Wednesday, January 10, 2018

Mixed result in Finjan case

The outcome:

A jury found Blue Coat Systems, Inc. (“Blue Coat”) liable
for infringement of four patents owned by Finjan,
Inc. (“Finjan”) and awarded approximately $39.5 million
in reasonable royalty damages. After trial, the district
court concluded that the ’844 patent was patent-eligible
under 35 U.S.C. § 101 and denied Blue Coat’s post-trial
motions for judgment as a matter of law (“JMOL”) and a
new trial. Blue Coat appeals.

We find no error in the district court’s subject matter
eligibility determination as to the ’844 patent and agree
that substantial evidence supports the jury’s finding of
infringement of the ’844 and ’731 patents. However, we
conclude that Blue Coat was entitled to JMOL of noninfringement
for the ’968 patent because the accused
products do not perform the claimed “policy index” limitation.
On appeal, Blue Coat does not challenge the verdict
of infringement for the ’633 patent.

With respect to damages, we affirm the award with
respect to the ’731 and ’633 patents. We vacate the damages
award for the ’968 patent, as there was no infringement.
With respect to the ’844 patent, we agree with Blue
Coat that Finjan failed to apportion damages to the
infringing functionality and that the $8-per-user royalty
rate was unsupported by substantial evidence.

We therefore affirm-in-part, reverse-in-part, and remand
to the district court for further consideration of the
damages issue as to the ’844 patent.

Blue Coat, represented by Mark Lemley, prevailed on the
'968 patent matter.

From the decision:

Blue Coat also argues that it was entitled to JMOL of
non-infringement with respect to the ’968 patent because
Finjan failed to introduce substantial evidence that the
accused products implement the claimed “policy index.”
We agree.

The ’968 patent is directed to a “policy-based” cache
manager that can efficiently manage cached content
according to a plurality of security policies. The patentee
agrees that a “policy” is a rule or set of rules that determines
whether a piece of content can be accessed by a
user. Different policies can apply to different users, and
the decision of whether to let a user access content is
made by comparing the content’s security profile with the
policy governing the user’s access. Thus, the policy based
cache manager in the ’968 patent is a data structure that
keeps track of whether content is permitted under various
policies. Claim 1, the sole asserted claim, is reproduced
below, with key language underlined:

1. A policy-based cache manager, comprising:

a memory storing a cache of digital content,
a plurality of policies, and a policy
index to the cache contents, the policy index
including entries that relate cache
content and policies by indicating cache
content that is known to be allowable relative
to a given policy, for each of a plurality
of policies;


the results of which are
saved as entries in the policy index.

The CAFC noted:

As Finjan’s expert
expressly acknowledged, however, Proxy SG does not save
final decisions about whether content can be accessed by
users subject to a given policy. It simply stores the evaluation
of each individual rule that goes into making an
ultimate policy decision. This is not what the claim language
requires. The policy index claimed in the ’968
patent must store the “results” of a content evaluator’s
determination of “whether a given digital content is
allowable relative to a given policy.”

How Blue Coat prevailed at the CAFC is of interest:

At summary judgment, the district court agreed that
this claim language requires the policy index to store final
allowability determinations and noted that “Defendant’s
argument would likely prevail if all policies consist of
multiple rules or conditions.” Finjan, Inc. v. Blue Coat
Sys., Inc., No. 13-CV-03999-BLF, 2015 WL 3630000, at *9
(N.D. Cal. June 2, 2015). The court nevertheless declined
to grant summary judgement because “the ’968 patent
specifically provides that a policy can be just one rule.” Id.
If Proxy SG saved the results of applying each rule that
makes up a one-rule policy, it would be saving final allowability
determinations for a plurality of policies and
thus infringing. The district court therefore gave Finjan
the opportunity to prove at trial that “the Proxy SG policy
cache contains a number of condition evaluations, each of
which is determinative of whether a file is allowable
relative to one of a plurality of single condition policies.”

At trial, Finjan made no such showing. There was no
evidence indicating that the condition determinations
stored by Proxy SG are final allowability decisions for
users governed by single-rule policies. Indeed, Finjan’s
expert acknowledged that Proxy SG never saves final
allowability determinations and must instead re-evaluate
the allowability of content each time it is requested. It is
therefore clear that the jury’s infringement verdict was
not supported by substantial evidence.

Because Finjan failed to present evidence that the accused
product ever stores final allowability determinations,
Blue Coat was entitled to JMOL of noninfringement.

Of damages

Two categories of compensation for infringement are the
patentee’s lost profits and the “reasonable royalty he
would have received through arms-length bargaining.”
Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1324
(Fed. Cir. 2009).
The only measure of damages at issue in this case is a
reasonable royalty, which “seeks to compensate the patentee
. . . for its lost opportunity to obtain a reasonable
royalty that the infringer would have been willing to pay
if it had been barred from infringing.” AstraZeneca AB v.
Apotex Corp., 782 F.3d 1324, 1334 (Fed. Cir. 2015) (citing
Lucent Techs., 580 F.3d at 1325).

An issue

We agree with Blue Coat that the $8-per-user royalty
rate employed in Finjan’s analysis was unsupported by
substantial evidence. There is no evidence that Finjan
ever actually used or proposed an $8-per-user fee in any
comparable license or negotiation. Rather, the $8-per-user
fee is based on testimony from Finjan’s Vice President of
IP Licensing, Ivan Chaperot, that the current “starting
point” in licensing negotiations is an “8 to 16 percent
royalty rate or something that is consistent with
that . . . like $8 per user fee.” J.A. 40409. Mr. Chaperot
further testified that the 8–16% figure was based on a
2008 verdict obtained by Finjan against Secure Computing.
On this basis, Finjan’s counsel urged the jury to use
an $8-per-user royalty rate for the hypothetical negotiation
because “that’s what Finjan would have asked for at
the time.” J.A. 41654.
While any reasonable royalty analysis “necessarily involves
an element of approximation and uncertainty, a
trier of fact must have some factual basis for a determination
of a reasonable royalty.” Unisplay, S.A. v. Am. Elec.
Sign Co., 69 F.3d 512, 517 (Fed. Cir. 1995). Mr. Chaperot’s
testimony that an $8-per-user fee is “consistent with”
the 8–16% royalty rate established in Secure Computing
is insufficient. There is no evidence to support Mr. Chaperot’s
conclusory statement that an 8–16% royalty rate
would correspond to an $8-per-user fee, and Finjan fails to
adequately tie the facts of Secure Computing to the facts
in this case.
See LaserDynamics, 694 F.3d at 79
(“[A]lleging a loose or vague comparability between different
technologies or licenses does not suffice.”).
Secure Computing did not involve the ’844 patent, and
there is no evidence showing that the patents that were at
issue are economically or technologically comparable.


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