Synopsys, Inc. v. Sunlune Corporation

[3] 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 SAN JOSE DIVISION [7] 8 SYNOPSYS, INC., Case No. 24-cv-00220-BLF 9 Plaintiff, ORDER GRANTING PLAINTIFF 10 v. SYNOPSYS, INC.’S MOTION FOR DEFAULT JUDGMENT 11 SUNLUNE CORPORATION, [Re: ECF 43] 12 Defendant. [14] 15 Plaintiff Synopsys, Inc. (“Synopsys”) brings this suit against Defendant Sunlune 16 Corporation (“Sunlune”) for violation of the Digital Millennium Copyright Act (“DMCA”), 17 17 U.S.C. § 1201 et seq., and breach of contract, alleging that Sunlune used counterfeit license keys 18 to exceed its license to use certain Synopsys software. See Compl., ECF 1. The Court has issued 19 both a temporary restraining order (“TRO”) and a preliminary injunction against Sunlune. See 20 TRO, ECF 17; Prelim. Inj., ECF 27. 21 Sunlune has not appeared in this suit through counsel, and instead has attempted to litigate 22 pro se despite the Court’s explicit advisement that a corporation may proceed in federal court only 23 through a licensed attorney. See Order Striking Answer, ECF 34; Order Striking Opp., ECF 39. 24 The Clerk has entered default against Sunlune. See Clerk’s Notice, ECF 41. 25 Synopsys now moves for default judgment against Sunlune. See Pl.’s Mot. for Def. Jud., 26 ECF 43. The Court finds the motion to be suitable for decision without oral argument, and the 27 motion hearing set for January 16, 2025 is VACATED. The motion for default judgment is 1 I. BACKGROUND1 2 Plaintiff Synopsys is a software company headquartered in Sunnyvale, California. See 3 Compl. ¶ 8. It is the fourteenth largest software company in the world, and is a leading provider 4 of electronic design automation (“EDA”) software, which is used in the design, testing, and 5 manufacture of microchips and electronic systems. See id. Synopsys has invested millions of 6 dollars into the research, development, design, and refinement of its EDA software applications, 7 which include IC Compiler II, Fusion Compiler, HSPICE, and PrimeLib. See id. ¶¶ 9-10 . 8 Synopsys does not sell its ownership rights, copyrights, or other intellectual property rights 9 to its EDA software. See Compl. ¶ 11. Instead, Synopsys licenses its EDA software, thereby 10 granting its customers limited rights to install the software and to access specific software 11 programs subject to control by Synopsys’ License Key System. See id. Each customer must use a 12 license key file to execute Synopsys’ tools. See id. ¶ 13 . The license key file contains the 13 customer’s name, identifies the software the customer is licensed to use, and identifies the number 14 of concurrent users permitted under the customer’s license. See id. The License Key System can 15 detect potential software piracy. See id. ¶ 14 . 16 Defendant Sunlune is a chip design company located in Santa Clara, California. See 17 Compl. ¶ 15. In February 2023, Sunlune entered into an End-User Software License and 18 Maintenance Agreement (“EULA”) with Synopsys. See id. ¶ 16 . The EULA is an overarching 19 agreement under which a customers may enter into a license for specific Synopsys EDA tools. 20 See id. In August 20203, Sunlune entered into a limited license to Synopsys’ Fusion Compiler, 21 HSPICE, and PrimeLib software products. See id. ¶ 17 . However, Sunlune used counterfeit 22 license keys to access more copies of the licensed products than was authorized, and to access a 23 product not covered by the license, IC Compiler II. See id. ¶¶ 18-19 . Sunlune has used 24 counterfeit license keys at least 15,000 times to obtain unauthorized access Synopsys’ EDA 25 software. See Roffman Decl. ¶¶ 12-15, ECF 43-1. [27] 1 The Background section is drawn from the factual allegations of the complaint, which are 1 Synopsys filed this suit in January 2024, asserting two claims: (1) violation of the DMCA, 2 and (2) breach of contract. See generally Compl., ECF 1. Synopsys also filed an application for 3 TRO. See TRO Applic., ECF 10. Sunlune did not respond to the TRO application and did not 4 appear at the hearing set by the Court. The Court issued the requested TRO, prohibiting Sunlune 5 from accessing, using, transferring, or copying any Synopsys software without authorization from 6 Synopsys. See TRO, ECF 17. The Court also directed Sunlune to show cause why a preliminary 7 injunction should not issue. See id. Synopsys and Sunlune thereafter submitted a proposed 8 stipulated preliminary injunction, which was approved by the Court. See Prelim. Inj., ECF 27. 9 In March 2024, Sunlune filed a pro se answer to the complaint. See Answer, ECF 29. The 10 Court struck Sunlune’s answer on the basis that a corporation may not proceed pro se in federal 11 court, and set a May 2024 deadline for Sunlune to make a proper appearance through counsel. See 12 Order Striking Answer, ECF 34. When Sunlune failed to appear through counsel by that deadline, 13 Synopsys filed a motion for a Clerk’s entry of default. See Mot. for Entry of Default, ECF 37. 14 Sunlune filed a pro se response, which the Court struck, and the Clerk entered default against 15 Sunlune in June 2024. See Order Striking Opp., ECF 39; Clerk’s Notice, ECF 41. 16 Synopsys now seeks entry of default judgment against Sunlune. 17 II. LEGAL STANDARD 18 Default may be entered against a party who fails to plead or otherwise defend an action, 19 who is neither a minor nor an incompetent person, and against whom a judgment for affirmative 20 relief is sought. See Fed. R. Civ. P. 55(a). After entry of default, a court may, in its discretion, 21 enter default judgment. See Fed. R. Civ. P. 55(b)(2); Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th 22 Cir. 1980). 23 In deciding whether to enter default judgment, a court should consider the following 24 factors: (1) the possibility of prejudice to the plaintiff; (2) the merits of the plaintiff’s substantive 25 claims; (3) the sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the 26 possibility of a dispute concerning material facts; (6) whether the default was due to excusable 27 neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring 1 In considering these factors, all factual allegations in the plaintiff’s complaint are taken as 2 true, except those related to the amount of damages. See TeleVideo Sys., Inc. v. Heidenthal, 826 3 F.2d 915, 917-18 (9th Cir. 1987). When the damages claimed are not readily ascertainable from 4 the pleadings and the record, the court may either conduct an evidentiary hearing or proceed on 5 documentary evidence submitted by the plaintiff. See Johnson v. Garlic Farm Truck Ctr. LLC, [6] 2021 WL 2457154 , at *2 (N.D. Cal. Jun. 16, 2021). 7 III. DISCUSSION 8 Although Synopsys’ motion refers to both its DMCA claim (Claim 1) and its contract 9 claim (Claim 2), the motion makes clear that Synopsys requests relief only under the DMCA. See 10 Pl.’s Mot. for Def. Jud. at 11. Specifically, Synopsys states that any contract damages such as lost 11 revenues “are subsumed within the significant statutory damages award requested on Synopsys’ 12 DMCA claims.” Id. Synopsys also seeks permanent injunctive relief under the DMCA. See id. at 13 14. Because Synopsys seeks relief only under the DMCA, the Court limits its evaluation of 14 Synopsys’ motion for default judgment to Claim 1 under the DMCA. The Court dismisses Claim 15 2 for breach of contract without prejudice. 16 “When entry of judgment is sought against a party who has failed to plead or otherwise 17 defend, a district court has an affirmative duty to look into its jurisdiction over both the subject 18 matter and parties.” In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). The Court discusses in turn 19 subject matter jurisdiction, personal jurisdiction, service of process, the Eitel factors, and the 20 requested relief. 21 A. Subject Matter Jurisdiction 22 The Court has federal question jurisdiction over Claim 1 for violation of the DMCA 23 because that claim is brought under a federal statute. See 28 U.S.C. § 1331 (“The district courts 24 shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties 25 of the United States.”). 26 B. Personal Jurisdiction 27 The Court also has personal jurisdiction over Sunlune. A corporation is subject to general 1 place of business. See Daimler AG v. Bauman, 571 U.S. 117, 137 (2014). Sunlune maintains its 2 principal place of business in Santa Clara, California. See Compl. ¶ 15. 3 C. Service of Process 4 When a plaintiff requests default judgment, the court must assess whether the defendant 5 was properly served with notice of the action. See Solis v. Cardiografix, No. 12-cv-01485, 2012 6 WL 3638548 , at *2 (N.D. Cal. Aug. 22, 2012). Synopsys personally served the summons and 7 complaint on Sunlune’s agent for service of process, Fuquan Wang, on January 22, 2024. See 8 POS, ECF 13. 9 D. Eitel Factors 10 Next, the Court considers whether default judgment is warranted under the Eitel factors. 11 1. Factor 1 – Possibility of Prejudice 12 Under the first Eitel factor, the Court finds that Synopsys would be prejudiced without a 13 default judgment against Sunlune. Because Sunlune did not respond to the complaint, Synopsys’ 14 only recourse is default judgment. See Ridola v. Chao, No. 16-CV-02246-BLF, 2018 WL 15 2287668, at *5 (N.D. Cal. May 18, 2018) (plaintiff prejudiced without default judgment because 16 she “would have no other means of recourse against Defendants for the damages caused by their 17 conduct”); Craigslist, Inc. v. Naturemarket, Inc., 694 F. Supp. 2d 1039, 1054 (N.D. Cal. 2010) 18 (“Here, denial of Plaintiff’s request for judgment and injunctive relief would leave Plaintiff with 19 no means to prevent further infringement by Defendants, and leave Plaintiff prone to continued 20 circumvention of its security measures by Defendants.”). 21 The first factor weighs in favor of granting default judgment. 22 2. Factors 2 and 3 – Merits and Sufficiency of Claim 23 The second and third Eitel factors address the merits and sufficiency of the plaintiff’s 24 claims. Courts often analyze these two factors together. See Dr. JKL Ltd. v. HPC IT Educ. Ctr., [25] 749 F. Supp. 2d 1038, 1048 (N.D. Cal. 2010) (“Under an Eitel analysis, the merits of plaintiff’s 26 substantive claims and the sufficiency of the complaint are often analyzed together.”). “[T]he 27 general rule is that well-pled allegations in the complaint regarding liability are deemed true.” 1 Synopsys’ DMCA claim is brought under 17 U.S.C. § 1201 (a)(1), which provides in 2 relevant part that “[n]o person shall circumvent a technological measure that effectively controls 3 access to a work protected under this title.” 17 U.S.C. § 1201 (a)(1)(A). The Ninth Circuit 4 discussed this provision at length in MDY Indus., LLC v. Blizzard Ent., Inc., 629 F.3d 928 (9th Cir. 5 2010). Departing from Federal Circuit decisions holding that a § 1201(a) plaintiff must show the 6 act of circumvention infringes or facilitates infringement of the plaintiff’s copyright, the MDY 7 court construed § 1201(a) to create “a new anticircumvention right distinct from copyright 8 infringement[.]” MDY, 629 F.3d at 948 . Under the Ninth Circuit’s construction, a copyright 9 owner may seek redress for another’s circumvention of technological measures that control access 10 to a protected work regardless of whether the owner’s copyright is infringed. See id. at 950 . The 11 MDY court opined that § 1201(a) provides an important enforcement tool that copyright owners 12 may use to ensure they receive compensation for valuable non-infringing access to their works, for 13 example, where copyright owners “make movies or music available online, protected by an access 14 control measure, in exchange for direct or indirect payment.” Id. 15 Consistent with the guidance provided by MDY, district courts in the Ninth Circuit have 16 identified the elements of a DMCA claim under § 1201(a)(1)(A) as follows: “(i) the work at issue 17 was protected under the Copyright Act, (ii) the copyrighted work was protected by a 18 ‘technological measure,’ and (iii) the technological measure was ‘circumvented’ in order to obtain 19 access to the copyrighted work.” iSpot.tv, Inc. v. Teyfukova, No.: 2:21-cv-06815-MEMF(MARx), [20] 2023 WL 3602806 , at *4 (C.D. Cal. May 22, 2023) (citing MDY, 629 F.3d at 944 ); see also 21 Synopsys, Inc. v. Libr. Techs., Inc., No. 20-CV-07014-CRB, 2022 WL 783898 , at *2 (N.D. Cal. 22 Mar. 15 , 2022) (reciting same elements). The DMCA defines the phrase “to circumvent a 23 technological measure” to mean, among other things, “to avoid, bypass, remove, deactivate, or 24 impair a technological measure, without the authority of the copyright owner[.]” 17 U.S.C. § 25 1201(a)(3)(A). 26 Synopsys’ factual allegations in its complaint, which are accepted as true, satisfy these 27 elements. Synopsys alleges that: its software is protected under the copyright laws of the United 1 technological measures, including Synopsys’ License Key System (second element), see id. ¶¶ 252 26; and Sunlune used counterfeit license keys to circumvent Synopsys’ License Key System in 3 order to obtain unauthorized access to Synopsys’ IC Compiler II, Fusion Compiler, HSPICE, and 4 PrimeLib products (third element), see id. ¶ 26 . The complaint alleges that “Synopsys has 5 identified over 11,000 instances of Sunlune operating counterfeit keys under 7 different usernames 6 to access Synopsys’ EDA software without authorization.” Id. ¶ 20 . 7 While Synopsys’ factual allegations alone are sufficient to demonstrate the merits and 8 sufficiency of its DMCA claim, Synopsys bolsters those allegations with the declaration of Dan 9 Roffman, an expert in forensic technology investigations. See Roffman Decl., ECF 43-1. Mr. 10 Roffman states that Synopsys “goes to great lengths” to protect its products through use of 11 licensing software, and he describes the mechanism by which Synopsys’ licensing software 12 detects piracy and alerts Synopsys. See id. ¶¶ 7-9 . Sunlune nonetheless was able to circumvent 13 Synopsys’ protections through use of multiple counterfeit license keys via multiple servers and 14 devices. See id. ¶¶ 10-15 . Mr. Rothman notes that the data provided by Synopsys indicates more 15 than 11,000 instances of circumvention by Sunlune. See id. ¶ 10 . Following forensic imaging, 16 however, Mr. Rothman detected more than 15,000 circumventions of Synopsys’ protections by 17 Sunlune. See id. ¶ 15 . Mr. Roffman opines that Sunlune attempted to conceal its circumvention 18 of Synopsys’ protections, and its unauthorized access to Synopsys’ products, by spoliating 19 evidence. See id. ¶¶ 16-17 . 20 The Court finds that Synopsys has established the merits and sufficiency of its DMCA 21 claim and thus that the second and third Eitel factors weigh in favor of granting default judgment. 22 3. Factor 4 – Sum of Money at Stake 23 Under the fourth Eitel factor, the Court must consider the amount of money at stake in 24 relation to the seriousness of the Defendants’ conduct. “Default judgment is disfavored when a 25 large amount of money is involved or unreasonable in light of the potential loss caused by the 26 defendant’s actions.” Operating Engineers’ Health & Welfare Tr. Fund for N. California v. 27 Hansen, No. 19-CV-08344-JSC, 2024 WL 3558851 , at *4 (N.D. Cal. July 26, 2024) (internal 1 misconduct of the defendant, default judgment may be appropriate.” Id. (internal quotation marks 2 and citation omitted). 3 Synopsys seeks statutory damages under the DMCA, which provides in relevant part that 4 “[a]t any time before final judgment is entered, a complaining party may elect to recover an award 5 of statutory damages for each violation of section 1201 in the sum of not less than $200 or more 6 than $2,500 per act of circumvention . . . as the court considers just.” 17 U.S.C. § 1203 (c)(3)(A). 7 Although Mr. Roffman’s declaration establishes more than 15,000 acts of circumvention by 8 Sunlune, Synopsys limits its request for statutory damages to the 11,000 acts of circumvention 9 alleged in the complaint so as not to run afoul of Federal Rule of Civil Procedure 54(c), which 10 provides that “[a] default judgment must not differ in kind from, or exceed in amount, what is 11 demanded in the pleadings.” See Pl.’s Mot. for Def. Jud. at 10. Synopsys does seek maximum 12 statutory damages of $2,500 per act of circumvention, and thus requests a total damages award of 13 $27,500,000 ($2,500 per violation multiplied by 11,000 violations). 14 Synopsys acknowledges that the requested award is quite large, but it argues that 15 maximum statutory damages are warranted in light of Sunlune’s willful misconduct. Other courts 16 in this district have awarded maximum statutory damages of $2,500 per act under § 1203(c)(3)(A) 17 where the defendant’s conduct was willful, finding such an award to be “both consistent with 18 Congressional intent and necessary to discourage wrongful conduct by other potential [violators].” 19 Sony Computer Ent. Am., Inc. v. Filipiak, 406 F. Supp. 2d 1068, 1075 (N.D. Cal. 2005). In the 20 present case, Sunlune’s willful misconduct is established by its use of multiple counterfeit license 21 keys, via multiple servers and devices, over a substantial period of time. Moreover, Mr. Roffman 22 opines that the vast majority of Sunlune’s acts of circumvention occurred in August 2023, the 23 same month Sunlune entered into a limited license to Synopsys’ Fusion Compiler, HSPICE, and 24 PrimeLib software products. See Roffman Decl. ¶ 10; Compl. ¶ 17. Based on that timing, it 25 appears that Sunlune intended to obtain unauthorized access to Synopsys’ products when it 26 entered into the limited license. Sunlune’s acts of circumvention continued through April 2024, 27 well after this lawsuit was filed in January 2024. See Roffman Decl. ¶ 13. Finally, Sunlune 1 in violation of its discovery obligations. See Roffman Decl. ¶¶ 16-17. 2 The Court cannot conceive of a more egregious violation of the DMCA’s 3 anticircumvention provision, and on that basis concludes that an award of the maximum statutory 4 damages authorized by Congress for such violations is appropriate here. The Court’s conclusion 5 is based on the particular facts of this case, as established by Synopsys’ uncontroverted factual 6 allegations and evidence, which demonstrate Sunlune’s willful violation of the DMCA over an 7 extended period of time, violation of its discovery obligations, and spoliation of evidence. 8 Accordingly, the fourth Eitel factor weighs in favor of granting default judgment despite the large 9 amount of damages sought by Synopsys. 10 4. Factors 5 and 6 – Possibility of Factual Dispute or Excusable Neglect 11 Under the fifth and sixth Eitel factors, the Court considers whether there is the possibility 12 of a dispute over any material fact and whether the default was due to excusable neglect. See 13 Ridola, 2018 WL 2287668 , at *13. Sunlune stipulated to entry of the preliminary injunction and 14 filed an answer to the complaint. Although the answer subsequently was stricken, Sunlune clearly 15 was aware of this action and could have made a proper appearance through counsel to raise any 16 factual dispute that might exist. Sunlune did not do so. There is no indication that Sunlune’s 17 failure to appear through counsel was due to excusable neglect. To the contrary, the Court 18 expressly advised Sunlune that it may litigate this action only through licensed counsel, and 19 granted Sunlune an opportunity to obtain counsel before default was entered. On this record, the 20 Court finds that there is no possibility that Sunlune could dispute any material fact or establish that 21 default was caused by excusable neglect. 22 The fifth and sixth Eitel factors weigh in favor of granting default judgment. 23 5. Factor 7 – Policy Favoring Decision on the Merits 24 The seventh Eitel factor, which is the policy favoring decisions on the merits, weighs 25 against default judgment. In cases where the other factors weigh in favor of default judgment, the 26 seventh factor will not be an impediment to granting default judgment. See Ridola, 2018 WL 27 2287668, at *13 (“Although federal policy favors decision on the merits, Rule 55(b)(2) permits 1 6. Conclusion 2 The Court finds that the first through sixth Eitel factors strongly favor granting default 3 judgment, and that those factors outweigh the seventh Eitel factor. Accordingly, Synopsys’ 4 motion for default judgment is GRANTED on Claim 1 brought under the DMCA. 5 E. Relief Requested 6 Synopsys requests statutory damages under the DMCA in the amount of $27,500,000, as 7 discussed above, and entry of a permanent injunction. The Court finds that the requested statutory 8 damages are warranted for the reasons discussed above. In particular, the Court finds that 9 Sunlune’s egregious misconduct – willful violation of the DMCA in complete disregard of 10 Synopsys’ rights, violation of its discovery obligations, and attempt to conceal its actions – 11 justifies an award of the maximum statutory damages available. 12 With respect to the request for a permanent injunction, such relief is expressly authorized 13 by the DMCA. See 17 U.S.C. § 1203 (b)(1) (authorizing district court to “grant temporary and 14 permanent injunctions on such terms as it deems reasonable to prevent or restrain a violation”). 15 The Court previously granted a TRO and a preliminary injunction to prohibit Sunlune’s continued 16 unauthorized access to Synopsys’ products. The factual determinations underlying those rulings 17 are only strengthened by the additional evidence presented in the current motion for default 18 judgment. Courts may impose permanent injunctions when granting default judgment DMCA 19 cases. See, e.g., Craigslist, 694 F. Supp. 2d at 1062 (granting default judgment that included 20 permanent injunctive relief in DMCA case). Accordingly, the Court finds that a permanent 21 injunction is appropriate in this case. 22 “Generally, an injunction must be narrowly tailored to remedy only the specific harms 23 shown by a plaintiff, rather than to enjoin all possible breaches of the law.” Craigslist, 694 F. 24 Supp. 2d at 1062. The injunction requested by Synopsys is limited to a prohibition on Sunlune’s 25 unauthorized access of Synopsys’ products and is consistent with the language of the preliminary 26 injunction previously issued in this case. 27 The Court finds that Synopsys has established its entitlement to both the statutory damages 1 IV. ORDER 2 (1) Plaintiff Synopsys, Inc.’s motion for default judgment is GRANTED. 3 (2) A separate Default Judgment will be entered for Plaintiff Synopsys, Inc. and 4 against Defendant Sunlune Corporation on Claim | for violation of the DMCA, 5 awarding statutory damages in the amount of $27,500,000 and imposing a 6 permanent injunction. 7 (3) Claim 2 for breach of contract is DIMISSED WITHOUT PREJUDICE. 8 (4) This order terminates ECF 43. [9] 10 Dated: November 15, 2024 BETH LABSON FREEMAN %L United States District Judge [16] = 17 Z 18