Case 4:18-cv-07229-YGR Document 105 Filed 09/17/20 Page 1 of 4
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`FINJAN, INC.,
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`Plaintiff,
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`v.
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`QUALYS INC.,
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`Case No. 18-cv-07229-YGR (TSH)
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`DISCOVERY ORDER
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`Re: Dkt. No. 100
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`Defendant.
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`Finjan seeks financial information concerning foreign sales of the accused Qualys
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`products. To determine if this information is relevant, we have to start with the basics. 35 U.S.C.
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`§ 271(a) states that “whoever without authority makes, uses, offers to sell, or sells any patented
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`invention, within the United States or imports into the United States any patented invention during
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`the term of the patent therefor, infringes the patent.” (emphasis added). Section 271(a)’s reach is
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`limited to activity within the United States, as “no infringement occurs when a patented product is
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`made and sold in another country.” Microsoft Corp. v. AT&T Corp., 550 U.S. 437, 441 (2007).1
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`“Thus, while U.S. patent law allows for ‘damages adequate to compensate for the infringement,’
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`there is no compensation for a defendant’s foreign exploitation of a patented invention, as such
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`activity is not infringement at all.” Kajeet, Inc. v. Qustodio, LLC, 2019 WL 8060078, at *13 (C.D.
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`Cal. Oct. 22, 2019) (quoting Power Integrations, Inc. v. Fairchild Semiconductor Int’l, Inc., 711
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`F.3d 1348, 1371 (Fed. Cir. 2013) (citing 35 U.S.C. § 284)).
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`Accordingly, the location of the alleged conduct bears directly on the relevance of foreign
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`sales information. After all, “[t]he royalty base for reasonable royalty damages cannot include
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`1 There is an exception in section 271(f), which is not at issue here.
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`Northern District of California
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`United States District Court
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`Case 4:18-cv-07229-YGR Document 105 Filed 09/17/20 Page 2 of 4
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`activities that do not constitute patent infringement, as patent damages are limited to those
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`‘adequate to compensate for the infringement.’” AstraZeneca AB v. Apotex Corp., 782 F.3d 1324,
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`1343 (Fed. Cir. 2015) (quoting 35 U.S.C. § 284). If the alleged exploitation of the patented
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`invention occurred overseas, “information regarding defendant’s foreign sales is not relevant to
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`the hypothetical negotiation of the reasonable royalty amount because defendant would not be
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`liable for foreign sales that do not violate U.S. patent laws.” Kajeet, 2019 WL 8060078, *13. By
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`contrast, foreign sales are relevant for infringing products that are made, used, offered for sale, or
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`sold within the United States. See Railroad Dynamics, Inc. v. A. Stucki Co., 727 F.2d 1506, 1519
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`(Fed. Cir. 1984) (“When it made the 1,671 carsets in this country, it infringed claim 10. Whether
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`those carsets were sold in the U.S. or elsewhere is therefore irrelevant, and no error occurred in
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`including those carsets among the infringing products on which royalty was due.”). Of course, the
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`whole patented invention – not just part of it – must be made, used, offered for sale, or sold within
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`the United States; otherwise, the conduct does not amount to infringement. See Centillion Data
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`Sys., LLC v. Qwest Commc’ns Int’l, Inc., 631 F.3d 1279, 1288 (Fed. Cir. 2011) (“to ‘make’ the
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`system under § 271(a), Qwest would need to combine all of the claim elements—this it does not
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`do.”).
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`The parties seem to agree on the above general principles.2 Where they divide is on
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`whether Finjan is asserting a claim that Qualys’s foreign sales are of products that were made,
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`used, offered for sale, or sold in the U.S. Finjan is correct that a discovery motion is not the right
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`place for the Court to make a factual determination regarding whether Qualys’s foreign sales are
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`of products that infringe domestically, so the Court declines to discuss any of the evidence the
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`parties have submitted on that disputed point. The bigger issue is that Finjan’s infringement
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`contentions contend that Qualys’s accused products infringe only when they are combined with or
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`connected to other devices and software on a network, so mere development in the U.S. is not
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`enough to show that the foreign sales are of infringing products that were “made” here. Finjan’s
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`2 Finjan previously argued that worldwide sales are relevant to the reasonable royalty even if the
`products are not made in the U.S., see ECF No. 79, but it now “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.” ECF No. 100.
`2
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`Northern District of California
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`United States District Court
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`Case 4:18-cv-07229-YGR Document 105 Filed 09/17/20 Page 3 of 4
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`infringement contentions also do not contend that Qualys “uses,” “offers for sale” or “sells” the
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`patented technology in the U.S. for foreign customers. In other words, Qualys argues that Finjan’s
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`theories of relevance for the foreign sales are way outside anything disclosed in its infringement
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`contentions. For its part, in the discovery letter brief, Finjan does not dispute that characterization
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`of its infringement contentions.3 Instead, Finjan argues that “the Court’s Patent Rules permit
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`Finjan, upon a timely showing of good cause, to amend contentions, and good cause includes
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`‘recent discovery of nonpublic information,’ such as information about Qualys’s internal
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`activities. It is to develop exactly that nonpublic information that Finjan seeks this discovery.
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`Denying it on the basis that the contentions have not yet fully developed the case would put Finjan
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`in the impossible situation of being unable to update contentions, because it is unable to receive
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`nonpublic information, because it has not yet updated contentions.” ECF No. 100.
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`There are two problems with Finjan’s argument. First, it does not make any sense. The
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`foreign sales information that Finjan seeks has nothing to do with the liability evidence that either
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`does or does not show that the products Qualys has sold overseas were infringing when they were
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`made here, or that Qualys used, offered for sale, or sold here products for its foreign customers.
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`That evidence is about primary conduct, not sales information.
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`Second, fact discovery closes on October 1, 2020, ECF No. 78, which is two weeks from
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`now. Finjan has not moved to amend its infringement contentions to include the infringement
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`theories that would make foreign sales information relevant. At this point, unless Finjan moved to
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`shorten time, its unfiled motion to amend could not even be heard until after fact discovery is
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`closed. Of course, it would be up to Judge Gonzalez Rogers to decide whether to allow Finjan to
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`3 By contrast, at the hearing Finjan asserted that its infringement contentions do contend that
`Qualys infringes by domestically making the patented invention, which it then sells in foreign
`sales. Finjan pointed to its infringement contention for claim 4a of the ‘154 patent, which refers to
`a storage medium that stores the software. Finjan asserted that Qualys’s domestic development of
`the software (which of course has to be stored in something) satisfies claim 4a. However, the
`Court is unpersuaded. As Qualys correctly pointed out, claim 4a also incorporates by reference
`the analysis for claim 1a (it says: “See analysis for Claim 1a above”), which discloses “a system
`for protecting a computer” that comprises certain components and which would not be satisfied
`merely by software in a storage medium. Pointing to this infringement contention was Finjan’s
`sole attempt to assert that its domestic “making” theory was disclosed in its infringement
`contentions for foreign sales. Finjan did not argue at the hearing that its infringement contentions
`disclose its domestic use, offer for sale or sold theories for foreign sales.
`3
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`Northern District of California
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`United States District Court
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`Case 4:18-cv-07229-YGR Document 105 Filed 09/17/20 Page 4 of 4
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`amend its infringement contentions in a material way after fact discovery has closed. But as
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`matters stand now, Finjan is trying to obtain discovery based on infringement theories that are way
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`outside its infringement contentions, fact discovery is about to close, and Finjan has not even
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`asked Judge Gonzalez Rogers for permission to amend. The undersigned is quite skeptical that
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`Finjan’s new infringement theories will ever be in this case.
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`To be clear, the Court is not holding that infringement contentions under the Patent Local
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`Rules define the outer bounds of relevance for discovery purposes. Finjan is right that such a
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`holding would have a chicken-and-egg quality to it, since Patent Local Rule 3-6(c) expressly
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`contemplates that infringement contentions may be amended based on nonpublic information
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`obtained in discovery. Rather, the Court’s point is that we are almost at the end of fact discovery,
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`and Finjan seems to have done nothing to make its new infringement theories part of its liability
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`case.4 Finjan’s motion to compel the foreign sales information is therefore DENIED.
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`IT IS SO ORDERED.
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`Dated: September 17, 2020
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`THOMAS S. HIXSON
`United States Magistrate Judge
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`4 Finjan has a few back up arguments, but they are makeweights. Finjan argues that Qualys’s
`foreign customers benefit from security updates that Qualys develops from information that it
`gains in part from the infringing domestic use by its U.S. customers of Qualys’s products. That
`argument is irrelevant, however, because the reasonable royalty compensates for infringement, and
`Finjan’s argument does not demonstrate that the foreign sales are of products that infringe. Also,
`Finjan does not even articulate how the value of that “benefit” would be reflected in the foreign
`sales information it seeks. Finjan also asserts that Qualys induces its foreign customers to infringe
`in the U.S. by using Qualys’s U.S.-based cloud platform. Again, however, that argument fails to
`demonstrate that products in other countries infringe. Finjan also does not explain how the foreign
`sales information it seeks would be related to any damages for the alleged induced domestic
`infringement on the cloud platform. Finally, Finjan makes a two-sentence assertion that foreign
`sales are relevant to establishing the commercial success of Finjan’s inventions. However, that
`argument is too underdeveloped for the Court to meaningfully assess it. The Court has previously
`admonished Finjan for making conclusory arguments. See ECF No. 89 (“If Finjan is going to
`press this point, it must assert a well-developed argument and not just make a conclusory
`assertion.”). Indeed, the whole reason for the current letter brief is that Finjan’s arguments in the
`previous letter brief were so undeveloped the Court required further briefing. See id.
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`Northern District of California
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`United States District Court
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