Cadence Design Systems, Inc. v. Syntronic AB

Background

Cadence sued Syntronic AB, which the opinion calls Syntronic Sweden; Syntronic Research and Development USA Inc.; and Syntronic (Beijing) Technology R&D Center Co., Ltd., which the opinion calls Syntronic Beijing. Cadence alleged federal copyright infringement, circumvention of copyright-protection systems, and breach of contract based on the defendants’ alleged unauthorized use of Cadence software.

Cadence served Syntronic Beijing at Syntronic USA’s principal place of business and argued that service on Syntronic USA completed service on Syntronic Beijing. Cadence also pointed to Syntronic Beijing’s actual notice of the litigation and its shared U.S. counsel. Cadence asked the court to authorize service through that counsel under Federal Rule of Civil Procedure 4(f)(3), which permits court-ordered service on a foreign defendant by means not prohibited by an international agreement.

Syntronic Beijing moved to quash service. The defendants also moved to dismiss, arguing that Syntronic Beijing and Syntronic Sweden lacked sufficient contacts with California for personal jurisdiction and that the first amended complaint failed to state a claim.

Alternative Service and Motion to Quash

The court held that service through Syntronic Beijing’s U.S.-based counsel was permissible under Rule 4(f)(3). It stated that Rule 4(f)(3) is not a last-resort method and that service through U.S. counsel is not prohibited by the Hague Convention in these circumstances. Because Syntronic Beijing had actual notice, shared counsel with defendants who had already been served, and was represented by that counsel, the court found that service through counsel was reasonably calculated to provide notice and an opportunity to respond.

The court therefore granted Cadence’s motion for alternative service and denied Syntronic Beijing’s motion to quash. Cadence was required to serve Syntronic Beijing through its U.S. counsel by September 20, 2021.

Personal Jurisdiction and Jurisdictional Discovery

The court considered whether it had general or specific personal jurisdiction over Syntronic Beijing and Syntronic Sweden. Cadence argued that the entities were alter egos of Syntronic USA, meaning their separate corporate identities might be disregarded for jurisdictional purposes. Cadence also argued that the defendants consented to California jurisdiction through software license agreements and purposefully directed allegedly unauthorized software use toward California.

The court found that the existing facts were not enough to determine whether general jurisdiction existed. But Cadence had raised sufficient questions about the entities’ relationships to justify further discovery. The court cited allegations concerning overlapping officers and employees, intercompany accounts, shared counsel, descriptions of Syntronic as a unified enterprise, and shared use of the Syntronic email domain.

The court likewise found insufficient facts to decide specific jurisdiction over Syntronic Beijing and Syntronic Sweden. Cadence had raised enough questions about possible consent to jurisdiction and contacts with California to warrant additional discovery. The court ordered the parties to conduct jurisdictional discovery concerning both general and specific jurisdiction.

Failure-to-State-a-Claim Motion

The defendants argued under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal for failure to state a legally sufficient claim, that Cadence had not plausibly alleged copyright violations in the United States, had made fatally unclear allegations, and had not identified which defendant violated the Copyright Act or breached a contract.

The court concluded that these arguments were intertwined with the jurisdiction questions. Discovery about the defendants’ relationships and contacts with California would also assist with the merits of Cadence’s claims. The court therefore denied the defendants’ motion to dismiss the first amended complaint without prejudice to renewal after the jurisdiction questions were resolved.

Disposition

The court granted Cadence’s motion for alternative service; denied Syntronic Beijing’s motion to quash service; ordered jurisdictional discovery; and denied, without prejudice, the defendants’ motion to dismiss the first amended complaint. The order did not decide whether the defendants were liable for copyright infringement, circumvention, or breach of contract.