1

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

----------------------------------------------------------------X

ARGENTTO SYSTEMS, INC. and :

NICK SANTINO, :

:

Plaintiffs, :

:

-v.- :

:

THE PEAK ORGANIZATION, INC., :

PEAK COUNSEL, INC., PEAK :

DISCOVERY, INC., RICHARD :

EICHENBERG, ARNOLD SCHLANGER, :

MICHAEL DALEWITZ, and PHILIP :

GREENBERG, :

:

Defendants. :

----------------------------------------------------------------X

No.: 09 Civ. 2615 (LLS)(AJP)

ECF Case

DECLARATION OF

NICK SANTINO

IN SUPPORT OF

PRELIMINARY

INJUNCTION AND

EXPEDITED DISCOVERY

NICK SANTINO, under penalty of perjury, declares as follows:

1. I am the President and Founder of Argentto Systems, Inc. (“ASI”). As the

owner of the copyright to the legal review metrics software at issue in this action (the

“Performance Metrics Software”), I am also a Plaintiff. I make this declaration pursuant

to 28 U.S.C. § 1746 in support of Plaintiffs’ application for a preliminary injunction and

expedited discovery.

BACKGROUND

2. I have been an independent software developer and consultant since 1994.

In 2001, as my business grew, I founded and incorporated ASI. ASI is a software

development and consulting company that develops, customizes and provides computer

software solutions to businesses ranging from law firms to investment banks to computer

manufacturers. ASI offers a full suite of software programs, from accounting enterprise

2

systems, to oil trading software platforms, securities portfolio management software,

legal case management software, and various interactive web applications. In addition,

ASI provides information technology (“IT”) consulting and support services to its clients.

Since its founding, ASI has employed approximately fifteen software programmers.

3. As a leading developer of software based on proven Microsoft

technologies, ASI has developed unique intellectual property unparalleled in its industry,

including multi-company accounting software that permits entities with multiple business

units to consolidate their general ledgers into a single database, investment portfolio

management software, and interactive web-based job posting software that integrates the

needs of job candidates, staffing services, and potential employers. Starting in 2002, I

have applied for and/or obtained copyright registrations for these and other software

packages developed for licensing to clients.

4. Attached hereto as Exhibit A is a true and correct copy of ASI’s current

marketing catalog, which ASI provides to current and prospective customers to describe

and offer its software for licensing. The Performance Metrics Software at issue in this

action appears on page 14 of the catalog.

5. As part of its customer relationships, ASI inevitably adapts its software

packages to the needs of a particular customer. That customization work, and ongoing

support of the software once the customer has implemented it, constitutes a major portion

of ASI’s workload and revenue generation. In any event, ASI does not permit its

customers access to the proprietary source code for such software, to ensure the security

of ASI’s intellectual property.

3

THE PERFORMANCE METRICS SOFTWARE

6. In 2006 and early 2007, I realized that that no one in the e-discovery

industry had been able to find a solution to the problem of quality control and efficiency

management in the context of litigation discovery document review. I decided to

develop, with the investment of considerable expense and programmer time, a unique and

proprietary software system to analyze and chart the progress and performance of large-

scale review of documents in the course of complex legal proceedings. This software,

which no one in the e-discovery or document review industries had previously been able

to create, provides unprecedented control over the document review process in large

litigations.

7. Successful discovery management requires complex metrics, or

measurement of the performance and efficiency of each document reviewer. The

Performance Metrics Software enables supervisors to manage effectively the progress,

accuracy, and efficiency of individual reviewers and the review team as a whole. The

metrics include: (1) documents per hours and averages; (2) pages per hours and averages;

(3) hours logged by reviewers; (4) documents reviewed; (5) documents re-reviewed; (6)

documents with no tags; (7) pages reviewed; (8) tags made; (9) tags at the first, second

and QC level; (10) additional tags added at the first-level review; (11) document review

costs at issue level.

8. The Performance Metrics Software (1) is platform agnostic, meaning it

can be used on any document review platform; (2) enables a user to manage multiple

projects simultaneously; (3) is web-based, so it is easy to use and secure; and (4) provides

4

graphical displays of individual as well as group performance. The Performance Metrics

Software is written in the 16-bit .NET programming language.

9. With the Performance Metrics Software, supervisors can (1) access a

consolidated history of individual reviewer skills for use on future projects; (2) identify

under-performing reviewers; (3) identify inaccurate coders; (4) share performance data

with the review team, providing an incentive to achieve; and (5) export data into

spreadsheets for storage and internal use.

10. The implementation of these features was and is unprecedented in the e-

discovery industry. An IT specialist at one top New York law firm, upon first viewing

the software, told me that that law firm had been trying for seven years, without success,

to create this document review management and metrics functionality. Although it is

based on proven Microsoft technologies such as the SQL Server 2005 database software

and the .NET programming language and framework in Microsoft Visual Studio, the user

interface, data algorithms, data tables, drivers, and database structure of the Performance

Metrics Software consist of numerous original constituent elements. The Performance

Metrics Software contains over 950,000 lines of software source code. Over 6,000 hours

of ASI programmer time, over a period of 28 months, were required to write the

Performance Metrics Software.

11. When the Performance Metrics Software was completed in late November

2007, I sent a copyright application and the required fee to the U.S. Copyright Office, as I

had done for other software ASI developed. Attached hereto as Exhibit B is a true and

correct copy of the copyright application I submitted, along with a copy of the check and

the source code deposit that I sent to the U.S. Copyright Office with the application.

5

12. I obtained a U.S. Copyright Certificate of Registration for the

Performance Metrics Software (called “Legal Review Metrics”), Registration Number

TX 6-901-797, effective December 3, 2007. A copy of this Certificate of Registration is

attached hereto as Exhibit C. I exclusively licensed the Performance Metrics Software to

ASI, so that ASI could license it to clients.

13. I am not aware of any competing software package in the e-discovery

industry. Our implementation of the Performance Metrics software is unique, and offers

a huge competitive advantage to whoever markets it to prospective law firm and other

legal clients.

ASI’S EFFORTS TO PROTECT THE PERFORMANCE METRICS SOFTWARE

TRADE SECRET

14. ASI maintains the confidentiality of its trade secrets, including its

proprietary source code, in many ways.

15. First, all ASI employees and contractors are required to sign strict

confidentiality, work for hire, and non-disclosure agreements.

16. Second, ASI’s programmers who develop, test, maintain and upgrade its

source code are the only individuals at ASI who have access to the source code through

password-protected computers. ASI provides each programmer with a user name and

password without which the programmer cannot access the system on which the source

code resides. Only I have the password to directly access the server containing and

running the Performance Metrics Software source code.

6

17. Third, ASI programmers are prohibited from working on ASI software,

including the source code, outside the office. At the office, ASI programmers are

permitted access only to their own workstations and computers.

18. Fourth, ASI’s offices, including the servers on which its software source

code resides, are locked, secured, and protected by guard dog.

19. Finally, while ASI provides its actual and prospective customers and

licensees with access to its software user interfaces to view its form and functionality,

and may offer limited access to underlying data to the extent the customer or licensee

requires such access for daily use, absolutely no one other than ASI’s own computer

programmers has access to the source code embodying that software.

20. The Performance Metrics Software source code was always maintained

and run on servers belonging to ASI. Neither Peak nor any third party was ever

permitted access to the source code for the Performance Metrics Software or any other

source code.

THE RELATIONSHIP BETWEEN ASI AND PEAK

21. Frank Barone, Peak’s newly-hired controller, first contacted me to work

with Peak in 2002. Mr. Barone introduced me to Richard Eichenberg, Peak’s President

and Founder. Peak needed help with its accounting systems. Although Peak had been in

existence for decades, its accounting systems and other IT systems were in a shambles.

For example, even though Peak had invested hundreds of thousands of dollars in its

accounting systems over the years, it still did not have a means to write accounts-payable

checks to clients.

22. In June 2002, Peak engaged ASI to provide one of ASI’s existing software

7

solutions for accounts payable, general ledger, and certain other accounting functions.

With the success of these first initiatives, Peak then requested that ASI provide software

for accounts receivable, payroll, and additional accounting functions. In January 2003,

ASI provided a “live payroll” software system, finally bringing Peak’s payroll

capabilities into the 21st century. We consistently provided this software ahead of

schedule and under budget.

23. ASI’s accounting systems, including its innovative “multi-company”

system permitting consolidation of the accounting for Peak’s multiple divisions, were

proprietary and unique. ASI ran the accounting software, and maintained the “data

tables” for the underlying databases. Peak and ASI agreed that ASI would have

exclusive access and administrative control over the accounting server, which was

separate from all of Peak’s existing network, and housed in a separate building. With

that agreement, I installed the accounting database on that server. To the best of my

knowledge, no one other than Frank Barone and me ever accessed that server, for the

following six years, until June 2008.

24. In the summer of 2003, I realized that Peak was still using paper time slips

and fax machines to keep track of the hours its temporary employees were working; this

system caused Peak’s billing, accounting, and payroll functions to be slow, disconnected,

and inefficient. I began developing a “beta” version of a web-based solution for timecard

entry and approval. Despite Richard Eichenberg’s apprehension, I demonstrated the beta

system to him, and Peak ultimately adopted the use of this web-based solution as

“PeakInteractive.net” in February 2004. The ability of Peak’s temporary employees, and

their supervisors at client companies, to report and approve hours using a web-based

8

interface catapulted Peak to a leading position among staffing services. Because of the

strong promotional benefit of this innovative software solution, Richard and other

executives asked me to accompany Peak executives in sales calls to prospective clients.

In numerous instances, I was aware that new staffing client companies cited Peak’s web-

based timecard entry and approval system as the primary reason for their choosing Peak

for their staffing needs.

THE AGREEMENTS BETWEEN ASI AND PEAK

25. ASI had an agreement with Peak with respect to the use and ownership of

all software licensed by ASI to Peak, including the Performance Metrics Software,

throughout the companies’ relationship. This agreement is reflected in various

documents.

26. First, in late June 2002, when ASI began providing accounting and related

software to Peak, Peak and ASI entered into a Confidentiality Agreement designed to

protect Peak’s proprietary information, effective June 28, 2002. Attached hereto as

Exhibit D is a true and correct copy of this Confidentiality Agreement. This agreement

specifically stated that software copyrights did not constitute part of Peak’s Confidential

Information, and that “ASI Systems, Inc. will retain all software intellectual property and

copyrights.” See Exhibit D ¶ 1.A., III.

27. On or about November 20, 2003, ASI and Peak entered into a

Confidentiality Agreement effective January 8, 2002, intended to replace the older

Confidentiality Agreement and to cover the entire period of the companies’ relationship.

Attached hereto as Exhibit E is a true and correct copy of this Confidentiality Agreement.

In this Confidentiality Agreement, the parties also expressly agreed and reaffirmed that

9

ASI would own all intellectual property rights in any software produced or provided in

the context of the parties’ relationship, as follows:

III OWNERSHIP. As between The Peak Organization,

Inc. and ASI Systems, Inc., all rights, titles, and interest,

including copyright interests and any other intellectual

property, in and to the Software produced or provided by

ASI Systems, Inc. under this Agreement shall be the

property of ASI Systems, Inc. To the extent of any interest

of The Peak Organization, Inc. therein, The Peak

Organization, Inc. agrees to assign and, upon its creation,

automatically assigns to ASI Systems, Inc. the ownership of

such Software, including copyright interests and any other

intellectual property therein, without the necessity of any

further consideration. (Exhibit E ¶ III)

28. In addition, as understood and intended by the parties, the agreement again

specifically stated and reaffirmed that software copyrights did not constitute part of

Peak’s Confidential Information. See Exhibit E ¶ I.A.

29. The agreement between Peak and ASI was also reflected in the “Terms

and Conditions” printed on each and every invoice provided by ASI to Peak in

connection with its software sales, service and support, including the Performance

Metrics Software.

30. Attached hereto as Exhibit F are the Terms & Conditions as they appeared

on the back of each invoice sent by ASI to Peak.

31. Section 5.1 of the Terms and Conditions of the agreement between ASI

and Peak provides:

OWNERSHIP RIGHTS

5.1 Ownership. As between Client and ASI Systems, Inc.,

except as set forth below in this Section 6, all right, title,

and interest, including copyright interests and any other

intellectual property, in and to the Software produced or

provided by ASI Systems under this Agreement shall be the

property of ASI Systems, Inc.. To the extent of any interest

10

of Client therein, Client agrees to assign and, upon its

creation, automatically assigns to ASI Systems the

ownership of such Software, including copyright interests

and any other intellectual property therein, without the

necessity of any further consideration.

32. Section 6.1 of the Terms and Conditions provides:

RESPONSIBILITIES OF Client FOR SOFTWARE

6.1 Limitations on Use. Client may not use, copy, or

modify the Software, or any copy, adaptation, transcription,

or merged portion thereof, except as expressly authorized

by ASI Systems hereunder. Client's rights may not be

transferred except to a successor in interest of Client's

entire business who assumes the obligations of this

Agreement. No service bureau work, multiple-user license,

or time-sharing arrangement is permitted. If Client uses,

copies, or modifies the Software or transfers possession of

any copy, adaptation, transcription, or merged portion of

the Software to any other party in any way not expressly

authorized hereunder, Client's license is automatically

terminated.

33. Section 7.1 and 7.2 of the Terms and Conditions provide:

PROPRIETARY INFORMATION

7.1 Trade Secrets. Client acknowledges that in order to

perform the services called for in this Agreement, it shall

be necessary for ASI Systems to disclose to Client certain

Trade Secrets that have been developed by ASI Systems at

great expense and that have required considerable effort of

skilled professionals. Client further acknowledges that the

Software will of necessity incorporate such Trade Secrets.

Client agrees that it shall not disclose, transfer, use, copy,

or allow access to any such Trade Secrets to any employees

or to any third parties, excepting those who have a need to

know such Trade Secrets in order to give effect to Client's

rights hereunder and who have bound themselves to respect

and protect the confidentiality of such Trade Secrets. In no

event shall Client disclose any such Trade Secrets to any

competitors of ASI Systems, Inc..

7.2 Scope of Restriction. As used herein, the term “Trade

Secrets” shall mean any scientific or technical data,

information, design, process, procedure, formula, or

improvement that is commercially valuable to ASI Systems

and not generally known in the industry.

11

34. These Terms and Conditions were essential terms in the agreement

between ASI and Peak. It was always my intention that ASI would keep control of the

software, to market and sell it to other clients. As set forth in the Terms and Conditions

and agreed between the companies, all intellectual property and proprietary trade secret

rights to the Performance Metrics Software belonged to ASI, and Peak’s license to use

the software was expressly contingent on ASI’s authorization.

35. Peak was well aware of these Terms and Conditions and of the fact that

they applied to the Performance Metrics Software, and all other software licensed by ASI

to Peak, with the exception of the Staffing Management System software described

below. On several occasions, I sent an extra copy of the Terms and Conditions printed on

ASI’s invoices and set forth above to various Peak executives, including Defendants

Richard Eichenberg, Michael Dalewitz, and Philip Greenberg.

36. In fact, I specifically recall that, in late 2003 or early 2004, around the

time that the Staffing Management System Software Agreement described below was

being discussed, Richard Eichenberg noticed the Terms and Conditions printed on the

back of an ASI invoice when he was in the process of paying it, and he telephoned me

and asked me to email him a copy in a larger and darker font. I did so. Attached hereto

as Exhibit G are the Terms and Conditions in the form that I sent to Mr. Eichenberg by

email. Later that day, Mr. Eichenberg telephoned me and expressed certain opinions and

concerns about the wording of the Terms and Conditions. I responded that these Terms

and Conditions reflected the terms of the agreement between ASI and Peak, that I

understood that Peak had been abiding by the Terms and Conditions since the beginning

of the relationship between our companies more than a year earlier, during which time

12

ASI had provided extensive accounting software and other software to Peak, and that

therefore there was no possibility of changing the Terms and Conditions of the

Agreement with respect to future software licensing. Mr. Eichenberg assented to my

statements and accepted the Terms and Conditions.

37. In 2004, separately from the licensing of ASI’s software, Peak engaged

ASI in our consulting capacity to manage Peak’s entire network, including e-mail. Peak

asked me to become an “outsourced CIO” (chief information officer). From that point

until June 2008, I helped Peak to administer its e-mail, network and enterprise servers,

and I worked with Peak’s own personnel to solve issues relating to individual

workstations and peripherals.

38. In late 2005, I proposed that Peak should consolidate its job posting

website with ASI’s web-based staffing software, which allows potential job candidates to

post availability and check listings, staffing companies to post listings and monitor needs,

and potential client companies to post needs and check on job candidates. I pointed out

that incorporating a separate subsystem into the Peak website to perform these functions

would reduce costs, reduce errors and increase efficiency exponentially; ASI’s software

was capable of fulfilling exactly what Peak needed. Peak agreed to adopt ASI’s web

interface, which I intended to market to staffing companies, job websites such as

Monster.com, and other, similar, customers. The web program became hugely popular

with Peak’s own employees, as well as Peak’s clients and staffing job candidates.

THE LICENSING OF THE PERFORMANCE METRICS SOFTWARE

39. In 2006, Richard Eichenberg told me that his “dream” for Peak was to

become successful in the rapidly growing e-discovery field, which, he told me; Peak had

13

previously tried and failed to do in 1999. Peak sought to re-launch its efforts with a new

e-discovery subsidiary, Defendant Peak Discovery, Inc. Peak intended to sell its e-

discovery services alongside the temporary legal staffing services offered by its existing

subsidiary Peak Counsel, Inc., and thereby increase revenues from both.

40. I began researching IT solutions in the document review and e-discovery

industries, and realized that no one had ever created software to monitor the performance

of document review, to measure individual reviewers’ and teams’ accuracy, speed and

efficiency. I saw that the significant variability in these areas was a major flaw in the

cost-efficiency of the entire e-discovery and document review process.

41. ASI then independently embarked upon development of the Performance

Metrics Software. When I demonstrated a “beta” version of the software to Richard

Eichenberg in early 2007, he was extremely enthusiastic.

42. In January 2008, without my prior knowledge or pre-approval, Peak

announced that it was offering the Performance Metrics Software as its “proprietary

software tool,” “Peak Review Metrics,” which formed the centerpiece of its e-discovery

and temporary legal document review services. Indeed, in Peak’s promotional materials,

the “Performance and Accuracy Metrics” software was frequently listed as the most

important benefit of engaging Peak to provide document review and e-discovery services.

Peak demonstrated the Performance Review Software at the annual American Bar

Association LegalTech event in February 2008, and utilized these demonstrations to gain

numerous new clients for Peak’s e-discovery and document review services.

43. Richard Eichenberg and other Peak executives repeatedly asked me to

assist Peak in promoting the Performance Review Metrics software in sales calls to

14

prospective clients. Numerous potential clients commented that they had never seen this

capability offered by any e-discovery or document review provider. The Performance

Metrics Software gave Peak a unique edge in the e-discovery and document review

markets, and Peak received numerous engagements based on potential clients’ interest in

the software’s capabilities. Based on statements made to me by Peak executives,

salespeople and clients, I believe that clients retained Peak primarily because of the

performance metrics capability of the Performance Metrics Software that Peak now

claims to own.

44. It was always understood and agreed between Peak and ASI that ASI

would be the sole and exclusive provider of support and data migration for the

Performance Metrics Software. It is a critical component of ASI’s business model to

derive revenues from such service and support, and I would never have permitted Peak to

use ASI’s software without such an agreement and understanding.

THE STAFFING MANAGEMENT SYSTEM SOFTWARE AGREEMENT

45. I understand that Peak is now contending that the license terms of the

Performance Metrics Software, and indeed all software ever licensed by ASI to Peak,

were governed by an “Alliance and Licensing Agreement Pertaining to Staffing

Management System” between the companies, dated December 17, 2003 (“the Staffing

Management System Agreement”). Any such argument totally contradicts the realities of

the licensing agreements and the understanding that both the Defendants and I had of the

companies’ relationship, as set forth below.

46. For many years, since the early 1990s and continuing at least through June

2008, the computer software that Peak utilized to manage its staffing operations has been

15

the “PC Hunter Recruiting Management System,” a software package licensed by Peak

from Micro J Systems. In late 2003, I proposed that Peak could adopt and assist in the

development of a modified and customized version of ASI’s 32-bit desktop Staffing

Enterprise System to replace or supplement PC Hunter. See ASI Catalog, Exhibit A at

12. This software allows staffing specialists, recruiters, or human resources (“HR”)

personnel to organize and categorize job candidates and existing employees by

availability, skills, education and work experience. In addition, companies can log job

listings and monitor needs for staffing, then cross-reference such listings or requests with

the candidates’ or employees’ files to fill these job needs.

47. With great skepticism, Peak agreed to explore utilizing this 32-bit desktop

application, which I intended to market to staffing companies like Peak, or to HR

departments of any large organizations wishing to search and categorize their own

employees’ qualifications and skill sets. This Staffing Management System would permit

such companies to manage employee profiles and search for specific skill sets,

educational background, or experience among a database of employees, and match them

with specific client requests. When Peak resisted my proposals, I suggested that Peak

could participate in any income generated from licensing the Staffing Management

software to third parties, and that Peak could have a perpetual license to use the software.

In keeping with this, and unlike all other ASI software licensed to Peak, I agreed to

provide a copy of the Staffing Management software source code to an escrow agent, to

be released to Peak under certain conditions.

48. Because the contemplated Staffing Management System project was to be

governed by terms different from all the other projects, services and licenses between

16

ASI and Peak, including specifically the proceeds and term of the software license, Peak

and I agreed to enter into an “Alliance and Licensing Agreement Pertaining to Staffing

Management System” (the “Staffing Management System Agreement”), which I signed

in December 2003, and which Richard Eichenberg signed in early January 2004. A true

and correct copy of the Staffing Management System Agreement is attached hereto as

Exhibit H.

49. The Staffing Management System Software was very different from the

Performance Metrics Software ASI would later license to Peak. The Staffing

Management Software was written in 32-bit VBA computer code and was intended to

interface with ASI’s accounting and billing software, which Peak had already licensed

and which was also written in 32-bit VBA code. By contrast, the Performance Metrics

Software was written in 16-bit .NET code atop a SQL Server 2005 database, and was

intended to be “platform-agnostic.” If Peak had adopted it, the Staffing Management

System Software would have been designed to encompass Peak’s entire recruiting and

placement business, for temporary workers and potential permanent hires. The

Performance Metrics Software does not relate to staffing, recruiting or placement

systems. Instead, it is narrowly focused on providing detailed reports on document

reviewers’ performance in large e-discovery litigation, and is primarily designed to

benefit law firms.

50. The Staffing Management System would have generated data belonging to

Peak, including the job candidates’ profiles, the clients’ staffing needs, and so on. The

Staffing Management System Agreement itself addresses this issue by providing that, if

Peak were to sell one of its divisions that had licensed the Staffing Management System,

17

the buyer would have the option of either keeping the Staffing System or just taking the

“pertinent data.” (Exhibit H ¶ e.) The Performance Metrics Software does not generate

data belonging to Peak’s divisions, but instead reports reviewer performance information

to law firms and other Peak clients based on those clients’ data.

51. ASI even invoiced Peak for the Staffing Management System software

project and for the Performance Metrics Software project on separate invoices, even

when work was performed on both projects in the same day. (In fact, ASI provided at

least six different categories of invoices for various separate projects in the same time

periods.)

52. Unfortunately, despite the promise of mutual gain for both ASI and Peak

from the Staffing Management System Agreement, the software was never completed

before the termination of the relationship between ASI and Peak, and only existed in

“beta” demonstration format. Although the project was never completed, in 2004 I

provided a disk containing “beta” Staffing Management System software source code to

Peak’s attorney as the “escrow” referenced in the Staffing Management System

Agreement. This was the only time I voluntarily provided Peak with source code for any

ASI software. In any event, as far as I know, Peak still uses PC Hunter Recruiting

Management System for its staffing management system needs.

53. Peak clearly understood that the Staffing Management System Agreement

was designed to cover only the Staffing Management System project software. The

Terms and Conditions continued to be printed on every invoice I sent to Peak. Also, my

exchange with Mr. Eichenberg concerning the Terms and Conditions of our agreement

with respect to all other software, set forth in Paragraph 34 above, took place in the same

18

months as the discussions concerning the Staffing Management System Agreement, and I

provided extra copies of the Terms & Conditions to various Peak executives, reaffirming

their applicability to software licensed by ASI to Peak, on several occasions after the

execution of the Staffing Management System Agreement.

THE THEFT OF ASI’S SOFTWARE AND TERMINATION OF THE

RELATIONSHIP BETWEEN ASI AND PEAK

54. As part of my duties as outside CIO, I also acted as a “Chief Security

Officer” for Peak. Peak began to have many problems with certain Peak executives who

did not comply with proper email security practices and web usage. I undertook to

investigate these problems. In the course of my investigation, I came across an email

from James Bandes, who was then Executive Director of Peak Off-Site, Inc. (the

predecessor of Defendant Peak Discovery, Inc.), to Richard Eichenberg on November 27,

2007. In that email, Bandes suggested, “There are many developers out there that could

reverse engineer what [Santino] has written especially if you have the source code and

even if you don't it can be done.” Because of this direct threat to ASI’s and my

intellectual property, I copied the text of this email and saved it. A true and correct copy

of this document is attached hereto as Exhibit I.

55. I promptly contacted Richard Eichenberg and Michael Dalewitz, informed

them that I had seen Mr. Bandes’s communication, stated my objections to his

suggestion, and emphatically reminded them of ASI’s copyright and other intellectual

property and trade secret rights under the companies’ agreements. I later sent Mr.

Dalewitz a copy of the Terms and Conditions printed on ASI’s invoices and pointed out

the provisions prohibiting the course of conduct that Mr. Bandes had suggested.

19

56. The relationship between Peak and ASI began to unravel in the spring and

summer of 2008.

57. In May 2008, I was working on a project late in the evening at Peak.

When he left the office in the evening, I accidentally left behind a flashlight, a

screwdriver, and a CD case with several CD-ROMs containing, among other files, the

source code for the Performance Metrics Software.

58. The next day, the items were not where I left them. When I inquired about

the location of my property, the flashlight and screwdriver were returned to me, but the

CD case was not. I made numerous inquiries, but the CD case and the CD-ROMs within

were never returned.

59. Shortly thereafter, in June 2008, Peak purported to terminate ASI’s

services, and I was removed from my position as “outsourced CIO.” With this

termination, consistent with the terms and conditions of the agreements between ASI and

Peak, all licenses of ASI software to Peak, including the Performance Metrics Software,

were terminated.

60. At the time of the termination, Peak owed ASI $30,000 in fees for

consulting and network administration services.

61. After the termination, I mailed all of Peak’s web information and images

to Richard Eichenberg and his counsel. I did this without being asked by anyone,

because I wanted to make sure that Peak had the images, text and information contained

in its website that I believed belonged to Peak. Peak’s current website, at peakorg.com,

contains the images, text and information that I provided at that time, although it is no

longer interactive and utilizes a different underlying web design.

20

62. Peak asked me, and I agreed, to maintain Peak’s data on ASI’s servers for

another three months, until September 2008, so that Peak could utilize new contractors to

extract its accounting, payroll and other data from the ASI databases.

63. In September 2008, when ASI’s accounting system and web interface

were replaced by another system and Peak’s contractors were no longer accessing the

ASI databases; I closed down Peak’s access to ASI’s servers. Peak still owed ASI

$21,004 in fees.

64. In the summer and fall of 2008, Peak repeatedly requested and demanded

that I provide the source code for ASI’s proprietary software. I refused to give up ASI’s

and my intellectual property and proprietary trade secrets.

65. In August 2008, Defendant Michael Dalewitz, the head of Defendant Peak

Discovery, Inc., told me that he and Peak viewed the Performance Metrics Software

project as terminated and that Peak no longer wished to use the Performance Metrics

Software.

66. After the termination of the Peak-ASI relationship, Peak replaced its ASI

accounting software with other software packages. Similarly, without the right to use the

ASI software, Peak replaced the interactive web site, “PeakInteractive.Net,” and began

utilizing a system from TempWorks for time card entry. As I mentioned above, the

“peakorg.com” web site now runs with non-interactive HTML pages. These changes are

not surprising, because ASI strictly controlled access to its source code, and Peak lacked

such source code after Peak terminated the relationship.

67. In stark contrast, as I have now learned, Peak has continued to use,

distribute, market, and promote the Performance Review Software, since before the

21

termination of the ASI-Peak relationship. Each law firm or other client that engages Peak

to provide services including Performance Metrics receives its own exclusive application

of the Performance Metrics Software user interface. The user interface screens contained

in the promotional materials distributed by Peak are virtually identical to ASI’s

Performance Metrics Software, with minor modifications. These modifications and

distributions of my software are entirely without my authorization. In other words, the

only software package that Peak has continued to use is the software for which Peak had

illicitly acquired the source code.

68. Although I believe that numerous individuals have participated in the

misappropriation and infringement of the Performance Review Metrics software,

including Defendants Arnold Schlanger and Michael Dalewitz, as indicated more fully

below, I believe that Defendant Richard Eichenberg has been chiefly responsible, and

that he has taken an active and direct role both in his dealings with me and in the choice

to misappropriate the software.

PEAK’S INFRINGEMENT AND MISAPPROPRIATION

69. In the first week of February 2009, the American Bar Association held its

annual LegalTech convention in New York City. Peak had made a surprise

announcement of the Performance Metrics Software at the LegalTech convention one

year earlier.

70. Later that month, I learned from a friend who attended the LegalTech

conference that Peak had been promoting the “Peak Review Metrics” software using

paper handouts and a slide show at the LegalTech conference itself. If prospective clients

showed interest in the software, Peak would then schedule “private demonstrations” of

22

the software. This behavior suggested that Peak was trying to keep the user interface and

other aspects of the Peak Review Metrics software from being revealed to the public and,

more importantly, ASI and me.

71. In the month since the LegalTech show, Peak and its e-discovery

subsidiary, Defendant Peak Discovery, Inc., has more openly promoted the “Peak Review

Metrics” software on its website and in brochures. True and correct copies of materials I

downloaded from the Internet from Peak Discovery concerning Performance Metrics are

attached hereto as Exhibit J. For example, through an acquaintance, I learned of a

presentation prepared by Defendant Michael Dalewitz to promote Peak Discovery to

potential customers. I understand that this presentation may be the “slide show” that was

used at the LegalTech conference. I reviewed and downloaded the presentation, which

was available on the Internet, and noted that on the page entitled “About Us,” the top

element of the “pyramid” of qualities describing the company, and thus the most

important and prominent element, was “Performance and Accuracy Metrics Software.”

A true and correct copy of screenshots of the presentation, downloaded from the website

slideshare.com, is attached hereto as Exhibit K.

72. I believe that Defendant Arnold Schlanger, who is Michael Dalewitz’s

father-in-law, is also intimately involved in the misuse of the Performance Metrics

Software to enhance Peak’s revenues. Mr. Schlanger is in charge of Peak Counsel, Inc.,

the provider of temporary legal personnel, which benefits directly whenever Peak gets a

new engagement from a law firm to provide document review services; those

engagements, in turn, depend in large part on the fact that Defendant Peak Discovery

offers Performance Review Metrics as part of its e-discovery services.

23

73. I believe it would be impossible for Peak to have independently created its

own Performance Metrics Software in the months since ASI’s relationship with Peak

terminated. It would take a team of programmers many months, at great cost, to write a

program capable of the Performance Metrics Software functions, whether they were

working “from scratch” or through “reverse engineering.” The Performance Metrics

Software remains unique in the industry.

74. Therefore, I believe that the Defendants are continuing to infringe ASI’s

and my valuable intellectual property, and to misappropriate ASI’s and my proprietary

trade secrets, in the Performance Metrics Software.

75. As a result of Defendants’ infringement and misappropriation, ASI is

being substantially harmed. ASI seeks customers to whom we can provide software and

services. We benefit from favorable publicity – such as the favorable reception being

given to the Performance Metrics Software – and Peak’s false representations that it owns

or has the rights to this otherwise unique software seriously undermines any true claim

ASI might make as to the uniqueness or originality of the Performance Metrics Software.

76. Peak’s infringing use of the Performance Metrics Software directly

competes with ASI’s efforts to market the software to potential customers. See Exhibit

A. It also deprives ASI of the profits that would be gained from licensing the software.

This is particularly damaging to ASI because ASI is a relatively small company with

relatively fewer sources of income. Having been deprived of the benefits of possibly our

most unique software, ASI has nearly been driven out of business. By contrast, Peak has

13 different divisions offering various temporary staffing and permanent employment

services. Although the Performance Metrics Software has clearly helped Peak achieve

24

extraordinary growth and profit, Peak’s continued existence does not depend on the

Performance Metrics Software.

PEAK’S STATE COURT COMPLAINT

77. Earlier this month, when I had already retained counsel to prepare to file

this lawsuit and application for preliminary injunction, I received a call from someone

wishing to assist ASI in connection with an action that had apparently been filed by Peak

against ASI in the New York State Supreme Court for New York County. I had not been

aware of the lawsuit filed by Peak, and I had not been served with any papers. As a result

of learning about Peak’s state court action (the “State Court Action”), I instructed my

counsel to file a notice of removal of that complaint to this Court.

78. As we will show at the appropriate time, Peak’s allegations in the State

Court Action are utterly meritless. But the allegations also show that Peak really has no

defense to this action whatsoever. A true and correct copy of Peak’s Verified Complaint

in the State Court Action is attached hereto as Exhibit L.

79. The State Court Action makes clear that Peak has copied the Performance

Metrics Software in violation of copyright law and ASI’s and my other rights. Under the

terms of ASI’s agreement with Peak, Peak’s usage of the Performance Metrics Software

is a clear-cut act of infringement and misappropriation of our trade secrets.

80. Peak seems to be claiming (Exhibit L ¶¶ 10-14) that all software licensed

by ASI to Peak, including the accounting software and the Performance Metrics

Software, was covered by the Staffing Management System Agreement. But as Peak

well knows, for the reasons set forth above in Paragraphs 39 to 53, the Staffing

Management System software project was different from, and not related to, the

25

Performance Metrics Software. The companies agreed to the Staffing Management

System Agreement specifically because Peak was not sure it wanted ASI’s Staffing

Management System software and it would only invest in the development of the

enhanced Staffing Management System software on terms different from the normal

licensing relationship between ASI and Peak. As indicated above, the Staffing

Management System project did not progress beyond the “beta” stage. I provided the

“escrow” copy of the software source code called for under the Staffing Management

System Agreement, and I was never asked to provide any additional “escrow” deposits

until I read Peak’s Complaint. (Exhibit L ¶ 35.) Also, Peak’s Complaint seems to

suggest that the Staffing Management System Agreement was intended to cover

accounting software based on Peak’s UA software license; UA is an accounting software

program that has nothing to do with the Performance Metrics Software.

81. At the same time, the Complaint itself appears to recognize that the

Performance Metrics Software was not part of the Staffing Management System

Agreement, because it alleges, “In addition, Peak also retained Argentto as a work for

hire to develop the PPM software.” (Exhibit L ¶ 13.) That actually contradicts the

express wording of the Staffing Management Systems agreement, in which Peak agrees

that ASI “shall be entitled to any claim for intellectual property and copyrights relating to

any enhancements to software adapted for use pursuant to this agreement . . . ” (Exhibit

H). Of course, neither ASI nor Peak ever contemplated that the Performance Review

Software was to be a “work for hire.” It was always understood that ASI owned the

copyright to the software – as Peak actually admits elsewhere in its Complaint. (Exhibit

L ¶ 11.)

26

82. All of these allegations suggesting that Peak now owns the copyright or

has other rights to the Performance Metrics Software, to the extent that I can understand

them, are completely false. I have always ensured that ASI owns all of its intellectual

property and proprietary trade secrets free and clear. Every ASI customer understands

this, because, among other reasons, our invoice “Terms and Conditions” make this crystal

clear, as set forth above. Also, I know that as an independent contractor under the

copyright laws, ASI’s work is not presumed to be “work for hire.” ASI owns what it

writes and develops, and ASI controls the use of its software closely, frequently by

hosting it ourselves for clients’ use. When the relationship terminates, the client’s license

terminates.

83. In any event, every invoice I ever sent Peak in connection with the

Performance Metrics Software contained the Terms & Conditions set forth above. On

various occasions, I sent the Terms & Conditions to Richard Eichenberg, Philip

Greenberg, Michael Dalewitz, and others, to reaffirm their commitment to following

those terms. My conversation with Richard Eichenberg, during the period when the

Staffing Management System Agreement was being considered to cover that special

project, confirmed Peak’s understanding of our agreement with respect to all other

software and services.

84. For all these reasons, the Staffing Management System Agreement had

nothing to do with the Performance Metrics Software. Peak knows that there is no

excuse for its conduct, and this effort to fabricate an excuse flies in the face of what both

I and the Defendants all know to be true. Instead, in my eyes, by filing this complaint, all