Case 5:17-cv-04467-BLF Document 73 Filed 05/16/18 Page 1 of 10
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`SAN JOSE DIVISION
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`FINJAN, INC.,
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`Plaintiff,
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`v.
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`SONICWALL, INC.,
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`Case No. 17-cv-04467-BLF
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`ORDER DENYING DEFENDANT'S
`MOTION TO DISMISS COMPLAINT
`FOR FAILURE TO STATE A CLAIM
`FOR WILLFUL INFRINGEMENT
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`Defendant.
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`[Re: ECF 26]
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`Defendant SonicWall (“SonicWall”) moves to dismiss the claims of willful infringement in
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`the Complaint filed by Plaintiff Finjan, Inc. (“Finjan”). Mot., ECF 26. Pursuant to Civil Local
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`Rule 7-1(b), the Court issues a decision on the instant motion without oral argument. For the
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`reasons discussed below, the Court DENIES SonicWall’s motion.
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`I. BACKGROUND
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`Finjan initiated the present lawsuit on August 4, 2017, alleging that SonicWall infringes
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`ten of Finjan’s patents: 6,154,844 (the “’844 Patent”), 7,058,822 (the “’822 Patent”), 6,804,780
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`(the “ʼ780 Patent”), 7,613,926 (the “’926 Patent”), 7,647,633 (the “’633 Patent”), 8,141,154 (the
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`“’154 Patent”), 8,677,494 (the “’494 Patent”), 7,975,305 (the “’305 Patent”), 8,225,408 (the “’408
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`Patent”), and 6,965,968 (the “’968 Patent”) (collectively, the “Asserted Patents”). Compl., ECF 1.
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`Finjan alleges that it is entitled to enhanced damages pursuant to 35 U.S.C. § 284 because
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`SonicWall has engaged in willful infringement of each of the Asserted Patents. Id. ¶¶ 72, 90, 106,
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`123, 140, 158, 170, 189, 206, 224.
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`Prior to the filing of this lawsuit, Finjan and SonicWall engaged in licensing discussions
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`that date back to June 2014. Id. ¶ 39. Around June 10, 2014, Finjan contacted SonicWall
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`regarding a potential license to Finjan’s patents, stating “Finjan owns a patent portfolio covering
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`Case 5:17-cv-04467-BLF Document 73 Filed 05/16/18 Page 2 of 10
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`behavior-based and antimalware security resulting from its R&D investments” and “we believe a
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`license to Finjan’s patent portfolio could be beneficial” to the company. Id. At that time,
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`SonicWall was a subsidiary of Dell, Inc. (“Dell”). Id. Dell sold SonicWall to a private equity
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`firm, Francisco Partners and Elliott Management, around November 1, 2016. Id. ¶ 44.
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`From June 2014 to March 2017, Finjan and SonicWall had numerous communications
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`about Finjan’s Asserted Patents and SonicWall’s products. Id. ¶¶ 39–44. On multiple occasions,
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`Finjan met with SonicWall’s representatives in Round Rock, Texas. Id. ¶¶ 41, 42. In particular,
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`around October 12, 2016, Finjan visited SonicWall to discuss whether SonicWall would take a
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`license to Finjan’s patents. Id. ¶ 43. Around November 1, 2016, Finjan emailed a presentation to
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`SonicWall that summarized the discussions that the parties had about three weeks earlier. Id.;
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`Ex. C to Springer Decl., ECF 25-10. This presentation identified each Asserted Patent and
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`described how SonicWall’s products related to Finjan’s patents. Compl. ¶ 43; Ex. C to Springer
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`Decl.
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`In the end, SonicWall refused to take a license to Finjan’s patents and at no time did
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`SonicWall provide any explanation why the accused products did not infringe the Asserted
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`Patents. Compl. ¶ 44. Eventually, Finjan filed this lawsuit against SonicWall on August 4, 2017.
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`II. LEGAL STANDARD
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`A. Motion to Dismiss
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`“A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a
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`claim upon which relief can be granted ‘tests the legal sufficiency of a claim.’” Conservation
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`Force v. Salazar, 646 F.3d 1240, 1241-42 (9th Cir. 2011) (quoting Navarro v. Block, 250 F.3d
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`729, 732 (9th Cir. 2001)). When determining whether a claim has been stated, the Court accepts
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`as true all well-pled factual allegations and construes them in the light most favorable to the
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`plaintiff. Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 690 (9th Cir. 2011). However, the
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`Court need not “accept as true allegations that contradict matters properly subject to judicial
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`notice” or “allegations that are merely conclusory, unwarranted deductions of fact, or
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`unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008)
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`(internal quotation marks and citations omitted). While a complaint need not contain detailed
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`factual allegations, it “must contain sufficient factual matter, accepted as true, to ‘state a claim to
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`relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
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`Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when it “allows the
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`court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.
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`B. Enhanced Damages Pursuant to 35 U.S.C. § 284 and Willful Infringement
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`Under 35 U.S.C. § 284, in a case of infringement, courts “may increase the damages up to
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`three times the amount found or assessed.” Section 284 “contains no explicit limit or condition”
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`on when a district court may award enhanced damages, but instead allows courts to “punish the
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`full range of culpable behavior.” Halo Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923, 1931,
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`1933 (2016). This “sort of conduct warranting enhanced damages has been variously described in
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`our cases as willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or—
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`indeed—characteristic of a pirate.” Id. at 1932. When awarding enhanced damages, “courts
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`should continue to take into account the particular circumstances of each case.” Id. at 1934.
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`Enhanced damages are generally reserved for “egregious cases of misconduct beyond typical
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`infringement,” such as those “typified by willful misconduct.” Id. at 1934–35.
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`In assessing the egregiousness of an actor’s behavior, “culpability is generally measured
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`against the knowledge of the actor at the time of the challenged conduct.” Id. at 1933 (citation
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`omitted). What matters is the actor’s subjective state of mind at the time of the challenged
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`conduct, not his objective reasonableness. See id. For this reason, “[t]he subjective willfulness of
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`a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to
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`whether his infringement was objectively reckless.” Id. at 1933. Courts have considered the
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`“totality of the allegations to determine whether a claim of willfulness is plausible.” See, e.g.,
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`Nanosys, Inc. v. QD Vision, Inc., No. 16-CV-01957, 2016 WL 4943006, at *7 (N.D. Cal. Sept. 16,
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`2016) (“Nanosys I”).
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`“Knowledge of the patent alleged to be willfully infringed continues to be a prerequisite to
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`enhanced damages” after Halo. WBIP, LLC v. Kohler Co., 829 F.3d 1317, 1341 (Fed. Cir. 2016)
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`(citing Halo, 136 S. Ct. at 1932–33). In addition, the complaint must plead some factual
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`allegations to support egregious behavior other than mere knowledge of the asserted patents to
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`Case 5:17-cv-04467-BLF Document 73 Filed 05/16/18 Page 4 of 10
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`survive a motion to dismiss. See, e.g., Cont’l Circuits LLC v. Intel Corp., No. CV16-2026, 2017
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`WL 679116, at *7–8 (D. Ariz. Feb. 21, 2017) (collecting cases and concluding that allegations of
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`knowledge alone are insufficient).
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`C. Request for Judicial Notice
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`The Court may generally consider exhibits attached to or incorporated by reference into the
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`complaint and matters properly subject to judicial notice. See Tellabs, Inc. v. Makor Issues &
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`Rights, Ltd., 551 U.S. 308, 322 (2007). In support of its motion, SonicWall filed a Request for
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`Judicial Notice (“RJN”) of the (1) July 8, 2014 email with attachments between Finjan and Dell;
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`(2) September 17, 2014 email with attachments between Finjan and Dell, and (3) Finjan’s October
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`12, 2016 PowerPoint presentation entitled Patent Licensing Discussions. RJN, ECF 27; Exs. A–C
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`to Springer Decl., ECF 25-6, 25-8, 25-10. These documents are referenced in the Complaint. See
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`Compl. ¶¶ 40, 43. SonicWall’s RJN is GRANTED, as the Complaint refers to those documents
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`and Finjan does not dispute their authenticity. Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992,
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`998 (9th Cir. 2010). The documents are accepted as what they represent, but any specific fact
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`findings and legal conclusions set forth in those documents may not bind this Court. Also, the
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`Court does not make any factual determinations as to whether the documents are sufficient
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`evidence to support the merits of Finjan’s case. Rather, the Court reviews the Complaint’s
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`allegations and the documents as a whole to determine whether Finjan pleads a plausible claim
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`under the standards set forth in Twombly and Iqbal.
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`III. DISCUSSION
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`In its motion to dismiss, SonicWall argues that Finjan has failed to state a claim for willful
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`infringement because the Complaint’s allegations “show nothing more than SonicWall engaging
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`in good faith, pre-suit settlement discussions with Finjan.” Mot. 6. SonicWall further contends
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`that Finjan does not allege that the parties had any prior business relationship, SonicWall copied
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`“something” from Finjan, or SonicWall designed a product based on “something” it learned from
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`Finjan. Id. On this basis, SonicWall asserts that Finjan has not pled allegations showing that
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`SonicWall “engaged in any sort of behavior that would be considered ‘egregious.”” Id.
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`Finjan responds that SonicWall “conflates the standard for proving willful infringement
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`with the standard of pleading it.” Opp’n 1, ECF 31. Finjan further avers that it has alleged more
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`than mere knowledge of the patents and has pled specific facts showing “SonicWall’s subjective
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`intent to string Finjan along with three years of sham settlement discussions, all while . . . selling
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`new products that SonicWall knew [to infringe].” Id. In particular, Finjan contends that the
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`Complaint alleges that Finjan provided details on how the Asserted Patents relate to SonicWall’s
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`products through prolonged settlement discussions but that SonicWall participated in the
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`discussions with a disingenuous manner. Id. at 2–3.
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`The Court agrees with Finjan that it has sufficiently pled claims for willful infringement.
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`The parties do not dispute that Finjan pleads that SonicWall had pre-suit knowledge of the
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`Asserted Patents, and thus the only issue is whether the Complaint’s allegations allow a reasonable
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`inference to be drawn that SonicWall engaged in “egregious conduct.” See, e.g., Cont’l Circuits
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`LL, 2017 WL 679116, at *7–8 (requiring a showing of egregious behavior to plead a willful
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`infringement claim). While enhanced damages may not be awarded where “the infringer knew
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`about the patent and nothing more,” Halo, 136 S. Ct. at 1936 (Breyer, J., concurring) (emphasis in
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`original), this is not such a case as elaborated below.
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`According to the Complaint, the parties had numerous communications where Finjan
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`discussed how SonicWall’s products related to the Asserted Patents. Compl. ¶¶ 39–44. Through a
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`number of telephone meetings and in-person meetings in Round Rock, Texas, Finjan explained
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`SonicWall’s infringement of each Asserted Patent element-by-element. Id. ¶¶ 70, 88, 104, 121,
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`138, 156, 168, 187, 204, 222 (emphasis added). In particular, during a meeting held around
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`October 12, 2016, Finjan “identified every one of Finjan’s patents that are asserted in this case . . .
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`and detailed how a number of [SonicWall’s] products – including Advanced Threat Protection,
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`Web Application Firewall, Content Filtering Service, and Gateway Anti-Virus and Anti-Spyware
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`– relate to Finjan’s patents.” Id. ¶ 43; see Ex. C to Springer Decl. These allegations allow a
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`reasonable inference to be drawn that SonicWall not only knew about the existence of the
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`Asserted Patents but how its products infringed each Asserted Patent in detail.
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`In addition, the Complaint contains allegations that support a reasonable inference that
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`SonicWall knew about its infringement for about three years, but notwithstanding that knowledge,
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`Case 5:17-cv-04467-BLF Document 73 Filed 05/16/18 Page 6 of 10
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`engaged in disingenuous licensing negotiations. For example, the Complaint alleges that
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`SonicWall sent representatives who had no authority to accept a license to at least one meeting,
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`engaged in at least one meeting while knowing that it would soon be sold by Dell, and canceled
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`meetings on short notice after Finjan’s representatives had taken a flight to attend the meetings.
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`Compl. ¶¶ 71, 89, 105, 122, 139, 157, 169, 188, 205, and 223. Moreover, for about three years,
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`SonicWall did not provide “any explanation as to how any of the Accused Products do not
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`infringe any of the Asserted Patents.” Id. ¶ 44. When considering those allegations and other
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`facts pled in the Complaint that show that SonicWall knew in detail about how it infringed each
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`Asserted Patent as a whole, a reasonable inference can be drawn that SonicWall’s licensing
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`discussions were disingenuous. Taking the Complaint’s allegations as true, there is “more than a
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`sheer possibility” that SonicWall engaged in disingenuous discussions and prolonged the
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`negotiations while being aware of its infringement. Potter Voice Techs., LLC v. Apple Inc., 24 F.
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`Supp. 3d 882, 886 (N.D. Cal. 2014) (citing Iqbal, 556 U.S. at 678) (“At the motion to dismiss
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`stage, the Court does not undertake a full evaluation of ‘probability,’ but simply asks for ‘more
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`than a sheer possibility that a defendant has acted unlawfully.’”). As such, the Court finds that the
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`Complaint contains sufficient facts from which a plausible conclusion could be reached that
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`SonicWall’s conduct went beyond those “in a typical infringement case” and thus was egregious.
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`Halo, 136 S. Ct. at 1935.
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`SonicWall’s arguments do not persuade the Court to reach an opposite conclusion. In its
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`motion, SonicWall argues that “[a]llegations that a defendant continued its accused acts of
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`infringement despite knowledge of an asserted patent—alone—do not rise to the requisite level of
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`egregiousness.” Mot. 6 (citing Rovi Solutions Corporation v. Lenovo (US) Inc., No. C 12-04209-
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`RS, Dkt. No. 34 (N.D. Cal. Nov. 15, 2012); Slot Speaker Technologies, Inc. v. Apple, Inc., No. 13-
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`CV-01161-HSG, 2017 WL 4354999 (N.D. Cal. Sept. 29, 2017); XpertUniverse, Inc. v. Cisco
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`Systems, Inc., Case No. 17-cv-03848-RS, Dkt. 46 at 11 (N.D. Cal. Oct. 11, 2017)). However,
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`Finjan alleges more than mere knowledge of the Asserted Patents and continued acts of
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`infringement. As discussed above, the Complaint pleads that SonicWall knew in detail how its
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`products infringe each Asserted Patent and that SonicWall engaged in the licensing discussions in
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`a disingenuous manner. Moreover, the three cases Rovi Solutions, XpertUniverse, and Slot
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`Speaker relied on by SonicWall are distinguishable from this case.
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`In Rovi Solutions, the only issue present before the court was whether the allegation that
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`the defendant “continued its infringing activities” was sufficient to state a claim for willful
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`infringement. Case No. C 12-04209-RS, Dkt. No. 34 at 5. The court decided that such an
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`allegation alone was insufficient to meet the pleading standard. Id. at 5–6. In contrast, Finjan
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`does not merely allege that SonicWall “continued its infringing activities.” As summarized above,
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`the Complaint pleads that SonicWall gained detailed knowledge about the purported infringement
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`of each Asserted Patent through multiple licensing discussions and that SonicWall’s actions
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`during the course of the negotiations demonstrate misconduct. Finjan therefore pleads more
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`factual allegations that support a showing of egregious behavior than that was present in Rovi
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`Solutions.
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`Slot Speaker faced the question whether it should grant the plaintiff’s request to amend the
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`complaint to assert a willful infringement claim. Slot Speaker, 2017 WL 4354999, at *1. The
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`court found that the amendment would be futile because the “[p]laintiff point[ed] to [d]efendant’s
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`post-suit manufacturing and sales as the exclusive evidence of [d]efendant’s willful infringement.”
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`Id., at *2. In other words, the willful infringement claim was insufficient because the plaintiff did
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`not plead any other factual allegations regarding the nature of the defendant’s conduct except for
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`on-going sales. Unlike the plaintiff in Slot Speaker, Finjan alleges more than “post-suit” sales
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`because the Complaint contains detailed allegations regarding SonicWall’s knowledge and
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`conduct during the licensing negotiations that continued for about three years. Thus, Finjan does
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`not simply rely on post-suit sales of SonicWall’s products, and Slot Speaker is inapplicable.
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`The court in XpertUniverse dismissed willful infringement claims under an entirely
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`different situation. In that case, the defendant’s earlier products were found to have infringed the
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`plaintiff’s patent at an earlier trial. Case No. 17-cv-03848-RS, Dkt. 46 at 2. The plaintiff alleged
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`that the defendant’s later products continued to infringe since the final judgment was entered in
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`the earlier trial. Id. at 11. The defendant, however, argued that its later products were “design-
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`around” products. Id. Because the “[d]isagreement about the existence of continued infringement
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`does not necessarily indicate willful . . . misconduct,” the court dismissed the plaintiff’s willful
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`infringement claims which were not supported by other allegations. See id. Unlike
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`XpertUniverse, this case does not implicate allegations of continued infringement after an earlier
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`jury verdict. Rather, Finjan’s claims for willful infringement are based on SonicWall’s purported
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`conduct that occurred during the parties’ licensing negotiations through a period of about three
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`years. The Court therefore is unpersuaded that XpertUniverse suggests that Finjan’s willful
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`infringement claims are deficient.
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`SonicWall’s other arguments are unavailing. SonicWall first asserts that the “fact that
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`settlement negotiations occurred while SonicWall was continuing to sell the accused products . . .
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`cannot be the basis for a claim of willfulness.” Mot. 7. In this regard, SonicWall avers that
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`settlement discussions are both encouraged and protected under Federal Rule of Evidence 408. Id.
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`at 7–8. Rule 408 provides that certain evidence pertaining to negotiations is not admissible “either
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`to prove or disprove the validity or amount of a disputed claim or to impeach by a prior
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`inconsistent statement or a contradiction.” Fed. R. Evid. 408. However, as SonicWall
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`acknowledges, the admissibility of the parties’ licensing discussions are not at issue in this motion.
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`See Mot. 8 (“[T]his motion is not predicated on the question of admissibility per se, which would
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`be decided by the Court later in the case.”). Holding that the settlement discussion allegations
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`should be ignored because they are protected by Rule 408 would effectively require Finjan to
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`prove its claims to survive a motion to dismiss. But Finjan need not prove its willful infringement
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`claims in its pleading. At this stage, Finjan only needs to plead factual allegations, when accepted
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`as true, “state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570.
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`Similarly, SonicWall argues that a willfulness claim that relies entirely on Rule 408-
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`protected communications cannot satisfy the Halo standard. Reply 10, ECF 33. But SonicWall
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`does not point to any authority supporting that this proposition is applicable at the motion to
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`dismiss stage. For the instant motion, the Court accepts all well-pled factual allegations as true
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`and construes them in the light most favorable to Finjan. Reese, 643 F.3d at 690. Admissibility is
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`not at issue in this motion. “Moreover, evidence of facts disclosed during compromise
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`negotiations is not inadmissible by virtue of having been first disclosed in the compromise
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`negotiations.” Phoenix Sols. Inc. v. Wells Fargo Bank, N.A., 254 F.R.D. 568, 584 (N.D. Cal.
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`2008). Therefore, to the extent that SonicWall is arguing that the allegations pertaining to the
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`settlement discussions cannot lend any support to Finjan’s willful infringement claim at the
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`pleading stage, the Court rejects that argument. Whether Finjan has evidence to prove its claims is
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`a matter for another day.
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`As a final point, SonicWall claims that allowing settlement discussions to form the basis of
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`willful infringement claims would cut against the public policy to encourage such discussions
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`Mot. 8. In particular, SonicWall asserts that a defendant may have to waive its attorney-client
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`privilege to show good faith when countering willful infringement claims. Id. For support,
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`SonicWall cites McRO, Inc. v. Namco Bandai Games Am., Inc., 23 F. Supp. 3d 1113, 1125 (C.D.
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`Cal. 2013). The law, however, recognizes that a party may have to waive its attorney-client
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`privilege to raise a defense, and Patent Local Rule 3-7 recognizes this possibility. See In re
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`EchoStar Commc'ns Corp., 448 F.3d 1294, 1298–99 (Fed. Cir. 2006) (discussing the scope of a
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`waiver of attorney-client privilege in response to a charge of willful infringement); Patent L.R. 3-
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`7. There is no special reason why purported egregious behavior should be shielded by the fact that
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`the defendant may have to waive its attorney-client privilege. In addition, SonicWall’s reliance on
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`McRO is not persuasive. While that case recognized “the need to maintain the attorney-client
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`privilege for litigation counsel,” it focused on the waiver problem where the willfulness
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`allegations were directed to post-suit conduct. See McRO, 23 F. Supp. 3d at 1124–25. McRO’s
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`discussion does not directly apply here because Finjan alleges that SonicWall acted egregiously
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`before the lawsuit was filed. For these reasons, the Court rejects SonicWall’s arguments.
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`Although settlement discussions play an important role in resolving disputes, Finjan’s willful
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`infringement claims satisfy the standards set forth in Iqbal and Twombly and thus should be
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`allowed to proceed.
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`To be clear, the fact that the parties engaged in licensing negotiations while SonicWall was
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`selling (and continues to sell) the accused products alone does not necessarily mean that
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`SonicWall’s behavior is egregious. Here, Finjan’s pleading goes beyond the mere allegation that
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`SonicWall acquired pre-suit knowledge of the Asserted Patents and sold infringing products.
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`9
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`Northern District of California
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`United States District Court
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`

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`Case 5:17-cv-04467-BLF Document 73 Filed 05/16/18 Page 10 of 10
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`Accordingly, at this motion to dismiss stage, Finjan has satisfied its burden to allege facts
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`from which a plausible conclusion could be reached that SonicWall engaged in egregious conduct
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`under Halo. Further developments of this case may reveal that the circumstances do not support
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`that SonicWall’s purported behavior was egregious.
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`IV. CONCLUSION
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`For the foregoing reasons, Finjan’s Complaint sufficiently pleads willful infringement.
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`SonicWall’s motion to dismiss the claims of willful infringement is DENIED.
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`IT IS SO ORDERED.
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`Dated: May 16, 2018
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`
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`______________________________________
`BETH LABSON FREEMAN
`United States District Judge
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`Northern District of California
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`United States District Court
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