Case 3:17-cv-05659-WHA Document 305-4 Filed 12/08/18 Page 1 of 5
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`Exhibit 3
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`Case 3:17-cv-05659-WHA Document 305-4 Filed 12/08/18 Page 2 of 5
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`·1· · · · · ·IN THE UNITED STATES DISTRICT COURT
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`·2· · · · ·FOR THE NORTHERN DISTRICT OF CALIFORNIA
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`·3
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`·4· ·FINJAN, INC., a Delaware
`· · ·Corporation,
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`· · · · · · · ·Plaintiff,· · · · · · · ·Case No.
`·6· · · · · · · · · · · · · · · · · · · 3:17-cv-05659-WHA
`· · · · ·vs.
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`· · ·JUNIPER NETWORKS, INC., a
`·8· ·Delaware Corporation,
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`· · · · · · · ·Defendant.
`10· ·_________________________________
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`11
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`12
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`13· · · · HIGHLY CONFIDENTIAL - ATTORNEYS' EYES ONLY
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`14
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`15· · · · · VIDEOTAPED DEPOSITION OF PHILIP HARTSTEIN
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`16· · · · · · · · Tuesday, October 23, 2018
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`23· ·Reported by:
`· · ·Cynthia Manning, CSR No. 7645, CLR, CCRR
`24
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`25· ·Job No. LA-196235
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`Case 3:17-cv-05659-WHA Document 305-4 Filed 12/08/18 Page 3 of 5
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`Page 70
`·1· · · · · · THE WITNESS:· I believe that's a fair
`·2· ·statement.
`·3· ·BY MS. CARSON:
`·4· · · · Q.· Is it fair to say that Finjan's license
`·5· ·agreements are all nonexclusive?
`·6· · · · · · MR. KASTENS:· Objection; form.
`·7· · · · · · THE WITNESS:· I would have to look at what
`·8· ·the provisions were in the M86 and Trustwave
`·9· ·agreements from a specific product production under
`10· ·the license.· There may have been exclusions because
`11· ·I know that we were, for example, excluded from
`12· ·making or competing with similar product offerings
`13· ·in the market for several years post that deal.
`14· ·BY MS. CARSON:
`15· · · · Q.· Do you know what an exclusive license is?
`16· · · · · · MR. KASTENS:· Objection.
`17· ·BY MS. CARSON:
`18· · · · Q.· -- for a patent?
`19· · · · A.· I believe that would be granting a license
`20· ·to only one party for their ability to use the
`21· ·patented technologies.
`22· · · · Q.· And Finjan has granted many different
`23· ·entities a license to use its patents; correct?
`24· · · · A.· It has, yes.
`25· · · · Q.· Is it fair to say that Finjan's license
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`Page 71
`·1· ·agreements generally include worldwide usage rights?
`·2· · · · · · MR. KASTENS:· Objection; form.
`·3· · · · · · THE WITNESS:· I believe it's a fair
`·4· ·statement to say we include worldwide license rights
`·5· ·as well.
`·6· ·BY MS. CARSON:
`·7· · · · Q.· Is it correct that Finjan has received
`·8· ·royalty payments ranging from $565,000 to $85
`·9· ·million per license for the 20-plus license
`10· ·agreements that its entered into?
`11· · · · · · MR. KASTENS:· Objection; form.
`12· · · · · · THE WITNESS:· Without looking at the other
`13· ·components of value, I think that would be the
`14· ·monetary dollar range.
`15· ·BY MS. CARSON:
`16· · · · Q.· What factors have resulted in different
`17· ·licensees paying different royalties to different
`18· ·rights to Finjan's patent portfolio?
`19· · · · A.· Some factors might include the length for
`20· ·which that license is viable, so a term license.
`21· ·Others might include noncash components of value in
`22· ·the license.· For example, it may be that patents
`23· ·are transferred or assigned to Finjan.· It may be
`24· ·that there is a technology partnership that results
`25· ·from a license as well.· It may be that we also seek
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`Page 72
`·1· ·to get a cross-license, for example, to our Finjan
`·2· ·Mobile operating subsidiary.
`·3· · · · Q.· Other than the length or term of the
`·4· ·license and the noncash component, can you think of
`·5· ·any other factors that have resulted in different
`·6· ·licensees paying different royalties for similar
`·7· ·rights to the Finjan patent portfolio?
`·8· · · · · · MR. KASTENS:· Objection; form.
`·9· · · · · · THE WITNESS:· In some instances, companies
`10· ·pay -- say if their product line is primarily
`11· ·hardware, they may pay at one rate.· If their
`12· ·product line is software, they may pay at a
`13· ·different rate.· In some instances if there are
`14· ·follow-on revenue events, then they may actually pay
`15· ·at a lower rate as prescribed in those agreements.
`16· ·BY MS. CARSON:
`17· · · · Q.· So would you agree that the hardware versus
`18· ·software component that you identified, that's sort
`19· ·of the nature of the products that are being sold by
`20· ·the potential licensee?· Is that fair?
`21· · · · A.· I would broaden that a little bit.· I would
`22· ·say if we look at it from a hardware and software
`23· ·and then technologies that are being deployed
`24· ·through cloud-based implementations.
`25· · · · Q.· Does Finjan have an established rate for
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`·1· ·cloud-based?
`·2· · · · A.· We use, as a starting point, a per-user
`·3· ·rate.
`·4· · · · Q.· And what is that?
`·5· · · · A.· It's $8 per user.
`·6· · · · Q.· Do you have any licensees who have actually
`·7· ·paid $8 per user for a license?
`·8· · · · A.· Explicitly in the agreements, no, I don't
`·9· ·think you would find that.
`10· · · · Q.· How about implicitly, have you based the
`11· ·royalty rate for any of the licenses that you've
`12· ·entered into on an $8-per-user rate?
`13· · · · A.· I'd have to defer to the licensing team,
`14· ·but my general awareness is that I know it's been
`15· ·part of at least one, if not more, negotiations.
`16· · · · Q.· Which ones are you aware of?
`17· · · · A.· As I sit here, I don't -- I don't remember
`18· ·which ones they are.
`19· · · · Q.· Do you know if they resulted in licenses?
`20· · · · A.· I would expect that they resulted in
`21· ·licenses, yes.
`22· · · · Q.· But you're not aware personally of which
`23· ·particular licensees, if any, had a royalty rate
`24· ·that was calculated on a per-user rate of $8; is
`25· ·that fair?
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`Case 3:17-cv-05659-WHA Document 305-4 Filed 12/08/18 Page 4 of 5
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`Page 74
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`·1· · · · · · MR. KASTENS:· Objection; form.
`·2· · · · · · THE WITNESS:· As I sit here, I couldn't
`·3· ·identify one for you, no.
`·4· ·BY MS. CARSON:
`·5· · · · Q.· Is it fair to say that one of the other
`·6· ·reasons why different licensees have paid different
`·7· ·royalties for similar rights to Finjan's patent
`·8· ·portfolio is that they had different revenue at
`·9· ·issue?
`10· · · · · · MR. KASTENS:· Objection; form.
`11· · · · · · THE WITNESS:· I think our -- the way in
`12· ·which we approach that is, when we think of a
`13· ·license, we think of it as a fair-value license.· So
`14· ·the license is for the value of the technology, not
`15· ·necessarily from the revenues of a company solely.
`16· ·BY MS. CARSON:
`17· · · · Q.· So Finjan doesn't consider the revenues
`18· ·associated with the products that are being accused
`19· ·in figuring out what a fair royalty would be?
`20· · · · A.· It could be.· In some instances, though,
`21· ·companies are unwilling to share revenues.· So we
`22· ·would then, for example, move to industry-available
`23· ·data to build a construct.
`24· · · · Q.· So revenue is something that Finjan
`25· ·considers in determining what a fair royalty would
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`·1· ·be to the extent that that information is available;
`·2· ·is that fair?
`·3· · · · A.· It --
`·4· · · · · · MR. KASTENS:· Objection; form.
`·5· · · · · · THE WITNESS:· It could be one factor, yes.
`·6· ·BY MS. CARSON:
`·7· · · · Q.· We talked about this a bit earlier, but
`·8· ·Finjan's starting point for any licensing
`·9· ·negotiation is 16 percent of gross sales for the
`10· ·accused products; correct?
`11· · · · A.· For software products.
`12· · · · Q.· Can you give me an example of a software
`13· ·product?
`14· · · · · · MR. KASTENS:· Objection; form.
`15· · · · · · THE WITNESS:· Again, moving to market
`16· ·research, we would be talking about endpoint
`17· ·software products.· So that would be something that
`18· ·would principally be delivered either via download
`19· ·or on a disc, if we were to back up maybe 10 years,
`20· ·something that would have to be installed or that
`21· ·would run in an environment on a device.
`22· ·BY MS. CARSON:
`23· · · · Q.· Is it fair to say that Finjan's starting
`24· ·point for any licensing negotiation involving a
`25· ·hardware product is 8 percent of gross sales for the
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`·1· ·accused products?
`·2· · · · · · MR. KASTENS:· Objection; form.
`·3· · · · · · THE WITNESS:· Eight percent of gross sales
`·4· ·for accused products, yes.
`·5· ·BY MS. CARSON:
`·6· · · · Q.· And can you give me an example of a
`·7· ·hardware product?
`·8· · · · A.· Sure.· So sometimes we call them
`·9· ·"appliances."· My son likes to say it looks like a
`10· ·pizza box.· It's something that you might see in a
`11· ·server room.· And in that box it has processing, it
`12· ·has memory, it has the ability to move and manage
`13· ·network traffic, and it also has the ability to
`14· ·process or identify or determine what to do with
`15· ·malicious content as it comes through.
`16· · · · Q.· Is it fair to say that the starting point
`17· ·of 8 percent of gross sales for the accused products
`18· ·for hardware products is for a portfolio license?
`19· · · · · · MR. KASTENS:· Objection; form.
`20· · · · · · THE WITNESS:· Trying to figure out how to
`21· ·best answer this.
`22· · · · · · So we think that the Finjan patent
`23· ·portfolio represents technologies which companies
`24· ·are using and have value.· So split between the 8
`25· ·and 16 percent would be how we would identify at
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`·1· ·least some component of what that value might be as
`·2· ·the determining factor to grant that portfolio
`·3· ·license.
`·4· ·BY MS. CARSON:
`·5· · · · Q.· I'm not sure I understand what you meant.
`·6· · · · · · You said "so split between the 8 and 16
`·7· ·percent would be how we would identify at least some
`·8· ·component of what the value might be."· What do you
`·9· ·mean by "split between the 8 and 16 percent"?
`10· · · · A.· So some companies, for example, may only
`11· ·make hardware and other companies, by contrast, may
`12· ·only sell software.· In some instances they may sell
`13· ·both but in disproportionate representations in
`14· ·their product offerings.
`15· · · · Q.· So in some instances Finjan would agree to
`16· ·a royalty rate between 8 and 16 percent if there was
`17· ·a mix of products?
`18· · · · · · MR. KASTENS:· Objection; form.
`19· · · · · · THE WITNESS:· I think as our starting point
`20· ·we would try and use the 8 for hardware sales and
`21· ·the 16, but I'm with you that I guess you could
`22· ·consider that a blended rate that at some point
`23· ·would fall in between that.
`24· ·BY MS. CARSON:
`25· · · · Q.· And the 8 and 16 percent, that's for a
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`Case 3:17-cv-05659-WHA Document 305-4 Filed 12/08/18 Page 5 of 5
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`·1· ·(Whereupon, at 3:45 p.m., the TUESDAY,
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`·1· ·Errata Sheet
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`·2· ·OCTOBER 23, 2018 deposition of PHILIP
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`·3· ·HARTSTEIN was adjourned.)
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`·3· ·NAME OF CASE: FINJAN, INC. vs. JUNIPER NETWORKS
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`·4· ·DATE OF DEPOSITION: 10/23/2018
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`·5· ·NAME OF WITNESS: Philip Hartstein
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`·6· · ____________________________
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`·6· ·Reason Codes:
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`·7· · · · · ·PHILIP HARTSTEIN
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`·7· · · · 1. To clarify the record.
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`·8· · · · 2. To conform to the facts.
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`·9· · · · 3. To correct transcription errors.
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`25· · · · · · · · · · · · · · ·_______________________
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`·1· · · · · · · · · REPORTER'S CERTIFICATE
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`·2· · · · · ·I, CYNTHIA MANNING, a Certified Shorthand
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`·3· ·Reporter of the State of California, do hereby
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`·4· ·certify:
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`·5· · · · · ·That the foregoing proceedings were taken
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`·6· ·before me at the time and place herein set forth;
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`·7· ·that any witnesses in the foregoing proceedings,
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`·8· ·prior to testifying, were placed under oath; that a
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`·9· ·verbatim record of the proceedings was made by me
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`10· ·using machine shorthand which was thereafter
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`11· ·transcribed under my direction; further, that the
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`12· ·foregoing is an accurate transcription thereof.
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`13· · · · · ·I further certify that I am neither
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`14· ·financially interested in the action, nor a relative
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`15· ·or employee of any attorney of any of the parties.
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`16· · · · · ·Before completion of the deposition, review
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`17· ·of the transcript [X] was [ ] was not requested.· If
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`18· ·requested, any changes made by the deponent (and
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`19· ·provided to the reporter) during the period allowed
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`20· ·are appended hereto.
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`21· · · · · · In witness whereof, I have subscribed my
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`22· ·name this 2nd day of November 2018.
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`24· · · · · · ________________________________________
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`25· · · · · · CYNTHIA MANNING, CSR No. 7645, CCRR, CLR
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