313 F. Supp. 3d 1056
N.D. Cal.2018Background
- Synopsys sued Ubiquiti, Ubiquiti Networks International Limited (UNIL), and individual Tsai for allegedly using evaluation and counterfeit license keys to access and copy Synopsys EDA software for ~3 years; Synopsys used embedded "piracy tracking" tools to discover the activity.
- Ubiquiti and UNIL counterclaimed that Synopsys (and its anti‑piracy vendor SmartFlow/ITCA) secretly embedded spyware, collected confidential system data, and disclosed it to third parties in violation of a Master Non‑Disclosure Agreement (MNDA) and various statutes.
- UNIL asserted eight counterclaims: declaratory relief, CFAA (18 U.S.C. §1030), California Penal Code §502, trespass to chattels, conversion, RICO (18 U.S.C. §§1962(c), (d)), and fraud. Ubiquiti sought leave to amend its counterclaims to mirror UNIL’s.
- Synopsys moved to dismiss UNIL’s counterclaims (arguing legal or pleading defects) and to strike state‑law claims under California’s anti‑SLAPP statute; it opposed Ubiquiti’s leave to amend as unduly delayed and futile.
- The Court found defendants’ fraud theory implausible and dismissed UNIL’s second through eighth counterclaims with leave to amend for certain claims; denied Ubiquiti’s motion for leave to amend as futile without prejudice; denied the anti‑SLAPP motion without prejudice.
Issues
| Issue | Synopsys' Argument | Defendants' Argument | Held |
|---|---|---|---|
| Whether UNIL adequately pleaded CFAA claims (unauthorized access, damage/loss, fraud) | Downloads were voluntary; no $5,000+ loss alleged; no system damage; fraud not pleaded with Rule 9(b) particularity | Hidden spyware exceeded authorization and accessed data outside scope of consent; incurred investigatory costs and lost value of confidential data | CFAA claims dismissed; leave to amend for loss/damage and fraud only if plausible allegations provided |
| Whether California Penal Code §502 claims survive | Overlap with CFAA; lack of damage/loss and fraud; consent via voluntary install/TOU; litigation privilege/Noerr immunity | Deeply hidden spyware and access to system areas unrelated to Synopsys software mean access was "without permission"; CCDAFA not preempted by CUTSA | §502 claims dismissed with leave to amend for loss/fraud; court declines to find preemption; Noerr‑Pennington not dispositive here |
| Whether RICO claims are adequately pleaded and barred by Noerr‑Pennington | Enterprise/predicate acts improperly alleged; insufficient pattern of wire fraud; lack of proximate cause and domestic injury; pre‑litigation petitioning protected | Alleged enterprise (Synopsys + SmartFlow + ITCA) used spyware and pre‑suit demands to extract fees, forming a pattern | RICO claims dismissed with leave to amend; must allege additional predicate acts, proximate cause, domestic injury, and that enforcement litigation was objectively baseless to overcome Noerr‑Pennington |
| Whether state common‑law claims (trespass to chattels, conversion, fraud) survive or are preempted | No impairment to systems (trespass); conversion and misappropriation preempted by CUTSA; fraud implausible and not directed at UNIL (no MNDA signatory) | Trespass and conversion based on unauthorized surveillance/use of data; fraud based on nondisclosure of spyware to induce downloads | Trespass and fraud dismissed with leave to amend to plead concrete harm/causation; conversion dismissed as preempted by CUTSA; Ubiquiti’s proposed amendments denied as futile without prejudice |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading must permit reasonable inference of liability)
- U.S. v. Nosal, 676 F.3d 854 (CFAA "exceeds authorized access" does not cover mere violations of use restrictions)
- LVRC Holdings LLC v. Brekka, 581 F.3d 1127 (overview of CFAA scope)
- Hemi Group, LLC v. City of New York, 559 U.S. 1 (RICO proximate‑cause requirement)
- RJR Nabisco, Inc. v. European Community, 136 S. Ct. 2090 (RICO requires domestic injury to recover)
- Mindys Cosmetics, Inc. v. Dakar, 611 F.3d 590 (anti‑SLAPP two‑step analysis)
- Hilton v. Hallmark Cards, 599 F.3d 894 (anti‑SLAPP plaintiff need only show minimal probability of prevailing)