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Finjan, Inc. v. Cisco Systems Inc.

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

June 7, 2017

FINJAN, INC., Plaintiff,
v.
CISCO SYSTEMS INC., Defendant.

          ORDER GRANTING DEFENDANT CISCO SYSTEMS, INC.'S MOTION TO DISMISS WITH LEAVE TO AMEND

          BETH LABSON FREEMAN United States District Judge

         Defendant Cisco Systems, Inc. (“Cisco”) moves to dismiss the claims of willful infringement in the First Amended Complaint (“FAC”) filed by Plaintiff Finjan, Inc. (“Finjan”). Pursuant to Civil Local Rule 7-1(b), the Court finds the instant motion suitable for decision without oral argument and hereby VACATES the hearing set for July 20, 2017. For the reasons discussed below, the Court GRANTS Cisco's motion with leave to amend.

         I. BACKGROUND

         Finjan initiated the present lawsuit on January 6, 2017, alleging that Cisco infringed five of its patents: U.S. Patent No. 6, 154, 844 (“the '844 patent”), U.S. Patent No. 6, 804, 780 (“the '780 patent”), U.S. Patent No. 7, 647, 633 (“the '633 patent”), U.S. Patent No. 8, 141, 154 (“the '154 patent”); and U.S. Patent No. 8, 677, 494 (“the '494 patent”) (collectively, the “Asserted Patents”). ECF 1. For each of these patents, Finjan alleged willful infringement, premised on the theory that

Defendant is well aware of Finjan's patents, including the [Asserted Patents], and have [sic] continued its infringing activity despite this knowledge. Finjan informed Defendant of its patent portfolio and infringement on or about March 2014, and have provided representative claim charts specifically identifying how Defendant's products and services infringe Finjan's patents. Finjan attempted unsuccessfully to actively engage in good faith negotiations for over two years with Defendant regarding Finjan's patent portfolio, including having a number of in-person and telephonic meetings explaining claim element by element of Defendant's infringement.
Despite knowledge of Finjan's patent portfolio, being provided representative claim charts of several Finjan patents, including the [Asserted Patents], and engaging in technical meetings regarding infringement of Defendant's products and services, Defendant has sold and continues to sell the accused products and services in complete disregard of Finjan's patent rights. As such, Defendant has acted recklessly and continues to willfully, wantonly, and deliberately engage in acts of infringement of the [Asserted Patents], justifying an award to Finjan of increased damages under 35 U.S.C. § 284, and attorneys' fees and costs incurred under 35 U.S.C. § 285.

Id. ¶¶ 57, 58, 72, 73, 88, 89, 103, 104, 114, 115. Another part of the complaint elaborated that, in March 2014, “Finjan entered into licensing discussions with Cisco under a mutual non-disclosure and standstill agreement (‘Agreement') dated March 21, 2014.” Id. ¶ 9. However, “[t]he Agreement for these discussions had been extended five times for a period of over two years, and has now expired.” Id.

         Cisco answered on March 6, 2017. ECF 24. In addition, it counterclaimed for breach of contract of the Agreement, which provided that

[t]he parties agree that neither disclosing party's disclosure to receiving party of any Property [sic] Information during the Discussion Period, nor receiving party's possession of such Proprietary Information pursuant to this Agreement and resulting from a disclosure during the Discussion Period, shall constitute, or be used by disclosing party or any third party as evidence in any legal action either to prove or disprove the validity, notice, or an accusation of infringement of any intellectual property rights for any purpose, including without limitation for the purpose of . . . pursuing . . . enhanced damages due to alleged willful infringement.

Id. ¶ 8. Cisco alleged that, by using the using the information exchanged under the Agreement in March 2014 to support its willfulness claims, Finjan breached the Agreement. Id. ¶ 9.

         On March 27, 2017, Finjan filed its FAC, which removed all references to the parties' 2013 licensing discussions or the Agreement. Instead, Finjan alleged that

Finjan and Cisco's relationship dates back over two decades. In the late 1990's, the parties entered into an original equipment manufacturer agreement that allowed Cisco to incorporate Finjan's technology into Cisco's product. Seeing the value of Finjan's technology, Cisco made multiple substantial financial investments in Finjan beginning as early as 2004. At the time of these investments, Cisco knew of Finjan's patent portfolio and patented technology. Cisco continued to gain knowledge about Finjan and its patents and patented technology after investing in Finjan. For example, pursuant to the parties' agreement, Cisco had an observer attend Finjan's board of director meetings. Cisco also attended presentations by Finjan in which Finjan discussed its issued and pending patents and its patented technology. As of June 2013, when Finjan became a publicly traded company, Cisco was the beneficial owner of shares of Finjan, and currently maintains ownership of shares of Finjan. Throughout the years Cisco and Finjan maintained an amicable relationship and consistently collaborated together on cybersecurity. However, in the second half of 2013, Cisco acquired the company Sourcefire, Inc. (“SourceFire”) and integrated that company's appliances and technology into Cisco's own product lines. Finjan patents cover technology acquired in the SourceFire deal, along with other unlicensed technologies that Cisco has implemented over the years.

FAC ¶ 9, ECF 26. It modified its willfulness allegations as follows:

Defendant is well aware of Finjan's patents, including the [Asserted Patents], and has continued its infringing activity despite this knowledge. Finjan and Cisco's relationship dates back over two decades. In the late 1990's, the parties entered into an original equipment manufacturer agreement that allowed Cisco to incorporate Finjan's technology into Cisco's product. Seeing the value of Finjan's technology, Cisco made multiple substantial financial investments in Finjan beginning as early as 2004. At the time of these investments, Cisco knew of Finjan's patent portfolio and patented technology. Cisco continued to gain knowledge about Finjan and its patents and patented technology after investing in Finjan. For example, pursuant to the parties' agreement, Cisco had an observer attend Finjan's board of director meetings. Cisco also attended presentations by Finjan in which Finjan discussed its issued and pending patents and its patented technology. As of June 2013, when Finjan became a publicly traded company, Cisco was ...

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