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`UNITED STATES DISTRICT COURT
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`SOUTHERN DISTRICT OF CALIFORNIA
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`FINJAN, INC.,
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`v.
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`Plaintiff,
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` Case No.: 17CV183 CAB (BGS)
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`ORDER ON DISCOVERY DISPUTES
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`ESET, LLC and ESET SPOL. S.R.O.,
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`[ECF 300, 328]
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`Defendants.
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`This Order addresses numerous discovery disputes raised by the parties, argued at
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`discovery conferences, and briefed via joint statements. (ECF 300, 328.) The Court rules
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`as set forth below as to each dispute.
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`DISCUSSION
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`I.
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`Legal Standards1
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`A.
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`Scope of Discovery
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`The Federal Rules of Civil Procedure provide that “parties may obtain discovery
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`regarding any non-privileged matter that is relevant to any party’s claim or defense and
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`1 The Court sets out general standards as to the scope of permissible discovery and
`general authority regarding damages to avoid repetition in analyzing each of the disputes.
`Authority unique to an individual dispute is discussed in analyzing that dispute.
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`proportional to the needs of the case, considering the importance of the issues at stake in
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`the action, the amount in controversy, the parties’ relative access to relevant information,
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`the parties’ resources, the importance of the discovery in resolving the issues, and
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`whether the burden or expense of the proposed discovery outweighs its likely benefit.”
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`Fed. R. Civ. P. 26(b)(1).
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`District courts have broad discretion in determining what is relevant. Facedouble,
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`Inc. v. Face.com, No. 12cv1584 DMS (MDD), 2014 WL 585868, at *1 (S.D. Cal. Feb.
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`13, 2014). And, the 2015 Amendments to Rule 26 made clear that “[r]elevancy alone is
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`no longer sufficient—discovery must also be proportional to the needs of the case.” In re
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`Bard IVC Filters Prods. Liability Litig., 317 F.R.D. 562, 564 (D. Ariz. 2016). When a
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`dispute implicates proportionality, the party claiming undue burden has an obligation to
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`explain what is burdensome about complying with the request and the party claiming it is
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`important enough to require a response must explain why it is important. Fed. R. Civ. P.
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`26 advisory committee’s notes.2 “The court’s responsibility, using all the information
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`provided by the parties, is to consider these, [undue burden or expense and importance of
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`information sought,] and all the other factors in reaching a case-specific determination of
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`the appropriate scope of discovery.” Id. Limits on discovery may be issued where the
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`“burden or expense outweighs the likely benefits.” Id. (citing Fed. R. Civ. P. 26(b)).
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`2 In explaining the 2015 Amendments to Rule 26, the Advisory Committee explains it this
`way:
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`[I]f the parties continue to disagree, the discovery dispute could be
`brought before the court and the parties’ responsibilities would remain
`as they have been since 1983. A party claiming undue burden or
`expense ordinarily has far better information — perhaps the only
`information — with respect to that part of the determination. A party
`claiming that a request is important to resolve the issues should be
`able to explain the ways in which the underlying information bears on
`the issues as that party understands them.
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`2
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`17CV183 CAB (BGS)
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`Case 3:17-cv-00183-CAB-BGS Document 364 Filed 10/23/18 PageID.13696 Page 3 of 19
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`B. Damages3
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`“When a patent is infringed, the patentee is entitled to ‘damages adequate to
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`compensate for the infringement, but in no event less than a reasonable royalty for the use
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`made of the invention by the infringer.’” Whitserve, LLC v Computer Packages, Inc.,
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`694 F.3d 10, 26 (Fed. Cir. 2012) (quoting 35 U.S.C. § 284). “A reasonable royalty can
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`be calculated from an established royalty, the infringer’s profit projections for infringing
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`sales, or a hypothetical negotiation between the patentee and infringer based on the
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`factors in Georgia–Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.
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`N.Y.1970).”4 Wordtech Sys., Inc. v. Integrated Network Solutions, Inc., 609 F.3d 1308,
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`3 Most of the discovery disputes addressed below concern ESET’s discovery requests
`seeking information it argues is relevant to calculating damages. Although neither party
`set out any basic authority on the topic in its briefing on most of the damages disputes,
`(see ECF 300), the parties clearly dispute whether the sought discovery is relevant to
`calculating a reasonable royalty, including a calculation based on a hypothetical
`negotiation between the parties.
`4 The parties only address particular Georgia-Pacific factors in one dispute addressed
`below, however, they raise the hypothetical negotiation as to numerous dispute, and the
`factors are relevant to the hypothetical negation. The Georgia-Pacific factors are:
`(1) royalties the patentee has received for licensing the patent to others; (2)
`rates paid by the licensee for the use of comparable patents; (3) the nature
`and scope of the license (exclusive or nonexclusive, restricted or
`nonrestricted by territory or product type); (4) any established policies or
`marketing programs by the licensor to maintain its patent monopoly by not
`licensing others to use the invention or granting licenses under special
`conditions to maintain the monopoly; (5) the commercial relationship
`between the licensor and licensee, such as whether they are competitors; (6)
`the effect of selling the patented specialty in promoting sales of other
`products of the licensee; (7) the duration of the patent and license term; (8)
`the established profitability of the product made under the patent, including
`its commercial success and current popularity; (9) the utility and advantages
`of the patent property over old modes or devices; (10) the nature of the
`patented invention and the benefits to those who have used the invention;
`(11) the extent to which the infringer has used the invention and the value of
`that use; (12) the portion of profit or of the selling price that may be
`customary in that particular business to allow for use of the invention or
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`3
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`17CV183 CAB (BGS)
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`1319 (Fed. Cir. 2010) (citing Lucent Techs. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed.
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`Cir. 2009) and Minks v. Polaris Indus., 546 F.3d 1364, 1372 (Fed. Cir.2 008)); see also
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`Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292, 1317 (Fed. Cir. 2011) (“This court
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`has sanctioned the use of the Georgia-Pacific factors to frame the reasonable royalty
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`inquiry. Those factors properly tie the reasonable royalty calculation to the facts of the
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`hypothetical negotiation at issue.”). “The hypothetical negotiation ‘attempts to ascertain
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`the royalty upon which the parties would have agreed had they successfully negotiated an
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`agreement just before infringement began,’ and ‘necessarily involves an element of
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`approximation and uncertainty.’” Id. (citing Lucent Techs., 580 F.3d at 1324–25).
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`II. Discovery Disputes Regarding Damages5
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`A. ESET’s Interrogatory No. 11 and Request for Production Nos. 157 and
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`160 – Licensing Information and Settlement Negotiations
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`ESET seeks to compel Finjan to provide a supplemental response to Interrogatory
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`11 with the number of infringing units covered by Finjan’s lump sum licensing
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`agreements to allow ESET’s expert to calculate a running royalty.6 Requests for
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`analogous inventions; (13) the portion of the realizable profit that should be
`credited to the invention as opposed to its non-patented elements; (14) the
`opinion testimony of qualified experts; and (15) the results of a hypothetical
`negotiation between the licensor and licensee.
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`i4i Ltd. P’ship v. Microsoft Corp., 598 F.3d 831, 853 n.3 (Fed. Cir. 2010).
`5 Sections A-G address the disputes raised in the parties’ Joint Statement on disputes
`regarding ESET’s First Set of Interrogatories and Fourth Set of Requests for Production
`regarding damages. (ECF 300.) Section H addresses a dispute raised as to Finjan’s RFP
`155 in a separate Joint Statement that also relates to damages. (ECF 328.)
`6 Interrogatory 11’s request for “an explanation of the math underlying each of the
`[Finjan] licensing agreements” is broader than the number of infringing units covered by
`Finjan’s lump sum licensing agreements. However, the Court understands ESET to be
`seeking to compel the number “of infringing units that are covered by any Finjan license
`agreement that is stated as a lump sum . . . instead of a running royalty,” to calculate a
`running royalty. ESET’s briefing on compelling a further response to Interrogatory 11
`only addresses compelling Finjan to provide this information. To the extent ESET is
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`4
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`17CV183 CAB (BGS)
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`production 157 and 160 seek all documents relating to negotiations concerning licenses
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`covering technology that is comparable to the technology covered by any of the asserted
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`patents and all documents related to settlement negotiations in Finjan’s prior litigations.
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`This dispute concerns information and documents underlying the licensing agreements.
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`Finjan has produced the actual licensing agreements.
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`ESET argues the answer to Interrogatory 11 and the documents requested are
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`relevant to determining a reasonable royalty rate. As to RFPs 157 and 160 ESET
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`indicates it is seeking documents reflecting the mathematical calculations needed to
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`answer Interrogatory No 11, Finjan’s settlement negotiations regarding prior licenses, and
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`settlement negotiations in Finjan’s prior litigations that resulted in a license. ESET
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`argues that because Finjan’s damages case against ESET will be predicated on Finjan’s
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`general licensing practices and these practices may be reflected in these underlying
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`settlement negotiation documents, they are relevant and should be produced.
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`Additionally, ESET argues it needs the underlying calculations and negotiation
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`documents because Finjan has indicated in discovery responses that all of its previous
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`licenses and settlement agreements are comparable licenses to the patents-in-suit. ESET
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`relies on In re MSTG, Inc. to argue the documents requested are not privileged and are
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`relevant to patent damages analysis. 675 F.3d 137 (Fed. Cir. 2012)
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`Finjan first emphasizes what it has already produced and expects to produce —
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`license agreements, written correspondence to the extent any numbers where identified
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`leading up to the execution of the settlement and license agreements, deposition
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`testimony regarding royalty rates, and an exemplary damages expert report. Finjan then
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`argues the request is overbroad, seeking all documents and discovery “concerning” or
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`“related to” any licensing and settlement negations. Finjan also distinguishes MSTG,
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`accurately noting that discovery of negotiation documents was only permitted because a
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`seeking something broader, the Court finds it has not shown it is entitled to more,
`particularly in light of Finjan having produced its licensing agreements.
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`17CV183 CAB (BGS)
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`specific need was shown, i.e. an expert relied on the documents in an expert report.
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`Although Finjan does not specifically address ESET’s argument that it needs the number
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`of infringing units covered by the lump sum agreements for purposes of calculating a
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`running royalty, it does argue generally that the requested discovery, beyond what has
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`already been produced, or is to be produced is irrelevant, overbroad, and compound.
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`The Court finds MSTG instructive on a number of points. First, it reiterates “that
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`settlement agreements can be pertinent to the issue of reasonable royalties.” 675 F.3d
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`1337, 1348. Finjan has produced these after obtaining third party consent, however,
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`Finjan is refusing to produce underlying settlement negotiation documents. MSTG also
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`affirms a lower court’s order for production of underlying negotiation documents in
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`addition to the settlement agreements. Id. These conclusions, and the decision’s prior
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`discussion declining to create a settlement negotiation privilege, make clear that
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`settlement negotiations may be discoverable. Id. at 1342-48. In this respect, ESET is not
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`demanding something that is entirely off limits.
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`However, MSTG applicability is also limited. Factually, it is distinguishable from
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`the present case in that the lower court decision that was affirmed only ordered
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`production of the settlement negotiation documents because part of an expert’s opinion
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`relied on those underlying negotiation documents. Id. at 1348. The production was
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`necessary because “[a]s a matter of fairness MSTG [could] not at one and the same time
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`have its expert rely on information about the settlement negotiations and deny discovery
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`as to those same negotiations.” Id. That is not the case here. The Court also notes that in
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`MSTG, the lower court had previously denied production of settlement negotiation
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`documents when the parties were in essentially the same position Finjan and ESET are
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`now as to RFPs 157 and 160. Id. That decision was not challenged. Id.
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`The MSTG court does not set out a particular standard to apply in considering
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`whether underlying settlement negotiation documents, like those sought here, should be
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`produced. Id. at 1347 (“Because the issue is not before us, we reserve for another day the
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`issue of what limits can appropriately be placed on discovery of settlement negotiations).7
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`The court indicates that “typically settlement negotiations that are admissible under
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`Federal Rule of Evidence 408 or disclosed to a party’s expert would be discoverable,” but
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`the court also notes it has “not yet decided the extent to which evidence of settlement
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`negotiations would be admissible under Rule 408” and even as to “such admissible or
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`disclosed material, some protections may be appropriate.” Id. at 1346-47. However, the
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`court does emphasize the lower courts’ discretion to control and limit discovery under
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`Rule 26. The court also explains, seemingly with some approval, that some courts “have
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`imposed heightened standards for discovery in order to protect confidential settlement
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`discussions,” that require: (1) a showing of a special need for the material; (2) a resulting
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`unfairness from not getting the discovery; and (3) that the need for the sought discovery
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`outweighs the confidentiality interest. Id. at 1347 (citing In re Teligent, Inc., 640 F.3d
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`53, 57-58 (2d Cir. 2011)).
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`As to Interrogatory 11, “the underlying number of allegedly infringing units that
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`are covered by any Finjan license agreement that is stated as a lump sum . . . instead of a
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`running royalty” is relevant to damages because ESET needs it to calculate a running
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`royalty from the lump sums and the burden of providing this information, assuming
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`Finjan has it, is not great.
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`As to the portion of RFPs 157 and 160 that seeks underlying settlement documents
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`reflecting the mathematical calculations needed to answer Interrogatory 11, as stated
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`above, the Court finds ESET is entitled to these documents as well. Because it seems
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`possible that settlement negotiations may be disclosed in producing documents reflecting
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`the number of infringing units covered by the lump sum agreements, the Court applies
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`the standard referenced in MSTG. ESET has shown a particular need for the documents
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`that contain that information. ESET has explained that it would be unable to calculate a
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`7 Neither party provides or sets out any standard they seek for the Court to apply in
`considering this issue.
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`17CV183 CAB (BGS)
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`running royalty for all the lump sum licensing agreements absent that information,
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`leaving it without discovery it needs for damages calculations. As to whether the need
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`for the sought discovery outweighs the confidentiality interest, the Court finds, based on
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`the briefing and scope of the request, that it does, primarily because the confidentiality
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`interest in those limited documents reflecting the number of infringing units would not be
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`great.
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`Accordingly, Finjan shall provide a supplemental response to Interrogatory 11. It
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`shall include the number of allegedly infringing units that are covered by any Finjan lump
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`sum licensing agreement for the asserted patents. Finjan shall also supplement its
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`response to RFPs 157 and 160, to the extent it has not done so, with documents reflecting
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`the number of allegedly infringing units that are covered by any Finjan lump sum
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`licensing agreement for the asserted patents. The supplemental response and production
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`must be provided by October 30, 2018.
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`Beyond the scope set forth above as to RFPs 157 and 160, the RFPs are overbroad
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`and ESET has not shown a specific need for the underlying settlement negotiation
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`documents. First, these RFPs are overbroad, seeking all settlement negotiation
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`documents in all of Finjan’s prior litigations and any document relating to negotiations
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`concerning licenses covering technology comparable to the technology covered by the
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`asserted patents. As the MSTG court reiterated, courts have the discretion to control and
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`limit discovery. Here, ESET is seeking the entire scope of underlying settlement
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`negotiation documents without, sufficient justification. ESET has the actual licensing
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`agreements and, as order above, it will be provided the calculations or documents
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`explaining the calculations of the lump sum licensing agreements. The breadth requested
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`is not warranted or proportional. Second, applying the standard referenced in MSTG,
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`ESET has not met the first element. That Finjan’s case may be based on its licensing
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`practices does not open up all settlement negotiations documents to production. That is
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`not a specific need. If Finjan were to rely on any of its underlying settlement
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`negotiations in calculating damages, as was the case in MSTG, then that would not only
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`demonstrate a specific need, but also align with the MSTG court’s conclusion that as a
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`matter of fairness, reliance on those documents requires their production. The Court is
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`not finding that Finjan’s reliance on underlying settlement negotiations is the only way to
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`show specific need, rather, the Court finds ESET has not shown any other specific need
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`sufficient to justify accessing this broad scope of underlying settlement negotiations.
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`ESET’s request to compel further responses to Interrogatory 11 and RFPs 157 and
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`160 is GRANTED in part and DENIED in part as set forth above.
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`B.
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`ESET’s Request for Production Nos. 151 and 155 – Documents Related
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`to Third Party Sales, Revenue, and Marketing
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`ESET’s RFPs 151 and 155 seek documents in Finjan’s possession related to third
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`parties’ sales, pricing, revenue, and marketing of products made by third parties that are
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`licensed under one or more of the patents-in-suit. Finjan has responded to these RFPs
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`only with information regarding its own Vital Security appliances.
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`ESET argues these documents are relevant to show what Finjan allows third parties
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`to claim regarding products covered by the patents including whether patented features
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`are mentioned. ESET also argues these documents may show whether Finjan’s prior
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`licenses are comparable to that which would be obtained through a hypothetical
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`Finjan generally argues these requests are overbroad, vague, and unduly
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`burdensome. Finjan claims the information sought is either subject to confidentiality
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`provisions or public, making it as easily accessible to ESET as Finjan. Finjan also asserts
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`that it is unclear what information ESET seeks, or why it is relevant without addressing
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`any of ESET’s arguments, noted above, regarding relevancy.
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`As to relevancy, the Court finds the requested documents are relevant to damages.
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`ESET explains, sales and marketing documents sought may show what restrictions Finjan
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`does or does not impose on its licensees in the sales and marketing of their licensed
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`products. Additionally, these documents may show whether Finjan’s prior licenses are
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`comparable to that which would be obtained through a hypothetical negotiations. In
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`terms of burden, it appears the only burden is redaction of third party information to the
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`extent it is confidential. Weighing the importance of the information sought and the
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`burden of production, the Court finds a further response is required.
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`ESET’s request to compel a further response is GRANTED. Finjan shall provide
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`supplemental responses to RFPs 151 and 155 on or before October 30, 2018.
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`C. ESET’s Request for Production Nos. 166, 168, 169, and 172-177 –
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`Finjan’s Experts in Prior Litigation
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`ESET’s RFPs 166, 168, 169 and 172-177 seek trial testimony, deposition
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`testimony, deposition exhibits, and expert reports from Finjan’s prior litigations
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`concerning one or more of the asserted patents for five Finjan experts. Finjan has
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`produced trial transcripts for each, but not all their expert reports, deposition transcripts,
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`or deposition exhibits. Finjan also indicates that it produced its own damages reports
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`with third party confidential information redacted.
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`ESET argues these documents are relevant to show any “changing story and
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`shifting positions” by Finjan in general and by specific experts that may testify against
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`ESET in this case. ESET acknowledges that the accused products in those prior
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`litigations are not exactly the same as here, but all the accused products in these prior
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`litigations on the asserted patents concern anti-virus technology. Finjan states that the
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`documents requested are wholly irrelevant, but does not specifically address ESET’s
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`argument that they are relevant to show a change in Finjan’s position.
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`Finjan argues these interrogatories are unduly burdensome and not proportional to
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`the needs of the case and also argues the production of trial testimony and damages
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`reports are sufficient to provide a basis for each expert’s opinion. Finjan explains that
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`these productions would implicate an extensive amount of third party confidential
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`information because they are about third party products. Finjan argues redacting them —
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`“18 reports spanning thousands of pages and well over 4,000 pages of deposition
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`testimony, not including exhibits — would take excessive hours to review and redact.
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`ESET responds that this amounts to complaining that redacting the requested documents
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`would take too much work.
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`ESET has shown these documents are relevant to identify changes in positions
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`taken by Finjan,8 but, as noted above, relevancy alone is not enough. In re Bard IVC
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`Filters Prods. Liability Litig., 317 F.R.D. at 564. Finjan has identified a specific burden
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`imposed, the redaction of third party confidential information from a large number of
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`documents. In weighing the burden and the importance of the information, the Court
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`finds Finjan must respond.
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`ESET’s request to compel a further response to these interrogatories is
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`GRANTED as set forth above. Finjan must provide a supplemental response to these
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`RFPs on or before October 30, 2018.
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`D. ESET’s Request for Production No. 163 – Third Party Defendants’
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`Expert Reports on Damages
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`ESET’s RFP 163 seeks “[d]ocuments sufficient to show the defendants calculation
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`of damages in Previous Finjan Litigations.” Essentially, ESET wants Finjan to produce
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`the damages expert reports prepared by defendants in Finjan’s prior litigations, those
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`defendants’ trial exhibits, and documents those defendants relied on in calculating
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`damages concerning one or more of the asserted patents.
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`ESET argues these documents, particularly the expert reports, are relevant because
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`they demonstrate a prior damages analysis of the asserted patents, including analysis of
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`relevant documents, Finjan’s prior licenses, and may also disclose non-infringing
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`alternatives considered in each of those cases. Finjan responds that the requested
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`documents implicate irrelevant third party highly confidential information and
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`8 A portion of a hearing transcript cited by Finjan for a different issue sums up the
`relevance well, “Finjan’s damage reports you can get, because their position matter. And
`it may be an admission. It may be any number of things.” (Martinez Decl., Ex. 11 at
`11:5-7 (emphasis added).)
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`responding would be unduly burdensome. Specifically, Finjan argues they are not
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`relevant because damages are unique to a specific defendant, i.e. the reasonable royalty
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`negotiated between Finjan and that defendant, as opposed to ESET, at the time of the
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`hypothetical negotiation. As Finjan explains, those reports are based on third party
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`products not accused here and include patents not asserted against ESET. Finjan again
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`also points to what it has already produced — Finjan’s own damages expert reports and
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`non-confidential trial transcripts and trial exhibits from the prior litigations.
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`Neither party cites the Court to any written decisions discussing this issue, but
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`Finjan cites to a short order and underlying hearing transcript in another case where
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`similar information was sought by a defendant from Finjan. (Martinez Decl., Exs. 10-
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`11). That court found the request ridiculous.9 This Court recognizes, despite possible
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`motives not explicitly stated in the briefing,10 that there might be some relevant
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`information contained within those defendants’ expert reports based simply on the fact
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`that they are addressing damages for infringement of some of the same patents. That
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`said, the Court finds the importance of the information sought is not great given they are
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`analyzing damages for infringement of different products and, as Finjan rightly points
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`out, the hypothetical negotiation is specific to the parties in this case. Additionally,
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`9 Specifically, the court said “Oh, no. Okay. This is a ridiculous request. . . . Have you
`ever gotten a judge to go along with this?? . . .Okay. Well, you’ll never get a judge to go
`along with this.” (Martinez Decl., Ex. 11 at 9:20-10:4.) Earlier in the hearing the court
`explained “You’re not entitled to probe the basis for the report. The report, standing
`alone, is not an issue in this case.”
`10 Finjan did not rely on this portion of the transcript, but the court characterized the
`motive for the request as follows: “What you want, actually, if you were most honest
`about it, is you want more ways of attacking their number. And you’d look at the defense
`expert and say, Oh, I hadn’t thought of that. I’ll try that. And I’ll put that in our expert
`report. That’s actually what you want.” It is not clear to this Court that there is anything
`necessarily wrong with that motive. As discussed above, it is more a matter of balancing
`the importance of the information sought, given it largely pertains to different products,
`and the burden of the production.
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`unlike Finjan’s own expert reports, there is no need to review these for Finjan’s
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`potentially changing positions, because they are not Finjan’s positions. Finally, as
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`discussed above, producing these reports, that belong to third parties and contain
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`confidential information, would require significant redaction or obtaining permission
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`from the defendant third parties to produce them. Balancing the minimal importance of
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`the documents sought and the burden of production, the Court finds no further response is
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`required.
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`ESET’s request to compel a further response to Interrogatory 163 is DENIED.
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`E.
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`ESET’s Request for Production No. 191– Non-Licensing Revenue
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`ESET’s RFP 191 seeks documents showing revenue generated by Finjan from non-
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`licensing sources from 2000 to present and the sources of that revenue. Finjan only
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`produced documents relating to Finjan’s own products, but represented it will produce
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`other financial information that demonstrates Finjan’s overall revenues. Finjan also
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`points to public SEC filings as a source of information concerning its revenues.
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`ESET argues that a comparison of licensing and non-licensing revenue are relevant
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`to damages because it could show Finjan would have been largely dependent on licenses
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`during the hypothetical negotiation. Additionally, ESET argues this information may
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`show ESET and Finjan are not competitors which is also relevant to damages. As to what
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`has or will be produced or is publically available, ESET also explains that the publically
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`available documents filed with the SEC do not provide this information because they are
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`consolidated statements from which the non-licensing revenue cannot be deduced and
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`overall revenue information does not allow a comparison.
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`Finjan generally points to the overall revenue information it will provide and
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`public SEC filing as being sufficient, generally argues the sought discovery is not
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`relevant to the asserted patents, and inaccurately argues ESET has not explained why this
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`information is not sufficient, what specific additional information it seeks, or why it is
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`entitled to it. As noted above, ESET has explained the relevancy of this information to
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`damages and why the consolidated public filings and overall revenue information will not
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`17CV183 CAB (BGS)
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`Case 3:17-cv-00183-CAB-BGS Do