Synopsys, Inc. v. AzurEngine Technologies, Inc. is a federal lawsuit in the Southern District of California about chip design software. Synopsys sued a San Diego startup that had no current licence from it, alleging that people associated with the startup had used counterfeit licence keys to run Synopsys tools more than 15,000 times. The startup replied that it believed a Chinese business partner had provided valid licensed access. On 2019-08-15 the court granted a preliminary injunction and rejected both that reply and an argument that the access took place abroad. The case settled, and the court dismissed it with prejudice on 2020-01-09.[1][3]
Background
According to the court’s order, Synopsys licenses its electronic design automation (EDA) tools through customised licences that grant limited rights. Its main access control is a licence key system: the software does not run unless a licensee checks out a key from a server that grants keys only to approved licensees, and the system monitors use against each licensee’s contract terms.[1]
AzurEngine was a San Diego startup founded in 2016 to develop a reconfigurable processor for deep learning. It was working on a multi-million dollar chipset design project with an unnamed Chinese business partner.[1][2]
The dispute
Beginning in June 2019, Synopsys’ monitoring programs detected call-home data indicating that individuals associated with AzurEngine, which had no current Synopsys licence, had accessed its EDA software. Synopsys said the data showed counterfeit licence keys used more than 15,000 times to get around the licence key system. It filed suit on 2019-08-01 under the Digital Millennium Copyright Act (DMCA), 17 U.S.C. section 1201, and moved for a temporary restraining order, an order to show cause and expedited discovery. The tools named were Design Compiler, PrimeTime, VCS, Formality, IC Compiler, StarRC and Library Compiler.[1]
AzurEngine opposed. It said it had not been warned before the suit, that its use was under what it understood to be a valid licence provided through its Chinese partner, that an injunction would delay a major project, and that the access occurred through servers in China.[1][2]
Decision or outcome
On 2019-08-15 Chief Judge Larry Alan Burns treated the request for a restraining order as a motion for a preliminary injunction, because AzurEngine had been heard, and granted it. The order made these findings.[1]
- Effective access control. A licence system that will not run the software without a key checked out from a server designed to grant keys only to approved licensees “effectively controls” access, as other courts had held, including in the Synopsys v. InnoGrit case.
- Circumvention. Call-home data showing at least 15,000 uses of counterfeit keys was enough to show likely circumvention.
- The partner’s licence. Even if AzurEngine had a valid licence, a lawful purchaser still needs authorisation to circumvent, so its belief about a licence was irrelevant to circumvention. The court added that it is for the parties to ensure that they are not breaking the law.
- Extraterritoriality. The relevant conduct, gaining access by circumvention, occurred in the United States, so applying the DMCA was a domestic application even if servers were in China.
- Harm and equities. Synopsys’ licence compliance director said customers asked why they should pay if software could be had free elsewhere, and the court accepted that circumvention undermines negotiating position and goodwill. It described the claim that an injunction would harm the startup’s design project as “audacious”.
The injunction bars AzurEngine and those acting with it from accessing, using, transferring or copying Synopsys software without authorisation, and orders it to preserve all relevant evidence. The court declined to require a bond. It denied expedited forensic imaging, noting that AzurEngine had a litigation hold and every incentive to move quickly to normal discovery, but ordered preservation anyway.[1]
The parties filed a notice of settlement on 2019-11-12 and a joint motion to dismiss. On 2020-01-09 the court dismissed all claims with prejudice and kept jurisdiction to interpret and enforce the settlement agreement. The settlement terms are not in the public record.[3][4]
Significance for software licensing and SAM practice
The points below are commentary on the court’s order.
- Third-party access arrangements. The defence was that a business partner had provided access. The court treated the question as whether counterfeit keys were used, not whether the user believed it was entitled. A company that receives tool access from a partner or contractor should ask how the licence is delivered and keep evidence of it. See software license audit.
- Offshore servers do not remove US exposure. Where the people circumventing are in the United States, the court saw no extraterritorial problem.[1]
- Detection is automatic. The case began with call-home data noticed in June 2019 and a lawsuit within two months, and the defendant said it had no prior warning of the suit.[1][2]
- Related cases. Synopsys v. InnoGrit produced the earlier ruling the court relied on, and Synopsys v. Sunlune shows where a similar claim ended without a settlement. For the general practice see license compliance.
Lessons learned
- Believing that a business partner supplied a valid licence does not answer a claim of circumvention if counterfeit keys were used to reach the software. The court held that even a lawful purchaser needs authorisation to circumvent.[1]
- Running the software on servers in another country does not take circumvention by a US-based company outside US law if the access was by people in the United States. The court applied the Supreme Court’s test of where the conduct that is the focus of the statute occurred.[1]
- An engineering project that depends on the software is not a reason for a court to keep an injunction away; the court called that argument audacious. The court noted the company could buy a licence.[1]
- A litigation hold already in place can lead a court to deny forensic imaging on an expedited basis, but the court still ordered evidence to be preserved. The injunction was paired with a preservation order covering hard drives and devices.[1]