<< I telephoned the Nine Circuit Court of Appeals, (415) 556-9800, and
asked how I could get a copy of the decision. >>
The decision was published today in the Daily Appellate Report, of which I have a copy. I have also read the decision in full. Essentially, the decision is a great setback to Avant! as the case has been sent back to the district court (where it was originally decided) to determine whether the Aquarius software infringes Cadence's code.
A lot has been made of the fact (by Avant!) that this decision affirms their right to sell Aquarius software. Nothing could be further from the truth. So we're all on the same page, here's what Avant! said in the releases they have issued both last night and again today:
<< The Court stated, "[T]here are no findings upon which we could base a conclusion that Avant! violated Cadence's copyright" in Aquarius. As a result, Avant! will continue to supply its customers with Aquarius products. Today's court decision means that there will be no disturbance of Avant!'s ability to do business with its Aquarius customers. >>
While I can't type out the entire text of the decision, here is the entire section from which Avant! chose to quote:
<< The district court expressly made no finding as to whether the Aquarius software contained code copied from Cadence. The district court did not state whether any conduct occurring within the clean room process infringed Cadence's copyright (e.g., intermediate copying of Cadence code during the process of creating the Aquarius code).
Ultimately, the district court concluded that there was insufficient evidence to enjoin the production or sale of the Aquarius software "to the extent that they contain essentially the same source codes as do Avant!'s prior products." Id. at 13.
The district court's conclusion was erroneous. If the Aquarius software infringes Cadence's copyright, the district court should have entered an order preliminarily enjoining Avant! from selling the software.
Cadence asserts on appeal that the district court should have preliminarily enjoined Avant!'s use of the replacement code "because Avant! violated Cadence's copyrights and misappropriated Cadence's trade secrets to create the replacement code." However, as stated above, there are no findings upon which we could base a conclusion that Avant! violated Cadence's copyright, and Cadence did not appeal the trade secret aspects of the district court's order. On remand, the district court will have to determine whether the Aquarius software infringes Cadence's code. If so, the district court shall enter an order enjoining the sale of the software. >>
Contrary to what Avant!'s many press releases would have investors believe, the court has not enjoined Avant! from selling Aquarius software only because the court has never attempted to make a finding as to whether or not Aquarius infringes on Cadence's code. Indeed, that is what the appeals court is instructing the district to do -- to make such a finding.
And what is the likely result of that finding? Remember, that Avant!'s entire success in this case now hinges on whether or not its so-called clean room procedures (during which it claims to have rewrote the code stolen from Cadence, and on which the Aquarius software is based), were in fact adequate. Well, we can look no further than yesterday's decision for a few clues. The court wrote:
<< The district court made the following findings: 1) that Cadence had established that its source code was protected by copyright and trade secret law; (2) that Avant! had used some of Cadence's code in its ArcCell products, thereby infringing Cadence's copyright; and (3) that Cadence will likely prevail on its claim that Avant!'s clean room procedures were inadequate. >>
This bears repeating: Cadence will likely prevail on its claim that Avant!'s clean room procedures were inadequate.
The opinion continues:
<< Specifically, the court found that Avant!'s use of an independent expert to examine portions of the code identified by Cadence as infringing and rewrite and delete any potentially infringing code in the Aquarius software "d[id] not appear to have been sufficient" because Avant! was able to take advantage of its knowledge of the functions and the basic structure of the Cadence code. Id. In addition, the district court noted that the use of Cadence's code to create specifications for Avant!'s engineers "rais[ed] serious questions." Id. >>
Again, it remains for the district court to find whether or not the Aquarius software infringes Cadence's code. This very same court has already indicated that the clean room was not so clean after all.
Ironically, there appears to be no doubt whatsoever now that Avant! stole code from Cadence. "Avant! deliberately copied Cadence's code."
Also of note to those who would claim that the stolen code accounts for only a small portion of Avant!'s income is the finding of the district court that "the infringing software account for 60% of Avant!'s income and that a preliminary injunction would 'seriously jeopardize Avant!'s ability to survive as a relatively new company ..." This 60% contemplates, of course, the Aquarius software which will now come under renewed scrutiny by the lower court.
Hope this helps.
- Peter B |
