Finjan Holdings (NASDAQ:FNJN) is a pioneer in the cybersecurity industry with an intellectual property portfolio of 40+ patent assets encompassing the industry's core technology including, but not limited to, software, web infrastructure and network equipment. To date the company has monetized its patent portfolio using only 2 of the 40+ to the tune of approximately $145 million via licensing, litigation and settlements, with five parties including Microsoft (NASDAQ:MSFT), Trustwave (TWAVE), M86 , Secure Computing and two who are confidential.
Following these favorable rulings, settlements and more importantly the collection of over $145 million, Finjan in 2013 was very active, having filed separate suits against FireEye (NASDAQ:FEYE), Blue Coat Systems (NASDAQ:BCSI), and Websense (NASDAQ:WBSN) followed by Proofpoint (NASDAQ:PFPT) and its subsidiary Armorize Technologies.
It is important for investors to understand the fine line of disclosure these IP monetization companies walk. All court orders, motions, etc. are all available online by registering on Public Access to Court Electronic Records (PACER). Finjan doesn't seem to be issuing press releases detailing these events contrary to other companies in the space, but has done a good job of providing court docs on their website, finjan.com.
Below is important information I pulled from recent documents on PACER and the USPTO. I have also detailed some of the events to date.
Timeline of Events to Date:
I have included a screenshot of each case taken from the company website. Click here for all four cases.
· July 8, 2013 - Finjan filed a patent infringement complaint against FireEye, Inc. (Case No. 4:13-cv-03133-SBA). Finjan alleges that FireEye infringes on the '822, '633, '780, '844, '086, '305, and '408 patents. This case is pending before Saundra B. Armstrong in the Northern District of California.
· August 28, 2013 - Finjan filed a patent infringement complaint against Blue Coat Systems (Case No. CV 13-cv-03999-EMC). Finjan alleges that Blue Coat infringes on the '780, '822, '633, '844, '968 and '731 patents. The case has been assigned to Edward M. Chen in the Northern District of California.
· September 23, 2013 - Finjan filed a patent infringement complaint against Websense, Inc. (Case No. 3:13-cv-04398-JSW). Finjan alleges that Websense infringes on the '822, '633, '408 and '154 patents. The case is pending before the Honorable Jeffrey S. White in the Northern District of California.
· December 16, 2013 - Finjan filed a patent infringement complaint against Proofpoint and its subsidiary Armorize Technologies (Case No. 3:2013-cv-05808). Finjan alleges that Proofpoint infringes on the '918, '154, '086, '408, '305, '844 and '633 patents. The case has been assigned to William Alsup in the Northern District of California.
What Does Each Patent Claimed to be Infringed Upon Relate to?
Below are the patent numbers followed by a brief description pulled from Finjan's website (www.finjan.com) and a link to the full patent.
'780: Blue Coat and FireEye: System and method for protecting a computer and a network from hostile downloadables (click here for full patent).
'822: Blue Coat, FireEye and Websense: Malicious mobile code runtime monitoring system and methods (here).
'633: Blue Coat, FireEye and Websense: Malicious mobile code runtime monitoring system and methods (here).
'844: Blue Coat and FireEye: System and method for attaching a downloadable security profile to a downloadable (here).
'968: Blue Coat: Policy-based caching (here).
'731: Blue Coat: Method and system for caching at secure gateways (here).
'086: FireEye: Method and system for protecting a computer and a network from hostile downloadables (here).
'305: FireEye: Method and system for adaptive rule-based content scanners for desktop computers (here).
'408: FireEye and Websense: Method and system for adaptive rule-based content scanners (here).
'154: Websense: System and method for inspecting dynamically generated executable code (here).
'918: Proofpoint: System and methods for enforcing a security context on a downloadable (here).
Motions to be Aware of:
October 7, 2013: FireEye filed an Administrative Motion to Consider Whether the Cases Should be Related (Dkt. No. 25), requesting that the Court combine the FireEye, Blue Coat and Websense actions.
October 7, 2013: A request for reexamination of the '822 patent for "Malicious mobile code runtime monitoring system and methods" was filed.
October 11, 2013: Finjan filed an opposition to FireEye's motion (Dkt. No. 35). Blue Coat and Websense joined in FireEye's motion (Dkt. Nos. 34-35).
October 30, 2013: The Court issued a notice that "the court has reviewed the motion and determined that no cases are related and no reassignments shall occur."
November 19, 2013: Reexamination of '822 patent denied.
Importance of Motions:
FireEye motioned to have the cases consolidated. The court's decision to decline this motion is materially in Finjan's favor for the following reasons:
1. FireEye wanted all the cases to be together as opposed to separated due to resources such as lawyers and money. Now that the cases are separated, the cost of litigation increased for each party and the four defendants cannot collaborate on strategy.
2. Four different cases as opposed to one dramatically reduces risk and thus favors Finjan. Finjan will have multiple shots on goal as opposed to one, diversifying risk and a good thing, in my honest opinion.
3. And lastly, four different judges will be overseeing each case in which again the risk of an interpretation by one judge as opposed to four goes down as well.
In regards to the motion to reexamine the '822 patent, this is common practice for defendants. This denial strongly again favors Finjan. Additionally, it seems as though Finjan has strategically filed multiple patents under each case so in the event that one patent does get rejected in reexamination the case is likely not to be thrown out.
Proposed Case Schedule:
In case number C13-3999, Finjan vs. Blue Coat in the Northern District of California with Judge Edward M. Chen, the following court schedule has already been issued.
February 27, 2014 - Invalidity contentions
March 13, 2014 - Exchange of proposed terms for construction
April 3, 2014 - Exchange of preliminary claim constructions and extrinsic evidence
April 28, 2014 - Joint claim construction and prehearing statement
May 28, 2014 - Completion of claim construction discovery (including depositions of experts who submitted declarations in support of claim construction positions)
June 12, 2014 - Claim construction briefs - opening brief
June 26, 2014 - Claim construction briefs - responsive brief
July 3, 2014 - Claim construction briefs - reply brief
July 21, 2014 - Tutorial (at 2:30 p.m.)
August 4, 2014 - Claim construction hearing (at 2:30 p.m.)
The most important date is August 4, 2014. This is the construction hearing or Markman hearing of the case. For those new to these stories, the Markman is a pretrial hearing in which the judge examines the evidence from all parties and designates appropriate meanings to key words or complicated matters in the evidence. These patents can get pretty complicated, so it is common practice to have certain items defined so all parties including the jury are on the same page. Very important in these cases.
Finjan filed its patent infringement against Blue Coat on August 28, 2013 and will have their Markman hearing less than one year from that date on August 4th, 2014. After the Markman hearing, trial dates vary, but generally speaking, occur approximately 6 months from that date. In this case we are looking at a February 2015 trial date.
As an investor in the space who has experienced both ends of the trade in the IP space, it is critical that investors follow closely the court docs and adjust their risk assessment and valuation accordingly. Throughout this extensive litigation process there will be a series of motions filed by each party as part of their strategy (FireEye's proposal to consolidate the cases and to reexamine the patent, for example). The courts' response to these motions will be valuable in providing us a clearer picture as to what the outcome may be. I will not venture to make a prediction on each case, but if I had to make an analogy I would say that from the information I have gathered, Finjan is winning the game and we are currently in the 4th inning. I urge those who are serious about this investment or any other investment in these companies monetizing their IP to purchase a PACER subscription.
Disclaimer: Please be advised that Finjan Holdings trades on the OTC market. As with all of these investments and specifically those who are enforcing their intellectual property, there is risk involved including the liquidity of this security and I urge everyone reading this to do their own due diligence before making an investment decision. Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our 'opinions' and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision.
Disclosure: I am long FNJN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.