Synopsys, Inc. v. Library Technologies, Inc.

Background

Synopsys, Inc. owns and licenses electronic design automation software used to simulate semiconductor circuits. Its software, including HSPICE, operates with license-key files issued to paying customers. Library Technologies, Inc. was a longtime customer.

Synopsys alleged that Library Technologies bypassed the licensing system to use more copies of the software than the parties’ End User License and Maintenance Agreement allowed. It asserted claims for breach of that agreement and under the Digital Millennium Copyright Act, a federal statute that prohibits certain forms of bypassing technological controls on copyrighted works.

Library Technologies challenged subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). It argued that the facts could not support a federal copyright claim and that the dispute was only contractual between non-diverse parties.

Court’s Analysis

The court explained that a factual challenge to subject-matter jurisdiction ordinarily permits the court to consider evidence beyond the complaint. But when the jurisdictional question and the merits of the federal claim are intertwined, the court must apply the summary-judgment standard rather than resolve the dispute through a jurisdictional dismissal. Summary judgment is appropriate only when there is no genuine dispute about any material fact and the moving party is entitled to judgment as a matter of law.

The court concluded that Synopsys sufficiently pleaded a claim under Section 1201(a)(1)(A) of the Digital Millennium Copyright Act. The allegations identified: (1) software that Synopsys claimed was protected by copyright; (2) a proprietary licensing system that controlled access through legitimate license keys; and (3) Library Technologies’ alleged alteration of identifying information on license-server computers to permit more concurrent use than its license allowed.

The court rejected Library Technologies’ argument that it could not have bypassed the licensing system because it owned nine copies of HSPICE, was allowed to make at least nine backup copies, and used only copies it owned or backed up. The court said these arguments disputed facts relevant to the merits. Because Library Technologies itself identified genuine disputes about material facts, the summary-judgment standard was not satisfied.

The court also rejected Library Technologies’ arguments that Synopsys’s copyright allegations were conclusory, that Synopsys needed to provide a copyright-registration certificate at this stage, and that Synopsys’s alleged failure to give notice and an opportunity to cure under the agreement affected federal jurisdiction. The court stated that the existence of a contractual remedy did not displace federal law or federal jurisdiction.

Disposition

The court did not decide the ultimate merits of Synopsys’s Digital Millennium Copyright Act claim. It held only that the claim was well pleaded and was not so insubstantial, implausible, foreclosed, or devoid of merit that no federal controversy existed. The court DENIED Library Technologies’ motion to dismiss for lack of jurisdiction.

Judge

The order was issued by Charles R. Breyer, United States District Judge.