Autodesk, Inc. v. ZWCAD Software Co., Ltd. et al

Filing 107

ORDER denying 48 Motion to Dismiss. Signed by Judge Edward J. Davila on 5/13/2015. (ejdlc3S, COURT STAFF) (Filed on 5/13/2015) Modified on 5/13/2015 (ejdlc1S, COURT STAFF).

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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AUTODESK, INC.,

Case No. 5:14-cv-01409-EJD

United States District Court
Northern District of California

Plaintiff,
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ORDER DENYING MOTION TO
DISMISS

v.
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Re: Dkt. No. 48

ZWCAD SOFTWARE CO., LTD., et al.,
Defendants.

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Plaintiff Autodesk, Inc. (“Autodesk” or the “Plaintiff”) brings this action for copyright

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infringement and trade secret misappropriation against Defendants Global Force Direct, LLC

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(“Global Force Direct”), ZWCAD Software Co., Ltd., ZWCAD Design Co., Ltd., and HK

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ZWCAD Software Ltd. (collectively, “ZWSoft” or the “Defendants”). Presently before the Court

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is Defendants’ Motion to Dismiss Plaintiff’s Complaint for failure to identify the specific

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copyrights or trade secrets Plaintiff alleges were copied. Docket Item No. 48. Plaintiff opposes

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the motion. Dkt. No. 61.

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The Court has subject matter jurisdiction over Autodesk’s copyright and trade secret

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misappropriation claims under 28 U.S.C. §§ 1331, 1338(a) and (b), and 1367(a). The Court has

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considered the briefing and the oral argument presented at the hearing on April 30, 2015. For the

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reasons discussed below, the Motion to Dismiss is DENIED.

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Case No.: 5:14-cv-01409-EJD
ORDER DENYING MOTION TO DISMISS

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I.

FACTUAL BACKGROUND

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Autodesk provides computer-aided design software which “create[s] digital models and

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workflows that allow visualization, simulation and analysis of designs before implementation.”

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Dkt. No. 62 at ¶ 1. AutoCAD is Autodesk’s “flagship product” and largest revenue-generating

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product. See id. at ¶¶ 12, 15. Over one hundred registered U.S. copyrights cover AutoCAD,

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including Registration Nos. TX0006576172, TX0006586280, and TX0006589381, which

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specifically cover AutoCAD 2008’s source code and other protectable elements. See Dkt. No. 1 at

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¶ 15; see also Dkt. No. 75 at 3.
Based in Guangzhou, China, ZWSoft released their first CAD products in 2002,

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approximately 20 years after AutoCAD was released. See Dkt. No. 1 at ¶¶ 10, 16. Until 2012,

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United States District Court
Northern District of California

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ZWSoft based its relevant products on the IntelliCAD software platform, licensing code from a

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third party. Id. at ¶ 18. In 2012, however, Autodesk alleges that ZWSoft announced a “new”

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direction with an internally designed codebase called “ZWCAD+.” Id. at ¶ 19.
Autodesk alleges that despite ZWSoft’s claim that its software was developed internally,

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ZWCAD+ shares not only the same interfaces and commands as AutoCAD, but also performs

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identically to prior versions of Autodesk’s software in unmistakable ways. Id. at ¶ 22.

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Specifically, Autodesk alleges that ZWSoft engaged in wholesale copying of “large portions of

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Autodesk source code” in order to create its software program ZWCAD+. See Dkt. No. 62 at ¶¶

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21-24.

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Autodesk further alleges that ZWSoft emphasized their copying in marketing materials as a

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way to entice customers to purchase their products. See Dkt. No. 1 at ¶¶ 17, 21. For example, in

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product brochures and press releases, ZWSoft touted their products as “offer[ing] a working

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environment almost identical to AutoCAD.” Id. at ¶ 17.

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Autodesk also alleges that ZWCAD+ products display identical idiosyncrasies and bugs

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that could have been introduced only through the wholesale copying of significant portions of

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misappropriated Autodesk code. Id. at ¶¶ 22, 23, 24. As one example, ZWCAD+ products

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display the same software bug as AutoCAD 2007 and 2008 when “coloring in” or “shading”

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Case No.: 5:14-cv-01409-EJD
ORDER DENYING MOTION TO DISMISS

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certain geometries. Id. at ¶ 24.
The screenshots below show an unusual error that occurs when a user selects a

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“pick point” (i.e., a specific point within the drawing) away from the clover and flower petals. Id.

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Instead of properly coloring in both the clover and the petals, both AutoCAD 2007 and

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ZWCAD+ 2012 color in only the petals – not the clover:

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United States District Court
Northern District of California

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Autodesk alleges that ZWCAD+ 2012 and 2014 also display an identical error to

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AutoCAD 2007 and 2008 when “trimming” certain shapes, i.e., deleting a portion of the shape that

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falls on one side of an “edge.” Id. As shown in the screenshots below, a user of AutoCAD 2007

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and 2008 was not able to trim away certain lines where two overlapping shapes had relatively

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close radiuses. ZWCAD+ 2012 and 2014 contain the same bug:

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Autodesk further alleges that ZWCAD+ “share[s] similar interfaces and commands,” and

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“performs identically to prior versions of AutoCAD” in “crucial and unmistakable ways.” Id. at ¶

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22. In sum, based on these similarities, Autodesk alleges that Defendants have committed

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copyright infringement and trade secret misappropriation. Id. at ¶ 31.

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Case No.: 5:14-cv-01409-EJD
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II.

PROCEDURAL BACKGROUND
In 2014, Autodesk filed suit against ZWSoft and its United States-based distributor GFD in

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the Northern District of California, San Francisco Division for copyright infringement and trade

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secret misappropriation. See Dkt. No. 1 at ¶¶ 4, 32-48. Autodesk later amended its complaint to

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add Hong Kong-based corporation HK ZWCAD Software Ltd. as a defendant. See Dkt. No. 62 at

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¶ 4.
Autodesk also initiated summary proceedings against ZWSoft before the Hague District

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Court in the Netherlands. See Dkt. No. 68-3 at ¶ 9. ZWSoft opposed discovery of its source code

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outside of China, and the parties ultimately agreed that ZWSoft could produce its source code in
China for the purposes of the Dutch action. See id. at ¶ 10. The Dutch court then ordered ZWSoft

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United States District Court
Northern District of California

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to produce its source code to a custodian in China. See Docket No. 68-7 at §§ 4.15, 4.16; Docket

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No. 68-8 at §§ 3.2, 3.3.
Meanwhile, in the Northern District of California, GFD answered the complaint, and the

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parties entered into a stipulated protective order. See Dkt. Nos. 22, 34. After ZWSoft appeared in

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the case, the case was reassigned to the San Jose division for all further proceedings. See Dkt.

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Nos. 40, 44. ZWSoft then moved to dismiss the case and also asked Autodesk to stipulate to

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follow Hague Convention procedures with regard to the data being sought from China or to amend

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the protective order to allow for examination of ZWSoft’s data in China. See Dkt. No. 52-1 at ¶¶

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6-9.

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On December 19, 2014, ZWSoft moved the Court to require Autodesk to conduct all

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discovery against ZWSoft solely pursuant to the Hague Convention rather than the Federal Rules

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to mitigate the risk that discovery of its data and documents outside of China may subject it to

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liability under Chinese state secret and privacy laws. Dkt. No. 52. The motion was then referred

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to Magistrate Judge Grewal. Dkt. No. 53. The court denied ZWSoft’s motion because it agreed

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with Autodesk that ZWSoft has not shown that a genuine risk of liability under Chinese law or

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other factors justify the additional protective measures it seeks. Dkt. No. 81. Further, because

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ZWSoft has not shown that good cause exists for the additional procedures outlined in its amended

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Case No.: 5:14-cv-01409-EJD
ORDER DENYING MOTION TO DISMISS

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protective order, the court also denied ZWSoft’s request that the court amend the protective order

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and require examination of its source code and related documents in China. See id.
On March 27, 2015, ZWSoft moved the Court to appoint an expert for the limited purpose

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of source code review and comparison, or in the alternative, motion for a protective order. Dkt.

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No. 82. That motion is set for hearing on May 5, 2015 before Magistrate Judge Grewal.

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III.

LEGAL STANDARD
On a Rule 12(b)(6) motion to dismiss for failure to state a claim, the complaint is construed

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in the light most favorable to the non-moving party, and all material allegations in the complaint

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are taken to be true. Sanders v. Kennedy, 794 F.2d 478, 481 (9th Cir. 1986); see Fed. R. Civ. P.
12(b)(6). This rule does not apply to legal conclusions - “[t]hreadbare recitals of the elements of a

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United States District Court
Northern District of California

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cause of action, supported by mere conclusory statements, do not suffice” to state a claim.

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Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). While a complaint does not need detailed factual

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allegations to survive a 12(b)(6) motion, plaintiffs must provide grounds demonstrating their

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entitlement to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, the plaintiff

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must allege sufficient factual allegations “to raise a right to relief above the speculative level.” Id.

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This threshold is reached when the complaint contains sufficient facts to allow the court to draw a

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reasonable inference that the defendant is liable for the alleged misconduct. Iqbal, 556 U.S. at

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678. Finally, even if a court should find that an operative complaint is lacking in specificity, leave

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to amend to cure any such deficiencies should be freely granted. Fed. R. Civ. P. 15(a); see also

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Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000).

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IV.

DISCUSSION

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A.

Whether Autodesk Adequately Pled A Claim For Copyright Infringement

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ZWSoft moves to dismiss Autodesk’s Complaint for failure to identify the specific

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copyrights or trade secrets Autodesk alleges were copied. Dkt. No. 48. Specifically, ZWSoft

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asserts that Autodesk has failed to specify which portions of its source code it alleges the

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Defendants copied. See Dkt. No. 75 at 7. Further, ZWSoft argues that Autodesk’s allegations

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appear to concern only surface similarities between the ZWSOFT and AutoCAD interfaces, yet

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Case No.: 5:14-cv-01409-EJD
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Autodesk does not allege that those visual aspects of AutoCAD are copyrighted, or protected as

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trade secrets. See id. The Court disagrees that these arguments require dismissal.
A plaintiff seeking to establish copyright infringement must prove “(1) ownership of a

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valid copyright, and (2) copying of constituent elements of the work that are original.”1 Thus, to

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state a claim, Plaintiff must set forth sufficient facts alleging that Plaintiff owned a valid copyright

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for AutoCAD, and that Defendants violated Plaintiff’s exclusive rights under the Copyright Act by

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copying original elements of the work.
For the first element, the Complaint states that Autodesk “owns well over a hundred

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registered U.S. copyrights relating to its AutoCAD products,” and gave three illustrative
registration numbers, which cover AutoCAD 2008’s source code and other protectable elements.

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United States District Court
Northern District of California

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See Dkt. No. 1. at ¶ 15. Here, Plaintiff has sufficiently alleged ownership of valid copyrights.2

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Autodesk further alleged that ZWSoft committed copyright infringement via its incorporation of

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“significant portions of Autodesk’s proprietary source code” from AutoCAD 2007 and 2008 into

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Defendants’ ZWCAD+ 2012 and 2014 products. See id. at ¶¶ 22, 24-30.
However, ZWSoft argues that it has no way of knowing which of “well over a hundred

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copyrights are at issue.” See Dkt. No. 48 at 8:10-11. ZWSoft further argues that “the titles,

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contents, and relationship of these three copyrights remain unspecified.” See id. at 8:8. Therefore,

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ZWSoft contends that “Autodesk’s infringement should be dismissed” because “Autodesk has

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failed to identify a single aspect of source code or a specifically infringed registered copyright.”

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See id. at 6:25-28.
Despite ZWSoft’s argument that Autodesk must identify specific copyright registrations at

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issue, the Court is unable to find any case requiring that a plaintiff produce that information or

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face dismissal under 12(b)(6).3 Moreover, Autodesk has specifically alleged that it “owns well

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over a hundred registered U.S. copyrights relating to its AutoCAD products,” including the three

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Feist Publications, Inc. v. Rural Telephone Service Co., Inc., 499 U.S. 340, 361 (1991).
U.S. Copyright Registration Nos. TX0006576172, TX0006586280, and TX0006589381
Imageline, Inc. v. CafePress.com. Inc., No. CV 10-9794 PSG, 2011 U.S. Dist. LEXIS 39828, at
*7-8 (C.D. Cal. Apr. 6, 2011); see also Adobe Systems v. My Choice Software LLC, No. 14-cv02150-BLF, 2014 U.S. Dist. LEXIS 161059, at *7 (N.D. Cal. Nov. 14, 2014).
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Case No.: 5:14-cv-01409-EJD
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registration numbers. See Dkt. No. 1 at ¶ 15. To the extent that Defendants contend that not all of

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the identified registration numbers actually relate to AutoCAD, that is a factual challenge to the

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Complaint that is not appropriately raised in the context of a Rule 12(b)(6) motion.4
For the second element, ZWSoft’s marketing of the similarities between the two product

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lines is relevant and circumstantial evidence of copying.5 Moreover, “the determination of

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whether a work is sufficiently original to be protected is ‘a factual issue that is inappropriate for

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determination on a motion to dismiss.’”6 The fact that the precise scope of Defendants’

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misconduct - if any - remains to be fleshed out in discovery does not render the Complaint

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inadequate.
“In reviewing the sufficiency of a complaint, ‘[t]he issue is not whether the plaintiff will

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United States District Court
Northern District of California

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ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.’”

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Gilligan v. Jamco Dev. Corp., 108 F.3d 246, 248 (9th Cir. 1997) (quoting Scheuer v. Rhodes, 416

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U.S. 232, 236 (1974)). Further, the plausibility standard “does not impose a probability

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requirement at the pleading stage; it simply calls for enough fact to raise a reasonable expectation

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that discovery will reveal evidence supporting the allegation.” Twombly, 550 U.S. 544, 556

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(2007). Accordingly, taking Plaintiff’s allegations of material fact as true and construing them in

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the light most favorable to Plaintiff, the court finds that the claim of copyright infringement is

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plausible. Thus, Plaintiff’s Complaint sufficiently states a claim upon which relief may be

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granted. Defendants’ Motion to Dismiss Plaintiff’s cause of action for copyright infringement is

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DENIED.

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B.

Whether Autodesk Adequately Pled A Claim For Trade Secret
Misappropriation

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The California Uniform Trade Secrets Act prohibits misappropriation of trade secrets,

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See Adobe Systems, No. 14-cv-02150-BLF, 2014 U.S. Dist. LEXIS 161059, at *3 (N.D. Cal.
Nov. 14, 2014).
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See JBJ Fabrics, Inc. v. Mark Indus., Inc., No. 86-4881 FFF, 1987 U.S. Dist. LEXIS 13445, at
*33 (C.D. Cal. Nov. 4, 1987) (defendant’s admission of similarity weighed in favor of finding of
infringement)
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See FragranceNet.com, Inc. v. FragranceX.com, Inc., 679 F. Supp. 2d 312, 320 (E.D.N.Y. 2010);
see also Dkt. No. 61 at 11.
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Case No.: 5:14-cv-01409-EJD
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which it defines as:

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(1) Acquisition of a trade secret of another by a person who knows
or has reason to know that the trade secret was acquired by improper
means; or
(2) Disclosure or use of a trade secret of another without express or
implied consent by a person who:
(A) Used improper means to acquire knowledge of the trade
secret; or
(B) At the time of disclosure or use, knew or had reason to
know that his or her knowledge of the trade secret was:
(i) Derived from or through a person who had utilized
improper means to acquire it;
(ii) Acquired under circumstances giving rise to a duty to
maintain its secrecy or limit its use; or
(iii) Derived from or through a person who owed a duty to
the person seeking relief to maintain its secrecy or limit its
use; or
(C) Before a material change of his or her position, knew or
had reason to know that it was a trade secret and that
knowledge of it had been acquired by accident or mistake.

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Cal. Civ. Code § 3426.1(b). “Improper means” include the “breach or inducement of a breach of a

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duty to maintain secrecy.” Cal. Civ. Code § 3426.1(a).

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United States District Court
Northern District of California

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To state a claim for misappropriation of trade secrets under the California Uniform Trade

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Secrets Act, a plaintiff must allege that: (1) the plaintiff owned a trade secret; (2) the defendant

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misappropriated the trade secret; and (3) the defendant’s actions damaged the plaintiff. Nexsales

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Corp. v. Salebuild, Inc., 11–CV–3195, 2012 WL 216260 at *2 (N.D. Cal. Jan. 24, 2012). ZWSoft

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moves to dismiss the Complaint on the grounds that Autodesk fails to sufficiently allege the first

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and second elements – ownership and misappropriation.

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i.

Trade Secret Ownership

ZWSoft argues that Autodesk’s allegation that the “plaintiff has a secret process is a bare

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legal conclusion” and that Autodesk “should describe the subject matter of the trade secret with

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sufficient particularity.” See Dkt. No. 48 at 11.
A plaintiff need not “spell out the details of the trade secret,” but must minimally provide

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“reasonable notice of the issues which must be at the time of trial and […] provide reasonable

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guidance in ascertaining the scope of appropriate discovery.”7

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Diodes, Inc. v. Franzen, 260 Cal. App. 2d 244, 251 (1968); see also Brocade Commc’ns Sys.,
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Case No.: 5:14-cv-01409-EJD
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Here, Autodesk alleged that the “source code which comprises AutoCAD 2007 and 2008 is

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a trade secret, including those portions of code that underlie the commands, interfaces and

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program files associated with the dozens of specific features which were wrongfully acquired and

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used in Defendants’ ZWCAD+ 2012 and 2014 programs.” See Dkt. No. 1 at ¶¶ 14, 22-31, 42.

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Autodesk further alleged that “its source code is not publicly known, and that Autodesk goes to

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great lengths to keep its most valuable asset protected, including depositing the code only in

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secure source code repositories, and restricting access to only a few select individuals, all of whom

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are required to sign iron-clad non-disclosure agreements.” Id. at ¶¶ 14, 42.
Moreover, courts are “in general agreement that trade secrets need not be disclosed in

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detail in a complaint alleging misappropriation for the simple reason that such a requirement

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United States District Court
Northern District of California

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would result in public disclosure of the purported trade secrets.”8 As such, Autodesk has

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identified its alleged trade secrets with sufficient particularity to survive a Rule 12 motion.

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ii.

Misappropriation

ZWSoft argues that Autodesk has not identified “the impermissible manner in which

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ZWSoft acquired” the AutoCAD trade secrets to support a misappropriation claim. See Dkt. No.

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48 at 14.

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Under the California Uniform Trade Secret Act, misappropriation can be established

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through wrongful acquisition or use without consent. Cal. Civ. Code § 3426.1. Here, Autodesk

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has adequately alleged that ZWCAD+ was “built by someone with improper and illegal access to

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AutoCAD source code,” that its code had been “stolen,” and that, without Autodesk’s consent,

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“Defendants acquired, disclosed and/or used” Autodesk’s trade secret information “through

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improper means.” See Dkt. No. 1 at ¶¶ 22, 24, 29, 43.

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Moreover, there is no requirement that Autodesk plead exactly how Defendants

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Inc. v. A10 Networks, Inc., 873 F. Supp. 2d 1192 (N.D. Cal. 2012) (finding software optimization,
hardware optimization and customer contact list all sufficiently identified and cognizable as trade
secrets).
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Leucadia, Inc. v. Applied Extrusion Techs., Inc., 755 F. Supp. 635, 636 (D. Del. 1991); see also
SD Prot., Inc. v. Del Rio, 498 F. Supp. 2d 576, 576 (E.D.N.Y. 2007).
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“improperly obtained [or used] the alleged trade secret.”9 Again, as “discovery has not yet

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commenced,” “it would be unreasonable to require” a plaintiff to demonstrate “the precise ways in

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which Defendants may have used [their] trade secrets, given that Defendants are the only ones

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who possess such information.”10
In sum, Autodesk identified its trade secrets (such as the AutoCAD 2007 and 2008 source

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code, the code’s associated algorithms, and its architecture) and adequately alleged the wrongful

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acquisition or use necessary to support a misappropriation claim with sufficient particularity to

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survive a Rule 12 motion. Therefore, the Court DENIES Defendants’ Motion to Dismiss

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Plaintiff’s cause of action for trade secret misappropriation.
V.

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For the foregoing reasons, the Court DENIES Defendants’ Motion to Dismiss Autodesk’s

United States District Court
Northern District of California

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first and second cause of action in its Complaint.
IT IS SO ORDERED.

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CONCLUSION

Dated: May 13, 2015
______________________________________
EDWARD J. DAVILA
United States District Judge

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Gaetano Assocs., Ltd. v. Artee Collections, Inc., No. 05 CIV. 3329 (DLC), 2006 U.S. Dist.
LEXIS 77144, at *7 (S.D.N.Y. Oct. 25, 2006).
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Vinyl Interactive, LLC v. Guarino, No. C 09-0987 CW, 2009 U.S. Dist. LEXIS 41498, at *2122 (N.D. Cal. May 1, 2009).
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Case No.: 5:14-cv-01409-EJD
ORDER DENYING MOTION TO DISMISS