Judge Alsup Tees Up Fee Award Against Finjan, Calling Case Against Juniper a “Fiasco”

  • January 17, 2021
  • Category: Patent Litigation Feature

Finjan, Inc. has just seen another setback in its Northern District of California litigation against Juniper Networks (3:17-cv-05659). On January 9, District Judge William Alsup ruled that much of the NPE’s case against Juniper had been “exceptional” under Octane, due in part to Finjan’s attempt to switch out its infringement theory on the eve of trial—a misstep that led Judge Alsup to throw out its entire damages case. That decision sets the stage for an award of attorney fees against Finjan for its litigation conduct, which Judge Alsup repeatedly decried as having “wasted a great deal of everyone’s time and energy”.

Finjan, which was acquired by Fortress Investment Group LLC last July, filed its lawsuit against Juniper in September 2017 (3:17-cv-05659). The NPE’s complaint accused the company of infringing eight patents—with two later dropped, and another added—through the provision of various antivirus, cloud, and sandboxing products and technologies, including Juniper’s SRX Gateways, Sky ATP, and/or Junos Space Security Director. The following February, Judge Alsup ordered the parties to engage in a “shootout”, a narrowing procedure that he first introduced in early 2017 as a way, in his opinion, to more efficiently get to the merits of a patent case. In a shootout, the plaintiff is required to choose a single patent claim for which it thinks it has the strongest arguments and then to move for summary judgment of infringement and validity as to that sole claim. The defendant, in turn, must pick a “weakest claim” and move for summary judgment of noninfringement and invalidity. If successful, the plaintiff would possibly be awarded a preliminary injunction; and if unsuccessful, the court might “impose a sanctions award on them sua sponte for bringing such a ridiculous claim”.

Two such shootouts occurred over the course of the litigation, and the manner in which Finjan pursued certain key aspects of its case throughout both of those stages led him to conclude in his January 2021 order that the case had been “exceptional”.

The first of the two shootouts were partially resolved in Juniper’s favor in August 2018, when Judge Alsup granted the defendant’s shootout motion as to noninfringement—holding that the company’s SRX Gateway and Sky ATP products do not infringe claim 1 of Finjan’s 6,804,780 patent under the construction of the phrase “performing a hashing function”. Later that month, Judge Alsup then issued an order addressing Finjan’s motion, in which the NPE sought a judgment of infringement and validity as to claim 10 of the 8,677,494 patent. While Judge Alsup partially granted the motion as to infringement for certain claim limitations, he struggled with the application of the parties’ agreed-upon definition of “database” to the identified structures before him, deferring any further, clarifying construction of the term “until the jury is instructed so that the Court will have the benefit of the trial record before construing the term”. He scheduled a trial as to Juniper’s infringement under that construction in December 2018, leading to a verdict of noninfringement as to claim 10 of the ‘494 patent later that month. That verdict, and the case’s other judgments in Juniper’s favor, were later summarily affirmed by the Federal Circuit, before which Finjan had already stipulated to the dismissal with prejudice of its other claims.

Finjan’s pursuit of a flawed damages case both immediately before and during the December 2018 trial led to several rebukes from the court—and Judge Alsup would later describe that conduct, in his January 2021 exceptionality order, as a “fiasco [that] wasted a great deal of everyone’s time and energy”. Key among the underlying missteps was the NPE’s belated attempt to revamp its infringement case: as subsequently recounted by Judge Alsup, “[a]fter discovering its infringement theory covered only a minute portion of Juniper’s revenue base, on the eve of [trial] Finjan flip flopped and came up with a new infringement theory, one which would capture more of Juniper’s products and inflate the target revenue base”. In particular, as previously reported by RPX, Finjan had sought to establish a $7.2M royalty base through the testimony of its damages expert, but Juniper argued that this opinion overreached, in that it counted SRX devices for which the Sky ATP addon had not been installed (as required for infringement). Rather, the company argued, the maximum royalty base—including revenue from the paid version of Sky ATP (a freemium product) and from SRX devices with Sky ATP installed—was just $1.8M. Judge Alsup apparently agreed and excluded the entire damages theory: “Finjan tried to sneak this theory in with its expert-damages report, but we caught it, and the Daubert order excluded that trick”.

Finjan then tried to present a “facts-only damages case” to the jury—an attempt, Judge Alsup underscored, that “utterly failed”. For example, a Finjan executive testified as to what the NPE would have asked from Juniper during negotiations, but Judge Alsup struck that “prejudicial testimony” as “patently irrelevant to the question of the hypothetical royalty that two reasonable parties might have agreed to” (as later summarized; emphasis in original). He then gave Finjan a “stern rebuke” and provided the jury with a limiting instruction. “More broadly”, continued Judge Alsup, “Finjan made no effort at trial to allocate the target revenue base between allegedly infringing product functions and noninfringing functions”, while its facts-only damages case “artificially attempt[ed] to inflate revenue to which it would be entitled” just as its expert had sought to do on the eve of trial. For those reasons, Judge Alsup ultimately struck Finjan’s entire damages case as “woefully inadequate”.

Between its insufficient damages case, and the fact that no injunction was available for the expired ‘494 patent, Judge Alsup lamented in his exceptionality order that the “whole song and dance came to nothing, even before the jury later rejected the merits of the infringement claim”. As a result, he concluded that “[t]he entire assertion of the ‘494 patent thus stood out as exceptional”.

Judge Alsup further faulted Finjan for its litigation conduct during the second shootout, during which Juniper sought and won summary judgment of noninfringement and invalidity of claim 9 of the ‘780 patent, the same patent that it had successfully targeted in the first round. Here, Judge Alsup found that Finjan should have dropped the patent from the case after Juniper’s initial victory, since claim 9 shared the claim limitation that formed the basis for the court’s ruling as to claim 1. Yet the NPE did not; indeed, Judge Alsup noted, Finjan not only kept that claim “in the running” for round two, it “even expanded the scope of accused products”—only to fail to oppose Juniper’s second shootout motion as to the majority of those products. “Just as both parties have a joint duty to frame dispositive issues with good judgment”, explained Judge Alsup, “each party has an individual duty to continually reevaluate the viability of its claims. Finjan shirked its end of both of those duties and again wasted everyone’s time and energy in instigating this motion aspect”. Between those errors and several others related to the second shootout, Judge Alsup found that “Finjan’s assertion of the ‘780 patent stands out as exceptional as well”.

That said, Judge Alsup also declined to find that Finjan’s conduct had been exceptional across the board. For instance, he held that the NPE was within its rights not to accept “claim constructions regarding the ‘154 patent from other tribunals”, countering that the plaintiff “had every right to distinguish and even argue against earlier nonbinding claim constructions by the Patent Trial and Appeal Board and unpublished Federal Circuit memoranda” (emphasis in original). Under the circumstances, Judge Alsup ruled that a fee award in this case should be “limited narrowly to time spent defending against the specific patents tainted by that misconduct”.

Having so ruled, Judge Alsup concluded by reiterating his exceptionality finding as to Finjan’s litigation of the ‘494 and ‘780 patents but declining to award fees just yet. Rather, he ordered Juniper to resubmit its billing records in order to limit them to fees incurred for time spent on those two patents. In a separate order issued that same day, Judge Alsup then proposed the appointment of a special master to oversee the remainder of the fee dispute.

Judge Alsup’s January rulings are the latest of several setbacks suffered by Finjan since the start of last year. In March, the NPE’s Southern District of California case against ESET (3:17-cv-00183) made its way to trial, only to see District Judge Cathy Ann Bencivengo declare a mistrial on the fifth day, with the agreement of counsel, in light of COVID-19. Also delayed was its Northern District of California trial against Cisco (5:17-cv-00072), which in mid-December District Judge Beth Labson Freeman pushed from January 11 to June 4. While that order does not specifically cite the pandemic as the reason, the court had already thrice continued the case as a result of COVID-19. After reportedly stating in April that she was “fairly confident” the trial could be held on its originally scheduled date in June 2020, Judge Freeman continued the trial the following month—moving it to October 19 to allow the court to clear its backlog of criminal cases. Judge Freeman then delayed the case again to November 2 after Cisco raised additional public health concerns, and postponed the case one more time on October 26 to the just-vacated date of January 11.

Also impacted by COVID-19 has been a lawsuit filed against Intel by another Fortress subsidiary, VLSI Technology LLC, in the Western District of Texas (1:19-cv-00977)—where presiding District Judge Alan D. Albright has taken more of a wait-and-see approach to jury trials during the pandemic. Late last year, he moved a trial scheduled in that case from Austin, where the courthouse remains closed, to Waco, in an attempt to proceed with a scheduled January trial. However, the Federal Circuit ruled on December 23 that Judge Albright moved the trial without proper authority and that doing so would require a complete convenience analysis to determine whether the entire case could be transferred to Waco. On December 30, Judge Albright granted plaintiff VLSI’s emergency motion for such a transfer, also announcing that he would push the trial back to mid-February to give Intel time to appeal.

As that appeal proceeds, another issue being litigated is the impact of Fortress’s acquisition of Finjan on the VLSI campaign. Late last year, Intel disclosed that it holds a license to Finjan’s portfolio under a 2012 license agreement that grants to it rights to patents held by Finjan and its “affiliates”. On January 11, Intel filed suit against Fortress in the Delaware Court of Chancery, reportedly seeking a judgment that that Finjan license now also covers all patents held by Fortress and its affiliates, including VLSI, because when Fortress acquired Finjan, they all became “affiliated” under the terms of the agreement.

See here for more on other recent developments in the VLSI campaign.

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