Case 1:18-cv-01519-MN Document 245 Filed 12/15/20 Page 1 of 5 PageID #: 8797
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`December 15, 2020
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`RICHARD L. RENCK
`E-MAIL: RLRenck@duanemorris.com
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`VIA CM/ECF AND HAND DELIVERY
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`The Honorable Judge Maryellen Noreika
`844 N. King Street, Unit 19, Room 4324
`Wilmington, DE 19801-3555
`Re: Finjan LLC v. Rapid7, Inc. and Rapid7 LLC, Case No. 18-1519-MN (D. Del.)
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`Dear Judge Noreika:
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`Pursuant to the Court’s December 8, 2020 Order, Rapid7 respectfully submits this letter
`regarding collateral estoppel issues impacting the construction of “content processor” for the ’154
`Patent, in view of the Federal Circuit’s Rule 36 affirmance in the Finjan/Juniper matter. There,
`the trial court entered summary judgment of non-infringement of the ’154 Patent based on its
`construction of the term “content processor.” Neither party argued that there was any alternative
`basis for the trial court’s non-infringement finding. The judgment thus fully and finally resolved
`the claim construction of “content processor” and precludes Finjan from re-litigating that
`construction here. Finjan’s statement during oral argument that certain damages issues applied to
`all patents cannot serve as an independent basis for the affirmance of the non-infringement issues
`for the ’154 Patent and is thus irrelevant to the collateral estoppel question.
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`I.
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`Legal Background
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`“A Rule 36 affirmance is a binding judgment for collateral estoppel purposes.” Phil-Insul
`Corp. v. Airlite Plastics Co., 854 F.3d 1344, 1355 (Fed. Cir. 2017). There is an exception when
`an appellee briefed and argued two or more independent bases for affirmance on a given issue,
`such that it cannot be determined which of the independent bases was the reason for affirmance on
`that issue. See, e.g., TecSec, Inc. v. IBM, 731 F.3d 1336, 1343 (Fed. Cir. 2013) (“‘where the court
`in the prior suit has determined two issues, either of which could independently support the result,
`then neither determination is considered essential to the judgment’” (internal citations omitted);
`United Access Technologies, LLC v. CenturyTel Broadband Svcs., LLC, No. 11-339-LPS, 2016
`WL 5745085, at *3 (D. Del. Sept. 30, 2016) (Stark, J.)). Critically, this exception applies when
`there are independent bases for affirmance of a given finding, not anytime separate, independent
`issues are appealed.
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`For example, in TecSec, a judgement of non-infringement was affirmed, in which the
`judgment “was independently predicated on alternative grounds: [1] TecSec’s failure of proof as
`to IBM’s and its customers’ acts and as to IBM’s intent,” and [2] “failure to show that IBM’s
`software met certain limitations of the claims, as construed.” TecSec, 731 F.3d at 1343-44. The
`Court found that the “former ground was not and is not dependent on any claim construction,” and
`therefore collateral estoppel did not apply to the claim construction. Id. at 1344. See also United
`Access, 2016 WL 5745085, at *3 (“On appeal, the EarthLink defendants argued that the Federal
`Circuit could affirm this Court’s judgment of non-infringement for CO-ADSL either based on this
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`DUANE MORRIS LLP
`222 DELAWARE AVENUE, SUITE 1600 WILMINGTON, DE 19801-1659
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`Case 1:18-cv-01519-MN Document 245 Filed 12/15/20 Page 2 of 5 PageID #: 8798
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`The Honorable Judge Maryellen Noreika
`December 15, 2020
`Page 2
`Court’s construction of ‘signal interface,’ or for the independent reason that the jury verdict of
`non-infringement for RT-ADSL compelled a finding of non-infringement for CO-ADSL.”).
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`II.
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`Argument
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`Here there is no alternative, independent reason for affirmance of the trial court’s finding
`of non-infringement on the ’154 Patent. The only reason for affirmance on the ’154 Patent is
`rooted in the trial court’s construction of “content processor.” Finjan attempts to avoid collateral
`estoppel by arguing that a remedy issue (i.e., damages issue) on separate patents (1) applies to the
`’154 Patent, and (2) somehow resolves a liability issue (i.e., infringement) as to the ’154 Patent.
`Finjan is wrong on both points.
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`A.
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`Construction of “content processor” Was Necessary
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`As an initial matter, the construction of “content processor” was necessary to the trial
`court’s finding of non-infringement on the ’154 Patent, and thus the Federal Circuit’s affirmance
`of that judgment. Finjan’s Opening Appellant’s Brief thus states – in a bolded section heading –
`that the construction of “content processor” “led to summary judgment of no infringement.” Ex.
`1, Finjan Opening Br. at 18. Finjan also argues that “[t]he district court’s ‘154 error was pure
`claim construction error, reviewable de novo and warranting reversal.” Id. at 32. Finjan further
`noted of the trial court’s judgment: “[f]inding that Finjan’s evidence did not specifically address
`this new construction, the court entered judgment of no infringement either literally or by
`equivalence.” Id. at 19; see also id. at 28 (“the district court’s construction of ‘content processor’
`(‘154 Patent) improperly imported limitations from the written description”). Juniper, the
`appellee/defendant, similarly raised a single ground for affirmance on the ’154 Patent liability
`issue, the “content processor” construction:
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`Ex. 2, Juniper Response Br. at 1; see also, id. at 4 (“Summary of the Argument The ’154 Patent
`(“content processor”): The District Court correctly determined that “content processor” in the
`“client computer” processes content that has been modified at the gateway computer.”). Juniper
`also noted “[b]ecause Finjan raises no argument in its briefing to challenge the District Court’s
`determination that there was no genuine issue of material fact, the only real issue in this appeal is
`Finjan’s claim construction challenge.” Id. at 22. In other words, the only issue with the liability
`determination of the ’154 Patent on appeal was this claim construction issue. Thus, the Federal
`Circuit’s affirmance necessarily affirmed that determination.
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`Case 1:18-cv-01519-MN Document 245 Filed 12/15/20 Page 3 of 5 PageID #: 8799
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`The Honorable Judge Maryellen Noreika
`December 15, 2020
`Page 3
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`B.
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`The is No Other Basis in the Record for Affirming Non-Infringement
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`Finjan argued during this Court’s December 8th teleconference that there were five different
`reasons for affirmance. That is misleading and incorrect as a matter of law. Finjan appealed five
`separate liability and remedy issues relating to three different patents – but only one liability issue
`relating to the ‘154 Patent. Taken to its logical conclusion, Finjan’s position would mean any time
`more than one issue is on appeal (no matter how unrelated the issues), a Rule 36 affirmance cannot
`lead to collateral estoppel. That is simply not the law. Indeed, Judge Stark articulated this exact
`concern in United Access, emphasizing that “the Court has concerns that Plaintiff’s view, if pressed
`too far, would eliminate all possibility of collateral estoppel effect from cases that terminate with
`a Rule 36 affirmance – an outcome that cannot be correct.” 2016 WL 5745085, at *5 (citations
`omitted). Although he declined to find that collateral estoppel applied, Judge Stark made clear
`that this determination was based on “the specific circumstances here—where there is ‘some
`ambiguity’ as to whether an issue was ‘necessarily decided’ in a prior case, and that ambiguity
`arises from a party’s express appellate argument for affirmance on alternative, independent
`grounds that are supported by the record in the district court case.” Id. (emphasis added). Here,
`there was no “express appellate argument for affirmance on alternative, independent grounds”
`supported by the district court record for the ’154 Patent liability finding. Indeed, there were no
`alternative grounds for affirmance of the liability finding at all. And while Finjan points to a
`statement it made during oral argument (i.e., not an alternative ground for affirmance raised by the
`appellee), that statement has no relationship to the liability issue for the ’154 Patent. The only
`argument for affirmance by the appellant on the ’154 Patent was grounded in the construction of
`“content processor,” which was necessary to the judgment.
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`C.
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`Finjan’s Remedy Issues Do Not Impact the Liability Issue on the ’154 Patent
`as a Matter of Law
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`Finjan principally argues that statements it made during oral argument about the damages
`issues applying to all patents provides an alternative, independent basis to affirm the ’154 Patent
`non-infringement finding. That result is impossible as a matter of law.
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`The Federal Circuit has confirmed that damages expert testimony is permissible, not
`required, and that liability issues (e.g., infringement) can still be decided by a jury in the absence
`of damages expert testimony, even if that means the damages are nominal. See, e.g., Apple, Inc.
`v. Motorola, Inc., 757 F.3d 1286, 1330 (Fed. Cir. 2014). Thus, just because Finjan may not like
`the damages remedy it could recover if successful on remand, that is not a basis for the Federal
`Circuit to dispose of the liability question of infringement as a matter of law. Id. at 1328 (“if the
`patentee’s proof is weak, the court is free to award a low, perhaps nominal, royalty, as long as that
`royalty is supported by the record.”). While Finjan strategically may not want to proceed with
`more limited damages, the Federal Circuit does not engage in litigation strategy determinations as
`a basis for affirming judgment on liability issues, as Finjan’s position seems to suggest.
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`In sum, for the exception to the general rule that collateral estoppel arises from a Rule 36
`affirmance to apply here, this Court would have to speculate (among other things) that the Federal
`Circuit ignored its own binding precedent that damages expert testimony is not required and that
`nominal damages can be awarded by the Court where the plaintiff’s damages case is weak. There
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`Case 1:18-cv-01519-MN Document 245 Filed 12/15/20 Page 4 of 5 PageID #: 8800
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`The Honorable Judge Maryellen Noreika
`December 15, 2020
`Page 4
`is simply no basis in the record to support this conclusion, especially when no party ever suggested
`such an outcome.
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`D.
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`Finjan Did Not Argue to the Federal Circuit that the Damages Issues would
`Dispose of the Liability Issues
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`Consistent with the governing law that a weak (or even non-existent) damages case does
`not resolve the issue of liability, Finjan did not argue that the damages issues would preclude a
`liability finding on the ’154 Patent. Instead, Finjan’s lawyer first acknowledged that the ’154
`Patent claim construction issue was in play, and that the Federal Circuit was capable of performing
`that de novo review without her oral argument. Appeal No. 19-2405, Oral Argument
`(http://oralarguments.cafc.uscourts.gov/default.aspx?fl=19-2405_10072020.mp3) at 28:34-29:13.
`Next, Finjan’s lawyer acknowledged that Finjan could get relief on the ’154 Patent liability issue,
`but argued if Finjan did not also get relief on the damages issue, it would be “left with a wrong
`with no remedy,” apparently unhappy with the prospect of nominal damages upon a finding of
`infringement on remand. Id. Then, at the end of rebuttal, Finjan’s lawyer was asked whether the
`“damages issue” relates to all patents-in-suit or just the ’494 Patent. She responded that it would
`relate to all patents “because all of them are system claims”, and because Finjan’s damages expert
`would be excluded in its entirety. Id. at 32:26 -32:50. Again, Finjan’s lawyer did not argue to the
`Federal Circuit that this would preclude a liability determination on the ’154 Patent, i.e., the legally
`impossible result that Finjan argues now.
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`Moreover, the damages issues on appeal did not even relate to the ’154 Patent. Finjan
`appealed damages issues relating to (1) actual notice for the ’780 Patent; (2) marking/constructive
`notice for the ’780 Patent and ’494 Patents; and (3) a Daubert order excluding its damages expert
`report on the ’494 Patent (which proceeded to trial separately from the ’154 Patent). Ex. 1, Finjan
`Opening Br. at 25, 27. None of these issues could be an independent basis for affirmance of non-
`infringement on the ’154 Patent as a matter of law because they do not apply to the ’154 Patent,
`and even if they did, they do not preclude a remand on the liability issues for the ’154 Patent. More
`specifically, the notice issue for the ’780 and ’494 Patents (two patents that expired before actual
`notice, meaning there are no damages available absent pre-suit notice) does not apply to the ’154
`Patent because the ‘154 Patent does not expire until 2025. Id. at 27, Appx 400, 415. Likewise,
`the trial court’s exclusion of Finjan’s damages expert report for the ’494 Patent does not apply to
`the ’154 Patent. The excluded expert report only addressed the ’494 Patent. Id. at 14-17; Ex. 2,
`Juniper Response Br. at 3-5, 46-47.
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`Finjan argued during the Court’s December 8 teleconference that the parties briefed the
`damages issues applying to all patents. The record does not show that. Regardless, Finjan did not
`argue (and nor did Juniper) the damages issues would dispose of liability issues on the ’154 Patent.
`Instead, Finjan requested that the Federal Circuit address ’494 Patent damages issue related to
`“combined infringement by end user hardware and ‘cloud’ services” because that would become
`“law of the case” for damages for any remand. Ex. 1, Finjan Opening Br. at 66-67. Finjan argued
`that “[r]emand without substantive review of these issues would promote a pointless trial and new
`judgment, then a new appeal on this same issue.” Id. at 67. That, of course, would be the case
`with respect to the ’154 Patent only if Finjan chose to pursue the same damages approach on
`remand. But there is nothing in the record indicating that Finjan would have been required to take
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`Case 1:18-cv-01519-MN Document 245 Filed 12/15/20 Page 5 of 5 PageID #: 8801
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`The Honorable Judge Maryellen Noreika
`December 15, 2020
`Page 5
`the same approach to damages on the ’154 Patent. Finjan did not argue that there was, and did not
`argue that remand on the ’154 Patent would not be appropriate if the damages issue were not
`resolved in its favor. Ultimately, even if the Federal Circuit affirmed on the damages issues (and
`even assuming those issues apply to the ‘154 Patent), and remanded on the infringement issues,
`Finjan could still, at a minimum, proceed with the lower ($1.8 million) royalty base articulated as
`appropriate by trial court. Id. at 62. While Finjan may not like the limited damages, low damages
`are not a reason to affirm a non-infringement liability finding.
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`RLR/chp
`Attachments
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`Very truly yours,
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`/s/ Richard L. Renck
`Richard L. Renck (#3893)
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`Counsel for Rapid7, Inc. and Rapid7 LLC
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