Synopsys, Inc. v. Ubiquiti Networks, Inc.
| Decision Date | 15 August 2017 |
| Docket Number | Case No. 17-cv-00561-WHO |
| Court | U.S. District Court — Northern District of California |
| Parties | SYNOPSYS, INC., Plaintiff, v. UBIQUITI NETWORKS, INC., et al., Defendants. |
This case stems from the purported interest of defendants Ubiquiti Network Inc., UNIL, and Ching-Han Tsai to review and evaluate for licensing plaintiff Snyopsys, Inc.'s high-value semiconductor electronic design and automation software. Snyopsys alleges that defendants fraudulently gained access to their copyrighted software and related support materials and used the evaluation license keys and counterfeit keys to repeatedly and illegally access and copy those programs and materials over the course of three years. When defendants' alleged conduct was discovered, Synopsys sued. Ubiquiti and Tsai seek to dismiss six of seven causes of action in the Amended Complaint (AC), and to strike Synopsys' affirmative defenses to Ubiquiti's counterclaims for declaratory judgment and breach of contract. Separately UNIL moves to dismiss for lack of personal jurisdiction.
For the reasons discussed below, Ubiquiti's motion to dismiss is granted only with respect to the Anti-Counterfeiting Act claim (18 U.S.C. § 2318) and some of the predicate acts alleged under the Racketeer Influenced and Corrupt Organizations Act (RICO, 18 U.S.C. § 1964). I deny Ubiquiti's motion to strike the affirmative defenses in large part because Synopsys has alleged sufficient facts in its AC and Answer to support its defenses and allow Ubiquiti to contest them. I deny UNIL's motion to dismiss for lack of jurisdiction because there are sufficient uncontested facts showing that its conduct has a substantial connection with California.
Synopsys is a corporation with a principal place of business in Mountain View, California. AC ¶ 1. It is a leading provider of electronic design automation (EDA) solutions for the semiconductor industry. Id. ¶ 22.1 It has a developed a "comprehensive, integrated portfolio of prototyping, IP, implementation, verification, manufacturing, optical, field-programmable gate array, and software quality and security solutions." Id. ¶ 23. Its software applications - including Debussy, Design Compiler, Formality, HSPICE, IC Compiler, Laker, Nlint, nWave, PrimeTime, Synplify Pro AV, Synplify Premier AV, TetraMAX, VCS, and Verdi- are works subject to copyright protection. Id. ¶ 24. It licenses its software programs to users, using a "License Key" system to provide customers access to the applications Id. ¶¶ 25-26.
Ubiquiti Networks Inc. is a corporation headquartered in San Jose, California. AC ¶ 2. It and its subsidiaries "develop high performance networking technology for service providers and enterprises." AC ¶ 3. A significant part of Ubiquiti's research and development operations are based outside the United States. Id. ¶ 5. Defendant Ubiquiti Networks International, Ltd. (UNIL) is alleged to be a subsidiary of Ubiquiti that is involved in the development and distribution of networking technology for Ubiquiti. Id. ¶ 6. UNIL incorporated under the laws of Hong Kong, and has a branch in Taipei, Taiwan. Id. Synopsys alleges that Ubiquiti and UNIL share at least one corporate officer, Robert J. Pera. Id. ¶ 7. UNIL's Taipei branch employs persons in the field of semi-conductor design and it regularly conducts semiconductor design activities and designs products to be imported and sold in the United States. Id. ¶¶ 8-9. Defendant Ching-Han Tsai is employed by Ubiquiti as a project lead and is a semiconductor professional who regularly works in California. Id. ¶¶ 10-13.
Synopsys alleges that in 2013 Tsai, Ubiquiti, and UNIL fraudulently induced Synopsys to grant them access to a subset of Synopsys' software for a finite time for purposes of evaluation.AC ¶ 27. Since 2014, Tsai, Ubiquiti, and UNIL have been "secretly using counterfeit keys" obtained or created through hacker websites to circumvent the License Key system and use Synopsys' EDA software including its Debussy, Design Compiler, Formality, HSPICE, IC Compiler, Laker, Nlint, nWave, PrimeTime, Synplify Pro AV, Synplify Premier AV, TetraMAX, VCS, and Verdi applications without a "valid license." Id. ¶ 28. Synopsys alleges that Tsai and others at Ubiquiti and UNIL "conspired to, and did, form an associated in fact enterprise ('Piracy Enterprise') with the purpose of pirating Synopsys' software and that the defendants took wrongful acts in furtherance of their Enterprise," including (i) gaining unauthorized access to, (ii) making and distributing copies of, and (iii) using counterfeit keys to make unauthorized use of Synopsys' software and documentation. Id. ¶ 29. It asserts that Ubiquiti and UNIL share information technology structures (communication networks, file repositories, email servers, IP addresses, and website domains hosted in the United States) that were used by both Ubiquiti and UNIL to conduct the Piracy Enterprise. FAC ¶ 30. All three defendants also used interstate internet communications to conduct the Enterprise, including extensive use of the counterfeit License Keys. Id. ¶¶ 31-32.
On September 11, 2013, Tsai, acting on behalf of Ubiquiti and UNIL, exchanged emails with Synopsys employees in Mountain View, California, stating that Ubiquiti was interested in licensing Synopsys' VCS and Verdi EDA software applications, as well as licensing a "separate suite" of semiconductor design materials. AC ¶ 35. On September 12, 2013, Tsai met with Synopsys employees in San Jose and indicated Ubiquiti was also interested in Synopsys' Design Compiler application. Id. Tsai represented that Ubiquiti planned to build a semiconductor design team at Ubiquiti's U.S. headquarters and that Synopsys was its main choice for EDA software. Id. These statements, according to Synopsys, were designed to create the impression that Ubiquiti wanted to create a significant business relationship with Synopsys, but were false when they were made. Id.
On September 30, 2013, acting on behalf of the Enterprise, Tsai emailed Synopsys and said that Ubiquiti was interested in taking 21 licenses for various EDA applications during various points from November 2013 through June 2014. Id. ¶ 36. On October 1, 2013, Tsai indicated theUbiquiti wanted to take a local area network (LAN) form of license to be used by a small U.S. team. Id. ¶ 37. On October 14, 2013, Tsai indicated that Ubiquiti intended to make its first EDA software purchase before October 31, 2013, and that it would prefer to pay Synopsys from an "offshore account" in Hong Kong. Id. ¶ 38. That same day, Tsai also asked by email for an "evaluation license" for Synopsys' VCS application, stating that he would be the "one doing the eval" on his personal laptop. Id. ¶ 39. Synopsys alleges that all of these representations were false when made.
On October 15, 2013, in reliance on Tsai's false representations, Synopsys entered into a Master Non-Disclosure Agreement (MNDA), the purpose of which was to facilitate the parties' discussions and potential business relationship. Ubiquiti signed the MNDA on October 15, 2013 and Synopsys executed it on November 25, 2013. Id. ¶ 40. From October 14, 2013 through November 25, 2013, Tsai continued to represent that Ubiquiti was interested in licensing Synopsys' EDA tools. Eventually, Tsai negotiated an agreement under which Ubiquiti would evaluate Synopsys' VCS application at a specific location in San Jose for 90 days. Id. ¶ 41.
In reliance on Tsai's representations, on November 26, 2013, Synopsys executed a 90-day evaluation license (License) that permitted Ubiquiti to evaluate Synopsys' VCS application. Id. ¶ 43. That non-transferable license allowed Ubiquiti to test VCS on two computers in San Jose. Id. The License strictly circumscribed use and prohibited Ubiquiti from using the software to design products and from "making unauthorized copies of Synopsys' software, decompiling or reverse engineering Synopsys' software, tampering with or attempting to circumvent Synopsys' license key system, or distributing Synopsys' software to third parties, among other restrictions." Id. The License contained a confidentiality provision and a clause expressly superseding all prior agreements between the parties "with respect to the subject matter" of the license. Id. In order to facilitate use of the License, Synopsys also provided Tsai with temporary log in credentials permitting access to Synopsys' file download and customer service websites that were all located and hosted in the Northern District (except for one server located in Ireland that was accessed by the Enterprise through a remote host located in Mountain View, California). Id. ¶ 44.
Synopsys alleges that Tsai failed to disclose that the Piracy Enterprise intended to usepirated copies of the VCS application at unauthorized locations on unauthorized computers. Id. Shortly after inducing Synopsys to provide the evaluation License, persons acting on behalf of the Enterprise began using counterfeit license keys to access unauthorized copies of VCS from unauthorized locations. Id. ¶ 42. As soon as Tsai had access to it, Tsai accessed Synopsys' file download and customer support website and the Enterprise began making and distributing unauthorized copies of Synopsys software and documentation using both illicit license keys and counterfeit facsimiles of Synopsys' license keys. Id. ¶¶ 44, 45. The Enterprise participants - Tsai, Ubiquiti, and UNIL - passed to one another software and other technology components designed to circumvent Synopsys' measures to control access to its copyrighted works. Id. ¶ 42.
On December 2, 2013, Tsai on behalf of the Enterprise emailed Synopsys that he was having trouble running the software using the temporary license key, purportedly on a "virtual machine" located at Ubiquiti's San Jose headquarters. Id. ¶ 46. Synopsys responded and...
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