Finjan, Inc. v. Blue Coat Systems, Inc.
879 F.3d 1299 (Fed. Cir. 2018)
Authored by Lee Seitz
Statement of Facts: Finjan, Inc. sued Blue Coat Systems, Inc. for infringement of multiple patents concerning malware identification and protection. After trial, the jury found that Blue Coat infringed on four of Finjan’s patents and awarded Finjan $39.5 million. Following a bench trial, the District Court for the Northern District of California found that U.S. Patent No. 6,154,844 (“the ’844 patent”) is directed to patent-eligible subject matter under 35 U.S.C. § 284.
Procedural History: The district court denied Blue Coat’s motions for judgment as a matter of law and a new trial, holding that Finjan had provided substantial evidence to support each finding of infringement and the damages award. Bloat Coat appealed to the Federal Circuit.
Questions Presented: First, whether the district court erred in finding that the ’844 patent’s subject matter was eligible for a patent. Second, whether Blue Coat infringed Finjan’s ’844 patent, U.S. Patent No. 7,418, 731 (“the ’731 patent”), and U.S. Patent No. 6,965,968 (“the ’968 patent”). Third, whether the damages were adequate to compensate for the infringement, where the damages apportioned equal a “reasonable royalty [Finjan] would have received through arms-length bargaining.” 879 F.3d at 1309 (citing Lucent Technologies, Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009).
Holdings: First, no. No error exists in the district court’s subject matter eligibility determination as to the ’844 patent. Second, yes. Substantial evidence supports the jury’s finding of infringement of the ’844 and ’731 patents. However, the district court should have granted judgment as a matter of law motion for the ’968 patent. Third, the awards for the ’731 and ’633 patents were affirmed but the award for the ’968 patent was vacated. The award for the ’844 patent is remanded to the district court for further consideration.
Reasoning: Whether the subject matter of Patent ’844 was patent eligible depends on the two-step framework in Alice Corp. v. CLS Bank International, 134 S. Ct. 2347, 2355 (2014) (“Alice”). For the first step, the court must determine whether the claims are directed to an abstract idea. Id. Because of the result in step one, the court did not proceed to step two of Alice. The court relied on precedent to determine that both general virus screening and virus screening on an intermediate computer are abstract ideas for purposes of patentability, however, the court noted that the claimed method in the ’844 patent does more than that. The ’844 patent includes a behavior-based scan instead of a conventional code-matching scan, and this characteristic represents an improvement in computer functionality. Additionally, the ’844 patent’s approach enables more flexible and nuanced virus filtering. The asserted claims are directed to a non-abstract improvement in computer functionality.
Even assuming the claims are directed to a new idea, Blue Coat argues that the ideas are abstract because Finjan did not sufficiently describe how to implement the idea. Blue Coat cites several cases in support of its arguments, and the court states that these cases stand for the principle that “a result, even an innovative result, is not itself patentable.” 879 F.3d at 1305. In conclusion, the court finds that the claims recite more than a mere result; instead, the ’844 patent represents a non-abstract idea.
Next, the court discusses the jury finding that Blue Coat’s products infringed on the ’844, ’731, and ’968 patents. Blue Coat argues that its product does not infringe because the ’844 patent involves a server-side product evaluating content and linking a security profile to a downloadable before publishing it to the Internet. Alternatively, Blue Coat’s product uses a cloud-based service that evaluates content. The court finds that Blue Coat’s argument is a claim construction issue that it cannot raise for the first time in a post-trial motion. Because of this and the construction presented to the jury, the ’844 patent was supported by substantial evidence.
Blue Coat argues that its product does not infringe on the ’731 patent. The ’731 patent protects a private intranet from malicious software embedded in webpages on the public Internet. The product creates security profiles that comprise a list of computer commands that the file is programmed to perform. Blue Coat argues that its product did not infringe because its product does not contain the requisite list of computer commands. However, below, Blue Coat did not request a construction of the list of commands term. Therefore, the court applied the ordinary meaning of the term. At trial, Finjan presented expert testimony that Blue Coat’s product contained a list of computer commands. The court found that the claim language simply requires a security profile to include a list of computer commands that a corresponding one of the incoming files is programmed to perform. Substantial evidence supports the jury’s finding that the list of commands limitation is satisfied by the certain integers in Blue Coat’s product that Finjan presented as evidence.
Blue Coat argues that its product does not infringe on the ’968 patent. This patent is a program that determines whether a user can access a piece of content based on a policy index; the program saves the results of those policy determination in the policy index. Relying on testimony from Finjan’s expert, the court found that Finjan did not prove that the Blue Coat’s product saves final allowability determinations. Therefore, the jury’s finding that the ’968 patent was infringed is not supported by substantial evidence and Blue Coat was entitled to judgment as a matter of law.
The court noted that Finjan failed to apportion damages to the infringing functionality of the ’844 patent for two reasons. First, Finjan found that the Blue Coat product’s component that performs the infringing method accounts for 4% of that product’s entire web traffic—which is 75 million users. Finjan focused on that specific component because Finjan claimed it is the “smallest, identifiable technical component” tied to the footprint of the invention. 879 F.3d at 1311. However, the component also performs non-infringing features, so further apportionment for purposes of damages is required. Second, once Finjan determined the number of users, Finjan then multiplied that number by a rate of $8 per user, but no evidence exists to support this rate. Finjan’s rationale was that the price is Finjan’s starting price during negotiations and that the this was the rate for damages in previous litigation, but Finjan’s reasons fail to present a case to support the jury’s verdict.
For damages concerning the ’731 and ’633 patents, Finjan’s expert used a Blue Coat diagram that breaks the Blue Coat product into twenty-four parts. Finjan’s expert found that one function infringed the ’633 patent and three functions infringed the ’731 patent. The apportionment is then 1/24th and 3/24, respectively. Blue Coat argues that each of the twenty-four boxes should not be treated as equal; however, the expert’s reliance on Blue Coat’s own diagram and testimony from a Blue Coat engineer for the conclusion that the boxes are equal is substantial evidence.