Cangrade, Inc. v. Synopsys, Inc.

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United States District Court
Northern District of California
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
CANGRADE, INC.,
Plaintiff,
v.
SYNOPSYS, INC.,
Defendant.
Case No. 25-cv-01381-NW
ORDER GRANTING IN PART AND
DENYING IN PART MOTION TO
DISMISS OR STRIKE
Re: ECF No. 68
On September 5, 2025, Defendant Synopsys, Inc. (“Synopsys”) filed a motion to dismiss
Plaintiff Cangrade, Inc.’s (“Cangrade”) second amended complaint. ECF No. 68.1 Having
considered the parties’ briefs and the relevant legal authority, the Court concludes oral argument is
not required, see N.D. Cal. Civ. L.R. 7-1(b), and GRANTS IN PART and DENIES IN PART
Synopsys’s motion for the reasons set forth below.
I. BACKGROUND
This Order assumes the reader is familiar with the alleged facts as set forth in the Court’s
August 1, 2025 Order granting in part and denying in part Synopsys’s motion to dismiss the first
amended complaint and does not repeat them here. ECF No. 54.
Cangrade filed its original complaint against Synopsys on February 10, 2025, alleging six
causes of action: (1) violation of the federal Defend Trade Secret Act (“DTSA”); (2) violation of
the California Uniform Trade Secrets Act (“CUTSA”); (3) breach of contract; (4) professional
negligence; (5) negligent interference with prospective economic relations; and (6) breach of
confidence. See Compl., ECF No. 1. Synopsys filed a motion to dismiss, see ECF No. 21, and
1 Record citations are to material in the Electronic Case File (“ECF”); pinpoint citations are to the
ECF-generated page numbers at the top of documents.
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Cangrade responded by filing an amended complaint that removed the claim for breach of
confidence. See ECF No. 30. Synopsys then filed a motion to dismiss the first amended
complaint. ECF No. 37. On August 1, 2025, the Court granted in part and denied in part
Synopsys’s motion to dismiss the first amended complaint. ECF No. 54.
On August 22, 2025, Cangrade filed a second amended complaint with five causes of
action: (1) violation of the federal DTSA; (2) violation of the CUTSA; (3) breach of contract; (4)
professional negligence; and (5) negligent interference with prospective economic relations. ECF
No. 63. In its second amended complaint, the fourth and fifth causes of action have a parenthetical
stating “dismissed” next to the title. Id. Synopsys moved to dismiss or strike the second amended
complaint on several grounds.2 ECF No. 68. Cangrade opposed, see ECF No. 73, and Synopsys
filed a reply. ECF No. 74.
II. LEGAL STANDARD
A. Motion to Dismiss Under Rule 12(b)(6)
To survive a motion to dismiss, a plaintiff must plead “enough facts to state a claim to
relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The
Court must “accept all factual allegations in the complaint as true and construe the pleadings in the
light most favorable to the [plaintiff].” Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005).
However, “the tenet that a court must accept a complaint’s allegations as true is inapplicable to
threadbare recitals of a cause of action’s elements, supported by mere conclusory statements.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
If the Court dismisses the complaint, it must then decide whether to grant leave to amend.
The Ninth Circuit has “repeatedly held that a district court should grant leave to amend even if no
request to amend the pleading was made, unless it determines that the pleading could not possibly
be cured by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000)
(citations and internal quotation marks omitted).
2 Synopsys’s motion mostly seeks to dismiss or strike certain portions of Cangrade’s causes of
action, not causes of action in their entirety.
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B. Motion to Strike Under Rule 12(f)
Under Federal Rule of Civil Procedure 12(f), a “court may strike from a pleading an
insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed. R.
Civ. P. 12(f). The purpose of a Rule 12(f) “motion to strike is to avoid the expenditure of time and
money that must arise from litigating spurious issues by dispensing with those issues prior to
trial.” Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 973 (9th Cir. 2010).
III. DISCUSSION
In its second motion to dismiss or strike, Synopsys again makes a plethora of arguments
(many of them repetitive of arguments Synopsys made in its first motion to dismiss or strike) as to
why Cangrade’s causes of action should be dismissed or portions stricken. The Court addresses
each one by claim and argument advanced.
A. Cangrade’s Claims for Professional Negligence and Negligent Interference
with Economic Relations (Counts IV and V)
First, the Court agrees with Synopsys that Cangrade’s claims for professional negligence
and negligent interference with economic relations (Counts IV and V) should not appear in
Cangrade’s complaint as they were dismissed without leave to amend per the Court’s prior Order.
See ECF No. 54 at 8-10. Synopsys’s motion to strike is GRANTED in this respect and these
portions of Cangrade’s second amended complaint are STRICKEN.
B. Cangrade’s Claims for Willful Trade Secret Misappropriation (Counts I and
II)
In its second amended complaint, Cangrade newly requests “an award of exemplary
damages as permitted by the relevant law.” Second Am. Compl. (“SAC”), ECF No. 63 at 32.
Cangrade adds new allegations in support of this request under both its federal DTSA claim and
CUTSA claim. Id. ¶¶ 131, 141. Specifically, Cangrade alleges:
Based on the information available to Cangrade, Synopsys’ actions in
publishing Cangrade’s source code were knowing, intentional, and
willful, entitling Cangrade to an award of exemplary damages under
18 U.S.C. § 1836(b)(3)(C) / Cal. Civ. Code § 3426.3.
Id. Synopsys moves to dismiss Cangrade’s DTSA and CUTSA claims, or first and second causes
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of action respectively, to the extent they seek exemplary damages or redress for willful trade secret
misappropriation. ECF No. 68 at 13-18.
As an initial matter, the Court finds Rule 12(b)(6), not Rule 12(f) is the appropriate
procedural vehicle here. Under Rule 12(f), a “court may strike from a pleading an insufficient
defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f).
Synopsys’s argument that Cangrade cannot seek exemplary damages does not readily fit within
any of these categories. Additionally, “Rule 12(f) does not authorize district courts to strike
claims for damages on the ground that such claims are precluded as a matter of law.”
Whittlestone, Inc., 618 F.3d at 974–75. While Synopsys does not argue that Cangrade’s
exemplary damages claims fail as a matter of law, Synopsys does argue that they fail because
Cangrade fails to plausibly allege that an individual actor, or an officer, director, or managing
agent of Synopsys, engaged in willful or malicious conduct. ECF No. 68. And “the proper
medium for challenging the sufficiency of factual allegations in a complaint is through Rule
12(b)(6) not Rule 12(f).” In re Yahoo! Inc. Customer Data Sec. Breach Litig., 313 F. Supp. 3d
1113, 1147 (N.D. Cal. 2018) (cleaned up).
As to the merits of the argument, Synopsys contends that Cangrade’s exemplary damages
claims fail because Cangrade failed to allege that an officer, director, or agent committed an act of
oppression, fraud, or malice. ECF No. 68 at 15-16.3 Cangrade responds that the statutory
language does not impose such a requirement, nor can one be imported from other statutory
sections relating to punitive damages. ECF No. 73 at 16-22. Cangrade’s interpretation of the law
is incorrect, and the Court finds Cangrade’s allegations insufficient.
Under the CUTSA, “if willful and malicious misappropriation exists, the court may award
exemplary damages in an amount not exceeding twice any award” for actual loss or unjust
enrichment. Cal. Civ. Code § 3426.3(c). By statute, a plaintiff may only recover exemplary
damages if it is shown “by clear and convincing evidence that the defendant has been guilty of
3 Synopsys also argues Cangrade exceeded the scope of leave granted by the Court’s previous
motion to dismiss Order. Id. The Court rejects this argument; the prior motion to dismiss Order
was not so limited. See ECF No. 54.
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oppression, fraud, or malice.” Cal. Civ. Code § 3294(a). A corporate entity cannot engage in
oppression, fraud, or malice for the purposes of exemplary damages unless “on the part of an
officer, director, or managing agent of the corporation.” Cal. Civ. Code § 3294(b) (“With respect
to a corporate employer, the advance knowledge and conscious disregard, authorization,
ratification or act of oppression, fraud, or malice must be on the part of an officer, director, or
managing agent of the corporation”); see also Taiwan Semiconductor Mfg. Co. v. Tela
Innovations, Inc., No. 14-CV-00362-BLF, 2014 WL 3705350, at *6 (N.D. Cal. July 24, 2014)
(“[A] company simply cannot commit willful and malicious conduct—only an individual can.”).
Therefore, Cangrade must plead that an officer, director, or managing agent of Synopsys
committed an act of oppression, fraud, or malice.
Cangrade’s second amended complaint does not meet this standard. Rather than
specifically plead that an officer, director, or managing agent of Synopsys committed an act of
oppression, fraud, or malice, Cangrade focuses on extraneous facts. For example, Cangrade
alleges that a Synopsys employee (who is not an officer, director, or managing agent) “uploaded
and disclosed Cangrade’s proprietary software source code to GitHub, and it became accessible on
the public GitHub repository.” SAC ¶ 31. Cangrade then alleges that this action “was not the
only act of breach of confidentiality in which its employee was involved.” Id. ¶ 36. The import of
other breaches of confidentiality unrelated to Cangrade is unclear. Instead, Cangrade alleges that
“[o]nce data has been placed into the hands of a bad actor who has already acted to publish it once,
any assurance of its secrecy has been destroyed.” Id. ¶ 50. This is insufficient to meet the
standard. What Cangrade does not allege is telling. Cangrade does not allege that a Synopsys
officer, director, or managing agent maliciously concealed the disclosure of Cangrade’s source
code or otherwise acted fraudulently.
Similarly, Cangrade’s allegations that “Synopsys conducted two investigations into the
data breach” and “refused to provide Cangrade with any information regarding the outcome of
those investigations” do not meet the standard. Id. ¶ 48. Instead, Cangrade must plead that an
officer, director, or managing agent of Synopsys committed an act of oppression, fraud, or malice.
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The Court GRANTS Synopsys’s motion to dismiss Cangrade’s DTSA4 and CUTSA
claims, or first and second causes of action respectively, to the extent they seek exemplary
damages or redress for willful trade secret misappropriation. Cangrade is granted leave to amend
these claims only to add allegations that an officer, director, or managing agent of Synopsys
committed an act of oppression, fraud, or malice.
C. Cangrade’s Request for Unjust Enrichment Damages (Counts I and II)
In the Court’s prior order granting Synopsys’s first motion to dismiss in part, Cangrade’s
trade secret misappropriation claims were dismissed with leave to amend for failing to allege
damages with sufficient factual detail. ECF No. 54 at 14-15. In response, Cangrade amended its
complaint to add several paragraphs of factual allegations as to damages under a heading titled the
same. SAC ¶¶ 89-111.
In its latest motion to dismiss, Synopsys argues that Cangrade’s amended allegations fail to
plausibly allege unjust enrichment. ECF No. 68 at 18-20, 25-27. Synopsys asserts that Cangrade
failed to identify a benefit conferred upon Synopsys as a result of the alleged misappropriation.
Id. at 20 (“Cangrade has not pled any ‘profit’ or ‘calculable benefit’ Synopsys realized from the
unauthorized act of publishing, only money it received for the authorized act of auditing.”
(emphasis in original)).
In trade secret misappropriation cases, a “complainant may recover damages for the actual
loss caused by misappropriation” or “for the unjust enrichment caused by misappropriation that is
not taken into account in computing damages for actual loss.” Cal. Civ. Code § 3426.3(a); see
also 18 U.S.C. § 1836(b)(3)(B). The term “unjust enrichment” is generally “synonymous with
restitution.” Ajaxo Inc. v. E*Trade Fin. Corp., 187 Cal. App. 4th 1295, 1305 (2010). The phrase
“is used in law to characterize the result or effect of a failure to make restitution of or for property
4 While neither party cites to binding authority that imports the exemplary damages requirement
that an “officer, director, or managing agent” commit an act of oppression, fraud, or malice from
the California Civil Code to the DTSA, it is appropriate to impose that requirement here because
the DTSA exemplary damages provision is similar to that in the CUTSA. Compare 18 U.S.C.
§ 1836(b)(3)(C) and Cal. Civ. Code § 3426.3(c); InteliClear, LLC v. ETC Glob. Holdings, Inc.,
978 F.3d 653, 657 (9th Cir. 2020) (finding it appropriate to analyze DTSA and CUTSA “claims
together because the elements are substantially similar.”)
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or benefits received under such circumstances as to give rise to a legal or equitable obligation to
account therefor.” Id. (citation and emphasis omitted). In the context of a trade secrets action,
“unjust enrichment is typically measured by the defendant’s profits flowing from the
misappropriation.” Id. “[W[here a defendant has not realized a profit or other calculable benefit
as a result of his or her misappropriation of a trade secret, unjust enrichment is not provable within
the meaning of section 3426.3, subdivision (b).” Id. at 1313.
Here, in support of entitlement to unjust enrichment damages, Cangrade alleges:
Synopsys was unjustly enriched by its misappropriation of
Cangrade’s trade secrets, by retaining a large fee for auditing the
source code, while publishing it. It would be unjust for Synopsys to
benefit from its illegal conduct. Under 18 U.S.C. § 1836(b)(3)/ Cal.
Civ. Code § 3426.3, Cangrade is entitled to disgorgement of the fees
Synopsys received from Paylocity.
SAC ¶¶ 131, 140. This is sufficient to satisfy the notice pleading of Rule 8(a), which requires only
“a demand for the relief sought, which may include relief in the alternative or different types of
relief.” Fed. R. Civ. P. 8(a). Whether Cangrade has “pled any ‘profit’ or ‘calculable benefit’”
gained from the unauthorized act of publishing, as Synopsys insists in its motion is a factual issue
more appropriately resolved on summary judgment. ECF No. 68 at 20.
D. Synopsys’s Remaining Arguments
Synopsys argues that “Cangrade’s amended trade secret claims should also be dismissed
because the parties’ Agreement precludes them.” Id. at 21. This too is a factual issue that is
inappropriate for resolution on a motion to dismiss.
Finally, Synopsys asserts that, as amended, Cangrade’s trade secret claims are barred by
the economic loss rule because they are “indistinguishable from its breach of contract claim.” Id.
at 22. The Court previously rejected this argument in its prior order stating:
Cangrade’s claims for trade secret misappropriation are not barred by
the economic loss rule. First, while the issue appears to be an
unsettled one, Cangrade persuasively argues that the economic loss
rule does not extend to statutory claims like those under the DTSA
and CUTSA. Opp’n at 17-19. The economic loss rule does not apply
when conduct “also violates a duty independent of the contract.”
Robinson Helicopter Co., 34 Cal. 4th at 989 (citation omitted). Here,
both the DTSA and the CUTSA impose duties independent of the
parties’ contract and are “decidedly not a state-law tort claim.” In re
Apple Inc. Device Performance Litig., 347 F. Supp. 3d 434 (N.D. Cal.
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2018), on reconsideration in part, 386 F. Supp. 3d 1155 (N.D. Cal.
2019) (finding a Computer Fraud and Abuse Act claim not barred by
the economic loss rule).
ECF No. 54 at 10. The Court will not entertain this argument again.
IV. CONCLUSION
For the reasons stated, the Court GRANTS in part and DENIES in part Synopsys’s motion
to dismiss or strike the second amended complaint as follows:
• Synopsys’s motion to strike Cangrade’s claims for professional negligence and
negligent interference with economic relations (Counts IV and V) is GRANTED and
these portions of Cangrade’s second amended complaint are STRICKEN.
• Synopsys’s motion to dismiss Cangrade’s trade secret misappropriation claims under
the DTSA and CUTSA (Counts I and II) to the extent they seek exemplary damages or
redress for willful trade secret misappropriation is GRANTED with leave to amend.
Cangrade may amend these claims only to add allegations that an officer, director, or
managing agent of Synopsys committed an act of oppression, fraud, or malice.
• Synopsys’s motion to dismiss or strike is DENIED in all other respects.
Any amended complaint consistent with this order shall be filed within 21 days.
IT IS SO ORDERED.
Dated: January 16, 2026
Noël Wise
United States District Judge
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