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Finjan, Inc. v. Blue Coat Systems, Inc.

United States District Court, N.D. California, San Jose Division

July 18, 2016

FINJAN, INC., Plaintiff,
v.
BLUE COAT SYSTEMS, INC., Defendant.

          ORDER REGARDING POST-JUDGMENT MOTIONS [RE: ECF 492, 498, 499, 500, 505]

          BETH LABSON FREEMAN UNITED STATES DISTRICT JUDGE

         Following a ten-day jury trial, the jury returned a verdict finding that Defendant Blue Coat Systems, Inc. infringed five of Plaintiff Finjan, Inc.’s patents involving computer and network security: U.S. Patent Nos. 6, 804, 780 (the “’780 patent”), 6, 154, 844 (the “’844 patent”), 7, 418, 731 (the “’731 patent”), 6, 965, 968 (the “’968 patent”), and 7, 647, 633 (the “’663 patent”). Verdict 2-3, ECF 438. The jury found Blue Coat did not infringe U.S. Patent No. 7, 058, 822 (the “’822 patent”). Id. The jury also rejected Blue Coat’s invalidity defense of anticipation, id. at 5, and issued an advisory verdict that on invention dates of the ’844 and ’731 patents, id. at 4. The jury awarded Finjan a total of $39, 528, 487 in lump-sum damages. Id. at 6-7. Following the jury’s verdict, the Court held a bench trial on non-jury legal issues regarding the priority dates for the ’844 and ’731 patents, prosecution history estoppel, patent eligibility under 35 U.S.C. § 101, and laches. ECF 466.

         Blue Coat now moves on several grounds to amend the Court’s judgment as a matter of law, ECF 498, and for a new trial, ECF 499, findings of facts and conclusions of law, ECF 500. For the reasons herein, Blue Coat’s motion to amend the Court’s findings of facts and conclusions of law is DENIED; Blue Coat’s motion for judgment as a matter of law is DENIED; Blue Coat’s motion for a new trial and motion to amend the judgment is GRANTED IN PART AND DENIED IN PART; Finjan’s motion for enhanced damages and pre- and post-judgment interest is GRANTED IN PART AND DENIED IN PART; and Finjan’s motion for attorneys’ fees is DENIED.

         I. BACKGROUND

         Finjan filed its original complaint on August 28, 2013. ECF 1. Finjan asserted Blue Coat infringed its ’780, ’844, ’968, ’822, and ’633 patents. Id. at 9-33.

         All of the asserted patents are directed toward behavior-based Internet security. That is, rather than scanning and maintaining a list of known viruses and malicious code signatures, the asserted patents provide a system and methods for identifying, isolating, and neutralizing potentially malicious code based on the behavior of that code.

         The ’822 and ’633 patents, both titled “Malicious Mobile Code Runtime Monitoring System and Methods, ” are related and share the same specification. The ’822 patent issued on June 6, 2006 and lists Yigal Mordechai Edery, Nimrod Itzhak Vered, and David R. Kroll as inventors. The ’633 patent is a continuation of the ’822 Patent, and issued on January 12, 2010. The ’633 Patent lists Yigal Mordechai Edery, Nimrod Itzhak Vered, David R. Kroll, and Shlomo Touboul as inventors. These patents provide systems and methods for protecting devices on an internal network from code, applications, and/or information downloaded from the Internet that performs malicious operations. ’633 patent at Abstract. At a high level, the disclosed embodiments describe a protection engine that generally resides on a network server and inspects incoming downloads for executable code. Id. col. 2:20-3:4. Upon detection of executable code, the protection engine deploys “mobile protection code” and protection policies to the download destination. Id. col. 3:5-21. At the destination, the downloadable-information is executed, typically within a sandboxed environment, and malicious or potentially malicious operations that run or attempt to run are intercepted and neutralized by the mobile protection code according to set protection policies. Id. col. 3:22-40.

         The ’844 patent, titled “System and Method for Attaching a Downloadable Security Profile to a Downloadable, ” issued on November 28, 2000 and lists Shlomo Touboul and Nachshon Gal as inventors. This patent claims a system and methods of network protection wherein an inspector reviews a piece of downloadable-information for suspicious code or behavior according to a set of rules. ’844 patent at col. 2:3-19. The inspector generates a profile characterizing the areas of suspicion and then attaches that profile to the downloadable-information. Id. The profile can include other unique identifiers and certificates that are later read by a protection engine to determine whether or not to trust the profile. Id. col. 20-48. By providing verifiable profiles, the object of the invention is to provide flexible, efficient protection against known and unknown hostile downloadable information without having to re-inspect the same piece of downloadable-information each time. Id. col. 2:61-3:7.

         The ’731 patent, titled “Method and System for Caching at Secure Gateways, ” issued on August 26, 2008 and lists Shlomo Touboul as the sole inventor. This patent describes systems and methods of operating computer and network gateways that protect an intranet of computers. The claimed invention provides for caching of security information and policies at the gateway. ’731 patent at Abstract. This caching mitigates network latency-delay in the transmission of data- caused when the gateway processes downloadable information to protect intranet devices. Id. col. 1:55-67.

         The Court held a Markman hearing on August 22, 2014 and construed ten terms. ECF 118. Finjan moved for summary judgment of infringement, ECF 179, and Blue Coat moved for summary judgment of non-infringement of the asserted patent claims, ECF 174. The Court denied Finjan’s motion for summary judgment and finding Blue Coat’s ProxySG Pop-Up Blocker did not infringe the ’822 and ’633 patents, granted in part Blue Coat’s motion. Order on SJ 25, ECF 184.

         From July 20, 2015 to August 3, 2015, the Court held a jury trial regarding Blue Coat’s alleged infringement. At trial, Finjan asserted claims 1, 7, 11, 15, and 41 of the ’844 patent, claims 9 and 10 of the ’822 patent, claim 14 of the ’633 patent, claims 1 and 17 of the ’731 patent, claim 1 of the ’968 patent, and claims 9 and 13 of the ’780 patens. Verdict 2, ECF 438. At the close of Finjan’s case, Blue Coat moved for judgment as a matter of law on all claims of infringement, judgment as a matter of law pursuant to the Court’s claim constructions, and judgment as a matter of law on damages. Trial Tr. 1179:4-18, ECF 428. At the close of all evidence, Blue Coat renewed its request for judgment as a matter of law as to infringement and damages, and moved for judgment as a matter of law as to invalidity of all asserted claims. Trial Tr. 1977:15-21, ECF 433. Finjan moved for judgment as a matter of law on all asserted claims with respect to infringement, validity, and damages. Trial Tr. 1867:11-14. The Court allowed all issues to reach the jury. Trial Tr. 1987:24-1988:1.

         On August 4, 2015, the jury returned its verdict. Verdict, ECF 438. The jury found that Blue Coat literally infringed claims 1, 7, 11, 15, and 41 of the ’844 patent, claims 1 and 17 of the ’731 patent, claim 1 of the ’968 patent, and claim 9 and 13 of the ’780 patent. Id. at 2. The jury also found that Blue Coat infringed claim 14 of the ’633 patent under the doctrine of equivalents. Id. at 3. The jury found Blue Coat did not infringe, either literally or under the doctrine of equivalents, claims 9 and 10 of the ’822 patent. Id. 2-3. In addition, the jury found Blue Coat did not prove the asserted claims were anticipated by clear and convincing evidence. Id. at 5. The jury awarded Finjan $24, 000, 000 for Blue Coat’s infringement of the ’844 patent, $1, 667, 000 for infringement of the ’633 patent, $6, 000, 000 for infringement of the ’731 patent, $7, 750, 000 for infringement of the ’968 patent, and $111, 787 for infringement of the ’780 patent. Id. 6-7.

         On September 9, 2015, the Court held a bench trial regarding priority dates for the ’844 and ’731 patents, prosecution history estoppel, patent eligibility of the ’844 patent, and laches. On November 20, 2015, the Court issued its findings of facts and conclusions of law. Order Regarding Non-Jury Legal Issues, ECF 486. The Court found that Finjan had not met its burden to show that the priority date of the ’844 patent is November 8, 1996 and thus, the presumptive invention date of the ’844 patent is December 22, 1997; the priority date of the ’731 patent is November 6, 1997; prosecution history estoppel does not preclude Finjan from asserting infringement of the ’633 patent under the doctrine of equivalents; Blue Coat had not met its burden to show the ’844 patent is patent ineligible; and Blue Coat’s defense of laches is moot. Id. That same day, the Court entered judgment. ECF 487.

         The parties filed their respective post-trial motions on December 4, 2015, ECF 492, and December 18, 2015, ECF 498, 499, 500, 505, and the Court held a hearing on these motions on April 28, 2016, ECF 538.

         II.BLUE COAT’S MOTION FOR JUDGMENT AS A MATTER OF LAW AND MOTION FOR A NEW TRIAL AND AMEND THE JUDGMENT

         A. Legal Standard

         In a patent infringement case, the Federal Circuit applies the law of the regional circuit with respect to matters of procedural law. Wordtech Sys., Inc. v. Integrated Network Solutions, 609 F.3d 1308, 1318-19 (Fed. Cir. 2010).

         1. Motion for Judgment as a Matter of Law

         Federal Rule of Civil Procedure 50(b) allows a party to renew no later than 28 days after the entry of judgment, a motion of for judgment as a matter law made under Rule 50(a) that was not granted by the Court. Fed.R.Civ.P. 50(b). Under Ninth Circuit law, a renewed motion for judgment as a matter of law should be granted “if the evidence, construed in the light most favorable to the nonmoving party, permits only one reasonable conclusion, and that conclusion is contrary to the jury’s verdict.” Pavao v. Pagay, 307 F.3d 915, 918 (9th Cir. 2002); see also Old Town Canoe Co. v. Confluence Holdings Corp., 448 F.3d 1309, 1314 (Fed. Cir. 2006) (“A motion for JMOL is properly granted only if no reasonable juror could find in the non-movant’s favor.”) (citing Sanghvi v. City of Claremont, 328 F.3d 532, 536 (9th Cir. 2003)).

         In reviewing a motion for a judgment as a matter of law, “the court must draw all reasonable inferences in favor of the nonmoving party.” Escriba v. Foster Poultry Farms, Inc., 743 F.3d 1236, 1241 (9th Cir. 2014). “‘[A]lthough the court should review the record as a whole, it must disregard evidence favorable to the moving party that the jury is not required to believe, ’ and may not substitute its view of the evidence for that of the jury.” Johnson v. Paradise Valley Unified Sch. Dist., 251 F.3d 1222, 1227 (9th Cir. 2001)(quoting Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000)). “[T]he court must not weigh the evidence, but should simply ask whether the plaintiff has presented sufficient evidence to support the jury’s conclusion.” Harper v. City of Los Angeles, 533 F.3d 1010, 1021 (9th Cir. 2008).

         2. Motion for a New Trial

         Under Federal Rule of Civil Procedure 59(a)(1), a court “may, on motion, grant a new trial on all or some of the issues.” A court may grant a new trial “if the verdict is contrary to the clear weight of the evidence, is based upon false or perjurious evidence, or to prevent a miscarriage of justice.” Molski v. M.J. Cable, Inc., 481 F.3d 724, 729 (9th Cir. 2007). A judge should not grant a new trial unless she “is left with the definite and firm conviction that a mistake has been committed.” Landes Constr. Co. v. Royal Bank of Canada, 833 F.2d 1365, 1371-72 (9th Cir. 1987) (internal citations omitted). In considering a Rule 59(a) motion for a new trial, the court “is not required to view the trial evidence in the light most favorable to the verdict. Instead, the district court can weigh the evidence and assess the credibility of the witnesses.” Experience Hendrix L.L.C. v. Hendrixlicensing.com Ltd, 762 F.3d 829, 842 (9th Cir. 2014). “Ultimately, the district court can grant a new trial under Rule 59 on any ground necessary to prevent a miscarriage of justice.” Id. (citing Murphy v. City of Long Beach, 914 F.2d 183, 187 (9th Cir. 1990)). A trial court should grant a motion for a new trial if (1) the jury instructions were erroneous or inadequate, (2) the court made incorrect and prejudicial admissibility rulings, or (3) the verdict is contrary to the great weight of the evidence. See Chiron Corp. v. Genentech, Inc., 363 F.3d 1247, 1258 (Fed. Cir. 2004).

         B.Overview

         All of the issues raised in Blue Coat’s Rule 50(b) motion are also raised in Blue Coat’s Rule 59 motion for a new trial. As a result, the Court addresses the issues in the order set forth in Blue Coat’s Rule 59 motion. Where issues overlap between the Rule 59 and Rule 50(b) motion, the Court discusses them together.

         In both motions, Blue Coat moved for relief on some issues only in short conclusory statements, often in footnotes. See, e.g. Mot. for New Trial 7 n. 10 (“The erroneous jury instructions with regards to damages also warrants a new trial. (See Dkt. 425.) So too do erroneous claim constructions.”); see also id. at 14 n. 16 (“Blue Coat still contends that claim 14 is invalid for the reasons explained in its claim construction brief and motion for summary judgment motion.”). Where Blue Coat made conclusory arguments or attempted to incorporate other filings by reference, the Court will not address those arguments further and summarily denies the motions on the grounds previously stated by the Court. See Asetek Danmark A/S v. CMI USA, Inc., Case No. 13-cv-00457-JST, 2015 WL 5568360, at *10; Kohler v. Inter-Tel Techs., 244 F.3d 1167, 1182 (9th Cir. 2001) (“Issues raised in a brief which are not supported by argument are deemed abandoned.”).

         C. Settlement Agreements

         In support of its damages case, Finjan presented a number of settlement agreements in other cases along with other licensing agreements. Blue Coat argues the admission of the following three settlement agreements was contrary to law and highly prejudicial: (1) 2012 settlement agreement with Webroot; (2) 2010 settlement agreement with Intel/McAfee; (3) 2014 settlement agreement with Websense. Mot. for New Trial 2-5, ECF 499. According to Blue Coat, under the Federal Circuit’s decision in Lucent Tech., Inc. v. Gateway, Inc., 580 F.3d 1301 (Fed. Cir. 2009), settlement agreements are only admissible in limited circumstances that are not present in this case. Moreover, Blue Coat argues the settlement agreements were not comparable to the hypothetical negotiation because they took place years after the hypothetical negotiation. Id. at 3. Finally, Blue Coat argues the jury instructions regarding settlement agreements were erroneous because they did not inform the jury that the admitted settlement agreements did not properly reflect a hypothetical negotiation between the parties. Id. at 5. Finjan responds that the admission of these three settlement agreements does not warrant a new trial. Opp. to New Trial 1-4, ECF 518.

         The Court disagrees with Blue Coat and finds the admission of the three settlement agreements was not contrary to law and not highly prejudicial. First, Blue Coat’s reliance on Lucent is not persuasive. In Lucent, plaintiff’s expert relied upon one settlement agreement that was drastically different than other available license agreements and resulted in a damages award three to four times larger than any amount in evidence. Id. at 1328-32. Here, Finjan used the three disputed settlement agreements as further support for a reasonable royalty within the range suggested by Finjan’s other license agreement. See, e.g., Trial Tr. 1089:6-9 (“But here the royalty that they used here to calculate the settlement payment falls exactly in the range of both the arms length agreements…”); see also GPNE Corp. v. Apple, Inc., Case No. 12-cv-02885-LHK, 2014 WL 1494247, at *7 (N.D. Cal. Apr. 16. 2014).

         As to the fact that the settlement agreements took place after the date of the hypothetical negotiation, under the facts of this case, where Finjan’s business model is based “entirely on litigation and licensing of [its] patents, ” Finjan’s licenses are probative of the royalty to which the parties would have agreed in a hypothetical negotiation. GPNE, 2014 WL 1494247, at *7.

         Finally, the Court does not find persuasive Blue Coat’s argument that the jury instruction regarding settlement agreements did not inform the jury that “the settlement agreements fail to properly reflect a hypothetical negotiation between the parties…[and]… have little probative value to the question of royalty damages.” The Court provided a separate instruction that specifically addressed Blue Coat’s concern by stating that “settlement agreements are negotiated on dates earlier or later than the [hypothetical negotiation date]” and that the license fees negotiated by a settlement may be influenced by factors unrelated to the value of a patent. Jury Instructions 47, ECF 437. The record shows that Blue Coat had ample opportunity to distinguish these settlement agreements through fact and expert testimony and to argue to the jury, consistent with the jury instruction given by the Court, that no weight should be given to them. However, admission of these agreements in light of the other evidence of comparable licenses was not erroneous and not prejudicial. The Court concludes a new trial is not warranted as a result of the admission of the settlement agreements.

         D. Total Product Revenues

         Blue Coat argues that allowing evidence of the total product revenue for the accused products and services was contrary to law and highly prejudicial. Mot. for New Trial 6, ECF 499. In response, Finjan argues that Blue Coat waived this argument by not objecting to the presentation of this testimony. Opp. to New Trial 4, ECF 518. In reply, Blue Coat argues that it objected to this testimony by making a motion in limine to preclude the admissibility of the total revenue for each of the accused products. Reply to New Trial 4, ECF 526.

         The admission of total product revenue was neither contrary to law nor highly prejudicial. The Court allowed total product revenue into evidence because it was potentially relevant to Dr. Layne-Farrar’s damages analysis under the Georgia-Pacific factors. Order Regarding MILS 7, ECF 367. Contrary to Blue Coat’s argument, there is not a per se prohibition on the admission of total product revenue. Blue Coat now claims that Finjan did not properly utilize total product revenue during trial, but anticipating this concern, the Court previously stated in its order regarding the parties’ motions in limine that it “w[ould] permit [Finjan] to use such revenues and acquisition valuations as a starting point for a properly apportioned royalty base. [If Finjan] fails to adequately develop such testimony concerning apportionment, [Blue Coat] may move to strike the evidence from the record.” Blue Coat’s argument, however, comes too late. To the extent that Finjan never connected total product revenues to a properly apportioned royalty base, Blue Coat never made that objection at trial and has thus waived that objection. Accordingly, a new trial is not warranted on the basis of the admission of total product revenues.

         E.Damages Award

         1. ’844 Patent

         Blue Coat argues that there is no factual or legal support for the jury’s damages award regarding the ’844 patent. Mot. for New Trial 6-7, ECF 499. According to Blue Coat, Finjan asked the jury to award it $24 million based on WebPulse’s 75 million users multiplied by 4%, the portion of web requests processed by DRTR, multiplied by an $8 per user royalty. Id. Blue Coat argues that Finjan’s use of 75 million users improperly includes extraterritorial instances of alleged infringement. Id. Blue Coat also argues that Finjan’s use of a 4% apportionment did not properly apportion out the non-infringing functions of DRTR. JMOL 3, ECF 498. Finally, Blue Coat argues that the $8 per user fee did not reflect Finjan’s licensing practices at the time of the hypothetical negotiation. Id. at 3-5.

         Finjan responds that it presented unrebutted evidence that WebPulse was developed and updated within the United States, Opp. to New Trial 6, ECF 518 and that at the time of the hypothetical negotiation the parties would have agreed to $8 per user royalty, Opp. to JMOL 2, ECF 516. Finjan also argues that it properly apportioned WebPulse to the patented invention’s footprint. Id. at 3.

         After reviewing the evidence, the Court agrees with Finjan. First, Finjan expressly addressed the territoriality of WebPulse’s users during trial. Dr. Layne-Farrar discussed how “with the patents you only have to pay if the accused product is made or use or sold within the jurisdiction of that patent.” Trial Tr. 1106:4-6. With respect to WebPulse, Dr. Layne-Farrar testified that it was “made in the U.S., it’s the cloud product…that’s pushed and it’s pushed out of Utah. So, again, that would have been covered out of these patents because it was made in the U.S.” Trial Tr. 1106:11-15. This was unrebutted as Blue Coat did not ...


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