Case 5:17-cv-04467-BLF Document 363 Filed 03/04/21 Page 1 of 9
`
`DUANE MORRIS LLP
`D. Stuart Bartow (CA SBN 233107)
`dsbartow@duanemorris.com
`Nicole E. Grigg (CA SBN 307733)
`negrigg@duanemorris.com
`2475 Hanover Street
`Palo Alto, CA 94304-1194
`Telephone: 650.847.4150
`Facsimile: 650.847.4151
`DUANE MORRIS LLP
`Joseph A. Powers (PA SBN 84590)
`Admitted Pro Hac Vice
`japowers@duanemorris.com
`Jarrad M. Gunther (PA SBN 207038)
`Admitted Pro Hac Vice
`jmgunther@duanemorris.com
`30 South 17th Street
`Philadelphia, PA 19103
`Telephone: 215.979.1000
`Facsimile: 215.979.1020
`Attorneys for Defendant
`SONICWALL INC.
`
`DUANE MORRIS LLP
`Matthew C. Gaudet (GA SBN 287789)
`Admitted Pro Hac Vice
`mcgaudet@duanemorris.com
`John R. Gibson (GA SBN 454507)
`Admitted Pro Hac Vice
`jrgibson@duanemorris.com
`Robin L. McGrath (GA SBN 493115)
`Admitted Pro Hac Vice
`rlmcgrath@duanemorris.com
`David C. Dotson (GA SBN 138040)
`Admitted Pro Hac Vice
`dcdotson@duanemorris.com
`Jennifer H. Forte (GA SBN 940650)
`Admitted Pro Hac Vice
`jhforte@duanemorris.com
`1075 Peachtree NE, Suite 2000
`Atlanta, GA 30309
`Telephone: 404.253.6900
`Facsimile: 404.253.6901
`
`UNITED STATES DISTRICT COURT
`
`NORTHERN DISTRICT OF CALIFORNIA
`SAN JOSE DIVISION
`
`FINJAN, LLC, a Delaware Limited Liability
`Company,
`
`Plaintiff,
`
`v.
`
`SONICWALL INC., a Delaware Corporation,
`
`Defendant.
`
`Case No.: 5:17-cv-04467-BLF-VKD
`
`DEFENDANT SONICWALL INC.’S
`MOTION IN LIMINE TO EXCLUDE THE
`TESTIMONY OF DR. MCDUFF’S PRICE
`PER SCAN OPINIONS (METHOD NO. 3)
`(MOTION IN LIMINE NO. 4)
`Date:
`March 18, 2021
`Time:
`1:30 PM
`Courtroom: 3, 5th Floor
`Judge:
`Hon. Beth Labson Freeman
`
`REDACTED
`
`DEFENDANT SONICWALL, INC.’S MOTION IN LIMINE TO EXCLUDE THE TESTIMONY OF DR. MCDUFF’S PRICE PER SCAN
`OPINIONS (METHOD NO. 3) (MOTION IN LIMINE NO. 4), CASE NO. 5:17-CV-04467-BLF-VKD
`
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`Case 5:17-cv-04467-BLF Document 363 Filed 03/04/21 Page 2 of 9
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`TABLE OF REFERENCED EXHIBITS1
`
`September 4, 2020 Expert Report of DeForest McDuff, Ph.D
`Order on Daubert Motions [Re: ECF 421, 423, 425, 427, 429, 431],
`Finjan, Inc. v. Cisco Systems, Inc., Case No. 17-cv-00072-BLF, Dkt.
`No. 555 (N.D. Cal. Apr. 21, 2020)
`September 3, 2020 Expert Report of Dr. Aaron Striegel
`November 3, 2020 Deposition Transcript of Aaron Striegel, Ph.D.
`November 2, 2020 Deposition Transcript of DeForest McDuff, Ph.D.
`Marker Advisors, LLC document marked as McDuff Deposition Ex.
`No. 5
`Agreement for VirusTotal Services, bearing bates numbers SonicWall-
`Finjan_00101991 - SonicWall-Finjan_00101996, marked as Striegel
`Deposition Ex. No. 2
`Agreement for VirusTotal Services, bearing bates numbers FINJAN-SW
`158696 - FINJAN-SW 158701, marked as Striegel Deposition Ex. No. 3
`January 8, 2017 Email, bearing bates numbers Finjan-SW 403972 -
`Finjan-SW 403972
`February 27, 2020 Deposition Transcript of Julie Mar-Spinola
`September 7, 2016 Transcript of Proceedings, Finjan, Inc. v. Sophos,
`Inc., Case No. C 14-1197 WHO (N.D. Cal.), bearing bates numbers
`FINJAN-SW158070 - FINJAN-SW158104
`2018 SonicWall Cyber Threat Report, bearing bates numbers FINJAN-
`SW 433167 – FINJAN-SW 433191, marked as McDuff Deposition Ex.
`No. 4
`October 9, 2020 Expert Report of Stephen L. Becker, Ph.D. on Behalf of
`Defendant
`
`Ex. 1
`
`Ex. 2
`Ex. 6
`Ex. 9
`Ex. 10
`Ex. 13
`
`Ex. 22
`
`Ex. 23
`
`Ex. 24
`
`Ex. 25
`Ex. 26
`
`Ex. 27
`
`Ex. 28
`
`
`1All exhibits are attached to the Declaration of Jarrad M. Gunther.
`
`DEFENDANT SONICWALL, INC.’S MOTION IN LIMINE TO EXCLUDE THE TESTIMONY OF DR. MCDUFF’S PRICE PER SCAN
`OPINIONS (METHOD NO. 3) (MOTION IN LIMINE NO. 4), CASE NO. 5:17-CV-04467-BLF-VKD
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`Case 5:17-cv-04467-BLF Document 363 Filed 03/04/21 Page 3 of 9
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`Pursuant to Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc.,
`509 U.S. 579 (1993), SonicWall seeks to exclude Finjan’s damages expert, Dr. McDuff, from
`presenting his Method 3 (Price-Per-Scan) reasonable royalty opinions. For Method 3, Dr. McDuff
`looked to “the number of accused scans multiplied by an appropriate royalty per scan.” Ex. 1
`(McDuff Report) ¶ 150. Because the manner in which he derived both his “royalty per scan” and the
`“number of accused scans” are methodologically flawed and without basis in the facts, this
`methodology should be excluded.
`
`A.
`Legal Standard
`The Court is well-familiar with the general legal standard governing admission of expert
`opinion and, therefore, SonicWall will not repeat it here. See, e.g., Ex. 2 (Cisco Daubert Order), at
`1-2; see also Commonwealth Sci. & Indus. Research Organisation v. Cisco Sys., Inc., 809 F.3d 1295,
`1302 (Fed. Cir. 2015) (“CSIRO”) (“‘Where the data used is not sufficiently tied to the facts of the
`case,’ a damages model cannot meet the ‘substantive statutory requirement of apportionment of
`royalty damages to the invention’s value.’”) (quoting Summit 6, LLC v. Samsung Elecs. Co., Ltd.,
`802 F.3d 1283, 1296 (Fed. Cir. 2015)).
`
`B.
`
` Per Scan Relies On Dr. Striegel’s Flawed
`Dr. McDuff’s Royalty Rate of
`Analysis of the
` Agreements
`
`Dr. McDuff opines that “
`that this amount is supported by the “
`” and “
`
`” and claims
`
`
`.” Ex. 1 ¶ 154 (emphasis added). Dr. McDuff’s
`conclusions are based entirely on Dr. Striegel’s separate, flawed analysis of Finjan and SonicWall’s
` licenses. Ex. 10 at 147:1-6.
`
`Specifically, Dr. Striegel opined that “
`
`,” and also that
`/scan calculation is based on the price for
`.” Ex. 6 ¶ 126. Dr. McDuff’s
`.” Ex. 1 ¶ 154 n. 347. But the actual record evidence confirms that neither
`“
`SonicWall nor Finjan ever paid for, or even obtained a license to,
`. Instead,
`
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`DEFENDANT SONICWALL, INC.’S MOTION IN LIMINE TO EXCLUDE THE TESTIMONY OF DR. MCDUFF’S PRICE PER SCAN
`OPINIONS (METHOD NO. 3) (MOTION IN LIMINE NO. 4), CASE NO. 5:17-CV-04467-BLF-VKD
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`Case 5:17-cv-04467-BLF Document 363 Filed 03/04/21 Page 4 of 9
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` service
`they both purchased and obtained a license to a completely separate and distinct
`– “
`” – which both Drs. Striegel and McDuff admit was priced at
`scan figure that Dr. McDuff uses for his Method 3
` or less per look-up (i.e.,
`royalty rate). Ex. 9 at 33:23-40:18, 41:20-22; Ex. 22; Ex. 23; Ex. 10 at 159:9-163:17. Put simply,
`Dr. Striegel was just plain wrong in opining that either Finjan or SonicWall had a license to
`. And by relying on the higher
` pricing (instead of the
`much lower pricing for
` service that SonicWall and Finjan actually
`licensed), Dr. McDuff calculated a royalty rate that was over-inflated by at least 16X, improperly
`skewing the damages range. Because his royalty rate analysis is not tied to the facts of record, Dr.
`McDuff’s per scan royalty rate is flawed, and his opinions regarding this method must be excluded.
`See CSIRO, 809 F.3d at 1302 (“[A]s damages models are fact-dependent, a distinct but integral part
`of the admissibility inquiry is whether the data utilized in the methodology is sufficiently tied to the
`facts of the case.”).
`Nor would it be acceptable for Dr. McDuff to simply maintain his use of the price of the
` service even though it was never used by either party. To be clear, in
`determining the royalty rate to apply to this method, Dr. McDuff relied heavily on his understanding
`that the
` figure was consistent with “
`
`
`
`” Ex. 1 ¶ 154(b), (c). Absent the threshold relevance of both parties subscribing to and
`licensing the technology there is no reason for Dr. McDuff to have chosen the pricing for this service
`as relevant to the hypothetical negotiation. In fact, it is used by neither, and therefore there is no
`reason that it would have been considered at the hypothetical negotiation and Finjan has failed to
`provide the requisite technical and economic relevance to be considered here, warranting exclusion.
`Wordtech Sys, Inc. v. Integrated networks Solutions, Inc., 609 F.3d 1308, 1319-20 (Fed. Cir. 2010)
`(“[C]omparisons of past patent licenses to the infringement must account for ‘the technological and
`economic differences between them.’”) (quoting ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 870
`(Fed. Cir. 2010)).
`
`
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`DEFENDANT SONICWALL, INC.’S MOTION IN LIMINE TO EXCLUDE THE TESTIMONY OF DR. MCDUFF’S PRICE PER SCAN
`OPINIONS (METHOD NO. 3) (MOTION IN LIMINE NO. 4), CASE NO. 5:17-CV-04467-BLF-VKD
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`Case 5:17-cv-04467-BLF Document 363 Filed 03/04/21 Page 5 of 9
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`Although Dr. McDuff briefly mentions other alleged bases of support, none could possibly
`provide a methodologically sound basis for use of this royalty rate here. First, he references otherwise
`undocumented discussions with Mr. Hartstein and Ms. Mar-Spinola saying that they used
`/scan
`in negotiations with “
`.” Ex. 1 ¶ 154 & n. 346. As to Sophos, the final settlement
`itself says nothing at all about a price per scan, and contemporaneous emails between Sophos and
`Finjan confirm that
` either. See, e.g., Ex. 24
`(offering terms “
`
`
`
`” Ex. 1 ¶ 45(b). The “others” are never identified and thus cannot be a basis for an analysis
`of technical or economic comparability, especially in view of Ms. Mar-Spinola’s testimony that
`Finjan does not have “a standard pricing” and instead “[i]t’s all dependent on the prospect.” Ex. 25
`at 57:18-58:5. Nor do any of Finjan’s other licenses reflect any price per scan rate, much less a
`/scan rate. Id. at 55:6-11 (confirming that “
`
`). In short, there is no basis to even begin an
`analysis of economic or technical comparability from these data points; indeed, it is even worse than
`the “starting point” rejected by the Federal Circuit in Finjan, Inc. v. Blue Coat Sys., Inc., 879 F.3d
`1299, 1312 (Fed. Cir. 2018), as there is nothing tying a
` to what the parties
`would have used at the hypothetical negotiation in the 2012-2014 period. See id. (“Mr. Chaperot's
`testimony that an 8–16% royalty rate would be the current starting point in licensing negotiations
`says little about what the parties would have proposed or agreed to in a hypothetical arm's length
`negotiation in 2008.”).
`Dr. McDuff also references Mr. Hartstein’s testimony from the Sophos case (Ex. 1 at n. 346,
`citing Finjan-SW 158070, at -85 (Ex. 26)), but the cited testimony is clearly discussing the Blue Coat
`I jury verdict, which had nothing to do with a price per scan, and in any event, was overturned on
`appeal after the Federal Circuit found that Finjan’s testimony used figures that were “plucked from
`thin air and, as such, cannot be the basis for a reasonable royalty calculation.” Blue Coat, 879 F.3d
`at 1312. This level of ipse dixit cannot sustain a methodology that would increase damages by an
`
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`DEFENDANT SONICWALL, INC.’S MOTION IN LIMINE TO EXCLUDE THE TESTIMONY OF DR. MCDUFF’S PRICE PER SCAN
`OPINIONS (METHOD NO. 3) (MOTION IN LIMINE NO. 4), CASE NO. 5:17-CV-04467-BLF-VKD
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`Case 5:17-cv-04467-BLF Document 363 Filed 03/04/21 Page 6 of 9
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`order of magnitude. See DSU Med. Corp. v. JMS Co., 296 F. Supp. 2d 1140, 1158 (N.D. Cal.
`2003), aff'd, 471 F.3d 1293 (Fed. Cir. 2006) (“Picking
`this million dollar number
`is
`classic ipse dixit and would remain so even if Dr. Degnan were to now essay an expansion of his
`reconstruction of the market.”).
`
`C.
`
`Dr. McDuff’s Royalty Base Is Improperly Predicated On His Incorrect,
`Layman’s Understanding of a Single Statement In SonicWall’s Annual Cyber
`Threat Reports
`Dr. McDuff opined that
`.” Ex. 1 ¶ 151. Dr. McDuff then identified what he believed to be the “
`
`
`
`” (id. ¶
`153) based solely on statements in SonicWall’s annual Cyber Threat Reports indicating that
`SonicWall as a company had collected, e.g., “
`” in 2017. See id.
`¶ 152 and Attachment J-3 thereto (notes and sources, citing SonicWall’s 2018-2020 Cyber Threat
`Reports)); Ex. 10 at 109:22-114:12; Ex. 27. But the number of “unique malware samples” set forth
`in SonicWall’s Cyber Threat Report is demonstrably not the number of “scans” performed by any
`SonicWall product, let alone one very specific product, i.e., Capture ATP. Instead, it represents the
`number of malware samples identified generally by the industry, i.e., by SonicWall itself and third
`parties. See Ex. 28 ¶ 550 (confirming understanding with SonicWall’s Alex Dubrovsky).
`Nor is this question just a battle of experts. Dr. McDuff is not qualified to opine on the actual
`number of “scans” that Capture ATP performs for several reasons, and he points to no one else (i.e.,
`no fact witness or technical expert opinion) to justify this position.
`First, Dr. McDuff does not have the necessary technical expertise that would allow him to
`render an expert opinion to calculate (or even approximate) the number of “scans” performed by
`Capture ATP. Dr. McDuff admits he has no “formal expertise in computer science” and that he is
`not rendering any technical opinions in this case. Ex. 10 at 119:11-120:1. Dr. McDuff further admits
`he did not consult with any of Finjan’s technical experts to support his non-technical understanding
`of the statements in the Cyber Threat Report. Id. at 116:2-6. Nor is his interpretation of a statement
`in SonicWall’s annual Cyber Threat Report a question of economics or damages, which is where Dr.
`McDuff’s expertise resides. Id. at 122:6-123:2. Simply put, Dr. McDuff is not qualified to opine as
`
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`DEFENDANT SONICWALL, INC.’S MOTION IN LIMINE TO EXCLUDE THE TESTIMONY OF DR. MCDUFF’S PRICE PER SCAN
`OPINIONS (METHOD NO. 3) (MOTION IN LIMINE NO. 4), CASE NO. 5:17-CV-04467-BLF-VKD
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`Case 5:17-cv-04467-BLF Document 363 Filed 03/04/21 Page 7 of 9
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`to his “understanding” that “a unique malware sample” as discussed in the Cyber Threat Report is
`the same “kind of scans that are performed by Capture ATP” and accused of infringement here. Id.
`at 119:4-10.
`Second, Dr. McDuff’s interpretation is directly contradicted by his opinions on other issues.
`For example, Dr. McDuff, citing to third-party market research firm Gartner, opined that SonicWall
`did not have a sandboxing technology (i.e., Capture ATP) in the market until August 2016, at the
`earliest. Ex. 1 ¶ 13 (“
`.”);
`Ex. 10 at 131:15-133:23; Ex. 13 (admitting Capture ATP was not released until summer of 2016). It
`would thus be impossible for at least 172 million of the purported “scans” Dr. McDuff calculated
`using the Cyber Threat Report from 2014-August 2016—which account for over half of his royalty
`base—to represent “scans” performed by Capture ATP (which had not even been released during that
`period). Ex. 10 at 123:9-124:18.
`In sum, Dr. McDuff’s “understanding” as to what the Cyber Threat Reports represented is not
`only unsupported by any technical foundation, but it is an area in which he does not possess expertise
`to offer an opinion. Further, the opinion he does offer is contradicted by other opinions and citations
`to third party market analysis.
`
`D.
`Conclusion
`Dr. McDuff’s Methodology No. 3 is the result of a flawed methodology for calculating a
`royalty rate, and an unsupported technical opinion by an economist to calculate the relevant royalty
`base. Accordingly, the Court should preclude Dr. McDuff from providing his Method No. 3 opinions.
`
`
`
`
`Dated: March 4, 2021
`
`
`
`Respectfully Submitted,
`
`
`/s/ Nicole E. Grigg
`
`Nicole E. Grigg (formerly Johnson)
`Email: NEGrigg@duanemorris.com
`DUANE MORRIS LLP
`2475 Hanover Street
`Palo Alto, CA 94304-1194
`
`Matthew C. Gaudet (Pro Hac Vice)
`Email: mcgaudet@duanemorris.com
`
`
`
`5
`DEFENDANT SONICWALL, INC.’S MOTION IN LIMINE TO EXCLUDE THE TESTIMONY OF DR. MCDUFF’S PRICE PER SCAN
`OPINIONS (METHOD NO. 3) (MOTION IN LIMINE NO. 4), CASE NO. 5:17-CV-04467-BLF-VKD
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`Case 5:17-cv-04467-BLF Document 363 Filed 03/04/21 Page 8 of 9
`
`John R. Gibson (Pro Hac Vice)
`Email: jrgibson@duanemorris.com
`Robin L. McGrath (Pro Hac Vice)
`Email: rlmcgrath@duanemorris.com
`David C. Dotson (Pro Hac Vice)
`Email: dcdotson@duanemorris.com
`Jennifer H. Forte (Pro Hac Vice)
`Email: jhforte@duanemorris.com
`1075 Peachtree Street, Ste. 2000
`Atlanta, GA 30309
`
`Joseph A. Powers (Pro Hac Vice)
`Email: japowers@duanemorris.com
`Jarrad M. Gunther (Pro Hac Vice)
`Email: jmgunther@duanemorris.com
`30 South 17th Street
`Philadelphia, PA 19103
`
`Attorneys for Defendant
`SONICWALL INC.
`
`
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`DEFENDANT SONICWALL, INC.’S MOTION IN LIMINE TO EXCLUDE THE TESTIMONY OF DR. MCDUFF’S PRICE PER SCAN
`OPINIONS (METHOD NO. 3) (MOTION IN LIMINE NO. 4), CASE NO. 5:17-CV-04467-BLF-VKD
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`Case 5:17-cv-04467-BLF Document 363 Filed 03/04/21 Page 9 of 9
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`CERTIFICATE OF SERVICE
`This is to certify that a true and correct copy of DEFENDANT SONICWALL INC.’S
`MOTION IN LIMINE TO EXCLUDE THE TESTIMONY OF DR. MCDUFF’S PRICE PER
`SCAN OPINIONS (METHOD NO. 3) was served by ECF on all counsel of record on March 4,
`2021.
`
`
`
`
`
`
`
`/s/ Nicole E. Grigg
`Nicole E. Grigg
`
`
`
`
`1
`DEFENDANT SONICWALL INC.’S CERTIFICATE OF SERVICE
`CASE NO. 5:17-CV-04467-BLF-VKD
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`