IP Law Daily Synopsys gets preliminary injunction barring licensee from unauthorized use of software
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Thursday, June 27, 2019

Synopsys gets preliminary injunction barring licensee from unauthorized use of software

By Thomas Long, J.D.

A license permitted use of the software in China, but forensic evidence showed the licensee circumvented access controls in order to use the software in its California office.

Electronic design automation provider Synopsys, Inc., has been granted a preliminary injunction barring integrated circuits and systems developer InnoGrit Corp. from accessing, using, transferring, or copying Synopsys’s software in violation of the Digital Millennium Copyright Act. According to the federal district court in San Jose, California, Synopsys was likely to succeed on the merits of its DMCA claims for circumvention of access control measures and importing software to carry out that circumvention. Forensic evidence showed that InnoGrit imported a "crack file" from an Iranian software piracy website and obtained license key generator software from a Chinese website in order to unlock the Synopsys software and use it without authorization (Synopsys, Inc. v. InnoGrit Corp., June 26, 2019, Koh, L.).

The electronic design automation (EDA) technology provided by Synopsys uses computers to design, verify, and simulate the performance of electronic circuits. Synopsys offers a variety of EDA software applications to purchasers. In order to access the software, customers purchase licenses that grant them limited rights to install the software and to access and use specific programs subject to control by Synopsys via a license key system. The license key system controls access to the EDA software by requiring a user to access an encrypted control code provided by Synopsys in order to execute the software. The control code is contained in a license key file that specifies the location or locations where the software is authorized to be used.

In January 2017, Synopsys subsidiary Synopsys International Ltd.—which was charged with distribution and oversight of Synopsys software in China—executed an end user license and maintenance agreement (EULA) with InnoGrit. The license authorized InnoGrit to use the Synopsys EDA software at an address provided by InnoGrit, which was located in Shanghai, China. Around May 2017, Synopsys accused InnoGrit of pirating Synopsys software for use in InnoGrit’s San Jose, California, office. Synopsys alleged that InnoGrit engaged in unlawful circumvention of the license key system, in violation of Section 1201(a)(1) of the DMCA and imported technology to carry out that circumvention in violation of DMCA Section 1201(a)(2). InnoGrit’s actions allegedly allowed it to use the EDA software without authorization "many thousands of times." Synopsys filed suit against InnoGrit and filed an ex parte application for a temporary restraining order, which was denied. However, the court ordered InnoGrit to show cause why a preliminary injunction should not issue. After briefing by the parties, the court decided to grant a preliminary injunction.

Likelihood of success. Synopsys retained a consulting company to analyze forensic evidence from InnoGrit’s computers. The consultant identified at least two ways InnoGrit apparently violated 17 U.S.C. §1201(a)(1), which prohibits "circumvention of technological measures that effectively control access to a copyrighted work." First, the consultant’s examination revealed evidence of software piracy, including forensic artifacts related to counterfeit license keys, counterfeit key generators, and "crack" files for Synopsys software. A "crack file" generally contains tools to unlock unauthorized copies of particular software, in this case the Synopsys EDA software. Second, the consultant reported that InnoGrit manually changed the media access control (MAC) address on 11 computers in the United States, which allowed InnoGrit to run the EDA software on unauthorized computers. Because the EDA software only ran when a license key matched the MAC address of a computer authorized to run the software, this conduct amounted to circumvented of an access control measure, the court said. In addition, the forensic evidence showed that InnoGrit imported a crack file from an Iranian software piracy website and obtained license key generator software from a Chinese website that hosted pirated software. Therefore, the court said, Synopsys can prove that InnoGrit imported technology that can circumvent Synopsys’s measures to control access to its EDA software, in violation of 17 U.S.C. §1201(a)(2).

Irreparable harm. The court found that Synopsys established the requisite irreparable harm for issuance of a preliminary injunction. Synopsys estimated that software piracy decreased its market share by about $500 million in revenue every year, and asserted that competing with piracy "creates downward pricing pressure to induce customers to pay for a license rather than paying nothing to use pirated software off the street—or, as in this case, from a Chinese or Iranian piracy website."

Balance of equities; public interest. The balance of equities favored an injunction, in the court’s view. There was evidence that InnoGrit continued to use unauthorized copies of the EDA software until May 26, 2019, more than a month after suit was filed. Furthermore, InnoGrit did not identify any damage it might sustain from an injunction. An injunction would do no more than require InnoGrit to comply with the law, the court said. In addition, the public interest favored an injunction because the public had an interest in enforcing the DMCA.

This case is No. 5:19-cv-02082-LHK.

Attorneys: Denise Marie Mingrone (Orrick, Herrington & Sutcliffe LLP) for Synopsys, Inc. Jeremy Todd Elman (Dorsey & Whitney LLP) and Daralyn J. Durie (Durie Tangri LLP) for InnoGrit Corp.

Companies: Synopsys, Inc.; InnoGrit Corp.

MainStory: TopStory Copyright TechnologyInternet CaliforniaNews

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