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As patent reform stalls, “non-practicing entity” nabs a $40 million verdict

Jury validates patents on cybersecurity and detecting "hostile downloadables."

Finjan CEO Phil Hartstein.
Enlarge / Finjan CEO Phil Hartstein.
Finjan Holdings, a patent-licensing company operating in the cybersecurity space, won a hefty $39.5 million jury verdict (PDF) on Tuesday, when a San Jose jury found that Blue Coat Systems infringed five of its patents.

The verdict is a major win for Finjan, which has five more lawsuits ongoing against major computer security firms. While the nearly $40 million win is a far cry from the eye-popping $533 million Smartflash v. Apple verdict that came down earlier this year (since thrown out), it's still definitely on the high side of patent verdicts.

Finjan fired off a spate of lawsuits beginning in 2013, and has sued FireEye, Proofpoint, Sophos, Symantec, and Palo Alto Networks in addition to Blue Coat. All of its cases were filed in the Northern District of California.

"In this environment, there are accusations of whether you're a patent troll or [a nonpracticing entity], and the fact that you don't make products means that your patents aren't worthy of attention," Finjan's head of intellectual property, Julie Mar-Spinola, told The Recorder"This decision bolstered our credibility, and to a certain extent, may be a stamp of credibility." 

"We are both grateful and gratified with the jury's verdict," Mar-Spinola added in a company statement on the win.

Finjan was an Israeli e-mail and Web security company that sold its operations in 2009, then went public as a company focused on licensing its patents. Today, patents are Finjan's only source of cash. In 2013, the company earned no revenue. Last year, it earned $5 million, stemming from a single litigation settlement.

During the two-week trial that concluded this week, Finjan accused Blue Coat products such as WebPulse and ProxyAG of infringing six patents related to "cybersecurity," such as this patent on protecting a computer from "hostile downloadables." The San Jose jury agreed with Finjan that all patents were valid, and found five of the six to be infringed. The verdict (PDF) came in Tuesday and was announced by Finjan yesterday.

The Finjan win comes as patent reform appears to have stalled in Congress, which has left for summer recess without passing a bill. Finjan executives have been active in advocating against reform. Company CEO Phil Hartstein, who previously worked for brand-name patent licensors like IP Nav and Rembrandt IP, wrote a 2014 op-ed saying that while Finjan is a "non-practicing entity," it should not be considered a "patent troll," since the company "exercise[s] ethical business practices when it comes to asserting their patent rights."

Finjan's patents were invented by Israeli entrepreneur Shlomo Touboul, who founded the operating company in 1996 and remains an advisor today.

Channel Ars Technica