Cadence Design Systems, Inc. v. Syntronic AB

Background

Cadence makes and licenses software used to design integrated circuits and printed circuit boards. It sued Syntronic AB, Syntronic Research and Development USA Inc., and Syntronic (Beijing) Technology R&D Center Co. Cadence asserted claims for federal copyright infringement, circumvention of copyright-protection systems, and breach of contract, alleging that the defendants obtained, copied, and used its software without authorization or valid license files.

The defendants’ amended answers asserted laches and failure to mitigate damages as affirmative defenses to all three claims. Laches is an equitable defense based on unreasonable delay; failure to mitigate damages argues that an injured party did not take reasonable steps to limit its losses. The defendants alleged that Cadence knew of the alleged unauthorized software use in 2014. Cadence’s complaint sought money damages, injunctive relief, and the impoundment and destruction of infringing copies and products made using its software.

Cadence previously obtained an order striking the defenses without prejudice and allowing the defendants to amend their answers. After the defendants amended their answers again, Cadence filed this second motion to strike under Federal Rule of Civil Procedure 12(f).

Legal standard

Rule 12(f) permits a court to remove an insufficient defense or other improper matter from a pleading. The court explained that a motion to strike generally should be granted only when the challenged matter could have no possible bearing on the litigation. It also noted that, in the Ninth Circuit, an affirmative defense generally receives fair-notice treatment: the defense must identify its legal theory in general terms but need not allege facts making it plausible at the pleading stage.

Laches

For the copyright claims, the court held that the laches defense could remain because the defendants alleged that Cadence knew of the alleged infringement in 2014, and Cadence sought not only damages and an injunction but also impoundment and destruction of products made using its software. The court recognized that the defense might ultimately fail, but said whether extraordinary circumstances existed involved factual issues that could not be resolved on a motion to strike.

For the contract claim, the court held that laches could also remain. Under California law, laches is available for claims seeking equitable relief rather than only legal relief. Because Cadence requested injunctive relief for its contract claim, the court treated that claim as equitable for purposes of the defense.

Failure to mitigate damages

For the copyright claims, the court declined to strike the failure-to-mitigate defense. It found it unnecessary at this stage to decide whether the defense duplicated other arguments or whether Cadence had a duty to warn the defendants. The court stated that discovery should not be foreclosed because Cadence might seek summary judgment on the issue later.

For the contract claim, the court found that California contract law recognizes failure to mitigate damages. Cadence argued that it had no duty to mitigate breaches before they occurred and that notifying Syntronic would not reduce damages from earlier breaches. The court nevertheless found that, because Cadence sought remedies for products designed using its software during the relevant period, Syntronic had plausibly alleged an ongoing or increased accumulation of damages.

Disposition

Judge Susan Illston denied Cadence’s motion to strike Syntronic’s affirmative defenses of laches and failure to mitigate damages. The order resolved only whether those defenses could remain in the pleadings; it did not decide whether Syntronic will ultimately prevail on either defense.