Software Infringement Defense Law Firm – We handle BSA audits involving CNC Mastercam products and Federal Court lawsuits alleging piracy or unlicensed installations.

Copyright Watchdog 2018 Alert – CNC has filed another lawsuits in California (9th Circuit) through its copyright counsel Milord and Associates PC.  Contact us if you are in need of a defense or to see if you your insurance policy may cover the alleged intellectual property infringement.  8:18-cv-00855-CJC-AGR.

CNC Software, Inc. v. Prime Forming and Construction Supplies, Inc. et al Cormac J. Carney, presiding Alicia G. Rosenberg, referral Date filed: 05/14/2018 Date of last filing: 05/15/2018

See sample allegations below.

Introduction

CNC makes many different software products and they have been around for a while now.  According to Wikipedia:

“Founded in Massachusetts in 1983, CNC Software, Inc. is one of the oldest developers of PC-based computer-aided design / computer-aided manufacturing (CAD/CAM) software. They are one of the first to introduce CAD/CAM software designed for both machinists and engineers. Mastercam, CNC Software's main product, started as a 2D CAM system with CAD tools that let machinists design virtual parts on a computer screen and also guided computer numerical controlled (CNC) machine tools in the manufacture of parts. Since then, Mastercam has grown into the most widely used CAD/CAM package in the world. CNC Software, Inc. is now located in Tolland, Connecticut. Mastercam's comprehensive set of predefined toolpaths—including contour, drill, pocketing, face, peel mill, engraving, surface high speed, advanced multiaxis, and many more—enable machinists to cut parts efficiently and accurately. Mastercam users can create and cut parts using one of many supplied machine and control definitions, or they can use Mastercam's advanced tools to create their own customized definitions. Mastercam also offers a level of flexibility that allows the integration of 3rd party applications, called C-hooks, to address unique machine or process specific scenarios. Mastercam's name is a double entendre: it implies mastery of CAM (computer-aided manufacturing), which involves today's latest machine tool control technology; and it simultaneously pays homage to yesterday's machine tool control technology by echoing the older term master cam, which referred to the main cam or model that a tracer followed in order to control the movements of a mechanically automated machine tool.”

However, when you are dealing with a software audit, this glitzy description probably does not give you the “warm fuzzies.”  This blog will give you some basic information about handling software compliance audits dealing with this firm, normally you will be dealing with the Business Software Alliance and their lawyers.

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Listen to Attorney Steve discuss CNC Mastercam software piracy lawsuits in federal court

VIDEO:  Click on the picture above to learn more about CNC CAM (computer aided manufacturing) lawsuits.  Also discussed is PDRSS (which tracks geolocation and unauthorized access of their software by machine and tool companies).

Is CNC a member of the BSA?

Yes.  You can check their status here – BSA “CNC – Mastercam”

CNC's position on software piracy

This is a quote taken from their website.

“Software piracy is a serious issue for the software industry. According to some industry analysts, more than 1 out of every three copies of the software installed on computers worldwide was pirated in 2008. Revenue lost to software piracy during this period is estimated at over $50 billion worldwide.  CNC Software, Inc. takes piracy very seriously. We have made the commitment to ensure our licensed customers investment is protected by not tolerating piracy of Mastercam software. In addition to our own efforts against piracy which include legal letters and follow up, we endorse the efforts of the Business Software Alliance (BSA), the leading anti-piracy organization in the world, to fight software piracy through education and enforcement activities.”

How much does the Mastercam software cost?

CNC makes a wide variety of products.  Check out their website for a complete list.  We have provided a link below to a online chat discussing their pricing. 

What are some of the typical CNC products?

Here are some of their products:

• Mastercam X7
• Mastercam X7 MUI
• Mastercam X7 MU2
• CNC-X-Lathe
• CNC-X9-Mill
• CNC-X-MillTurn
• CNC-X-Wire

CNC Copyrighted Software Products That May Be At Issue

MASTERCAM X5 o U.S. Copyright Registration No. TX0007403804, registered on June 23, 2011 – “MASTERCAM X5” (the “MASTERCAM X5 Copyright”).

MASTERCAM X6 o U.S. Copyright Registration No. TXu 1-832-859, registered on May 22, 2012 – “MASTERCAM X6” (the “MASTERCAM X6 Copyright”).

MASTERCAM X7 o U.S. Copyright Registration No. TX0007923706, registered on August 27, 2013 – “MASTERCAM X7” (the “MASTERCAM X7 Copyright”).

MASTERCAM X8 o U.S. Copyright Registration No. TX0008051551, registered on November 28, 2014 –  “MASTERCAM X8” (the “MASTERCAM X8 Copyright”).

What industries does CNC software serve?

According to one lawsuit filed by Milord & Associates Intellectual Property Law Firm, some of the industries CNC serves are:

• Aerospace
• Consumer Goods
• Education
• Energy/Power
• Government/Military
• Job Shop
• Plastic Fabrication

How did Mastercam find out about unlicensed software use/piracy?

There are several ways a software company can typically find out about illegal software piracy.  Here are a few:

• A secret Informant (sometimes a disgruntled ex-employee and sometimes a software consultant or reseller, for example, if you tried to upgrade your software, and they check and see you have no valid license in their licensing registration database.
• Their software is known to be embedded with PDRSS technology, which upon certain events being triggered (ex., certain thresholds met based upon parameters set by the software provider) certain information will be sent back to CNC, who will monitor and analyze the data received (ex. they may be able to retrieve your company identity, location, MAC addresses for all devices that physically connect to your network, name of the computer(s) at issue, version of the software allegedly pirated, and license serial number).  According to one CNC copyright infringement complaint I reviewed, this is all spelled out in their End-User-License-Agreement (“EULA”) and Software Licensing Agreement (“SLA”) which, according to them, must be agreed to before using their software on a computer by forcing the user to click “I agree” up to the first 15 times they tried to use the software.
• Publishing new job postings on sites like LinkedIn, Job.com, Career Builder, Monster.com, GlassDoor, etc. The idea is that if you are seeking someone with “experience with Mastercam X7 or X8,” your company should probably have a registered, licensed copy of their software.
• Accolades are posted in Architecture, Engineering, and Manufacturing publications boasting of what software was used to create the products, while again, not being properly licensed, which they can look up.
•  
• Submitting “Crash reports” that indicate an unlicensed copy is being used
• CNC, according to one federal complaint I read, may also go to websites on the internet that sell illegal software and try to figure out who is using their products without paying for them.

These are some of the main things I see as a software defense attorney.

Are there defenses to these cases?

Every case is different.  Here is a blog we wrote featuring common defenses to copyright infringement claims.  Many of these BSA software cases can be settled if you narrow it down to the products at issue, figure out who the informant was and what the source of information was, and come up with a strategy to settle the case.  In other cases, the software publisher may take a firm stance (especially if you have ignored their offers to get licensed) in federal court and may seek to litigate the case for statutory damages of up to $150,000 per infringed title (if they can show willful copyright infringement), or may also seek their actual damages (tarnishment), and Defendants profits.  Depending on the industry involved and the nature of the work, this could amount to a “bet the farm” copyright litigation case.

What to do when you get an audit demand letter from an IP Law firm?

As a starting point, we recently did a great podcast on whether or not these software audits are truly “voluntary.”  You can hear our podcast by clicking on the link.  We have also talked about what you should do if you receive an audit letter.  The first piece of information is to go over our checklist for dealing with software compliance audits.  Few firms can match our passion and thought leadership in this critical area of business defense.

Sample Allegations in the CNC lawsuit (noted above)

Here are a few of the main allegations being made.  The case is in a very early stage.

• Plaintiff, CNC Software, Inc. (“CNC” or “Plaintiff”) brings this action against Defendants Prime Forming & Construction Supplies, Inc. d/b/a Fitzgerald Formliners (“Fitzgerald”) and Edward Fitzgerald (collectively, “Defendants”) for copyright infringement in violation of 17 U.S.C. § 101 et seq. By this Complaint, CNC seeks, inter alia, injunctive relief, monetary damages, and attorney's fees under 17 U.S.C. §§ 106, 501, 502, 504 and 505.

• Defendant Edward Fitzgerald has control over the day-to-day operations at Fitzgerald and directly benefits from the tortious conduct alleged herein, and is the moving, active, conscious force behind Fitzgerald's copyright infringement. Edward Fitzgerald has been addressed on several notices of infringement, but he has taken no affirmative steps to cease the infringement, which has continued. Edward Fitzgerald would know of and have to approve the use of the infringing software based on the skills he touts on his LinkedIn profile, including product development, budgets, purchasing, strategic planning, operations management, manufacturing, marketing strategy, engineering, purchasing, negotiations, and contract management.

Attorney Steve® tip:  As we have told people, in copyright cases alleging willful copyright infringement, it is NOT UNCOMMON to see a Defendant sued in their PERSONAL CAPACITY (despite the “piercing of the corporate veil” theory).  This can expose an officer or director of a shop to SERIOUS FINANCIAL consequences.  As the case caption notes:

CNC SOFTWARE, INC., a Connecticut Corporation, Plaintiff, v. PRIME FORMING & CONSTRUCTION SUPPLIES, INC. d/b/a FITZGERALD FORMLINERS, a California corporation, and EDWARD FITZGERALD, an individual, Defendants.

• To reduce the use of illegally copied software, software providers implement license verification technology where the software will not function unless a license has been legally purchased. The license verification technology may be a software mechanism or a physical mechanism to be attached to a single computer. The license verification technology may be in the form of a key (i.e., a series of numbers and letters) that a user types in during the software installation process or a hardware device, where the software will only operate correctly when the hardware device is attached to the computer executing the software. The license verification technology is provided by the software provider to the buyer when the software is purchased legally. Users who have not made a legitimate purchase of the software will not have access to the key or hardware device provided by the software provider. Therefore the software will not function properly. CNC Software, Inc. provides license verification technology as a component of the Security mentioned above Mechanism.

• Software hackers reverse engineer the Security Mechanism and then provide processes and utilities to bypass the license enforcement to allow unauthorized use of the software. These processes and utilities mimic the license verification technology (i.e., keys, hardware devices, etc.) to allow pirated software to function fully as legally purchased software. Software utilities that mimic the license verification technology are often called “cracked” licenses. Software hackers may also create hacked versions of the software such that a license is not needed during installation.

• A MAC address is a unique hardware identifier assigned to network interfaces. Every device that makes a physical connection to the network, whether it is an Ethernet card or port, or wireless connection, has a unique and specific address. Thus, a computer with both an Ethernet connection and a wireless connection has two unique MAC addresses. A MAC address is a series of numbers and letters. When a network device is manufactured, it is assigned a MAC address at the factory. The first six digits of a MAC address represent the device manufacturer, which can be looked up on the Internet.

• On April 23, 2015, Meishan Piao, Manager, Global Compliance for CNC Software, sent a letter to Defendants notifying Fitzgerald of the infringing use of MASTERCAM® software. Defendants failed to respond. 37. On August 7, 2017 counsel for CNC contacted Defendants regarding their infringing use of the MASTERCAM® software. Defendants failed to respond.

NOTE:  This is the problem we have discussed with many companies in both Autodesk, SIIA, and BSA software audits.  The failure to respond and resolve these issues early can lead to a lawsuit wherein a Plaintiff is seeking HEFTY copyright infringement damages that can lead a company to the bankruptcy court.  But can you discharge software piracy in bankruptcy court?

What to do if dealing with Ansys Audit?

According to Wikipedia:

“ANSYS, Inc. is an American Computer-aided engineering software developer headquartered south of Pittsburgh in Cecil Township, Pennsylvania, United States. Ansys publishes engineering analysis software across various disciplines including finite element analysis, structural analysis, computational fluid dynamics, explicit and implicit methods, and heat transfer.”

We have heard that Ansys might be tracking users who log in to their system (at least one business owner from Canada shared this belief with us), and they may send you a letter (through one of their resellers – in the case we dealing with it came from Simotech Group).  While our firm is not licensed to practice law in Canada, and thus we cannot advise on the Canadian laws, it did cause me to look up the Ansys EULA license agreement to see what it said as far as which jurisdiction a federal copyright lawsuit could be filed in.  Here is what I found on their website:

“The rights and obligations of the parties hereto will be governed by the substantive law of the Commonwealth of Pennsylvania, excluding the United Nations Convention on the International Sale of Goods and choice of law provisions.

The parties hereto consent to the venue and jurisdiction of the federal and state courts maintaining jurisdiction over Washington County, Pennsylvania for purposes of any legal proceedings arising under or relating to this Agreement.”

Note:  Ansys is located in Cannonsburg, Pennsylvania.  At any rate, in this case, the reseller is willing to sell a licensed version of the software in exchange for a copyright release and settlement agreement.  Some of the general issues that popped into my head were:

1.  What is the settlement amount?
2. Are there any defenses to software infringement or mitigating factors?
3. Will the release be adequate?
4. Does the reseller have the legal authority to bind the software company?
5. Will there be hidden traps in the settlement agreement?
6. Is contribution or indemnity available from any third party?
7. Does general liability or D&O insurance cover the terms of the settlement?

If you have facing an issue involving Ansys or MasterCam CNC, call us to discuss your case with a United States Copyright Attorney.

Listen to Attorney Steve discuss common settlement terms following a license compliance audit.

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Firms that are legit (not a scam – don't throw away the letter without speaking to a copyright law firm).

Many people have told us that they received either an email or a letter, and due to the logos they saw, they thought the letter was a joke.  For one, the BSA logo looks pretty basic, and I think many recipients of the letter are totally fooled when they get it and they oftentimes think it is a Nigerian scam and throw the letter away.  Only later, when they research the issue further or receive follow-up letters or emails, do they decide to look up the lawyer and see what's going on.  As a matter of public interest, if you receive a letter from any of the following lawyers or law firms, you should know that we have dealt with these IP firms and/or reviewed their demand letters, and yes, they are REAL.

1. Weir Johnson
2. Donahue Fitzgerald  This firm handles the bulk of “Autodesk” audits, often dealing with architect and engineering and design firms.
3. Klemchuk
4. The Venable
5. Warner Law Group
6. Royer-Cooper-Cohen-Braunfeld
7. Troutman Sanders
8. FDK law
9. Sullivan Worcester (Solidworks letter – 3D design software infringement) [infringement notice could also come from Arent Fox law firm]
10. Flyer & Flyer (Vero)
11. Software Compliance Group
12. Saul Ewing
13. Riley Wein

Potential settlement scenario

I recently got off the phone with a representative of the Software Compliance Group.  I was informed that my Client first started using the software in 2014 (almost three years ago and getting close to the copyright three-year statute of limitations).  I explained some common defenses to software infringement:

1. Software fair use (just check out the software for scholarly research purposes – no commercial use).
2. Laches
3. Acquiescence (obviously, they were sitting around since 2014 and allowing you to use their software despite their knowledge of infringement
4. Consent

These are some of the main things that jumped to my head when the software representative said the infringing use of the Mill3d software has been going on since 2014.  I said, “why didn't you nip it in the bud and send an infringement letter in 2014 instead of allowing the uses to continue to try to rack up the lost profit damages?”  I was informed, “that's a good question.”  At any rate, the way these settlements work, you could see the following:

1.  They offer to sell you Mastercam 2017 Mill 3d plus basic support for about $14,000
2. If you take that, they might be willing to settle the case.
3. If you don't want that (ex., don't need the software), they might settle for less, for example by selling you their “standard mill” software plus basic support for around $6,700.
4. Typically they will want to convey your software (through a valid reseller) whether you want or need it, and this is a general price to settle that they may (or may not) offer.
5. Upon paying for valid software, they will send you their standard release, (but you should have a copyright infringement defense attorney review as some changes and additions may need to be made to best protect your rights.
6. If you still do not want to settle going this route, we can discuss whether you may want to assert your legal defenses and litigate the case or possibly go on the offensive by seeking Declaratory Judgement.

Resources:

1.  Thread dealing with costs of CNC software

2.  Is Mastercam suing Surfcam thread

3.  eMastercam

4.  Should I pirate CAM software?

5.  VIDEO – how to respond to software demand letters with BSA

Free consultation for software audit cases

If you are facing a software audit or have received an infringement demand letter or notice of subpoena (which means you have been sued).  Don't stress out; call us to discuss your situation with a software infringement defense lawyer.

We can discuss your potential defenses to infringement and help you get a grip on a reasonable response strategy.  We have helped many clients across the United States in these types of cases.

For audits and demand letter responses, we are usually able to structure a low, predictable flat rate price that will not lead to a shocking legal bill once your case is settled (like many firms do).

We have a tremendous amount of experience in this field and federal court.   In addition, as evidence of our passion and commitment to this specialized practice area, you may note that few other websites offer a plethora of legal and scholarly information and research, as does our firm.  We are not afraid of peer review.

Call us at (877) 276-5084.