Autodesk, Inc. v. ZWCAD Software Co., Ltd. was a 2014 to 2015 lawsuit in which Autodesk, the developer of AutoCAD, alleged that the Chinese developer ZWSoft had used AutoCAD source code to build its competing ZWCAD+ product. Autodesk sued in The Hague in February 2014 and in the Northern District of California in March 2014, claiming copyright infringement and trade secret misappropriation. ZWSoft denied copying and counterclaimed for a declaration of non-infringement and for unfair competition. In November 2015 the parties settled: according to Autodesk’s announcement, ZWSoft discovered that an employee had improperly used AutoCAD intellectual property in developing ZWCAD+, acknowledged the error, agreed to stop selling, licensing or otherwise making ZWCAD+ available in all markets, and paid Autodesk an undisclosed sum. The U.S. case was dismissed by stipulation.[1][3][4]
Background
ZWSoft’s companies admitted in their answer that they develop the ZWCAD and ZWCAD+ CAD products, that ZWCAD 1.0 was released in 2002 followed by annual versions, and that ZWCAD+ 2012 and 2014 followed. They admitted that they had pursued design objectives for ZWCAD through a licence from the IntelliCAD Technology Consortium, and that in 2012 they announced a transition to an entirely new codebase called ZWCAD+. The products could be bought online through distributors.[1]
The dispute
Autodesk’s lawsuits alleged that AutoCAD source code had been misappropriated and improperly used in developing ZWCAD+.[4] The complaint itself is not in the public RECAP archive, but ZWSoft’s answer shows its structure: Autodesk’s allegations about software evolving through releases and about source code containing bugs and other idiosyncrasies, which ZWSoft admitted only in general terms and otherwise denied, followed by claims for relief that ZWSoft denied.[1]
ZWSoft’s defence and counterclaims
ZWSoft’s counterclaims, filed in May 2015, alleged that:[1]
- ZWCAD and ZWCAD+ were developed internally and with licensed or permissible open-source third-party components, including from IntelliCAD, Flexera Software, Open Source Geospatial Foundation and others, many of which Autodesk also uses;
- similarities between AutoCAD and ZWCAD+ arose from those common components, not from source code theft, and other CAD products shared the same similarities;
- Autodesk was a competitor bringing litigation to drive ZWSoft out of the international CAD market, and was pressing unnecessary discovery to raise its costs.
ZWSoft sought a declaration that it had not infringed any Autodesk copyright, and asserted unfair competition under California Business and Professions Code § 17200. It also reserved its right to seek a transfer or stay in favour of proceedings in China or the Netherlands, and disputed personal jurisdiction.[1]
Settlement discussions
In July 2015 the parties told the court that they had met in San Francisco on 7 July 2015, that the meeting had been productive, and that further formal discovery, including continued expert review of both parties’ source code, review and translation of ZWSoft’s documents and depositions of ZWSoft employees in China, would be very costly. They agreed to extend all deadlines by 90 days to allow informal fact-finding and settlement talks, noting that a settlement with ZWSoft would likely also resolve the claims against its U.S. sales company.[2]
Decision or outcome
There was no ruling on the merits. On 19 November 2015 Autodesk announced that the parties had agreed to settle the suits in The Hague and in California. According to Autodesk’s announcement, ZWSoft initially denied the allegations but then discovered that an employee had in fact improperly used AutoCAD intellectual property in developing ZWCAD+; its chief executive publicly acknowledged the error; ZWSoft agreed to stop selling, licensing or otherwise making ZWCAD+ available in all markets, effective immediately; and an undisclosed sum was paid to Autodesk.[4] A stipulation dismissing the U.S. case without prejudice was filed the same day, and the docket was closed on 20 November 2015.[3]
Significance for software licensing and SAM practice
The case was between competitors, but its outcome reached customers: a commercially licensed CAD product was withdrawn from sale and licensing in every market as part of a settlement.[4]
- Alternative products carry supplier IP risk. Organisations that choose a lower-cost alternative to a market leader depend on that supplier’s right to sell what it sells; here the settlement ended sales and licensing of ZWCAD+ everywhere.[4]
- Compatibility is not the issue. ZWSoft’s defence relied on shared, licensed components and industry-wide similarities; the settlement turned on the use of AutoCAD intellectual property by an employee, not on compatibility as such.[1][4]
- Source code review is expensive. The parties’ own filing cited the cost of expert source code review, translation and depositions abroad as a reason to settle.[2]
Lessons learned
- A product can be withdrawn by settlement. ZWSoft agreed to stop selling and licensing ZWCAD+ in all markets with immediate effect, so a buyer’s continuity depends on the supplier’s IP position as well as its commercial health.[4]
- Source code disputes are slow and costly. The parties’ joint filing cited expert source code review, translation of documents and depositions in China as reasons to pause the case for settlement talks.[2]
- The claim was about code, not compatibility. ZWSoft’s answer shows that Autodesk’s complaint relied on bugs and idiosyncrasies in the code, which ZWSoft attributed to common licensed components.[1]