Case 3:17-cv-05659-WHA Document 230-10 Filed 11/12/18 Page 1 of 3
`Case 3:17-cv-05659-WHA Document 230-10 Filed 11/12/18 Page 1 of 3
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`EXHIBIT 8
`EXHIBIT 8
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`Case 3:17-cv-05659-WHA Document 230-10 Filed 11/12/18 Page 2 of 3
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`FINJAN, INC., A DELAWARE
`CORPORATION,
`
`PLAINTIFF,
`
`CASE NO. CV-15-03295-BLF
`
`SAN JOSE, CALIFORNIA
`
`BLUE COAT SYSTEMS,
`
`INC
`
`JANUARY 8, 2018
`
`VOLUME 2
`
`PAGES 25 - 283
`SEALED PAGES 251-253,
`265-267
`
`TRANSCRIPT OF TRIAL
`BEFORE THE HONORABLE BETH LABSON FREEMAN
`UNITED STATES DISTRICT JUDGE AND A JURY
`
`KRAMER, LEVIN, NAFTALIS & FRANKEL,
`
`BY:
`
`PAUL J. ANDRE
`LISA KOBIALKA
`JAMES HANNAH
`
`9 9 0 MARSH ROAD
`MENLO PARK, CALIFORNIA 94025
`
`217 LEIDESDORFF STREET
`SAN FRANCISCO, CALIFORNIA 94111
`
`(APPEARANCES CONTINUED ON THE NEXT PAGE.)
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`2
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`INDEX OF PROCEEDINGS
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`3 OPENING STATEMENT BY MR. ANDRE
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`4 OPENING STATEMENT BY MS. DURIE
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`P. 13 5
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`P. 15 9
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`INDEX OF WITNESSES
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`FOR THE PLAINTIFF:
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`DAVID KROLL
`DIRECT EXAM BY MR. HANNAH
`CROSS-EXAM BY MR. SABRI
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`HARRY BIMS
`DIRECT EXAM BY MR. ANDRE
`CROSS-EXAM BY MS. SHANBERG
`REDIRECT EXAM BY MR. ANDRE
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`SHLOMO TOUBOUL
`VIDEOTAPED DEPOSITION
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`PHILIP HARTSTEIN
`DIRECT EXAM BY MS. KOBIALKA
`CROSS-EXAM BY MS. DURIE
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`P. 182
`P. 1 8 8
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`P. 194
`P. 2 11
`P. 2 16
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`P. 2 1 7
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`P. 219
`P. 2 6 8
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`OFFICIAL COURT REPORTERS:
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`IRENE L. RODRIGUEZ, CSR, RMR, CRR
`CERTIFICATE NUMBER 8074
`LEE-ANNE SHORTRIDGE, CSR, CRR
`CERTIFICATE NUMBER 9595
`PROCEEDINGS RECORDED BY MECHANICAL STENOGRAPHY,
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`1 AP P E AR AN C E S: (CONT'D)
`2 FOR THE DEFENDANT:
`MORRIS ON & FOERSTER
`BY:
`STEFANI SHANBERG
`NATHAN SABRI
`ROBIN BREWER
`EUGENE MARDER
`MADELEINE E. GREENE
`MICHAEL GUO
`ALEX N. HADDUCK
`425 MARKET STREET
`SAN FRANCISCO, CALIFORNIA
`94105
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`9 ALSO PRES ENT:
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`SYMANTEC
`BY: DAVID MAJORS
`CARRIE FLYNN
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`FINJAN
`BY:
`JULIE MAR-SPINOLA
`PHILIP HARTSTEIN
`
`MORRISON & FOERSTER
`BY: ANTONIO RAMOS, PARALEGAL
`425 MARKET STREET
`SAN FRANCISCO, CALIFORNIA
`94105
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`THOMAS & THOMAS
`BY: GEOFFREY S. THOMAS
`1321 JONES STREET
`OMAHA NEB RAS KA 6 8 102
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`RLM
`BY:
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`JASON YOUNG
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`UNITED STATES COURT REPORTERS
`28
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`INDEX OF EXHIBITS
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`!DENT.
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`EVIDENCE
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`PLAINTIFF'S:
`1284
`1245
`771
`963
`967
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`DEFENDANT'S:
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`JOINT:
`2006
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`21 7
`218
`225
`230
`231
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`1 8 5
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`UNITED STATES COURT REPORTERS
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`UNITED STATES COURT REPORTERS
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`1 of 148 sheets
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`Page 25 to 28 of 250
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`01/09/2018 08: 19:56 AM
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`FINJAN-JN 336280
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`Case 3:17-cv-05659-WHA Document 230-10 Filed 11/12/18 Page 3 of 3
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`I'D LIKE TO TELL YOU THAT ALL OF THOSE DISCUSSIONS ARE
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`MUTUAL AND THAT WE CAN MOVE FORWARD AND REACH A LICENSING
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`AGREEMENT, BUT IN SOME INSTANCES OUR ONLY OPTION BECOMES
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`LITIGATION.
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`Q. DOES FINJAN START -- HAVE A STARTING APPROACH WHEN IT
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`REACHES OUT TO A POTENTIAL LICENSEE'
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`A. WE DO. OUR RATES ARE -- AND THESE WILL SOUND FAMILIAR TO
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`YOU -- THESE ARE 8 PERCENT FOR HARDWARE, 16 PERCENT FOR
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`SOFTWARE, OR $8 PER USER TO THE EXTENT THAT THERE'S A USER
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`BASE, OR THAT THE REVENUES ARE NOT REFLECTED BASED ON THE VALUE
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`OF THE TECHNOLOGY IN THE COMPANY'S -- IN THE DATA THAT THEY'RE
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`ABLE TO SHARE WITH US.
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`Q. WHERE DID THIS $8 PER USER COME FROM'
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`A.
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`SO $8 PER USER, YOU HAVE TO BACK UP A LITTLE BIT AND
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`UNDERSTAND THAT -- I MENTIONED EARLIER THAT THERE WERE SIMILAR
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`TIMES AND YOU COULD WALK INTO A STORE AND YOU WOULD PAY $50 FOR
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`A BOX OF SOFTWARE AND IT WAS VERY EASY TO APPLY 16 PERCENT TO
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`THE PRICE OF THAT SOFTWARE.
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`THE INDUSTRY HAS MOVED TO A MODEL BY WHICH IT SELLS ITS
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`SOFTWARE NOW INTO THE INDUSTRY. IT'S CALLED SOFTWARE AS A
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`SERVICE.
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`AND THE WAY THAT THEY PRICE AND CHARGE CUSTOMERS FOR THIS
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`TECHNOLOGY NOW IS EITHER BY THE SEAT OR BY THE USER. SO IT'S
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`KIND OF THE SAME THING. YOU MAY GET A TEN SEAT COMPANY LICENSE
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`THAT COMES FOR A PRICE.
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`SO I WENT OUT TO THE INTERNET AND I LOOKED AT BLUE COAT'S
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`PRICING THAT IT WOULD SELL ON A SEAT BASIS, ON AVERAGE BETWEEN
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`40 AND $60 PER YEAR.
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`SO, AGAIN, TRYING TO DERIVE A NUMBER, A PER USER RATE OF
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`$8, YOU CAN TAKE THE AVERAGE OF 40 TO 60 AND IT'S $50 AND,
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`AGAIN, YOU CAN SAY 16 PERCENT OF $50 IS $8.
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`Q.
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`AND WHEN YOU'RE DOING THIS RESEARCH, WHAT TIMEFRAME IS
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`THIS RESEARCH FROM'
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`A. MOSTLY FROM THE 2013 AND 2014 TIMEFRAMES.
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`Q.
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`AND WERE THERE ANY OTHER DATA POINTS THATS UPPORTED THE $8
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`PER USER VALUATION'
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`A.
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`SURE. THERE ARE SOME OTHER THINGS THAT HAPPEN WHEN YOU'RE
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`SELLING SOFTWARE AS A SERVICE. SO YOU AS A CONSUMER MIGHT SAY,
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`WOW, I REMEMBER PAYING $50 FOR THIS, BUT I CAN JUST DOWNLOAD IT
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`AND PAY $20 A YEAR.
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`SO THE IDEA FOR YOU IS THAT YOU HAVE THIS SENSATION THAT
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`YOU'RE PAYING LESS FOR THE TECHNOLOGY BUT, IN FACT, ONCE YOU
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`START PAYING, THEN YOU CONTINUE PAYING FOR SOME PERIOD OF TIME.
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`WHAT THAT REQUIRES IS THAT YOU UNDERSTAND THE METRIC, THE
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`METRICS THAT YOU WOULD USE TO THEN MODEL THAT BUSINESS.
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`SO, IN OTHER WORDS, IT'S NOT JUST ABOUT HOW MANY PEOPLE
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`ARE USING THE TECHNOLOGY AT THAT POINT. YOU ALSO HAVE TO
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`INCORPORATE SOMETHING WITHIN THE INDUSTRY THAT MEASURES HOW
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`LONG EACH OF THOSE USERS STAYS USING THAT AND PAYING FOR THAT
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`TECHNOLOGY.
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`UNITED STATES COURT REPORTERS
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`UNITED STATES COURT REPORTERS
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`259
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`SO WE HAD TO MOVE WITH THE INDUSTRY'S ADOPTION WITH THE
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`SERVICE. SO THE $8 IS DERIVED FROM THE 16 PERCENT. IT
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`ACTUALLY IS CONNECTED MATHEMATICALLY.
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`Q. AND WERE YOU INVOLVED IN COMING UP WITH THIS $8 PER USER'
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`A.
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`SO, YES. I DID THE WORK. I DID A LOT OF THE RESEARCH.
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`AS I MENTIONED, THE MARKET RESEARCH REPORTS, YOU CAN READ A LOT
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`OF GENERAL INDUSTRY REPORTS.
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`THE WORK THAT I HAD TO DO WAS TO UNDERSTAND HOW DO YOU
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`TAKE WHAT IS A PERCENTAGE RATE AND EQUATE THAT INTO A FIXED
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`PRICE LIKE A FEE, THE $8?
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`SO IN THIS INSTANCE YOU GO BACK AND YOU LOOK AT THE
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`PRICING OF THE SOFTWARE.
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`SO IN 2013, ROUGHLY AROUND THE TIME OF THIS, IT WENT TO
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`THE INTERNET AND YOU LOOK UP AND THIS TECHNOLOGY WOULD SELL FOR
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`ABOUT $50. IF ANYONE WANTED TO GO AND BUY IT, IT WOULD BE
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`ABOUT $50.
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`SO THE SIMPLE MATH THERE IS 16 PERCENT OF $50 IS $8, BUT
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`IT'S ALSO SUPPORTED BY A NUMBER OF OTHER DATA POINTS AS WELL.
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`Q. AND WHAT ARE THOSE OTHER DATA POINTS'
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`A. OKAY. SO YOU HAVE TO TAKE INTO ACCOUNT THAT COMPANIES
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`OFTEN SELL THEIR PRODUCTS TO ENTERPRISES DIFFERENTLY THAN THEY
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`WOULD, SAY, TO A CONSUMER.
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`SO THEY MAY CHARGE YOU ON A VOLUME BASIS AND MAYBE YOU
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`ONLY PAY $40 A USER OR MAYBE IN A LOW VOLUME BASIS MAYBE YOU
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`WOULD PAY AS MUCH AS $60.
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`SO THAT INDUSTRY METRIC IS CALLED CHURN.
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`Q.
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`AND WHAT DID YOU LEARN ABOUT CHURN'
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`A.
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`SO, AGAIN, YOU CAN READ IN THE VERY DETAILED -- AND THIS
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`IS WHAT I DID. I LOOKED UP AND I READ THE MARKET RESEARCH.
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`YOU CAN ALSO GO TO -- I MEAN, IT WAS EVERYWHERE. YOU COULD
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`READNEW YORK TIMES WALL STREET JOURNAL CNN. EVERYBODY WAS
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`TALKING ABOUT THE TRANSITION TO SOFTWARE AS A SERVICE.
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`AND IN TERMS OF CHURN, THERE ARE A COUPLE OF ARTICLES THAT
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`I SPECIFICALLY RECALL, ONE BECAUSE IT HAD A REALLY CUTE NAME,
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`IT SAYS CHURN IS KING.
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`AND THAT'S IMPORTANT BECAUSE IT SHOWS THAT YOU ARE AT
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`LEAST -- I THINK IN THE TITLE IT DEMONSTRATES THAT IT'S NOT
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`JUST THE ACCUMULATION OF PEOPLE WHO HAVE PAID TO DOWNLOAD THE
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`SOFTWARE, BUT IT'S AGAIN HOW LONG ARE THEY GOING TO STAY.
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`AND THEN TO UNDERSTAND THE HOW LONG DO THEY STAY, YOU NEED
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`TO LOOK AT SOFTWARE AS A SERVICE SORT OF METRIC. WHAT IS
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`HAPPENING? WHAT ARE THE NUMBERS BEHIND THAT? SO THERE IS A
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`LOT OF BENCHMARKING THAT IS DONE OUT THERE. SO I READ AND
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`REVIEWED THAT INFORMATION AS WELL.
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`AND THE ANSWER IS THAT USERS, THE CHURN MODEL SUGGESTS
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`THAT USERS WILL STAY SUBSCRIBED FOR AN AVERAGE OF TWO AND A
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`HALF YEARS.
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`SO IN THAT EXAMPLE THAT I GAVE YOU WHERE YOU MAY HAVE PAID
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`$50 WHEN YOU BOUGHT THE BOX, BUT NOW YOU'VE DOWNLOADED IT AND
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`YOU'RE PAYING $20 A YEAR, BUT NOW YOU HAVE THE MATH THAT SAYS
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`01/09/2018 08: 19:56 AM
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`Page 256 to 259 of 264
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`58 of 148 sheets
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`UNITED STATES COURT REPORTERS
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`UNITED STATES COURT REPORTERS
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`FINJAN-JN 336337
`
`