Finjan, Inc. v. Blue Coat Sys., No. 2016-2520, 2018 U.S. App. LEXIS 601 (Fed. Cir. Jan. 10, 2018) (Before Dyk, Linn, and Hughes, J.) (Opinion for the court, Dyk, J.).
Finjan owns the ’844, ’731, ’986 and ’633 patents which are directed to identifying and protecting against malware. Finjan sued Blue Coat for infringement, and a jury found Blue Coat liable for infringement of all four patents, awarding Finjan approximately $39.5 million. The court concluded that the ’844 patent was directed to patent-eligible subject matter under 35 U.S.C. § 101. Blue Coat’s motions for judgment as a matter of law and a new trial were denied.
The Federal Circuit first addressed subject matter eligibility of the ’844 patent. Under Alice Corp. v. CLS Bank Int’l, it must first be determined whether the disputed claims are “directed to” a patent-ineligible concept. If they are, the court must consider whether claimed elements transform the claim into patent-eligible subject matter. The ’844 patent is directed to a method of providing computer security by scanning a “downloadable” and attaching the results of that scan to the item itself in the form of a “security profile.” This allows access to be tailored for different users and ensures that threats are identified before a file reaches a user’s computer. The fact that the security profile “identifies suspicious code” allows the system to accumulate and utilize newly available, behavior-based information about potential threats. Therefore, the claims are directed to a non-abstract improvement in computer functionality, not an abstract concept of computer security. Blue Coat argued that the claims are abstract because they do not sufficiently describe a non-abstract implementation. However, the claims recite specific steps—generating a security profile that identifies suspicious code and linking it to a downloadable—that accomplish the desired results. They do not simply recite a result. Because the subject matter is non-abstract, the Court did not need to analyze step two of Alice.
Blue Coat then argued that the district court should have granted JMOL of non-infringement of the ’844 patent, because substantial evidence did not support the jury verdict. Specifically, Blue Coat argued that the claims, which require linking a security profile to a downloadable “before a web server makes the Downloadable available to web clients,” could only be infringed by a server-side product that evaluates content before it is published to the Internet. Because Blue Coat’s accused WebPulse product only evaluates downloadables that are already available on the Internet, it did not infringe the ’844 patent. However, basedon the court’s claim construction, which was undisturbed, WebPulse links security profiles to downloadables before downloadables can be received by users of the service, even if the downloadable was already published on the Internet. Thus, the ’844 infringement verdict was supported by substantial evidence.
The Court then considered whether Blue Coat was entitled to a JMOL of non-infringement as to the ’731 patent, directed to a computer gateway that protects a private intranet from malicious software embedded in webpages on the public Internet. The gateway operates by scanning potentially malicious files and creating “security profiles” that each comprise “a list of computer commands that the file is programmed to perform.” Blue Coat argued that the ’731 patent was not infringed because the “security profiles” created by the accused product do not a “list of computer commands.” Instead, they include “an identifier of a type of command the system should watch for.” However, the claim language requires “a list of computer commands that a corresponding one of the incoming files is programmed to perform.” It does not mandate any particular representation of that information. Therefore, substantial evidence supported the jury’s finding that the ’731 patent was infringed.
Blue Coat also argued that it was entitled to a JMOL of non-infringement with respect to the ’968 patent because Finjan failed to introduce substantial evidence that the accused products implement the claimed “policy index.” The Court agreed. The ’968 patent claims managing access to cached content according to a “policy index,” stipulated to mean “a data structure indicating allowability of cached content relative to a plurality of policies.” The claimed ‘968 policy index must store the “results” of a content evaluator’s determination. The accused product, Proxy SG, determines whether access is permitted under the user’s security policy. However, Finjan failed to present evidence that Proxy SG ever stores its final determinations. Because the jury’s infringement verdict was not supported by substantial evidence, Blue Coat was entitled to a JMOL of noninfringement as to the ’968 patent.
The only measure of damages at issue was a reasonable royalty. Blue Coat first argued that, in calculating a royalty base for the ’844 patent, Finjan failed to apportion damages to the infringing functionality. DRTR, or “dynamic real-time rating engine,” is the part of WebPulse responsible for analyzing URLs that have not already been categorized. DRTR performs both infringing and non-infringing functions. At trial, Finjan attempted to tie the royalty base to the incremental value of the infringement by multiplying WebPulse’s total number of users by the percentage of web traffic that passes through DRTR. Finjan argued that the apportionment was adequate because DRTR was the “smallest, identifiable technical component” tied to the footprint of the invention. However, the fact that Finjan established a royalty base from the “smallest, identifiable technical component” did not protect them from the “essential requirement” that the “ultimate reasonable royalty award must be based on the incremental value that the patented invention adds to the end product.”
Blue Coat identified a second error in Finjan’s reasonable royalty calculation. To arrive at a lump sum reasonable royalty payment for infringement of the ’844 patent, Finjan simply multiplied the royalty base by an $8-per-user royalty rate. This fee was based on testimony from Finjan’s Vice President of IP Licensing, who said that the current starting point in licensing negotiations was an “8 to 16 percent royalty rate or something that is consistent with that . . . like $8 per user fee.” Because there was no factual basis for this determination, the Court remanded to the district court to determine whether Finjan waived the right to establish reasonable royalty damages under a new theory and whether to order a new trial on damages.
For the ’731 and ’633 patents, Finjan’s expert did apportion the revenues comprising the royalty base between infringing and non-infringing functionality of Proxy SG. The jury’s damages awards for infringement of these two patents were affirmed.
Claims are not directed to abstract results when they recite specific steps that accomplish the desired result of the patent. Jury verdict of infringement should be set aside when there is no evidence that the accused product includes a feature claimed in the patent. When an accused product performs infringing and non-infringing functions, the patentee must do more than establish a royalty base based on the smallest, identifiable technical component of the accused product. If the smallest identifiable technical component contains non-infringing features, additional apportionment is required.