FINJAN, INC. v. BLUE COAT SYS., INC., Case No. 2016-2520, January 10, 2018. Before Dyk, Linn, and Hughes.
- When the accused technology does not make up the whole of the accused product, apportionment is required.
- Historical “starting point” figures in other licensing negotiations cannot be the sole basis for a reasonable royalty calculation.
- Software-based innovations can make non-abstract improvements to computer technology and deemed patent-eligible subject matter under Alice step 1.
Defendant-Appellant Blue Coat Systems appealed a N.D. Cal. jury verdict awarding damages for infringement of four patents as well as the district court’s determination of subject matter eligibility and denial of JMOL. CAFC affirmed subject matter eligibility, affirmed infringement and damages for two patents, reversed a finding of infringement for one patent, and remanded for further consideration of damages for a fourth patent.
- Subject-Matter Eligibility: The CAFC affirmed the district court’s determination that claims directed to a behavior-based computer virus scan were eligible under § 101 under step 1 of the analysis set forth in Alice Corp. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014). The claim at issue was a method claim relating to scanning a downloadable file for viruses and attaching the results of a security scan to that file. The CAFC held that although virus screening is an abstract idea, the claimed method, a “behavior-based” approach to virus screening, employed a new kind of “security profile” file that constituted a non-abstract improvement in computer functionality and recited steps to accomplish the desired result. Thus, the CAFC ruled the idea was non-abstract and there was no need to proceed to Alice step 2.
- Apportionment: The CAFC rejected plaintiff’s theory of damages that apportioned a “smallest, identifiable technical component” in a manner that encompassed non-infringing functionality. The accused dynamic real-time rating engine software had multiple components and non-infringing features, and the CAFC found plaintiff’s apportionment inappropriate because “the ultimate combination of royalty base and royalty rate must reflect the value attributable to the infringing features of the product, and no more.”
- Reasonable Royalty: The CAFC rejected plaintiff’s reasonable royalty claim employing an “$8-per-user fee” identified in testimony from plaintiff’s licensing witness as consistent with the “current starting point” used by the company in licensing negotiations. The CAFC held that historical “starting point” figures in other licensing negotiations cannot be the sole basis for a reasonable royalty calculation and noted that the “current starting point” in licensing negotiations says little about what the parties would have proposed or agreed to in a hypothetical arm’s length negotiation. Here, there was no evidence that plaintiff had ever used or proposed an $8-per-user fee in any comparable license or negotiation.