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Even the Value of the Smallest Salable Unit Must Be Apportioned
In Finjan, Inc. v. Blue Coat Sys., Inc., 16-2520 (Fed. Cir. Jan. 10, 2018), the Federal Circuit ruled that basing a reasonable royalty calculation on the “smallest salable unit” does not obviate the need to apportion damages to the patented contribution within that unit.
The Federal Circuit vacated a portion of the damages awarded to Finjan by the jury in its patent infringement case against Blue Coat. Finjan's '844 patent (U.S. Pat. No. 6,154,844 titled System and Method for Attaching a Downloadable Security Profile to a Downloadable) claims, inter alia, a method for providing computer security to a local network by attaching a security profile to downloadable content before the content is made available to a user in the local network. For example, the invention can help safeguard a business computer system in the event an employee tries to download content from the Internet that is infected with malware.
The “attachment” of the profile to the downloadable content (the infringing method) is performed by the DRTR (dynamic real-time rating engine) portion of Blue Coat's infringing WebPulse product. Finjan's damages expert testified that the DRTR is the smallest salable unit of WebPulse and he based his royalty calculation on the total usage of the DRTR by Blue Coat's customers. However, the DRTR performs both infringing and non-infringing functions. The Federal Circuit vacated the jury's award of damages on the grounds Finjan had failed to properly apportion the value of the infringing features within the DRTR, notwithstanding whether DRTR was the smallest salable unit. In addition, the Federal Circuit vacated a damages award based on a paid-up royalty, on the grounds the rate was “plucked from thin air,” and not based on evidence.
Background
The infringing product sold by Blue Coat is called WebPulse, a cloud-based system that screens content that is downloadable from the Internet. It can be purchased by an employer to screen the content downloaded by its employees. WebPulse “associates URL's with over eighty different categories, including pornography, gambling, shopping, social networking and 'suspicious.'” Id. at 18. URLs that have not already been categorized, are analyzed by the DRTR portion of WebPulse.
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