Case 4:18-cv-07229-YGR Document 100 Filed 09/04/20 Page 1 of 7
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`September 4, 2020
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`VIA ELECTRONIC FILING
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`Honorable Thomas S. Hixson
`U.S. District Court, Northern District of California
`San Francisco Courthouse
`Courtroom G – 15th Floor
`450 Golden Gate Avenue
`San Francisco, CA 94102
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`Re:
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`Joint Discovery Statement
`Finjan, Inc. v. Qualys Inc., Case No. 4:18-cv-07229-YGR
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`Dear Judge Hixson:
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`Pursuant to the Court’s order (Dkt. 89), the parties submit the following joint statement
`regarding Plaintiff Finjan, Inc.’s (“Finjan”) motion to compel Defendant Qualys Inc. (“Qualys”)
`to provide worldwide sales for the accused products.
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`Respectfully submitted,
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`/s/ Kristopher B. Kastens
`Kristopher Kastens (State Bar No. 244979)
`KRAMER LEVIN NAFTALIS & FRANKEL LLP
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`Attorneys for Plaintiff
`Finjan, Inc.
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`/s/ Cristopher D. Mays
`Cristopher D. Mays (State Bar No. 266510)
`WILSON SONSINI GOODRICH & ROSATI
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`Attorneys for Defendant
`Qualys Inc.
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`Case 4:18-cv-07229-YGR Document 100 Filed 09/04/20 Page 2 of 7
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`Finjan’s Position
`The Court should order Qualys to produce discovery into financial information for
`overseas sales of accused products that were developed, tested, assembled, and/or compiled, in
`whole or in relevant part, in the U.S.1
`Qualys’ Financials for Products Developed, Assembled, Compiled in the U.S., as well
`as Sold or Distributed from the U.S. is Discoverable Regardless of the Customer’s Location
`Discovery responses indicate that Qualys develops its cloud-based platform in California,
`and all Qualys accused products utilize that platform, which is accused of infringement. See Ex.
`2 at 9-10 (Resp. Interrog. 5); see also, e.g., Ex. 3 (LinkedIn Profile of California-based
`employee). Thus, Qualys’ infringing cloud-based platform, made in and managed from the U.S.,
`services Qualys and customers worldwide. Discovery also indicates Qualys has a California
`based contractor that manufactures, assembles and tests accused appliances, including appliances
`sold outside the U.S. Ex. 2 at 9-10; see also, Ex. 4 at QUALYS00030027. Qualys also
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`. Ex. 5 at QUALYS00883693; Ex. 6 at 28.
`Qualys does not dispute that it compiles code inside the U.S. to create computer readable
`program code, or that it directs the loading this code on infringing systems in the U.S. to service
`customers outside the U.S. This likely meets the “making” requirement for each asserted claim,
`and certainly meets it for Finjan’s claims directed to a “computer readable medium.” Ex. 7
`(Finjan’s infringement contentions for asserted computer readable media claims). Centillion
`Data is inapposite because, unlike here, the claims required a “personal computer processor
`means” that was not provided until the code was installed. Microsoft actually supports Finjan’s
`position, because after Qualys compiles the code, it is expressed as a computer readable copy so
`that the compiled version can be read by a computer.
`Qualys’s dispute is also premature. Whether Qualys infringes by domestically “making”
`in these instances is a central dispute not ripe in a discovery motion. In cases presenting attempts
`to argue that infringement requires extra steps, the Federal Circuit has rejected arguments like
`Qualys’s. E.g., Silicon Graphics, Inc. v. ATI Techs., Inc., 607 F.3d 784, 794 (Fed. Cir. 2010)
`(“Where, as here, a product includes the structural means for performing a claimed function, it
`can still infringe . . . apart from the operating system that is needed to use the product.”);
`Centrak, Inc. v. Sonitor Techs., Inc., 915 F.3d 1360, 1371–74 (Fed. Cir. 2019) (reversing SJ of
`no infringement due to fact questions about identity of final assembler). Because discovery
`indicates a likelihood of domestic infringement, Finjan is entitled to discovery into the economic
`effects, including overseas. Railroad Dynamics, Inc. v. A. Stucki Co., 727 F.2d 1506, 1519 (Fed.
`Cir. 1984), confirms domestic infringement can lead to royalties on overseas sales: “Whether
`[certain domestically made] carsets were sold in the United States or elsewhere is [ ] irrelevant,
`and no error occurred in including those carsets among the infringing products on which the
`royalty was due.” Id. Additional authority is replete. See, e.g., Power Integrations, Inc. v.
`Fairchild Semiconductor Int'l, Inc., No. CV 04-1371 LPS, 2018 WL 4804685, at *1-2 (D. Del.
`Oct. 4, 2018); Plastronics Socket Partners, Ltd. v. Dong Weon Hwang, No. 218CV00014-
`JRGRSP, 2019 WL 4392525, at *5 (E.D. Tex. June 11, 2019); Polaris Innovs. Ltd. v. Kingston
`Tech. Co., Inc., Case No. CV 16-00300, 2017 WL 3275615, at *5 (C.D. Cal. Feb. 14, 2017).
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`1 Qualys has refused to provide discovery into foreign financial information (Finjan’s Letter Brief, Dkt. No. 79 at 2),
`and has also refused to provide a witness on Topic Nos. 23, 26 and 29 regarding foreign sales activity. Ex.1, Qualys
`Objections to 30(b)(6) Notice, at ¶ 15 and Topic Nos. 23, 26, and 29 (limiting deposition to U.S. activity).
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`Case 4:18-cv-07229-YGR Document 100 Filed 09/04/20 Page 3 of 7
`Case 4:18—cv-07229-YGR Document 100 Filed 09/04/20 Page 3 of 7
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`Qualys’s repeated assertion that Finjan’s contentions preclude this discovery misread
`those contentions and mistake their role. Nothingm Finjan’s contentions limits, as Qualys
`wrongly contends Finjan from demonstrating thatm addition to infringing by use (i.e., in a
`networked environment), Qualys also infringes by domestically making the technology (through
`development, compilation, testing, assembly, etc.) or having it made. Further, the Court’s Patent
`Rules pemnt Finj an, upon a timely showing of good cause, to amend contentions, and good
`cause includes “recent discovery of nonpublic information,” such as information about Qualys’s
`internal activities. It is to develop exactly that nonpublic information that Finjan seeks this
`discovery. Denying it on the basis that the contentions have not yet fully developed the case
`would put Finjan in the impossible situation of being unable to update contentions, because it is
`unable to receive nonpublic information, because it has not yet updated contentions.
`The Court queried whether foreign sales were discoverable if they “do not infringe.”
`ECF #89 at l. Finjan confirms it is not seeking discovery on products with no colorable
`infringement. Its request is limited to products with U. S. development, testing, compilation, or
`assembly, which may be infringement. Because discovery indicates Qualys has so infringed,
`Finjan is entitled to learn the associated economic impact for setting both royalty rate and base.
`Qualys ’ Domestic “Use”, “Oflers for Sale” and “Sales” ofthe Patented Technology
`Make Financial Information Relating to Overseas Customers and Sales Discoverable
`Qualys also “uses” the accused products in the U.S. for its foreign customers, users and
`subscribers (collectively “customers”) because it owns and operates the U.S.—based servers the
`within the U.S. that run its cloud—based scanning engines used by those foreign customers. For
`example, Qualys has datacenters located in the U.S. that host scanning engines Qualys uses on
`behalf of customers physically located outside the U.S., and which operating on their own
`infringe. See Ex. 2 at 9—10; Ex. 4 at QUALYSOOO30033 (“We currently host substantially all of
`our solutions from two third-party data centers, located in the United States and Switzerland.” .
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`Furthennore, the accused roducts
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`See, e.g., Ex. 8 at QUALY802033331. Qualys’ domestic “use” of Finjan’s patented
`ology, and thus infiingement under § 271(a), entitles Finjan to reasonable discovery into
`tec
`the economic footprint of such use, including the revenues associated with it, wherever they are
`located. Qualys’s cormter here fails for the reasons given above, and because it is based on blank
`assertion rather than evidence. This is no basis for avoiding discovery.
`Qualys domestically “offers to sell” and “sells” accused products to foreign customers.
`Within Qualys’ global sales force, the “Americas” team transmits offers and makes sales from
`the U.S. to foreign customers, and the details of those transactions when they result in sales are
`discoverable. See Ex. 2 at QUALYSOOO30025; Plastronics, 2019 WL 4392525, at *5. Qualys
`also generates a significant portion of its sales through channel partners. This includes managed
`service providers, value—added resellers and consulting firms located in the U.S., which help
`Qualys “broaden its global reach” and “target new geographic regions.” See Ex. 2 at
`QUALYSOOO30022. Such channel partner sales to foreign customers are relevant to damages.
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`Qualys ’ Sales Records Relating to Overseas Customers Are Further Discoverable
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`Because Their Value Was Likely Increased as a Result of Qualys ’ Domestic Infringement
`Qualys also leverages the benefits of its U.S. use (and infringement) of its accused
`products for its foreign customers, which is relevant to a reasonable royalty analysis. When U.S.
`customers use the accused products to 11111 security scans to detect threats, Qualys repackages
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`Case 4:18-cv-07229-YGR Document 100 Filed 09/04/20 Page 4 of 7
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`that data from its U.S.-based scans in security updates sent largely from the U.S., and which
`benefits Qualys as well as its Qualys’ customers worldwide. See, e.g., Ex. 9 at FINJAN-
`QUALYS 042706. As a result, Qualys’ foreign customers benefit from Qualys’ “use” of the
`accused products by using the threat data derived from Qualys’ infringing U.S. activity, and the
`value of that benefit is relevant for the purposes of assessing a reasonable royalty. Georgia-
`Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116 at 1120 (S.D.N.Y. 1970).
`Qualys’ Foreign Financial Information Discoverable for Infringement and Validity
`Qualys operates U.S.-based “cloud” offerings as accused products, which are hosted on
`servers located in the U.S. Qualys provides its customers, including overseas customers,
`instructions to use those offerings in an infringing manner. Since such instructions give rise to
`Qualys’ performing the act of inducing infringement in the U.S. for foreign customers, it exposes
`Qualys to § 271(b) inducement liability. Finjan is entitled to discovery into the economic activity
`surrounding such inducement, including activity involving overseas customers.
`Qualys should also produce information on foreign sales because it is relevant to
`establishing the commercial success of Finjan’s inventions. Leo Pharma. Prod., Ltd. v. Rea, 726
`F.3d 1346 (Fed. Cir. 2013) (objective indicia is part of the obviousness analysis). Qualys’s
`contention that it has produced the necessary data is inaccurate. With Qualys asserting hundreds
`of different obviousness combinations, Finjan is entitled to closely review the records of
`commercial success for the accused technology.
`Qualys Has Alleged No Burden Associated With the Requested Production
`Rule 26(b)(1) requires proportionality between the likely relevance of the requested
`information and the burden associated with its production. Qualys’s sudden argument of the
`burden is now waived and, in any event, unsubstantiated.
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`Qualys’s Position
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`1.
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`Foreign Sales of the Accused Products Alone Are Irrelevant to Direct Infringement.
`Foreign sales activity is relevant to direct infringement only if the patented invention as a
`whole is tied to an infringing act within the United States. See 35 U.S.C. 271(a) (“Section 271(a)”).
`Finjan improperly focuses on the accused products instead of the patented inventions. See
`Deepsouth Packing Co. v. Laitram Corp., 406 U.S. 518, 527 (1972) (“[Patentee’s] argument that
`Deepsouth sells the machines . . . cannot carry the day unless it can be shown that Deepsouth is
`selling the ‘patented invention.’”). The two are not synonymous. Specifically, Finjan’s
`infringement contentions allege that Qualys’s accused products infringe only when combined
`and/or interconnected with other devices and software on a network. See, e.g., Ex. B at 22-23, 73,
`76, 80-81, 87, 91, 99, 104, 150, 164, 177, 239, 280, 297, 304, 355, 362-363, 393, 409, 410, 472-
`474. Based on Finjan’s own allegations, foreign sales are irrelevant unless the entire patented
`invention of the claims—and not just the accused products—are made, used, sold, or offered for
`sale within the U.S. See Deepsouth, 406 U.S. at 527. But Finjan’s contentions and its arguments
`above fail to make this critical allegation. See Ex. A; Ex. B at 1-17.2
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`A.
`No Allegation of “Making” the Patented Inventions in the U.S.
`Finjan’s infringement contentions accuse Qualys’s software products (which operate on
`cloud servers around the globe) and a hardware scanner appliance (which is installed on a
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`2 For convenience, Qualys has combined the multiple documents comprising Finjan’s infringement contentions into
`a single document and included separate bates number. Citations to Exhibit B are to these bates numbers.
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`Case 4:18-cv-07229-YGR Document 100 Filed 09/04/20 Page 5 of 7
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`customer’s network). Finjan improperly claims that the mere development of these products
`constitutes “making” under Section 271(a), entitling it to foreign sales. This is wrong. Making
`does not occur until every claim element is combined into the product. See Centillion Data Sys.,
`LLC v. Qwest Commc'ns Int'l, Inc., 631 F.3d 1279, 1288 (Fed. Cir. 2011) (“to ‘make’ the system
`under § 271(a), Qwest would need to combine all of the claim elements—this it does not do.”).
`For software, this requires that the software be installed on the machine that can run it. See id.
`(“The customer, not Qwest, completes the system by providing the ‘personal computer data
`processing means’ and installing the client software.”); cf. Microsoft Corp. v. AT&T Corp., 550
`U.S. 449-450 (2007) (“Until it is expressed as a computer-readable ‘copy,’ e.g., on a CD–ROM,
`Windows software—indeed any software detached from an activating medium—remains
`uncombinable.”). But Finjan’s contentions never allege that Qualys’s software products are
`installed on machines in the United States before being sold abroad.3 Likewise, for Qualys’s
`scanner appliances, Finjan’s infringement contentions allege that the appliances are only part of
`the patented invention, and do not infringe until deployed in an actual network and interconnected
`with other devices and software. See Ex. B. at 000104, 126, 128, 130, 133, 135, 136, 177, 179,
`192, 196, 209, 211, 227, 229, 236, 239, 241, 252, 262, 285, 304, 306, 307, 363, 374, 381, 410, and
`459. That Qualys’s software and appliances may be developed in the U.S. is not enough.4
`The documents and cases on which Finjan relies do not alter this result. The documents
`emphasize the global nature of Qualys, and do not establish with any plausibility that any of the
`patented inventions are made here before being sold abroad. And, Finjan’s cited cases are each
`factually distinguishable because they involve an allegation that the patented inventions were made
`in the U.S. that is missing from Finjan’s contentions.
`Finjan alleges that Qualys does not dispute that it compiles code inside the U.S. But as
`Finjan’s cited exhibits show, Qualys conducts development activities on multiple continents. See
`Ex. 2 at 9-10. Finjan’s claim that Qualys’s arguments are premature also miss the point. The issue
`is what Finjan alleged in its contentions. Finjan never alleged that any of the accused products
`alone infringe any of the asserted claims. Per Finjan’s contentions, Qualys’s products are only one
`component of the patented invention. Thus, like Centillion the domestic manufacture of those
`components is not an infringing act that opens the door to foreign sales. See 631 F.3d 1279, 1288.
`Nor did Finjan ever allege a theory of recover that included foreign sales through any of
`the means which it now argues. Finally, Finjan alleges that mere development of software at least
`satisfies the “computer-readable storage medium” claims. But this too is incorrect. Finjan’s
`contentions for those claims each refer to other claims where Finjan alleges infringement only
`once the software is installed and interconnected with a variety of other network devices and
`software. See Ex. B at 87, 91, 150, 164, 297, 355, 402, 434, 449, 464. Moreover, Finjan’s
`contentions for those claims allege infringement only once the software is placed on a storage
`medium. This is different from Finjan’s present position, which seeks foreign sales of uninstalled
`software in the abstract. See id.
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`3 Even if Finjan had made this allegation (and it has not), it would still not be entitled to the entirety of Qualys’s
`foreign sales data, but only those sales for which there was an alleged act of making (i.e. installation of software)
`within the U.S.
`4 Finjan made similar arguments in Finjan, Inc. v. Blue Coat Sys., Inc., and Magistrate Judge Grewal denied Finjan’s
`motion to compel foreign sales data. See 2014 WL 5321095, at *2 (N.D. Cal. Oct. 17, 2014); Qualys Ex. C (Finjan,
`Inc. v. Blue Coat Sys., Inc., Case No. 5:13-cv-03999-BLF, ECF. 109-3 (N.D. Cal. Oct. 9, 2014)).
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`Case 4:18-cv-07229-YGR Document 100 Filed 09/04/20 Page 6 of 7
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`2.
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`B.
`No Allegation of Domestic Use, Sales, or Offers for Sale,” for Foreign Sales.
`Finjan also fails to plausibly allege that Qualys used, sold, or offered to sell the patented
`inventions within the U.S. Finjan first argues that Qualys “uses” the patented invention by
`operating servers running the accused software products. But this is not an infringing “use.” In
`Centillion, the Federal Circuit specifically addressed this scenario and held that an accused
`infringer does not “use” an infringing system by providing backend server software. See 631 F.3d
`at 1286 (“We agree with Qwest that, as a matter of law, it does not “use” the patented invention
`under the appropriate test from NTP . . . Supplying the software for the customer to use is not the
`same as using the system.”).
`Finjan next argues that Qualys makes infringing sales and offers to foreign customers from
`within the U.S. But this rests on a single document that Finjan mischaracterizes. The document in
`question refers to Qualys’s global sales force across multiple continents. See Ex. 2 at 30025. Finjan
`speculates that these foreign sales are sourced from the United States. And, as before, Finjan never
`articulated any of these theories in its contentions. See Ex. A; Ex. B at 1-17.
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`C.
`Inducement Still Requires Direct Infringement in the U.S.
`Finjan argues that its indirect infringement claims under 35 U.S.C. § 271(b) entitles it to
`discovery of foreign sales. Finjan is wrong – even an indirect infringement claim requires an
`underlying act of infringement within the U.S. See Ziptronix, Inc. v. Omnivision Techs., Inc., 71
`F. Supp. 3d 1090, 1098 (N.D. Cal. 2014). This argument fails for the reasons discussed above.
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`Know-how from Foreign Operations does not Entitled Finjan to Global Sales.
`Finjan cursorily argues that Qualys’s extraterritorial operations are relevant to a reasonable
`royalty analysis because of know-how in fighting malware and viruses that Qualys gains through
`its foreign-deployed products. Finjan claims that such know-how enhances the value of Qualys’s
`domestic operations, rendering such sales relevant. This argument has several flaws. First, Finjan
`cites no authority supporting this position, which would neutralize extraterritorial limits for any
`case in which reasonable royalty is alleged. Second, Finjan is silent on why foreign sales would
`inform the inquiry any better than the worldwide revenue data that Qualys already produced.
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`3.
`Qualys Already Produced Information Sufficient to Assess Commercial Success.
`Finjan alleges that Qualys’s foreign sales data is relevant to establishing the commercial
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`success (and therefore the validity) of the patented inventions. Once again, however, Finjan offers
`no authority holding that non-infringing foreign sales may be used in this manner. But, in any
`event, Finjan has effectively accused every Qualys product, and Qualys has already produced
`worldwide revenue data for these products. To the extent foreign activity informs commercial
`success, Finjan already has sufficient information.
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`4.
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`Obtaining and Producing the Information Finjan Seeks is Unduly Burdensome.
`Production would burden Qualys. The information Finjan seeks does not exist in a readily
`producible form. Qualys personnel must retrieve and generate the underlying data in producible
`form. This is no trivial undertaking. Since that Finjan already has Qualys’s worldwide revenue
`information, the marginal value to this information does not outweigh the burden to collect it.
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`Case 4:18-cv-07229-YGR Document 100 Filed 09/04/20 Page 7 of 7
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`In accordance with Civil Local Rule 5-1(i)(3), I attest that concurrence in the filing of this
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`ATTESTATION
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`document has been obtained from any other signatory to this document.
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`/s/ Kristopher Kastens
`Kristopher Kastens
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