Trade Secrets.
137. The purpose of the NDA was to induce VSL to disclose information that could be
misappropriated.
138. Google deliberately concealed this purpose, as evidenced by the Google Post-It
Notes, discussed above.
139. VSL relied upon the plain language of the NDA and complied with the NDAs
stated Purpose to its detriment.
140. If VSL had known the true facts namely, that Google was looking to exploit the
information it learned through the NDA with no real intention of entering into a transaction VSL
would never have shared information with Google or entered into the NDA.
141. Plaintiffs have been damaged by Googles fraudulent conduct in an amount to be
determined at trial.
REQUEST FOR RELIEF
WHEREFORE, Plaintiffs respectfully request that this Court enter judgment in their favor
and against Defendants as follows:
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a. That Defendants be enjoined temporarily and permanently from
misappropriating VSLs confidential and proprietary information and know-how, including,
without limitation, any development, use, or manipulation of the VSL Trade Secrets, as well as
VSLs other proprietary information and related materials;
b. Actual, incidental, statutory, and consequential damages from Defendants,
together with interest, in an amount to be proven at trial;
c. Disgorgement of amounts by which Defendants were unjustly enriched;
d. For an order requiring that any funds and all profits Defendants acquire or
have already acquired by wrongful conduct be placed into a constructive trust for the sole benefit
of Plaintiffs;
e. For restitution and/or disgorgement of all revenues, earnings, profits,
compensation, and benefits which may have been obtained by Defendants as a result of such
unfair, unlawful and/or fraudulent business acts and practices;
f. For an order requiring that ownership of any Google patent that is based on
VSLs confidential and proprietary information and know-how, including, without limitation, any
development, use, or manipulation of ODT-related materials, be transferred to VSL;
g. For statutory, punitive and exemplary damages in an appropriate amount to
be determined by the Court as permitted by law;
h. For declaratory relief clarifying the parties rights under the NDA;
i. For Plaintiffs attorneys fees and costs in this matter; and
j. For such other and further relief as the Court may deem just and proper.
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LAW OFFICESOF
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(415) 981-7210
Dated: August 11, 2014 WALKUP, MELODIA, KELLY & SCHOENBERGER

MICHAEL A. KELLY
MATTHEW D. DAVIS
KHALDOUN A. BAGHDADI
J AY W. EISENHOFER
GEOFFREY C. J ARVIS
ADAM J . LEVITT
CATHERINE SILLEABHIN
CHRISTOPHER M. J OE
ERIC W. BUETHER
BRIAN A. CARPENTER
MARK A. PERANTIE
Attorneys for Plaintiffs

DEMAND FOR TRIAL BY JURY
Plaintiffs hereby demand a trial by jury.

Dated: August 11, 2014 WALKUP, MELODIA, KELLY & SCHOENBERGER

MICHAEL A. KELLY
MATTHEW D. DAVIS
KHALDOUN A. BAGHDADI
J AY W. EISENHOFER
GEOFFREY C. J ARVIS
ADAM J . LEVITT
CATHERINE SILLEABHIN
CHRISTOPHER M. J OE
ERIC W. BUETHER
BRIAN A. CARPENTER
MARK A. PERANTIE
Attorneys for Plaintiffs

Trade Secret Complaint Against Google

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