Judge Alsup Awards $5.9M in Fees to Juniper in Finjan Case, Flagging NPE’s “Improper” Conduct

July 30, 2021

Finjan Holdings, Inc. has hit another stumbling block in its infringement suit against Juniper Networks, just over six months after District Judge William Alsup ruled that the NPE’s litigation conduct had rendered the case “exceptional” under Octane. On July 26, Judge Alsup adopted the recommendation of a special master and awarded Juniper $5.9M in attorney fees, nearly all of what the defendant had originally sought. Judge Alsup also declined to impose sanctions against the plaintiff, though he emphasized that there had still been “improper conduct by Finjan and its counsel”—adding that his ruling “[i]n no way . . . vindicate[s]” the conduct of the NPE’s attorneys.

Finjan’s Litigation Conduct Prompts a Rebuke from Judge Alsup

Finjan, which was acquired by Fortress Investment Group LLC in July 2020, sued Juniper in September 2017 (3:17-cv-05659) over the provision of various antivirus, cloud, and sandboxing products and technologies. In February 2018, Judge Alsup ordered the parties to engage in a “shootout”, a narrowing procedure in which litigants must move for summary judgment as to a single patent claim for which they believe they have the strongest arguments as to infringement and validity for the plaintiff, and the opposite for the defendant. 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 Judge Alsup to conclude in a January 2021 order that the case had been “exceptional” under Octane.

In particular, Judge Alsup flagged several instances of problematic litigation conduct related to the first shootout, which proceeded to a jury trial in December 2018—ending in a verdict of noninfringement—after the court struggled to apply the parties’ agreed-upon definition of a key claim term (“database”) from the patent at issue (8,677,494). Among that problematic conduct was Finjan’s attempt on the eve of trial to switch to a new infringement theory, introduced in a report from its damages expert, after realizing that its prior theory “covered only a minute portion of Juniper’s revenue base” (as later summarized by the court). This effort was unsuccessful, as Judge Alsup excluded the entire damages theory and rejected it as a “trick”, apparently agreeing with Juniper that the theory included products with noninfringing configurations, thereby inflating the royalty base.

In the wake of that setback, Finjan tried and failed to present a “facts-only damages case” at trial, but Judge Alsup was no more sympathetic—rejecting as prejudicial an executive’s testimony on what the NPE would have sought by Juniper, and providing a curative instruction to the jury. Judge Alsup further faulted the plaintiff for both failing to allocate the royalty base and for inflating it. This prompted the court to exclude Finjan’s entire damages case, leading Judge Alsup to conclude in January that “[t]he entire assertion of the ‘494 patent thus stood out as exceptional”.

Judge Alsup also objected to Finjan’s conduct during the second shootout, finding that the NPE should have dropped its claim as to the claim it selected from the ‘780 patent—as it contained the same claim limitation that formed the basis for the court’s noninfringement ruling in the first shootout (the one selected by Juniper for summary judgment, not the one that went to trial). Judge Alsup underscored that rather than dropping the claim, Finjan “even expanded the scope of accused products”. By shirking its duty to “continually reevaluate the viability of its claims” as to that claim, Judge Alsup found the NPE’s litigation conduct exceptional as to this patent as well. However, he found that Finjan’s conduct had not been exceptional as to the patent selected by Juniper (8,141,154), explaining that the NPE was within its rights to reject and argue against certain claim constructions issued by the Patent Trial and Appeal Board.

As a result, 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”. He subsequently appointed a special master, Matthew Borden, to determine the amount that should be awarded. In May, Borden recommended that Juniper be awarded $5.9M in attorney fees, just shy of the $6.2M sought by the defendant, including a relatively de minimis amount ($150K) for “fees on fees” (i.e., time spent litigating fees issues). Borden asserted that Juniper should be entitled to reimbursement of those fees, over certain Finjan objections, because “[l]ike the Battle of Verdun, high-stakes patent litigation can become a costly fight over inches and yards. When engaging in such combat, each side can expect that its adversary will respond in kind”. See here for details on the special master’s recommendation.

Judge Alsup Accepts the Special Master’s Fee Recommendation

On July 26, Judge Alsup adopted Borden’s recommendation and awarded Juniper the full $5.9M, rejecting Finjan’s challenges as to the scope of those fees.

Specifically, the NPE objected to the special master’s determination that fees were warranted for the entirety of the litigation as to the ‘494 and ‘780 patents. Judge Alsup overruled both objections, noting that Borden’s determination was directly based on the court’s order determining that the entirety of Finjan’s litigation conduct for those patents had been exceptional. As such, Judge Alsup found that the NPE was effectively seeking reconsideration of the court’s underlying exceptionality order as to both patents, rejecting those attempts as unrelated to the special master’s recommendation.

However, Judge Alsup stopped short of hitting Finjan with sanctions, as requested by Juniper in the form of its expert witness fees and travel expenses. The defendant had argued that several instances of alleged misconduct crossed the threshold warranting sanctions, including Finjan’s attempt to switch out its damages theory on the eve of the first shootout trial; its facts-only damages case during that trial; its assertion that a phone call had given Juniper notice of infringement, later disproven when a recording was produced; and the NPE’s misrepresentation of a certain district court decision in its arguments related to notice.

Judge Alsup determined that these instances of misconduct did not rise to the level that sanctions were warranted under 28 USC Section 1927 or the court’s inherent power—though he acknowledged that “[v]ociferous and belligerent ligating may transgress into conduct warranting sanctions, and the Fees Order did point out improper conduct by Finjan and its counsel”. While the NPE’s last-minute change to its damage theory was indeed a “blatant instance of ‘shifting sands’”, Judge Alsup found that this fell short of the level of misconduct detailed in an analogous Ninth Circuit decision that awarded sanctions based in part on the filing of fraudulent documents. Although the Finjan affidavit alleging actual notice had been proven untrue, Judge Alsup found that this conduct had merely been “reckless”, not “willfully false”.

That said, Judge Alsup saved one final barb for Finjan’s counsel, naming three attorneys whose “conduct was improper and frustrated the fairness of the proceedings. Judges in the future should take this into account when dealing with them in future cases”.

For more background on this case, including Finjan’s troubled damages case and the two shootouts, see “Jury Returns Noninfringement Verdict for Juniper in Finjan Suit Amidst Uncertainty over Definition of ‘Schema’” (December 2018).