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`UNITED STATES DISTRICT COURT
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`SOUTHERN DISTRICT OF CALIFORNIA
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`
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`FINJAN, INC.,
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`v.
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`ESET, LLC et al.,
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`
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`Plaintiff,
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`Defendants.
`
` Case No.: 17-CV-183-CAB-BGS
`
`ORDER ON MOTIONS FOR
`SUMMARY JUDGMENT AND
`MOTIONS TO EXCLUDE OR
`STRIKE
`[Doc. Nos. 466, 467,469, 470, 474, 476,
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`
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`478, 479, 481, 483, 484, 486, 488, 490,
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`AND RELATED COUNTERCLAIMS
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`492, 494, 497, 499, 501, 506, 509, 510,
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`
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`
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`I.
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`Introduction
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`513, 515, 524, 526, 530, 531]
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` At the close of fact and expert discovery and in accordance with the scheduling order
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`in this case, the parties filed motions for summary judgment, Daubert motions challenging
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`each other’s experts, and motions to exclude certain evidence. The Court provided no
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`limitations regarding the number of dispositive motions that could be filed or total page
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`limitations. The parties took extreme advantage of this and filed in total twenty-eight
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`complex motions, putting before the Court an extraordinary number of issues purportedly
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`without material facts in dispute and therefore proper for adjudication as a matter of law.
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`Having reviewed the voluminous briefing, declarations and exhibits submitted by both
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`parties, the Court concludes that for the majority of the substantive motions, facts were
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`most definitely in dispute and summary judgment was not appropriate. Similarly, for the
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`majority of the challenges to the admissibility of expert testimony, the Court concludes that
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`the challenges go to the weight to be afforded the opinions. They are best challenged by
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`cross-examination rather than deemed inadmissible and excluded as an exercise of the
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`Court’s gatekeeper role.
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`A number of the motions to exclude certain evidence centered on accusations of
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`untimely disclosures and resulting prejudice to the moving party. These accusations flew
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`in both directions, and the pages of briefing allocated to these arguments of attorney
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`misconduct were exhausting. Generally, the Court concludes that there was no undue
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`prejudice and that all of the evidence in question can be presented to a jury.
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`Of the twenty-eight motions, the Court held a hearing on six motions on September
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`26, 2019. [Doc. No. 679, transcript of 9/26/19 hrg.] Those six motions are addressed
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`below. As to the remaining twenty-two motions, the Court issued tentative rulings [Doc.
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`No. 695] which remain unchanged.
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`II. ESET’s Motions
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`A.
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`Summary Judgment of Non-Infringement, License or Unenforceability
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`The Court finds numerous material facts in dispute as to the following motions and
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`they are therefore DENIED.
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`• Doc. No. 470 Motion for Non-Infringement of CMPS
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`• Doc. No. 476 Motion for Non-Infringement of ‘621/’755 Patents
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`• Doc. No. 481 Motion for Non-Infringement of ‘844 Patent
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`• Doc. No. 484 Motion for Non-Infringement of ‘086 Patent
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`• Doc. No. 488 Motion for Non-Infringement of ‘780 Patent
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`• Doc. No. 486 Motion for License Defense
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`• Doc. No. 531 Motion for Unenforceability of ‘086, ‘621 and ‘755 Patents
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`B. Motions to Exclude Experts and Strike Contentions
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` The Court declines to exclude the experts contested in the motions listed below
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`because their opinions are best challenged by cross-examination rather than exclusion. The
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`motions are therefore DENIED. ESET’s request to strike Finjan’s Third Amended
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`Infringement Contentions is also DENIED.
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`• Doc. No. 474 Exclusion of Bims
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`• Doc. No. 479 Exclusion of Mitzenmacher, Medvidovic, Goodrich and Cole
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`• Doc. No. 469 Exclusion of Orso1
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`• Doc. No. 492 Motion to Strike Third Amended Contentions
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`III. FINJAN’s Motions
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`A.
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`Summary Judgment of Infringement or of ESET’s Defenses
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`The Court finds numerous material facts in dispute as to the following motions and
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`they are therefore DENIED.
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`• Doc. No. 497 Motion for Infringement of ‘086 Patent
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`• Doc. No. 499 Motion for Infringement of ‘621 Patent
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`• Doc. No. 501 Motion for Infringement of ‘780 Patent
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`• Doc. No. 506 Motion for No License Defense
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`• Doc. No. 509 Motion for No Inequitable Conduct
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`• Doc. No. 513 Motion for Validity over Certain Prior Art References
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`B. Motions to Exclude Experts and Strike Evidence
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` The Court declines to exclude the experts contested in the motions listed below
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`because their opinions are best challenged by cross-examination rather than exclusion. The
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`
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`1 ESET moved to exclude the testimony of Dr. Alexxandro Orso regarding his opinions as to secondary
`considerations of non-obviousness. The Court RESERVES on this motion. ESET may voir dire this
`witness out of the presence of the jury to determine if his opinions are supported by the requisite nexus
`between the inventions and his conclusions regarding the secondary considerations of non-obviousness.
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`motions are therefore DENIED. Finjan’s motions to exclude certain prior art and non-
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`infringing alternatives are also DENIED.
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`• Doc. No. 510 Exclusion of Thompson
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`• Doc. No. 515 Exclusion of Spafford
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`• Doc No. 524 Exclusion of Britven
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`• Doc. No. 530 Motion to Exclude Certain Prior Art
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`• Doc. No. 526 Motion to Exclude Non-Infringing Alternatives.
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`IV. The Remaining Motions
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`A.
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`Priority Dates [Doc. No. 483]
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`As stated on the record at the hearing, this motion is DENIED as to ESET’s
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`proposed priority dates for the ‘780, ‘086, ‘621 and ‘755 patents. There are material facts
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`in dispute regarding whether the earlier patents to which Finjan claims priority disclose the
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`inventions claimed in these patents.
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`The Court, however, was prepared to adopt the IPR decision that the inventors of the
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`‘844 patent were not in possession of the subject matter of the challenged claims of that
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`patent any time prior to the December 22, 1997 filing date of the 08/995,648 application.
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`[Doc. No. 483-20, at 21-25; Doc. No. 697, at 51.] The parties represented that there had
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`been further developments in the Patent Office regarding that determination. The matter
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`therefore remains under submission pending updates from the parties.
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`B.
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`ESET Motion re: Indefiniteness of “Downloadable” [Doc. No. 478]
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`The genesis of this motion goes back to the claim construction of the term
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`“Downloadable.” The Court references the claim construction order [Doc. No. 195], the
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`portion of the claim construction hearing regarding this term [Doc. No. 610-3], and the
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`portion of the hearing on this motion [Doc. No. 697 at 3:13-22:19] for context. In
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`summary, the term “Downloadable” is defined by the inventor somewhat differently in the
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`lineage of the patents at issue. In U.S. Patent No. 6,167,520, filed January 29, 1997, it is
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`defined as, “a small executable or interpretable application program which is downloaded
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`from a source computer.” In U.S. Patent No. 6,092,194, filed November 6, 1997 and
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`incorporating the ‘520 patent, it is defined as “an executable application program which is
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`downloaded from a source computer.” Both specifications use the sample examples of
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`executable and interpretable application programs to identify what constitutes a
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`“Downloadable.” Because both definitions are incorporated by reference throughout the
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`patents, and the Court found they could be reconciled, the Court adopted the definition set
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`for in U.S. Patent 6,167,520, that patent being incorporated into all the subsequent patents
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`in the family tree.
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`The definition of “Downloadable” in the ‘520 patent includes “small” as a
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`description of the executable programs that are defined as a “Downloadable.” At the time
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`of claim construction the Court noted that this term of size might lead to an indefiniteness
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`issue if persons of skill in the art on January 29, 1997, the date the ‘520 patent was filed,
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`did not understand what would constitute “small” with respect to “executable programs
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`from a source computer that run on the destination computer.” That question, however,
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`was left for another day.2
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`That day has come and ESET now contends that “Downloadable” is an indefinite
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`term and as it is a claim limitation in all asserted claims of the five asserted patents, each
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`is invalid under 35 U.S.C. § 112, which requires “that a patent’s claims, viewed in light of
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`the specification and prosecution history, inform those skilled in the art about the scope of
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`the invention with reasonable certainty.” Nautilus, Inc. v. Biosig Instruments, Inc., 572
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`U.S. 898, 910 (2014). While there need not be precise numerical certainty, there must be
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`no more than a “modicum of uncertainty.” Id.
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`ESET has the burden of proving indefiniteness by clear and convincing evidence.
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`Biosig Instruments, Inc. v. Nautilus, Inc., 783 F.3d 1374, 1377 (Fed. Cir. 2015). ESET
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`presented evidence in its motion that Finjan’s experts had difficulty setting forth a
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`2 Finjan’s objection that the defense of indefiniteness is untimely and should be struck is denied. This
`issue was identified at claim construction and Finjan was on notice that ESET would likely pursue it.
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`consistent understanding of how a person of skill in the art in 1997 would interpret a “small
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`executable program.” Finjan countered that the kinds of programs identified as examples
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`in the patent disclosure would provide adequate notice to a person of skill what was
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`encompassed by the term “small.” Based on conflicting record before the Court, the Court
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`cannot find at this time that ESET has demonstrated by clear and convincing evidence that
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`the definition of “Downloadable” is indefinite. The motion for summary judgment is
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`therefore DENIED without prejudice to ESET demonstrating this invalidity defense at
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`trial.
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`C. Exclusion of Dr. Ricardo Valerdi Testimony [Doc. No. 490]
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`ESET moves to exclude the testimony of Dr. Ricardo Valerdi. Federal Rule of
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`Evidence 702 creates “a gatekeeping role for the judge” to “ensure that an expert’s
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`testimony both rests on a reliable foundation and is relevant to the task at hand.” Daubert
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`v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 597 (1993). Dr. Valerdi offers an
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`opinion employing a computer model to ascertain the cost he estimates that ESET incurred
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`to develop and maintain the accused software incorporated into the accused products.
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`Finjan however acknowledges that it has “verified ESET’s costs by analyzing (i) financial
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`statements produced by ESET to estimate the maintenance and ongoing development costs
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`ESET actually incurred related to the infringing systems; and (ii) the testimony of ESET’s
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`head of finance, Ms. Jana Michalakova, regarding ESET’s actual development and costs
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`related to the accused technologies for the relevant time period.” [Doc. No. 602 at 20.]
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`Rather than rely on estimates derived from actual financial data, Finjan employed Dr.
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`Valerdi to model the costs to develop and maintain the accused systems.
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`This model is offered as evidence to support a cost savings analysis. Dr. Valerdi’s
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`modeling however estimates the cost of developing the existing ESET software, not
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`alternative non-infringing software. It therefore has no relevance to a cost savings analysis.
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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
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`F.2d 1075, 1080-81 (Fed. Cir. 1983). The comparison, however, should be to the costs of
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`developing a non-infringing alternative. Prism Techs. LLC v. Sprint Spectrum L.P., 849
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`F.3d 1360, 1376 (Fed. Cir. 2017) (costs saved by renting an infringing structure versus
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`building a non-infringing structure). Dr. Valerdi’s modeling exercise is based not on
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`creating a non-infringing alternative system, but on recreating the accused system.
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`The Court finds no value in substituting the estimated actual costs of developing and
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`maintaining ESET’s alleging infringing system with Dr. Valerdi’s model. Such modeling
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`may be of assistance when actual costs cannot be determined, but that is not the situation
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`here. Because the actual costs can be determined, Dr. Valerdi’s hypothetical construction
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`of ESET’s costs is facially unreasonable. Such proposed testimony on the creation of
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`unverifiable estimates from disputed inputs to come to a facially unreasonable hypothetical
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`number as to the costs of developing and maintaining the accused technologies will be
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`confusing and misleading to the jury, prejudicial to the defendant, and a waste of time. The
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`motion to exclude the testimony of Dr. Valerdi is GRANTED pursuant to Federal Rule of
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`Evidence 403.
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`D. Exclusion of Dr. Eric Cole Testimony [Doc. No. 494]
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`ESET moves to exclude the testimony of Dr. Eric Cole. Dr. Cole provides opinions
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`on the infringement of the ‘844 patent, the cost to ESET of implementing a non-infringing
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`alternative to all the patents-at-issue, inputs for Dr. Valerdi’s cost estimation model, and
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`willfulness.
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`The motion to exclude as to Dr. Cole’s opinion regarding infringement of the ‘844
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`patent is DENIED. ESET challenges many of the assumptions and conclusions of Dr.
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`Cole’s infringement opinion, but the Court concludes that is best left to cross-examination.
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`Regarding Dr. Cole’s other opinions, however, the motion is GRANTED. The
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`Court has excluded Dr. Valerdi’s testimony, therefore the Court strikes as irrelevant and
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`confusing, under Rule 403, any testimony by Dr. Cole regarding the number of lines of
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`code that make up the infringing functionality of the patents-at-issue. This testimony is
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`also excluded in that Dr. Cole was not identified as an expert on the infringement of any
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`patents except the ‘844 patent. Consequently, his opinions of what source code executes
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`the infringing functionality of the patents not within his purview are excluded.
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`Dr. Cole’s opinion on the costs of ESET providing its services through a “non-
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`infringing alternative,” (i.e., manually processing the files) is also excluded. Finjan
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`acknowledged at the hearing on this motion that this proposed alternative is not viable.
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`[Doc. No. 697, at 81:17-82:12.] Introducing the prohibitive cost and time of performing
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`such processing manually, when it is recognized by all Finjan’s experts as a non-viable
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`alternative, would only serve to mislead and confuse the jury and introduce a prejudicial
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`damages figure into the discussion. It is excluded under Rule 403.3
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`Similarly, Dr. Cole’s opinion regarding willfulness is excluded. Dr. Cole offers an
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`opinion regarding what Finjan calls the standard of care in the industry. Based on Dr.
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`Cole’s personal experience at McAfee, he would opine to the jury that a reasonable
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`company would have reviewed Finjan’s “patented technology” upon learning of Finjan and
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`its enforcement of its patent portfolio. Finjan concedes Dr. Cole does not opine on what
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`ESET did – only what he believes similarly situated reasonable companies would have or
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`should have done. [Doc. No. 589, at 16.]
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`This opinion suggests that there is duty to investigate a competitor’s portfolio rather
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`than a duty to determine if a known patent is infringed. Dr. Cole’s opinion is not whether
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`ESET’s actions when it learned of specific Finjan patents was reasonable. He instead offers
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`an opinion that a prudent company would be actively monitoring a competitor’s patent
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`holdings and failure to do so is below a standard of care. This opinion is likely to mislead
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`and confuse the jury in reaching a determination of whether ESET took due care to
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`3 Finjan cited Prism Tech, 849 F.3d at 1375, for its holding that it was not error to admit cost savings
`evidence based on evidence of the cost Sprint would incur to avoid infringement by building a private
`network instead of leasing the services from third-party providers. Prism, however, discusses the costs
`and availability of this non-infringing alternative and evidence that Sprint could have attempted to build
`its own network. Id. at 1376-77. In this case, Finjan’s experts all agreed that the proposed manual
`processing system would not be a viable alternative, so introducing the purported exorbitant cost of
`implementing such a system is a distraction and misleading.
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`determine if it was infringing after it learned of the patents at issue. The opinion is
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`excluded under Rule 403 as well.
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`E.
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`Exclusion of Kevin Arst’s Testimony [Doc. No. 467]
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`ESET moves to exclude the testimony of Kevin Arst, who is Finjan’s designated
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`expert on a reasonable royalty. Despite the fact that Finjan has a history of licensing the
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`patents at issue in this case, Mr. Arst apparently elected to ignore established royalty rates,
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`or comparable licenses as benchmarks for his analysis.
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`The reasonable royalty may be based upon an established royalty, if there is one, or
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`if not upon a hypothetical royalty resulting from arm’s length negotiations between a
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`willing licensor and a willing licensee. “Where an established royalty rate for the patented
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`inventions is shown to exist, the rate will usually be adopted as the best measure of
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`reasonable and entire compensation.” Hanson, 718 F.2d at 1078.
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`Mr. Arst’s opinion is based instead on a cost savings analysis – the amount ESET
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`would reasonably pay in lieu of the cost it would incur to manually process files.4 [Doc.
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`No. 599, at 16 (Mr. Arst’s cost-savings opinions are based on Dr. Cole’s assessment that
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`ESET would need to incur the full manual processing costs absent its infringement of the
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`patents-in-suit.).] Although cost savings is a “well settled method of determining a
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`reasonable royalty,” Hanson, 718 F.2d at 1080-81, the Court GRANTS the motion to
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`exclude Mr. Arst’s cost savings opinion because the opinion is based on the unreliable
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`assumption that manual processing is a viable alternative, when, as discussed supra with
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`respect to Dr. Cole’s opinion, it is not.
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`Finjan may revise Mr. Arst’s damages opinion, removing reliance on the opinions
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`of Dr. Valerdi and Dr. Cole. He may not however introduce new materials. ESET will be
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`4 Mr. Arst’s opinion also relies upon Dr. Valerdi’s analysis of the cost of developing and maintaining
`ESET’s existing system, as support for the cost “to build a new system.” Dr. Valerdi did not however
`estimate the cost of building a non-infringing alternative system and therefore provides no factual
`assumption to support Mr. Arst’s royalty analysis. The motion to strike Mr. Arst’s opinion relying on
`Dr. Valerdi’s modeling estimates is GRANTED.
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`given an opportunity to provide a responsive opinion and depose Mr. Arst on any revised
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`opinion. [See Doc. No. 697, at 90:8-16.]
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`F.
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`Summary Judgment of No Willful Infringement and No Pre-Suit
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`Damages [Doc. No. 466]
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`ESET moves for summary judgment on Finjan’s allegation of willful infringement
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`and to exclude any claim for damages prior to the filing of the complaint. Knowledge of
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`the patent alleged to be willfully infringed is a prerequisite to enhanced damages. Halo
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`Elecs., Inc. v. Pulse Elecs., Inc., 136 S. Ct. 1923, 1932-22 (2016). But knowledge of the
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`patent itself is not enough. Finjan is required to show that ESET “acted despite a risk of
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`infringement that was ‘either known or so obvious that it should have been known’” to
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`ESET. WesternGeco LLC v. ION Geophysical Corp. 837 F.3d 1358, 1362 (Fed. Cir. 2016).
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`Willful infringement is measured by the totality of the circumstances. Finjan claims
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`that Eset should have known of Finjan’s patents, but Finjan presents no evidence that ESET
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`was actually aware of any asserted Finjan patent prior to the receipt of a January 22, 2015
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`letter from Finjan. [Doc. No. 466-4.] In that letter Finjan identifies two of the patents in
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`suit, the ‘844 and ‘086 as relevant to ESET products or services, identifying specific
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`products that correspond to those identified patents. Although no claim charts were
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`provided in January 2015, at that time ESET was on notice of those two patents. No
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`reference was made to, and therefore no notice was given as to the ‘780 patent. The ‘621
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`patent and the ‘755 patent did not even issue until November 17, 2015, and December 22,
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`2015, respectively, so it was an impossibility for the January 22, 2015 letter to constitute
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`notice of infringement of those later issued patents.
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`Following the January 22, 2015 letter, the parties entered into a Standstill Agreement
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`to investigate whether there was infringement and to discuss potential licensing. [Doc. No.
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`466-6.] That Agreement was continued until June 30, 2016. On July 1, 2016 this lawsuit
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`was filed. During the term of the Standstill Agreement the parties agreed to disclose
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`confidential information to assist in the discussion but that the disclosure of such
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`information could not be used to establish a claim for damages or willful infringement.
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`10
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`17-CV-183-CAB-BGS
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`

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`Case 3:17-cv-00183-CAB-BGS Document 699 Filed 10/16/19 PageID.36005 Page 11 of 11
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`Finjan asserts that based on publicly available information, ESET knew throughout
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`the pendency of Standstill Agreement that it was infringing the Finjan patents at issue and
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`that it was negotiating in bad faith. The Court DENIES the motion for summary judgment
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`of willful infringement but cautions Finjan that it must produce evidence at trial that ESET
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`had knowledge of each of the asserted patents and committed subjective willful
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`infringement as of the dates it became aware of those patents. The evidence of ESET’s
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`knowledge cannot be based on disclosures made by Finjan during the Standstill Agreement,
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`but rather must be independent of those discussions.
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`With regard to notice, Finjan has presented no evidence it provided actual notice of
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`infringement to ESET prior to January 22, 2015 for the ‘844 patent and ‘086 patent. Further
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`Finjan has presented no evidence that it provided actual notice of infringement of the ‘780
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`patent, the ‘621 patent and the ‘755 patent outside of disclosures subject to the Standstill
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`Agreement provisions. The Court therefore finds that the damage period starts on January
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`22, 2015 for the ‘844 patent and the ‘086 patent, and on the filing date of the complaint
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`(July 1, 2016) for the ‘780 patent, the ‘621 patent, and the’755 patent.
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`It is SO ORDERED.
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`17
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`Dated: October 16, 2019
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`11
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`17-CV-183-CAB-BGS
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