Dassault Systemes SolidWorks Corporation v. Blissera Corp., et al.

Filing 30

ORDER by Judge Charles R. Breyer denying 24 Motion for Default Judgment; granting 28 Motion to Set Aside Default. (crblc2, COURT STAFF) (Filed on 2/5/2024)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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DASSAULT SYSTÈMES
SOLIDWORKS CORPORATION,

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Plaintiff,

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v.

United States District Court
Northern District of California

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BLISSERA CORPORATION & SUREN
ALEXANIAN,

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Case No. 23-cv-03190-CRB
ORDER DENYING MOTION FOR
DEFAULT JUDGMENT AND
GRANTING MOTION TO SET
ASIDE DEFAULT

Defendant.

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Plaintiff Dassault Systèmes Solidworks Corporation (“Plaintiff”) sued Defendants

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Blissera Corporation (“Blissera”), a developer that engineers and sells personal vacuum

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elevators1, and Suren Alexanian (“Alexanian”), Blissera’s CEO, (collectively

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“Defendants”) alleging copyright infringement arising from Alexanian’s and Blissera

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employees’ use of Plaintiff’s software without purchasing the appropriate license.

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Defendants failed to appear in this case, so—following the Clerk’s entry of default on

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September 29, 2023—Plaintiff moved for default judgment. See Mot. (dkt. 24). However,

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three days before the hearing on that default judgment motion, Defendants filed a response

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and moved to set aside default. See Opp. (dkt. 27); Mot. to Set Aside Default (dkt. 28).

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The Court finds that these motions are suitable for resolution without oral argument

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or further briefing, pursuant to Civil Local Rule 7-1(b). For the reasons described below,

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the Court DENIES Plaintiff’s motion for default judgment and GRANTS Defendants’

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Personal vacuum elevators are elevators that use vacuum compressor technology instead
of cables. See Blissera, Technology, Blissera.com (Jan. 25, 2024),
https://www.blissera.com/technology.

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motion to set aside the default.

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I.

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A.

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After entry of default, well-pleaded factual allegations in the complaint are taken as

Factual Background

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true, except as to the amount of damages. Fair Hous. Of Marin v. Combs, 285 F.3d 899,

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906 (9th Cir. 2002). The complaint alleges as follows.

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United States District Court
Northern District of California

BACKGROUND

Plaintiff Dassault Systèmes Solidworks Corporation is the creator, author, and

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owner of SolidWorks, a computer-aided design and computer-aided engineering software

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package typically used by engineers, product developers, and manufacturers for 3D

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modeling. See Mot. at 1. Without purchasing a license, Blissera employees and Alexanian

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downloaded and installed SolidWorks software and thereby accepted the terms of the

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SolidWorks license agreement that only gives the user the right to install SolidWorks

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software once they have a paid license. See Compl. (dkt. 1) ¶¶ 59–60. To download the

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software, Blissera employees and Alexanian ran an illegal program called SolidSquad

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crack to bypass SolidWorks’ anti-piracy measures. See id. ¶ 68.

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Plaintiff implements monitoring technology to detect the use of unlicensed copies

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of SolidWorks software and transmit data about those uses back to Plaintiff. See Compl. ¶

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14. Plaintiff’s monitoring technology detected at least 441 unlicensed uses of the

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SolidWorks software on three computers belonging to Blissera from July 21, 2019, to

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September 2, 2023. Compl. ¶ 4, 8. The Plaintiffs allege that they know Alexanian used

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the unlicensed software because all three of the computers had an account registered to

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SolidWorks software with the email address “[e-mail].” See Compl. ¶ 25, 39,

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47. Defendants also utilized add-ons to the SolidWorks software without purchasing them,

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including Inspection Professional, Simulation Premium, and CAM and MBD Standard

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add-ons. Compl. Ex. 3 at 2; Mot. Ex. 1 (Taggert Decl.) ¶¶ 11–14.

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Once Plaintiff detected the unlicensed uses of its software, it sent a letter to

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Alexanian instructing that he and Blissera cease and desist from using the unlicensed

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technology. See Compl. ¶ 72. After some limited communication between Plaintiff’s
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counsel and Alexanian on behalf of himself and Blissera, Alexanian stopped responding.

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See id. ¶ 73. A compliance mediator from Plaintiff subsequently communicated with

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Defendants between November 10, 2022, and November 16, 2022, to try to resolve the

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dispute, but Defendants stopped responding to those communications too. Id. ¶ 74; id. Ex.

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6. Plaintiff has detected the unlicensed use of its software on Blissera computers as

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recently as September 2, 2023. See Mot. at 5.

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B.

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Plaintiff filed this suit on June 27, 2023. See Compl. Defendants were served soon

United States District Court
Northern District of California

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Procedural Background

thereafter: Blissera was served on July 5, 2023, and Alexanian was served on July 20,

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2023. See Blissera Certificate of Service (dkt. 9); Alexanian Certificate of Service (dkt.

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14). Neither Blissera nor Alexanian responded to the complaint within the time required

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by Federal Rule of Civil Procedure 12. The clerk entered default on September 29, 2023,

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and a copy was sent to Defendants at 101 Jefferson Dr., Menlo Park CA 94025-1114. See

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Clerk’s Notice of Entry of Default (dkt. 22). Subsequently, Plaintiffs sent Defendant the

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notice of motion for default judgment and the motion in support of default judgment both

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to 101 Jefferson Dr., Menlo Park CA 94025-1114 and to Reid Dammann, counsel for

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Defendants, by email. See Notice of Mot. (dkt. 24) at 2. Plaintiff then filed this motion

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for default judgment. At the time of filing, Defendants still had not appeared in this action.

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However, three days before the hearing on the motion for default judgment, Defendants

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filed an opposition and a motion to set aside the entry of default.

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II.

MOTION FOR DEFAULT JUDGMENT

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A.

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“[E]ntry of a default judgment is within the discretion of the court.” Lau Ah Yew v.

Legal Standard

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Dulles, 236 F.2d 415, 416 (9th Cir. 1956). In determining whether to enter default

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judgment, the Court must first assess whether service of process on the party against whom

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default is requested was proper and whether the Court properly has jurisdiction.

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Folkmanis, Inc. v. Uptown Toys LLC, No. 18-cv-00955-EMC, 2018 WL 4361140, *1–*2

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(N.D. Cal. Sept. 13, 2018); In re Tuli, 172 F.3d 707, 712 (9th Cir. 1999). Then, the Court
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examines the Eitel factors:

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(1) the possibility of prejudice to the plaintiff, (2) the merits of
the plaintiff’s substantive claim, (3) the sufficiency of the
complaint, (4) the sum of money at stake in the action, (5) the
possibility of a dispute concerning material facts, (6) whether
the default was due to excusable neglect, and (7) the strong
policy underlying the Federal Rules of Civil Procedure favoring
decisions on the merits.

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Northern District of California

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Eitel v. McCool, 782 F.2d 1470, 1471–72 (9th Cir. 1986).
B.

Discussion
1.

Service of Process

“In deciding whether to grant or deny default judgment, the Court must first assess

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the adequacy of the service of process on the party against whom default is requested

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because, if service were improper, that may well explain the failure of a defendant to

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appear in a lawsuit.” Folkmanis, Inc., 2018 WL 4361140, at *1–*2 (internal quotation

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marks and citation omitted). Pursuant to Rule 4(e) of the Federal Rules of Civil Procedure,

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an individual defendant may be served by “delivering a copy of the summons and

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complaint to the individual personally” or by “following state law for serving a summons

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in an action brought in courts of general jurisdiction in the state where the district court is

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located.” Fed. R. Civ. P. 4(e)(2)(A); Fed. R. Civ. P. (e)(1). A corporation must be served

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“in the manner prescribed by Rule 4(e)(1). Fed. R. Civ. P. (h)(1)(A).

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Substitute service is permitted in California where “a copy of the summons and of

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the complaint cannot with reasonable diligence be personally delivered to the person to be

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served . . . a summons may be served by leaving a copy of the summons and of the

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complaint at such person’s usual place of business in the presence of . . . a person

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apparently in charge of his or her office, place of business, or usual mailing address other

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than a United States Postal Service post office box, at least 18 years of age, who shall be

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informed of the contents thereof, and by thereafter mailing a copy of the summons and of

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the complaint by first-class mail, postage prepaid to the person to be served at the place

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where a copy of the summons and complaint were left.” California Code of Civil

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Procedure § 415.20(b).
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subsequently served by substituted service on July 24, 2023, both at their usual place of

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business at 101 Jefferson Dr., Menlo Park CA 94025-1114. See Blissera Certificate of

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Service; see Alexanian Certificate of Service. Therefore, under Rule 4(h) and (e), service

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was adequate for Blissera Corporation. Additionally, under Rule 4(e) and California Code

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of Civil Procedure section 415.20(b), service was adequate for Alexanian.

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Northern District of California

Blissera was served with the complaint on July 10, 2023, and Alexanian was

2.

Jurisdiction

Where, as here, a plaintiff seeks entry of default judgment against a party who has
failed to plead or otherwise defend, “a district court has an affirmative duty to look into its

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jurisdiction over both the subject matter and the parties.” In re Tuli, 172 F.3d at 712.

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Under 28 U.S.C § 1331, federal courts have subject matter jurisdiction over cases “arising

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under . . . [the] laws . . . of the United States.” Additionally, under 28 U.S.C. §1338(a),

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federal courts have subject matter jurisdiction over cases “arising under any Act of

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Congress relating to . . . copyrights.” Two of Plaintiff’s claims have been brought under

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federal statutes that provide protections for copyrights. The first is for Federal Copyright

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Infringement which prevents the “viola[tion] . . . of the exclusive rights of a copyright

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owner.” 17 U.S.C. § 501(a). The second is for the Circumvention of Technological

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Measures, which states that “[n]o person shall circumvent a technological measure that

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effectively controls access to . . . a copyrighted work.” 17 U.S.C. §1201(a)–(b). Courts

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may also exercise supplemental jurisdiction “over . . . claims that are so related to claims . .

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. within [the court’s] original jurisdiction that they form part of the same case or

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controversy.” 28 U.S.C. §1367(a). Here, the breach of contract claims arise from the

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same facts as the Copyright Infringement and Circumvention of Technological Measure

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claims. Therefore, the Court may properly exercise subject matter jurisdiction.

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The Court may exercise personal jurisdiction over the Defendants because

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Blissera’s principal place of business is in Menlo Park, CA and Alexanian resides in

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Sunnyvale, CA. See Compl. ¶¶ 7–8.

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3.

Eitel Factors

Applying the Eitel factors, the Court addresses the possibility of prejudice from
entering a default judgment, the merits of Plaintiff’s claims and sufficiency of the
complaint, the money at stake, the possibility of a dispute of material facts, whether the
entry of default was due to excusable neglect, and whether the public policy preference for
a decision on the merits precludes entry of default judgment.
a.

Possibility of Prejudice

The first Eitel factor asks whether there would be prejudice to plaintiff from not
entering judgment. 782 F.2d at 1471. Here, because Defendants have moved to set aside
default and indicated their intention to litigate the matter, Plaintiff will suffer no prejudice
by litigating the case. See Mot. to Set Aside Default; Sorensen v. AmPro Tools Corp., No.
08-00096 CW, 2009 WL 35239, *1–*2 (N.D. Cal. Jan. 6, 2009) (holding that where a
plaintiff had entered default and a defendant subsequently motioned to set aside default,
the plaintiff would suffer no prejudice by litigating the case). Therefore, the first Eitel
factor weighs against entering default judgment.
b.

Merits of Claims & Sufficiency of the Complaint

The second and third Eitel factors address whether the Plaintiff’s claims are
adequately pleaded and sufficient to find liability on the facts alleged. 782 F.2d at 1471.
However, the “defendant is not held to admit facts that are not well pleaded or to admit
conclusions of law.” DirectTV, Inc. v. Hoa Huynh, 503 F.3d 847, 854 (9th Cir. 2007).
The Plaintiff brings claims for Copyright Infringement, Circumvention of Technological
Measures, and Breach of Contract. The Court addresses each claim in turn, assessing
whether they satisfy the second and third Eitel factors.
i.

Federal Copyright Infringement (17 U.S.C. § 106)

Under 17 U.S.C. § 106, copyright infringement is established where the plaintiff
proves “(1) ownership of a valid copyright and (2) copying of constituent elements of the
work that are original.” Feist Publications v. Rural Telephone Service Co., 499 U.S. 340,
361 (1991). The Plaintiff alleges copyright infringement under two theories: (1) direct
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United States District Court
Northern District of California

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infringement by Alexanian and (2) vicarious infringement by Blissera via Alexanian and

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other Blissera employees. See Mot. at 11–12. The Court will address each theory in turn.

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To establish direct infringement, a plaintiff must (1) show “ownership of the

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allegedly infringed material” and (2) “demonstrate that the alleged infringers violated at

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least one exclusive right granted to copyright holders under 17 U.S.C. § 106.” A&M

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Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1013 (9th Cir. 2001). Additionally, direct

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infringement requires the plaintiff to show volitional conduct. Perfect 10, Inc. v.

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Giganews, Inc., 847 F.3d 657, 666 (9th Cir. 2017). Volitional conduct, in the copyright

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context, means that “direct liability must be premised on conduct that can reasonably be

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described as the direct cause of the infringement.” Id. (quoting Perfect 10, 2014 WL

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8628034, *1, *7 (C.D. Cal. Nov. 14, 2014)).

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Here, Plaintiff is the owner of all rights and title to the copyrights for SolidWorks.

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See Compl. ¶¶ 11–13. Plaintiff has alleged that Alexanian violated Plaintiff’s exclusive

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right to reproduce SolidWorks software in copies without authorization. Id. at ¶¶ 79–80;

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see 17 U.S.C. § 106(1). An unauthorized copy is created each time the Defendant executes

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the SolidWorks software onto a Blissera computer which copies and stores SolidWorks

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code. Id. at ¶¶ 53, 81; see 17 U.S.C. § 106(1).

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As for the volition element, Plaintiff alleges that Alexanian downloaded the

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SolidWorks software from the internet, installed it, and ran it which created a copy on their

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computer’s storage system. See Compl. ¶¶ 79–81. Plaintiff also alleges that Alexanian ran

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SolidSquad to access the software without a license key. See id. at ¶ 93. This constitutes

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direct actions by Alexanian that cause the infringement. Thus, the elements of direct

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infringement are met and the second and third Eitel factors are satisfied as to this claim.

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“To prevail on a claim for vicarious infringement, a plaintiff must prove ‘the

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defendant has (1) the right and ability to supervise the infringing conduct and (2) a direct

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financial interest in the infringing activity.’” Perfect 10, 847 F.3d at 672. “[A] defendant

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exercises control over a direct infringer when he has both a legal right to stop or limit the

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directly infringing conduct, as well as the practical ability to do so.” Perfect 10, Inc. v.
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Amazon.com, Inc., 508 F.3d 1146, 1173 (9th Cir. 2007). A “financial benefit exists where

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the availability of the infringing material acts as a draw for customers.” Perfect 10, 847

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F.3d at 673. “The essential aspect of the ‘direct financial benefit’ inquiry is whether there

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is a causal relationship between the infringing activity and any financial benefit a

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defendant reaps, regardless of how substantial the benefit is in proportion to a defendant’s

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overall profits.” Id.

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Northern District of California

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Plaintiff sufficiently alleges that Blissera had the right and ability to supervise the

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infringing conduct. Specifically, Plaintiff states that the infringing activity was conducted

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by Alexanian and other Blissera employees on computers owned by or under the control of

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Blissera. Compl. ¶¶ 34, 41, 49. Therefore, based on this ownership, Plaintiff adequately

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pleads that Blissera had the legal right and practical ability to stop the infringing conduct

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and is likely to succeed on the merits of its direct infringement claim.

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However, while Plaintiff does make a conclusory allegation that Blissera “received

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a direct financial benefit from the copyright infringement,” Plaintiff does not explain how.

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Compl. ¶ 84. The Court has noted that to prove the direct financial benefit prong, the

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Plaintiff must show “more than evidence that customers were ‘drawn’ to [a company] to

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obtain access to infringing material in general.” Perfect 10, 847 F.3d at 673. Here, the

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Plaintiff has not alleged even the proposition that customers were drawn to Blissera as a

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result of the copyright infringement. Thus, the element here is not met, vicarious liability

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is not sufficiently pleaded on the face of the complaint, and Plaintiff is unlikely to succeed

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on this claim.

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ii.

Circumvention of Technological Measures (17 U.S.C.
§ 1201)

“Section 1201(a)(1) of the [Digital Millennium Copyright Act (“DMCA”)]
prohibits circumvention of ‘a technological measure that effectively controls access to’ a
copyrighted work.” Synopsys v. InnoGrit, Corp., Case No. 19-CV-02082-LHK, 2019 WL
4848387, *1, *7 (N.D. Cal. Oct. 1, 2019).
“The DMCA defines a ‘technological measure that effectively controls access to a
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work’ as a measure that, ‘in the ordinary course of its operation, requires the application of

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information, or a process or a treatment, with the authority of the copyright owner, to gain

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access to the work.’” 17 U.S.C. §1201(a)(3)(B); Synopsys, 2019 WL 4848387 at *7.

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“The DMCA dictates that ‘to “circumvent a technological measure” means to descramble a

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scrambled work, to decrypt an encrypted work, or to otherwise avoid, bypass, remove,

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deactivate, or impair a technological measure, without the authority of the copyright

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owner.’” 17 U.S.C. § 1201(a)(3)(A).

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Plaintiff alleges that Alexanian and Blissera employees utilized a SolidSquad crack

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to access the SolidWorks software without a license key. Compl. ¶ 30. SolidSquad crack

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is a computer software program used to defeat license key systems which protect and

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control access to licensed software. Compl. ¶ 67. License key systems, like the one

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Plaintiff describes in its complaint, are “technological measures” for the purposes of the

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DMCA. Synopsys, 2019 WL 4848387 at *7. By using SolidSquad crack to gain access to

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Plaintiff’s software, Defendants circumvented Plaintiff’s license key and gained access to

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the SolidWorks software.2 Thus, the elements of Plaintiff’s circumvention of

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technological measures claim are adequately pleaded and the claim is likely to succeed on

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the merits.

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iii.

Breach of Contract

Plaintiff alleges breach of contract against both Defendants. The license agreement

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is governed by Massachusetts law. Compl. ¶ 117. “In order to prevail on a breach of

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contract claim in Massachusetts, a plaintiff must show ‘the existence of a valid and binding

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contract, that the defendant breached the contract’s terms, and the plaintiff suffered

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damages as a result of the breach.’” Thakkar v. United States, 389 F. Supp. 3d 160, 177

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(D. Mass 2019) (quoting Scholz v. Goudreau, 901 F.3d 37, 43 (1st Cir. 2018)). “Under

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Massachusetts law, the formation of a contract requires a definite offer, acceptance, and

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consideration.” Berkele v. Lyft, 199 F. Supp. 3d 284, 294 (D. Mass. 2016). “Formation of

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In fact, Plaintiff alleges that Defendants ran the SolidSquad crack at least 441 times to do
so. Compl. ¶ 67; Ex. 1.
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a contract is judged by the objective conduct of the parties, rather than their subjective

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intent.” Id.

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During the installation process of Solidworks, the user is provided with a link to the

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license agreement. Compl. ¶ 59. The license agreement states that “installing and using

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[SolidWorks] . . . will signify your agreement to be bound by these terms and conditions.”

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Compl. ¶ 59. Therefore, by downloading the software, Plaintiff alleges that Alexanian and

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other Blissera employees necessarily agreed to the terms and conditions of the SolidWorks

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software. The Plaintiff alleges that the agreement is also supported by consideration in the

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form of the “right to access and/or download [Solidworks] and to use it in accordance with

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the terms and conditions set out in the agreement.” Mot. at 10. Thus, the license qualifies

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as a valid and binding contract.

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The agreement states that a user “may not load or use [SolidWorks] in any

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computer or copy it without a right to do so.” Compl., Ex. 3 at 2. It only gives the user

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permission to “install and use one (1) copy of [SolidWorks] on any single computer” once

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they “have paid the license fee for a single-user license of [SolidWorks].” Compl., Ex. 3 at

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3–4. Plaintiff sufficiently alleges that neither Alexanian nor any of their employees at

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Blissera paid for the copies of SolidWorks that were installed and thus, breached this term

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of the license agreement. Compl. ¶ 64. The license agreement also states that Plaintiff

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“reserves the right to use a hardware lock device, license administration software, and/or a

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license authorization key to control access to [SolidWorks.]” Compl., Ex. 3 at 24.

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Additionally, it specifies that the user “may not take steps to avoid or defeat the purpose of

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any such measures” and that the “use of any offering without any required lock device or

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authorization key provided by [Plaintiff] is prohibited.” Id. Plaintiff sufficiently alleges

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that Blissera and Alexanian breached this term by running SolidSquad crack to circumvent

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the license key measures it implemented. Compl. ¶¶ 67–70, 112–116.

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Finally, Plaintiff alleges that they incurred damages as a result of the breach, in the

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form of unpaid license fees. They allege actual damages attributable to this breach in the

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amount of $79,374. See Mot. at 19–20. Thus, Plaintiff sufficiently pleads a claim for
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Therefore, Plaintiff has sufficiently pleaded and established likelihood of success

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for its direct copyright infringement, circumvention of technological measures, and breach

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of contract claims, but has not for its copyright infringement claim for vicarious

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infringement. Because almost all of Plaintiff’s claims are sufficiently pleaded and likely to

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succeed, the second and third Eitel factors weigh in favor of default judgment.

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breach of contract and meets both the second and third Eitel factors.

c.

Money at Stake

As for the fourth factor, the sum of money at stake, “the Court must consider the
amount of money at stake in relation to the seriousness of Defendant’s conduct.” Dr. JKL

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Ltd. v. HPC IT Educ. Ctr., 749 F. Supp. 2d 1038, 1050 (N.D. Cal. 2010) (citation and

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quotation marks omitted). When the amount at stake is substantial or unreasonable in

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light of the allegations in the complaint, default judgment is disfavored. See Eitel, 782

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F.2d at 1472 (affirming the denial of default judgment where the plaintiff sought $3 million

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in damages and the parties disputed material facts in the pleadings).

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Plaintiff requests damages in the total of $1,590,603.40. For its breach of contract

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claim, Plaintiff requests $79,374 in actual damages, which totals Defendants’ unpaid license

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subscriptions, including the software license for each of Defendants’ three computers and all

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applicable add-ons. Mot. at 16–17. In addition, Plaintiff requests $396,870 in statutory

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damages for their copyright infringement claim, see 17 U.S.C. §504(c)(1), $1,102,500 in

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statutory damages for Defendants’ 441 violations of the DMCA, see 17 U.S.C.

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§1203(c)(3)(A), and $11,859.40 in attorney’s fees and costs. See Mot. at 25.

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Although Plaintiff has alleged serious claims that, if true, have caused Plaintiff harm,

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the amount of money at stake is nevertheless substantial. This sum is especially

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considerable in light of the Defendant’s purported lack of financial resources to defend this

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suit. See Mot. at 2; Alexanian Decl. ¶¶ 34–37, 39, 40. This factor weighs against default

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judgment because in general, default judgment is disfavored where there is a large sum of

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money involved. Eitel, 782 F.2d at 1472.

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4.

Remaining Eitel Factors

The remaining Eitel factors similarly weigh against default judgment. The fifth
factor asks whether there is a possibility of dispute about material facts. “[W]hen the Clerk
has entered default, all well-pleaded factual allegations set forth in the complaint [are]
taken as true.” Atain Specialty Ins. Co. v. North Bay Waterproofing, Inc., No. 14-cv04056, 2015 WL 428161 *1, * 4 (N.D. Cal. January 30, 2015). However, “this assumption
of truth does not apply as forcefully” where the defaulted defendant “makes an appearance
and disputes the material facts in the pleadings. S.E.C. v. Harrison, No. 8:21-cv-01610SPG-DFM, 2022 WL 17327325, *1, *9 (C.D. Cal. Oct. 4, 2022) (finding that a defendant
with default judgment entered against them and who had failed to file a motion to set aside
entry of default still satisfied this Eitel factor in her favor because she opposed the entry of
default and disputed factual allegations in the plaintiff’s complaint). Here, the defaulted
Defendants have opposed the motion for default judgment and disputed factual allegations
in the complaint. See Opp. This actual dispute of material facts between the parties
weighs against entry of default judgment.
The sixth Eitel factor examines whether the defendant’s failure to respond to the
complaint was the result of excusable neglect. Eitel, 782 F.2d at 1471–72. The Court has
held that “a signed return of service constitutes prima facie evidence of valid service which
can be overcome only by strong and convincing evidence. S.E.C. v. Internet Solutions for
Business Inc., 509 F.3d 1161, 1163 (9th Cir. 2007). Here, Plaintiff provided signed returns
of service, however, Defendants subsequently filed an opposition to Plaintiff’s motion for
default judgment and a motion to set aside default. See Opp.; Mot. to Set Aside Default.
In their filings, defendants dispute that they properly received service. Opp. at 10–11. The
other explanations they offer for failing to respond to the complaint are that (1) they were
in settlement negotiations with Plaintiff and therefore, did not expect that Plaintiff would
pursue default against them and (2) Defendant did not have the funds to litigate this case
until late January 2024. See Opp., Alexanian Decl. ¶¶ 36–37, 39, 41. While Defendants
did not defend this action initially, Defendants did seek counsel once aware of the suit and
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were actively engaging in settlement negotiations. See Alexanian Decl. ¶ 39. They have

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now appeared in the action and indicated their intent to defend against it. Therefore,

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because there is some evidence of excusable neglect—that is, Defendants became aware of

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the suit late and then thought the suit was on hold while they engaged in settlement

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negotiations—this factor weighs slightly against entry of default judgment.

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The last Eitel factor examines whether the policy of deciding a case based on the

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merits precludes entry of default judgment. Eitel, 782 F.2d at 1472. Courts have found

8

that “any doubts as to the propriety of a default are usually resolved against the party

9

seeking a default judgment.” Harrison, 2022 WL 17327325 at *9 (citations omitted).

10

Here, because Defendant has opposed this Motion and indicated their intent to litigate

11

these claims, this factor weighs against entry of default judgment. Alexanian Decl. ¶ 41.

12

Because the majority of the Eitel factors weigh against entry of default judgment,

13

and because “[c]ases should be decided upon their merits whenever reasonably possible,”

14

782 F.2d at 1472, the Court DENIES entry of default judgment.

15

III.

16
17

MOTION TO SET ASIDE DEFAULT
Given that the Court denied the motion for default judgment, the Court now

analyzes Defendants’ motion to set aside the clerk’s entry of default.

18

A.

19

Federal Rule of Civil Procedure 55(c) provides that an entry of default may be set

Legal Standard

20

aside “[f]or good cause shown.” See Hawaii Carpenters’ Tr. Fund v. Stone, 794 F.2d 508,

21

513 (9th Cir. 1986). The good cause analysis considers three factors: (1) whether the

22

defendant’s culpable conduct led to the default; (2) whether the defendant has a

23

meritorious defense; and (3) whether reopening the default judgment would prejudice the

24

plaintiff. See TCI Grp. Life Ins. Plan v. Knoebber, 244 F.3d 691, 696 (9th Cir. 2001).

25

Default judgments are generally disfavored, the Court must apply Rule 55 liberally,

26

and any doubts must be resolved in favor of the motion to set aside entry of default. See

27

Meadows v. Dominican Republic, 817 F.2d 517, 521 (9th Cir. 1987). Furthermore, the

28

court’s discretion is “especially broad” where a party seeks to set aside entry of default
13

1

rather than a default judgment. See O’Connor v. Nevada, 27 F.3d 357, 364 (9th Cir.

2

1994).

3

United States District Court
Northern District of California

4

B.

Discussion
1.

Defendants’ Culpability

5

The first factor requires the Court to consider whether Defendant’s culpable

6

conduct led to their default. “[A] defendant’s conduct is culpable if he has received actual

7

or constructive notice of the filing of the action and intentionally failed to answer.”

8

Knoebber, 244 F.3d at 691. However, a failure to answer is not intentional unless done so

9

willfully, deliberately, or in bad faith.” Id. at 697. Where the defendant’s failure to

10

answer is neglectful but they offer a “credible, good faith explanation negating any

11

intention to take advantage of the opposing party, interfere with decisionmaking, or

12

otherwise manipulate the legal process,” courts have found that the conduct is not

13

intentional. Id. at 697–98.

14

Here, the Defendants allege that they became aware of the lawsuit on August 16,

15

2023, when Plaintiff’s counsel emailed Alexanian a copy of the complaint and notice that

16

Plaintiff was in default. Alexanian Decl. ¶ 16, Ex. 17. Soon after, Alexanian retained

17

counsel to represent Defendants for the limited purpose of negotiating a settlement

18

agreement. Alexanian Decl. ¶ 34; Dammann Decl. (dkt. 28) ¶ 3. Defendants claim that

19

this representation was so limited because Defendants could not afford a full defense of the

20

litigation at the time. Id.

21

Between August 16, 2023, and December 2023, Plaintiffs and Defendants engaged

22

in settlement negotiations. Defendants claim that because they were in negotiations with

23

Plaintiff, they believed that Plaintiff would refrain from moving for default or pursuing a

24

motion for default judgment. Alexanian Decl. ¶ 39. This may seem odd given that

25

default had already been entered on September 29, 2023. See Clerk’s Entry of Default.

26

However, according to Defendants, they did not receive a notice of Plaintiff’s motion for

27

entry of default or the clerk’s notice for entry of default until Defendants’ counsel emailed

28

them a copy on December 1, 2023. Opp. at 7; Alexanian Decl. ¶ 39.
14

1
2

latest, they offer a plausible explanation as to why they did not file a response. Namely,

3

that they were engaged in settlement negotiations for many months and were unaware that

4

Plaintiff was continuing forward with the suit while those negotiations took place.

5

Alexanian Decl. ¶ 39.

6

United States District Court
Northern District of California

While Defendants were undeniably aware of the suit by August 16, 2023, at the

Thus, Defendants’ failure to file an answer does not seem to be devious, deliberate,

7

willful, or in bad faith. There is no evidence that Defendants intended to take advantage of

8

Plaintiff or manipulate the legal process. Rather, it seems that Defendants were actively

9

engaged in trying to proactively settle the suit. Courts have found that where a defendant’s

10

conduct is not culpable, their failure to respond to a lawsuit is excusable and it is therefore

11

in the interests of substantial justice to vacate the default and decide the case on the merits.

12

Knoebber, 244 F.3d at 697. Because Defendants have offered a credible explanation that

13

negates any inference of bad faith, the Court finds that Defendants were not culpable here

14

and this factor thus weighs in favor of setting aside the default.

15
16

2.

Meritorious Defense

To satisfy the second prong of the good faith test, the Defendants must show that

17

they have a meritorious defense to Plaintiff’s claims, “which is not a heavy burden.” Davy

18

v. Paragon Coin, Inc., No. 18-cv-00671-JSW, 2021 WL 2940200, *1, *3 (N.D. Cal. Mar.

19

26, 2021). “All that is necessary to satisfy the meritorious defense requirement is to allege

20

sufficient facts that, if true, would constitute a defense.” Id. (quoting Knoebber, 244 F.3d

21

at 700) (internal citations omitted). However, if the defendant presents no meritorious

22

defense, “then nothing but pointless delay can result” from setting aside the default

23

Knoebber, 244 F.3d at 697. The inquiry at this stage is not whether the factual allegations

24

are true but rather whether the factual allegations would be the subject of the later

25

litigation. Id.

26

In their opposition, Defendants claim that they did not use unlicensed copies of

27

SolidWorks. Opp. at 13. Defendants make the same assertions in emails between

28

Solidworks and themselves in the events leading up to the filing of this suit. Alexanian
15

1

Decl. Exs. 5, 7, 9, 11, 13. Alexanian further alleges that he had received free licenses

2

through a SolidWorks startup program and that the monitoring technology that Plaintiff

3

uses to flag unlicensed uses of SolidWorks software mistakenly identified his uses of the

4

software as unlicensed. Alexanian Decl. Ex. 16. If Defendants’ story is true, it constitutes

5

a meritorious defense to Plaintiff’s copyright infringement, circumvention of technological

6

measures, and breach of contract claims. Thus, while it is not appropriate to decide

7

whether these assertions are true, the Court finds the facts set forth in Defendant’s

8

declaration and its briefing sufficient to establish that Defendant has a meritorious defense.

9

Therefore, this factor weighs in favor of setting aside the default.

United States District Court
Northern District of California

10

3.

Prejudice to Plaintiff

11

The third factor of the good faith inquiry addresses whether setting aside the default

12

would prejudice the plaintiff. To be prejudicial, the setting aside of the default must result

13

in greater harm than simply delaying resolution of the case. Knoebber, 244 F.3d at 701.

14

“[T]he standard is whether [plaintiff’s] ability to pursue his claim will be hindered.” See

15

Falk v. Allen, 739 F.2d 461, 463 (9th Cir. 1984). Here, other than forcing Plaintiff to

16

litigate its claims on the merits—which “cannot be considered prejudicial” for purposes of

17

lifting entry of default—there is no evidence that granting this motion would hinder

18

Plaintiff’s ability to pursue its claims. See Knoebber, 244 F.3d at 701. For example, there

19

is no evidence that the delay in litigation has resulted, or will result, in a loss of evidence,

20

increased discovery difficulties, or greater opportunity for fraud or collusion. See Bey v.

21

Malec, et al., No. 18-cv-02626-SI, 2018 WL 3145628, *1, *2 (N.D. Cal. June 27, 2018)

22

(citing Thompson v. American Home Assurance Co., 95 F.3d 429, 433–34 (6th Cir. 1996).

23

Because setting aside the default will not prejudice the plaintiff, this factor weighs in favor

24

of doing so.
Accordingly, because all factors weigh in favor of setting aside the default, the

25
26

Court concludes that entry of default should be set aside.

27

IV.

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CONCLUSION
For the foregoing reasons, the Court DENIES Plaintiff’s motion for default
16