By Robert B. Barnett Jr., J.D.
Assertion of an unauthorized use of a license key satisfies the "circumvention" pleading requirement for a claim under Section 1201(a)(1) of the Digital Millennium Copyright Act.
A suit by electronic design automation provider Synopsis, Inc., against integrated circuits and systems developer InnoGrit, Corp., adequately stated causes of action for (1) circumventing a technology measure in violation of the Digital Millennium Copyright Act (DMCA), (2) trafficking in circumvention technology in violation of the DMCA, and (3) copyright infringement in violation of the Copyright Act, the federal district court in San Jose, California, has ruled. In denying InnoGrit’s motion to dismiss, the court ruled that (1) the unauthorized use of a license key constitutes circumvention under the DMCA, (2) the trafficking claim does not require any allegation that InnoGrit actually used the circumvention technology, and (3) affirmative defenses to the copyright infringement claim are unavailable at the motion to dismiss stage because they did not appear on the face of the complaint (Synopsys, Inc. v. InnoGrit, Corp., October 1, 2019, Koh, L.).
Synopsys had developed electronic design automation software that allows computers to design, verify, and simulate the performance of electronic circuits. When a customer licenses the software, Synopsis grants access via a license key system. Synopsys’s Chinese subsidiary negotiated a licensing agreement with InnoGrit, a China-based integrated circuits and systems developer for use in InnoGrit’s Shanghai office. According to Synopsys, the following events occurred. First, InnoGrit pirated the legally obtained software and shared it with InnoGrit’s San Jose office. To enable the sharing, InnoGrit manipulated the identifying information on at least 15 InnoGrit computers based in San Jose. Second, an InnoGrit employee downloaded a variety of software piracy tools from an Iranian website, including a "crack file" containing counterfeit licensing keys for Synopsys products. InnoGrit apparently shared these files across its computer network. Third, an InnoGrit employee downloaded piracy tools and counterfeit license key generator software from a Chinese website. Apparently, the tools and the software were shared across InnoGrit’s network. Fourth, InnoGrit downloaded an illegal copy of Synopsys’ software from an Iranian website.
Synopsys sued InnoGrit in California federal court, asking initially for a temporary restraining order. The court denied the request, citing an absence of irreparable harm, although it later granted Synopsys a preliminary injunction (Synopsys gets preliminary injunction barring licensee from unauthorized use of software, June 27, 2019). The complaint alleged three causes of action: (1) circumventing a technology measure that controls access to a copyrighted work in violation of the 17 U.S.C. §1201(a)(1), (2) trafficking in circumvention technology in violation of 17 U.S.C. §1201(a)(2), and (3) copyright infringement in violation of 17 U.S.C. §§106 and 602. InnoGrit filed a motion to dismiss.
Circumvention. In seeking dismissal of the DMCA circumvention claim, InnoGrit argued that Synopsys failed to allege circumvention of a technological measure. First, the court concluded that Synopsys’ key system qualified as a technological measure that controls access to a copyrighted work. Second, the court concluded Synopsys adequately pleaded circumvention. InnoGrit argued that the claim was, at worst, a breach of contract claim on the theory that the use of Synopsys’s own license key files (even if stolen) can never amount to a circumvention. The court, however, citing the majority of case law from this district, ruled that the unauthorized use of a license key constitutes circumvention under §1201(a)(1). In any event, Synopsys’s allegations went way beyond merely contending that InnoGrit lacked authorization to a use a license key. It alleged that InnoGrit affirmatively manipulated the identifying information on at least 15 InnoGrit computers in order to bypass the restrictions and illegally run Synopsys software. As a result, Synopsys sufficiently stated a claim under §1201(a)(1).
Trafficking. InnoGrit sought dismissal of the trafficking claim on the ground that Synopsys failed to allege that InnoGrit actually used any of the technology that it allegedly trafficked to circumvent the license key system. The proof required in §1201(a)(2), however, differs from the proof required in §1201(a)(1). The trafficking claim under §1201(a)(2) does not require a showing that the defendant actually circumvented a technological measure. Thus, the allegations involving the downloading of the files on the Iranian and Chinese websites were sufficient to support the trafficking claim. The court also rejected InnoGrit’s argument that downloading a file from a foreign website is not the "importation" that §1201(a)(2) prohibits. Other courts in this district have found that the trafficking requirements were satisfied by file downloads. As a result, the court ruled that Synopsys adequately pleaded a trafficking claim under §1201(a)(2).
Copyright infringement. In seeking dismissal of the copyright infringement claim, InnoGrit asserted the affirmative defenses of de minimis copying and fair use. The court refused to allow InnoGrit to assert the affirmative defenses at this stage of the litigation. For the defenses to apply, they must appear on the face of the pleading, which they did not in this case. Synopsys alleged two copyright infringements: (1) a violation of §106 when InnoGrit unlawfully copied the software in the U.S. and other places and (2) a violation of §602 when InnoGrit imported into the U.S. the illegal copy of Synopsys software from the Iranian website. In the absence of any valid opposition to the two copyright infringement claims, the court ruled that Synopsys’s claims were sufficiently pleaded.
The court, therefore, denied in its entirety InnoGrit’s motion to dismiss the complaint.
This case is No. 5:19-cv-02082-LHK.
Attorneys: Denise Marie Mingrone (Orrick, Herrington & Sutcliffe LLP) for Synopsys, Inc. Jeremy Todd Elman (White & Case LLP) for InnoGrit Corp.
Companies: Synopsys, Inc.; InnoGrit Corp.
MainStory: TopStory Copyright TechnologyInternet CaliforniaNews
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