Electronic design automation (EDA) software development leaders Synopsys, Inc. and Cadence Design Systems recently settled copyright infringement cases using the Digital Millennium Copyright Act (DMCA), providing hope to the industry that software piracy can be addressed with the right evidence and legal process. Both cases before the U.S. District Court for the Northern District of California were concluded successfully.
Synopsys vs. Ubiquiti
Synopsys, Inc., a global leader in semiconductor design software, filed a complaint against Ubiquiti, a U.S.-based designer of networking technology, including semiconductor chips, with a subsidiary in Taiwan, claiming violations under the Digital Millennium Copyright Act. Synopsys alleged that Ubiquiti used counterfeit license keys to access its software without buying a proper license. Synopsys provided evidence showing that Ubiquiti used counterfeit license keys more than 39,000 times to access the software.
The 1998 Digital Millennium Copyright Act (DMCA), prohibits circumvention of copyright protection systems. Although it has not been the subject of a published opinion, it is widely presumed that the DMCA, like the Copyright Act, does not reach conduct that takes place entirely abroad. Does the DMCA provide protection if an end user in the U.S. circumvents a copyright protection system and uses unlicensed software that resides on a server in a foreign country?
While discovery and not the actual crime was the issue in this case, it is likely the standard for cross-border liability will be more fully addressed in future cases. The court ruled that Ubiquiti was not entitled to categorically refuse discovery of its Taiwanese computers, however, this ruling was for discovery, so Ubiquiti might ultimately have won under the DMCA if it could have proved that none of its U.S. personnel intentionally circumvented Synopsys’ copyright protection systems. However, Ubiquiti for undisclosed reasons chose not to pursue the case further, and on January 17, 2019, the case was dismissed when Ubiquiti settled and paid $18 million to Synopsys, agreeing to a permanent injunction to prevent any unlicensed use of Synopsys software.
Cadence vs. Pounce Consulting
On August 15, 2017 Cadence Design Systems, a leading developer of software for designing transistors, standard cells, and IP blocks for systems on chips, integrated circuits, and printed circuit boards, filed a complaint against Pounce Consulting, a Mexican company with a subsidiary in the U.S. that offers services related to electronic design and requires engineers on staff be skilled in the use of Cadence’s software. Cadence alleged that Pounce circumvented the license manager within the software and used cracked copies without proper licensing. Cadence detected unauthorized use of the software using anti-piracy technology. The evidence gathered proved that Pounce used the software without authorization thousands of times on at least 25 different machines identified as affiliated with Pounce. Cadence also presented evidence confirming Pounce’s illegal use of Cadence software to perform its contracts with third parties. Cadence sought a default judgment with respect to three claims: copyright infringement, circumvention of copyrighted protections under the DMCA, and breach of contract.
Statutory damages for circumvention of the DMCA is $200 to $2500 per act of circumvention. Cadence argued that its tracking measures detected 6,933 unauthorized uses of its products on 26 different computers, for a total of $17,332,500 in maximum statutory damages. The court found in favor of Cadence and awarded actual damages for breach of contract in lost licensing revenue, statutory damages for each of the 6,900 infringing incidences, disgorgement of profits, and attorney’s fees and costs. The total awarded to Cadence was in excess of $6M.
Software piracy is an epidemic that undermines the electronic design automation (EDA) industry and creates an unfair competitive landscape for customers who pay for software and therefore have a higher cost of doing business than their competitors who steal software. The DMCA is a powerful legal basis for protecting software intellectual property and restoring balance to the market. The commitment to license compliance efforts by EDA vendors is leveling the playing field and making sure that the semiconductor and electronics industries of the future are dominated by companies with respect for intellectual property. With successful outcomes like the cases described in this blog, we expect to see more lawsuits involving the DMCA in 2019 and beyond!
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