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Case 3:17-cv-05659-WHA Document 554 Filed 06/25/19 Page 1 of 14
`
`IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
`
`
`
`
`
`
`
`
`
`FINJAN, INC.,
`
`
`Plaintiff,
`
`v.
`
`TRUSTWAVE HOLDINGS, INC.,
`
`
`Defendant.
`
`
`C.A. No.18C-04-006-WCC-CCLD
`
` TRIAL BY JURY DEMANDED
`
`
`
`COMPLAINT
`
`
`Plaintiff Finjan, Inc. (“Finjan”), by and through its undersigned counsel,
`
`asserts its claims against Trustwave Holdings, Inc. as follows.
`
`NATURE OF THE ACTION
`
`1.
`
`This is a complaint for breach of contract.
`
`PARTIES
`
`2.
`
`Finjan is a Delaware corporation with a principal place of business at
`
`2000 University Avenue, Suite 600, Palo Alto, California, 94303.
`
`3.
`
`On information and belief, Defendant Trustwave Holdings, Inc.
`
`(“Trustwave”) is a Delaware corporation with a principal place of business in 70
`
`W. Madison St., Suite 600, Chicago, IL 60602. On information and belief,
`
`Trustwave makes, uses, sells, and/or offers to sell in the United States, or imports
`
`into the United States, including in this judicial district, cybersecurity products or
`
`processes that practice the inventions claimed in Finjan’s patents.
`
`
`
`EFiled: Apr 05 2018 12:03PM EDT
`Transaction ID 61878611
`Case No. N18C-04-006 WCC CCLD
`
`
`
`

`

`Case 3:17-cv-05659-WHA Document 554 Filed 06/25/19 Page 2 of 14
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`
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`FINJAN’S INNOVATIONS
`
`4.
`
`Finjan was founded in 1997 as a wholly-owned subsidiary of Finjan
`
`Software Ltd., an Israeli corporation. In 1998, Finjan moved its headquarters to
`
`San Jose, California. Finjan was a pioneer in developing proactive security
`
`technologies capable of detecting previously unknown and emerging online
`
`security threats, recognized today under the umbrella term “malware.” These
`
`technologies protect networks and endpoints by identifying suspicious patterns and
`
`behaviors of content delivered over the Internet. Finjan has been awarded, and
`
`continues to prosecute, numerous patents covering innovations in the United States
`
`and around the world resulting directly from Finjan’s more than decades-long
`
`research and development efforts, supported by a dozen inventors and over $65
`
`million in R&D investments.
`
`5.
`
`Finjan built and sold software, including application program
`
`interfaces (APIs) and appliances for network security, using these patented
`
`technologies. These products and related customers continue to be supported by
`
`Finjan’s licensing partners. At its height, Finjan employed nearly 150 employees
`
`around the world building and selling security products and operating the
`
`Malicious Code Research Center, through which it frequently published research
`
`regarding network security and current threats on the Internet. Finjan’s pioneering
`
`approach to online security drew equity investments from two major software and
`
` 01:23041496.1
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`Case 3:17-cv-05659-WHA Document 554 Filed 06/25/19 Page 3 of 14
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`
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`technology companies, the first in 2005 followed by the second in 2006. Finjan
`
`generated millions of dollars in product sales and related services and support
`
`revenues through 2009, when it spun off certain hardware and technology assets in
`
`a merger. Pursuant to this merger, Finjan was bound to a non-compete and
`
`confidentiality agreement, under which it could not make or sell a competing
`
`product or disclose the existence of the non-compete clause. Finjan became a
`
`publicly traded company in June 2013, capitalized with $30 million. After
`
`Finjan’s obligations under the non-compete and confidentiality agreement expired
`
`in March 2015, Finjan re-entered the development and production sector of secure
`
`mobile products for the consumer market.
`
`TRUSTWAVE LICENSES FINJAN’S PATENTS
`
`6.
`
`Finjan and Trustwave entered into an Amended and Restated Patent
`
`License Agreement (the “Agreement”), which is a binding contract supported by
`
`offer, acceptance and mutual consideration. Among other things, under Section
`
`2.1.1 of the Agreement, Finjan granted “to Licensee a limited, non-exclusive
`
`(without the right to assign except as provided in Sections 2.4 or 6.9 below), fully
`
`paid up, worldwide right and license, to:
`
`“(a) make, have made, use, import, sell and offer for sale (directly or
`
`indirectly, via one or more tiers of distribution channels) the Licensed
`
`Products and Services under the Licensed Patents;”
`
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`

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`Case 3:17-cv-05659-WHA Document 554 Filed 06/25/19 Page 4 of 14
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`
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`7.
`
`Under the Agreement, in the event Trustwave was acquired, certain
`
`royalties would be due on certain products. Specifically, Section 2.5 of the
`
`Agreement states:
`
`“Acquiring Parties. In the event of an Acquisition of
`Licensee, all the provisions of this Agreement applicable
`to Licensee (except as related to Section 3), shall be
`deemed to apply to the Acquirer, and its respective
`Affiliates that are licensed hereunder, and the royalties
`that apply under Section 3 to Permitted Transferees shall
`apply (from the effective date of such Acquisition) to all
`Licensed Products and Services sold and licensed by the
`Acquirer and its Affiliates licensed hereunder that are not
`attributable to the Existing Business.”
`
`Section 3.2.1 of the Agreement, which provides the applicable royalty, states:
`
`“in respect of Permitted Transferees, and OEMs which
`are Excluded Persons and not Threshold Value OEMs
`exceeding the Net Sales Threshold, the then-prevailing
`royalty rate to be determined and agreed in good faith by
`Licensor and Licensee and reviewed annually if
`requested by Licensor based on then current royalty rates
`in the enterprise software market for customers of
`equivalent size for similar products, and, in the absence
`of such agreed prevailing rate provided such absence of
`agreement is not due to a lack of good faith on Licensor’s
`part,
`
`
`Pursuant to Sections 2.5 and 3.2.1 of the Agreement, a
`
` royalty would be due on
`
`“any products and services other than the Licensed Products and Services and
`
`Integrated Licensed Products and Services as actually offered and distributed by
`
`the Licensee and their Affiliates at the time of the Transfer (“Existing Business.”).”
`
` 01:23041496.1
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`Case 3:17-cv-05659-WHA Document 554 Filed 06/25/19 Page 5 of 14
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`
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`Further, under Section 3.3 of the Agreement, interest at the rate of “
`
`per
`
`annum” would also be due on such royalties.
`
`SINGTEL ACQUIRES TRUSTWAVE, TRIGGERING ROYALTY
`CLAUSES IN THE AGREEMENT
`
`8.
`
`Singtel publicly announced its offer to acquire Trustwave no later than
`
`April 7, 2015. Trustwave announced on August 31, 2015, that Singtel had
`
`completed its acquisition of Trustwave, including the Trustwave products and
`
`services that are the subject of the Agreement that is at issue in this dispute. On
`
`information and belief, Singtel now wholly owns Trustwave.
`
`9.
`
`In 2015, Trustwave informed Finjan that Singtel was in the process of
`
`acquiring Trustwave. By mid-2015, Finjan began negotiations with Trustwave
`
`regarding the royalties due under the Agreement. Finjan explained that pursuant to
`
`Sections 1.13, 2.4 and 2.5, a
`
` royalty would be owed on products not
`
`attributable to “Existing Business,” as defined by the Agreement. Finjan also
`
`explained that Section 1.4 and Exhibit B of the Agreement imposed a
`
` royalty
`
`on relevant sales.
`
`10.
`
`In a July 22, 2015 email, Trustwave informed Finjan that it agreed
`
`that section 2.5 applied to the acquisition of Trustwave by Singtel.
`
`11. By the fall of 2015, the parties were nearing an agreement regarding
`
`additional royalties, when Trustwave suddenly, and without explanation, stopped
`
`responding to Finjan’s emails, and thus refused to deal with Finjan.
`
` 01:23041496.1
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`Case 3:17-cv-05659-WHA Document 554 Filed 06/25/19 Page 6 of 14
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`
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`12. After Trustwave withdrew from negotiations, on November 16, 2015,
`
`Finjan notified Trustwave that it was in breach of the Agreement. On December
`
`30, 2015, Finjan reiterated to Trustwave that it was in breach of the Agreement,
`
`stating that “Trustwave/SingTel is in breach of the license to the Finjan patents and
`
`is on notice for lack of compliance.”
`
`13. On June 22, 2016 of 2016, Finjan requested an audit pursuant to
`
`Section 3.4 of the Agreement for an accounting of the royalties resulting from
`
`Singtel’s acquisition of Trustwave. Section 3.4 of the Agreement states:
`
`Licensee further agrees to permit its books and records,
`and to require any of its Affiliates licensed hereunder or
`OEMs, as the case may be, to permit such of their books
`and records necessary to determine the royalties paid
`hereunder, to be examined by an auditor or independent
`accounting firm mutually selected by Licensor and
`Licensee from time-to-time during regular business
`hours, but not more than once a year.”
`
`Finjan proposed Connor Consulting to perform the audit, as Connor Consulting
`
`came highly recommended, specialized in performing royalty audits, and would
`
`cost less than other auditors. But Trustwave rejected Finjan’s proposed and instead
`
`suggested either KPMG or Ernst & Young to perform the audit. Finjan looked into
`
`having Ernst & Young perform the audit, but discovered that it had an engagement
`
`with Singtel and thus could not perform the audit due to a conflict. Finjan then
`
`retained KPMG, the other auditor suggested by Trustwave, to perform the audit.
`
`Pursuant to the Agreement, Finjan initially paid for the audit. Under Section 3.4,
`
` 01:23041496.1
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`

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`Case 3:17-cv-05659-WHA Document 554 Filed 06/25/19 Page 7 of 14
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`
`
`those audit fees could be shifted to Trustwave if the audit revealed an
`
`underpayment of a certain amount.
`
`14. KPMG attempted to perform its audit, but was denied various
`
`information by Trustwave, in violation of Section 3.4 of the Agreement. Among
`
`other things, Trustwave refused to provide sales and technical information on
`
`products that Trustwave did not believe were within the scope of the Agreement,
`
`unilaterally dictating the terms of KPMG’s audit, and violating the Agreement.
`
`15. Based on Trustwave’s definition of what products were within the
`
`scope of the agreement, KPMG concluded that an additional $160,524.91 was due
`
`under the Agreement. However, based on KPMG’s own analysis of what products
`
`were within the scope of the agreement, KPMG determined that an additional
`
`$1,526,445.95 was due under the Agreement. Due to the amount by which
`
`Trustwave was in underpayment, it was also required to pay for the audit, in the
`
`amount of $50,654.67. On October 1, 2017, Finjan requested payment of those
`
`fees and the cost of the audit, and asked that Trustwave advise whether it would
`
`pay by October 18, 2017. Trustwave declined to pay.
`
`16. On March 6, 2018, Finjan again reached out to Trustwave to request
`
`payment of the fees and the cost of the audit. Over one week later, Trustwave’s
`
`counsel responded on March 14 to request a CEO-to-CEO conversation to resolve
`
`this dispute. Finjan promptly agreed to that request, and on March 16 provided
`
` 01:23041496.1
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`

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`Case 3:17-cv-05659-WHA Document 554 Filed 06/25/19 Page 8 of 14
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`
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`Trustwave’s counsel with the direct contact information of Finjan’s CEO. To date,
`
`Trustwave has not reached out to Finjan or its CEO, despite its request.
`
`JURISDICTION AND VENUE
`
`17. The Court has subject matter jurisdiction and personal jurisdiction
`
`over Trustwave at least by virtue of Section 6.4.1 of the Agreement, which states
`
`that “[t]he parties hereto hereby irrevocably submit to the exclusive jurisdiction of
`
`any federal or state court located within the State of Delaware over any dispute
`
`arising out of or relating to this Agreement and each party hereby irrevocably
`
`agrees that all claims in respect of such dispute or any suit, action proceeding
`
`related thereto may be heard and determined in such courts.” This dispute arises of
`
`and relates to the Agreement by virtue of Trustwave’s breach of various
`
`provisions, described above and detailed further below.
`
`18. The Court also has personal jurisdiction over Trustwave because
`
`Plaintiff’s claims against each of them arises out of or relate to each of their
`
`purposeful contacts with Delaware, and the exercise of personal jurisdiction over
`
`each Trustwave in this particular case would comport with principles of fair play
`
`and substantial justice.
`
`19. This Court also has personal jurisdiction over each Trustwave because
`
`it has engaged in systematic and continuous contacts with this State and this
`
`district by, inter alia, regularly conducting and soliciting business in this State and
`
` 01:23041496.1
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`Case 3:17-cv-05659-WHA Document 554 Filed 06/25/19 Page 9 of 14
`
`
`
`this district, and deriving substantial revenue from products and/or services
`
`provided to persons in this State and this district. For example and without
`
`limitation, as noted above, Trustwave is a Delaware corporation. As another
`
`example without limitations, Trustwave offers for sale and on information and
`
`belief has sold its products and services to residents on this State.
`
`20. Venue is proper in this Court at least by virtue of Section 6.4.1 of the
`
`Agreement, which, in addition to stating that “[t]he parties hereto hereby
`
`irrevocably submit to the exclusive jurisdiction of any federal or state court located
`
`within the State of Delaware over any dispute arising out of or relating to this
`
`Agreement,” further states that “[t]he parties hereby irrevocably waive, to the
`
`fullest extent permitted by applicable law, any objection which they may now or
`
`hereafter have to the laying of venue of any such dispute brought in such court or
`
`any defense of inconvenient forum for the maintenance of such dispute.”
`
`21. Venue is further proper in this State because Trustwave is
`
`incorporated here, and a substantial part of the events or omissions giving rise to
`
`the claims alleged herein occurred in this district, and because Trustwave is subject
`
`to this Court’s personal jurisdiction with respect to the claims alleged herein.
`
`FIRST CAUSE OF ACTION
`
`(Breach of Contract – Failure to Pay Royalties)
`
`22. Finjan incorporates paragraphs 1 through 21 herein by reference.
`
` 01:23041496.1
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`

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`Case 3:17-cv-05659-WHA Document 554 Filed 06/25/19 Page 10 of 14
`
`
`
`23. Finjan and Trustwave entered into the Agreement, a valid,
`
`enforceable, and binding contract supported by offer, acceptance, and mutual
`
`consideration. Trustwave was acquired by Singtel no later than August 31, 2015.
`
`24. The Agreement provides that, in the event of an acquisition of
`
`Trustwave, at least a
`
` royalty on “any products and services other than the
`
`Licensed Products and Services and Integrated Licensed Products and Services as
`
`actually offered and distributed by the Licensee and their Affiliates at the time of
`
`the Transfer (‘Existing Business.’)” are due. Accordingly, additional royalties are
`
`due under the Agreement.
`
`25. Further, Finjan commenced an audit pursuant to Section 3.4 of the
`
`Agreement. The independent auditor, KPMG, concluded that at least
`
`$1,526,445.95 in additional royalties were owed by Trustwave to Finjan, based on
`
`the available information. Despite Finjan’s repeated requests, Trustwave refuses to
`
`pay that amount.
`
`26. Accordingly, Trustwave has breached the Agreement by failing to pay
`
`the royalties.
`
`27. Finjan has fully performed its obligations under the Agreement to the
`
`extent those obligations were not excused by Trustwave’s breaches thereof.
`
`28. As a direct and proximate result of Trustwave’s breach of the
`
`Agreement, Finjan has suffered damages, in the amount of at least $1,526,445.95
`
` 01:23041496.1
`
`- 10 -
`
`

`

`Case 3:17-cv-05659-WHA Document 554 Filed 06/25/19 Page 11 of 14
`
`
`
`for the period of January 1, 2014 through December 31, 2016, based on the
`
`information made available to Finjan.
`
`SECOND CAUSE OF ACTION
`
`(Breach of Contract – Noncompliance with Audit)
`
`29. Finjan incorporates paragraphs 1 through 21 herein by reference.
`
`30. Finjan and Trustwave entered into the Agreement, a valid,
`
`enforceable, and binding contract supported by offer, acceptance, and mutual
`
`consideration.
`
`31. The Agreement allows for audits of Trustwave to determine whether
`
`additional royalties are due. In the event of such an audit, Trustwave is required to
`
`permits its books and records to be examined by an auditor. Trustwave refused to
`
`provide certain information on products that it contends are not within the scope of
`
`the Agreement. But the Agreement does not allow Trustwave to limit what books
`
`or records are examined by the auditor. Accordingly, Trustwave interfered with
`
`the requested audit, preventing it to be performed in accordance with Section 3.4 of
`
`the Agreement. Trustwave has violated Section 3.4 of the Agreement, and has thus
`
`breached the Agreement.
`
`32. Finjan has fully performed its obligations under the Agreement to the
`
`extent those obligations were not excused by Trustwave’s breaches thereof.
`
` 01:23041496.1
`
`- 11 -
`
`

`

`Case 3:17-cv-05659-WHA Document 554 Filed 06/25/19 Page 12 of 14
`
`
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`33. As a direct and proximate result of Trustwave’s breach of the
`
`Agreement, Finjan has suffered damages, in an amount to be determined at trial.
`
`THIRD CAUSE OF ACTION
`
`(Breach of Contract – Cost of Audit)
`
`34. Finjan incorporates paragraphs 1 through 21 herein by reference.
`
`35. Finjan and Trustwave entered into the Agreement, a valid,
`
`enforceable, and binding contract supported by offer, acceptance, and mutual
`
`consideration.
`
`36. Section 3.4 of the Agreement states:
`
`“Licensor shall bear the cost of the audit, provided,
`however, that if the audit reveals an underpayment in
`excess of the greater of
`, then Licensee
`shall, within 30 days, reimburse Licensor for the costs of
`such audit.”
`
`37. KPMG, the independent auditor mutually agreed upon by the parties
`
`to perform an audit pursuant to the Agreement, determined that $1,526,445.95 in
`
`additional royalties were owed by Trustwave to Finjan. This amount is in excess
`
`of the greater of
`
`. Accordingly, pursuant to Section 3.4 of the
`
`Agreement, Trustwave is required to bear the cost of the audit, $50,654.67.
`
`Trustwave refuses to pay that amount, in violation of the Agreement. Accordingly,
`
`Trustwave has breached the Agreement by failing to pay for the audit fees.
`
`38. Finjan has fully performed its obligations under the Agreement to the
`
`extent those obligations were not excused by Trustwave’s breaches thereof.
`
` 01:23041496.1
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`- 12 -
`
`

`

`Case 3:17-cv-05659-WHA Document 554 Filed 06/25/19 Page 13 of 14
`
`
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`39. As a direct and proximate result of Trustwave’s breach of the
`
`Agreement, Finjan has suffered damages, in the amount of at least $50,654.67 for
`
`the cost of the audit.
`
`PRAYER FOR RELIEF
`
`WHEREFORE, Finjan respectfully requests entry of judgment as follows:
`
`A.
`
`That Trustwave be ordered to pay to Finjan damages for its breach of
`
`the Agreement, in the amount of $1,526,445.95;
`
`B.
`
`That Trustwave be ordered to pay Finjan pre-judgment and post-
`
`judgment interest on the damages caused to it by reason of Trustwaves’ breach of
`
`the Agreement, including interest pursuant to Section 3.3 of the Agreement in the
`
`amount of
`
` per annum;
`
`C.
`
`That Trustwave be ordered to pay Finjan for the cost of the audit, in
`
`the amount of $50,654.67;
`
`D.
`
`That Trustwave be ordered to pay Finjan pre-judgment and post-
`
`judgment interest on the cost of the audit;
`
`E.
`
`That Finjan be awarded its Attorneys’ fees, including because of
`
`Trustwave’s willful breach and its blatant lack of response.
`
`DEMAND FOR JURY TRIAL
`
`Finjan hereby demands a jury trial on all issues so triable.
`
`
`
` 01:23041496.1
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`- 13 -
`
`

`

`Case 3:17-cv-05659-WHA Document 554 Filed 06/25/19 Page 14 of 14
`
`
`
`Dated: April 4, 2018
`
`Of Counsel:
`
`John L. Cooper
`Winston Liaw
`FARELLA BRAUN + MARTEL LLP
`235 Montgomery Street
`17th Floor
`San Francisco, California 94104
`Telephone: (415) 954-4400
`
`
`
`YOUNG CONAWAY STARGATT & TAYLOR LLP
`/s/ Karen L. Pascale
`______________________________________
`Karen L. Pascale (#2903)
`Mary F. Dugan (#4704)
`1000 North King Street
`Wilmington, DE 19801
`Telephone: (302) 571-6600
`kpascale@ycst.com
`mdugan@ycst.com
`Attorneys for Plaintiff Finjan, Inc.
`
` 01:23041496.1
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`- 14 -
`
`

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