Embarcadero Technologies, Inc. v. NCR Corporation was a copyright lawsuit in the United States District Court for the Southern District of Texas. Embarcadero, the maker of RAD Studio, Delphi and C++Builder, accused NCR Corporation of using unlicensed copies of its software. The court never reached the licensing questions. On 2020-03-26 it granted NCR summary judgment because every alleged infringing download had been made outside the United States, where the US Copyright Act does not apply.[2]
Background
Embarcadero holds United States copyrights in Delphi, C++Builder, RAD Studio and InterBase. According to its complaint, as summarized by the court, its licences require registration with Embarcadero and compliance with its service and licence agreements. It sold one-year licence subscriptions with a key that expires after the year, and it offered free versions of C++Builder and Delphi to users who attested that they were individuals, small businesses or organizations with less than USD 5,000 a year in revenue and fewer than five developers.[1] The current Community Edition terms set the same USD 5,000 revenue threshold.[3]
Embarcadero alleged that in May 2018 it found three machines on an NCR domain using “cracked” licence keys for RAD Studio, meaning keys modified to get around copy protection and avoid payment.[1] On 2018-05-07 it emailed NCR a “Notice of License Violation”. The notice identified one machine by its MAC address as having used RAD Studio 10.2 Tokyo Architect on 2018-05-02, and it acknowledged that the usage might be covered by a valid licence. Embarcadero later linked the machine to a user name in the corp.ncr.com domain.[2] NCR’s counsel replied that the matter involved a single employee of NCR Serbia who had downloaded one trial version of the software.[2]
The dispute
Embarcadero sued on 2019-02-19. It alleged that NCR used the software illegally more than fifty times and claimed rights under six registered copyrights for Delphi CE, one for C++Builder CE and seventeen for RAD Studio.[1] NCR moved to dismiss, arguing that the conduct took place abroad. In August 2019 the court held that the location of the infringement is an element of the claim, not a question of the court’s jurisdiction. It denied the motion without prejudice, because the complaint did not say where the downloads happened.[1] The same order refused Embarcadero’s request for entry of default, finding that NCR had shown good cause for missing the answer deadline.[1]
The parties then agreed to limited discovery on location first. It identified six people said to have downloaded the software without authorization. All were employees or contractors of NCR subsidiaries in Serbia, Italy, India and Israel, and all lived abroad. Embarcadero confirmed a list of seven RAD Studio installer files, versions 10.2 to 10.3.1 including one Community Edition installer, as “all of the implicated downloads”.[2]
Embarcadero relied on a declaration by its Global Manager of License Compliance. It argued that the public IP address, a registration in the UTC-6:00 time zone, the English language setting and the United States region pointed to an NCR server in Atlanta.[2] NCR’s deputy chief information security officer explained that corp.ncr.com is a logical domain that connects the whole corporate family worldwide. Membership of the domain says nothing about where a computer is. Software downloaded from the internet goes straight to the employee’s laptop and is not stored or cached on NCR servers, and a search of NCR’s US servers found none of the files.[2]
Decision or outcome
Chief Judge Lee H. Rosenthal granted summary judgment for NCR on 2020-03-26.[2] The court denied Embarcadero’s request under Rule 56(d) for more discovery. That request covered all software NCR had downloaded in three years and the architecture of NCR’s worldwide IT network, which the court found far broader than the threshold issue required. The court also found that Embarcadero had not explained why it had not sought narrower discovery earlier.[2] On the merits, the undisputed evidence showed that every download was by an employee or contractor of a foreign subsidiary, that each person lived or worked overseas, and that none of the downloads was stored on an NCR server in the United States. Because the Copyright Act does not reach extraterritorial infringement, Embarcadero had no actionable claim, and final judgment was entered by separate order.[2] No appellate decision was found in the court records consulted.
Significance for software licensing and SAM practice
The case shows how a developer-tool vendor can detect unlicensed use and turn it into a claim. Embarcadero’s evidence came from its own licence and registration data: MAC addresses, domain user names, IP addresses, time zone and locale settings, and the names of the installer files.[2] The current RAD Studio licence states that Embarcadero collects information about Community Edition use “for auditing purposes”, and it gives Embarcadero an audit right covering machine IDs and serial numbers.[3] See Embarcadero RAD Studio licensing and Embarcadero Community Edition licensing.
The decision turned on territorial copyright law, not on the licence terms. A vendor in the same position could bring claims in the countries where the use occurred, or under its contract. The ruling therefore does not mean that unlicensed use by a foreign subsidiary carries no risk.
Lessons learned
- Count the whole group. Embarcadero’s telemetry linked downloads on a shared corporate domain to the parent company, even though the users worked for separate subsidiaries.[2] An effective licence position for developer tools should cover every subsidiary on the domain.
- Free and trial downloads matter. The implicated files included a Community Edition installer, and NCR described the first incident as a downloaded trial version.[2] Community Edition eligibility depends on the revenue of the organization, not the individual, so employees of larger companies cannot rely on it.[3]
- Location and legal entity are facts that matter. The outcome depended on evidence that the users worked for foreign subsidiaries and that the software never sat on US servers.[2] Keep records of which entity each user works for and where installations are located.
- Answer violation notices with facts. Embarcadero’s notice itself said the usage might be covered by a valid licence.[2] Check entitlements, users and locations before conceding or disputing.