Synopsys, Inc. v. Library Technologies, Inc.

Opinion

1 2 3 4 7 8 SYNOPSYS, INC., Case No. 20-cv-07014-CRB

9 Plaintiff, ORDER DENYING MOTION TO 10 v. DISMISS FOR LACK OF JURISDICTION 12 Defendant.

13 Plaintiff Synopsis, Inc. owns and licenses electronic design automation (“EDA”) 14 software tools, which enable designers of computer processor chips to simulate 15 semiconductor circuits. Synopsis’ EDA software tools, including one dubbed HSPICE, 16 only run with unique license key files that Synopsis issues to paying customers. Defendant 17 Library Technologies, Inc. (“LTI”) is a longtime customer of Synopsis. 18 In 2020, Synopsis sued LTI in federal district court, alleging that LTI circumvented 19 Synopsis’ licensing system to use more copies of Synopsis’ tools (including HSPICE) than 20 was permitted under the parties’ End User License and Maintenance Agreement 21 (“EULA”). See Compl. (dkt. 1). Synopsis alleges that, in circumventing the licensing 22 system, LTI violated the EULA and the Digital Millennium Copyright Act (“DMCA”). 23 LTI now brings a factual challenge to subject matter jurisdiction under Federal Rule of 24 Civil Procedure 12(b)(1). See Mot. (dkt. 105). LTI argues that, because the facts cannot 25 support a DMCA claim, the case is just a contractual dispute between non-diverse parties. 26 The Court finds oral argument unnecessary and DENIES LTI’s motion to dismiss for lack 27 of jurisdiction. I. LEGAL STANDARD 1 Under Rule 12(b)(1) of the Federal Rules of Civil Procedure, a defendant may move 2 to dismiss for lack of subject matter jurisdiction. See White v. Lee, 227 F.3d 1214, 1242 3 (9th Cir. 2000). Rule 12(b)(1) attacks on standing can be either facial, confining the 4 court’s inquiry to allegations in the complaint, or factual, permitting the court to look 5 beyond the complaint. Id.; Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 6 2004). When addressing a factual attack, courts may consider evidence like declarations 7 submitted by the parties, and the party opposing the motion to dismiss has the burden of 8 establishing subject matter jurisdiction by a preponderance of the evidence. See, e.g., 9 Leite v. Crane Co., 749 F.3d 1117, 1121 (9th Cir. 2014). 10 However, “where a statute provides the basis for both the subject matter jurisdiction 11 of the federal court and the plaintiff’s substantive claim for relief,” the “question of 12 jurisdiction and the merits of an action are intertwined.” Safe Air, 373 F.3d at 1039-40. 13 Where jurisdiction and the merits are intertwined, a court may not use Rule 12 but rather 14 must apply the summary judgment standard under Rule 56. See id.; see, e.g., Johnson v. 15 Techbusiness Resources, LLC, 2020 WL 7013596, at *1 (N.D. Cal. Nov. 28, 2020). A 16 court may grant summary judgment only if “there is no genuine dispute as to any material 17 fact and the movant is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56(a). 18 A case “arises under” federal law if a “well-pleaded complaint establishes either 19 that federal law creates the cause of action or that the plaintiff’s right to relief necessarily 20 depends on resolution of a substantial question of federal law.” Empire Healthchoice 21 Assur., Inc. v. McVeigh, 547 U.S. 677, 689–90 (2006) (citation omitted). “Dismissal for 22 lack of subject matter jurisdiction because of the inadequacy of the federal claim is proper 23 only when the claim is so insubstantial, implausible, foreclosed by prior decisions of this 24 Court, or otherwise completely devoid of merit as to not involve a federal controversy.” 25 Steel Co. v. Citizens for a Better Env., 523 U.S. 83, 89 (1998) (citation omitted). 26

27 II. DISCUSSION 1 Section 1201(a)(1)(A) of the DMCA provides that “[n]o person shall circumvent a 2 technological measure that effectively controls access to a work protected under this title.” 3 17 U.S.C. § 1201(a)(1)(A). To plead a DMCA claim, Synopsis must plausibly allege (1) 4 that its software is a “work protected under [the Copyright Act]”; (2) that its licensing 5 system is a “technological measure that effectively controls access” to that work; and (3) 6 that LTI “circumvent[ed]” that technological measure. See id. To “circumvent a 7 technological measure” means, inter alia, “to avoid, bypass, remove, deactivate, or impair 8 a technological measure, without the authority of the copyright owner.” Id. 9 § 1201(a)(3)(A). 10 Synopsis sufficiently pleaded a DMCA claim. First, Synopsis alleges that the EDA 11 software applications “are creative and original works subject to copyright protection.” 12 Compl. ¶ 10. Second, Synopsis alleges that it sells licenses (but not ownership rights) to 13 its EDA software, and that its “proprietary license server software” ensures that EDA 14 applications can only be used with “legitimate license keys” that “list the name of the 15 customer, identify the software the customer is licensed to use, and the number of 16 concurrent uses purchased.” Id. ¶¶ 12, 13; see Synopsys, Inc. v. InnoGrit, Corp., 2019 WL 17 4848387, at *7 (N.D. Cal. Oct. 1, 2019) (finding that Synopsis’ license key system is a 18 “technological measure” under the DMCA). Third, Synopsis alleges that LTI “bypassed 19 Synopsys’ license key system by altering identifying information on various license server 20 computers in order to facilitate more concurrent usage of Synopsys software than 21 permitted under the license.” Id. ¶ 23. 22 LTI’s jurisdictional arguments fail because they simply dispute the allegations in 23 the complaint. LTI argues that there can be no DMCA claim because (1) LTI owned 24 outright nine copies of HSPICE; (2) the contract permitted LTI to make at least nine 25 backup copies of HSPICE; and (3) LTI only used copies that it owned or backed up. See 26 Mot. at 9-13. In short, LTI disputes the facts, arguing that LTI could not have 27 “circumvent[ed]” the licensing system because it owned (rather than licensed) the software 1 and only used copies that it rightfully possessed. See generally id. Because jurisdiction is 2 intertwined with the merits of the sole federal claim, the Court must apply the summary 3 judgment standard. See Safe Air, 373 F.3d at 1039-40. This standard is not met because 4 LTI itself points to many genuinely disputed material facts. See Fed. R. Civ. P. 56(a). 5 The Court also rejects LTI’s other arguments. The Court disagrees that Synopsis’ 6 allegation as to copyright protection is conclusory or that it must be substantiated by a 7 copyright registration certificate. See Mot. at 11-12. And LTI’s argument that Synopsis 8 should have given notice of LTI’s alleged breach of the EULA to permit LTI an 9 opportunity to cure has no relevance to this Court’s jurisdiction. See Mot. at 12-13. At 10 times, LTI seems to suggest that the existence of a remedy based on violation of the EULA 11 supersedes federal law or federal jurisdiction, see, e.g., Reply (dkt. 117) at 3-5, but this 2 contention lacks any support. 5 13 The Court will not express a view on the ultimate merits of Synopsis’ DMCA S 14 || claim. But it easily concludes that the claim is well-pleaded and that it is not “so 3 15 || insubstantial, implausible, foreclosed by prior decisions of [the Supreme] Court, or a 16 || otherwise completely devoid of merit as to not involve a federal controversy.” See Steel 3 17 || Co., 523 U.S. at 89. The Court DENIES LTI’s motion to dismiss for lack of jurisdiction. 19 Dated: March 15, 2022 Lo 5 ~ CHARLES R. BREYER 20 United States District Judge 21 22 23 24 25 26 27 28