Finjan, Inc. v. Secure Computing Corp.

• Decision Date: 04 November 2010
• Docket Number: Nos. 2009-1594,Nos. 2009-1576,s. 2009-1576,s. 2009-1594
• Citation: 626 F.3d 1197,97 U.S.P.Q.2d 1161
• Parties: FINJAN, INC. (Formerly Finjan Software, Ltd.), Plaintiff-Cross Appellant, v. SECURE COMPUTING CORPORATION, Cyberguard Corporation, and Webwasher AG, Defendants-Appellants, and Does 1 through 100, Defendants.
• Court: U.S. Court of Appeals — Federal Circuit

626 F.3d 1197

97 U.S.P.Q.2d 1161

FINJAN, INC. (Formerly Finjan Software, Ltd.), Plaintiff-Cross Appellant,

v. SECURE COMPUTING CORPORATION, Cyberguard Corporation, and Webwasher AG, Defendants-Appellants,andDoes 1 through 100, Defendants.

Nos. 2009-1576, 2009-1594.

United States Court of Appeals, Federal Circuit.

Nov. 4, 2010.

Daryl L. Joseffer, King & Spalding LLP, of Washington, DC, argued for plaintiff-cross appellant. With him on the brief were Paul D. Clement; Paul J. Andre, Lisa Kobialka, of Redwood Shores, CA; and Adam Conrad, of Charlotte, NC.

David J. Healey, Fish & Richardson P.C., of Houston, TX, argued for defendants-appellants. With him on the brief was Justin M. Barnes, of San Diego, CA. Of counsel on the brief were Ronald J. Schutz, Jacob M. Holdreith, Christopher A. Seidl, and Trevor J. Foster, Robins, Kaplan, Miller & Ciresi LLP, of Minneapolis, MN. Of counsel was Benjamin C. Elacqua.

Before NEWMAN, GAJARSA, and LINN, Circuit Judges.

LINN, Circuit Judge.

This is a patent infringement case involving "proactive scanning" technology for computer security. Finjan, Inc. sued Secure Computing Corporation ("Secure"), Cyberguard Corporation, and Webwasher AG (collectively "Defendants") in the District Court for the District of Delaware for infringement of U.S. Patents No. 6,092,194 ("'194 patent"), No. 6,804,780 ("'780 patent"), and No. 7,058,822 ("'822 patent"). Defendants counterclaimed against Finjan for infringement of U.S. Patents No. 6,357,010 ("'010 patent") and No. 7,185,361 ("'361 patent"). A jury found that none of the patents was invalid, that Finjan did not infringe Defendants' patents, and that Defendants willfully infringed all asserted claims of Finjan's patents. The district court awarded damages to Finjan, enhanced the award under 35 U.S.C. § 284, and imposed a permanent injunction against Defendants.

Defendants appeal infringement and damages. Finjan cross-appeals denial of damages for the period between the entry of judgment and the entry of the injunction. We affirm the verdict of infringement on the asserted "system" and "storage medium" claims, but reverse the verdict of infringement on the asserted method claims. We also affirm the damages award, but remand for determination of post-judgment, pre-injunction damages.

Background

Finjan's asserted patents relate to proactive scanning, or techniques directed to detecting and defeating previously unknown, Internet-based threats to computers, such as viruses.

The '194 patent is entitled a "System and Method for Protecting a Computer and a Network From Hostile Downloadables." Claim 1 is representative:

1. A computer-based method, comprising the steps of:

receiving an incoming Downloadable addressed to a client, by a server that serves as a gateway to the client;

comparing, by the server, Downloadable security profile data pertaining to the Downloadable, the Downloadable security profile data includes a list a [sic] suspicious computer operations that may be attempted by the Downloadable, against a security policy to determine if the security policy has been violated; and

preventing execution of the Downloadable by the client if the security policy has been violated.

The asserted claims include method claims (1-14, 24-30) and corresponding "system" (32-36) and "computer-readable storage medium" (65) claims for performing the claimed methods.

The '780 patent bears the same title as the '194 patent and covers "caching," or identifying previously encountered downloadable files. Representative claim 1 describes:

1. A computer-based method for generating a Downloadable ID to identify a Downloadable, comprising:

obtaining a Downloadable that includes one or more references to software components required to be executed by the Downloadable;

fetching at least one software component identified by the one or more references; and

performing a hashing function on the Downloadable and the fetched software components to generate a Downloadable ID.

Like the '194 patent, the asserted claims of the '780 patent include method claims (1-6), system claims (9-14), and a computer-readable storage medium claim (18).

The '822 patent is directed to a "Malicious Mobile Code Runtime Monitoring System and Methods" and addresses "sandboxing" potentially dangerous downloadables with protective code. Representative claim 4 covers:

4. A processor-based method, comprising:

receiving downloadable-information;

determining whether the downloadable-information includes executable code; and

causing mobile protection code to be communicated to at least one information-destination of the downloadable-information, if the downloadable-information is determined to include executable code,

wherein the causing mobile protection code to be communicated comprises forming a sandboxed package including the mobile protection code and the downloadable-information, and causing the sandboxed package to be communicated to the at least one information-destination.

The relevant claims encompass "processor-based methods" (4, 6, 8) and "processor-based systems" (12-13). Thus, the asserted claims of each patent in suit include both method and non-method claims.

Defendants sold three accused computer security products: a "Webwasher" software download, a "Webwasher" hardware"appliance" or server containing software, and a "Cyberguard TSP" hardware appliance that also contains software. Defs.' Principal Br. 11. It is undisputed that all three products contain source code for eight software modules. Three of those modules—Anti-Virus, Anti-Malware, and Content Protection—offer proactive scanning functionality, in addition to other features. The eight modules are "locked" when the three products are sold, requiring a customer to purchase a separate key to activate each individual module. Therefore, a customer who purchases an accused product can activate all, some, or none of the eight modules at different cost. See Tr. of Jury Trial (Day Four), Mar. 6, 2008, 704:6-20.¹

Finjan alleged that Defendants directly infringed under 35 U.S.C. § 271(a) by testing and selling the accused products. Finjan did not assert any theories of indirect infringement. The jury found that Defendants willfully infringed all asserted claims, either literally or under the doctrine of equivalents. Joint Special Verdict Form 2-6. It also found that Finjan did not infringe any asserted claims of the '010 and '361 patents, and that none of the five patents in suit was invalid. The jury awarded Finjan $9.18 million in royalties. Id. at 10. The parties filed various motions for judgment as a matter of law ("JMOL") or a new trial under Rules 50 and 59(a) of the Federal Rules of Civil Procedure. The district court denied those motions, but enhanced damages by 50%, awarded damages that accrued between the verdict and entry of judgment, and entered a permanent injunction. Finjan Software, Ltd. v. Secure Computing Corp., No. 06-CV-369, 2009 WL 2524495 (D.Del. Aug.18, 2009) (" Memorandum").

Defendants appeal the verdicts of infringement of Finjan's patents and damages, but do not appeal the jury's determinations regarding noninfringement of Defendants' patents, validity of all patents, or willfulness with respect to infringement of Finjan's patents. Finjan cross-appeals only the district court's damages ruling, claiming additional entitlement to post-judgment, pre-injunction damages. We have jurisdiction under 28 U.S.C. § 1295(a)(1).

Discussion

I. Infringement

"A determination of infringement is a question of fact that is reviewed for substantial evidence when tried to a jury." ACCO Brands, Inc. v. ABA Locks Mfr. Co., 501 F.3d 1307, 1311 (Fed.Cir.2007). We review denial of post-trial motions for JMOL and new trial under regional circuit law. Revolution Eyewear, Inc. v. Aspex Eyewear, Inc., 563 F.3d 1358, 1370 (Fed.Cir.2009).

In the Third Circuit, review of denial of JMOL is plenary. McKenna v. City of Phila., 582 F.3d 447, 460 (3d Cir.2009). "[W]e must review the record in the light most favorable to the prevailing party unless the record is critically deficient of that minimum quantum of evidence from which a jury might reasonably afford relief." Potence v. Hazleton Area Sch. Dist., 357 F.3d 366, 370 (3d Cir.2004) (quotation omitted). "The standard of review on a motion for a new trial is abuse of discretion, except where a district court bases its denial of the motion on an application of law, in which case an appellate court's review is plenary." McKenna, 582 F.3d at 460. The Third Circuit views the evidence in the light most favorable to the nonmoving party. Grazier v. City of Phila., 328 F.3d 120, 128 (3d Cir.2003)."[N]ew trials because the verdict is against the weight of the evidence are proper only when the record shows that the jury's verdict resulted in a miscarriage of justice or where the verdict, on the record, cries out to be overturned or shocks our conscience." Williamson v. Consol. Rail Corp., 926 F.2d 1344, 1353 (3d Cir.1991).

A. System and Storage Medium Claims

In a nutshell, Defendants' noninfringement theory is that they sold no infringing products because all software modules that feature proactive scanning were locked when sold. "For the customer," according to Defendants, "as a practical matter, it was the same as if it never received the source code for the 'locked down' modules and their features at all." Defs.' Principal Br. 5. Defendants argue that infringement occurred only when customers purchased keys and unlocked proactive scanning modules because "[d]isabled code, by definition, is incapable of being used." Id. 28. Thus, Defendants claim that Finjan's failure to allege indirect or joint infringement is fatal.

Finjan responds first with a waiver argument, claiming that Defendants forfeited their contention that locked software cannot infringe by failing to raise it in their JMOL motions. This court disagrees. It is correct that "[i]f a party seeks a judgment in its favor based on insufficiency of the evidence, he must file...