Docket Nos. 2016-2520
DYK, LINN, HUGHES
January 10, 2018
Brief summary: DC decision that Finjan’s ‘844 patent is directed to § 101 patent eligible subject matter (“a new kind of file that enables a computer system to do things it could not do before”) affirmed; denial of JMOL regarding infringement of the ‘968 patent reversed; and jury’s reasonable royalty calculation remanded (e.g., Finjan’s $8-per-user fee royalty that “appears to have been plucked from thin air”).
Summary: Blue Coat appealed jury finding of infringement of four Finjan patents directed to identifying and protecting against malware (the ‘844, ‘731 and ‘968 patents), the DC determination that the ‘844 patent is patent eligible under § 101, and the approximate $39.5 million damages award, and denial of its JMOL and new trial motions. The FC panel first reviewed the § 101 decision de novo (McRO, FC 2016) under the Alice (US 2014; Mayo, US 2012; Diamond, US 1981) two-step framework (Step one: are the claims are issue “directed to” a patent-ineligible concept (“an inventive concept…that…amounts to ‘significantly more’ than the abstract idea itself)? Step two: do “the elements of each claim both individually and ‘as an ordered combination’…‘transform the nature of the claim’ into a patent-eligible application”). “Starting at step one,” the FC panel “examine[d] the ‘844 patent’s ‘claimed advance’ to determine whether the claims are directed to an abstract idea” (Affinity Labs, FC 2016; Enfish, FC 2016 (claims must “focus on ‘the specific asserted improvement in computer capabilities” and not one “for which computers are invoked merely as a tool”); Intell. Ventures, FC 2016 (“[b]y itself, virus screening is well-known and constitutes an abstract idea”, as is “performing the virus scan on an intermediary computer”)). Here, the FC concluded “the claimed method does a good deal more” than virus screening, as it “scans a downloadable and attaches the virus scan to the downloadable in the form of a newly generated file: a ‘security profile that identifies suspicious code in the received Downloadable”. It found this “behavior-based virus scan” to “constitute an improvement in computer functionality” (“enabl[ing] more flexible and nuanced virus filtering…a new kind of file that enables a computer system to do things it could not do before”) and to be patent eligible under § 101 (“software-based innovations can make ‘non-abstract improvements to computer technology’” as in Enfish). And unlike Apple (FC 2016) and Affinity Labs that “hearken back to a foundational patent law principle: that a result, even an innovative result, is not itself patentable”, the FC panel concluded “the claims recite more than a mere result” (“they recite specific steps…that accomplish the desired result”).
The DC’s denial of JMOL was reviewed de novo and the new trial decision for an abuse of discretion (Revolution Eyewear, FC 2009). The FC panel found the ‘844 and ‘731 infringement determinations to be supported by substantial evidence, but that Blue Coat’s system did not meet the ‘968 patent’s “policy index” limitation because “Finjan failed to present evidence” of the same, and that BC was therefore entitled to JMOL of noninfringement of the ‘968 patent.
On damages, the FC panel explained that § 284 “limits damages to those ‘adequate to compensate for the infringement’” and are available as “the patentee’s lost profits” (not considered here) “and the ‘reasonable royalty he would have received through arms-length bargaining” (Lucent, FC 2009; AstraZeneca, FC 2015 (“royalty…infringer would have been willing to pay if it had been barred from infringing”)). The FC panel agreed that, as to the ‘844 patent, “Finjan failed to apportion damages to the infringing functionality” (Ericsson, FC 2014; Mentor Graphics, FC 2017 (en banc, for “multi-component product with patent and unpatented components, apportionment is required”); Virnet X (FC 2014); Quanta Comp., FC 2012 (“apportionment to the ‘smallest salable patent-practicing unit’”, damages for entire product only when shows that “demand for the entire product is attributable to the patented feature”)). Here, the FC panel found “all of the infringing functionality occurs in DRTR [dynamic real-time rating engine], but some DRTR functions infringe and some do not” and BC’s “customers also value WebPulse’s” other features, and “[f]urther apportionment was required to reflect the value of the patent technology compared to the value of the unpatented elements.” The FC panel also found insufficient evidence to support Finjan’s $8-per-user fee royalty that “appears to have been plucked from thin air” (Quanta (“alleging a loose or vague comparability between different technologies or licenses does not suffice”)). This decision was therefore remanded for the DC essentially “to determine whether Finjan has waived the right to establish reasonable royalty damages under a new theory” (Promega, FC 2017) since “reversal of JMOL could result in a situation in which Finjan receives no compensation for Blue Coat’s infringement of the ‘844 patent.” The FC panel also found “[t]he jury’s damages awards for infringement of the ‘731 and ‘633 patents were based on substantial evidence.”