Cisco’s Acts In IP Row Don’t Seem 'Egregious,' Judge Says
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Law360, San Jose (December 14, 2017, 4:40 PM EST) -- A California federal judge indicated Thursday that she’d likely toss willful infringement allegations from Finjan Inc.’s suit accusing Cisco Systems Inc. of buying and using technologies from a smaller company that infringe its cybersecurity patents, saying she didn’t see “egregious conduct” in the pleadings.
U.S. District Judge Beth Labson Freeman didn’t issue a final ruling Thursday on Cisco’s motion seeking to trim the willful infringement claims from the second revision of Finjan’s suit, telling the parties after oral arguments that she’d give the matter additional consideration. But she told Finjan’s counsel at the start that she was leaning in that direction.
“I just don't see anything I can get my hands on that suggests egregious conduct,” she said.
San Jose, California-based Finjan’s suit alleges that Cisco is infringing five of its patents covering ways to protect computers from malicious software and viruses when connected to the internet, citing Cisco’s failure to enter a licensing agreement despite knowledge of Finjan’s patent portfolio. The infringement began when Cisco acquired technology that infringes the patents-in-suit from a company called Sourcefire Inc., the complaint says, adding that because Cisco’s conduct was supposedly willful, it warrants enhanced damages.
During Thursday’s proceedings, Judge Freeman said while the amended complaint sufficiently pled that Cisco had knowledge of the patents, that wasn’t enough to show any infringement was willful.
“It's not an unusual situation for a company to purchase a smaller company in order to get a capability that they didn’t already have. You can pick up a Silicon Valley newspaper and we can see that that happens all the time,” the judge said.
Finjan attorney Paul Andre of Kramer Levin Naftalis & Frankel LLP argued that Finjan and Cisco have a 20-year relationship that included Cisco making financial investments in Finjan and previously being shareholders. As a result, Andre said, Cisco purportedly knew of Finjan’s patent portfolio and patented technology.
“They knew of our campaign to protect our intellectual property,” Andre said. “Now, if they go out and purchase technologies that they know to be infringing, or should know is infringing, that’s egregious.”
That was the problem, Judge Freeman replied: The complaint doesn’t include an allegation that Cisco purchased a product that they knew to be infringing. Andre said it was in the pleadings, that Cisco knew or should have known the technology was infringing.
“That's a conclusory statement, it's not fact-based,” Judge Freeman said.
Andre said that unless the court allows the claims to get to the discovery stage, Finjan won’t be able to secure such evidence.
“If we’re allowed to take discovery on this issue, my guess is we'll find a whole lot,” the attorney said. “As we sit now we don’t have that information, we can’t get behind the curtain.”
Cisco’s attorney Matthew Gaudet of Duane Morris LLP told the court that the complaint doesn’t include an allegation that Finjan told Cisco they were doing anything wrong.
“What’s required is knowledge of infringement,” Gaudet said. “That’s the willful piece.”
He also argued that Finjan hadn’t shown a “nexus” between the patents and the accused products.
“There is nothing that ever connects anything about any notice or the patents to the products we acquired from Sourcefire,” Gaudet said. “Nobody ever suggested to anybody that those products had anything to do with any Finjan patent.”
In June, Judge Freeman granted Cisco’s prior motion to dismiss the willful infringement allegations, but provided Finjan with leave to amend its suit. The complaint, she said, didn’t contain factual allegations that support the conclusion that Cisco had presuit knowledge of the asserted patents.
Finjan sued Cisco back in January, alleging the willful infringement occurred after Cisco bailed on patent licensing discussions. The plaintiff company said it spent about two years attempting to negotiate a licensing agreement with Cisco for patents that cover the technology acquired in the Sourcefire deal. But Cisco continued to sell the accused products — products that contain its Advanced Malware Protection, among others — without regard for Finjan’s IP rights, the complaint claimed.
Cisco responded to the lawsuit with a counterclaim alleging Finjan committed a breach of contract by using information from a nondisclosure agreement to support its willfulness claims. Finjan then filed a first amended complaint that altered its willfulness allegations, and Cisco followed up with a motion to dismiss, claiming Finjan failed to state a claim for willful infringement.
In her prior order dismissing the previous willful infringement allegations, Judge Freeman also said Finjan didn’t show how Cisco’s behavior rose to the “egregious” level of misconduct that warrants enhanced damages as set by the U.S. Supreme Court in last year's Halo Electronics Inc. v. Pulse Electronics Inc.
Under Halo, willfulness is not a prerequisite to awarding enhanced damages, nor are enhanced damages required upon a finding of willfulness, Judge Freeman said. Instead, enhanced damages are awarded in “egregious cases of misconduct beyond typical infringement,” such as those “typified by willful misconduct,” the judge said.
The patents-in-suit are U.S. Patent Numbers 6,154,844; 6,804,780; 7,647,633; 8,141,154 and 8,677,494.
Finjan is represented by Paul Andre, Lisa Koblialka and James Hannah of Kramer Levin Naftalis & Frankel LLP.
Cisco is represented by Patrick S. Salceda, L. Norwood Jameson, Matthew C. Gaudet, David C. Dotson, Jennifer H. Forte, Joseph A. Powers and Jarrad M. Gunther of Duane Morris LLP.
The case is Finjan Inc. v. Cisco Systems Inc., case number 5:17-cv-00072, in the U.S. District Court for the Northern District of California.
--Additional reporting by Daniel Siegal and Melissa Daniels. Editing by Alanna Weissman.
