Lately the publishing empire of Reed Elsevier has suffered a serious attack of Software Piracy Anxiety Syndrome, known in the medical world as SPAS, a malady generally cured by an increase in readership hopefully demonstrable through an increase in the number of subscribers. During the month of August both EDN and Electronics Business have printed articles about Software Piracy in the EDA industry. EDN published an article by Michael Santarini on August 18, and Electronics Business had an article by Geoffrey James in its August issue. Before I get into the meat of the topic let me take care of a couple of issues.

In general I liked the James article better. In just one page the author manages to provide actual numbers of lost revenues for the EDA industry, while Mr. Santarini leaves the subject open to interpretation and wanders off into the subject of the use of software by customers of companies that have been or are sued for patent infringement or misappropriation of trade secrets but continue to use the software they licensed in good faith. Obviously this is not software piracy, since the software was paid for and legally obtained: but it makes for good journalism, the one you can find in publications readily available at the supermarket check out stands. The fact that Mr. Santarini chose to further promote his article by sending an email to the deepchip.com gossip forum is a commercial promotion act that would not have been tolerated by the previous editor-in-chief at EDN. Unfortunately EDN is finding it necessary, lately, to be more concerned about its business goals than its technical content, a fact further corroborated by the appointment of its VP of Sales to the position of Associate Publisher.

But let’s talk about software piracy. First of all I must address the issue of legally obtained software from vendors that were later found guilty of misappropriation or patent infringement. There are a couple of legal issues that make the recovery attempted by Silvaco and that threatened by Synopsys unrealistic and without merit. In both cases customers purchased the software in good faith before its tainted status was proven in court and a judgment rendered. If all EDA customers were required to take into consideration the probability that the software they purchase might at some point be the subject of a negative legal court decision, the revenues of the EDA industry would be at least cut in half. In addition the attempt by Silvaco to obtain a portion of the revenues of products developed using the software in question is clearly an attempt by a very small company to enrich itself, since such profit sharing formula has never been used in the industry. Thus any fine of this sort would have to be punitive only. Given that there is no precedent for calculating the amount, I doubt very much that any court would be willing to speculate, since such action will immediately result in an appeal that would have a great probability of being upheld. The bombasting by Rex Jackson, Synopsys General Counsel and acting CFO, with respect to actions his company might take against Magma customers should Synopsys win the patent infringement case it brought against Magma, is even less credible. Synopsys itself has established a precendent, as has Cadence. Cadence took no action against customers that had purchased and used Avanti software built on legally proven stolen code. And Synopsys took no action against customers of Nassda, even if it was on its way to winning the trade-secrets suit it brought against that company before it managed to purchase it instead. Had Synopsys really decided that such a punitive action might stand up in a court of law, they would have imposed some penalty on Nassda customers in order to establish a precedent for the obviously much larger revenues they would eventually collect from Magma’s customers should Synopsys win its court case. All customers must be able to rely on the representation of the EDA vendor when purchasing a tool. Otherwise the required due diligence process would be too costly, but more importantly too time consuming, to allow a well structured market to exist. To his credit Mr. James did not cover this side item in his article.

It is a fact that there are pirated copies of EDA tools, no one would debate this. It is also a fact that neither authors points out, that low cost tools make up the largest number of pirated copies. There are many more copies of illegal FPGA and PCB design tools than there are copies of ASIC design tools. There are two reasons for this fact. First of all many very small companies, often a one man operation, engage in design of either FPGA or PCB, and these organizations generally run on a shoestring and cannot afford to pay for a license, even if the license is less than $5,000. These organizations also do not have the credibility with the EDA vendors to obtain software at a discount, so they “borrow” the license. It is not an accident that Mr. Santarini chose Altium as his example of an EDA vendor who can document cases of piracy in China. Altium products are low cost, PCB development tools running on a personal computer, a perfect target for piracy. So the number of illegal copies is high, for an industry with only $4 billion in annual revenues, but the financial impact is significantly less than the $466 million postulated by Mr. James.

Mr. James quotes Rajeev Madhavan, CEO of Magma Design Automation, noting that there are web sites offering entire suite of EDA tools from the four major vendors at a fraction of the cost. In fact, almost all of these web sites are fraudulent and do not have what they offer. Non-the-less they are more than happy to take the money of the eager “customer” since in almost every case the site is based in a country that has a poor civil legal system and thus getting one’s money back is practically impossible. One should always remember that if something is too good to be true, it almost always is. I agree that the existence of even one legitimate provider of discounted software is a major headache for the EDA industry.

I am not justifying the unauthorized use of any EDA tool, but I also think that the problem is not as critical as the articles make it seem. After all, as Mr. James judiciously observes, the EDA industry yearly revenues are approximately one tenth the size of the revenues lost to software piracy in the same amount of time. I would venture that the actual volume of lost revenues yearly is around $100 million or about 2.5% of total revenues. Unfortunately small EDA companies bear the brunt of the losses and the percentage impact on their bottom line is significant.

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