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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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`ESET, LLC, et al.,
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`Plaintiff,
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`Defendants.
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` Case No.: 3: 17-cv-00183-CAB-BGS
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`ORDER ON FINJAN’s MOTION
`FOR REVIEW OF MAGISTRATE
`JUDGE’S ORDER ON DISCOVERY
`DISPUTE AS TO ESET’S
`INTERROGATORY NO. 23
`[Doc. No. 408]
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`AND RELATED COUNTERCLAIMS.
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`Plaintiff Finjan objects to the Magistrate Judge’s ruling that it provide Defendants
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`ESET LLC and ESET SPOL. S.R.O. (collectively “ESET”) with information regarding
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`legal fees paid in connection with the settlement of previous litigation. [Doc. No. 408-1.]
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`Plaintiff filed its motion on the grounds that the ruling regarding Interrogatory No. 23 is
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`clearly erroneous and contrary law and as a result, it seeks the return and destruction of the
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`supplemental discovery provided in response to the Magistrate Judge Skomal’s order. [Id.]
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`As the Court has explained previously, its review of magistrate judge orders on non-
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`dispositive motions is limited. A district court judge may reconsider a magistrate judge’s
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`ruling on a non-dispositive motion only “where it has been shown that the magistrate’s
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`Case 3:17-cv-00183-CAB-BGS Document 433 Filed 01/24/19 PageID.14918 Page 2 of 5
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`order is clearly erroneous or contrary to law.” 28 U.S.C. § 636(b)(1)(1); see also Fed. R.
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`Civ. P. 72(a). “A magistrate judge’s legal conclusions are reviewable de novo to determine
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`whether they are “contrary to law” and findings of fact are subject to the “clearly
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`erroneous” standard.” Meeks v. Nunez, Case No. 13cv973-GPC(BGS), 2016 WL 2586681,
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`*2 (S.D. Cal. May 4, 2016) (citing Perry v. Schwarzenegger, 268 F.R.D. 344, 348 (N.D.
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`Cal. Mar. 22, 2010)).
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` “The ‘clearly erroneous’ standard applies to the magistrate judge’s factual
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`determinations and discretionary decisions . . . .” Computer Econ., Inc. v. Gartner Grp.,
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`Inc., 50 F. Supp. 2d 980, 983 (S.D. Cal. May 25, 1999) (citations omitted). “Under this
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`standard, ‘the district court can overturn the magistrate judge’s ruling only if the district
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`court is left with the definite and firm conviction that a mistake has been made.’” Id.
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`(quoting Weeks v. Samsung Heavy Indus. Co., Ltd., 126 F.3d 926, 943 (7th Cir. 1997)); see
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`also Green v. Baca, 219 F.R.D. 485, 489 (C.D. Cal. Dec. 16, 2003) (citations omitted).
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`The “contrary to law” standard “allows independent, plenary review of purely legal
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`determinations by the Magistrate Judge.” Jadwin v. Cnty. of Kern, 767 F. Supp. 2d 1069,
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`1110 (E.D. Cal. Jan. 24, 2011) (citing FDIC v. Fidelity & Deposit Co. of Md, 196 F.R.D.
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`375, 378 (S.D. Cal. May 1, 2000); see also Computer Econ., 50 F. Supp. 2d at 983 n. 4;
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`see also Green, 219 F.R.D., at 489. A magistrate judge’s order “is contrary to law when it
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`fails to apply or misapplies relevant statutes, case law, or rules of procedure.” Jadwin, 767
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`F. Supp. 2d at 1110-11 (quoting DeFazio v. Wallis, 459 F. Supp. 2d 159, 163 (E.D.N.Y
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`Oct. 17, 2006)) (internal quotation marks omitted).
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`On October 30, 2018, Magistrate Judge Skomal held a telephonic discovery
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`conference which including a discussion regarding ESET’s Interrogatory No. 23, with the
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`parties being ordered to submit a joint statement on the issue. [Doc. No. 377.] On
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`November 7, 2018, the parties submitted the requested joint statement [Doc. No. 381] and
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`on November 20, 2018, Magistrate Judge Skomal issued on order that addressed the dispute
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`surrounding Interrogatory No. 23 [Doc. No. 392].
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`Case 3:17-cv-00183-CAB-BGS Document 433 Filed 01/24/19 PageID.14919 Page 3 of 5
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`ESET’s Interrogatory No. 23 asks Finjan to:
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`identify all dollar amount and date of each contingency payment made by
`Finjan for legal services in connection with settlement of each litigation
`initiated by Finjan from January 2005 to August 2018.
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`[Doc. No. 381 at 2.]
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`Magistrate Judge Skomal accurately summarized the parties’ positions as set forth
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`in the joint statement. [Doc. Nos. 381, 392.] Finjan argued that the discovery sought was
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`irrelevant and unnecessary, especially since the information regarding settlement
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`agreements would ultimately be inadmissible. [Doc. No. 392 at 1.] Further, Finjan asserted
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`that it had already provided information that it claimed adequately explained what Finjan
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`does consider in licensing negotiations, that “this is what ESET’s experts should be
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`considering in determining how settlement amounts are calculated, not how or if legal fees
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`are factored into the settlement agreements.” [Id. at 2.] ESET, in turn, argued that its
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`expert may need to take the contingency fee payments into consideration in determining
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`the value of Finjan’s settlement agreements, and, ultimately, the value of the asserted
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`patents. [Id.] Further, ESET argued that its and Finjan’s experts should be given the
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`information regarding any settlements and the contingency fee payments stemming from
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`them in order to provide an actual value of the settlement, that the experts could then choose
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`to accept or reject. [Id.] ESET disputed Finjan’s assertion that Finjan does not take
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`contingency payments into consideration when determining the value of its settlement
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`agreements, characterizing it as a “self-serving statement.” [Id.] Judge Skomal concluded
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`that Finjan could not deny ESET information that could potentially be relevant to its
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`expert’s determination of a reasonable royalty based solely on the fact that Finjan does not
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`factor contingency fees into its settlement agreements. [Id.] Finjan was therefore
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`compelled to provide a response to Interrogatory No. 23. [Id. at 3.]
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`Plaintiff is objecting on the grounds that payments by Finjan to its outside counsel
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`for legal services have no relevance to damages in this action as a matter of law. Plaintiff
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`argues that the purpose of a hypothetical negotiation, as explained in Carnegie Mellon
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`University v. Marvell Technology Group, Ltd, 807 F.3d 1283, 1303-04 (Fed. Cir. 2015), is
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`“to ascertain the royalty upon which the parties would have agreed had they successfully
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`negotiated an agreement just before the infringement began.” [Doc. No. 408 at 9.] While
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`Finjan concedes that settlement agreements may be considered as one of the 15 factors that
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`may affect the outcome of hypothetical negotiations, it posits that such information may
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`not always be informative because the circumstances under which they were entered can
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`vary considerably, citing for the first time LaserDynamics, Inc v. Quanta Computer, Inc.
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`694 F.3d 51, 77 (Fed. Cir. 2012). [Id. at 9.] Plaintiff contends, therefore, that the court
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`failed to properly consider its explanation of damages law, informing that if the court had,
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`it would have become evident that payments to attorneys should not be deducted from the
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`value of settlement agreements, thereby making ESET’s proposed calculation incorrect.
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`[Id. at 9-11.] Further, Plaintiff asserts that the order is clearly erroneous because there is
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`no factual basis for claiming Finjan’s payments to its attorneys are relevant. [Id. at 11-13.]
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`Finally, Plaintiff argues that the information is not discoverable under Rule 26. [Id. at 13-
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`15.]
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`But, after consideration of both parties’ positions, Magistrate Judge Skomal found
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`Finjan cannot deny ESET information that may be relevant to ESET’s expert’s
`determination of a reasonable royalty based solely on Finjan’s assert that it
`does not factor contingency fees into its settlement agreements. Similarly, in
`terms of the relevancy of the discovery, ESET is not limited to considering
`only the things Finjan’s witnesses generally and somewhat vaguely identify
`as factors it considers in calculating its settlement agreements. ESET is not
`required to take them at their word as to how they calculate it to the exclusion
`of any other possible factors that might have mattered. ESET’s proposed
`calculation, deducting the contingency fees from the settlement amount to
`arrive at the true value of the agreement, may not ultimately hold up or be
`admissible, but that does not mean it is outside the scope of discovery.
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`[Doc. No. at 392 at 3.]
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`In so finding, Magistrate Judge Skomal distinguished the request from the singular
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`case Finjan relied on in the joint statement, applied the standard set forth in Federal Rule
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`of Civil Procedure 26(b)(1), concluded the information was relevant and the burden of
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`responding was minimal.
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`A review of the order demonstrates that Magistrate Judge Skomal had a thorough
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`understanding of the parties’ positions and discovery history, referenced specific
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`arguments made by the parties, and was familiar with, and in fact discusses, the relevant
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`case law. See generally, Doc. No. 392. Given the broad discretion of the court in
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`conducting discovery, the ruling of Magistrate Judge Skomal was not an abuse of
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`discretion. Plaintiff has failed to show that the discovery order was “clearly erroneous or
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`contrary to law.” Plaintiff’s request that this Court order ESET to return and destroy the
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`supplemental discovery provided in response to Interrogatory No. 23 is therefore
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`DENIED.
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`It is SO ORDERED.
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`Dated: January 24, 2019
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