Splunk Inc. v. Cribl, Inc.

Background

This order addresses the claims and affirmative defenses that the parties preserved and tried to the bench, along with Splunk’s motion for a permanent injunction. The opinion states that the jury had found Cribl liable for copyright infringement and breach of the SGT contract. The verdict was ambiguous about which uses of Splunk Enterprise supported those findings and how broadly Cribl was found liable.

Cribl’s affirmative defenses

Cribl sought judgment in its favor based on equitable estoppel, unclean hands, and copyright misuse.

- Equitable estoppel: The court held that Cribl did not prove by clear and convincing evidence that it was ignorant of the relevant facts or believed Splunk had approved uses allowed under the earlier TAP contract but not the SGT contract. The court also found that Cribl did not prove it believed Splunk approved of reverse engineering. - Unclean hands: This defense generally prevents a party that acted inequitably or in bad faith concerning the dispute from obtaining equitable relief. The court concluded that Cribl did not prove by clear and convincing evidence that Splunk terminated the TAP program in bad faith or induced infringement or breach through an improper termination. The jury had rejected Cribl’s argument that the termination itself was improper. - Copyright misuse: Copyright misuse is a defense to copyright infringement that can prevent a copyright holder from using a licensing arrangement to obtain control beyond the copyright monopoly. The court rejected Cribl’s request for broad judgment based on this doctrine. It noted that a narrower argument might have challenged contract language to the extent it prohibited fair use, but Cribl had not advanced that argument and the tailored injunction would provide the relief it could have obtained through it.

California Section 17200 claim and counterclaim

Splunk relied on Cribl’s alleged breach of the SGT contract to support a claim under Section 17200 of the California Business and Professions Code. The court found that a contract breach alone was insufficient for the unlawful prong. For the unfair prong, the court applied the rule for claims between business competitors requiring a practice to be tied to a legislatively declared policy, such as the policy or spirit of antitrust law. The court found that Splunk had not sufficiently pleaded an incipient antitrust violation, an antitrust-policy violation, or harm to competition beyond generalizations and harm to itself. The opinion therefore found Splunk’s Section 17200 claim inadequate.

Cribl’s Section 17200 counterclaim was based on copyright misuse. The court stated that such a claim can be based on copyright misuse when the misuse violates antitrust policy or its spirit. The court did not address the counterclaim further because the tailored injunction provided the relief Cribl could have obtained under it. The court also declined to allow Cribl to broaden its defenses and counterclaim at this late stage after previously narrowing the issues it asked the court to decide.

Permanent injunction

The court applied the four-factor test for a permanent injunction under the Copyright Act and California law: irreparable injury, inadequate legal remedies, the balance of hardships, and the public interest.

The court found that the first two factors strongly favored an injunction. It credited Splunk’s arguments that allowing Cribl to operate as though it still had a TAP license would undermine Splunk’s licensing program and that money damages could not restore Splunk’s ability to administer that program.

The balance of hardships and public interest, however, strongly favored a narrower injunction. The court emphasized the history of the TAP partnership, including Cribl’s investment in developing a complementary product and the possibility that a sweeping injunction could put Cribl out of business. It also found that a broad injunction could harm the public by preventing Cribl Stream from continuing to interoperate with Splunk Enterprise, including as customers need updates for changes to Splunk Enterprise and its S2S protocol.

Ruling

The court held that the SGT contract’s restrictions on internal business purposes and monitoring for competitive purposes could not override statutory fair uses. It construed the contract’s ambiguity against Splunk, the drafter, and allowed all fair uses of Splunk Enterprise under the Copyright Act. The court distinguished marketing uses, which it found were not fair uses.

The court granted a tailored injunction allowing Cribl to continue using Splunk Enterprise for all fair uses under the Copyright Act while enjoining other uses, including marketing uses. The parties were ordered to meet and confer about enforcement terms, potentially including depositions and site visits, and to jointly file a proposed judgment by June 4, 2024, at noon.