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`Case 5:17-cv-04467-BLF Document 365-2 Filed 03/04/21 Page 1 of 28
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`EXHIBIT 2
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`EXHIBIT 2
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`Case 5:17-cv-00072-BLF Document 555 Filed 04/21/20 Page 1 of 27Case 5:17-cv-04467-BLF Document 365-2 Filed 03/04/21 Page 2 of 28
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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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`CISCO SYSTEMS INC.,
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`Defendant.
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`Case No. 17-cv-00072-BLF
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`ORDER ON DAUBERT MOTIONS
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`[Re: ECF 421, 423, 425, 427, 429, 431]
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`Plaintiff Finjan, Inc. (“Finjan”) brings this patent infringement lawsuit against Defendant
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`Cisco Systems, Inc. (“Cisco”), alleging infringement of five of Finjan’s patents directed to computer
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`and network security: U.S. Patent Nos. 6,154,844; 6,804,780; 7,647,633; 8,141,154; and 8,677,494.
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`Before the Court are the parties’ motions to exclude certain opinions of each party’s experts
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`under Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S.
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`579 (1993). Cisco brings five motions to exclude opinions of: (1) Finjan’s technical experts Drs.
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`Cole, Mitzenmacher, and Medvidovic at ECF 421; (2) Finjan’s corporate governance expert Dr.
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`James Tompkins at ECF 423; (3) Finjan’s cost expert Dr. Ricardo Valerdi at ECF 427; (4) Finjan’s
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`damages expert Dr. Layne-Farrar at ECF 429; and (5) Finjan’s source code expert Dr. Goodrich at
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`ECF 431. Finjan brings one motion to exclude opinions of (1) Cisco’s source code expert Mr.
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`Overby and (2) Cisco’s damages expert Dr. Becker. ECF 425. The Court heard oral arguments on
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`March 26, 2020 (the “Hearing”).
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`I. LEGAL STANDARD
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`Federal Rule of Evidence 702 provides that a qualified expert may testify if “(a) the expert’s
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`scientific, technical, or other specialized knowledge will help the trier of fact to understand the
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`evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the
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`testimony is the product of reliable principles and methods; and (d) the expert has reliably applied
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`the principles and methods to the facts of the case.” Fed. R. Evid. 702. In Daubert v. Merrell Dow
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`Pharmaceuticals, Inc., the Supreme Court held that Rule 702 requires the district court to act as a
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`gatekeeper to “ensure that any and all scientific testimony or evidence admitted is not only relevant,
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`but reliable.” 509 U.S. at 589. In Kumho Tire Co., Ltd. v. Carmichael, the Supreme Court clarified
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`that the “basic gatekeeping obligation” articulated in Daubert applies not only to scientific testimony
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`but to all expert testimony. 526 U.S. 137, 147 (1999). The Supreme Court also made clear that the
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`reliability inquiry is a flexible one, and “whether Daubert’s specific factors are, or are not,
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`reasonable measures of reliability in a particular case is a matter that the law grants the trial judge
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`broad latitude to determine.” Id. at 153; see also Micro Chem., Inc. v. Lextron, Inc., 317 F.3d 1387,
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`1391 (Fed. Cir. 2003).
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`“Daubert and Rule 702 are safeguards against unreliable or irrelevant opinions, not
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`guarantees of correctness.” i4i Ltd. P’ship v. Microsoft Corp., 598 F.3d 831, 854 (Fed. Cir. 2010)
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`aff’d, 131 S. Ct. 2238 (2011). So long as an expert’s methodology is sound and his opinions satisfy
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`the requirements of Rule 702, underlying factual disputes and how much weight to accord the
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`expert’s opinion are questions for the jury. Micro Chem., 317 F.3d at 1392; Primiano v. Cook, 598
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`F.3d 558, 565 (9th Cir. 2010).
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`II. DISCUSSION
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`The parties have each moved to exclude opinions rendered by the other party’s technical and
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`economics experts. The Court addresses the dispute about each expert in turn.
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`A. Cisco’s Motions to Exclude
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`1. Drs. Cole, Mitzenmacher, and Medvidovic
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`Cisco moves to exclude the opinions and proposed testimony of Finjan’s technical experts,
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`Drs. Cole, Mitzenmacher, and Medvidovic on two areas: (1) Cisco’s alleged prior knowledge of
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`Finjan’s technology and patents and (2) the incorporation of the general descriptions of Cisco’s
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`accused products in the opinion regarding infringement of each claim element.
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`a. Cisco’s alleged prior knowledge of Finjan’s technology and patents
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`In addition to the infringement issues Finjan’s technical experts address, each of their reports
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`includes a section related to Cisco’s prior knowledge of Finjan’s technology and patents. See Cole
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`Report ¶¶ 84-98, ECF 420-3; Mitzenmacher Report ¶¶ 69-81, ECF 420-4; Medvidovic Report ¶¶
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`79-91, ECF 420-5. Cisco argues that each expert “cites the same documents (including
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`presentations, magazine articles, and email correspondence between the parties), and concludes that
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`‘Cisco knew or should have known that it was infringing one or more of Finjan’s patents.’” Cisco’s
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`Motion to Exclude the Testimony of Finjan’s Experts (Cole, Mitzenmacher, Medvidovic) (“Cisco’s
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`Motion Re Technical Experts”) at 1-2, ECF 421 (citing Cole Report ¶¶ 84-98; Mitzenmacher Report
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`¶¶ 69-81; Medvidovic Report, ¶¶ 79-91). According to Cisco, these opinions “are not based on any
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`scientific, technical, or other specialized knowledge, but are thinly disguised ‘willfulness’
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`opinions.” Cisco’s Motion Re Technical Experts at 1.
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`Finjan responds that its technical experts “do not testify that Cisco knew it was willfully
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`infringing” but rather “they provide an explanation of the complex technology and patents that
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`Finjan disclosed to Cisco’s engineers.” Finjan’s Opposition to Cisco’s Motion Re Technical Experts
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`(“Opp’n Re Technical Experts”) at 1, ECF 458. Finjan claims that the experts “explained how the
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`2006-2009 presentations discuss the technology of Finjan’s products, its competitors’ products, and
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`its patents” and that these explanations would “assist the jury in understanding these technical
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`disclosures.” Id.
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`The Court disagrees with Finjan’s characterization of its technical experts’ opinions
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`regarding Cisco’s knowledge of Finjan’s patents and technology. Had the experts actually provided
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`an explanation of technical documents as suggested by Finjan, such opinions might have assisted
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`the jury; but they did not. The experts appear to merely set forth a high-level timeline of the
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`relationship and communications between the parties and cite to documents produced in this
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`litigation. Moreover, Finjan’s experts explicitly opine that “Cisco knew or should have known that
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`it was infringing one or more of Finjan’s patents[.]” Cole Report ¶ 98; Mitzenmacher Report ¶ 81;
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`Medvidovic Report ¶ 91. Such speculative testimony regarding Cisco’s knowledge is impermissible
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`and not within the purview of technical experts. See Finjan, Inc. v. Blue Coat Sys., Inc., No. 13-cv-
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`03999-BLF, 2015 WL 4272870, at *3 (N.D. Cal. July 14, 2015) (excluding Drs. Cole and
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`Medvidovic from testifying on “Defendants’ subjective beliefs”).
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`Accordingly, Cisco’s motion to exclude the opinions of Drs. Cole, Mitzenmacher, and
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`Medvidovic on Cisco’s knowledge of Finjan’s patents and technology and the chronology of the
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`parties’ relationship and communications is GRANTED. To the extent Finjan believes its technical
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`experts explained the technical contents of certain documents, Finjan will have some leeway at trial
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`to offer such testimony only if (1) the testimony is related to how an engineer would have understood
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`the documents without any reference to Cisco’s state of mind and (2) the testimony can be tied back
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`to the experts’ disclosures in their reports.
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`b. Incorporation of “overview” of accused products in the element-by-element
`infringement analysis
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`Each of Finjan’s technical expert reports contains a lengthy section where the expert
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`provides an “overview” of the accused technologies. See e.g., Cole Report ¶¶ 400-484 (describing
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`Talos), ECF 459-8; Mitzenmacher Report ¶¶ 144-198 (describing Cisco’s AMP for Meraki MX),
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`ECF 459-10; Medvidovic Report ¶¶ 585-779 (describing Cisco’s ThreatGrid technology). The
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`experts then provide an element-by-element infringement analysis of the asserted claims, in which
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`they incorporate the “overview” sections. See e.g., Cole Report ¶ 800 (“I incorporate my Overview
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`of the Accused Products and Accused Technologies herein, and in particular the discussions of the
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`accused technologies and functionalities identified below in my analysis and discussion of source
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`code, and in my Overview of Infringement above.”). Cisco seeks to exclude the incorporation of
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`the “overview” section into the element-by-element analysis because such “blanket statements”
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`would “leave the door open for Finjan to amend, enlarge, and adapt its infringement read in the
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`future which is highly prejudicial because it provides no notice on Finjan’s specific infringement
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`theories prior to trial.” Motion Re Technical Experts at 3. Finjan responds that its experts “provided
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`fulsome analyses based on the expert reports in their entirety.” Opp’n Re Technical Experts at 3.
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`While the Court is mindful of Cisco’s concerns regarding the potential for shifting
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`infringement theories at trial, the Court is not persuaded that Cisco’s over-inclusive request to
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`exclude all incorporated paragraphs is necessary or proper. Thus, the Court DENIES as overbroad
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`Cisco’s motion to exclude the opinions of Drs. Cole, Mitzenmacher, and Medvidovic regarding the
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`incorporation of the “overview” sections. That said, the Court will hear specific objections at trial
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`in the event that Finjan’s experts present any infringement theories not specifically discussed in their
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`element-by-element infringement analysis.
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`2. Dr. Tompkins
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`Cisco moves to exclude the opinions of Finjan’s corporate governance expert, Dr. James
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`Tompkins. Beginning in 2004, Cisco made a series of investments in Finjan. Second Amended
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`Complaint ¶ 48, ECF 55. As part of the investment agreement between the parties, Cisco was
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`permitted to send one non-voting representative to all Finjan Board of Directors meetings. Id. Cisco
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`designated its employee, Yoav Samet, as its board observer. Id. ¶ 49. The parties appear to agree
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`that the role and responsibilities of a board observer are governed by contract. Cisco’s Motion to
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`Exclude the testimony of Finjan’s Expert James Tompkins, Ph.D. (“Tompkins Motion”) at 1; ECF
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`480; Finjan’s Opposition to Cisco’s Motion to Exclude Dr. James Tompkins Ph.D. (“Tompkins
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`Opp’n”) at 3, ECF 457. Also, the parties do not dispute that Mr. Samet was not a director (or a
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`member) of Finjan’s Board. Tompkins Motion at 1; Tompkins Opp’n at 3.
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`Dr. Tompkins provides his expert opinion on (1) the role and responsibilities of a member
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`of a board of directors as well as board operations, (2) Finjan’s board operations and its processes
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`during the time period when Cisco was a board observer, and (3) “whether it was reasonable for
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`Finjan to expect the Cisco observer on Finjan’s Board to operate in good faith.” Tompkins Report
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`¶ 1, ECF 422-7. To that end, after describing generally the roles and responsibilities of a board of
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`directors and the fiduciary duties owed to a company by the members of its board (not applicable to
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`Mr. Samet since he was not a board member), Dr. Tompkins provides a description of Cisco and
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`Finjan’s interactions and relationship over the years. Tompkins Report ¶¶ 10-35. Dr. Tompkins
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`then opines that “it was reasonable for Finjan to expect the board observer to act in good faith.”
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`Tompkins Report ¶ 39. Then, Dr. Tompkins (who is not an attorney) creates a test for the conditions
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`under which a board observer would be operating in “good faith.” Tompkins Report ¶ 44.
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`Cisco argues that Dr. Tompkins’ testimony should be excluded because his “legal test to
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`determine whether Cisco’s Board observer acted in ‘good faith’ and his ‘conditions’ for finding a
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`‘breach of good faith’ usurps the role of the Court to instruct the jury on the law.” Tompkins Motion
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`at 3. Cisco further argues that the rights and obligations of a board observer are fixed by contract,
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`and cannot be determined by Mr. Tompkins’ “test.” Id. Cisco further objects to Mr. Tompkins’
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`factual summation of the parties’ relationship as prejudicial and not properly subject to expert
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`testimony. Id. at 4-5. Finjan responds that “Dr. Tompkins uses his specialized experience and
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`expertise in corporate governance to derive his opinions about the conduct Finjan reasonably
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`expected from Cisco’s Board observer” and “arrives at his opinions through consideration of the
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`parties’ relationship and history[.]” Tompkins Opp’n at 3-4.
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`Because the role of the board observer is defined by the contract Finjan and Cisco entered
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`into (see ECF 422-6 § 2.7), the Court finds that Dr. Tompkins’ testimony regarding Finjan’s
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`“expectations” regarding the board observer – even if proper – is irrelevant and will not assist the
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`jury. Moreover, Dr. Tompkins’ “good faith test” appears to be an attempt to insert a legal concept
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`(i.e., good faith) into a relationship governed by contract law – which is improper and not within the
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`purview of a corporate governance expert. Accordingly, the Court GRANTS Cisco’s motion to
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`exclude Dr. Tompkins’ testimony as to Finjan’s expectations of the board observer and his “good
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`faith test.” Dr. Tompkins may, however, testify generally as to the role of a board observer and how
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`that role differs from that of a board member or director (e.g., a board observer’s responsibilities are
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`governed by a contract) as long as his testimony can be tied back to the disclosures in his report.
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`3. Dr. Valerdi
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`Pursuant to Federal Rules of Evidence 403, 702, and Daubert, Cisco moves to exclude the
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`testimony of Finjan’s cost expert Dr. Ricardo Valerdi. Finjan tasked Dr. Valerdi with determining
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`“the cost of developing the following Accused Products: Advanced Malware Protection (AMP),
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`AMP for Endpoint, Outbreak Filters, Talos Security Intelligence (Talos), and ThreatGrid.” Valerdi
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`Report at 1, ECF 426-6. For his analysis, he used the allegedly infringing code – identified by
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`Finjan’s technical experts – to estimate “what it would cost Cisco to develop these products from
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`scratch, assuming it was able to do so without the benefit of Finjan’s Patents-in-Suit.” Id. Dr.
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`Valerdi estimates that it would have cost Cisco over $1 billion to develop the same software that
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`Finjan accuses of infringement. Id. at 30. In turn, Finjan’s damages expert, Dr. Layne-Farrar adopts
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`Dr. Valerdi’s figures as one of her five damages methodologies. See ECF 426-5 ¶¶ 362-365.
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`Cisco does not challenge Dr. Valerdi’s qualifications or his use of SEER-SEM software in
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`calculating the cost of developing Cisco’s software. See generally, Cisco’s Motion to Exclude the
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`Testimony of Finjan’s Expert Dr. Ricardo Valerdi (“Valerdi Motion”), ECF 426 (redacted version
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`available at ECF 427). Instead, Cisco argues that Dr. Valerdi’s cost estimate is irrelevant because
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`it provides no evidence as to the costs of writing new software that would result in a non-infringing
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`alternative. Id. at 1. Finjan responds that because Finjan’s technical experts determined that there
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`is “no commercially acceptable alternatives on the market,” Dr. Valerdi “estimated the costs Cisco
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`would have incurred based on the functionalities required for a system to meet Cisco’s needs that
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`were directly tied to the patented technology.” Finjan’s Opposition to Cisco’s Motion to Exclude
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`Dr. Ricardo Valerdi (“Valerdi Opp’n”) at 2-3, ECF 459-6 (redacted version available at ECF 461).
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`According to Finjan, Dr. Valerdi “calculated the cost to develop the accused products from scratch
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`based on the lines of infringing source code, which also serves as a proxy for building a comparable
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`non-infringing system.” Valerdi Opp’n at 4.
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`“Reliance upon estimated cost savings from use of the infringing product is a well settled
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`method of determining a reasonable royalty.” Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d
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`1075, 1080-81 (Fed. Cir. 1983). Under this method, “[a] price for a hypothetical license may
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`appropriately be based on consideration of the ‘costs and availability of non-infringing alternatives’
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`and the potential infringer’s ‘cost savings.’” Prism Techs. LLC v. Sprint Spectrum L.P., 849 F.3d
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`1360, 1376 (Fed. Cir. 2017) (affirming damages award that was based, in part, on the costs saved
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`by renting an infringing backhaul structure versus building a non-infringing backhaul structure)
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`(citation omitted). This “cost savings” method in determining a reasonable royalty compares the
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`difference in cost “between what the defendant did that was infringing with a non-infringing
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`alternative that the defendant could have done.” Acceleration Bay LLC v. Activision Blizzard Inc.,
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`No. 1:16-CV-00453-RGA, 2020 WL 474650, at *2 (D. Del. Jan. 29, 2020). With that in mind, it is
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`clear that Finjan’s cost estimate does not fit the “cost savings” methodology established by the
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`Federal Circuit. Finjan’s approach (i.e., using the cost estimate of building the infringing system
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`from scratch as “a proxy for building a comparable non- infringing system”) is admittedly a novel
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`one. See Valerdi Opp’n at 2; Transcript of the Hearing (“Hr’g Tr.”) at 25:1-3, ECF 506.
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`Two other courts have considered and rejected this methodology. In Acceleration Bay, the
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`plaintiff presented an expert damages opinion that relied on “cost savings” opinions by Dr. Valerdi.
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`Acceleration Bay LLC v. Activision Blizzard Inc., No. 1:16-CV-00453-RGA, 2019 WL 4194060, at
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`*3 (D. Del. Sept. 4, 2019). There, as here, Dr. Valerdi “base[d] his estimate of the cost on the
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`number of lines of code in the current [accused products]” and “adopt[ed] the position that [a non-
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`infringing] network does not exist.” Id. at *3-4. Judge Andrews excluded Dr. Valerdi’s opinion
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`and explained:
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`Dr. Valerdi provides no justification as to why developing an
`alternative network would, in theory, cost exactly the same amount as
`developing the existing network. Of course, he cannot justify this
`conclusion because he has no basis in fact for concluding that an
`alternative network might exist at all. Indeed, there is no basis in fact
`to conclude that creation of the infringing network saved Defendant
`any money over a theoretical alternative.
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`Id. at *4. Accordingly, Judge Andrews found Dr. Valerdi’s opinion was “not an acceptable basis
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`for determining an amount of costs saved by using the accused infringing technology.” Id. When
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`plaintiff moved for reconsideration, Judge Andrews further explained that “the cost of writing new
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`software is irrelevant when there is no evidence that the cost of writing new software could result
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`in a non-infringing alternative.” Acceleration Bay, 2020 WL 474650, at *2.
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`Similarly, in Finjan, Inc. v. ESET, LLC, Dr. Valerdi offered an opinion “employing a
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`computer model to ascertain the cost he estimates that [defendant] incurred to develop and maintain
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`the accused software incorporated into the accused products.” No. 17-CV-183-CAB-BGS, 2019
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`WL 5212394, at *3-4 (S.D. Cal. Oct. 16, 2019). Judge Bencivengo excluded Dr. Valerdi’s opinion
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`because Dr. Valerdi’s model “estimate[d] the cost of developing the existing [infringing] software,
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`not alternative non-infringing software” and therefore “has no relevance to a cost savings analysis.”
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`Id. at *3.
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`The Court finds these opinions well-reasoned and similarly concludes that Dr. Valerdi’s cost
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`analysis is based not on creating a non-infringing alternative system, but on recreating the accused
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`system. Because the Federal Circuit’s “cost savings” method is based on comparing the difference
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`in cost between the infringing product and a non-infringing alternative, the Court sees no relevance
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`in Dr. Valerdi’s estimated actual cost of developing Cisco’s allegedly infringing system.
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`Accordingly, Dr. Valerdi’s opinion is of little probative value and would unfairly prejudice Cisco
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`because the over $ 1 billion estimate “cannot help but skew the damages horizon for the jury[.]”
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`Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1320 (Fed. Cir. 2011); see also Fed. R. Evid.
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`403.
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`In conclusion, the Court GRANTS Cisco’s motion to exclude the testimony of Finjan’s cost
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`expert Dr. Ricardo Valerdi.
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`4. Dr. Layne-Farrar
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`Dr. Layne-Farrar, Finjan’s damages expert, presents five different damages methodologies
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`– all of which Cisco moves to exclude. See Cisco’s Motion to Exclude the Testimony of Finjan’s
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`Dr. Layne-Farrar (“Layne-Farrar Motion”), ECF 428-3 (redacted version available at ECF 479).
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`First, Cisco points to “an overarching problem with all five methods” based on Dr. Layne-Farrar’s
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`presentation of damages figures that are not discounted to reflect the time value of money. Id. at 1-
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`2. Cisco then moves to exclude methods 1, 2, 4, and 5 based on “specific methodological failings[.]”
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`Id. at 3-9.
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`a. Time Value of Money Discount
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`There is no dispute that all of Finjan’s patent license agreements are for upfront, lump sum
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`royalty payments for Finjan’s portfolio of patents. See Layne-Farrar Report ¶ 282, ECF 428-5. Dr.
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`Layne-Farrar explains:
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`[B]ecause of the upfront nature of the payment, lump sum royalties
`typically entail a discount reflecting the time value of money. That is,
`receiving a dollar today is worth more than receiving a dollar
`tomorrow, so the licensor generally offers the licensee a time value of
`money discount for upfront payments.
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`Layne-Farrar Report ¶ 274. According to Dr. Layne-Farrar, “Finjan began its license negotiations
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`with an 8%-16% royalty rate, to which discounts were applied for the time value of money and the
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`benefits of other provisions ….” Layne-Farrar Report ¶ 282. Dr. Layne-Farrar also acknowledges
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`that both Cisco and Finjan “prefer[] lump sum payments rather than running royalties in a patent
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`license as it gives it certainty about payment.” Layne-Farrar Report ¶ 283.
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`Dr. Layne-Farrar opines, however, that “[g]iven the nature of the relationship between Finjan
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`and Cisco, [she does] not believe a discount would apply in this matter.” Layne-Farrar Report ¶
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`274. Accordingly, for each of her damages methodologies, Dr. Layne-Farrar presents two damages
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`figures: one figure discounted for time value of money and another without that discount – the latter
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`being the one she opines is accurate. Id. Dr. Layne-Farrar’s justification for her opinion (i.e., that
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`the time value of money discount does not apply to Finjan and Cisco’s hypothetical negotiation) is
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`that “Cisco and Finjan … would have increased the royalty rate, given Cisco’s intentional decision
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`to acquire infringing technologies after being both an investor in Finjan and an observer on Finjan’s
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`Board of Directors.” Id. ¶ 284. Cisco seeks to exclude Dr. Layne-Farrar’s undiscounted figures
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`because her justifications boil down to “a thinly-veiled argument that Cisco is a willful infringer and
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`therefore should be penalized.” Layne-Farrar Motion at 2.
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`Finjan responds that the relationship between the parties is one of the Georgia-Pacific
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`Factors and was properly considered by Dr. Layne-Farrar. Finjan’s Opposition to Cisco’s Motion
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`to Exclude Dr. Layne-Farrar (“Layne-Farrar Opp’n”) at 1-2, ECF 459-4 (redacted version available
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`at ECF 460). According to Finjan, at the time of hypothetical negotiations, “Cisco was executing
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`on its business mandate to acquire security products by spending over $2.7 billion to acquire the
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`infringing products.” Layne-Farrar Opp’n at 2 (citing Layne-Farrar Report ¶¶ 322, 91-109, ECF
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`459-16). “Having poured billions of dollars into acquiring the infringing technologies,” Finjan
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`argues, “Cisco had to be licensed, and was willing to pay a premium.” Layne-Farrar Opp’n at 2
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`(citing Layne-Farrar Report ¶ 322). Cisco replies that while the nature of the relationship between
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`the parties heading into the hypothetical negotiation is a fair consideration, “that factor cannot be
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`used as subterfuge to improperly present an argument of willfulness and allege that Cisco knowingly
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`“needed a license to lawfully execute on its acquisitions.” Cisco’s Reply Brief in Support of Its
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`Motion to Exclude the Testimony of Finjan’s Dr. Layne-Farrar (“Layne-Farrar Reply”) at 1, ECF
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`467-4 (redacted version available at ECF 469).
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`The Court agrees with Cisco that Dr. Layne-Farrar’s justifications for not applying the time
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`value of money discount is based solely on the assumption that Cisco willfully infringed Finjan’s
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`patents. Dr. Layne-Farrar acknowledges that time value of money discount is intrinsic in the concept
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`of a lump sum payment and one that Finjan generally applies to its license agreements. See Layne-
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`Farrar Report ¶¶ 274, 282. She further acknowledges that Cisco and Finjan would have preferred a
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`lump sum royalty payment. Id. ¶ 283. But she provides no basis for nixing the discount other than
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`the overall relationship between the parties. And she has
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`. Although
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`considerations of the relationship between the parties are properly accounted for in the damages
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`analysis, Dr. Layne-Farrar’s reliance on Cisco’s “intentional decision to acquire infringing
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`technologies” is misplaced because that opinion goes to proof of willful infringement, not the
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`measure of damages to be decided by the jury. Finjan cites to Dr. Layne-Farrar’s deposition
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`testimony and argues that “Finjan does not offer ‘time value of money’ discounts[.]” Layne-Farrar
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`Opp’n at 2 (citing ECF 459-18 at 56:8-57:11; 59:14-60:8). But the Court is not persuaded by that
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`testimony because it directly contradicts Dr. Layne-Farrar’s report. See Layne-Farrar Report ¶ 282
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`(“Finjan began its license negotiations with an 8%-16% royalty rate, to which discounts were
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`applied for the time value of money and the benefits of other provisions
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`.”)
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`(emphasis added). Having offered no other foundation for this opinion, the Court agrees with Cisco
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`that Dr. Layne-Farrar’s exclusion of the standard time value of money discount is tantamount to a
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`double-dip for willfulness enhanced damages. Finjan will have its chance to obtain treble damages
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`if it proves willfulness. But that is a task left to the Court, not the jury.
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`In conclusion, the Court finds that Dr. Layne-Farrar’s opinion lacks proper foundation for
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`concluding that time value of money discount would not have been applied to Cisco and Finjan’s
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`hypothetical negotiations. Thus, the Court GRANTS Cisco’s motion to exclude Dr. Layne-Farrar’s
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`damages figures that do not apply the time value of money discount.
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`b. Royalty Rates
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`In a separate method, Dr. Layne-Farrar applies a royalty rate to a royalty base apportioned
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`for the accused products to calculate Finjan’s damages. See Layne-Farrar Report ¶ 346, ECF 459-
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`16. Cisco seeks to exclude all damages calculations based on this method, challenging the royalty
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`rate adopted by Dr. Layne-Farrar and her royalty base (including apportionment methods). See
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`Layne-Farrar Motion at 3-8.
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`i. Dr. Layne-Farrar’s Use of 8% and 16% Royalty Rate
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`There is no dispute that when licensing its patents, Finjan’s practice is to begin its
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`negotiations with an 8% (for hardware) and 16% (for software) royalty rate, to which it then applies
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`various discounts. Layne-Farrar Report ¶¶ 282-83, ECF 428-5. In case of hypothetical negotiations
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`between Finjan and Cisco, however, Dr. Layne-Farrar opines that the parties would have agreed to
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`the 8% and 16% royalty rate without applying any discounts. Layne-Farrar Report ¶ 320, ECF 459-
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`16. Cisco argues that Dr. Layne-Farrar’s royalty rate should be excluded because she “starts and
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`ends [her analysis] at the 8% and 16% rates” (i.e., the opening offers) and “identifies no evidence
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`that any of Finjan’s nearly two dozen licensees actually agreed to these opening offers.” Layne-
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`Farrar Motion at 3, 4. Finjan responds that the discounts applied in Finjan’s other license
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`agreements were “based on facts not present here.” Layne-Farrar Opp’n at 3 (citing Layne-Farrar
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`Report ¶¶ 320-332; 189-266, ECF 459-16).
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`First, Cisco argues that that “the Federal Circuit has rejected the use of 8 and 16% rates.”
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`Layne-Farrar Motion at 4 (citing Finjan, Inc. v. Blue Coat Sys., Inc., 879 F.3d 1299, 1312 (Fed. Cir.
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`2018)). The Court agrees with Cisco that, as a general concept, starting and ending the damages
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`a