Synopsys, Inc. v. InnoGrit, Corp.

Background

Synopsys alleged that InnoGrit used Synopsys electronic-design-automation software beyond the authorized limits of a license agreement. According to the second amended complaint, InnoGrit manipulated the identifying information of at least 15 computers in San Jose, California, to bypass Synopsys’s host-computer restrictions. Synopsys also alleged that InnoGrit downloaded a “crack file” containing counterfeit license keys, instructions, and unauthorized software copies; downloaded piracy tools and license-key-generator software; distributed those materials among computers; and copied and ran an unauthorized version of Synopsys’s Synplify 2014.03 software.

The second amended complaint asserted three causes of action: violation of section 1201(a)(1) of the Digital Millennium Copyright Act, which addresses bypassing technology that controls access to copyrighted works; violation of section 1201(a)(2), which addresses trafficking in technology designed to bypass such controls; and copyright infringement under sections 106 and 602 of the Copyright Act.

Motion to Dismiss and Evidence

InnoGrit moved under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. InnoGrit argued that the complaint did not adequately allege circumvention under section 1201(a)(1), did not allege that InnoGrit actually used the devices it allegedly trafficked under section 1201(a)(2), and showed that the alleged copying was either de minimis, meaning too minor to count as infringement, or fair use.

The court held that it generally could not consider material outside the pleadings on a Rule 12(b)(6) motion. It found that the documents InnoGrit cited in its reply—including the end-user license agreement, a forensic investigator’s declaration, and emails concerning an alleged evaluation license—were either cited too late, were not incorporated into the complaint, were irrelevant, or involved facts subject to reasonable dispute. The court therefore considered the sufficiency of the second amended complaint rather than evaluating outside evidence.

Digital Millennium Copyright Act Section 1201(a)(1)

The court concluded that Synopsys adequately alleged that its license-key system was a technological measure that effectively controlled access to copyrighted software. The system required users to apply an encrypted control code contained in a license-key file, and the complaint alleged that the file used computer-identifying information to restrict access to authorized computers.

The court also concluded that Synopsys adequately alleged circumvention. Although InnoGrit argued that using authentic license keys could not constitute circumvention, the court relied on allegations that InnoGrit altered the identifying information of computers in San Jose to bypass the host-identification restriction. The court stated that this alleged conduct prevented the license-key system from operating as intended and was sufficient to state a section 1201(a)(1) claim.

Digital Millennium Copyright Act Section 1201(a)(2)

The court held that section 1201(a)(2) does not require a plaintiff to allege that the defendant actually used the circumvention technology it allegedly trafficked. The complaint alleged that InnoGrit downloaded and distributed a crack file, piracy tools, and counterfeit license-key-generator software, and that employees used generated counterfeit keys to access Synopsys software.

The court declined to consider InnoGrit’s separate argument that downloading files from foreign websites could not qualify as importation because InnoGrit raised that argument for the first time in its reply. The court concluded that Synopsys adequately stated a claim under section 1201(a)(2).

Copyright Act Claims

The court rejected InnoGrit’s reliance on de minimis copying and fair use as grounds for dismissal. The complaint alleged that InnoGrit downloaded and copied entire copies of Synplify 2014.03, so it was not clear from the complaint that the copying was too minor to constitute infringement. The court also stated that whether possessing a license for another version of Synplify affected the infringement claim raised factual issues that could not be resolved on a motion to dismiss.

The court further found that InnoGrit had not adequately presented its fair-use argument and that the complaint alleged commercial purposes, no transformative use, and bad faith. Those allegations weighed against finding fair use at the pleading stage. The court therefore concluded that neither defense was sufficient to defeat Synopsys’s copyright-infringement allegations under sections 106 and 602.

Disposition

The court denied InnoGrit’s motion to dismiss the second amended complaint. The order resolved only whether Synopsys had adequately pleaded its claims; it did not determine ultimate liability for the alleged conduct.