Where an internet security company moved to dismiss a complaint, filed an answer, moved to stay the action, appeared at a hearing, participated in a settlement conference and engaged in discovery before it moved to enforce a forum-selection clause, the forum selection motion was rejected.
Synopsys Inc. and Risk Based Security Inc., or RBS, identify and share with their customers software security vulnerabilities. Earlier this year, after Synopsys announced additional work it planned to perform in this area, RBS sent Synopsys a cease and desist letter alleging that Synopsys’s planned work would constitute copyright infringement of RBS’s database, misappropriation of RBS’s trade secrets and tortious interference with RBS’s current and prospective economic relationships.
Synopsys then brought this action, seeking a declaratory judgment that its conduct does not so infringe, misappropriate or interfere. Synopsys also sued RBS for copyright misuse. RBS moved to dismiss Synopsys’s claim for copyright misuse and moved for judgment on the pleadings as to Synopsys’s other claims.
At the hearing, the court granted the motion to dismiss because copyright misuse constitutes an affirmative defense, but not an affirmative claim. Because a justiciable controversy existed and RBS had waived its ability to enforce a forum-selection clause, however, the court denied RBS’s motion for judgment on the pleadings. The court further explains these holdings below.
Since the November 18 hearing, RBS has filed with the court a covenant not to sue and a letter to Synopsys withdrawing its cease and desist letter. The parties dispute whether these documents render the case or controversy moot and, thus, require dismissal of Synopsys’s remaining claims.
Under the Declaratory Judgment Act, a federal court “may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought” where “a case of actual controversy within its jurisdiction” exists. Given the parties’ history, RBS’s explicit threat to sue in the cease and desist letter generated “an objectively ‘real and reasonable apprehension of litigation.’”
The fact that Synopsys had not yet identified the specific disclosures it intended to make did not strip the court of subject-matter jurisdiction. Nor does RBS’s argument that it has not registered any copyrights in the subject intellectual property require dismissal of this case for lack of subject-matter jurisdiction.
RBS also says that a forum-selection clause in the agreement requires dismissal of this case. During the approximately six-month period between when Synopsys filed this action and the date RBS moved for judgment on the pleadings on these grounds, however, RBS moved to dismiss the complaint, filed an answer, moved to stay the action, appeared at a hearing, participated in a settlement conference and engaged in discovery. RBS’s zealous defense in this action weighs against the application of the forum-selection clause. Under these same facts, the court finds that enforcement of the clause would prejudice Synopsys.
Despite the prevalence of copyright misuse as an affirmative defense and counterclaim, the Fourth Circuit has yet not recognized copyright misuse as an affirmative claim. The court may permit a novel claim to move forward even if it does “not fall within the four comers of our prior case law,” but it sees no reason to do so here where RBS denies having a copyright. The court thus dismisses Count Three.
RBS created a question as to the continued justiciability of this action when it issued the covenant and the withdrawal letter. The Supreme Court has outlined a stringent burden-shifting framework that applies when a party issues a covenant not to sue in the midst of the litigation. Here, RBS has failed to meet its “formidable” burden of showing that the injury Synopsys seeks to remedy and prevent “could not reasonably be expected” to recur.
While Synopsys filed suit because of a dispute over certain anticipated business conduct challenged by RBS, by filing this suit, Synopsys intended to include other future business actions it may take with regard to BDSA and, accordingly, any financial and reputational harm that may result from efforts to impede such actions. Because the relief Synopsys seeks in this suit includes future business activities in addition to the challenged conduct, and the covenant does not protect Synopsys in performing those activities, RBS has not met its burden.
RBS’s motion to dismiss Count Three granted. RBS’s motion for judgment on the pleadings denied.
Synopsys Inc. v. Risk Based Security Inc., Case No. 3:21-cv-252, Jan. 11, 2022. EDVA at Richmond (Gibney). VLW 022-3-011. 16 pp.