Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_13-cv-02965/USCOURTS-cand-3_13-cv-02965-27/pdf.json

Nature of Suit Code: 820
Nature of Suit: Copyright
Cause of Action: 17:101 Copyright Infringement

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On November 13, 2014, Synopsys filed an Administrative Motion, by which it seeks

an order striking portions of ATopTech’s reply or, in the alternative, the Court’s

consideration of arguments made in one of Synopsys’ earlier filings. ATopTech has filed

opposition to the Administrative Motion. The Court hereby GRANTS Synopsys’ alternative

request and will consider the designated arguments made in Synopsys’ prior filing.

2

By order filed November 17, 2014, the Court took the motion under submission.

United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SYNOPSYS, INC.,

Plaintiff,

 v.

ATOPTECH, INC.,

Defendant. /

No. C 13-2965 MMC

ORDER GRANTING IN PART AND

DENYING IN PART MOTION TO

DISMISS

Before the Court is defendant ATopTech, Inc.’s (“ATopTech”) “Motion to Dismiss

Counts XI and XII of Synopsys, Inc.’s Amended Complaint,” filed October 15, 2014, by

which ATopTech seeks dismissal, pursuant to Rule 12(b)(6) of the Federal Rules of Civil

Procedure, of two claims, breach of contract and breach of the implied covenant of good

faith and fair dealing, as set forth in plaintiff Synopsys, Inc.’s (“Synopsys”) Amended

Complaint (“AC”). Synopsys has filed opposition, to which ATopTech has replied.1

 Having

read and considered the papers filed in support of and in opposition to the motion, the

Court hereby rules as follows.2

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The prior order referenced herein was issued October 24, 2013 by the Honorable

Samuel Conti. On January 8, 2014, the above-titled action was reassigned to the

undersigned.

2

I. Breach of Contract

A. Breach Allegations

 1. Copying and Unauthorized Use

In its AC, Synopsys, as in its initial complaint, alleges ATopTech breached the

parties’ Connections Program License Agreement (“CPLA”) by “cop[ying] PrimeTime and

GoldTime input and output formats into [ATopTech’s] Aprisa user documentation and

software” (AC ¶ 35) and “possessing and using proprietary PrimeTime and GoldTime input

and output formats and other proprietary confidential information following the CPLA’s

termination” (id. ¶ 99). In its prior order, the Court3

 found Synopsys’ allegations of copying

impermissibly vague and conclusory to the extent Synopsys did not identify the “other”

information that allegedly was copied. (See Order Granting in Part and Denying in Part

Defendant’s Motion to Dismiss (“Order”), filed October 24, 2013, at 29:14-18.) In that

regard, the AC provides no additional specificity. 

Accordingly, for the reasons stated in the Court’s prior order, the AC is subject to

dismissal to the extent it alleges a breach based on the copying or use of “other proprietary

information.”

By the same order, however, the Court found the complaint sufficiently alleged

copying of GoldTime and PrimeTime input and output formats. (See Order at 29:11-14, 20-

23). As to those allegations, ATopTech argues the CPLA prohibits copying and use only

for purposes other than those allowed therein, that the AC includes no facts identifying any

such prohibited use, and, further, that the input and output formats are not confidential

information because all such material, as Synopsys alleges (see AC ¶¶ 23-24), was

publicly filed with the Copyright Office. As set forth in the Court’s prior order, Synopsys has

alleged sufficient facts to show copying and use, and, given the CPLA’s provision

precluding ATopTech from “mak[ing] copies . . . without the prior written consent of

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[Synopsys]” (see Alexander Decl., filed October 15, 2014, Ex. A, Section 3.2(viii)), whether

such conduct was or was not in accordance with the CPLA’s provisions is a factual dispute

not properly subject to resolution on a motion to dismiss. See Newcal Indus., v. Ikon Office

Solution, 513 F.3d 1038, 1051 (9th Cir. 2008) (holding dismissal under Rule 12(b)(6)

improper where argument in support thereof “hinge[d] on factual disagreements rather than

legal deficiencies”). The Court agrees, however, that any information filed with the

Copyright Office is no longer confidential. See KEMA, Inc. v. Koperwhats, No. C-09-1587

MMC, 2010 WL 726640, at *4 (N.D. Cal. Mar. 1, 2010) (rejecting argument that, in light of

Copyright Office’s restrictions on access and copying, source code submitted to Copyright

Office remained protected as trade secret). 

Accordingly, the AC is not subject to dismissal to the extent it alleges a breach by

ATopTech’s copying and unauthorized use of proprietary GoldTime and PrimeTime input

and output formats prior to Synopsys’ filing such material with the Copyright Office, and is

subject to dismissal to the extent it alleges a breach after the time of such filing.

2. Disclosure

In its AC, Synopsys alleges ATopTech breached the CPLA by “disclosing to its

customers Synopsys’ proprietary PrimeTime and GoldTime input and output formats” (AC ¶

97). As in its initial complaint, Synopsys alleges it is in possession of Aprisa documentation

“revealing that Aprisa includes proprietary PrimeTime and GoldTime input and output

formats” in its software and user documentation (see id. ¶ 35). In response to the Court’s

prior order dismissing such claim, Synopsys has added an allegation that ATopTech

“distributes” such software and user documents to its customers. (See id. ¶ 97). The Court

finds Synopsys’ allegations now suffice to support its claim of breach based on disclosure. 

Further, as set forth above, and contrary to ATopTech’s argument, the AC sufficiently

alleges such formats were confidential prior to Synopsys’ filing them with the Copyright

Office. 

Accordingly, the AC is not subject to dismissal to the extent it alleges a breach by

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ATopTech’s disclosure of proprietary PrimeTime and GoldTime input and output formats

prior to Synopsys’ filing such material with the Copyright Office. 

3. Reverse Engineering

In its AC, Synopsys, for the first time, alleges ATopTech breached the CPLA by

“using reverse engineering of Synopsys’ GoldTime software.” (AC ¶ 36.) In support

thereof, Synopsys alleges ATopTech advertises its product, Aprisa, as having “‘excellent

correlation with sign-off timing’ and a ‘tight correlation’ with Synopsys’ PrimeTime software”

(id.), and further alleges, “on information and belief,” that such degree of correlation was

achieved solely by copying and “improperly using reverse engineering” of said software

(id.). 

ATopTech argues Synopsys has alleged insufficient facts to support an inference of

reverse engineering. The Court disagrees. See, e.g., Brocade Commc’ns Sys., Inc. v. A10

Networks, Inc., 2011 WL 1044899, at *8 (N.D. Cal. Mar. 23, 2011) (finding complaint

sufficient, in context of copyright infringement, where plaintiff alleged defendant had access

to protected material and that there was substantial similarity between parties’ products;

noting “many” of plaintiff’s allegations were made on information and belief and that, “[i]f

discovery reveal[ed]” facts to the contrary, defendant could move for summary judgment);

see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 547 (2007) (holding plaintiff need only

plead “enough facts to state a claim to relief that is plausible on its face”). 

ATopTech additionally argues Synopsys’ allegations do not suffice to raise an

inference of breach, pointing out the CPLA only prohibits reverse engineering for certain

specified purposes, which, ATopTech argues, Synopsys has not alleged. Again, the Court

disagrees. As Synopsys points out, the CPLA prohibits reverse engineering for, inter alia,

the purpose of “discover[ing] any . . . underlying ideas, underlying user interface

techniques, or algorithms” (see Opp’n at 6) and, as discussed below, Synopsys alleges

AtopTech improperly used Synopsys’s proprietary material to unfairly compete with

Synopsys. Further, whether any reverse engineering was or was not in accordance with

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the CPLA’s provisions is, as noted above in connection with copying and use, a factual

dispute not properly subject to resolution on a motion to dismiss. See Newcal, 513 F.3d at

1051.

Accordingly, the AC is not subject to dismissal to the extent it alleges a breach

based on reverse engineering.

B. Damages Allegations

In its prior order, the Court found Synopsys had failed to adequately plead damages,

in that the initial complaint only alleged ATopTech “sought commercial gain and competitive

advantage” by its use of Synopsys’ proprietary information (see Compl. ¶ 40), noting “the

mere fact that [ATopTech] sought those things does not indicate harm to [Synopsys]”

(see Order at 30). In the AC, Synopsys now alleges ATopTech’s breaches allowed

ATopTech to “accelerate substantially the development and improvement of its products to

unfairly compete with Synopsys, including Synopsys’ IC Compiler,” which has resulted in

“lost sales and price erosion of Synopsys’ products.” (See AC ¶ 98.) Synopsys further

specifies that its products compete with ATopTech’s Aprisa. (See AC ¶ 4.)

ATopTech argues Synopsys’ new allegations are conclusory and thus inadequate to

plead damages. The Court disagrees. See, e.g., Benedict v. Hewlett-Packard Co., 2014

WL 234218, at *21 (N.D. Cal. Jan. 21, 2014) (finding, where plaintiff brought breach of

contract claim based on misuse of confidential information, complaint sufficiently pleaded

damages based on allegation of “lost profits, unjust enrichment, and/or reasonable

royalties”).

Accordingly, the AC is not subject to dismissal based on an asserted failure to plead

damages.

II. Breach of the Implied Covenant of Good Faith and Fair Dealing

A. Breach Allegations

1. Right to Audit

Synopsys alleges ATopTech breached the implied covenant of good faith and fair

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dealing by “frustrating Synopsys’ ability to verify ATopTech’s performance” under the

CPLA. (See AC ¶ 109.) In its prior order, the Court found essentially the same allegation

insufficient, noting Synopsys had not alleged the CPLA “contained any clause that granted

it a right to verify [ATopTech’s] compliance.” (See Order at 31:24-26.) In the AC,

Synopsys now alleges “Section 7 of the CPLA . . . provides that Synopsys has the right to

verify ATopTech’s performance under the CPLA” and that ATopTech breached the implied

covenant by “refus[ing] to provide Synopsys with the information Synopsys requested

under its contractual audit rights” (AC ¶ 48). ATopTech does not argue that it cooperated

in Synopsys’ effort to obtain an audit, but instead contends there is no right to an audit set

forth in the CPLA and that Synopsys cannot create one through the implied covenant. The

parties’ dispute over the meaning and scope of Section 7 is factual in nature and,

consequently, is not appropriate for resolution on a motion to dismiss. See Newcal, 513

F.3d at 1051 (holding dismissal under Rule 12(b)(6) improper where argument in support

thereof “hinge[d] on factual disagreements rather than legal deficiencies”).

Accordingly, the AC is not subject to dismissal to the extent it alleges ATopTech

breached the implied covenant by “frustrat[ing] Synopsys’ ability to verify ATopTech’s

performance” of the CPLA (see AC ¶ 109).

2. Unauthorized Access and Downloading

In the AC, Synopsys, for the first time, alleges the CPLA and two other license

agreements between the parties contain an implied covenant that ATopTech, when given

access to certain material subject to the above-referenced agreements, would not access,

use and/or copy any other material. ATopTech argues the actions ATopTech took with

regard to any material not referenced in said agreements cannot provide the basis for a

breach of the implied covenant. The Court agrees. Indeed, such material is, in Synopsys’

own words, “outside the scope of the parties’ agreements.” (See Opp’n at 12:22-25); see

also Guz v. Bechtel Nat. Inc., 24 Cal. 4th 317, 349-50, (2000) (holding implied covenant

“cannot impose substantive duties or limits on the contracting parties beyond those

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incorporated in the specific terms of their agreement”); Plastino v. Wells Fargo Bank, 873

F. Supp. 2d 1179 (N.D. Cal. 2012) (finding plaintiff failed to allege breach of implied

covenant where plaintiff did not identify “specific contractual provision that was frustrated”).

Accordingly, the AC is subject to dismissal to the extent it alleges ATopTech

breached the implied covenant by accessing and downloading materials not referenced in

the parties’ agreements.

B. Damages Allegations

Synopsys’ damages allegations as to its surviving claim for breach of the implied

covenant are the same as the above-discussed allegations made in connection with its

claim for breach of contract, with the additional allegation that it incurred “monetary costs

relating to [its] attempts to verify ATopTech’s compliance.” (See AC ¶ 112.) As discussed

above, the AC is not subject to dismissal based on an asserted failure to plead damages.

CONCLUSION

For the reasons stated above, ATopTech’s motion to dismiss is hereby GRANTED in

part and DENIED in part as follows:

1. The motion is GRANTED to the extent Synopsys’ breach of contract claim is

based on copying and use of material other than PrimeTime and GoldTime input and

output formats and to the extent it is based on copying, use, and/or disclosure of material

after Synopsys filed such material with the Copyright Office.

2. The motion is GRANTED to the extent Synopsys’ breach of the implied covenant

claim is based on access to, downloading of, and/or any other use of material not

referenced in the parties’ agreements. 

3. In all other respects, the motion is DENIED.

IT IS SO ORDERED.

Dated: January 7, 2015 

MAXINE M. CHESNEY

United States District Judge

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