Case 3:17-cv-00183-CAB-BGS Document 105 Filed 03/21/17 PageID.2354 Page 1 of 8
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`UNITED STATES DISTRICT COURT
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`SOUTHERN DISTRICT OF CALIFORNIA
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` Case No.: 3:17-cv-0183-CAB-(BGS)
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`ORDER ON ESET LLC’S MOTION
`TO DISMISS
`[Doc. No. 47]
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`FINJAN, INC.,
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`v.
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`Plaintiff,
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`ESET, LLC, a California Limited Liability
`and ESET SPOL. S.R.O., a Slovak
`Republic Corporation,
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`Defendants.
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`Before the Court is Defendant ESET LLC’s Rule 12(b)(6) motion to dismiss Plaintiff
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`Finjan, Inc.’s complaint for willful infringement of six patents. [Doc. No. 47.] This
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`motion comes to the Court with an unusual procedural history.
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`I.
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`Background
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`Finjan’s complaint was filed in the Northern District of California on July 1, 2016
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`(“N.D. Case”). Earlier that same day, ESET filed a complaint in the Southern District of
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`California, 16-cv-1704, for declaratory judgment of non-infringement of one the patents at
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`issue in the Finjan complaint (“S.D. Case”). On July 26, 2016, Finjan moved to dismiss
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`the S.D. Case in light of the N.D. Case. On July 27, 2016, ESET moved to dismiss the
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`N.D. Case in light of the S.D. Case. On September 1, 2016, District Judge James Donato
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`stayed the N.D. Case while this Court considered Finjan’s motion to dismiss the S.D. Case.
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`On September 26, 2016, this Court granted Finjan’s motion to dismiss the S.D. Case.
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`At a hearing on October 6, 2016, Judge Donato lifted the stay in the N.D. Case and
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`discussed with the parties setting a case management conference and issuing a scheduling
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`order. [Doc. No. 56-3, at 10-11.] Judge Donato instructed the parties to proceed with
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`initial disclosures in accordance with the local patent rules and submit a proposed
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`scheduling order. [Id.] The court also discussed the negotiation history between the parties
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`and mediation potential.
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`Although an answer had not yet been filed, there was no discussion regarding ESET
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`filing a responsive pleading to the complaint. Defense counsel stated ESET would file a
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`motion for change of venue, which was filed November 14, 2016 [Doc. No. 60], he never
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`apprised the court however that ESET would also file a motion to dismiss pursuant to Rule
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`12(b)(6) to challenge the adequacy of the pleadings under Rule 8. [Doc. No. 56-3 at 16.]
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`On October 20, 2016, the parties filed a Joint Case Management Statement [Doc. No. 49]
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`as directed by the court, and at the same time ESET filed this motion to dismiss for failure
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`to state a claim, that is now before this Court.
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`On November 14, 2016, despite the pending motion to dismiss the complaint, Judge
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`Donato entered a Scheduling Order [Doc. No. 61] that among other things required: (1) the
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`parties make initial disclosures by November 21, 2016; (2) Finjan provide infringement
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`contentions by December 9, 2016 and make a Preliminary Election of Asserted Claims by
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`January 11, 2017 [Doc. No. 72]; and (3) ESET provide invalidity contentions by January
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`20, 2017 and make a Preliminary Election of Prior Art by January 25, 2017 [Doc. No. 74].
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`On January 26, 2017, without ruling on the motion to dismiss, Judge Donato granted
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`ESET’s motion for change of venue and ordered this case transferred to the Southern
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`District of California [Doc. No. 75] and it was ultimately assigned to the undersigned by
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`low number rule [Doc. No. 84] with the motion to dismiss still pending. On March 20,
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`2017, the Court heard argument on the motion.
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`Case 3:17-cv-00183-CAB-BGS Document 105 Filed 03/21/17 PageID.2356 Page 3 of 8
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`II. Discussion
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`ESET challenges the sufficiency of the pleadings with regard to the allegations of
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`direct infringement, inducing infringement and willful infringement of the six patents at
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`issue. Although a motion to dismiss is based on the adequacy of the pleading itself, the
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`Court does not believe in the context of this particular case that it would be a proper
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`application of Rule 1, which directs the Court and the parties to construe and administer
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`the rules of civil procedure to secure the just, speedy and inexpensive determination of
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`every action and proceeding, for the Court to simply ignore all that has transpired since the
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`complaint was filed. The Court will therefore consider ESET’s motion to dismiss in light
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`of all the information that has been disclosed between the parties regarding the allegations
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`of patent infringement in this case pursuant to the Scheduling Order entered by Judge
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`Donato.
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`1. Dismissal of all Patents Based on Unsupported Allegations All Claims Infringed.
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`Defendant moved in part to dismiss the complaint as to all asserted patents because
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`the complaint alleges infringement of every claim of each asserted patent without providing
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`plausible allegations specific to each and every claim as to what accused product infringes
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`each element of each claim and how. Plaintiff has however at this point, pursuant to the
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`court’s scheduling order, narrowed the list to 25 total claims and provided claim charts for
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`each of those asserted claims directed to an accused product. The Court therefore deems
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`the matter of the sufficiency of the pleadings with regard to the now unasserted claims to
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`be moot.1
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`Based on Finjan’s Preliminary Election of Asserted Claims and Preliminary
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`Infringement Contentions the following claims are presently at issue before the Court:
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`1 This determination does not preclude Finjan from seeking to renew allegations of infringement as to the
`withdrawn claims of the patents at issue should Finjan contend it necessary to do so following claim
`construction or with leave of court upon a showing of good cause.
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`Patent
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`Claim
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`Type of Infringement Alleged
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`6,154,844
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`Independent Claim 1
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`Direct 271(a) and Inducing 271(b)
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` Dependent Claim 7
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`Direct 271(a) and Inducing 271(b)
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` Dependent Claim 11
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`Direct 271(a) and Inducing 271(b)
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`Independent Claim 15
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`Direct 271(a)
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` Dependent Claim 16
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`Direct 271(a)
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` Dependent Claim 21
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`Direct 271(a)
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`6,804,780
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`Independent Claim 9
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`Direct 271(a)
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` Dependent Claim 13
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`Direct 271(a)
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`Independent Claim 18
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`Direct 271(a)
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`7,975,305
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`Independent Claim 1
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`Direct 271(a)
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` Dependent Claim 2
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`Direct 271(a)
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` Dependent Claim 7
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`Direct 271(a)
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`Direct 271(a)
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` Dependent Claim 11
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`8,079,086
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`Independent Claim 1
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`Direct 271(a) and Inducing 271(b)
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` Dependent Claim 2
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`Direct 271(a) and Inducing 271(b)
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`Independent Claim 9
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`Direct 271(a)
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` Dependent Claim 10
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`Direct 271(a)
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`Independent Claim 24
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`Direct 271(a)
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`9,189,621
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`Independent Claim 1
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`Direct 271(a) and Inducing 271(b)
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` Dependent Claim 5
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`Direct 271(a) and Inducing 271(b)
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`Independent Claim 10
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`Direct 271(a) and Inducing 271(b)
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` Dependent Claim 13
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`Direct 271(a) and Inducing 271(b)
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` Dependent Claim 15
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`Direct 271(a) and Inducing 271(b)
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`9,219,755
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`Independent Claim 3
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`Direct 271(a) and Inducing 271(b)
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` Dependent Claim 6
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`Direct 271(a) and Inducing 271(b)
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`Case 3:17-cv-00183-CAB-BGS Document 105 Filed 03/21/17 PageID.2358 Page 5 of 8
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`2. Dismissal of Direct Infringement Claims of ‘621, ‘755 and ‘305 Patents.
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`Defendant moved to dismiss the allegations of direct infringement of the ‘621 patent
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`and ‘755 patent because they cover systems that include computer hardware elements such
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`as a processor and memory, and the ‘305 patent because it covers a system that includes
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`the element of a network interface housed within a computer. The accused products are
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`security software products so Defendant asserts it does not make, use or sell a product that
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`Finjan can plausibly allege meets all the limitations of these system claims. Finjan’s
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`infringement contentions however include user guides for the accused software that
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`describe hardware system components required to operate the software. To ascertain the
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`required or recommended hardware components needed to utilize the software, it is
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`plausible that ESET uses a system within the scope of the claims. Unauthorized use of the
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`patented system, even for the purpose of developing, testing and improving the software
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`products ESET sells can constitute infringement.2 Finjan’s infringement contentions
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`provide a sufficient basis for a plausible claim of direct infringement, and the Court finds
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`it unnecessary for Plaintiff to amend the complaint to incorporate the information set forth
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`in the contentions to meet Rule 8 requirements.3 The motion to dismiss the claims of direct
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`infringement of the ‘621, ‘755 and ‘305 patents is denied.
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`3. Dismissal of the Indirect Infringement Claims.
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`With regard to the allegations of inducing infringement which requires prior
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`knowledge of the patents by the Defendant, based on the Plaintiff’s narrowed infringement
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`contentions, there are presently four patents to which this allegation is asserted: Claims 1,
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`2 ESET denied such use at the hearing, but for purposes of the motion to dismiss such use is a plausible
`allegation.
`3 This determination is limited to whether a sufficient pleading under Rule 8 was, or could be provided.
`It is not a determination in any way on the merits of Plaintiff’s direct infringement allegations. Nor does
`it preclude Finjan from establishing an alternative theory of direct infringement. In its opposition Finjan
`contended that ESET directly infringes the claimed systems by putting the invention into service, i.e.,
`controlling the system as a whole and obtaining benefit from it. Centillion Data Sys., LLC v. Quest
`Commc’ns Int’l, Inc., 631 F.3d 1279, 1284 (Fed. Cir. 2011).
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`Case 3:17-cv-00183-CAB-BGS Document 105 Filed 03/21/17 PageID.2359 Page 6 of 8
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`7 and 11 of the ‘844 patent; Claims 1 and 2 of the ‘086 patent; Claims 1, 5, 10, 13, and 15
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`of the ‘621 patent; and Claims 3 and 6 of the ‘755 patent.
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`The complaint on its face alleges that Defendant was notified of the ‘844 patent in
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`or about January 22, 2015. [Doc. No. 1 at ¶ 48.] There is no specific date alleged that
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`Defendant became aware of the ‘086 patent [id. at ¶ 96], but at argument Plaintiff
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`represented it could establish Defendant was notified of the ‘086 patent no later than
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`February, 2015. The complaint alleges that the parties engaged in in-person and telephonic
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`meetings from October 2015 through April 2016 at which Plaintiff offered element by
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`element explanations of its infringement allegations and Defendant nevertheless continued
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`to engage in the alleged infringing activities.4 The Court does not find it necessary at this
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`juncture for Plaintiff to amend to add the February date of notice of the ‘086 patent to
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`plausibly state an inducement claim.
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`As for the ‘621 patent and the ‘755 patent, the complaint does not adequately allege
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`that the Defendant had knowledge of these two patents prior to the filing of the lawsuit.
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`There is a generic recitation that Defendant was aware of Plaintiff’s patent portfolio, but
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`that is not sufficient to demonstrate that Defendant specifically knew of these two patents,
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`that issued on November 17, 2015 and December 22, 2015, respectively, prior to the filing
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`of the lawsuit. Plaintiff did not offer that it could establish a date Defendant knew of these
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`two patents earlier than the filing of the lawsuit.
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`Defendant therefore argued that the requisite knowledge for inducing infringement
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`cannot be established by the filing of the complaint for subsequent acts, citing Mallinckrodt
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`Inc. v. E-Z-EM Inc., 670 F.Supp.2d 349, 354 (D. Del. 2009). Plaintiff however countered
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`that knowledge of the patents based on the filing of a complaint is sufficient to meet the
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`knowledge requirement for an induced infringement claim. See Bascom Research LLC v.
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`4 In light of Plaintiff’s reliance in the complaint and in opposition to this motion on the pre-lawsuit
`negotiations as evidence to support allegations of inducing infringement and willful infringement, the
`Court determines that Defendant may also rely upon and use in its defense evidence from those same
`negotiations.
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`Case 3:17-cv-00183-CAB-BGS Document 105 Filed 03/21/17 PageID.2360 Page 7 of 8
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`Facebook, Inc., 2013 WL 968210, at *4 (N.D. Cal. Mar. 12, 2013). There is a split among
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`District Courts, but the weight of authority in the Northern District of California, where
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`this case was originally filed, is that knowledge of the patents can be established through
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`the filing. Id. The claim for induced infringement is however, limited to the post-filing
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`conduct, which this Court adopts for this case. Consequently, Plaintiff may proceed on the
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`inducement claims for the ‘621 and the ‘755 patents for post-filing conduct.
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`As with the allegations of direct infringement, the subsequently produced
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`infringement contentions provide sufficient allegations that Defendant instructed
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`customers in the use of the accused products in systems or methods that would infringe the
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`asserted claims. The information is sufficient to put Defendant on notice of what is asserted
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`and the Court does not find it necessary in the context of this particular case for the Plaintiff
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`to amend to establish plausible claims of inducing infringement.
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`The motion to dismiss the inducement claims as to the ‘844 and ‘086 patents is
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`denied. The motion to dismiss the inducement claims as to the ‘621 and ‘755 patents is
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`denied, but the allegation for these two patents is limited to post-filing conduct.
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`4. Dismissal of the Willful Infringement Allegations.
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` The complaint alleges that prior to the filing of the lawsuit Finjan put ESET on notice
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`of its contentions ESET’s products infringe the patents at issue. Despite that notice and
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`related meetings between the parties to address those contentions, the complaint asserts
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`that ESET continues to sell products alleged to infringe.
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`Willfulness is measured by reference to the knowledge of the accused infringer at
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`the time of the challenged conduct. See Halo Electronics Inc. v. Pulse Electronics, Inc.,
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`136 S. Ct. 1923, 1933 (2016). The complaint states sufficient facts to allege ESET’s
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`continued sales are willful. ESET may introduce evidence of its response to Finjan’s notice
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`of infringement and the steps it took to address those contentions. The motion to dismiss
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`the willful infringement allegations is denied.
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`Case 3:17-cv-00183-CAB-BGS Document 105 Filed 03/21/17 PageID.2361 Page 8 of 8
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`III. Conclusion
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`ESET is ordered to file an answer to the complaint no later than April 3, 2017 in
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`accordance with this order. The parties are further ordered to file a joint proposed schedule
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`for a tutorial and claim construction hearing no later than April 3, 2017. The parties are
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`instructed to meet and confer to determine a maximum of 15 claim terms or phrases that
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`require construction and are deemed the most significant to resolution of this matter.
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`Additional terms or phrases may only be submitted for construction upon a showing of
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`good cause. Finally, plaintiff is directed to lodge with the Court any claim construction
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`orders issued by any other courts on these patents no later than April 3, 2017.
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`It is SO ORDERED.
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`Dated: March 21, 2017
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