2000 University Avenue
Suite 600
East Palo Alto, CA 94303
(650) 282 3228
www.finjan.com
A N N U A L R E P O R T 2 0 1 6
2 0 Y E A R S AT T H E C E N T E R O F C Y B E R S E C U R I T Y
2016
Finjan has generated over $250M from its IP to-date.
2015
Finjan launched its FinjanMobile™ and CybeRisk™ subsidiaries
2014
Finjan was listed on the NASDAQ Capital Market under the trading symbol
“FNJN” where we continue to trade today.
2013
Finjan became a publicly traded company capitalized with $30M and began a
more focused program to license the Company’s landmark intellectual property.
2009
The online security industry began moving towards real-time, behavior-based,
proactive threat detection. In the same year, the Company completed its first
license with Microsoft.
2005
Finjan divested hardware and technology assets, including sales and executive
teams and the Company’s Malicious Code Research Center (MCRC) into M86
Security.
2002
Finjan raised funding from top tier US and international venture funds, private
equity groups, and corporate investors.
1997
Finjan began a migration from a pure software company into a diversified
hardware and software platform technology provider.
1996
Finjan was formed in Israel to cultivate proprietary technology that focused
on proactively detecting threats to online security by identifying patterns and
behavior of online viruses and other malicious code.
Executive Officers
Board of Directors
Stock Listing
Phil Hartstein
President and Chief Executive Officer
Julie Mar-Spinola
Chief Intellectual Property Officer and
VP, Legal Ops
Michael Noonan
Chief Financial Officer and Treasurer
Eric Benhamou ¹
Chairman and CEO of Benhamou
Global Ventures, LLC
Daniel Chinn
Partner at Tulchinsky Stern Marciano
Cohen Levitski & Co.
Glenn Daniel ¹,²
Former Managing Director
Houlihan Lokey
Harry Kellogg 2,3
Vice Chairman, Emeritus
Silicon Valley Bank
Gary Moore
Former Co-President and COO
Cisco Systems
Alex Rogers ²,³
Managing Director of HarbourVest
(Asia) Limited and HarbourVest
Partners LLC
Michael Southworth ¹
CEO
Contact Solutions LLC
The NASDAQ Capital Market
Ticker Symbol: FNJN
Offices
Finjan Holdings, Inc.
2000 University Avenue
Suite 600
East Palo Alto, CA 94303
Phone: (650) 282 3228
Email: investors@finjan.com
www.finjan.com
Independent Registered
Public Accounting Firm
Marcum LLP
750 Third Avenue, 11th Floor
New York NY, 10017
Phone: 212-485-5500
Transfer Agent and
Registrar
Computershare Investors Services
250 Royall Street
Canton, MA 02021
Phone: 877-373-6474
Annual Meeting
June 21, 2017, 9:00 a.m. PST
Finjan Holdings, Inc.
2000 University Avenue
Suite 600
East Palo Alto, CA 94303
Phone: (650) 282 3228
¹ Audit Committee
² Compensation Committee
³ Nominating and Corporate Governance Committee
CORPORATE GOVERNANCE INFORMATION: We are committed to maintaining the highest standards of business conduct and corporate
governance, which we believe are essential to running our business efficiently, serving our stockholders well and maintaining our integrity
in the marketplace. Accordingly, our Board has adopted and maintains a Code of Business Conduct and Ethics, a Code of Ethics for Principal
and Senior Financial Officers, and Charters for each of the Audit Committee, the Compensation Committee, and the Nominating and
Corporate Governance Committee. Please visit our website at www.finjan.com to view or obtain a copy of the current version of any of these
documents.
ADDITIONAL INFORMATION: We file annual, quarterly and periodic reports, proxy statements and other information with the Securities
and Exchange Commission. You may request a copy of any of these documents, at no cost to you, by writing or telephoning us at: Finjan
Holdings, Inc., 2000 University Avenue, Suite 600, East Palo Alto, CA 94303 Attention: Investor Relations, telephone (650) 282-3228. We will
not send exhibits to these reports unless the exhibits are specifically requested and you pay a modest fee for duplication and delivery.
In 1995, Shlomo Touboul, Finjan’s founder and lead inventor on a number of our patents, became intrigued with the Java programming language. While the commercial success of Java, at the time was unknown, it has become one of the most widely used software technologies to deliver content and information over networks and the internet. Shlomo immediately recognized that this program would require a new type of security to protect it from hackers.In fact the name “Finjan” is derived from the word used in the Middle East to describe a vessel or small cup that contains or “protects” the coffee - or java. Shlomo believed the name was appropriate because the idea for the company and the associated technology came from his realization that with the introduction of the Java programming language, the existing security software would not be able to contain or protect against the possible threats to a computer using Java. D E A R S H A R E H O L D E R S,
We understand that with any investment – in Finjan or otherwise – uncertainty of outcome
and unpredictability of revenues weigh heavily on the minds of shareholders. That is why we
endeavor, every day, to build a stronger and more durable business. We achieved that strength
in 2016 with our first profitable year as a public company and revenues exceeding $18 million,
a three-fold increase from revenues in 2015.
This recent strength has positioned Finjan to
redeem and retire the entirety of our Series A
preferred shares held by Halcyon and Soryn in only
ten months time. Having retired this financing,
we have cemented our credibility within the
banking and investment communities and expect
to leverage these relationships as we continue to
explore future growth opportunities.
Our commitment to our shareholders is manifested
in Finjan building a robust and diversified
cybersecurity company. Today, we operate four lines
of business and through our strategic objectives
over the last two years, we have made meaningful
strides in each. Built upon our foundational patents,
our licensing and enforcement segment operated
through Finjan, Inc. has generated over $250 million
in licensing fees and has millions in outstanding
collections. This past year we streamlined this
business to create efficiencies and lower costs
which has translated into predictable expenses
while our revenues have moved toward a decidedly
upward trend. On the enforcement side of our
business we have had two trial wins, one of which
has been recently settled, and we are on track for
three trials in U.S. and German courts in 2017.
While we prefer a licensing pathway, litigation is
often required to protect the value of our patent
portfolio and stakeholders’ related interests. Our
second line of business, operated by Finjan Mobile,
is migrating Finjan’s early inventions into mobile
devices. Having achieved over 120,000 downloads of
our mobile browsers to-date, we recently released
VitalSecurityTM 3.5 which opens the door to revenue
generation. We expect to increase our investment
in new mobile security technologies in 2017 that
will result in a catalog of expanded features and
offerings in new and existing products. CybeRisk,
our third line of business, is a risk advisory services
business. In this business, we recently transitioned
headquarters from Tel Aviv to the U.S. in an effort to
have greater control but also to allow greater access
to this firm’s specialty of Financial Services. Finally,
in our investing segment, we continue to see early
returns from our Strategic LP investment in JVP’s
cyber strategic partners fund VII. To date, JVP has
Phil Hartstein
President and
Chief Executive Officer
made eleven portfolio investments and seen two
early exits via acquisitions by PayPal and Huawei.
Looking ahead, we have already surpassed our
fiscal 2016 revenue with $25 million closed in
the first quarter of fiscal 2017 and we remain on
track to be profitable for the full year. Importantly,
as you can see by our momentum chart, we be-
lieve this signals an inflection point in our business
where we have achieved consistency in our oper-
ations and increasing revenues on a positive and
growing trend line. We hope to continue to build
upon this as one of our key objectives is to derive
more diversity of revenues from our subsidiaries.
Finjan’s management and Board of Directors would
like to thank our employees and consultants for
their hard work and dedication which led us to
record performance in 2016 and a very promising
start to 2017. I would also like to acknowledge our
loyal shareholder base for their patience and con-
fidence as we execute on our vision as a diversified
cybersecurity company. We remain more optimistic
than ever about the future potential for Finjan and
I am proud to be a part of this dynamic company.
Sincerely,
Phil Hartstein,
President & CEO
Finjan Holdings, Inc.
Strong Momentum Heading into 2017
$26,400*
$24,745**
$17,505
$18,115
$13,678
$4,998
$6,101
$4,687
2014
2015
2016
1 Q 2 017
Cash
Revenue
*Excludes retirement of Series A Preferred shares and Contingencies (totaling $9.5M)
**Excludes jury award currently >$40M or contracted revenue
1
F I N J A N / A N N U A L R E P O R T 2 0 1 6
Given the uptrend in mobile device usage coupled with the amount of transient corporate
data, the average mobile user presents and represents higher risks of data loss through
hacking. The consumer mobile device has become so convenient that we often forget about
online security. We blindly agree to terms of service, purchase products, pay bills, connect
to free Wi-Fi, not thinking twice about our personal data stored on our devices. Given this,
in June of 2015, Finjan returned to the research and development world with the creation of
security products for mobile devices.
The goal of Finjan’s first product, The Finjan Mobile Secure Browser was to make it simple
to access and ensure that its easy to use as it protects your mobile device from malicious
content from the Internet. More importantly, unlike most mobile applications, the Finjan
Secure Browser is intended to bring transparency to users who search for anything on the
internet with the promise of not collecting user data – your data.
Our Gen3.5 mobile secure browser “FinjanMobile VitalSecurityTM” is built-off Finjan patent
technology. It features, among other things new branding, passcode access, menu bar,
settings, browsing history and detailed virus information. Protecting mobile devices in the
workplace and securing data so it doesn’t leave the network is next on our radar.
T H E B E S T- I N - C L A S S M O B I L E
P R I VA CY A N D S E C U R I T Y P RO D U CT S
MOBILE APPS + PARTNERED DEVELOPMENT + PATENT LICENSING + ENTERPRISE SECURITY
Biometric
Authentication
Biometric
Authentication
Best in Class
Malicious Code
Screening
Finjan Mobile fortifies your
mobile device to defend against
spies, phish and malware
so your datastream is safe
wherever you go.
2
F I N J A N / A N N U A L R E P O R T 2 0 1 6
64,199
SECURITY
INCIDENTS
700M
COMPRISED
RECORDS
CYBERSECURITY ›
A Global Issue
$400B
COST*
82
COUNTRIES
REPRESENTED
2,260
CONFIRMED
DATA
BREACHES
CY B E R I S K D E L I V E R S G LO B A L A D VA N C E D CY B E R
R I S K A N D S E C U R I T Y A D V I S O R Y S E R V I C E S
RED TEAMING + WAR GAMES + CYBER EXPOSURE ASSESSMENT (CYBER ACTUARY)
+ CYBER BOARD / MANAGEMENT ADVISORY + CYBER RISK MODELING AND ANALYSIS
CybeRisk offers organizations an integrated cyber risk management process that
aligns management, security and risk into a one business-centric framework.
Through a team of elite consultants, situated in North America, Europe and the Middle
East, CybeRisk assesses a company’s risk exposure, quantifies it and empowers its’
customers with the appropriate mitigation strategies.
With decades of international experience in information risk management, threat
intelligence as well as strategic and tactical cyber security consulting, CybeRisk
delivers innovative cyber security solutions and risk management programs that
bridge the missing gap.
Verizon Data Breach Investigation Report for 2015: countries represented in combined caseload
*Lloyd's of London
3
F I N J A N / A N N U A L R E P O R T 2 0 1 6
S T R AT E G I C I N V E S T M E N T I N I N N O VAT I O N F U N D
CYBER STRATEGIC PARTNERS IN JVP FUND VII
• Research & development, investment and incubation
• Access to a pool of innovative technology and valuable cybersecurity
patent assets
• 6 cybersecurity investments to-date and 1 exist through acquisition
At the end of 2013, Finjan Holdings made its first investment into the Cyber Strategic
Partners Fund VII run by Jerusalem Venture Partners (JVP). Finjan invests in innovation
fund focused on emerging cybersecurity technology with three multi-national companies.
The fund has made 6 portfolio investments to-date and has exited one of its investments
through an acquisition.
PAYPAL ACQUISITION
HUAWEI ACQUISITION
4
F I N J A N / A N N U A L R E P O R T 2 0 1 6
2 0 1 6 F O R M 1 0 - K
1
F I N J A N / A N N U A L R E P O R T 2 0 1 6
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For Fiscal Year Ended: December 31, 2016
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number: 001-33304
FINJAN HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
2000 University Avenue, Suite 600, East Palo Alto, CA
(Address of principal executive offices)
20-4075963
(I.R.S. Employer
Identification No.)
94303
(Zip Code)
Registrant’s telephone number, including area code: 650-282-3228
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.0001 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of the “large accelerated filer,” “accelerated filer,” “non-accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
No
As of June 30, 2016, there were 22,806,609 shares of the registrant’s common stock, par value $0.0001 per share, issued and outstanding. Of
these, 17,658,670 shares were held by non-affiliates of the registrant. The market value of securities held by non-affiliates was $32,138,779 as
of June 30, 2016, based on the closing price of $1.82 for the registrant’s common stock on June 30, 2016.
As of March 23, 2017, there were 23,139,216 shares of the registrant’s common stock, par value $0.0001 per share, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of Finjan Holdings, Inc.’s Proxy Statement in connection with its Annual Meeting of Stockholders to be held in 2017 are
incorporated by reference into Part III of this report.
TABLE OF CONTENTS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
PART I
BUSINESS
ITEM 1.
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2.
PROPERTIES
ITEM 3.
ITEM 4. MINE SAFETY DISCLOSURES
LEGAL PROCEEDINGS
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
ITEM 6.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
SELECTED FINANCIAL DATA
AND RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8.
ITEM 9.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
SIGNATURES
2
3
4
4
11
22
22
22
35
35
36
36
45
45
45
46
47
47
47
47
47
48
50
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The following discussion includes forward-looking statements about the Company’s business, financial condition and
results of operations, including discussions about management’s expectations for the business. These statements include statements
regarding our expectations, intentions, beliefs and projections about our future results, performance, prospects and opportunities.
These statements can be identified by the fact that they do not relate strictly to historical or current facts or by the use of words
such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “potential,” “should,” “will,”
“will be,” “would,” and the negative of these terms and similar expressions, but this is not an exclusive way of identifying such
statements. Readers are cautioned that forward-looking statements are not guarantees of future performance. Our actual results,
performance and achievements may differ materially from those expressed in, or implied by, the forward-looking statements
contained in this report as a result of various risks, uncertainties and other factors. Important factors that could cause our actual
results to differ materially from our expectations include, without limitation, our ability to execute our business plan, the outcome
of pending or future enforcement actions, our ability to expand our technology portfolio, the enforceability of our patents, our
ability to raise additional capital on acceptable terms, our ability to continue to meet listing requirements of the NASDAQ Capital
Market, the continued use of our technologies in the market, the development or continuation of a liquid trading market for our
securities, regulatory developments and other factors described under Item 1A. “Risk Factors,” as set forth in this Annual Report
on Form 10-K, and any subsequent quarterly or current reports. The following discussion should also be read in conjunction with
the audited and unaudited consolidated financial statements and notes thereto as set forth in this Annual Report on Form 10-K,
and in any subsequent quarterly or current reports.
The Company will continue to file annual, quarterly and current reports, proxy statements and other information with
the Securities and Exchange Commission (the “SEC”). Forward-looking statements speak only as of the dates specified in such
filings. Except as expressly required under federal securities laws and the rules and regulations of the SEC, we do not undertake
any obligation to update any forward-looking statements to reflect events or circumstances arising after any such date, whether
as a result of new information or future events or otherwise. You should not place undue reliance on the forward-looking statements
included in this report or that may be made elsewhere from time to time by us, or on our behalf. All forward-looking statements
attributable to us are expressly qualified by these cautionary statements.
3
ITEM 1. BUSINESS.
Overview
PART I
Finjan Holdings, Inc. (the “Company” or “Finjan Holdings”) is a cybersecurity company focused in four business lines;
intellectual property licensing and enforcement, mobile security application development, advisory services, and investing in
cybersecurity technologies and intellectual property. Licensing and enforcement of the Company's cybersecurity patent portfolio
is operated by its wholly-owned subsidiary Finjan, Inc. (“Finjan”). Finjan became a wholly owned subsidiary of Finjan Holdings
in June of 2013 after a merger transaction, following which we began trading on the OTC Markets. Our common stock has been
trading on the NASDAQ Capital Market ("NASDAQ") since May 2014. Since the merger, the Company continues to execute on
its existing business lines while outlining a vision and focusing on growth.
Founded in 1997, Finjan developed software and hardware-based web and network security technologies capable of
detecting previously unknown and emerging threats on a real-time, behavior-based, basis, in contrast to signature-based methods
of intercepting only known threats to computers. The older, signature-based methods were standard in the web and network security
industry during the 1990s. Finjan invested heavily in both research and development of its technologies and in protecting its
innovations by securing patents covering them. As the web and endpoint security industries - known as cybersecurity - have
transitioned to behavior-based detection of malicious code, we believe that our patented technologies continue to be widely used,
without license, by third parties in a number of market segments.
During the years ended December 31, 2016 and 2015, we generated revenue from our cybersecurity business of
approximately $18.4 million and $4.7 million, respectively.
We recognized other income of approximately $0 and $1.3 million for the years ended December 31, 2016 and 2015,
respectively. The income during 2015 primarily derived from our investment in cybersecurity technologies.
During the year ended December 31, 2016, our net income was approximately $0.3 million, compared to a net loss of
$12.6 million during the year ended December 31, 2015.
As used in this Annual Report, references to the “Company,” “we,” “us,” and “our” are used to refer collectively to Finjan
Holdings, Inc. and it subsidiaries, unless otherwise indicated or the context requires.
Finjan Holdings Corporate Operating History
Finjan, Inc., our subsidiary, was founded in 1997 as a wholly-owned subsidiary of Finjan Software Ltd (“FSL”), an Israeli
corporation, to cultivate proprietary technologies that focused on proactively detecting threats to web and network traffic by
identifying patterns and behavior of web and network viruses and other malicious code, rather than relying on lists of threats known
within the web and network security industry. These technologies proactively scan and repel the latest, and often unknown, threats
to network, web, and endpoint devices on a real-time basis. Following the development of its patented technologies, FSL, together
with its subsidiaries, provided secure web gateway solutions, including software and hardware, to the enterprise and endpoint
markets both directly and through technology partners and original equipment manufacturers ("OEMs").
In 2002, FSL engaged in a reorganization in which Finjan Software, Inc. (“FSI”), a Delaware corporation, was formed
to acquire and hold all of the capital stock of Finjan. Between 2002 and 2009, FSI focused its efforts on research and development
and sales and marketing activities in an effort to bolster its position in the security industry and enhance its platform of web and
network inspection technologies. Throughout that time period, FSI’s activities were funded primarily by venture capital and private
equity firms with experience providing capital and management expertise to software security firms, some with investment and
operational experience within Israel’s cybersecurity and technology sectors. Finjan also received financial backing from multi-
national software and technology companies.
Between approximately 2002 and 2006, competitors in the web and network security industry began moving towards
real-time, behavior-based, proactive threat detection, at times in violation of Finjan’s patent rights. As a result, and beginning in
2005, Finjan commenced its licensing program around its patents. The first license, issued in 2005, was to Microsoft. In 2006, Finjan
also initiated its first patent infringement litigation against a third party it believed was infringing its patents.
4
In October 2009, FSI transferred its portfolio of intellectual property to Finjan (its wholly-owned subsidiary at the time).
Thereafter, in November 2009, FSI sold certain assets, including certain of its operating subsidiaries, not including Finjan, and its
sales and marketing assets to M86 Security ("M86"). Finjan also granted a fully-paid, non-exclusive patent license to M86, in
consideration for which M86 issued shares of its common stock to Finjan and FSI. In connection with that transaction, and
subsequent to November 2009, FSI and its remaining subsidiaries (including Finjan) ceased the development, manufacture,
marketing and sale of its products, as well as research conducted through its Malicious Code Research Center as part of a confidential
non-compete provision. Finjan retained ownership of its patents and all related rights. In March 2012, M86 merged with Trustwave
Holdings, Inc. ("Trustwave") through which M86’s license from Finjan was renewed with Trustwave to include an expanded scope
and an extension of the aforementioned non-compete for the development of software and hardware security products. In September
2015, Trustwave was acquired by Singapore Telecom ("SingTel").
Following the M86 and related transactions, and during an intervening period between 2009 and 2013, Finjan's existing
investors financed its activities, which consisted primarily of enforcing its intellectual property in the security sector while the
non-compete provision with M86 and Trustwave was in place.
Finjan Holdings (formerly, Converted Organics Inc.) was incorporated in Delaware in January of 2006 and in February
2007, we successfully completed an initial public offering. Finjan became a wholly owned subsidiary of Finjan Holdings in June
of 2013 after a merger transaction, following which we began trading on the OTC Markets under the ticker COIN. Our common
stock has been trading on NASDAQ since May 2014 under the ticker FNJN.
In April 2013, Finjan distributed all securities it held in two unaffiliated entities to FSI, and made a payment of cash in
an amount sufficient to repay and satisfy in full a pre-existing intercompany loan from FSI to Finjan. Following that distribution,
the board of directors and stockholders of FSI approved the dissolution of, and a plan of liquidation for FSI that resulted in, among
other things, the distribution of Finjan common stock to certain of FSI’s stockholders.
In June 2013, Finjan became a public company through a merger transaction described under “Corporate Information
and History—Corporate History (Finjan Holdings, Inc.) prior to June 2013” and became one of our wholly-owned subsidiaries.
Following the merger transaction, we immediately renamed the public company to Finjan Holdings, Inc. The newly renamed
Finjan Holdings, Inc. was capitalized again with more than $30 million in cash from its previous investors who, at the time of the
listing on NASDAQ, owned approximately 91.5% of the Company’s public equity. Finjan’s shareholders outlined a vision as a
public company to continue the licensing and enforcement of Finjan’s patented technologies as well as continuing to invest in new
cybersecurity technologies and services.
In November 2013, Finjan Holdings made its first investment into an innovation fund focused on new cybersecurity
technologies. The Company committed $5 million as a strategic limited partner to a fund managed by Jerusalem Venture Partners
("JVP"). JVP’s newly created Cyber Strategic Partners Fund VII was co-invested by the Company and three other multi-national
companies. To date, there are eleven portfolio investments made through the JVP fund and the Company has already received
distributions from its investment with JVP as two of the portfolio companies exited through an acquisition in 2015 and 2016.
In March 2015, the non-compete and confidentiality provisions related to the M86 and Trustwave transactions expired.
Within three months the Company had announced it was launching an advisory services business and entering mobile security
development. Today the Company operates its advisory services business through its subsidiary CybeRisk Security Solutions, Ltd
("CybeRisk") and its mobile security business through its subsidiary Finjan Mobile, Inc. ("Finjan Mobile"). CybeRisk was founded
in 2015 to deliver global advanced cyber risk and cyber security advisory services. Through a team of employees and consultants,
headquartered in East Palo Alto, with offices in Tel Aviv, CybeRisk assesses corporate risk exposure and delivers appropriate
mitigation strategies. Finjan Mobile fortifies mobile devices against spies, phishing and malware attacks.
Licensing and Enforcement – Licensing Best Practices
Under U.S. patent law, a patent owner has the right to exclude others from making, selling or using the owner’s patented
technology without a license to do so. Through Finjan, we generate revenues and related cash flows by granting intellectual property
licenses for the use of patented technologies that we own. We actively license and enforce our patent rights against unauthorized
use of our patented technologies (i.e. potential infringers). Many of our license agreements, whether entered into via negotiated
transactions (i.e. licensing transactions) or through a settlement or court ordered judgment (i.e. litigation action) or otherwise, are
structured on a fully paid-up basis (often referred to as a “global peace license”). For such licenses, we generally agree to a lump
sum license fee to be paid upon entering into the license or in accordance with a mutually agreed installment schedule. Some of
our license agreements, however, provide for future royalty payments in the event the licensee achieves certain milestones specified
in the applicable license agreement. Our license agreements largely contemplate recovery of fees for sales made prior to the
5
effective date of the license, as well as for future sales through a defined termination date, in an amount related to the royalties we
would have received had a license been in effect at the time of such sales.
How we conduct our licensing programs and enforcement actions is generally guided by our “Licensing Best Practices,”
which we adopted in March 2014 to demonstrate our commitment to ethical, transparent and consistent business practices for
intellectual property licensing. These Licensing Best Practices are based on the Company’s core values. In an effort to encourage
meaningful discussion and drive real change in the licensing practices of entities that license (and may or may not directly
manufacture or sell products) their respective patent portfolios, we called upon the IP industry to adopt similar initiatives that
support technological advancements, investments in innovation and continued job creation, while preserving a strong patent
system. We continue to be involved in industry efforts in this area, we regularly receive feedback on our Licensing Best Practices,
and we remain open to modifying our position based on potential adoption by broader industry groups.
Our Licensing Best Practices include seven actionable elements:
• Ensure focused licensing and enforcement programs pursue the provider of the patented technology and not its
customers, consumers or end users.
• Conduct reasonable diligence to determine a patent's enforceability and use with respect to prospective licensees,
and make that information available to them.
• Respect procedural rights and judicial efficiency in the courts and in the prosecution and protection of IP behind the
innovation.
• Be transparent with the intent in each discussion, and articulate the cause and effect scenarios which would prompt
a shift in communication and an escalation of each discussion.
•
Provide useful facts to prospective licensees and defendants to foster productive business discussions early and often
to aid in informed decision-making.
• Offer fair value licenses or settlements based on legitimate factors and considerations.
• Commit to keeping lines of communications open between the patent owner and prospective licensee to preserve a
path for the parties to find an amicable solution or resolution for their respective businesses.
In some cases, notwithstanding our pursuit of negotiated license transactions based on our Licensing Best Practices,
unlicensed users of our technologies may be unwilling, at least initially, to negotiate or pay reasonable royalties for their use (i.e.
infringement) of our patented technologies and often dispute any allegations of patent infringement. If we believe a party is
infringing one or more of our patents and such party refuses to take a license, we may institute legal action against such party. In
a patent infringement lawsuit, we typically seek damages for past infringement and an injunction against future infringement. We
evaluate, on a case-by-case basis, whether to commence litigation to preserve our patent rights, the value of our portfolio and the
value of the licenses to our existing licensees. Even if litigation is commenced, however, we endeavor to keep the option for early
resolution of the dispute between the parties available to the extent practicable.
Licensing and Enforcement – Legacy Activities, Prior to 2013
In June 24, 2005, Finjan’s then parent, FSL, entered into a patent license agreement with Microsoft Corporation for $8
million in cash as well as other valuable financial and non-financial consideration. The license grant includes, among other things,
a worldwide, non-exclusive, nontransferable royalty-free license for Microsoft and its affiliates to make, have made, use, sell, offer
for sale, import and distribute licensed products, among other rights.
In June 2006, Finjan, as successor to its parent FSI, filed a patent infringement lawsuit against Secure Computing Corp.
("Secure") and its subsidiaries in the United States District Court for the District of Delaware, resulting in a Judgment of
approximately $37.3 million, including interest and enhancements. In September 2011, Finjan received proceeds of approximately
$28.0 million, net of $9.3 million contingency legal fees, from Secure including $3.1 million of interest, in satisfaction of the
Judgment.
6
In July 2010, Finjan filed a patent infringement lawsuit against five additional software and technology companies in the
U.S. District Court of Delaware, which we refer to as the “2010 Litigation.” In April 2012, Finjan entered into a binding
memorandum of understanding with one of the parties to the 2010 Litigation pursuant to which Finjan agreed to withdraw its
claims against such party and grant it a license to use Finjan’s patents in exchange for equity in such party and other
consideration. The license is fully paid up unless the holder of the license has aggregate annual net sales to third-party distributors
or re-sellers in excess of $10 million (which has not been achieved to date). In addition, Finjan signed a confidential settlement,
release and license agreement with another party to the 2010 Litigation in November 2012. Pursuant to such agreement, Finjan
received $85 million in exchange for a one-time fully paid-up license, comprising a perpetual, non-exclusive worldwide license
to Finjan’s patent portfolio as of the date of such agreement and patents with a first effective priority date occurring at any time
prior to November 2022 that Finjan or its affiliates may own or control after the date of such agreement.
Licensing and Enforcement – Current Activities, Post 2013
Since completing the merger in June 2013, we have commenced preliminary discussions with numerous potential licensees
and have filed a number of patent infringement lawsuits in the Northern District of California, where such lawsuits were
warranted. In each case, we endeavor to adhere to our high standards and stated Licensing Best Practices. For additional
information regarding pending litigations, see “Item 3. Legal Proceedings.”
On September 24, 2014, Finjan entered into a license agreement with a third party against whom Finjan had filed a patent
infringement lawsuit in the Northern District of California, in settlement of such suit. Pursuant to this agreement, the parties
mutually agreed to dismiss the infringement litigation, and each party gave the other a general release for all claims that it might
have against the other, known or unknown, based on the actions of either party on or before the date of the settlement. Under the
license agreement, a third party agreed to pay Finjan a license fee of $8 million payable in four installments. The first installment
of $3 million was paid upon execution of the agreement and filing of the dismissal with prejudice, the second installment of $2
million was paid on January 16, 2015, the third installment of $2 million was paid on January 14, 2016, and the fourth and final
installment of $1 million was paid on January 13, 2017.
On April 7, 2015, Finjan entered into a Confidential Asset Purchase and Patent License Agreement, effective as of April
7, 2015, with F-Secure Corporation, a company incorporated in Finland (“F-Secure”). The agreement provides for F-Secure to
pay Finjan the sum of $1.0 million in cash, of which $0.7 million was recognized as revenues in 2015 and the remaining balance
of $0.3 million received and recorded as revenue on March 31, 2016, in accordance with the Company’s revenue recognition
policy, as described in Note 3 of our Financial Statements. The agreement also provides for the assignment by F-Secure to Finjan
of two patents, U.S. Patent Nos. 8,474,048 and 7,769,991, including among other things, all progeny applications or patents, foreign
counterparts and reissues (the “F-Secure Patents”). In exchange for the foregoing and other valuable consideration, Finjan agreed
to, subject to certain restrictions, limits and other conditions, grant F-Secure a worldwide, fully-paid, non-exclusive field of use
license to Finjan patents owned as of the effective date or acquired by Finjan or its affiliates within two years from the effective
date, as well as to the F-Secure Patents.
On August 4, 2015, a Jury in the Northern District of California returned a verdict that Blue Coat Systems, Inc. ("Blue
Coat") infringed 5 Finjan patents and awarded Finjan approximately $39.5 million in damages. Prior to the conclusion of this
lawsuit, Finjan filed a second separate action against Blue Coat alleging infringement of Finjan patents by new products and
services sold by Blue Coat. On October 14, 2016, Finjan filed a third case against Blue Coat in Germany. Finjan has not received
any revenue from the present lawsuit with Blue Coat. The second case against Blue Coat is currently scheduled to go to trial in
late 2017.
On November 15, 2015, Finjan and Avast Software s.r.o., a company organized under the laws of the Czech Republic
("Avast") entered into a Confidential Patent License, Settlement and Release Agreement, under which Avast licenses from Finjan
a worldwide, fully-paid up, non-exclusive, perpetual, irrevocable license under the identified Finjan patents and related patent
rights to use, make, have made, sell, offer to sell, import, export, and/or otherwise distribute Avast covered products through
multiple tiers of distribution. In consideration of the agreement, Avast agreed to pay Finjan $2.975 million in cash which was
recorded as revenue in the fourth quarter of 2015 in accordance with the Company’s revenue recognition policy, as described in
Note 3 of our Financial Statements. On January 19, 2017, Finjan filed a complaint against Avast as their recent acquisition of AVG
triggered certain terms in the Patent License Agreement that excludes an acquired company’s products as licensed.
On December 30, 2015, Finjan and a U.S.-based network security company ("Licensee") entered into a Confidential
Patent License, Settlement and Release Agreement under which Licensee receives from Finjan a worldwide, non-exclusive,
irrevocable license under the identified Finjan patents and related patent rights to use, make, have made, sell, offer to sell, import
and otherwise dispose of any and all Licensee products or services, alone or in combination with other Licensee products and
services. In consideration for the license, Licensee agreed to pay Finjan $3.65 million. A first payment of $1.0 million on December
7
31, 2015 was recorded as revenue in the fourth quarter of 2015 and the remaining $2.65 million was recorded as revenue in 2016,
in accordance with the Company’s revenue recognition policy, as described in Note 3 of our Financial Statements.
On June 3, 2016, Finjan entered into a Confidential Patent License, Settlement and Release Agreement (“June 3, 2016
License”) with Proofpoint, Inc. (“Proofpoint”) and Armorize Technologies, Inc. As part of the June 3, 2016 License, Case No.
3:15-cv-5808-HSG, entitled Finjan, Inc. v. Proofpoint, Inc. and Armorize Technologies, Inc., pending before the Honorable
Haywood S. Gilliam, Jr. in the U.S. District Court for the Northern District of California, was dismissed with prejudice on June
7, 2016. The June 3, 2016 License provides for Proofpoint to pay Finjan the sum of $10.9 million in cash, in which $4.3 million
was received on June 6, 2016, $3.3 million was received on December 28, 2016, and $3.3 million is payable on or before January
3, 2018. The Company recognized $7.6 million of the $10.9 million license as revenues as of December 31, 2016, as such amount
was determined to be fixed and determinable, in accordance with the Company’s revenue recognition policy as described in Note
3. The remaining balance of $3.3 million under the terms of the June 3, 2016 License will be recognized as revenue when the
payment is due. In exchange for the foregoing and other valuable consideration, Finjan agreed to, subject to certain restrictions,
limits and other conditions, grant Proofpoint a worldwide, non-royalty bearing, fully paid-up (as of the final payment),
nonexclusive, perpetual, irrevocable (except in the case of non-payment by Proofpoint or other material breach) license under
Finjan’s patents as specified in the June 3, 2016 License. Certain portions of the June 3, 2016 License are subject to Confidential
Treatment pursuant to a Confidential Treatment request filed with the Securities and Exchange Commission (“SEC”) on August
8, 2016 and Confidential Treatment Order granted by the SEC on September 26, 2016.
On June 30, 2016, Finjan entered into a Confidential Patent License Agreement (the “June 30, 2016 License”) with a
European cloud-based network security firm (the “2016 European Licensee”). The June 30, 2016 License provides for the 2016
European Licensee to pay Finjan $565,000 in cash, which was paid on or about the time of execution of the June 30, 2016 License.
Finjan recognized all of the $565,000 license as revenue as of December 31, 2016, as such amount was determined to be fixed
and determinable, in accordance with the Company’s revenue recognition policy as described in Note 3. In exchange for the
foregoing and other valuable consideration, Finjan agreed to, subject to certain restrictions, limits and other conditions, grant the
2016 European Licensee a nonexclusive, term license in the United States under Finjan’s U.S. patents as specified in the June 30,
2016 License.
On September 21, 2016, following a two-week trial, a Jury in the Northern District of California returned a verdict that
all five Finjan Patents were found literally infringed by Sophos, Inc. ("Sophos"). The jury verdict, decided that Finjan was entitled
to $15 million in damages for Sophos’ infringement. Finjan has not received any revenue from the lawsuit with Sophos.
On November 1, 2016, the Company issued a press release announcing that in Finjan, Inc. v. Sophos Inc. (14-cv-1197-
WHO), the Honorable William H. Orrick entered Judgment in favor of the Company’s wholly-owned subsidiary, Finjan, Inc.
and against Sophos affirming the earlier $15.0 million Jury Verdict and Award entered on September 21, 2016.
On December 28, 2016, Finjan entered into a Confidential Patent License Agreement (the “December 2016 License”)
with F5 Networks, Inc. (“F5”). The December 2016 License provides for F5 to pay a license fee of $4.0 million in cash, which
Finjan received on December 30, 2016. Finjan recognized all of the $4.0 million license as revenue as of December 31, 2016, as
such amount was determined to be fixed and determinable, in accordance with the Company’s revenue recognition policy as
described in Note 3. In exchange for the foregoing and other valuable consideration, Finjan agreed to, subject to certain restrictions,
limits and other conditions, grant F5 a nonexclusive, irrevocable (except in the case of non-payment by F5), worldwide paid-up
license under Finjan’s patents as specified in the December 2016 License.
Future Growth Strategy
Our mission, for the foreseeable future, is to build a diversified cybersecurity company benefiting from historical
investments in technology and patents while expanding into new product and service offerings. We believe our patented technologies
continue to hold significant value and we intend to vigorously protect our investment, the value of our existing licensees’
investments, and the value that technology and intellectual property represents for our shareholders. We are pursuing and will
continue to pursue our growth through the following strategies:
• Develop and Expand Existing Patent Portfolio - We have obtained and endeavor to continue to obtain new patents
relating to security technologies through research and development and/or acquisition in the cybersecurity space.
For example, on: January 24, 2017, our subsidiary, Finjan Mobile, Inc., was issued a U.S. Patent No. 9,554,279 titled
“Authorized Areas of Authentication.”
8
•
Invest in Internal Research & Development through Finjan Mobile - We continue to pursue internal research and
development of security technologies that both relate to Finjan's existing patented inventions as well as new concepts
to meet an ever-expanding market need. Products currently available and in development include Finjan Mobile
Secure Browser, VitalSecurity and next generation multi-factor authentication security applications utilizing geo-
location techniques on mobile devices. The Company continues to explore inorganic growth, acquisition opportunities
and partnerships to complement the vision for Finjan Mobile.
• Continue to Develop and Invest in CybeRisk - CybeRisk provides services to enterprise customers on a wide variety
of threats, current and future issues, and prevention. CybeRisk's advisory services enable customers to accelerate the
maturity of their cyber security posture and are intended to augment a company's own security and risk capabilities. We
intend to further invest in CybeRisk and grow our cybersecurity advisory services business. This could include one
or all of the following: the hiring of additional qualified personnel, the expansion of the business globally from its
current headquarters in East Palo Alto with offices in Tel Aviv.
•
Expand our IP Assets through Acquisitions and Strategic Partnerships - We intend to acquire and develop new
technologies and invest in intellectual property through strategic partnerships, acquisitions of technology-focused
companies, IP portfolios or other assets and other initiatives. We endeavor to identify relevant security technologies
and patents that have been, or are anticipated to be, widely adopted by third parties in connection with the manufacture
or sale of products and services, and to which we can bring enforcement actions (i.e., licensing or litigation) and
other expertise. We may also broaden our technology and patent holdings by working with inventors, acquiring
technology companies, investing in research laboratories, start-ups, or universities, and by creating strategic
partnerships with companies, large and small, seeking to effectively and efficiently monetize their technology and
patent assets. While we anticipate that we will initially focus on acquisitions and strategic partnerships involving
technologies relating to network, web and endpoint cybersecurity, we may seek to diversify to a broader market in
the future. Our experience with monetizing both technologies and patents may be considered valuable by potential
acquisition candidates and strategic partners who may lack resources or know-how to effectively and efficiently
generate a return for those investments.
• Continue to Demonstrate Best Practices in Pursuing Licensing Relationships and Enforcing our Patent Rights - In
March 2014, we adopted Licensing Best Practices to demonstrate our commitment to ethical, transparent and
consistent business practices for intellectual property licensing. We called upon and continue to promote industry-
wide adoption of a set of licensing best practices, through leadership organizations such as the Licensing Executive
Society and the Open Register of Patent Owners that support technological advancements, investments in innovation,
and continued job creation while protected by a robust patent system. We intend to continue pursuing a proactive
licensing campaign that adheres to our best practices guidelines while rigorously protecting our intellectual property
rights. We have entered into preliminary discussions with numerous potential licensees in accordance with these
Licensing Best Practices, but acknowledge that it takes many discussions and many months for preliminary discussions
to culminate in a license agreement, if at all. While it is our preference to resolve our patent-related disputes through
amicable business solutions, protecting the value of our patented technology is paramount.
Although we currently pursue growth initiatives through the above strategies, unforeseen market and industry conditions and new
developments may necessitate changes in our strategies. We intend to remain resilient, flexible, and open to new opportunities that
benefit our shareholders.
Competition
One of our strategic goals is to leverage the operational platform we have built to realize value inherent in not only our
existing patent portfolio and cybersecurity technologies, but also technologies and other assets to be developed and acquired in
the future. We expect, however, to encounter significant competition in the area of technology and intellectual property acquisitions
given the highly competitive nature of the cybersecurity sector. In certain cases, we may partner with venture capital firms, strategic
corporate buyers and various industry leaders to effectuate a technology acquisition or realize new licensing opportunities. In
other situations, these same venture capital firms, corporate buyers and industry players may be our direct competitors for the
technology and intellectual property assets.
We also face competitive pressures in the sense that companies may develop competing technologies that offer better or
less expensive alternatives to our patented technologies (i.e. “design arounds”). Technological advances or entirely different
approaches developed by one or more of our competitors could render certain of the technologies owned or controlled by our
operating subsidiaries obsolete and/or materially reduce their value.
9
Patented Technologies
Through Finjan, we currently have twenty-eight U.S. patents. Finjan’s current U.S. issued patents begin expiring at various
times from 2017 through 2032, and we also have two U.S. patent applications pending. Finjan also has thirty-eight international
patents and one international patent application pending, as of the date of this report. Although we may, from time to time, focus
on monetizing certain of these patents, we consider all of our patents to be “core” patents for our business.
The following table sets forth a brief description of Finjan’s issued and pending U.S. patents, including their respective
titles:
U.S. Patent No.
6,092,194
6,154,844
6,804,780
6,965,968
7,058,822
7,418,731
7,613,918
7,613,926
7,647,633
7,756,996
7,757,289
7,769,991
7,930,299
7,975,305
8,015,182
8,079,086
8,087,079
8,141,154
8,225,408
8,474,048
8,566,580
8,677,494
9,141,786
9,189,621
9,219,755
9,294,493
9,444,844
9,525,680
ISSUED U.S. PATENTS
Title
System and Method for Protecting a Computer and a Network from Hostile Downloadables
System and Method for Attaching a Downloadable Security Profile to a Downloadable
System and Method for Protecting a Computer and a Network from Hostile Downloadables
Policy-Based Caching
Malicious Mobile Code Runtime Monitoring System and Methods
Method and System for Caching at Secure Gateways
System and Method for Enforcing a Security Context on a Downloadable
Method and System for Protecting a Computer and a Network from Hostile Downloadables
Malicious Mobile Code Runtime Monitoring System and Methods
Embedding Management Data Within HTTP Messages
System and Method for Inspecting Dynamically Generated Executable Code
Automatically Executing an Anti-Virus Application on a Mobile Communication Device
System and Method for Appending Security Information to Search Engine Results
Method and System for Adaptive Rule-Based Content Scanners for Desktop Computers
System and Method for Appending Security Information to Search Engine Results
Malicious Mobile Code Runtime Monitoring System and Methods
Byte-Distribution Analysis of File Security
System and Method for Inspecting Dynamically Generated Executable Code
Method and System for Adaptive Rule-Based Content Scanners
Website Content Regulation
Splitting an SSL Connection Between Gateways
Malicious Mobile Code Runtime Monitoring System and Methods
Malicious Mobile Code Runtime Monitoring System and Methods
Malicious Mobile Code Runtime Monitoring System and Methods
Malicious Mobile Code Runtime Monitoring System and Methods
Computer Security Method and System with Input Parameter Validation
Malicious Mobile Code Runtime Monitoring System and Methods
Splitting an SSL Connection Between Gateways
PENDING U.S. PATENT APPLICATIONS
Application No.
14/941,911
Malicious Mobile Code Runtime Monitoring System and Methods
Title
15/383,641
Splitting an SSL Connection Between Gateways
10
Employees
As of December 31, 2016, we had 12 full-time employees, on a consolidated basis and across all of our business lines. We
have budgeted to hire additional full-time employees (not including additional consultants or independent contractors) in the near
future to expand our licensing and enforcement, mobile security and advisory services businesses. Personnel in our licensing and
enforcement business are responsible for the execution of our licensing and enforcement strategy, including analyzing licensing
opportunities and enforcement requirements, making tactical decisions related to our strategy, identifying new applications for our
existing technologies and pursuing opportunities to invest in new technologies through strategic partnerships and
acquisitions. Although our management dictates and controls our overall litigation strategy for each case we litigate (or settle), we
use outside legal counsel to execute certain aspects of our strategies. We also use consultants, including Finjan’s founder and
former Chief Technology Officer, Shlomo Touboul, to assess opportunities related to our technologies and additional technologies
we may pursue in the future. We also expect to hire additional full-time employees into both our mobile security business, operated
through our subsidiary Finjan Mobile and our advisory services business, operated through our subsidiary CybeRisk. We do not
expect to hire any full-time employees to manage our investment in the JVP innovation fund.
Neither we nor any of our subsidiaries is a party to any collective bargaining agreement. We consider our employee
relations to be good.
Corporate Information
Our principal executive offices are located at 2000 University Avenue, Suite 600, East Palo Alto, CA 94303. Our telephone
number is (650) 282-3228 and our web address is www.finjan.com. Financial and other information can be accessed on the
“Investors” section of our website. We make available through our website, free of charge, copies of our annual reports on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant
to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after filing such material electronically or otherwise
furnishing it to the Securities and Exchange Commission (the “SEC”). Also posted on our website are certain corporate governance
documents, including our Code of Business Conduct and Ethics. The reference to our website is textual in reference only, and the
information included or referred to on, or accessible through, our website does not constitute part of, and is not incorporated by
reference into, this report or any other filing.
We also file periodic reports, proxy statements and other information with the SEC. Such reports may be obtained by
visiting the Public Reference Room of the SEC at 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the
Public Reference Room can be obtained by calling the SEC at (800) SEC-0330. In addition, the SEC maintains an internet site at
http://www.sec.gov that contains reports, proxy and information statements and other information.
ITEM 1A. RISK FACTORS.
Investing in our common stock involves a high degree of risk. You should consider carefully the risks, uncertainties and
other factors described below, in addition to the other information set forth in this Form 10-K, before making an investment
decision. Any of these risks, uncertainties and other factors could materially and adversely affect our business, financial condition,
results of operations, cash flows or prospects. In that case, the market price of our common stock could decline, and you may lose
all or part of your investment in our common stock. See also “Cautionary Statement Regarding Forward-Looking Statements.”
Risks Related to Our Cybersecurity Business
Finjan’s limited operating history following its 2009 asset sale makes it difficult to evaluate its current business and
future prospects.
Following the sale of Finjan’s sales, marketing and certain other assets in 2009, Finjan’s business has consisted primarily
of the licensing and enforcement activities described under "Item 3. Legal Proceedings.” Since 2009, Finjan has generated
significant, but sporadic cash flows and net income through its licensing and enforcement activities. Finjan has a limited track
record, as a stand-alone entity, in executing its business plan which includes, among other things, acquiring, prosecuting, licensing,
litigating or otherwise monetizing patent assets, our cybersecurity consulting business, and developing mobile security applications.
Finjan’s limited operating history, as a stand-alone entity, in its current line of business makes it difficult to evaluate our current
business model and future prospects. There is a significant risk that we will not be able to implement or execute our current business
plan, or demonstrate that our business plan is sound.
11
We are presently substantially reliant on a limited number of patented technologies that we own through Finjan.
We derive substantially all of our income from a relatively small number of patented technologies. As of December 31,
2016, our assets consisted primarily of 28 U.S. and 38 international patents with additional pending applications we are processing
in patent offices around the world. Finjan’s current U.S. issued patents begin to expire at various times from 2017 through 2032,
and it currently has two U.S. patent applications and one international patent applications pending as of the date of the filing of
this Annual Report on Form 10-K. As new technological advances occur, many of the patented technologies we own through
Finjan may become obsolete before they are completely monetized. If we are unable to monetize our current patent assets for any
reason, including obsolescence of our technologies, the expiration of our patents, or challenges to the enforceability of our patents
through patent office ex parte re-examination or Inter Partes Reviews ("IPRs") or any other reason, our business and prospects
would be materially harmed.
We have a history of losses and may incur additional losses in the future.
We reported net income from operations of $0.3 million and a net loss of $12.6 million for the years ended December
31, 2016 and 2015, respectively. As of December 31, 2016, we had approximately $13.7 million in cash and cash equivalents and
short-term investments and working capital of $11.2 million. Although we reported net income from operations for the year ended
December 31, 2016, we expect to continue incurring significant legal and other selling, general and administrative expenses in
connection with our operations. As a result, we may incur losses in future periods depending on revenue. We believe, however,
that our existing revenue opportunities, balances of cash and cash equivalents and investments will be sufficient to finance our
anticipated capital and operating requirements for at least the next twelve months from the date of filing this annual report. Such
belief is based on current forecasts and assumptions regarding licensing of our technology, which are currently at various stages
of negotiation (which may not be successfully completed), our emerging business, as well as other financing and revenue sources.
We may not be successful in finalizing such licensing efforts and, even if successful, may need to raise additional capital in order
to provide sufficient funds to support and grow our business.
Any failure to protect or enforce our patents or other intellectual property rights could materially impair our business.
Our ability to successfully operate our business depends largely on the validity and enforceability of our patents and the
relevance of our patent rights to commercially viable products or services. Third parties have challenged, and we expect will
continue to challenge, the infringement, validity and enforceability of certain of our patents. In some instances, our patent claims
could be substantially narrowed or declared invalid, unenforceable, not essential, not infringed or a combination of the foregoing.
We cannot assure you that the validity and enforceability of our patents will be maintained or that our patent claims will be applicable
to any particular product or service. In addition, the U.S. Patent and Trademark Office (the “USPTO”) could invalidate or render
unenforceable our patents or materially narrow the scope of the patent claims during the course of USPTO post-grant proceedings
such as, for example, re-examinations or IPRs. Any significant adverse finding by the USPTO or adverse verdict of a court as to
the validity, enforceability or scope of certain of our patents and/or any successful design around certain of our patents could
materially and adversely affect our ability to secure future settlements or licenses on favorable terms, if at all, and otherwise harm
our business.
Under the American Invents Act (“AIA”), patents previously granted by the USPTO may be reviewed through post-patent
grant proceedings such as reexaminations or IPRs. The basic characteristics of Ex Parte reexamination are: the patent owner or
a third party may request the USPTO to reexamine an issued U.S. patent based on patents and printed publications that the requester
submits for the USPTO’s consideration. The requester must establish that the submitted prior art establishes a substantial and new
question of patentability, and if the requester meets such burden, the USPTO will grant the request and order reexamination of the
patent at issue. Unless the requester of the reexamination is the patent owner, the requester’s participation terminates following
such reexamination order and only the patent owner may proceed. The patent owner can appeal the final decision of the Central
Reexamination Unit (“CRU”) of the USPTO to the Patent Trial and Appeal Board (“PTAB”), and may further appeal a negative
decision to the Court of Appeals for the Federal Circuit (“CAFC”).
Generally, the grounds on which a petition for IPR is granted is whether the claimed invention is patentable strictly in
light of prior art consisting of patents or printed publications. The petitioner must demonstrate that there is a reasonable likelihood
that he/she/it will prevail as to at least one of the patent claims challenged to trigger the IPR. The PTAB decides on petitions and
can reject them if the prior art is the same or substantially the same prior art or arguments previously presented to the USPTO. If
the petition is granted, an IPR is statutorily required to be completed within one year of institution, which is extendable for up to
six months for good cause. Unlike reexaminations, the third party petitioner may stay involved in the proceedings. IPRs are
handled at the outset by the PTAB and do not go through the CRU of the USPTO. Final decisions of the PTAB are immediately
appealable to the CAFC, either by the patent owner or the third party.
12
It is becoming a trend, if not a practice, for accused infringers to petition for reexaminations or IPRs of asserted patents
as these proceedings may give the petitioner “two bites at the apple”. Parties to our enforcement actions may initiate IPRs with
respect to our patents in the future. Although we believe our patents are patentable in light of prior art, these proceedings are
relatively new and unpredictable. The outcome of the proceedings can range from decisions favorable to the patent holder, favorable
to both parties, or favorable to the petitioner. If the outcome is the latter, the value of the challenged patent can be materially
reduced or extinguished.
Our licensing cycle is lengthy and costly, and our licensing efforts may be unsuccessful.
The process of engaging a potential licensee to adopt a license can be lengthy and may not always result in a license
agreement. It may take many months or longer to identify potential licensees, prepare marketing, technical or other materials,
educate potential licensees on the benefits of entering into a license and agree, if at all, to licensing terms, conditions and price. Even
after expending significant time and resources into licensing efforts, we may be unsuccessful in entering into a licensing agreement
with a potential licensee. As such, we may incur significant losses in any particular period before any associated revenue stream
begins, if at all.
We currently are, and expect to continue to be involved in costly, time-consuming and uncertain litigation and
administrative actions to enforce our patents, which may adversely affect our financial condition and our ability to operate our
business.
If we believe a third party is infringing one or more of our patents and refuses to obtain a license to use our patented
technologies, we may be compelled to commence legal or administrative action against those third parties. Patent litigation is
inherently uncertain and we cannot predict the outcome of any litigation or administrative action. Moreover, many of the parties
we believe infringe our patents are large and well-funded companies with substantially greater resources than we have and may
devote substantial resources toward avoiding or limiting liability and the amount of associated damages for infringing our
patents. We could also face counterclaims that challenge the essential nature, validity, enforceability or infringement of our
patents. Regardless of whether legal action is successful, legal and expert fees and other costs associated with enforcement action
are significant.
Our cash flows can be unpredictable, and this may harm our financial condition or the market price for our common
stock.
The amount and timing of cash flows from our licensing and enforcement activities are subject to uncertainties stemming
primarily from uncertainties regarding the rates of adoption of our patented technologies, our lengthy license negotiation cycles,
the growth rates of our licensees, the outcome of enforcement actions and certain other factors. As such, our income and cash
flows may vary significantly from period to period, which could make our business difficult to manage, adversely affect our
business and operating results, cause our annual or quarterly results to fall below market expectations and adversely affect the
market price of our common stock.
Our cash flows and income have been derived from a limited number of sources.
Our net income in recent years has been derived from a limited number of license agreements and settlements, and we
expect that, in the near term, any income that we generate will be derived from a limited number of sources. In 2016, we derived
approximately $18.4 million of income from license agreements with 6 licensees. In 2015, we derived approximately $4.7 million
of income from three licensees. If we are unable to reach settlements and license agreements with a sufficient number of identified
third parties who use our technologies, our future income and cash flow could be adversely affected.
We may raise additional capital to support our present business plan and our anticipated business growth, and such
capital may not be available on acceptable terms, or at all, which would adversely affect our ability to operate.
In May 2016, we raised $10.2 million through the issuance of Series A Preferred Stock. Based on our current operating plans
(which includes our expectation of signing additional license agreements in 2017, which may not occur), our current resources
are expected to be sufficient to fund our planned operations at least for the coming twelve months. We nonetheless may raise
additional financing to fund licensing and enforcement actions, planned research and development activities and to better solidify
our financial position. We may also need to raise additional funds in connection with any acquisitions of technology or intellectual
property assets that we pursue. Such additional capital may not be available on acceptable terms, or at all, which would adversely
affect our operations. If we raise additional funds by issuing equity securities, our stockholders may experience dilution. Debt
financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt or additional
equity financing that we raise may contain terms that are not favorable to us or our stockholders.
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Further, if we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some
or all of our business plans, which would harm our operating results.
Any debt we incur in the future in capital raising efforts may limit our flexibility to obtain further financing and to
pursue other business opportunities.
If our anticipated capital raising efforts involve debt financing, we will have limitations on our ability to raise additional
debt financing or incur liens, as well as other limitations. Such limitations may limit our flexibility to pursue other business
opportunities. Additionally, our future level of indebtedness could have important consequences to us, including the following:
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our ability to obtain additional financing, if necessary, for working capital, or other purposes may be impaired or
such financing may not be available on favorable terms;
our funds available for operations, future business opportunities and distributions to stockholders will be reduced by
that portion of our cash flow required to make future interest payments on any debt incurred; and
• we may be more vulnerable to competitive pressures or a downturn in our business or the economy generally.
Our ability to service any debt raised in the future will depend upon, among other things, our successful monetization of
our patents, which will be affected by prevailing economic conditions and financial, business, and other factors, some of which
are beyond our control.
If we are unable to successfully commercialize our new business or identify additional sources of revenue, our financial
condition and operations may be materially adversely impacted.
We generate substantially all of our revenue from license and settlement agreements related to our patented technologies.
In 2015, we launched our new cybersecurity advisory business, CybeRisk, and our mobile security business, Finjan Mobile. Since
such businesses are relatively new and unproven, they may not yield any viable new revenue, inventions or technology, which
would lead to a loss of our investment in such activities. Such activities could also distract our management team from its present
business initiatives, which could have a material and adverse effect on our business. If we are unable to generate sufficient revenue
from such businesses or invent or acquire new technologies or products, our financial condition and operations may be materially
impacted. To date, we have not engaged in any material acquisitions of technology or intellectual property assets from unaffiliated
third parties. If we are unable to establish and maintain relationships within our industry, we may not be able to identify new
technology-based opportunities for sustainable revenues and growth. Even if we are successful in establishing relationships with
sources of technology, those relationships may not provide the volume or quality of technology and/or intellectual property assets
necessary to sustain our licensing and enforcement business. If we are unable to identify and establish meaningful relationships
with sources of technology and intellectual property our growth strategy may fail and our financial condition and operations may
be materially adversely impacted.
We may have to invest more resources in research and development than anticipated, which could increase our operating
expenses and negatively impact our operating results.
If new competitors, technological advances by existing competitors, and/or development of new technologies or other
competitive factors require us to invest significantly greater resources than anticipated in our research and development efforts,
our operating expenses could increase significantly. If we are required to invest significantly greater resources than anticipated in
research and development efforts without an increase in revenue, our operating results would decline. We expect research and
development expenses to increase in the foreseeable future as our technology development efforts continue.
We may be unable to achieve the financial or other goals intended at the time of any potential acquisition.
Our growth strategy includes the potential acquisition of patent, technology or other business assets or companies to
further diversify our assets and business operations. We may not be successful in identifying or funding acquisitions that are
consistent with our strategy or in completing such acquisitions. Acquisitions of patent, technology or other business assets or
companies are subject to numerous potential risks, including the following:
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our inability to enter into a definitive agreement with respect to any potential acquisition, or if we are able to enter
into such agreement, our inability to consummate the potential acquisition;
our inability to achieve the anticipated financial and other benefits of a specific acquisition;
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our inability to retain key personnel from an acquired company, if necessary;
difficulty in maintaining controls, procedures and policies during the transition and integration process;
diversion of our management’s attention from other business concerns; and
failure of our due diligence processes to identify significant issues, including issues with respect to patented
technologies and patent portfolios, and other legal and financial contingencies.
If we are unable to manage these risks effectively as part of any acquisition, our business and prospects could be adversely
affected. Depending upon the nature and structure of future acquisitions, our stockholders may not have the ability to vote on, or
consent to, the consummation of any such acquisition.
Technologies we acquire in the future, if any, may not be commercially successful.
We may acquire patents and technologies that are in the early stages of adoption in the commercial and consumer
markets. Demand for some of these technologies may be untested and subject to fluctuation based upon the rate at which such
patents and technologies are adopted in products and services. These technologies may require long development cycles and a
substantial investment before we can determine their commercial viability. As a result, there can be no assurance as to whether
technologies we acquire will have value that can be timely monetized, if at all.
Failures in our due diligence and/or inaccuracies of representations and warranties made by third parties may expose
us to material liabilities, write-downs or write-offs in the future.
We expect to conduct due diligence investigations of the patent technology or other intellectual property assets of
companies we seek to acquire in the future. Due diligence is time consuming and expensive and, at times, we may also rely on
opinions or representations or warranties of third parties to supplement, replace or support our own independent due diligence.
Even if we conduct extensive due diligence on particular patent technology or other intellectual property assets or companies, this
diligence may not reveal all material issues that affect the acquisition. If our diligence fails to identify issues related to the applicable
patent, technology or other intellectual property assets or companies or industry to which they relate, or opinions, representations
or warranties prove to be inaccurate, we may be forced to later write-down or write-off assets, or incur impairment or other charges
that could result in our reporting losses. Even though these charges may be non-cash items and not have an immediate impact on
our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our common
stock. In addition, we may acquire patent technologies or other intellectual property assets or companies from a seller who does
not have proper title to those assets. In those cases, we could lose part or all of our investment in the assets.
Our acquisitions of technology and patent assets may be time consuming, complex and costly, which could adversely
affect our operating results.
Acquisitions of patent, technology or other intellectual property assets or companies may be time consuming, complex
and costly to consummate. As a result, we expect to incur significant operating expenses and may be required to raise capital during
the negotiations even if the acquisition is ultimately not consummated. We may incur significant costs to organize and negotiate
a structured acquisition that does not ultimately result in an acquisition of any patent, technology or other intellectual property
assets or companies or, if consummated, proves to be unprofitable for us. These costs could adversely affect our operating results,
and if we incur losses, the value of our securities could decline.
It may be difficult for us to verify royalty amounts that we are owed under licensing agreements, and this may cause
us to lose revenues.
We anticipate that the terms of future license agreements may require licensees to document their use of our technologies
and report related data to us on a periodic basis. Although license terms may give us the right to audit books and records of licensees
to verify this information, audits can be expensive and time consuming, and may not be cost-effective based on our understanding
of a licensee’s business. Furthermore, any license compliance program that we establish to audit certain licensees in order to review
the accuracy of the information contained in their royalty reports may not be effective to ensure that we receive royalties to which
we are entitled.
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We depend on key senior management, engineering, patent and licensing resources.
Our future success depends largely upon the continued contributions of our directors, executive officers and other key
management and technical personnel. Our success also depends on our ability to continue to attract, retain and motivate qualified
personnel with specialized patent, licensing, and other skills (particularly in the cybersecurity field). The loss of members of our
management or key personnel could adversely affect our business. The market for such talent in our industry is extremely
competitive, especially in Silicon Valley. In particular, competition exists for qualified individuals with expertise in patents and
in licensing and the ability to identify and acquire technologies and patent assets. The failure to attract and retain such persons
with relevant and appropriate experience could interfere with our ability to enter into new license agreements, acquire new
technologies or otherwise meet our strategic objectives.
The success of our cybersecurity business depends in part upon our ability to retain the best legal counsel to represent
us in patent litigation and our ability to manage the costs of such services.
The success of our licensing and enforcement business depends upon our ability to retain the best legal counsel to advise
us and manage our enforcement and litigation activities and our ability to manage the costs of such services. As our licensing and
enforcement actions increase, it may become more difficult to find the best legal counsel to handle our active litigation cases, as
conflicts may prevent them from representing us. Also, since the cost of litigation can be very uncertain, we may underestimate
the cost of legal counsel and related activities, in relation to the value of the enforcement activity.
Federal courts are becoming more crowded, and as a result, patent enforcement litigation is taking longer and becoming
more costly.
Since patent disputes involving infringement, validity, and enforceability are governed by federal law, our patent
enforcement actions are decided within the federal court system. The federal court calendars are often congested with other civil
and criminal proceedings, giving rise to the risk of delays in our patent enforcement actions. Such delays may have a negative
impact on resolution of our disputes, adversely affect the timing of our cash flow projections and, therefore, have a negative impact
on our business. Further, lengthening of the litigation process increases the cost of litigation thereby harming our business.
Any reductions in the funding of the USPTO could have an adverse impact on the cost of processing pending patent
applications and the value of those pending patent applications.
Our business plan includes the possible acquisition of patent applications pending before the USPTO. The value of any
patent application we acquire will be dependent upon the issuance of patents in a timely manner, and any reductions in the funding
of the USPTO could materially delay the process by which the USPTO issues patents and consequently any income that may be
derived for the technologies claimed in the patent application. Further, reductions in funding from Congress could result in higher
patent application filing and maintenance fees charged by the USPTO, causing an unexpected increase in our expenses.
Competition for patent rights and patent portfolios is intense.
We expect to encounter significant competition in the areas of cybersecurity technology and intellectual property
acquisitions. This includes a growing number of competitors seeking to acquire the same companies or similar patents and
technologies that we may seek to acquire. We also compete with venture capital firms, strategic corporate buyers and various
industry leaders for technology acquisitions and licensing opportunities.
The markets served by our cybersecurity technologies are subject to rapid technological change, and if we are unable
to acquire new technologies and patents, our ability to generate income could be substantially impaired.
The markets served by our cybersecurity technologies and our licensees frequently undergo transitions in which products
rapidly incorporate new features and performance standards on an industry-wide basis. Cybersecurity products are based on
continually evolving consumer demands. This will require continued efforts and success in acquiring new patent portfolios with
licensing and enforcement opportunities. If we are unable to acquire new patented technologies and patent portfolios, or to identify
and ensure compliance with evolving industry standards, our ability to generate income could be substantially impaired and our
business and financial condition could be materially harmed.
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Our public company disclosure obligations may have unintended adverse consequences on our licensing and patent
enforcement strategy.
As a public company, we are subject to the disclosure and reporting requirements under the Securities Exchange Act of
1934, as amended, and other applicable U.S. securities laws, as well as the rules and regulations of the SEC and NASDAQ. In
order to comply with such laws, rules and regulations, we may be required to disclose certain information that may be detrimental
to our current or future licensing and enforcement programs. In addition, our disclosure obligations may adversely affect our ability
to enter into license or settlement agreements with third parties who are reluctant to have the monetary value and terms of such
agreements publicly disclosed. In such instances, we may seek confidential treatment of certain information reflected in our license
or settlement agreements, which requests may be denied by the SEC or limited to a greater extent than requested, which would
harm our relationship with current and future licensees. Also, we may incur additional costs and expenses seeking confidential
treatment of certain information reflected in such license or settlement agreements, which would negatively impact our operations.
New legislation, regulations, executive orders, or rules related to obtaining patents or enforcing patents could
significantly increase our operating costs and decrease our income.
If new legislation, regulations or rules are implemented either by Congress, the USPTO, other regulatory agencies or the
courts, or if the President of the United States issues executive orders that impact the patent application process, the patent
enforcement process or the rights of patent holders, these changes could materially and negatively affect our revenue and expenses.
For example, relatively new rules regarding the burden of proof in patent enforcement actions could significantly increase the cost
of our enforcement actions, and new standards or limitations on liability for patent infringement or limitations on the ability to
bring patent enforcement claims could negatively impact our income derived from such enforcement actions. Similarly, recent
judicial decisions relating to fee shifting in patent infringement actions and limitations relating to software patents may make
patent licensing and enforcement activities more difficult and costly, though it is unclear what the precise impact of these judicial
decisions will be.
Furthermore, U.S. patent laws have been amended by the Leahy-Smith America Invents Act, or the AIA, certain sections
of which became effective in September 2011. The AIA includes a number of significant changes to U.S. patent law. In general,
the legislation attempts to address issues surrounding the enforceability of patents and the increase in patent litigation by, among
other things, establishing new procedures for patent litigation. For example, the AIA changes the way that parties may be joined
in patent infringement actions, increasing the likelihood that such actions will need to be brought individually against parties
allegedly infringing by their respective allegations of infringement. In practice, however, many courts have consolidated separate
actions asserting the same patent for the purposes of case management and discovery, although individual trials remain separate.
In addition, accused infringers may now choose to attack patent validity by instituting an IPR process before the PTAB. In 2015,
in In Re Cuozzo Speed Techs., 793 F.3d 1268 (Fed. Cir. 2015), the Federal Circuit upheld a decision permitting the PTAB to evaluate
patent claims under a “broadest reasonable interpretation” standard. This standard used by the PTAB is higher than the “plain and
ordinary meaning” standard used in federal district courts, and has led to an arguably higher incidence of the PTAB finding claims
invalid in light of prior art. In January 2016, the Supreme Court agreed to hear the appeal on this issue as well as the issue of what
decisions by the PTAB are appealable to the traditional appellate court system. It remains unclear what, if any, impact the AIA
will have on the operation of our patent monetization and enforcement business. However, the AIA and its implementation could
increase the uncertainties and costs surrounding the enforcement of our patented technologies, which could have a material adverse
effect on our business and financial condition.
In September 2013, the United States Federal Trade Commission ("FTC") announced that it was planning to gather
information from approximately 25 companies that are in the business of buying and asserting patents in order to develop a better
understanding of how those companies do business and impact innovation and competition. The FTC released its study in October
2016. One of the outcomes of such study is the FTC’s proposed reforms to:
• Address the imbalances between the cost of litigation discovery for plaintiffs asserting patents and defendants
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defending their patents;
provide the courts and defendants with more information about the plaintiffs that have filed infringement lawsuits;
streamline multiple cases brought against defendants on the same theories of infringement; and
provide sufficient notice of these infringement theories as courts continue to develop heightened pleading
requirements for patent cases.
We are still analyzing how such reforms could affect our business and financial condition.
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In addition, the United States Department of Justice ("DOJ") has conducted reviews of the patent system to evaluate the
impact of patent assertion entities on industries in which those patents relate. It is possible that the findings and recommendations
of the DOJ could impact the ability to effectively license and enforce standards-essential patents and could increase the uncertainties
and costs surrounding the enforcement of any such patented technologies.
Furthermore, in various pending litigation and appeals in the United States Federal courts, various arguments and legal
theories are being advanced to potentially limit the scope of damages a patent licensing company might be entitled to. Any one of
these pending cases could result in new legal doctrines that could make our existing or future patent portfolios less valuable or
more costly to enforce.
On April 29, 2014, the United States Supreme Court ("Supreme Court") issued a decision, Octane Fitness, LLC v. Icon
Health & Fitness, Inc., 134 S. Ct. 1749 (2014), relaxing the standard for awarding attorneys’ fees to prevailing parties in patent
cases. While the Supreme Court maintained the standard that a case must be deemed “exceptional” under 35 U.S.C. § 285 for an
award of attorneys’ fees, it held that district courts were to consider the “totality of the circumstances” in making that determination,
that it was not necessary for a court to find independently sanctionable conduct or both objective baselessness and subjective bad
faith, and that clear and convincing evidence was not required. Although we are committed to litigating our patent cases in the
court room with the highest standard of professional conduct and on the merits of our claims, litigation is unpredictable. We,
therefore, cannot guarantee that we will prevail in our litigation matters or that we will not be ordered to pay the prevailing party’s
attorneys’ fees, which may be substantial.
On June 19, 2014, the Supreme Court issued a landmark decision in which it significantly tightened the standard for
patentability of software patents. Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014). Specifically, the Supreme Court
stated that if you have an idea so abstract that it cannot be patented, simply tying it to a “generic computer cannot transform a
patent-ineligible abstract idea into a patent-eligible invention.” The Supreme Court further stated that tying the abstract idea to
“purely functional and generic” hardware would, similarly, not make the idea patentable. Arguably, the Alice decision is intended
to limit the validity of poor quality software patents. The Alice decision may provide accused infringers of software patents new
arguments to challenge the validity of such patents. Practically, the effects of the Alice decision are still being assessed as patent
holders, attorneys, the USPTO, and courts, are trying to determine the proper bounds of the Alice decision. We cannot guarantee
that the Alice decision and ensuing developments will not have a negative impact on our business.
On June 16, 2015, the Court of Appeals for the Federal Circuit ("Federal Circuit") issued an opinion which may lead to
more patents being challenged on indefiniteness grounds. Williamson v. Citrix Online, LLC, 792 F.3d 1339 (Fed. Cir. 2015). One
type of patent claim is a “means-plus-function” claim. Section 112(f) of the Patent Act requires that means-plus-function claims
include a “corresponding structure,” described in the specification, for performing the function. Previous cases had held that if a
claim did not include the word “means,” there was a strong presumption that the requirements of section 112(f) did not apply. The
Williamson court removed the word “strong” from the presumption, as well as the requirement for a heightened evidentiary showing.
Williamson may result in an increase in accused infringers challenging patent claims on indefiniteness grounds. Such result could
have a material adverse effect on our business and operations.
Further, and in general, it is impossible to determine the extent of the impact of any new laws, regulations or initiatives
that may be proposed, or whether any of the proposals will become enacted as laws. Compliance with any new or existing laws
or regulations could be difficult and expensive, affect the manner in which we conduct our business and negatively impact our
business, prospects, financial condition and results of operations.
Our operations are subject to risks of natural disasters, acts of war, terrorism or widespread illness, any one of which
could result in a business stoppage and negatively affect our operating results.
Our business operations depend on our ability to maintain and protect our facility, computer systems and personnel, which
are primarily located in East Palo Alto. Our business operations are in close proximity to known earthquake fault zones. Our facility
and transportation for our employees are susceptible to damage from earthquakes and other natural disasters such as fires, floods
and similar events. Should earthquakes or other catastrophes such as fires, floods, power outages, communication failures or similar
events disable our facilities, we do not have readily available alternative facilities from which we could conduct our business,
which stoppage could have a negative effect on our operating results. Acts of terrorism, widespread illness and war could also
have a negative effect at our international and domestic facilities and on our operating results.
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Risks Related to Our Common Stock
The market value of our stock has, in the past, and may, in the future, not meet the minimum Market Value of Listed
Securities (“MVLS”) for continued listing on the NASDAQ Capital Market. Our ability to publicly or privately sell equity
securities and the liquidity of our common stock could be adversely affected if we are delisted from The NASDAQ Capital
Market.
As previously reported on our Current Report on Form 8-K filed on December 22, 2016, on December 16, 2016, we
received a letter from the staff of the Listing Qualifications Department of The NASDAQ Stock Market LLC (“Nasdaq”) notifying
us that we were not in compliance with Nasdaq Listing Rule 5550(b)(2), as the Company’s market value of listed securities
(“MVLS”) was below $35 million for the previous 30 consecutive business days. In accordance with Nasdaq Listing Rule 5810
(c)(3)(C), the Company has a period of 180 calendar days, or until June 14, 2017, to regain compliance with the minimum MVLS
requirement. To regain compliance, the Company’s MVLS must close at $35 million or more for a minimum of 10 consecutive
business days during the 180 calendar day compliance period.
At the expiration of the 180-day grace period, if we have not regained compliance with the minimum MVLS requirement,
we may request a hearing to remain on the NASDAQ Capital Market. If we do not regain compliance by the end of the 180-day
grace period or are not granted a hearing, Nasdaq will notify us that our common stock will be subject to delisting.
There can be no assurance that we will maintain or regain compliance with the requirements for listing our common stock
on the NASDAQ Capital Market or that we would be granted a hearing. Delisting from Nasdaq would likely cause our stock to
become even more thinly traded, making it more difficult for stockholders to sell large blocks of shares and for us to raise additional
capital on terms acceptable to us, or at all. Delisting could also have other negative results, including the loss of analyst coverage,
the loss of confidence by investors, increased employee turnover, and the inability to timely close licensing and other business
transactions required for the growth of our business.
Concentration of ownership among our existing executive officers, directors and their affiliates, and others who
beneficially own at least 10% of our outstanding common stock, may prevent new investors from influencing significant
corporate decisions.
Our executive officers, directors and their affiliates, together with others who own at least 10% of our outstanding common
stock, beneficially own or control approximately 65% of our common stock. Accordingly, these persons, acting individually or as
a group, will have substantial influence over the outcome of a corporate action requiring stockholder approval, including the
election of directors, any merger, consolidation or sale of all or substantially all of our assets or any other significant corporate
transaction. These stockholders may also exert influence in delaying or preventing a change in control of our company, even if
such change in control would benefit our other stockholders. In addition, the significant concentration of stock ownership may
adversely affect the market value of our common stock due to investors’ perception that conflicts of interest may exist or arise.
Future sales by us or our existing stockholders could dilute our stockholders and depress the market price of our
common stock.
Based on information contained in a Schedule 13D/A filed on February 14, 2017 and in Form 4 filings made in January
and March 2017, two of our significant stockholders sold approximately 137,000 shares and 20,000 shares , respectively, of our
common stock in the past fifteen months. While it is not easy to quantify how such sales may have depressed our share price, if
these stockholders continue to sell, or other existing stockholders sell a large number of shares of our common stock, or if we sell
additional common stock or securities that are convertible into common stock, in the future, the market price of our common stock
could decline. Further, even the perception in the public market that we or our existing stockholders might sell shares of common
stock could depress the market price of our common stock.
In addition, the issuance of additional shares by us, including the issuance of 2,196,836 shares of our common stock
underlying outstanding stock options and restricted stock units, 1,229,704 of which were vested as of December 31, 2016, could
dilute our stockholders’ ownership and voting interests in the Company and increase the number of shares of our common stock
eligible for resale in the public market. Further, our board of directors recently approved an increase in the number of shares
reserved under our 2014 Incentive Compensation Plan (“2014 Plan”). While such increase under the 2014 Plan is subject to
approval of our stockholders, following such approval, the issuance of shares of our common stock underlying stock options and
restricted stock units to be issued following such increase will dilute our stockholders’ ownership and voting interests in the
Company and increase the number of shares of our common stock eligible for resale in the public market.
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Our Common Stock may be affected by limited trading volume and price fluctuations, which could adversely impact
the value of our Common Stock.
There currently is only limited trading of our common stock.
The stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of companies with securities traded in those markets. Broad market and industry
factors may seriously affect the market price of companies’ stock, including ours, regardless of actual operating performance.
Market prices for public companies whose principle revenues are derived from the licensing of intellectual property have
been particularly volatile. We believe that various factors may cause the market price of our common stock to fluctuate, perhaps
substantially, and the factors include, among others, the following:
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quarterly variations in our operating results compared to market expectations;
our raising or failure to raise additional capital;
the risk of our inability to continue to meet listing requirements of the NASDAQ;
developments in relationships with licensees;
our or our competitors’ technological innovations;
announcements of developments in our patent enforcement actions
our failure to meet or exceed securities analysts’ expectations of our financial results;
a change in financial estimates or securities analysts’ recommendations;
changes in management’s or securities analysts’ estimates of our financial performance;
changes in market valuations of similar companies;
regulatory developments and court decisions that negatively impact the ability of patent owners to protect their assets.
actual or expected sales of our common stock by our stockholders, including any of our significant stockholders.
Our common stock may be considered a “penny stock.”
The SEC has adopted regulations, which generally define “penny stock” to be an equity security that has a market price
of less than $5.00 per share, subject to specific exemptions. The market price of our common stock is less than $5.00 per share
and therefore may be a “penny stock.” Brokers and dealers effecting transactions in “penny stock” must disclose certain information
concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable
to purchase the securities. These rules may restrict the ability of brokers or dealers to sell our common stock and may affect your
ability to sell shares of our common stock in the future.
Our stockholders may experience significant dilution if future equity offerings are used to fund operations or acquire
complementary businesses.
Our authorized capital stock consists of eighty million (80,000,000) shares of common stock, one hundred two thousand
(102,000) shares of Series A Preferred stock and nine million eight hundred ninety-eight thousand (9,898,000) shares of blank
check preferred stock. If we engage in capital raising activities in the future as we did in May 2016 (though on a non-dilutive
basis), including issuances of common stock or securities that are convertible into, or exercisable for, our common stock, to fund
the growth of our business, our stockholders could experience significant dilution. In addition, securities issued in connection with
future financing activities or potential acquisitions may have rights and preferences senior to the rights and preferences of our
common stock. We have adopted an equity incentive plan pursuant to which equity awards may be granted to eligible employees
(including our executive officers), directors and consultants, if our board of directors determines that it is in the best interest of
the Company and our stockholders to do so. The issuance of shares of our common stock upon the exercise of any such equity
awards may result in dilution to our stockholders and adversely affect our earnings.
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If securities or industry analysts do not publish, or cease publishing, research or reports about us, our business or our
market, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could
decline.
The trading market for our common stock may be influenced by whether industry or securities analysts publish research
and reports about us, our business, our market or our competitors and, if any analysts do publish such reports, what they publish
in those reports. We may not obtain analyst coverage in the future. Any analysts that do cover us may make adverse recommendations
regarding our stock, adversely change their recommendations from time to time, and/or provide more favorable relative
recommendations about our competitors. If any analyst who may cover us in the future were to cease coverage of our company
or fail to regularly publish reports on us, or if analysts fail to cover us or publish reports about us at all, we could lose, or never
gain, visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial
results or prevent fraud and our stock price may be adversely affected.
Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we
cannot provide reliable financial reports or prevent fraud, our operating results could be harmed. Any system of internal control
over financial reporting, regardless of how well designed, operated and evaluated, can provide only reasonable, not absolute,
assurance that its objectives will be met. We have experienced material weaknesses in the past and we cannot be certain that in
the future material weaknesses or significant deficiencies will not exist or otherwise be discovered. Any weaknesses or deficiencies
could result in misstatements of our results of operations, restatements of our consolidated financial statements, inability to timely
file periodic reports, a decline in our stock price and investor confidence, or other material effects on our business, reputation,
results of operations, financial condition or liquidity.
Anti-takeover provisions in our charter and bylaws may prevent or frustrate attempts by stockholders to change the
board of directors or current management and could make a third-party acquisition of our company difficult.
Our certificate of incorporation and bylaws contain provisions that may discourage, delay or prevent a merger, acquisition
or other change in control that stockholders may consider favorable, including transactions in which stockholders might otherwise
receive a premium for their shares. These provisions include the following:
•
•
•
•
•
•
our certificate of incorporation authorizes our board of directors, without the approval of our stockholders, to establish
classes or series of preferred stock with such rights, privileges and preferences as our board determines (i.e., “blank check”
preferred stock), including rights that may be senior to those of our common stockholders, which could be used to
discourage an unsolicited acquisition proposal;
our certificate of incorporation provides for a classified board of directors with staggered terms, which could delay or
otherwise make it more difficult for an outsider to gain control of our board of directors;
our certificate of incorporation requires supermajority voting to approve certain amendments to our certificate of
incorporation and bylaws;
our certificate of incorporation prohibits stockholders from acting by written consent or calling a special meeting, which
could make it more difficult for stockholders to wage a proxy contest for control of our board of directors or to vote to
repeal any of the antitakeover provisions contained in our certificate of incorporation and bylaws;
our certificate of incorporation provides that directors may only be removed for cause by a supermajority vote of our
stockholders; and
our bylaws contain advance notice provisions with respect to nominees for election to our board of directors.
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If we issue shares of preferred stock, investments in common stock could be diluted or subordinated to the rights of
the holders of preferred stock.
Our board of directors is authorized by our Certificate of Incorporation to establish classes or series of preferred stock
and fix the designation, powers, preferences and rights of the shares of each such class or series without any further vote or action
by our stockholders. Any shares of preferred stock so issued could have priority over our common stock with respect to dividend
or liquidation rights. For instance, we issued 102,000 shares of Series A Preferred Stock in May 2016. Under the terms of such
Series A Preferred Stock, with respect to payment of dividends and distribution of assets upon liquidation, dissolution or winding
up of the Company, whether voluntary or involuntary, the shares of the Series A Preferred Stock shall rank senior to all other
classes of securities of the Company. Further, the issuance of shares of preferred stock, or the issuance of rights to purchase such
shares, could be used to discourage an unsolicited acquisition proposal. For instance, the issuance of a series of preferred stock
might impede a business combination by including class voting rights that would enable a holder to block such a transaction. In
addition, under certain circumstances, the issuance of preferred stock could adversely affect the voting power of holders of our
common stock. Although our board of directors is required to make any determination to issue preferred stock based on its judgment
as to the best interests of our stockholders, our board of directors could act in a manner that would discourage an acquisition attempt
or other transaction that some, or a majority, of our stockholders might believe to be in their best interests or in which such
stockholders might receive a premium for their stock over the then-market price of such stock. Presently, our board of directors
does not intend to seek stockholder approval prior to the issuance of currently authorized preferred stock, unless otherwise required
by law or applicable stock exchange rules. Although we have no plans to issue any additional shares of preferred stock or to adopt
any new series, preferences or other classification of preferred stock, any such action by our board of directors or issuance of
preferred stock by us could dilute your investment in our common stock and warrants or subordinate your holdings to such shares
of preferred stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None
ITEM 2. PROPERTIES.
Our headquarters are located at 2000 University Avenue, Suite 600, East Palo Alto, CA 94303, which we lease pursuant
to a sublease entered into in January 2015. Finjan, Finjan Mobile and CybeRisk are based at the headquarters location. The initial
term of the sublease terminates in September 2018. In December 2016, the Company entered into a monthly lease agreement in
Tel Aviv, Israel, where it is conducting operations in support of CybeRisk. The Company also has office leases in New York, NY,
and Menlo Park, CA, which are subleased for the remainder of the lease terms.
We believe that the facilities described above are suitable and adequate for our present purposes and needs in the near
future.
ITEM 3. LEGAL PROCEEDINGS
A. United States District Court Actions
Finjan, Inc. v. FireEye, Inc., Case No. 13-cv-03133SBA, (N.D. Cal)
Finjan filed a patent infringement lawsuit against FireEye, Inc. (“FireEye”) in the United States District Court for the
Northern District of California on July 8, 2013, asserting that FireEye, Inc. is directly and indirectly infringing certain claims of
Finjan’s U.S. Patent Nos. 6,804,780, 7,058,822, 7,647,633, 7,975,305, 8,079,086, and 8,225,408, through the manufacture, use,
importation, sale, and/or offer for sale of its products and services, including but not limited to FireEye’s Threat Protection Platform,
including the FireEye Malware Protection System, the FireEye Dynamic Threat Intelligence, and the FireEye Central Management
System. Finjan amended its Complaint on August 16, 2013, to add U.S. Patent No. 6,154,844 to the list of asserted patents. The
principal parties in this proceeding are Finjan, Inc. and FireEye, Inc. Finjan seeks entry of judgment that FireEye, Inc. has infringed,
is infringing, and has induced infringement of the above-listed patents, a preliminary and permanent injunction from infringing,
or inducing the infringement of the above-listed patents, an accounting of all infringing sales and revenues, damages of no less
than a reasonable royalty and consistent with proof, enhanced damages, and enhanced damages for willful infringement, costs,
interest, and reasonable attorneys’ fees under 35 U.S.C. §285. FireEye, Inc. answered Finjan's Amended Complaint on September
3, 2013, by denying Finjan's allegations of infringement and counterclaiming that the asserted patents are invalid under 35 U.S.C.
§§ 101, 102, 103 and/or 112. Both parties have demanded a jury trial. On June 2, 2014, the Honorable Saundra Brown Armstrong
entered an Order Granting Motion to Stay Pending Reexamination of U.S. Patent Nos. 7,058,822 (“the ‘822 Patent”) and 7,647,633
(“the ‘633 Patent”). Accordingly, the action was placed off calendar until the U.S. Patent and Trademark Office ("USPTO")
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completed its administrative reexamination proceedings. On February 16, 2016, the USPTO issued an Ex Parte Reexamination
Certificate confirming the validity of claims 1-8 and 16-27 of the ‘822 Patent. On May 31, 2016, pursuant to the Court’s Order
Granting Motion to Stay Pending Reexamination, the parties filed a joint status report regarding the status of reexamination
proceedings of the ‘822 and ‘633 Patents. On September 16, 2016, the USPTO issued an Ex Parte Reexamination Certificate
confirming the validity of claims 1-7 and 28-33 of the ‘633 Patent. On October 4, 2016, the Court directed the parties that if
FireEye intends to file a Renewed Motion to Stay, it must do so by November 4, 2016. On November 3, 2016, FireEye filed its
Renewed Motion for Stay. Finjan's response to the motion was filed November 17, 2016, and FireEye filed a reply on November
23, 2016. The Court vacated the hearing on the Motion to stay scheduled for December 14, 2016 and stated that the Motion will
be decided on the pleadings. There can be no assurance that Finjan will be successful in settling or litigating these claims.
Finjan, Inc. v. Blue Coat Systems, Inc., Case No. 13-cv-03999-BLF (N.D. Cal.)
Finjan filed a patent infringement lawsuit against Blue Coat Systems, Inc., (“Blue Coat”) in the United States District
Court for the Northern District of California on August 28, 2013, asserting that Blue Coat is directly and indirectly infringing
certain claims of Finjan’s U.S. Patent Nos. 6,154,844, 6,804,780, 6,965,968, 7,058,822, 7,418,731, and 7,647,333. The principal
parties in this proceeding are Finjan and Blue Coat. This action is before the Honorable Judge Beth Labson Freeman. The Court
held a claim construction hearing, or Markman Hearing, for this matter on August 22, 2014. The Court entered its Markman Order
entitled “Order Construing Claims in U.S. Patent Nos. 6,154,844, 7,058,822, 7,418,731, and 7,647,633," on October 20, 2014,
which is available on PACER (www.pacer.gov), as Docket No. 118. Trial for this action took place from July 20, 2015 through
August 4, 2015. On August 4, 2015, the jury returned a unanimous verdict that each of the Finjan asserted patents are valid and
enforceable. Further, the jury returned a unanimous verdict that Finjan’s U.S. Patent Nos. 6,154,844, 6,804,780, 6,965,968, and
7,418,731 were literally infringed by Blue Coat, and that U.S. Patent No. 7,647,633 was infringed by Blue Coat under the Doctrine
of Equivalents. Upon the findings of infringement, the jury also awarded Finjan approximately $39.5 million in damages as
reasonable royalties for Blue Coat's infringement. On September 9, 2015, the Court held a bench trial on non-jury legal issues,
and issued findings of fact and conclusions of law on November 20, 2015. On November 20, 2015, the Court entered Judgment
in favor of Finjan. On January 29, 2016, the Court taxed costs against Blue Coat. A hearing for the parties’ post-trial motions
was held on April 28, 2016. On July 18, 2016, the Court issued an order upholding the jury’s verdict of infringement, validity,
and damages, and denying Blue Coat’s motion to amend the Court’s findings of fact and conclusions of law, denying Blue Coat’s
motion for judgment as a matter of law, granting Blue Coat’s motion to amend the judgment to show infringement under the
doctrine of equivalents is moot for U.S. Patent Nos. 6,154,844, 6,804,780, and 6,965,968, denying Blue Coat’s motion for a new
trial, denying Finjan’s motion for enhanced damages, granting Finjan’s motion for pre-and post-judgment interest, and denying
Finjan’s motion for attorneys’ fees. Blue Coat filed a Notice of Appeal to the United States Court of Appeals for the Federal Circuit
on August 17, 2016, and an Amended Notice of Appeal on August 22, 2016. On September 2, 2016, the parties submitted a joint
stipulation for approval of a supersedeas bond and a stay of enforcement of the judgment pending the resolution of Blue Coat’s
appeal. On September 7, 2016, the Court approved Blue Coat’s bond in the amount of $40,086,172.78. Blue Coat filed its Opening
Appellant Brief on December 20, 2016, and appealed the patent eligibility of U.S. Patent No. 6,154,844, infringement of U.S.
Patent Nos. 6,154,844, 6,965,968, and 7,418,731, and the jury’s damages award. Finjan filed its Response Brief on January 30,
2017. Blue Coat filed its Reply Appeal Brief on February 13, 2017. Finjan has not received any revenue from Blue Coat with
respect to this lawsuit. There can be no assurance that Finjan will be successful in collecting the full amount of the jury award.
Finjan, Inc. v. Sophos Inc., Case No. 14-cv-01197-WHO (N.D. Cal.)
Finjan filed a patent infringement lawsuit against Sophos Inc. (“Sophos”) in the United States District Court for the
Northern District of California on March 14, 2014, asserting that Sophos is directly and indirectly infringing certain claims of
Finjan’s U.S. Patent Nos. 6,154,844, 6,804,780, 7,613,918, 7,613,926, 7,757,289, and 8,141,154. Finjan amended the Complaint
on April 8, 2014 to add U.S. Patent Nos. 8,677,494 and 8,566,580 to the list of asserted patents. Finjan asserts infringement against
Sophos through the manufacture, use, importation, sale, and/or offer for sale of its products and services, including but not limited
to End User Protection Suites, Endpoint Antivirus, Endpoint Antivirus - Cloud, Sophos Cloud, Unified Threat Management, Next-
Gen Firewall, Secure Web Gateway, Secure Email Gateway, Web Application Firewall, Network Storage Antivirus, Virtualization
Security, SharePoint Security, Secure VPN, Secure Wi-Fi and Server Security. The principal parties in this proceeding are Finjan
and Sophos. This action is before the Honorable William H. Orrick. Finjan seeks entry of judgment that Sophos has infringed
and is infringing the above-listed patents, a judgment that Sophos has induced infringement of U.S. Patent Nos. 6,804,780,
7,613,918, 7,613,926, 7,757,289, 6,154,844, and 8,667,494, a judgment that Sophos has contributorily infringed U.S. Patent
No. 8,566,580, a preliminary and permanent injunction from infringing, inducing, or contributorily infringing the same patents,
an accounting of all infringing sales and revenues, damages of no less than a reasonable royalty and consistent with proof, enhanced
damages, costs, interest, and reasonable attorneys’ fees under 35 U.S.C. §285. A claim construction or Markman Hearing occurred
on February 13, 2015. The Court entered its Markman Order entitled “Claim Construction Order” on March 2, 2015, which is
available on PACER (www.pacer.gov), as Docket No. 73. On April 9, 2015, Finjan filed a Second Amended Complaint that
included a certificate of correction for the ‘154 Patent. On November 17, 2015, Finjan filed a Third Amended Complaint to add
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claims of Sophos’s willful infringement. Sophos filed an Answer to Finjan’s Third Amended Complaint on December 4, 2015.
On May 24, 2016, the Court issued an order on the parties’ motions to strike, motions for summary judgment, and discovery
matters. In its Order, the Court granted Sophos’ motion for summary judgment of non-infringement for U.S. Patent Nos. 7,757,289
and 7,613,918, denied the remainder of Sophos’ motion for summary judgment, denied Finjan’s motion for summary judgment
of infringement for U.S. Patent Nos. 7,613,926 and 8,677,494, granted Finjan’s motion for summary judgment that certain prior
art references were not publicly accessible, granted Finjan’s motion to strike in part to exclude certain prior art, granted Sophos’s
motion to strike in part to exclude portions of Finjan’s expert reports on infringement, and deferred ruling on Finjan’s motion for
summary judgment of validity for U.S. Patent Nos. 8,141,154, 8,677,494, 6,804,780, 8,154,844 and 7,613,926 after reviewing
supplemental filings to be submitted with the parties’ pre-trial filings. The Court also precluded Sophos from relying on documents
that were produced after the close of fact discovery. A mandatory settlement conference was held on July 25, 2016 with no
settlement. On August 26, 2016, the parties stipulated to withdrawing allegations in the case, including Finjan’s claim of
infringement of U.S. Patent No. 8,566,580.
Trial for this action took place from September 6, 2016 through September 21, 2016. On September 21, 2016, the jury
returned a unanimous verdict that each of the Finjan asserted patents are valid and enforceable. Further, the jury returned a
unanimous verdict that Sophos literally infringed U.S. Patent Nos. 6,154,844; 8,677,494; 6,804,780; 7,613,926 and 8,141,154 and
awarded Finjan $15 million in damages. The jury found that Sophos did not willfully infringe Finjan’s patents. On October 31,
2016, the Court entered Judgment in favor of Finjan. Sophos filed post-trial motions on December 20, 2016, asking the Court to
overturn jury’s determination and to find that there was no infringement, that U.S. Patent Nos. 6,154,844 and 8,677,494 are not
patent eligible, the damages were improper, and that collateral estoppel should apply, or, in the alternative, grant a new trial. The
Court held a hearing on the post-trials motions on January 18, 2017, and on March 14, 2017, the Court issued an order denying
Sophos’ request to overturn the jury’s determination and to find that there was no infringement, held that U.S. Patent Nos. 6,154,844
and 8,677,494 are patent eligible, that damages were proper, that collateral estoppel was not applicable, and denied the request
for a new trial. The Court also granted Finjan’s request for pre- and post-judgment interest. Finjan has not received any revenue
from Sophos with respect to this lawsuit. There can be no assurance that Finjan will be successful in collecting the full amount of
the jury award.
Finjan, Inc. v. Blue Coat Systems LLC, Case No. 5:15-cv-03295-BLF (N.D. Cal.)
Finjan filed a second patent infringement lawsuit against Blue Coat Systems LLC (“Blue Coat”) in the United States
District Court for the Northern District of California on July 15, 2015, asserting that Blue Coat is directly infringing certain claims
of Finjan’s U.S. Patent Nos. 6,154,844, 6,965,968, 7,418,731, 8,079,086, 8,225,408, 8,677,494, and 8,566,580 (collectively, the
“asserted patents”), through the manufacture, use, importation, sale, and/or offer for sale of its products and services, including
but not limited to the Web Security Service, WebPulse Cloud Service, ProxySG Appliances and Software, Blue Coat Systems
SV2800 and SV3800, Malware Analysis Appliances and Software, Security Analytics Platform, Content Analysis System, and
Mail Threat Defense, S400-10 and S400-20. Finjan seeks entry of judgment that Blue Coat has infringed and is infringing the
above-listed patents, a preliminary and permanent injunction from the infringement of the same patents, an accounting of all
infringing sales and revenues, damages of no less than a reasonable royalty consistent with proof, and enhanced damages for
willful infringement, costs, interest, and reasonable attorneys’ fees under 35 U.S.C. §285. Blue Coat filed its Answer to the
Complaint with Jury Demand and Counterclaim with Jury Demand against Finjan on September 8, 2015. On September 29, 2015,
Finjan filed its Answer to Blue Coat’s Counterclaim. This second Blue Coat action is also assigned to the Honorable Beth Labson
Freeman. On December 15, 2015, Blue Coat filed a Motion to Stay the case pending final resolution of Case 5:13-cv-03999-BLF,
and Motions for Joinder of several Petitions for Inter Partes review (“IPR”) on five of seven asserted patents, and Ex Parte
Reexamination requests for two asserted patents, filed previously by other defendants. A case management conference was held
on December 17, 2015. On March 1, 2016 Finjan filed an amended Complaint to add existing Finjan U.S. Patent No. 9,141,786
and two newly issued Finjan U.S. Patent Nos. 9,189,621 (issued November 17, 2015) and 9,219,755 (issued December 22, 2015).
On March 18, 2016, Blue Coat filed its Answer to the Amended Complaint and Counterclaims with Jury Demand. On April 8,
2016, Finjan filed its Answer to Blue Coat’s Counterclaims. On April 28, 2016, the Court held a hearing on Blue Coat’s motion
to stay. On June 10, 2016, Finjan notified the Court on the status of the IPR and Ex Parte Reexamination proceedings for the
asserted patents. On June 27, 2016, Finjan filed an Amended Answer to Blue Coat’s counterclaims, adding an affirmative defense
of collateral estoppel. On June 27, 2016, Blue Coat filed an Amended Answer to Finjan’s Amended Complaint. On July 11, 2016,
Finjan filed a motion to strike certain affirmative defenses in Blue Coat’s Amended Answer, and a reply to Blue Coat’s counterclaims.
On July 26, 2016 the Court denied Blue Coat's motion to stay the second case pending proceedings before the USPTO and the
United States Patent Trial and Appeal Board’s (“PTAB”). On July 28, 2016 Finjan filed a motion for preliminary injunction against
Blue Coat. The preliminary injunction would prohibit Blue Coat from making, using, offering to sell or selling within the U.S.
or import into the U.S. the Dynamic Real-Time Rating component of Blue Coat’s WebPulse product. On August 12, 2016, the
parties filed a joint claim construction statement setting forth the parties’ undisputed and disputed claim terms. On August 19,
2016, the Court issued an Order setting a schedule for discovery relating to Finjan’s preliminary injunction motion. On August
23, 2016, Blue Coat filed a motion to strike Finjan’s infringement contentions on the grounds of collateral estoppel and res judicata,
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which Finjan opposed on September 27, 2016. On September 16, 2016, Blue Coat filed a motion for judgment on the pleadings
under 35 U.S.C. § 101, claiming that the asserted claims of the ‘494 patent are ineligible for lack of patentable subject matter. The
Court held a claim tutorial hearing on February 3, 2017, but cancelled the Markman hearing when Finjan and Blue Coat agreed
to the meaning of all terms. The hearing on Finjan's Motion to Strike Blue Coat's Sixth, Ninth and Tenth Affirmative Defenses,
Finjan's Motion for Preliminary Injunction and Blue Coat's Motion for Judgment on the Pleadings was heard on November 10,
2016. On November 14, 2016, the Court granted-in-part Finjan’s Motion to Strike Blue Coat’s Affirmative Defenses. On November
22, 2016, the Court denied Finjan’s Motion for a Preliminary Injunction. On December 13, 2016, the Court denied Blue Coat’s
Motion for Judgment on the Pleadings. On January 31, 2017, the Court granted-in-part and denied-in-part Finjan’s motion to
compel discovery from Blue Coat. On February 7, 2017, Finjan supplemented its infringement contentions. On February 2, 2017,
the Court granted-in-part and denied-in-part Blue Coat’s Motion to Strike Finjan’s Infringement Contentions. Summary judgment
motions are due to be filed with the Court by May 17, 2017, and a summary judgment hearing is scheduled for June 22, 2017. A
pretrial conference is scheduled for October 5, 2017, and trial is scheduled for October 30, 2017. There can be no assurance that
Finjan will be successful in settling or litigating these claims.
Finjan, Inc. v. Symantec Corporation., Case No. 14-cv-02998-HSG (N.D. Cal.)
Finjan filed a patent infringement lawsuit against Symantec Corporation (“Symantec”) in the United States District Court
for the Northern District of California on June 30, 2014, asserting that Symantec is directly and indirectly infringing certain claims
of Finjan’s U.S. Patent Nos. 7,756,996, 7,757,289, 7,930,299, 8,015,182, and 8,141,154, through the manufacture, use, importation,
sale, and/or offer for sale of certain products and services. Finjan amended the Complaint on September 11, 2014 to add U.S.
Patent Nos. 6,154,844, 7,613,926 and 8,677,494. The accused products and services include Symantec Endpoint Protection,
Symantec Endpoint Protection Small Business Edition, Network Access Control, Norton Internet Security, Norton Anti-Virus,
Norton 360, Safe-Web Lite, Norton Safe Web, Messaging Gateway, Messaging Gateway for Service Providers, Messaging Gateway
Small Business Edition Managed Security Services-Advance Threat Protection, Advanced Threat Protection Solution, Symantec
Protection Engine for Cloud Services, Symantec Protection Engine for Network Attached Storage, Symantec Mail Security for
Domino, Symantec Mail Security for Microsoft Exchange, Symantec Scan Engine for Windows, Web Security.cloud, Email
Security.cloud, AntiVirus/Filtering for Domino, AntiVirus for Linux, Mail Security for SMTP, Scan Engine for Linux/Solaris,
AntiVirus for Caching/Messaging/NAS for Linux/Solaris, Protection Engine for Linux/Solaris, AntiVirus for Caching/Messaging/
NAS for Windows, Web Gateway and Norton Security. The principal parties in this proceeding are Finjan and Symantec. Finjan
seeks entry of judgment that Symantec has infringed and is infringing the asserted patents, has contributorily infringed and is
contributorily infringing U.S. Patent No. 8,015,182, and has induced infringement, and/or is inducing infringement of U.S. Patent
Nos. 6,154,844, 7,613,926, 7,756,996, 7,757,289, 7,930,299, and 8,677,494, a preliminary and permanent injunction from
infringing, contributorily infringing, or inducing the infringement of the same patents, an accounting of all infringing sales and
revenues, damages of no less than a reasonable royalty and consistent with proof, enhanced damages, and enhanced damages for
willful infringement, costs, interest, and reasonable attorneys’ fees under 35 U.S.C. §285. Symantec answered the Amended
Complaint on September 25, 2014, by denying Finjan’s allegations of infringement and counterclaiming that the asserted patents
are invalid under 35 U.S.C. §§ 101, 102, 103 and/or 112. Symantec filed an Amended Answer on October 31, 2014, removing
its Fourteenth Affirmative Defense of unenforceability. Both parties have demanded a jury trial. This matter is assigned to the
Honorable Haywood S. Gilliam, Jr., United States District Judge. A Markman Hearing was heard on June 29, 2015.
On July 3, 2015, Symantec filed petitions for IPR before the PTAB for all asserted claims of U.S. Patent Nos. 8,015,182,
8,141,154, 7,757,289, 7,930,299, and 7,756,996. On September 10, 2015, Symantec filed a total of 11 IPR petitions for all asserted
claims of asserted patents. On August 20, 2015, Symantec filed a motion to stay the case pending completion of these eight IPR
petitions. The motion was heard on October 1, 2015 and on October 9, 2015, the Court stayed the case pending the PTAB’s
decision on whether to institute IPR of the claims that are the subject of Symantec’s petitions. On January 14, 2016, the PTAB
denied institution of six IPRs of five asserted patents. On January 21, 2016, the parties filed a joint status report giving the Court
an update regarding the status of the IPR petitions. On February 26, 2016 the PTAB denied institution of an additional two IPRs
filed on separate patents, denying a total of eight petitions as of February 26, 2016. On March 11, 2016 the PTAB denied two
more IPR's on patents against Symantec, denying a total of 10 petitions to date. On March 18, 2016, the PTAB granted institution
on the 11th Petition by Symantec, relating to U.S. Patent No. 8,677,494 (IPR2015-01892). On March 29, 2016, the parties jointly
requested the Court lift the stay, and on March 30, 2016, the Court lifted the stay. On April 15, 2016, the parties jointly submitted
a proposed schedule to the Court for the remainder of the case. On August 1, 2016 the Court issued a Scheduling Order indicating
a timeline to trial but without specifically identifying a trial date. On August 31, 2016, the parties filed a joint stipulation requesting
that the Court set a date for a settlement conference. There was a settlement conference that took place on March 3, 2017, and the
parties provided an update on settlement discussions on March 17, 2017.
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On August 25, 2016, Symantec filed an administrative motion requesting leave to submit supplemental authority regarding
various claim construction issues and requesting the Court take judicial notice of statements made during and in connection with
the IPR proceedings. Finjan opposed the motion on August 28, 2016. On August 24, 2016, Finjan filed a request that the Court
take judicial notice of the PTAB’s construction of certain claim terms in connection with its denial to institute inter partes review
with respect to U.S. Patent Nos. 7,613,926 and 8,677,494. On August 25, 2016, Finjan filed a request that the Court take judicial
notice of the PTAB’s construction of certain claims in connection with its granting-in-part of inter partes review of U.S. Patent
No. 8,677,494 and denial of inter partes review of U.S. Patent No. 7,613,926. Following a hearing on November 3, 2016, the
Court granted the Motion and ordered the parties to file a joint statement by no later than November 11, 2016, proposing an
expedited schedule for disclosures, briefs, and a Markman hearing if "deemed necessary by the Court". Finjan filed an opening
supplemental claim construction brief on November 29, 2016, Symantec filed a responsive supplemental claim construction brief
on December 13, 2016, and Finjan filed a reply brief on December 20, 2016. A supplemental Markman Hearing was held on
January 20, 2017. The Court issued a Claim Construction Order on February 10, 2017. The Court issued an Order denying
Symantec’s Motion to Strike Finjan’s Infringement Contention and Sanctions on February 15, 2017. Acase management conference
was held on February 21, 2017 to discuss the schedule of the case. On March 14, 2017, the Court issued an order scheduling
summary judgment motions to be filed by September 22, 2017, the pretrial conference to be held on February 27, 2018, and a 10-
day trial to commence on April 9, 2018. There can be no assurance that Finjan will be successful in settling or litigating these
claims.
Finjan, Inc. v. Palo Alto Networks, Inc., Case No. 3:14-cv-04908 PJH (N.D. Cal.)
Finjan filed a patent infringement lawsuit against Palo Alto Networks, Inc. (“Palo Alto Networks”) in the United States
District Court for the Northern District of California on November 4, 2014, asserting that Palo Alto Networks is directly and
indirectly infringing certain claims of Finjan’s U.S. Patent Nos. 6,804,780, 6,965,968, 7,058,822, 7,418,731, 7,613,918, 7,613,926,
7,647,633, 8,141,154, 8,225,408, and 8,677,494, through the manufacture, use, importation, sale, and/or offer for sale of its products
and services, including but not limited to Next-Generation Security Platform, Next-Generation Firewall, Virtualized Firewall,
WildFire Subscription, WildFire Platform, URL Filtering Subscription, Threat Prevention Subscription, and Advanced EndPoint
Protection. Palo Alto Networks failed to timely respond to the Complaint and Finjan submitted an application for Entry of
Default. On Palo Alto Networks’ request, Finjan stipulated to an extension of time for Palo Alto Networks to respond. The
principal parties in this proceeding are Finjan and Palo Alto Networks. Finjan seeks entry of judgment that Palo Alto Networks
has infringed and is infringing the above-listed patents, and has induced infringement and is inducing infringement of U.S. Patent
Nos. 6,804,780, 6,965,968, 7,058,822, 7,418,731, 7613,918, 7,613,926, 7,647,633, 8,141,154, 8,225,408, and 8,677,494, a
preliminary and permanent injunction from infringing, or inducing the infringement the same patents, an accounting of all infringing
sales and revenues, damages of no less than a reasonable royalty consistent with proof, and enhanced damages for willful
infringement, costs, interest, and reasonable attorneys’ fees under 35 U.S.C. §285. Palo Alto Networks filed its Answer and
Counterclaims on December 31, 2015, by denying Finjan's allegations of infringement and counterclaiming that the asserted
patents are invalid under 35 U.S.C. §§ 101, 102, 103 and/or 112. Both parties have demanded a jury trial. On October 8, 2015,
the Honorable Edward M. Chen recused himself from the case and requested the case be reassigned to another judge. Also on
October 8, 2015, the case was reassigned to the Honorable Phyllis J. Hamilton in the Oakland division of the District Court for
the Northern District of California. On September 25, 2015, Palo Alto Networks filed a petition for IPR before the PTAB of U.S.
Patent No. 8,141,154. On September 30, 2015, Palo Alto Networks filed petitions for IPR of U.S. Patent Nos. 7,058,822, 7,418,731,
7,647,633 and 8,225,408. On November 4, 2015, Palo Alto Networks filed an IPR petition of U.S. Patent Nos. 7,613,926. On
November 5, 2015, Palo Alto Networks filed IPR petitions of U.S. Patent Nos. 6,965,968 and 8,141,154. On November 6, 2015,
Palo Alto Networks filed IPR petitions of U.S. Patent Nos. 6,804,780, 7,613,918, 8,225,408 and 8,667,494. On December 10,
2015, the matter was stayed pending a decision by the PTAB on whether to institute IPR of Finjan's claims of its ten patents
asserted against Palo Alto Networks. On March 21, 2016, the PTAB instituted trial on claims 1-8, 10 and 11 of U.S. Patent
No.8,141,154, and on April 20, 2016, the PTAB instituted trial on the same claims from a separate petition. On March 29, 2016,
the PTAB instituted trial on U.S. Patent No. 8,225,408, claims 14 and 19 of U.S. Patent No. 7,647,633, and denied institution of
inter partes review for U.S. Patent Nos. 7,058,822 and 7,418,731. On May 9, 2016, the PTAB denied institution of trial on U.S.
Patent Nos. 7,613,926, 6,965,968, 6,804,780, and 7,613,918. On May 13, 2016, the PTAB instituted trial on U.S. Patent No.
8,677,494. On May 26, 2016, the Court ordered the stay to remain in effect until the PTAB’s final determination of the instituted
IPRs. There can be no assurance that Finjan will be successful in settling or litigating these claims.
Finjan, Inc. v ESET, LLC et al., Case No. 3:16-cv-03731-JD (N.D. Cal.)
Finjan filed a patent infringement lawsuit against ESET, LLC ("ESET, LLC") and ESET SPOL S.R.O. (“ESET SPOL”)
(collectively "ESET") in the United States District Court for the Northern District of California on July 1, 2016, asserting that
ESET infringes Finjan’s U.S. Patent Nos. 6,154,844, 6,804,780, 7,975,305, 8,079,086, 9,189,621, and 9,219,755, through the
manufacture, use, importation, sale, and/or offer for sale of its products and services, including but not limited to, ESET ThreatSense,
ESET Advanced Heuristic, ESET DNA Signature, Host-based Intrusion Prevention System (HIPS), and ESET LiveGrid
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technologies including ESET’S Home Protection, Small Office, and Business product lines and ESET Services. Finjan seeks
entry of a judgment that ESET has infringed and is infringing the asserted patents, a preliminary and permanent injunction from
the infringement of the same patents, an accounting of all infringing sales and revenues, damages of no less than a reasonable
royalty consistent with proof, and enhanced damages for willful infringement, costs, interest, and reasonable attorneys’ fees under
35 U.S.C. § 285. On July 14, 2016, this case was assigned to the Honorable James Donato in the San Francisco division. On July
27, 2016, ESET, LLC filed a motion to dismiss or stay this action on the grounds that ESET, LLC first filed a declaratory judgment
action in the Southern District of California (ESET, LLC v. Finjan, Inc., Case No. 16-cv-01704 (S.D. Cal.)). A hearing was held
on this motion on August 31, 2016, during which the Court stayed this matter pending the Southern District’s resolution of Finjan’s
motion to dismiss ESET, LLC’s declaratory judgment action. On September 16, 2016, the Southern District dismissed ESET
LLC’s declaratory judgment action without prejudice. On September 27, 2016, Finjan filed a notice of supplemental authority
informing the Court that ESET’s declaratory judgment action in the Southern District of California was dismissed without prejudice
and requesting that the Court lift the stay. A Case Management Conference was held on October 6, 2016, wherein the Court
granted Finjan's request to lift the stay, referred the matter to a settlement conference, and ordered service of the Complaint on
ESET's counsel on behalf of ESET SPOL under Federal Rules of Civil Procedure 4(f). On January 27, 2017, the Court ordered
that this Case be transferred to the Southern District of California under 28 U.S.C. § 1404(a). This case was transferred to the
Southern District of California on January 30, 2017 and was assigned to the Honorable Cathy Ann Bencivengo on February 8,
2017, Case No. 3-17-cv-00183 (S.D. Cal.). There can be no assurance that Finjan will be successful in settling or litigating these
claims.
Finjan, Inc. v. ESET, LLC et al., Case No. 3:17-cv-00183 (S.D. Cal.)
Finjan filed a patent infringement lawsuit against ESET, LLC (“ESET, LLC”) and ESET SPOL S.R.O. (“ESET SPOL”)
(collectively, “ESET”) in the United States District Court for the Northern District of California on July 1, 2016 (Case No. 3:16-
cv-03731-JD (N.D. Cal.)), which was transferred to the Southern District of California on January 31, 2017. This action is currently
before the Honorable Cathy Ann Bencivengo. A Case Management Conference was held on March 20, 2017. On October 20,
2016, defendant ESET, LLC filed a motion to dismiss Finjan’s Complaint for failure to state a claim for patent infringement. On
November 2, 2016, defendant ESET SPOL filed a motion to dismiss Finjan’s Complaint for lack of personal jurisdiction and for
failure to state a claim for patent infringement. A hearing regarding ESET’s motions to dismiss was held on March 20, 2017.
There can be no assurance that Finjan will be successful in settling or litigating these claims.
ESET, LLC v. Finjan, Inc., Case No. 16-cv-01704 (S.D. Cal.)
ESET, LLC (“ESET”) filed a Complaint for Declaratory Judgment against Finjan, Inc. (“Finjan”) in the United States
District Court for the Southern District of California on July 1, 2016, asserting that there is an actual controversy between the
parties to declare that ESET does not infringe any claim of U.S. Patent No. 7,975,305 (“the ‘305 Patent”). ESET sought an entry
of judgment that it has not infringed any claim of the ’305 Patent, an injunction against Finjan from asserting any of the claims
in the ‘305 Patent against ESET or any of its customers or suppliers, and a finding that the case is exceptional and an award of
fees and costs under 35 U.S.C. § 285. On July 11, 2016, ESET filed an Amended Complaint for Declaratory Judgment, seeking
entry of judgment that it does not infringe any claim of the U.S. Patent Nos. 6,154,844, 6,804,780, 7,975,305, 8,079,086, 9,189,621,
and 9,219,755. ESET seeks an injunction against Finjan from asserting infringement of these patents against ESET or any of its
customers or suppliers, and a finding that the case is exceptional and an award of fees and costs under 35 U.S.C. § 285. On July
26, 2016, Finjan filed a motion to dismiss the action pursuant to the first-to-file rule, asserting that Finjan was first to file an action
in the Northern District of California with respect to five of the six patents at issue between the parties (Finjan, Inc. v ESET, LLC
et al., Case 3:16-cv-03731-JD (N.D. Cal.). In the alternative, Finjan sought to have the case transferred to the Northern District
of California on the basis that it is the most appropriate venue. On September 26, 2016, the Court granted Finjan’s motion and
dismissed this action without prejudice. ESET has appealed the dismissal to the Court of Appeals for the Federal Circuit. The
Federal Circuit dismissed this Appeal to the Federal Circuit on February 2, 2017 after the Court in Finjan, Inc. v. ESET, LLC et
al., Case 3:16-cv-03731-JD, transferred that case to the Southern District of California.
Finjan, Inc. v. Cisco Systems, Inc., Case No. 17-cv-00072-SK (N.D. Cal.)
Finjan filed a patent infringement lawsuit against Cisco Systems, Inc. (“Cisco”) in the United States District Court for
the Northern District of California on January 6, 2017, asserting that Cisco infringes Finjan’s U.S. Patent Nos. 6,154,844; 6,804,780;
7,647,633; 8,141,154; and 8,677,494 through the manufacture, use, importation, sale, and/or offer for sale of its products and
services, including but not limited to, Cisco’s Advanced Malware Protection, Cisco Collective Security Intelligence, Cisco Outbreak
Filters, Talos Security Intelligence and Research Group, and AMP Threat Grid technologies, including Cisco AMP for Endpoints,
Cisco AMP for Networks (also referred to by Cisco as “NGIPS”), Cisco AMP for ASA with FirePOWER Services, Cisco AMP
Private Cloud Virtual Appliance, Cisco AMP for CWS, ESA, or WSA, Cisco AMP for Meraki MX, Cisco AMP Threat Grid. Finjan
seeks entry of a judgment that Cisco has infringed and is infringing the asserted patents, a preliminary and permanent injunction
from the infringement of the same patents, an accounting of all infringing sales and revenues, damages of no less than a reasonable
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royalty consistent with proof, and enhanced damages for willful infringement, costs, interest, and reasonable attorneys’ fees under
35 U.S.C. § 285. Finjan filed a Proof of Service for January 12, 2017 on January 18, 2017. On March 6, 2017, Cisco answered
Finjan’s Complaint by denying Finjan’s allegations of infringement, and alleging a counterclaim of breach of contract. A case
management conference has been scheduled for June 8, 2017. There can be no assurance that Finjan will be successful in settling
or litigating these claims.
Finjan, Inc. v. ESET SPOL S.R.O. et al., Docket No. 4c O 33/16 (Düsseldorf District Court)
Finjan filed a patent infringement lawsuit against ESET SPOL. S.R.O. (ESET SPOL"), a Slovak Republic Corporation,
and ESET Deutschland GmbH (collectively “ESET”) in the Düsseldorf District Court of Germany on July 1, 2016, asserting that
ESET infringes Finjan’s European Patent No. 0 965 094 B1 (“the ‘094 Patent”), through the offering and/or delivering to customers
in the Federal Republic of Germany software covered by the ‘094 Patent, including but not limited to ESET’s ThreatSense, ESET
Advanced Heuristic, ESET DNA Signature, ESET LiveGrid technologies, including ESET’s Home Users, Small Office, and
Business product lines and ESET services. Finjan seeks a judgment sentencing ESET to a fine for each violation of patent
infringement or, alternatively imprisonment of ESET directors, cease and desist orders for offering or delivering infringing software,
providing Finjan with profit information for offering or delivering infringing software, damages, which Finjan has suffered or
shall suffer as a result of ESET offering or delivering infringing software since November 1, 2008. On November 24, 2016, ESET
filed a nullity action. There can be no assurance that Finjan will be successful in settling or litigating these claims.
Finjan, Inc. v. Blue Coat Systems, Inc., and Blue Coat Systems GmbH., Docket No. 4c O 33/16 (Dusseldorf District Court)
Finjan filed a third patent infringement lawsuit against Blue Coat Systems, Inc., which is its first patent infringement suit
against Blue Coat’s subsidiary Blue Coat Systems GmbH, located in Munich Germany in the Dusseldorf District Court of Germany
on October 14, 2016. Finjan asserts that Blue Coat infringes Finjan’s European Patent No. 0 965 094 B1 (“the ‘094 Patent”),
through the offering and/or delivering to customers in the Federal Republic of Germany software covered by the ‘094 Patent,
including but not limited to Blue Coat’s ProxySG Secure Web Gateway, Blue Coat’s Content Analysis System, Blue Coat’s Malware
Analysis Appliance, Webpulse, Security Analytics, Web Security Service, and Advanced Secure Gateway. Finjan seeks a judgment
sentencing Blue Coat to a fine for each violation of patent infringement or, alternatively imprisonment of Blue Coat’s directors,
cease and desist orders for offering or delivering infringing software, providing Finjan with profit information for offering or
delivering infringing software, damages, which Finjan has suffered or shall suffer as a result of Blue Coat offering or delivering
infringing software since November 1, 2008. There can be no assurance that Finjan will be successful in settling or litigating
these claims.
B. Proceedings before the United States Patent & Trademark Office (USPTO)
Ex Parte Reexamination Proceedings: As defined by the USPTO, an Ex Parte Reexamination is a “proceeding in which
any person may request reexamination of a U.S. Patent based on one or more prior patents or printed publications. A requester
who is not the patent owner has limited participation rights in the proceedings.”
U.S. Patent No. 8,079,086 (Assignee, Finjan, Inc.)
A first third-party request for Ex Parte Reexamination of U.S. Patent No. 8,079,086 was filed on October 7, 2013, on behalf of
FireEye, Inc. and assigned Reexamination Control Number 90/013,015. The USPTO denied FireEye’s request on November 19,
2013, and the reexamination proceedings terminated on January 14, 2014.
A second third-party request by FireEye, Inc., for Ex Parte Reexamination of U.S. Patent No. 8,079,086 was filed on February 7,
2014, and assigned Reexamination Control Number 90/013,147. The USPTO denied FireEye’s second request on March 27, 2014,
and the reexamination proceedings terminated on April 29, 2014.
A third third-party request for Ex Parte Reexamination of Claims 17 and 24 of U.S. Patent No. 8,079,086 was filed on December
9, 2015 by Proofpoint, Inc. and assigned Reexamination Control Number 90/013,654. The reexamination request was partially
granted on February 2, 2016. Requester’s petitioned the Director to reconsider the partial denial and the petition was granted on
March 21, 2016. A response to non-final Office Action was filed on August 10, 2016. On November 23, 2016, the Patent Office
issued a Reexamination Certificate confirming the patentability of all claims.
U.S. Patent No. 7,975,305 (Assignee, Finjan, Inc.)
A third-party request for Ex Parte Reexamination of Claims 1, 2, 5 and 13 of U.S. Patent No. 7,975,305 was filed on December
11, 2015 by Proofpoint, Inc. and assigned Reexamination Control Number 90/013,660. The request for reexamination was granted
on January 19, 2016 and a non-final Office Action was mailed on April 12, 2016. A response to the non-final Office Action was
filed on June 13, 2016. A Final Action was mailed on August 24, 2016 with a response due October 24, 2016. A response to the
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Final Action was filed on October 24, 2016 and a second interview with the Patent Office was conducted. The Patent Office issued
an Advisory Action maintaining the rejections. A Notice of Appeal was filed on November 11, 2016 and an Appeal Brief was
filed on January 23, 2017. Finjan is currently waiting on a response from the Patent Office. There can be no assurance that Finjan
will be successful in rebutting the patentability challenge before the USPTO.
U.S. Patent No. 7,647,633 (Assignee, Finjan, Inc.)
A third-party request for Ex Parte Reexamination of Claims 1-7 and 28-33 of U.S. Patent No. 7,647,633 was filed on October 7,
2013, on behalf of FireEye, Inc. and assigned Reexamination Control Number 90/013,016. The request for reexamination was
granted and a non-final Office Action was mailed November 19, 2013. The non-final Office Action included rejections of Claims
1-7 and 28-33 under various prior art (including previously considered and disclosed prior art) under 35 U.S.C. §§ 102 and/or
103. An in-person Examiner interview was conducted at the USPTO on February 4, 2014, and a timely response to non-final
Office Action was filed on February 19, 2014. The response to non-final Office Action included arguments and a supporting
declaration by Finjan showing commercial success, industry praise, and copying by others of products covered by pending claims;
a declaration by a technology expert rebutting improper technical interpretations of the prior art and the invention; and additional
new claims for consideration. Additionally, a renewed petition to accept an unintentionally delayed priority claim was also
submitted and the petition was granted on January 23, 2015. An updated filing receipt reflecting the priority claim was issued. A
final Office Action was issued May 22, 2015, and a Notice of Appeal was filed by Finjan on May 22, 2015. Finjan’s appeal brief
was filed August 24, 2015, appealing the rejections of Claims 1-7, 28-33 and 42-52. An Examiner’s Answer was received on
December 18, 2015. Finjan filed its Reply Brief requesting reversal of the rejections and a Request for Oral Hearing February 18,
2016. An Oral Hearing was conducted on June 22, 2016 and a decision reversing the Examiner’s rejections of claim 1-7, 28-33,
42, 44, 48 and 49 was mailed on June 29, 2016. An amendment cancelling rejected claims 43, 45-47 and 50-52 was filed on July
5, 2016 to move the application to Notice of Intent to Issue Reexamination Certificate (NIRC). A Reexamination Certificate
confirming the patentability of original claims 1-7 and 28-33 and new claims 42, 44, 48 and 49 was issued on September 16, 2016.
A second third-party request for Ex Parte Reexamination of Claims 8 and 12 of U.S. Patent No. 7,647,633 was filed on December
9, 2015 by Proofpoint, Inc. and assigned Reexamination Control Number 90/013,652. The reexamination request was granted on
February 3, 2016. On May 10, 2016, the USPTO terminated the reexamination and mailed a Notice of Intent to Issue a Reexamination
Certificate and on May 26, 2016, a Reexamination Certificate was issued confirming the patentability of all claims.
U.S. Patent No. 7,058,822 (Assignee, Finjan, Inc.)
A third-party request for Ex Parte Reexamination of Claims 1-8 and 16-27 of U.S. Patent No. 7,058,822 was filed on October 7,
2013, on behalf of FireEye, Inc. and assigned Reexamination Control Number 90/013,017. The request for reexamination was
granted and a non-final Office Action was mailed December 6, 2013. The non-final Office Action included rejections of Claims
1-8 and 16-27 under various prior art (including previously considered and disclosed prior art) under 35 U.S.C. §§ 102 and/or
103. An in-person Examiner interview was conducted at the USPTO on February 4, 2014, and a timely response to non-final
Office Action was filed on March 6, 2014. A final Office Action was mailed on September 8, 2014 and a response thereto was
filed on October 8, 2014, which included proposed claims amendments and arguments rebutting the various prior rejections. On
October 23, 2014, an Advisory Action was issued by the Patent Office maintaining the rejections from the final Office Action and
indicating that Finjan’s proposed claims amendments would not be entered. On December 8, 2014, Finjan: (1) filed a petition to
the Director of the Central Reexamination Unit (CRU) under 37 CFR 1.181 challenging the Examiner’s failure to enter the
amendments and requesting entry; and (2) a notice of appeal to the Patent Trial and Appeal Board. Finjan filed an appeal brief on
February 8, 2015. The Examiner filed a brief on March 30, 2015. Finjan filed a Reply Brief and a Request for Oral Hearing on
June 1, 2015, and the Appeal was docketed at the PTAB and assigned Appeal No. 2015-006304. An oral hearing before the PTAB
took place on November 3, 2015. On December 30, 2015, the PTAB issue a decision reversing the Examiner’s rejection of Claims
1-8 and 16-27 and new claims 37 and 40 added during prosecution of the reexamination. On February 16, 2016, an Ex Parte
Reexamination Certificate (Certificate No. US 7,058,822 C1) was issued to Finjan by the USPTO. Finjan was granted U.S. Patent
Nos. 9,141,786 and 9,219,755 containing additional claims on September 22, 2015 and December 2, 2015, respectively.
U.S. Patent No. 6,154,844 (Assignee, Finjan, Inc.)
A third-party request for ex parte reexamination of claims 32 and 42 of U.S. Patent No. 6,154,844 was filed on December 9, 2015
by Proofpoint, Inc. and assigned Reexamination Control Number 90/013,653. The request for reexamination was granted on
January 13, 2016. On March 30, 2016, the Patent Office terminated the reexamination and mailed a Notice of Intent to Issue a
Reexamination Certificate. On May 13, 2016, a Reexamination Certificate was issued confirming the patentability of all claims.
U.S. Patent No. 7,930,299 (Assignee, Finjan, Inc.)
A third-party request for ex parte reexamination of claims 13, 14-18, 20 of U.S. Patent No. 7,930,299 was filed on September 16,
2016 and assigned Reexamination Control Number 90/013,811. The request for reexamination was granted on November 14,
2016. On January 17, 2017, Finjan filed a petition to consider pre-institution argument requesting, inter alia, that the Director
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rescind and/or terminate the reexamination pursuant to 35 U.S.C. § 325(d). Finjan is currently waiting on a decision on the Petition.
There can be no assurance that Finjan will be successful in rebutting the patentability challenge before the USPTO.
U.S. Patent No. 8,015,182 (Assignee, Finjan, Inc.)
A third-party request for ex parte reexamination of claims 8-11, 13 of U.S. Patent No. 8,015,182 was filed on September 16, 2016
and assigned Reexamination Control Number 90/013,812. The request for reexamination was granted on October 17, 2016. On
December 19, 2016, Finjan filed a petition to consider pre-institution argument requesting, inter alia, that the Director rescind
and/or terminate the reexamination pursuant to 35 U.S.C. § 325(d). Finjan is currently waiting on a decision on the Petition. There
can be no assurance that Finjan will be successful in rebutting the patentability challenge before the USPTO.
U.S. Patent No. 7,756,996 (Assignee, Finjan, Inc.)
A third-party request for ex parte reexamination of claims 1-7 of U.S. Patent No. 7,756,996 was filed on September 16, 2016 and
assigned Reexamination Control Number 90/013,813. The request for reexamination was granted on November 14, 2016. On
January 17, 2017, Finjan filed a petition to consider pre-institution argument requesting, inter alia, that the Director rescind and/
or terminate the reexamination pursuant to 35 U.S.C. § 325(d). Finjan is currently waiting on a decision on the Petition. There
can be no assurance that Finjan will be successful in rebutting the patentability challenge before the USPTO.
Inter Partes Reexamination Proceedings:
As defined by the USPTO, an Inter Partes Reexamination is a “proceeding in which any person who is not the patent
owner and is not otherwise estopped may request examination of a U.S. Patent issued from an original application filed on or after
November 29, 1999, based on one or more prior patents or printed publications. Both patent owner and third party requester have
participation rights throughout the proceeding, including appeal rights.” Effective September 16, 2012, the American Invents Act
(“AIA”) replaced Inter Partes Reexaminations with proceedings referred to as post-grant review and Inter Partes Review (“IPR”).
Post-grant proceedings are generally available immediately after patent issuance. For patents filed under the pre-AIA first to
invent rules (i.e., applications filed prior to March 16, 2013, IPRs can be initiated immediately following issuance of patent. For
patents examined under the AIA first-to-file rules (i.e., applications filed on or after March 16, 2013), IPRs can be initiated after
the nine-month window of eligibility for post-grant review.
U.S. Patent No. 6,480,962 (Assignee, Finjan, Inc.)
A third-party request for Inter Partes Reexamination of all Claims 1-55 of U.S. Patent No. 6,480,962 was filed on November 29,
2011, on behalf of Symantec Corporation, and assigned Reexamination Control Number 95/001,836. The request for reexamination
was granted and a non-final Office Action was mailed January 25, 2012. The non-final Office Action included rejections of claims
1-55 under numerous prior art references and combinations of such references (including previously considered and disclosed
prior art) under 35 U.S.C. §§ 102 and/or 103. Finjan filed a response to non-final Office Action and the USPTO mailed an Action
Closing Prosecution (ACP) on October 2, 2013. Finjan responded to the ACP on December 2, 2013, which included proposed
claim amendments for consideration. Symantec responded on January 2, 2014. On June 27, 2014, the USPTO stated that the
proposed claim amendments would not be entered and issued a Right of Appeal Notice. On July 1, 2014, Finjan filed a Notice
of Appeal of the rejection of Claims 1-55 followed by an Appeal Brief on September 2, 2014. The Requester Symantec filed a
respondent brief on October 2, 2014. The Examiner filed a brief on March 25, 2015. Finjan filed a Rebuttal Brief on April 27,
2015 and a Request for Oral Hearing on May 26, 2015. The Rebuttal Brief maintained Finjan’s request to review the rejections
of Claims 2-4, 7-11, 13-14, 16-20, 22-32, 34-36, 39-44, 46-51, 53 and 54. Claims 1, 5, 6, 12, 15, 21, 33, 37, 38, 45, 52 and 55
were withdrawn from appeal in view the final invalidity decision issued on September 15, 2014 by the Federal Circuit. The Appeal
was forwarded to the PTAB in accordance with the Notice mailed June 2, 2015. Finjan also sought examination of additional
claims through multiple Track I expedited continuation applications. Finjan was granted U.S. Patent Nos. 9,189,621 and 9,291,755
containing those additional claims on November 17, 2015 and December 22, 2015, respectively. Oral argument was heard on
February 17, 2016. On February 29, 2016, the PTAB issued a decision affirming the rejections of the Examiner. On March 29,
2016, Finjan filed a request for rehearing regarding the rejection of claims 22-32 and 46 and the Requester filed comments on
April 28, 2016. The PTAB denied Finjan’s Request for Rehearing on August 5, 2016. Finjan did not appeal the PTAB decision to
the Federal Circuit. A Reexamination Certificate cancelling the rejected claims 2-4, 7-11, 13-14, 16-20, 22-32, 34-36, 39-44,
46-51, 53 and 54 was issued on January 12, 2017.
Inter Partes Review Proceedings:
As defined by the USPTO, Inter Partes Review (“IPR”) is a trial proceeding conducted at the Patent and Trial and Appeal
Board (PTAB or Board) to review the patentability of one or more claims in a patent only on a ground that could be raised under
§§ 102 or 103, and only on the basis of prior art consisting of patents or printed publications. For first-inventor-to-file patents IPR
process begins with a third party (a person who is not the owner of the patent) filing a petition after the later of either: (1) nine
months after the grant of the patent or issuance of a reissue patent; or (2) if a post grant review is instituted, the termination of the
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post grant review. These deadlines do not apply to first-to-invent patents. The patent owner may file a preliminary response to the
petition. An IPR may be instituted upon a showing that there is a reasonable likelihood that the petitioner would prevail with
respect to at least one claim challenged. If the proceeding is instituted and not dismissed, a final determination by the Board will
be issued within one year (extendable for good cause by six months). The procedure for conducting IPR took effect on September
16, 2012, and applies to any patent issued before, on, or after September 16, 2012.
U.S. Patent No. 7,613,926 (the “’926 Patent”)
On March 19, 2015, Sophos, Inc. filed a petition for IPR of U.S. Patent No. 7,613,926 (IPR2015-00907). Finjan filed a Patent
Owner’s Preliminary Response (“POPR”) to the petition on June 26, 2015. The PTAB denied Sophos’ petition to institute the
IPR proceeding on the ‘926 Patent on September 24, 2015. On October 26, 2015, Sophos filed a Request for Rehearing, and on
December 4, 2015, the PTAB denied Sophos’ Request for Rehearing.
U.S. Patent No. 8,677,494 (the “’494 Patent”)
On April 8, 2015, Sophos, Inc. filed a petition for IPR of U.S. Patent No. 8,677,494 (IPR2015-01022). Finjan filed a POPR to
the petition on July 14, 2015. The PTAB denied Sophos’ petition to institute the IPR proceeding on the ‘494 Patent on September
24, 2015. On October 26, 2015, Sophos filed a Request for Rehearing, and on January 28, 2016, the PTAB denied Sophos’ Request
for Rehearing.
U.S. Patent No. 7,756,996 (the “’996 Patent”)
On July 3, 2015, Symantec Corporation filed two (2) separate petitions for IPR of U.S. Patent No. 7,756,996 (IPR2015-
01545/01546). Finjan filed POPRs to the petitions October 19 and 20, 2015. The PTAB denied both of Symantec’s petitions to
institute IPR proceedings on the ‘996 Patent on January 14, 2016. On February 16, 2016, Symantec filed a Request for
Rehearing, and on February 25, 2016, the PTAB denied Symantec’s Request for Rehearing.
U.S. Patent No. 7,757,289 (the “’289 Patent”)
On July 3, 2015, Symantec Corporation filed a petition for IPR of U.S. Patent No. 7,757,289 (IPR2015-01552). Finjan filed a
POPR to the petition on October 19, 2015. The PTAB denied Symantec’s petition to institute IPR proceedings on the ‘289 Patent
on January 14, 2016.
U.S. Patent No. 7,930,299 (the “’299 Patent”)
On July 3, 2015, Symantec Corporation filed a petition for IPR of U.S. Patent No. 7,930,299 (IPR2015-01549). Finjan filed a
POPR to the petition October 20, 2015. The PTAB denied Symantec’s petition to institute IPR proceedings on the ‘299 Patent on
January 14, 2016.
U.S. Patent No. 8,015,182 (the “’182 Patent”)
On July 3, 2015, Symantec Corporation filed a petition for IPR of U.S. Patent No. 8,015,182 (IPR2015-01548). Finjan filed a
POPR to the petition on October 20, 2015. The PTAB denied Symantec’s petition to institute IPR proceedings on the ‘182 Patent
on January 14, 2016.
U.S. Patent No. 8,141,154 (the “’154 Patent”)
On July 3, 2015, April 19, 2016, and May 26, 2016, Symantec Corporation filed three (3) separate petitions for IPR of U.S. Patent
No. 8,141,154 (IPR2015-01547; IPR2016-00919; IPR2016-01071), and moved to join the petition for IPR filed by Palo Alto
Networks with respect to the ‘154 Patent (IPR2016-00151). Finjan filed a POPR to the petition in IPR2015-01547 on October
19, 2015. The PTAB denied Symantec’s petition to institute IPR proceedings in IPR2015-01547 on January 14, 2016. On February
16, 2016, Symantec filed a Request for Rehearing with respect to IPR2015-01547, and on February 25, 2016, the PTAB denied
Symantec’s Request for Rehearing. With respect to IPR2016-00919 and IPR2016-01071 on the ‘154 Patent, the PTAB’s granted
Symantec’s motions for joinder on September 8, 2016. On March 15, 2017, the PTAB issued a final written decision maintaining
the validity of the instituted claims in both IPR2016-00919 and IPR2016-01071.
U.S. Patent No. 8,677,494 (the “’494 Patent”)
On September 10, 2015, Symantec filed a petition for inter partes review of the ’494 Patent (IPR2015-01892). Finjan filed a
POPR to the petition on December 28, 2015. On March 18, 2016, the PTAB granted Symantec’s petition to institute the IPR
proceeding on claims 1, 2, 5, 6, 10, 11, 14, and 15 of the ’494 Patent. On April 1, 2016, Finjan filed a request for rehearing. The
PTAB denied the request for rehearing on May 23, 2016. On March 15, 2017, the PTAB issued a final written decision maintaining
the validity of claims 5, 10, 11, 14, and 15 and invalidating claims 1, 2, and 6 of the ’494 Patent.
On September 11, 2015, Symantec Corp. filed a petition for inter partes review of the ’494 Patent (IPR2015-01897). Finjan filed
a POPR to the petition on December 28, 2015. The PTAB denied Symantec’s petition to institute the IPR proceeding on the ’494
Patent on February 26, 2016.
31
U.S. Patent No. 6,154,844 (the “’844 Patent”)
On September 11, 2015, Symantec Corporation filed a petition for IPR of U.S. Patent No. 6,154,844 (“the ‘844 Patent”)
(IPR2015-01894). Finjan filed a POPR to the petition on December 17, 2015. The PTAB denied institution of the IPR proceeding
on the ‘844 Patent on March 11, 2016.
U.S. Patent No. 7,613,926 (the “’926 Patent”)
On September 11, 2015, Symantec, Corp. (“Symantec”) filed two petitions for IPR of the ’926 Patent (IPR2015-01893,
IPR2015-01895). Finjan filed its POPRs to the Petition on December 17, 2015. The PTAB denied Symantec’s petition to institute
the IPR proceeding for IPR2015-01895 on February 26, 2016. The PTAB denied Symantec’s petition to institute the IPR proceeding
for IPR2015-01893 on March 11, 2016.
U.S. Patent No. 8,141,154 (the “’154 Patent”)
On September 25, 2015 and November 5, 2015, Palo Alto Networks Inc. filed two (2) separate petitions for IPR of U.S. Patent
No. 8,141,154 and a Motion for Joinder to Symantec’s Petition for IPR of the ‘154 Patent (IPR2015-01547). (IPR2015-01979;
IPR2016-00151). Finjan filed a POPR to the first petition in IPR2015-01979 on December 29, 2015. With respect to IPR2015-
01979, the PTAB granted institution of IPR proceedings on the ‘154 Patent on March 21, 2016. On April 5, 2016, Finjan filed a
partial request for rehearing, and on April 19, 2016, the PTAB denied Finjan’s partial request for rehearing. On July 12, 2016,
Finjan submitted a Patent Owner Response to the Petition. With respect to IPR2016-00151 on the ‘154 Patent, Finjan filed a
POPR on February 17, 2016, and on April 20, 2016, the PTAB instituted trial on claims 1-8, 10, and 11, denied institution on
the remaining claims and denied Palo Alto Network’s Motion for Joinder. On May 4, 2016, Finjan filed a partial request for
rehearing, and on June 2, 2016, the PTAB denied Finjan’s Request for Rehearing. On June 16, 2016, the parties filed a joint notice
to amend the Scheduling Order. On August 31, 2016, Finjan filed its Patent Owner Response to Palo Alto Network’s Petition in
IPR 2016-00151. The parties had an oral hearing for IPR2016-00151 on January 24, 2017 and on March 15, 2017, the PTAB
issued a final written decision maintaining the validity of all instituted claims. The parties had an oral hearing for IPR2015-01979
on December 15, 2016 and on March 15, 2017, the PTAB issued a final written decision maintaining the validity of all instituted
claims.
U.S. Patent No. 7,647,633 (the “’633 Patent”)
On September 30, 2015, Palo Alto Networks, Inc. filed a petition for IPR of U.S. Patent No. 7,647,633 (IPR2015-01974). Finjan
filed a POPR to the petition on January 7, 2016. On March 29, 2016, the PTAB granted institution of IPR proceedings with respect
to claims 14 and 19 of the ‘633 Patent, and denied institution with respect to all other challenged claims. On April 12, 2016, Palo
Alto Networks filed a request for rehearing. On May 18, 2016, the PTAB denied Palo Alto Networks’ Request for Rehearing. On
June 1, 2016, the parties filed a joint notice to amend the Scheduling Order. On August 9, 2016, Finjan filed its Patent Owner
Response to Palo Alto Network’s Petition in IPR 2015-01974. The parties had an oral hearing on January 5, 2017, and on March
16, 2017, the PTAB issued a final written decision maintaining the validity of all instituted claims.
U.S. Patent No. 7,058,822 (the “’822 Patent”)
On September 30, 2015, Palo Alto Networks Inc. filed a petition for IPR of United States Patent No. 7,058,822 (IPR2015-01999).
Finjan filed a POPR to the petition on January 6, 2016. The PTAB denied institution of IPR proceedings on the ‘822 Patent on
March 29, 2016. On April 28, 2016, Palo Alto Networks filed a Request for Rehearing, and on May 18, 2016, the PTAB granted
Palo Alto Networks’ Request for Rehearing but did not alter its Decision denying institution.
U.S. Patent No. 7,418,731 (the “’731 Patent”)
On September 30, 2015, Palo Alto Networks Inc. filed a petition for IPR of United States Patent No. 7,418,731 (IPR2015-02000).
Finjan filed a POPR to the petition on January 8, 2016. The PTAB denied institution of IPR proceedings on the ‘731 Patent on
March 23, 2016. On April 22, 2016, Palo Alto Networks filed a Request for Rehearing. On May 20, 2016, the PTAB denied Palo
Alto Networks’ Request for Rehearing.
U.S. Patent No. 8,225,408 (the “’408 Patent”)
On September 30, 2015 and November 6, 2015, Palo Alto Networks Inc. filed two (2) separate petitions for IPRs of United States
Patent No. 8,225,408 (IPR2015-02001; IPR2016-00157). Finjan filed POPRs to the petitions on January 6, 2016, and February
17, 2016, respectively. On March 29, 2016, the PTAB granted institution of the IPR proceedings in IPR2015-02001 and
IPR2016-00157 and consolidated the two IPR proceedings. On April 12, 2016, Finjan filed requests for rehearing. On May 16,
2016, the PTAB denied Finjan’s Requests for Rehearing. On June 27, 2016, the parties filed a joint notice to amend the Scheduling
Order. On August 9, 2016, Finjan filed its Patent Owner Response to Palo Alto Network’s Petition in IPR 2015-02001 and IPR
2016-00157. The parties had an oral hearing on January 5, 2017, and on March 17, 2017, the PTAB issued a final written decision
maintaining the validity of all instituted claims.
32
U.S. Patent No. 7,613,926 (the “’926 Patent”)
On November 4, 2015, Palo Alto Networks, Inc. filed a petition for IPR of the ’926 Patent (IPR2016-00145). Finjan filed its
POPR on February 17, 2016. The PTAB denied Palo Alto Networks’ petition to institute the IPR proceeding on the ’926 Patent
on May 9, 2016.
U.S. Patent No. 6,965,968 (the “’968 Patent”)
On November 5, 2015, Palo Alto Networks Inc. filed two (2) separate petitions for IPR of United States Patent No. 6,965,968
(IPR 2016-00149, IPR2016-00150). Finjan filed POPRs to the petitions on February 17, 2016. On May 16, 2016, the PTAB
denied institution of IPR proceedings on both petitions.
U.S. Patent No. 6,804,780 (the “’780 Patent”)
On November 6, 2015, Palo Alto Networks Inc. filed a petition for IPR of United States Patent No. 6,804,780 (IPR 2016-00165).
Finjan filed a POPR to the petition on February 17, 2016. On April 21, 2016, the PTAB denied institution of IPR.
U.S. Patent No. 7,613,918 (the “’918 Patent”)
On November 6, 2015, Palo Alto Networks Inc. filed a petition for IPR of United States Patent No. 7,613,918 (IPR 2016-00164).
Finjan filed a POPR to the petition on February 17, 2016. On May 5, 2016, the PTAB denied institution of IPR.
U.S. Patent No. 8,677,494 (the “’494 Patent”)
On November 6, 2015, Palo Alto Networks Inc. filed a petition for IPR of United States Patent No. 8,677,494 (IPR 2016-00159).
Finjan filed a POPR to the petition on February 17, 2016. On May 13, 2016, the PTAB granted institution of IPR. On May 27,
2016, Finjan filed a Request for Rehearing, and on June 23, 2016 the PTAB denied Finjan’s Request for Rehearing. On June 27,
2016, the parties filed a joint notice to amend the Scheduling Order. On August 12, 2016, Finjan filed its Patent Owner Response
to Palo Alto Network’s Petition in IPR 2016-00159. The parties had an oral hearing on February 16, 2017 and are waiting on a
final decision from the PTAB.
U.S. Patent No. 6,965,968 (the “’968 Patent”)
On January 19, 2016, Blue Coat Systems, Inc. filed two petitions for IPR of the ‘968 Patent (IPR2016-00478; IPR2016-00479)
and a Motion for Joinder to Palo Alto Networks’ Petition for IPR of the ‘968 Patent (IPR2015-00149; IPR2015-00150). On April
22, 2016, Finjan filed a POPR to the petitions. On June 20, 2016, the PTAB denied institution of IPR proceedings on both petitions.
U.S. Patent No. 7,647,633 (the “’633 Patent”)
On January 20, 2016, Blue Coat Systems, Inc. filed a Petition for IPR of U.S. Patent No. 7,647,633 (“the ‘633 Patent”)
(IPR2016-00480) and a Motion for Joinder to Palo Alto Networks’ Petition for IPR of the ‘633 Patent (IPR2015-01974). On April
22, 2016, Finjan filed a POPR to the petition. On June 24, 2016, the PTAB instituted IPR, and granted Blue Coat’s Motion for
Joinder. On March 16, 2017, the PTAB issued a final written decision maintaining the validity of all instituted claims.
U.S. Patent No. 7,418,731 (the “’731 Patent”)
On January 21, 2016, Blue Coat Systems, Inc. filed a Petition for IPR of U.S. Patent No. 7,418,731 (“the ‘731 Patent”)
(IPR2016-00493) and a Motion for Joinder to Palo Alto Networks’ Petition for IPR of the ‘731 Patent (IPR2015-02000). On April
29, 2016, Finjan filed a POPR to the petition. On June 8, 2016, the PTAB denied institution of IPR.
U.S. Patent No. 6,804,780 (the “’780 Patent”)
On January 21, 2016, Blue Coat Systems, Inc. filed a petition for IPR of U.S. Patent No. 6,804,780 (IPR2016-00492) and a Motion
for Joinder to Palo Alto Networks’ Petition for IPR of the ‘780 Patent (IPR2016-00165). On April 29, 2016, Finjan filed a POPR
to the petition. On June 8, 2016, the PTAB denied institution of IPR.
U.S. Patent No. 6,154,844 (the “’844 Patent”)
On January 25, 2016, Blue Coat Systems, Inc. filed a Petition for IPR of U.S. Patent No. 6,154,844 (IPR2016-00498) and a Motion
for Joinder to Symantec Corp.’s Petition for IPR of the ‘844 Patent (IPR2015-01894). On April 29, 2016, Finjan filed a POPR to
the petition. On June 20, 2016, the PTAB dismissed the Petition and motion for joinder pursuant to Blue Coat’s motion to dismiss.
U.S. Patent No. 8,225,408 (the “’408 Patent”)
On April 27, 2016, Blue Coat Systems, Inc. filed two (2) separate petitions for IPRs of United States Patent No. 8,225,408
(IPR2016-00955; IPR2016-00956), and Motion for Joinder to Palo Alto Networks, Inc.’s Petitions for IPR of the ‘408 Patent
(IPR2015-02001 and IPR2016-00157). On August 30, 2016, the PTAB granted Blue Coat Systems, Inc.’s Motions for Joinder.
On March 17, 2017, the PTAB issued a final written decision maintaining the validity of all instituted claims in IPR2015-02001
and IPR2016-00157.
33
U.S. Patent No. 8,677,494 (the “494 Patent”)
On April 14, 2016 and on June 10, 2016, Blue Coat Systems, Inc. filed two Petitions for IPR of United States Patent No. 8,677,494
(IPR2016-00890; IPR2016-01174) and a Motion for Joinder to Symantec Corp.’s Petition for IPR of the ‘494 Patent (IPR2015-
01892) and Palo Alto Networks, Inc.’s Petition for IPR of the ‘494 Patent (IPR2016-00159). The PTAB granted Blue Coat’s
motions for joinder. On March 15, 2017, the PTAB issued a final written decision maintaining the validity of claims 5, 10, 11, 14,
and 15 and invalidating claims 1, 2, and 6 of the ’494 Patent in IPR2015-01892.
U.S. Patent No. 8,141,154 (the “’154 Patent”)
On April 21, 2016, Proofpoint, Inc. and Armorize Technologies, Inc. filed a Petition for IPR of U.S. Patent No. 8,141,154
(IPR2016-00937) and a Motion for Joinder to Palo Alto Networks, Inc.’s Petition for IPR of the ‘154 Patent (IPR2015-01979).
On June 24, 2016, the PTAB terminated the IPR proceedings pursuant to a joint motion.
U.S. Patent No. 7,647,633 (the “’633 Patent”)
On April 29, 2016, Proofpoint, Inc. and Armorize Technologies, Inc. filed a Petition for IPR of U.S. Patent No. 7,647,633 (“the
‘633 Patent”) (IPR2016-00966) and a Motion for Joinder to Palo Alto Networks’ Petition for IPR of the ‘633 Patent (IPR2015-
01974). On June 24, 2016, the PTAB terminated the IPR proceedings pursuant to a joint motion.
U.S. Patent No. 8,225,408 (the “’408 Patent”)
On April 29, 2016, Proofpoint, Inc. and Armorize Technologies, Inc. filed two separate Petitions for IPR of U.S. Patent No.
8,225,408 (the “’408 Patent”) (IPR2016-00967; IPR2016-00970) and a Motion for Joinder to Palo Alto Networks’ Petition for
IPR of the ‘408 Patent (IPR2015-02001; IPR2016-00157). On June 24, 2016, the PTAB terminated the IPR proceedings pursuant
to a joint motion.
U.S. Patent No. 8,079,086 (the “’086 Patent”)
On July 15, 2016, Blue Coat Systems, Inc. filed a Petition for IPR of U.S. Patent No. 8,079,086 (the “’086 Patent”) (IPR2016-01444).
Finjan filed its POPR on November 18, 2016. The PTAB denied institution of IPR on February 16, 2017.
U.S. Patent No. 8,225,408 (the “’408 Patent”)
On July 15, 2016, Blue Coat Systems, Inc. filed a Petition for IPR of U.S. Patent No. 8,225,408 (the “’408 Patent”) (IPR2016-01441).
On November 18, 2016, Finjan filed a POPR. On December 13, 2016, the PTAB authorized Blue Coat to file a Reply to the POPR
and Finjan a sur-reply to respond to the arguments in Petitioner’s Reply. On January 23, 2017, the PTAB denied institution of
IPR.
U.S. Patent No. 8,677,494 (the “’494 Patent”)
On July 15, 2016, Blue Coat Systems, Inc. filed a Petition for IPR of U.S. Patent No. 8,677,494 (the “’494 Patent”) (IPR2016-01443).
On January 23. 2017, the PTAB denied Blue Coat’s petition to institute the IPR proceeding on the ’494 Patent.
U.S. Patent No. 8,225,408 (“’408 Patent”)
On October 28, 2016, FireEye, Inc. filed a Petition for IPR of the ‘408 Patent (IPR2017-00157) and a Motion for Joinder to Blue
Coat Systems, Inc.’s Petition for IPR of the ‘408 Patent (IPR2016-01441). Finjan filed its POPR on February 3, 2017 and the
PTAB denied institution of IPR of Blue Coat’s Petition for IPR on January 23, 2017.
U.S. Patent No. 8,079,086 (the “’086 Patent”)
On October 28, 2016, FireEye, Inc. filed a petition for IPR of the ’086 Patent (IPR2017-00155) and a Motion for Joinder to Blue
Coat’s Petition for IPR of the ’086 Patent (IPR2016-01444). Finjan filed its POPR on February 3, 2017 and the PTAB denied
institution of IPR of Blue Coat’s Petition for IPR on February 16, 2017.
U.S. Patent No. 9,189,621 (the “’621 Patent”)
On March 1, 2017, Blue Coat Systems LLC filed a petition for IPR of the ’621 Patent (IPR2017-00995). The PTAB has not yet
issued a notice of filing date.
U.S. Patent No. 9,141,786 (the “’786 Patent”)
On March 1, 2017, Blue Coat Systems LLC filed a petition for IPR of the ’786 Patent (IPR2017-00996). Finjan will file its POPR
on June 14, 2017.
U.S. Patent No. 9,219,755 (the “’755 Patent”)
On March 1, 2017, Blue Coat Systems LLC filed a petition for IPR of the ’755 Patent (IPR2017-00997). Finjan will file its POPR
on June 15, 2017.
34
Except for the foregoing disclosures, Finjan is not presently aware of any other material pending legal proceedings, to
which Finjan or any of its subsidiaries are a party or of which any of its property is the subject.
Litigation, including patent litigation, is inherently subject to uncertainties. As such, there can be no assurance that Finjan
will be successful in litigating and/or settling any of these claims.
ITEM 4. MINE SAFETY DISCLOSURES.
None
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common stock has been trading on the NASDAQ under the symbol “FNJN” since May 12, 2014. The following
table sets forth the high and low sales prices for our common stock, as reported on the NASDAQ, for each of the periods listed
below.
No dividends were declared or paid.
Year Ending December 31, 2016
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Year Ended December 31, 2015
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Holders
High
Low
$
$
$
$
$
$
$
$
1.90 $
2.24 $
2.35 $
1.26 $
1.93 $
2.80 $
2.22 $
3.25 $
1.00
1.28
0.87
0.81
1.14
1.28
1.16
1.76
As of March 23, 2017, there were approximately 43 holders of record of our common stock. As many of our shares of
common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of
stockholders represented by these record holders.
Dividend Policy
We have not paid any cash dividends on our common stock to date. The payment of dividends in the future will be
contingent upon our revenues and earnings, if any, capital requirements and general financial condition, and will be within the
discretion of our then-existing board of directors.
Recent Sales of Unregistered Securities
Not applicable.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Not applicable.
35
ITEM 6. SELECTED FINANCIAL DATA.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not
required to provide the information under this item.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction
with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. In addition
to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and
assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of
certain factors, including but not limited to, those set forth under “Risk Factors” and elsewhere in this Annual Report on Form
10-K. See Cautionary Statement Regarding Forward-Looking Statements.”
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is organized
as follows:
Overview. A discussion of our business and overall analysis of financial and other highlights in order to provide
context for the remainder of MD&A.
Significant Developments. We highlight significant developments in our business and operations during the past
year.
Industry Trends & Outlook. A discussion of notable industry trends and how such trends might affect our business
and operations as well as an outlook on developments we see on the horizon.
Comparability to Future Results. We discuss areas of our historical business and operations that may not be indicative
of future results.
Results of Operations. A discussion of the nature and trends in our financial results and an analysis of our financial
results comparing fiscal 2016 to 2015.
Liquidity and Capital Resources. An analysis of changes in our balance sheets and cash flows, and a discussion of
our financial condition and our ability to meet cash needs.
Contractual Obligations. An overview of our contractual obligations outstanding as of December 31, 2016, including
expected payment schedules.
Critical Accounting Policies and Estimates. A discussion of our accounting policies that require critical estimates,
assumptions, and judgments.
Recent Accounting Pronouncements. Adiscussion of expected impacts of impending accounting changes on financial
information to be reported in the future.
36
Overview
We operate a cybersecurity business, focused on licensing and enforcement, developing mobile security applications,
providing advisory services, and investing in emerging cybersecurity technologies and intellectual property.
We operate our cybersecurity business through subsidiaries including, Finjan, Finjan Mobile and CybeRisk.
Through Finjan, we own a portfolio of patents, related to software and hardware technologies that proactively detect
malicious code and thereby protect end users from identity and data theft, spyware, malware, phishing, trojans and other web and
network threats. Founded in 1997, Finjan developed and patented technologies that are capable of detecting previously unknown
and emerging threats on a real-time, behavior-based, basis, in contrast to signature-based methods of intercepting only known
threats to computers. The older signature-based methods, were standard in the web and network security industry during the
1990s. As the web and endpoint security industries - known as cybersecurity - have transitioned to behavior-based detection of
malicious code, we believe that our patented technologies continue to be widely used by third parties in a number of market
segments. We intend to maximize the economic benefits of our technologies through further licensing and to broaden our
technologies and patent holdings through acquisitions and strategic partnerships.
As a core element of our continued patent licensing and enforcement business, our management team, having expertise
with technology and IP monetization, monitors a number of markets and assesses and observes the adoption of our patented
technologies in these markets. Our management team, in conjunction with outside legal, technical, and financial experts concludes
on a case-by-case basis whether or not they believe that Finjan’s patented technologies are being used. Based on these observations,
we continue to believe our patented technologies are highly relevant in specific cybersecurity technology areas including, but not
limited to endpoint/cloud software, web gateway/internet infrastructure, networking equipment markets, and mobile security. From
that basis, the Company pursues unlicensed entities through licensing, assertion of claims or both to preserve the value of our
portfolio in general. This also reinforces the value to existing licensees of the Finjan patent portfolio.
Since the sale of its hardware and software operations in 2009, Finjan’s primary source of income and related cash flows
has been the enforcement of its patent rights against unauthorized use and, to a lesser extent, income derived from intellectual
property licenses granted to third parties for the use of patented technologies that are owned by Finjan.
Finjan Mobile was founded to ensure that mobile devices are protected against spies, phishing and malware attacks.
Given the uptrend in mobile device usage coupled with the amount of transient corporate data, the average mobile user presents
and represents higher risks of data loss through hacking. The consumer mobile device has become so convenient that consumers
often forget about online security and download apps and blindly agree to terms of service, purchase products, pay bills, connect
to free Wi-Fi, and not think twice about personal data and photos stored on their devices. As such, in June of 2015, the Company
returned to the research and development world with the creation of security products for mobile devices.
CybeRisk was founded in 2015 to deliver global advanced cyber risk and cyber security advisory services. Through a
team of employees and consultants, based in East Palo Alto and Tel Aviv, CybeRisk assesses corporate risk exposure and delivers
appropriate mitigation strategies. Its unique and focused offering positions CybeRisk as the piece that interconnects the "server
room to the board room".
As of December 31, 2016, we had 12 employees. We intend to hire or engage additional full-time professionals, employees,
and/or consultants in alignment with our growth strategy. Although the market is highly competitive for attracting and retaining
highly qualified professionals in our industry, we continue our endeavor to find such candidates for our Company. Our management
team and additional personnel that we may hire in the future will be primarily responsible for executing and implementing our
licensing and enforcement strategy, including analyzing licensing and enforcement opportunities, making tactical decisions related
to our strategy, identifying new applications for our existing cybersecurity technologies and pursuing opportunities to invest in
new technologies through strategic partnerships and acquisitions.
37
Significant Developments During 2016 and Early 2017
Equity Raise of $10.2 Million in Series A Preferred Stock
On May 6, 2016, Finjan Holdings entered into a Series A Preferred Stock Purchase Agreement with Halcyon LDRII,
pursuant to which the Company agreed to issue to Halcyon LDRII in a private placement an aggregate of 102,000 shares of the
Company’s Series A Preferred Stock at a purchase price of $100.00 per share, for aggregate proceeds of $10.2 million.
Finjan Mobile Launched Gen3 Mobile Secure Browser, VitalSecurityTM
In 2016 Finjan Mobile, Inc. launched Gen3 Mobile Secure Browser, VitalSecurityTM, a fully functional browser that
offers protection for both mobile and tablet devices. Using VitalSecurityTM, users can safely browse the internet and be warned
that sites might contain malicious or suspicious content.
For the IOS and Android operating systems, Finjan Mobile VitalSecurity Browser educates users by identifying potential
vulnerabilities on websites. The app can identify URL’s that have been flagged by industry leading cyber companies and protect
you from viruses and malicious content.
The Gen3.5 mobile secure browser is completely redesigned and is built from Finjan’s patented technology. The browser
features:
• Complete browser functionality
•
Protection against potential phishing attacks
• Detailed analysis from top cyber companies
•
Private browsing functionality to guard privacy using private tabs
• Touch ID and Passcode security to protect your browsing experience
•
• Complete tracker transparency by alerting you of all advertising, social, content and analytic scripts that are embedded
Support for Tabs, Bookmarks and History
in websites you visit
Type in a search term and Finjan Mobile VitalSecurity will scan search results and present informative notifications -
Safe, Caution or Danger. If a site is considered dangerous, you can choose to click and go right to the website, or learn about
potential privacy and phishing vulnerabilities. Educating users on privacy and potential vulnerabilities is our main objective.
New Patents
On March 22, 2016, our subsidiary, Finjan, was issued U.S. Patent No. 9,294,493 (‘493 Patent). The ‘493 Patent relates
to protection against malicious program code that is injected via input parameters to function calls.
On September 13, 2016, our subsidiary, Finjan, was issued U.S. Patent No. 9,444,844. The 9,444,844 Patent relates
to proprietary malicious mobile code runtime monitoring systems and methods, designed to address potential network security
threats through better recognition of malicious code segments passing through Internet infrastructure and networks to endpoint
devices. The techniques described in the 9,444,844 Patent cover protection systems and methods offering security for one or more
personal computers and/or other intermittently or persistently network accessible devices or processes. Specifically, the inventive
aspects of the patent cover various defenses from malicious or otherwise undesirable operations of Java™ applets, ActiveX™
controls, JavaScript™ scripts, Visual Basic™ scripts, add-ons, and other programs which are downloaded by users without
considering their inherent security risks.
On October 5, 2016, our subsidiary, Finjan, was issued European Patent No. EP 1 810 152 B1 (‘EP B1 Patent). The patent
relates to parsing an incoming stream of mobile code, as the stream is being received, to discover potential exploits within the
mobile code.
On December 20, 2016, our subsidiary, Finjan, was issued U.S. Patent No. 9,525,680 (‘680 Patent). The ’680 Patent
relates to secure communication between a client and a server computer using certificates, even when a non-secure computer
intermediates between the client and the server.
On January 24, 2017, our subsidiary, Finjan Mobile received its first US patent, U.S. Patent No. 9,554,279. The patent
relates to authorizing a mobile device to access a secure server based in part on whether the mobile device is currently located
within an authorized geographical area.
38
Inter Partes Reviews
See “Item 3. Legal Proceedings.”
Patent litigations
See “Item 3. Legal Proceedings.”
Industry Trends and Outlook
We believe that 2017 might be an active year for patent law reform although intellectual property did not seem to be a
key issue during the presidential election cycle. We believe that proponents of patent law reform, largely made up of individual
or coalitions of powerful technology corporations continue to seek severe statutory limitations on how companies — specifically
those who own patents and do not make product covered by such patents — can enforce their patents against companies who
make products. The U.S. Congress is considering proposals from all constituents. In an effort to ensure fair and balanced protections
for all good faith patent owners, our executives have dedicated time and resources to actively educate our lawmakers and existing
and prospective stakeholders on how certain proposed reforms could harm individual inventors, startups, small companies, the
licensing industry and therefore, U.S. innovation and the U.S. economy as a whole.
Further, since the enactment of the AIA on September 16, 2011, several aspects of the patent law have been interpreted
by the courts, including what constitutes patentable subject matter, inducement of infringement, and (attorney) fee-shifting to the
non-prevailing party in the context of litigation, among other issues. Moreover, under AIA, patents previously granted by the
USPTO may be reviewed through post-patent grant proceedings such as reexamination or IPR. It has become a trend, if not a
practice, for accused infringers to petition for reexaminations or IPRs of asserted patents as these proceedings may give the
petitioner “two bites at the apple.” The outcome of the proceedings can range from decisions favorable to the patent holder,
favorable to both parties, or favorable to the petitioner. If the outcome is the latter, the value of the challenged patent can be
materially reduced or extinguished. Thus, patent rights, including enforcement of such rights against unauthorized use is inherently
subject to uncertainties.
We also believe cybersecurity issues will again be a very active sector in 2017. Cybersecurity is not just another technology
but a critical business issue that intersects government, corporations and individual citizens. We have recently seen a number of
devastatingly successful cybersecurity breaches targeting high profile government offices and corporations. The full extent of the
cost and damage associated with these attacks may not be known for some time. Nonetheless, these attacks are expected to continue,
along with their associated and sometimes unprecedented costs. In many cases, it is not just the government or corporation that
suffers losses or damages but their clients and customers, who can also fall victim by the breach of their personal and otherwise
confidential data. These issues have forced both government and corporations to take a serious look at their vulnerabilities, which
will lead to increased spending on cybersecurity infrastructure, including hardware and software, as well as cybersecurity consulting
services.
Comparability to Future Results
We have set forth below selected factors that we believe have had, or can be expected to have, a significant effect on the
comparability of our recent or future results. In addition to the factors described below, please see Item 1A. “Risk Factors” for
additional factors that may affect our operating results.
Fluctuations of Income, Expenses and Cash Flows Related to Licensing and Enforcement
Our licenses and judgments may not be recurring, and are not necessarily indicative of the income or cash flows that we
expect to generate in the future from our existing technology portfolio or otherwise. We expect income, expenses and cash flows
related to patent enforcement to be unpredictable and to fluctuate significantly from period to period. A number of factors, many
of which are beyond our control, may affect the timing and amount of our income and cash flows related to patent licensing and
enforcement actions, including, but not limited to, trial dates, the strength of our claims and likelihood of achieving an acceptable
license on settlement, the timing and nature of any appeals and our ability to collect on any favorable judgments. Significant
fluctuations in our income and cash flows may make our business difficult to manage and adversely affect our business and
operating results. We do not recognize income from our licensing and enforcement actions until the terms are fixed and determinable
or litigation is finalized (whether resolved at trial or in a settlement).
39
Our expenses, principally with respect to litigation costs, may also vary significantly from period to period depending
upon a number of factors, including, but not limited to, whether fees of outside legal counsel are paid on an hourly, contingent or
other basis, the timing of depositions, discovery and other elements of litigation, costs of expert witnesses and other consultants,
and other costs incurred in support of enforcement actions.
As a result of the factors described above and other known and unknown risks affecting our business, our historical
operating performance may not be indicative of our future results.
Stock-Based and Other Executive Compensation
Our Board of Directors has adopted the Finjan Holdings 2014 Incentive Plan (“2014 Plan”), which our shareholders
approved at our 2014 annual meeting of stockholders on July 10, 2014, pursuant to which 2,196,836 shares of common stock are
authorized for issuance. A total of 185,260 restricted stock units and 1,607,346 options remain outstanding as of December 31,
2016, under the 2014 Plan. Our Board of Directors recently approved an increase in the number of shares reserved under our 2014
Plan which is subject to approval of our stockholders. Therefore, we expect that future equity-based awards will continue to be
made under the 2014 Plan to our directors, officers and other employees and consultants. As a result, to the extent relevant, we
may incur non-cash, stock-based compensation expenses in future periods that may not be comparable to past periods.
We have increased the number of our employees to help execute our strategy in the cybersecurity business and support
our public company functions, and expect to hire additional employees in both capacities to continue our growth plans. Accordingly,
we will continue to incur compensation expenses in future periods that we did not incur during the historical period presented in
our financial statements.
Results of Operations
We operate a cybersecurity business, focused on licensing and enforcement, providing advisory services, developing
mobile security applications, and investing in emerging cybersecurity technologies and intellectual property.
Year ended December 31, 2016 compared with the year ended December 31, 2015:
For the Years Ended December 31,
2016
% of
Revenue
2015
% of
Revenue
Change % Change
(In thousands, except percentages)
Revenue
$
18,387
—
$
4,687 $
—
13,700
292 %
Cost of revenues
3,037
17%
814
17 %
2,223
273 %
Gross profit
15,350
83%
3,873
83 %
11,477
296 %
Operating expenses:
Sales, general and
administrative (1)
Research and development
Total operating expenses
14,430
570
15,000
78%
3%
82%
17,367
391
17,758
371 %
8 %
379 %
(2,937)
179
(2,758)
(17)%
46 %
(16)%
Other income
—
—
1,283
27 %
(1,283)
(100)%
Net income (loss)
$
350
2% $
(12,602)
(269)%
12,952
(103)%
(1) Includes stock based compensation $
872
5% $
766
16 %
106
14 %
40
Revenue in 2016 is derived from multiple license agreements that we entered into with third-parties following negotiations
pursuant to our patent licensing and enforcement program. In addition, we have a consulting business started in 2015. Our revenues
increased by $13.7 million or by 292%, to $18.4 million in the year ended December 31, 2016 compared to $4.7 million in the
year ended December 31, 2015. The increase is primarily due to licensing revenues, as further described in "Item 1. Business" -
"Licensing and Enforcement - Current Activities, Post 2013".
Cost of revenues includes legal fees directly associated with our licensing and enforcement program. Cost of revenues
increased 273% for the year ended December 31, 2016 compared to the year ended December 31, 2015, largely in proportion to
increased revenues.
Gross profit as a percentage of revenues remained consistent in 2016 compared to 2015 at approximately 83%, with gross
margin growing 296%, in relation to the increase in revenues.
Operating expenses consists of sales and marketing, general and administrative, and research and development. Sales,
general and administrative expenses ("SG&A") consisted primarily of legal fees incurred in pursuing our revenues, and employee
headcount related expenses. These comprise approximately 70% of total SG&A expense. Litigation expenses decreased $1.7
million to $6.3 million in 2016 compared to 2015, and is primarily due to the timing of various outstanding actions. See "Item 3.
Legal Proceedings". Employee headcount related expenses remained consistent year over at approximately $4.5 million. In addition,
SG&A expenses which include consulting and other professional fees, facilities and other administrative expenses and fees,
decreased by over $1 million in 2016 compared to 2015, primarily due to the cost of relocating to California in 2015.
Revenues and operations from the Company’s Finjan Mobile security business and the Company’s CybeRisk advisory
services and were deemed immaterial for the years ended December 31, 2016 and 2015.
For the year ended December 31, 2016 our other income was $0 compared to $1.3 million for the year ended December
31, 2015, due primarily from our gain on investing activities through a liquidity event in a cybertechnology fund.
Liquidity and Capital Resources
Overview
Our cash requirements are, and will continue to be, dependent upon a variety of factors. We expect to continue devoting
significant capital resources to the litigations in process and any other litigation we pursue. We also expect to require significant
capital resources to maintain our issued patents, prosecute our patent applications, acquire new technologies as part of our growth
strategy, and attract and retain qualified personnel on a full-time basis.
In addition, on November 21, 2013, we made a $5 million commitment to invest in an innovation fund through JVP to
invest in early-stage cyber technology companies, of which $2.7 million of the commitment remains unfunded. The fund can make
a call on our remaining commitment at any time. We expect to make payments to honor this commitment if and when capital
calls are made by the fund. We believe we have sufficient cash on hand to fund such obligations.
The Company leases its corporate headquarters office in East Palo Alto, California and offices in New York, New York,
Menlo Park, California and Tel Aviv, Israel. Under the terms of the four leases, the Company owes minimum lease obligations of
$1.2 million over the remaining life of the leases, of which $0.8 million is for the East Palo Alto headquarters lease. During 2015
the Company entered into subleases for each of the Menlo Park and New York offices for essentially the remaining duration of
the lease. As of December 31, 2016, the total future minimum lease payments to be received under the Menlo Park and New York
subleases was $178,000 and $292,000, respectively.
Our primary sources of liquidity are cash flows from operations, principally historical and future proceeds from licenses,
settlements and judgments in connection with our patent enforcement and licensing activities. During 2016, Finjan entered into
a licensing agreement that provides for installment payments through January, 2018. The amount and timing of cash flows from
our licensing and enforcement activities are subject to uncertainties stemming primarily from uncertainties regarding the rates of
adoption of our patented technologies, the success of our licensing efforts and the outcome of enforcement actions. Thus, our
income and cash flows may vary significantly from period to period.
41
Cash & cash equivalents
For the Years Ended
December 31,
2016
2015
(in thousands)
13,678
6,101
As of December 31, 2016, we had approximately $13.7 million of cash and cash equivalents, an increase of approximately
$7.6 million from $6.1 million in 2015. This is primarily attributable to the $6.8 million in net cash provided by financing activities,
$1.3 million in net cash provided operating activities, offset by $0.6 million in net cash used in investing activities.
Based on current forecasts, management believes that our cash and cash equivalents will be sufficient to meet our
anticipated cash needs for working capital and capital expenditures for at least the next 12 months from the date of filing this
annual report. Such forecasts include approximately $9.7 million received subsequent to year end as described in Note 15 of our
consolidated financial statements and $3.3 million of licensing revenue to be received by January 3, 2018 under existing contracts.
We may, however, encounter unforeseen difficulties that may deplete our capital resources more rapidly than anticipated. To insure
against any such difficulties, we may raise additional capital to fund licensing and enforcement actions, planned research and
development activities and to better solidify our financial position. Any efforts to seek additional funding could be made through
issuances of equity or debt, or other external financing. However, additional funding may not be available on favorable terms, or
at all. Further, if the Company is unable to obtain additional funding on a timely basis, the Company may be required to curtail
or terminate some or all of its business plans.
Cash flows for the year ended December 31, 2016 and 2015
Net cash provided by (used in) operating activities
Net cash used in investing activities
Net cash provided by financing activities
For the Years Ended
December 31,
2016
2015
(in thousands)
1,328
(11,259)
(559)
(199)
6,808
54
Operating Activities: Net cash provided by operating activities was $1.3 million for the year ended December 31, 2016
and is comprised of $0.4 million in net income, $0.9 million in stock-based compensation, $0.1 million in depreciation, offset by
$0.1 million change in net operating assets and liabilities.
Net cash used in operating activities was $11.3 million for the year ended December 31, 2015. This is comprised of a
net loss of $12.6 million and a $1.3 million return on investment, offset by $0.8 million in stock-based compensation and $1.8
million change in net operating assets and liabilities.
Investing Activities: During the year ended December 31, 2016, cash used by investing activities primarily related to the
$0.6 million cash call by JVP. During the year ended December 31, 2015, cash used by investing activities primarily related to
the $0.8 million cash call by JVP and $0.2 million related to the purchase of property, plant and equipment, offset by proceeds of
$0.8 million in cash from the exit of one of JVP's portfolio companies.
Financing Activities: During the year ended December 31, 2016, net cash provided by financing activities was $6.8
million and an immaterial amount for same period in 2015. Cash provided by financing activities of $6.8 million during 2016
primarily resulted from the Series A Preferred Stock Financing in May 2016 of $6.7 million, net comprised of the initial financing
of $9.5 million, net, offset by subsequent redemptions of $2.8 million. Redemptions are tied, at the option of the holder, to future
proceeds as defined in the Certificate of Designation. In addition, the financing is subject to dividends accreted to the investors
over time; a portion of the redemptions are applied to this accretion. Finally, $0.1 million of the net cash provided by financing
activities was proceeds from the exercise of stock options.
42
Contractual Obligations
The following table summarizes, as of December 31, 2016, the Company's contractual obligations over the next two years
for the property leases entered into during the years ended 2015, 2014, and 2013, and the Company's investment in JVP:
Contractual Obligations
Operating Lease Obligations:
Other Long-Term Liabilities:
Capital Commitments not Called
Payments due by Period (In thousands)
Less Than 1
Year
1-2 Years
Total
$
753 $
459 $
1,212
750
1,950
2,700
Total
$
1,503 $
2,409 $
3,912
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based on our consolidated financial
statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or
“GAAP.” The preparation of these financial statements in accordance with GAAP requires us to make estimates, assumptions and
judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate our estimates, assumptions and judgments, including those related to revenue
recognition, bad debts, inventories, warranties and income taxes. We base our estimates on historical experience and on various
other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities and our revenue recognition. Actual results may differ from these
estimates under different assumptions or conditions and the impact of such differences may be material to our consolidated financial
statements.
Critical accounting policies are those policies that, in management’s view, are most important in the portrayal of our financial
condition and results of operations. The methods, estimates and judgments that we use in applying our accounting policies have
a significant impact on the results that we report in our financial statements. These critical accounting policies require us to make
difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain.
Those critical accounting policies and estimates that require the most significant judgment are discussed further below. We consider
our most critical accounting policies and estimates to be revenue recognition, gain on settlements, valuation of long lived assets,
stock based compensation and accounting for business combinations-acquisition method accounting.
Revenue Recognition
Revenue is recognized when persuasive evidence of an arrangement exists, delivery of the product or service has occurred
and all obligations have been performed pursuant to the terms of the agreement, the sales price is fixed or determinable, and
collectability is reasonably assured.
Depending on the complexity of the underlying revenue arrangement and related terms and conditions, significant judgments,
assumptions and estimates may be required to determine when substantial delivery of contract elements has occurred, whether
any significant ongoing obligations exist subsequent to contract execution, whether amounts due are collectible and the appropriate
period or periods in which, or during which, the completion of the earnings process occurs. Depending on the magnitude of specific
revenue arrangements, if different judgments, assumptions and estimates are made regarding contracts executed in any specific
period, our periodic financial results may be materially affected.
43
Monetization of patented technologies by licensing through a negotiated agreement and/or enforcement of such patented
technologies by a court of law is the main source of our income. Licenses achieved by ordinary business negotiations where a fair
value of the license is determined by the Company is recognized as revenue. Due to our unique business, it is often necessary to
file patent infringement litigation against users of our patented technologies as part of the licensing and enforcement activities.
We may enter into certain settlements of patent infringement disputes once litigation commences. The amount of consideration
received upon any settlement or judgment is allocated to each element of the settlement based on the fair value of each element
using the residual method. Elements with fair values related to licensing agreement, royalty revenues, net of contingent legal fees,
are recognized as revenue. When the Company is unable to determine the fair value of a license agreement or a settlement, the
value of the license agreement or settlement is recognized as contra expense or gain on settlements in other income.
Stock-based Compensation Expense
Stock-based compensation payments to employees, non-employee consultants and directors are recognized as expense in
the statements of income. The compensation cost for all stock-based awards is measured at the grant date, based on the fair value
of the award (determined using a Black-Scholes option pricing model for stock options and intrinsic value on the date of grant for
non-vested restricted stock), and is recognized as an expense over the employee’s requisite service period (generally the vesting
period of the equity award). Determining the fair value of stock-based awards at the grant date requires significant estimates and
judgments, including estimating the market price volatility of our common stock, future employee stock option exercise behavior
and requisite service periods.
Stock-based compensation expense is recorded only for those awards expected to vest using an estimated pre-vesting
forfeiture rate. As such, we are required to estimate pre-vesting option forfeitures at the time of grant and reflect the impact of
estimated pre-vesting option forfeitures on compensation expense recognized. Estimates of pre-vesting forfeitures must be
periodically revised in subsequent periods if actual forfeitures differ from those estimates. We consider several factors in connection
with our estimate of pre-vesting forfeitures, including types of awards, employee class, and historical pre-vesting forfeiture data.
The estimation of stock awards that will ultimately vest requires judgment, and to the extent that actual results differ from our
estimates, such amounts will be recorded as cumulative adjustments in the period the estimates are revised. The Company granted
options to a small number of employees and consultants.
Off-Balance Sheet Arrangements
In connection with the investment in JVP, we have a commitment balance outstanding of approximately $2.7 million, which
can be called at any time.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09,
Revenue from Contracts with Customers (Topic 606). This ASU is a comprehensive new revenue recognition model that requires
a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration
it expects to receive in exchange for those goods or services. In August 2015, FASB issued ASU 2015-14, Revenue from Contracts
with Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASU 2014-09 to reporting periods
beginning after December 15, 2017, with early adoption permitted for reporting periods beginning after December 15, 2016.
Subsequently, FASB issued ASUs in 2016 containing implementation guidance related to ASU 2014-09, including: ASU 2016-08,
Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus
Net) , which is intended to improve the operability and understandability of the implementation guidance on principal versus agent
considerations; ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and
Licensing , which is intended to clarify two aspects of Topic 606: identifying performance obligations and the licensing
implementation guidance; and ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements
and Practical Expedients , which contains certain practical expedients in response to identified implementation issues. The Company
expects to adopt this guidance in the first quarter of fiscal 2018 and apply the modified retrospective approach. The Company is
evaluating the impact of adopting this new accounting standard on our consolidated financial statements.
In February, 2016, FASB issued ASU No. 2016-02 “Leases” that requires a lessee to recognize the assets and liabilities
that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments
(the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a
term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize
lease assets and lease liabilities. The new guidance is effective for fiscal years beginning after December 15, 2018, including
interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the effect of the standard on
our consolidated financial statements and related disclosures.
44
In March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements
to Employee Share-Based Payment Accounting” (“ASU 2016-09”). The standard is intended to simplify several areas of accounting
for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and
forfeitures. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016,
which for the Company will commence with the year beginning January 1, 2018, with early adoption permitted commencing
January 1, 2017. The Company is currently evaluating the standard to determine the impact of its adoption on the consolidated
financial statements.
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain
Cash Receipts and Cash Payments.” ASU No. 2016-15 clarifies and provides specific guidance on eight cash flow classification
issues that are not currently addressed by current GAAP and thereby reduce the current diversity in practice. ASU No. 2016-15
is effective for public business entities for annual periods, including interim periods within those annual periods, beginning after
December 15, 2017, with early application permitted. This guidance is applicable to the Company's fiscal year beginning January
1, 2018. The Company is currently evaluating the standard to determine the impact of its adoption on the consolidated financial
statements.
Other recent accounting standards that have been issued or proposed by FASB or other standards-setting bodies that do
not require adoption until a future date are not expected to have a material impact on our consolidated financial statements upon
adoption.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our exposure to market risk for changes in interest rates relates primarily to our holdings of cash and cash equivalents.
Our cash and cash equivalents as of December 31, 2016, totaled $13.7 million and consisted primarily of cash and money market
funds with original maturities of three months or less from the date of purchase. Our primary exposure to market risk is interest
income sensitivity, which is affected by changes in the general level of the interest rates in the United States. However, because
of the short-term nature of the instruments in our portfolio, a sudden change in market interest rates of 10% would not be expected
to have a material impact on our financial condition or results of operations. We do not have any foreign currency or other derivative
financial instruments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements and supplementary data of the Company required by this Item are described in
Item 15 of this Annual Report on Form 10-K and are presented beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
We carried out an evaluation, under the supervision and with the participation of our management, including our chief
executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures,
as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of
the end of the period covered by this report. Based upon our evaluation, our chief executive officer and chief financial officer
concluded that our disclosure controls and procedures were effective, as of December 31, 2016, to provide reasonable assurance
that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized
and reported accurately and within the time periods specified in the Securities and Exchange Commission rules and forms and
accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate
to allow timely decisions regarding required disclosure.
45
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting includes those
policies and procedures that:
•
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of our assets
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made
only in accordance with authorizations of our management and directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition
of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting of operations as of December 31,
2016. In making this assessment, management used the criteria in Internal Control—Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (2013 framework) (“COSO”). Based on this assessment, our
management concluded that, as of December 31, 2016, our internal control over financial reporting was effective.
This Annual Report on Form 10-K does not include an audit or attestation report from our registered public accounting
firm regarding our internal control over financial reporting. Our management’s report was not subject to audit or attestation by our
registered public accounting firm since we are not an accelerated filer or a large accelerated filer as defined in Rule 12b-2 under
the Securities Exchange Act of 1934.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the
Exchange Act that occurred during the fourth quarter of the year ended December 31, 2016 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
46
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item regarding directors, executive officers and corporate governance is hereby
incorporated by reference to the material appearing in the Proxy Statement for the Annual Stockholders Meeting to be held in
2017 (the “Proxy Statement”) under the caption “Directors, Management and Corporate Governance.” The information required
by this item regarding compliance with Section 16(a) of the Exchange Act, is hereby incorporated by reference to the material
appearing in the Proxy Statement under the caption “Section 16(a) Beneficial Ownership Reporting Compliance.” The information
required by this Item 10 with respect to the availability of our code of ethics is provided in Item 1 of this Annual Report on Form
10-K. See “Item 1. Business — Corporate Information.”
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement
under the caption “Executive Compensation.”
ITEM 12.
RELATED STOCKHOLDER MATTERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
The information regarding security ownership of certain beneficial owners and management required by this item is
hereby incorporated by reference to the material appearing in the Proxy Statement under the captions “Voting Securities of Certain
Beneficial Owners and Management” and “Executive Compensation—Outstanding Equity Awards at Fiscal Year End.”
ITEM 13.
INDEPENDENCE
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement
under the captions “Certain Relationships and Related Transactions” and “Directors, Management and Corporate Governance —
Director Independence.”
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item is hereby incorporated by reference to the material appearing in the Proxy Statement
under the caption “Proposal 3 – Ratification of Appointment of Independent Registered Public Accounting Firm – Disclosure of
Marcum LLP Fees for the Years Ended December 31, 2016 and 2015” and “- Pre-Approval Policies and Procedures.”
47
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
PART IV
Exhibit
Number
Exhibit Description
3.1
3.2
3.3
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
Amended and Restated Certificate of Incorporation of the Company, effective July 10, 2014 (incorporated
by reference to Exhibit 3.1 to our current report on Form 8-K filed July 11, 2014)
Certificate of Designation of Series A Preferred Stock dated May 20, 2016 (incorporated by reference to
Exhibit 3.1 to our current report on Form 8-K/A filed on May 24, 2016)
Amended and Restated Bylaws, adopted July 10, 2014 (incorporated by reference to Exhibit 3.1 to our current
report on Form 8-K filed July 11, 2014)
Form of Registration Rights Agreement, dated as of June 3, 2013, by and between the Company and certain
stockholders of the Company (incorporated by reference to Exhibit 10.3 to our current report on Form 8-K
filed June 3, 2013)
Amended and Restated Employment Agreement, dated January 14, 2015, between Finjan Holdings, Inc. and
Philip Hartstein (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed January
16, 2015)#
Employment Agreement, dated as of July 5, 2013, by and between the Company and Philip Hartstein
(incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed July 12, 2013)#
Amended and Restated Employment Agreement, dated November 11, 2014, between Finjan Holdings, Inc.
and Michael Noonan (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K
filed November 12, 2014)#
Employment Agreement, dated January 19, 2014, between Finjan Holdings, Inc. and Julie Mar-Spinola
(incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed March 31, 2015)#
Finjan Holdings, Inc. 2013 Global Share Option Plan (incorporated by reference to Exhibit 10.7 to our current
report on Form 8-K filed June 3, 2013)#
Form of Option Award under the Finjan Holdings, Inc. 2013 Global Share Option Plan (incorporated by
reference to Exhibit 10.8 to our annual report on Form 10-K filed March 14, 2014)#
Finjan Holdings, Inc. 2014 Incentive Compensation Plan, dated July 10, 2014 (incorporated by reference to
Exhibit 10.1 to our quarterly report on Form 10-Q filed August 11, 2014)#
Form of Finjan Holdings, Inc. 2014 Incentive Compensation Plan Restricted Stock Unit Agreement
(incorporated by reference to Exhibit 10.2 to our quarterly report on Form 10-Q filed August 11, 2014)#
Form of Finjan Holdings, Inc. 2014 Incentive Compensation Plan Non-Qualified Stock Option Agreement
(incorporated by reference to Exhibit 10.3 to our quarterly report on Form 10-Q filed August 11, 2014)#
Summary of Director Compensation (incorporated by reference to our Current Report on Form 8-K filed April
8, 2014)#
Finjan Holdings, Inc. Israeli Appendix to the 2014 Incentive Compensation Plan (incorporated by reference
to Exhibit 10.1 to our Current Report on Form 8-K filed June 26, 2015)#
Form of Israeli Option Award Agreement (incorporated by reference to Exhibit 10.2 to our Current Report
on Form 8-K filed June 26, 2015)#
Sublease Agreement, dated January 7, 2015, between Finjan Holdings, Inc. and Tribune Media Company
(incorporated by reference to Exhibit 10.1 to our current report on form 8-K filed September 11, 2013)
48
Exhibit
Number
10.15
10.16
21.1
23.1
31.1
31.2
32.1
32.2
Exhibit Description
Series APreferred Stock Purchase Agreement, dated May 6, 2016, between Finjan Holdings, Inc. and Halcyon
Long Duration Recoveries Investments I LLC (incorporated by reference to Exhibit 10.1 to our current report
on Form 8-K filed on May 12, 2016)
Patent License, Settlement and Release Agreement, dated June 3, 2016, between Finjan, Inc. and Proofpoint,
Inc. and Armorize Technologies (incorporated by reference to Exhibit 10.2 to our quarterly report on Form
10-Q filed August 9, 2016)%
Subsidiaries of Finjan Holdings, Inc.*
Consent of Marcum LLP.*
Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
Certifications of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002*†
Certifications of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002*†
101.INS
XBRL Instance Document*+
101.SCH
XBRL Taxonomy Extension Schema Document*+
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document*+
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document*+
101.LAB
XBRL Taxonomy Extension Label Linkbase Document*+
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document*+
*
%
†
+
#
Filed herewith.
Confidential treatment has been obtained with respect to certain omitted portions of this exhibit. Omitted
portions have been filed separately with the Securities and Exchange Commission.
This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18
of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be
incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent
that the registrant specifically incorporates it by reference.
Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files in Exhibit 101 hereto are deemed not
filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act
of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of
1934, as amended, and otherwise are not subject to liability under those sections.
Management contract or compensatory plan or arrangement.
49
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: March 27, 2017
Date: March 27, 2017
FINJAN HOLDINGS, INC.
By:
By:
/s/ Philip Hartstein
Philip Hartstein
President & Chief Executive Officer
(Principal Executive Officer)
/s/ Michael Noonan
Michael Noonan
Chief Financial Officer & Treasurer
(Principal Financial and Accounting Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and
appoints Philip Hartstein and Michael Noonan, and each of them, jointly and severally, his attorneys-in-fact, each with the power
of substitution, for him in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file
the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Name
/s/ Eric Benhamou
Eric Benhamou
/s/ Daniel Chinn
Daniel Chinn
/s/ Glenn Daniel
Glenn Daniel
/s/ Harry Kellogg
Harry Kellogg
/s/ Michael Southworth
Michael Southworth
/s/ Alex Rogers
Alex Rogers
/s/ Gary Moore
Gary Moore
/s/ Philip Hartstein
Philip Hartstein
/s/ Michael Noonan
Michael Noonan
Title
Director
Date
March 27, 2017
Chairman
March 27, 2017
Director
Director
Director
Director
Director
President & Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer& Treasurer
(Principal Financial and Accounting
Officer)
50
March 27, 2017
March 27, 2017
March 27, 2017
March 27, 2017
March 27, 2017
March 27, 2017
March 27, 2017
INDEX TO EXHIBITS
Exhibit Description
Amended and Restated Certificate of Incorporation of the Company, effective July 10, 2014 (incorporated by
reference to Exhibit 3.1 to our current report on Form 8-K filed July 11, 2014)
Certificate of Designation of Series A Preferred Stock dated May 20, 2016 (incorporated by reference to Exhibit
3.1 to our current report on Form 8-K/A filed on May 24, 2016)
Amended and Restated Bylaws, adopted July 10, 2014 (incorporated by reference to Exhibit 3.1 to our current
report on Form 8-K filed July 11, 2014)
Form of Registration Rights Agreement, dated as of June 3, 2013, by and between the Company and certain
stockholders of the Company (incorporated by reference to Exhibit 10.3 to our current report on Form 8-K filed
June 3, 2013)
Amended and Restated Employment Agreement, dated January 14, 2015, between Finjan Holdings, Inc. and
Philip Hartstein (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed January 16,
2015)#
Employment Agreement, dated as of July 5, 2013, by and between the Company and Philip Hartstein (incorporated
by reference to Exhibit 10.1 to our current report on Form 8-K filed July 12, 2013)#
Amended and Restated Employment Agreement, dated November 11, 2014, between Finjan Holdings, Inc. and
Michael Noonan (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed November
12, 2014)#
Employment Agreement, dated January 19, 2014, between Finjan Holdings, Inc. and Julie Mar-Spinola
(incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed March 31, 2015)#
Finjan Holdings, Inc. 2013 Global Share Option Plan (incorporated by reference to Exhibit 10.7 to our current
report on Form 8-K filed June 3, 2013)#
Form of Option Award under the Finjan Holdings, Inc. 2013 Global Share Option Plan (incorporated by reference
to Exhibit 10.8 to our annual report on Form 10-K filed March 14, 2014)#
Finjan Holdings, Inc. 2014 Incentive Compensation Plan, dated July 10, 2014 (incorporated by reference to
Exhibit 10.1 to our quarterly report on Form 10-Q filed August 11, 2014)#
Form of Finjan Holdings, Inc. 2014 Incentive Compensation Plan Restricted Stock Unit Agreement (incorporated
by reference to Exhibit 10.2 to our quarterly report on Form 10-Q filed August 11, 2014)#
Form of Finjan Holdings, Inc. 2014 Incentive Compensation Plan Non-Qualified Stock Option Agreement
(incorporated by reference to Exhibit 10.3 to our quarterly report on Form 10-Q filed August 11, 2014)#
Summary of Director Compensation (incorporated by reference to our Current Report on Form 8-K filed April
8, 2014)#
Finjan Holdings, Inc. Israeli Appendix to the 2014 Incentive Compensation Plan (incorporated by reference to
Exhibit 10.1 to our Current Report on Form 8-K filed June 26, 2015)#
Form of Israeli Option Award Agreement (incorporated by reference to Exhibit 10.2 to our Current Report on
Form 8-K filed June 26, 2015)#
Sublease Agreement, dated January 7, 2015, between Finjan Holdings, Inc, and Tribune Media Company
(incorporated by reference to Exhibit 10.1 to our current report on form 8-K filed September 11, 2013)
Exhibit
Number
3.1
3.2
3.3
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
51
Exhibit
Number
10.15
10.16
21.1
23.1
31.1
31.2
32.1
32.2
Exhibit Description
Series A Preferred Stock Purchase Agreement, dated May 6, 2016, between Finjan Holdings, Inc. and Halcyon
Long Duration Recoveries Investments I LLC (incorporated by reference to Exhibit 10.1 to our current report
on Form 8-K filed on May 12, 2016)
Patent License, Settlement and Release Agreement, dated June 3, 2016, between Finjan, Inc. and Proofpoint,
Inc. and Armorize Technologies (incorporated by reference to Exhibit 10.2 to our quarterly report on Form 10-
Q filed August 9, 2016)%
Subsidiaries of Finjan Holdings, Inc.*
Consent of Marcum LLP.*
Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
Certifications of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002*†
Certifications of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002*†
101.INS
XBRL Instance Document*+
101.SCH
XBRL Taxonomy Extension Schema Document*+
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document*+
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document*+
101.LAB
XBRL Taxonomy Extension Label Linkbase Document*+
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document*+
*
%
†
+
#
Filed herewith.
Confidential treatment has been obtained with respect to certain omitted portions of this exhibit. Omitted portions
have been filed separately with the Securities and Exchange Commission.
This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of
the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated
by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant
specifically incorporates it by reference.
Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files in Exhibit 101 hereto are deemed not filed
or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933,
as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as
amended, and otherwise are not subject to liability under those sections.
Management contract or compensatory plan or arrangement.
52
FINJAN HOLDINGS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Changes in Stockholders Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Page
F-2
F-3
F-4
F-5
F-6
F-8
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Audit Committee of the
Board of Directors and Shareholders
of Finjan Holdings, Inc.
We have audited the accompanying consolidated balance sheets of Finjan Holdings, Inc. (the “Company”) as of December 31,
2016 and 2015, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the years
then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position
of Finjan Holdings, Inc., as of December 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for
the years then ended in conformity with accounting principles generally accepted in the United States of America.
/s/ Marcum LLP
Marcum LLP
New York, NY
March 27, 2017
F-2
FINJAN HOLDINGS, INC.
Consolidated Balance Sheets
(In thousands, except share and per share data)
Assets
Current Assets:
Cash and cash equivalents
Accounts receivable, net
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Investments
Non-current assets
Total Assets
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable
Accounts payable - related parties
Accrued expenses
Accrued income taxes
Other liabilities - current
Total current liabilities
Other liabilities - long-term
Total Liabilities
Commitments and contingencies (Note 7)
Redeemable Preferred Stock
December 31,
2016
2015
$
13,678 $
1,066
292
15,036
203
2,745
321
6,101
—
322
6,423
257
2,195
325
$
18,305 $
9,200
$
1,858 $
88
1,832
3
33
3,814
2,220
17
450
9
32
2,728
119
130
3,933
2,858
—
—
Series A preferred stock - $0.0001 par value, 83,502 shares and nil issued and
outstanding at December 2016 and 2015, respectively (Liquidation preference of
$13,778 at December 31, 2016)
Stockholders’ Equity
Preferred stock - $0.0001 par value; 10,000,000 shares authorized; no shares issued and
outstanding (which excludes 83,502 shares and nil Series A Redeemable Preferred
Stock at December 31, 2016 and 2015, respectively) at December 31, 2016 and 2015
Common stock - $0.0001 par value; 80,000,000 shares authorized; 23,102,728 and
22,640,611 shares issued and outstanding at December 31, 2016 and 2015
Additional paid-in capital
Accumulated deficit
13,486
—
2
18,140
(17,256)
—
—
2
23,946
(17,606)
Total Stockholders’ Equity
886
6,342
Total Liabilities and Stockholders’ Equity
$
18,305 $
9,200
The accompanying notes are an integral part of these Consolidated Financial Statements
F-3
FINJAN HOLDINGS, INC.
Consolidated Statements of Operations
(In thousands, except share and per share data)
Revenues
Cost of revenues
Gross profit
Operating Expenses:
Selling, general and administrative
Research and development
Total operating expenses
For the Years Ended
December 31,
2016
2015
$
18,387 $
3,037
15,350
14,430
570
15,000
4,687
814
3,873
17,367
391
17,758
Income / (loss) from operations
350
(13,885)
Other Income
Return on Investment
Interest income
Total other income
Net Income / (Loss)
Accretion of Series A preferred stock
Net loss attributable to common stockholders
Net loss per share applicable to common stockholders, basic and diluted
—
—
—
1,271
12
1,283
350
(12,602)
(6,789)
(6,439) $
—
(12,602)
(0.28) $
(0.56)
$
$
Weighted average common shares outstanding, basis and diluted
22,837,263
22,548,932
The accompanying notes are an integral part of these Consolidated Financial Statements
F-4
FINJAN HOLDINGS, INC.
Consolidated Statement of Changes in Stockholders’ Equity
For the Years Ended December 31, 2016 and 2015
(In thousands, except share and per share data)
Common Stock
Shares
Amount
Additional
Paid-In
Capital
Accum.
Deficit
Total
Balance - December 31, 2014
22,448,098
$
2
$
23,126
$
(5,004)
$
18,124
Stock based compensation expense
—
Proceeds from exercise of stock options
192,513
Net loss
Balance – December 31, 2015
Stock based compensation expense
—
22,640,611
—
Proceeds from exercise of stock options
462,117
Accretion of Series A preferred stock
Net income
Balance – December 31, 2016
—
—
—
—
—
2
—
—
—
—
766
54
—
23,946
872
111
(6,789)
—
—
(12,602)
(17,606)
—
—
—
—
18,140 $
350
(17,256) $
766
54
(12,602)
6,342
872
111
(6,789)
350
886
23,102,728 $
2 $
The accompanying notes are an integral part of these Consolidated Financial Statements
F-5
FINJAN HOLDINGS, INC.
Consolidated Statements of Cash Flows
(In thousands)
Cash Flows From Operating Activities
Net Income (Loss)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
$
350 $
(12,602)
For the Years Ended
December 31,
2016
2015
Return on investment
Depreciation
Loss on disposal of Assets
Stock-based compensation expense
Changes in operating assets and liabilities:
Accounts receivable
Prepaid expenses and other current assets
Other non-current assets
Accrued expenses
Accounts payable
Accounts payable - related parties
Accrued income taxes
Other liabilities
Net Cash Provided by (used in) Operating Activities
Cash Flows From Investing Activities
Purchases of additional investment
Proceeds from investment
Purchase of property and equipment
Net Cash Used in Investing Activities
Cash Flows From Financing Activities
Proceeds from the sale of Series A Preferred shares, net of issuance costs
Redemption Series A Preferred shares
Proceeds from exercise of stock options
Net Cash Provided by Financing Activities
Net Increase (Decrease in) Cash and Cash Equivalents
Cash and Cash Equivalents - Beginning
—
63
—
872
(1,066)
30
4
1,382
(362)
71
(6)
(10)
1,328
(550)
—
(9)
(559)
9,490
(2,793)
111
6,808
7,577
6,101
(1,271)
50
34
766
2,016
(210)
(325)
(350)
545
(83)
9
162
(11,259)
(750)
826
(275)
(199)
—
—
54
54
(11,404)
17,505
Cash and Cash Equivalents - Ending
$
13,678 $
6,101
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for income taxes
Non-cash investing and financing activities:
Distribution of investment held by investee
Accretion of Series A Preferred Stock
$
— $
—
6,789
7
445
—
The accompanying notes are an integral part of these Consolidated Financial Statements
F-6
FINJAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND OPERATIONS
ORGANIZATION
Finjan Holdings, Inc. (the “Company” or “Finjan Holdings”), a Delaware corporation, operates a cybersecurity business focused
in four business lines: intellectual property licensing and enforcement, advisory services, mobile security application development
and investing in cybersecurity technologies and intellectual property. Revenues and operations from the Company’s Finjan Mobile
security business and the Company’s CybeRisk advisory services were deemed immaterial for the years ended December 31, 2016
and 2015. Licensing and enforcement of the Company's cybersecurity patent portfolio is operated, through its wholly-owned
subsidiary Finjan, Inc. ("Finjan"). Finjan became a wholly owned subsidiary of Finjan Holdings in June of 2013 after a merger
transaction, following which the Company began trading on the OTC Markets. The Company’s common stock has been trading
on the NASDAQ Capital Market ("NASDAQ") since May 2014.
Finjan was founded in 1997 as a wholly-owned subsidiary of Finjan Software Ltd. (“FSL”). FSL, together with its subsidiaries,
sold enterprise web security solutions, including real-time and behavior-based malware prevention. In October 2003, FSL
transferred all of its shares in Finjan to Finjan Software, Inc. (“FSI”). As a result of this transfer, Finjan became a wholly-owned
subsidiary of FSI (the “Former Parent”). On December 8, 2010, Finjan, Inc. changed its name to FI Delaware, Inc. On October 22,
2012, FI Delaware, Inc. changed its name back to Finjan, Inc.
In October 2009, FSI transferred its portfolio of intellectual property to Finjan (its wholly-owned subsidiary at the time). Thereafter,
in November 2009, FSI sold certain assets, including certain of its operating subsidiaries, not including Finjan, and its sales and
marketing assets to M86 Security (“M86”). Finjan also granted a fully-paid, non-exclusive patent license to M86, in consideration
for which M86 issued shares of its common stock to Finjan and FSI. In connection with that transaction, and subsequent to
November 2009, FSI and its remaining subsidiaries (including Finjan) ceased the development, manufacture, marketing and sale
of its products, as well as research conducted through its Malicious Code Research Center as part of a confidential non-compete
provision. Finjan retained ownership of its patents and all related rights. In March 2012, M86 merged with Trustwave Holdings,
Inc. (“Trustwave”) through which M86’s license from Finjan was renewed with Trustwave to include an expanded scope and an
extension of the non-compete for the development of software and hardware security products. In September 2015, Trustwave
was acquired by Singapore Telecom (“SingTel”). Finjan’s agreement with Trustwave includes extended royalty obligations upon
achievement of certain sales milestones. To date, Finjan has not received any additional payments under the license.
In February 2013, Finjan distributed all securities it held in two unaffiliated entities to FSI, and made a payment of cash in an
amount sufficient to repay and satisfy in full a pre-existing intercompany loan from FSI to Finjan. Following that distribution, the
board of directors and stockholders of FSI approved the dissolution of, and a plan of liquidation for, FSI that resulted, among other
things, in the distribution of Finjan's common stock to certain of FSI’s stockholders, whereby Finjan ceased to be a subsidiary of
the Former Parent.
NOTE 2 - LIQUIDITY
Based on current forecasts and assumptions, the Company believes that its cash and cash equivalents will be sufficient to meet
anticipated cash needs for working capital and capital expenditures for at least the next 12 months from the date of filing this
annual report. Such forecasts include approximately $9.7 million received subsequent to year end, as described in Note 15 and
$3.3 million of licensing revenue to be received by January 3, 2018 under existing contracts. The Company may, however,
encounter unforeseen difficulties that may deplete its capital resources more rapidly than anticipated. To insure against any such
difficulties, the Company may raise additional capital to fund licensing and enforcement actions, planned research and development
activities and to better solidify its financial position. Any efforts to seek additional funding could be made through issuances of
equity or debt, or other external financing. However, additional funding may not be available on favorable terms, or at all. Further,
if the Company is unable to obtain additional funding on a timely basis, the Company may be required to curtail or terminate some
or all of its business plans.
F-7
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany
balances and transactions have been eliminated in consolidation.
RECLASSIFICATIONS
Where applicable, certain prior period amounts have been reclassified for comparative purposes to conform to the current
presentation. These reclassifications have no impact on the previously reported loss.
USE OF ESTIMATES
The preparation of financial statements in conformity with US Generally Accepted Accounting Principles ("US GAAP"), requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. On an ongoing basis, the Company evaluates its estimates, including those related to stock-based compensation expense,
impairment of long-lived assets, the determination of the economic useful life of property and equipment, income taxes and
valuation allowances against net deferred tax assets. Management bases its estimates on historical experience or on various other
assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all highly liquid instruments with original maturities of three
months or less when purchased to be cash equivalents. Included in cash and cash equivalents are demand deposits and money
market accounts.
CONCENTRATIONS OF CREDIT RISK
The Company maintains its cash and cash equivalents in financial institutions located in the United States and Israel. At times, the
Company’s cash and cash equivalent balances may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance
Corporation (“FDIC”) insurance limits. The Company has not experienced any losses in such accounts. As of December 31, 2016
and 2015, substantially all of the Company’s cash and cash equivalents are uninsured.
During 2016, revenues generated by the Company were derived from three license agreements that the Company entered into with
third parties and existing agreements from 2014 and 2015 that had agreed upon future payment terms. Revenue for the year ended
December 31, 2015 was from three license agreements.
See “Note 9 - License, Settlement and Release Agreement.”
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance for doubtful accounts is based on the Company’s assessment of the collectability of customer accounts. The Company
does not currently require any collateral for accounts receivable. The Company regularly reviews the allowance by considering
factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions
that may affect a customer’s ability to pay. The Company did not record an allowance for doubtful accounts as of December 31,
2016 and 2015, respectfully. Bad debt expense for the years ended December 31, 2016 and 2015 was nil.
PROPERTY AND EQUIPMENT, NET
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated on the straight-line method
over the estimated useful lives of the related assets, which range from 3 to 7 years. Leasehold improvements are amortized on the
straight-line method over the shorter of the remaining lease term or the estimated useful economic lives of the related assets using
the straight-line method. The costs of additions and betterments are capitalized and expenditures for repairs and maintenance are
expensed in the period incurred. When items of property and equipment are sold or retired, the related costs and accumulated
depreciation are removed from the accounts and any gain or loss is included in income.
F-8
PATENTS
The Company owns or possesses licenses to use its patents. The Company’s patent costs were fully amortized prior to January 1,
2014. The costs of maintaining patents are expensed as incurred. Patents as of December 31, 2016 and 2015 are as follows:
Patents
Less: accumulated amortization
Total
INVESTMENTS
As of December 31,
2015
2016
(in thousands)
18,052 $
(18,052)
18,052
(18,052)
— $
—
$
$
Investments that are not controlled, and over which the Company does not have the ability to exercise significant influence are
accounted for under the cost method. All of the Company’s investments as of December 31, 2016 and 2015 are accounted for
under the cost method.
IMPAIRMENT OF LONG-LIVED ASSETS
Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate that their carrying amount
may not be recoverable. The carrying amount of a long lived asset is not recoverable if it exceeds the sum of the undiscounted
future cash flows expected to result from the use and eventual disposition of the asset. The amount of impairment loss, if any, is
measured as the difference between the carrying value of the asset and its estimated fair value. Fair value is estimated based on
the best information available and by making necessary estimates, judgments and projections. For of these tests, long-lived assets
must be grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of
the cash flows of other assets and liabilities. As of December 31, 2016, the Company has not identified any impairments.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The reported amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts
payable and accrued liabilities, approximate their fair value due to their short maturities.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. These fair value measurements apply to all financial instruments that are measured and
reported on a fair value basis.
Where available, fair value is based on observable market prices or is derived from such prices. The Company uses the market
approach valuation technique to value its investments. The market approach uses prices and other pertinent information generated
from market transactions involving identical or comparable assets or liabilities. The types of factors that the Company may take
into account in fair value pricing the investments include available current market data, including relevant and applicable market
quotes.
Based on the observability of the inputs used in the valuation techniques, financial instruments are categorized according to the
fair value hierarchy, which ranks the quality and reliability of the information used to determine fair values.
Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:
Level 1 - Observable inputs such as quoted prices in active markets.
Level 2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.
Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own
assumptions.
F-9
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the
assignment of an asset or liability within the fair value hierarchy is based on the lowest level of input that is significant to the fair
value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety
requires judgment, and considers factors specific to the asset or liability.
REVENUE RECOGNITION
Revenue is recognized when persuasive evidence of an arrangement exists, delivery of the product or service has occurred, all
obligations have been performed pursuant to the terms of the agreement, the sales price is fixed or determinable, and collectability
is reasonably assured.
Revenue results from grants of licenses to its patented cyber-security technology and settlements reached from legal enforcement
of the Company’s patent rights. The Company does not grant, at this time, technology or software end-user licenses. Revenue is
recognized when the arrangement with the licensee has been signed and the license has been delivered and made effective, provided
license fees are fixed or determinable and collectability is reasonably assured. The fair value of licenses achieved is recognized
as revenue.
The amount of consideration received upon any settlement or judgment is allocated to each element of the settlement based on the
fair value of each element. Elements related to licensing agreements and royalty revenues, is recognized as revenue in the
consolidated statement of operations. Elements that are not related to license agreements and royalty revenue in nature will be
reflected as a separate line item within the Other Income section of the consolidated statements of operations. Elements provided
in either settlement agreements or judgments include, the value of a license, legal release, and interest. When settlements or
judgments are achieved at discounts to the fair value of a license, the Company allocates the full settlement or judgment, excluding
specifically named elements as mentioned above, to the value of the license agreement or royalty revenue under the residual method
relative to full license fair value prior to the discount. Legal release as part of a settlement agreement is recognized as a separate
line item in the consolidated statements of operations when value can be allocated to the legal release. When the Company reaches
a settlement with a defendant, no value is allocated to the legal release since the existence of a settlement removes legal standing
to bring a claim of infringement, and without a legal claim, the legal release has no economic value. The element that is applicable
to interest income will be recorded as a separate line item in Other Income.
RESEARCH AND DEVELOPMENT EXPENSE
The Company expenses the cost of research and development as incurred. Research and development expenses consist primarily
of professional services costs associated with the development of mobile security application products.
SOFTWARE DEVELOPMENT COSTS
Software development costs are expensed as incurred. Development costs of computer software to be sold, leased, or otherwise
marketed are subject to capitalization beginning when a product’s technological feasibility has been established and ending when
a product is available for general release to customers. In most instances, the Company’s products are released soon after
technological feasibility has been established. Software development costs incurred subsequent to achievement of technological
feasibility were not material, and were expensed as incurred during the years ended December 31, 2016 and 2015.
FOREIGN CURRENCY
Foreign currency denominated assets and liabilities of foreign subsidiaries, where the local currency is the functional currency,
are translated into U.S. dollars using the exchange rates in effect at the balance sheet dates, and income and expenses are translated
using average exchange rates during the period. Foreign currency translation gains (losses) were immaterial for the years ended
December 31, 2016 and 2015.
Foreign currency transaction gains (losses) were immaterial for the years ended December 31, 2016 and 2015, and are included
as general and administrative expense, in the accompanying consolidated statements of operations.
F-10
SERIES A PREFERRED STOCK
The Company accounts for the redemption premium and issuance costs on its Series A Preferred stock by recognizing changes in
the redemption value immediately as they occur and adjusting the carrying value of the security to equal the redemption value at
the end of each reporting period. This method views the end of the reporting period as if it were also the redemption date for the
security.
STOCK-BASED COMPENSATION
The Company measures compensation cost for all employee stock-based awards at their fair values on the date of grant. Stock-
based awards issued to non-employees are measured at their fair values on the date of grant, and are re-measured at each reporting
period through their vesting dates. When a non-employee becomes an employee and continues to vest in the award, the fair value
of the individual’s award is re-measured on the date that he becomes an employee, and then is not subsequently re-measured at
future reporting dates. The fair value of stock based awards is recognized as expense over the service period, net of estimated
forfeitures, using the straight-line method for stock options and restricted stock. The Company uses the Black-Scholes option-
pricing model to estimate the fair value of its stock-based awards.
NET LOSS PER COMMON SHARE
Basic net loss per common share is based upon the weighted-average number of common shares outstanding. Diluted net loss per
common share is based on the weighted-average number of common shares outstanding and potentially dilutive common shares
outstanding.
Potentially dilutive common shares from employee equity plans and warrants are determined by applying the treasury stock method
to the assumed exercise of warrants and share options and were excluded from the computation of diluted net loss per share because
their inclusion would be anti-dilutive and consist of the following:
Stock options
Restricted stock units
Total
INCOME TAXES
December 31,
2016
1,607,346
185,260
1,792,606
2015
1,510,832
408,710
1,919,542
The Company files consolidated income tax returns in the U.S. federal jurisdiction and is headquartered in California, formerly
in New York. The federal and state income tax returns for the tax years 2013 and after remain subject to examination for federal
and state taxes. The Company will be filing state income tax returns for California and New York.
The Company accounts for income taxes pursuant to the asset and liability method which requires deferred income tax assets and
liabilities to be computed annually for temporary differences between the financial statement and tax bases of assets and liabilities
that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which
the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. The income tax provision or benefit is the tax payable or refundable for the period
plus or minus the change during the period in deferred tax assets and liabilities.
The benefit of tax positions taken or expected to be taken in income tax returns are recognized in the financial statements if such
positions are more likely than not of being sustained. As of December 31, 2016 and 2015, an immaterial or no liability for
unrecognized tax benefits was required to be reported. The Company does not expect its unrecognized tax benefit position to
change during the next twelve months.
The Company’s policy is to classify assessments, if any, for tax-related interest as interest expense and penalties as general and
administrative expenses. There were no amounts accrued for penalties or interest as of, or during the years ended December 31,
2016 and 2015.
F-11
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue
from Contracts with Customers (Topic 606). This ASU is a comprehensive new revenue recognition model that requires a company
to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects
to receive in exchange for those goods or services. In August 2015, FASB issued ASU 2015-14, Revenue from Contracts with
Customers (Topic 606): Deferral of the Effective Date, which deferred the effective date of ASU 2014-09 to reporting periods
beginning after December 15, 2017, with early adoption permitted for reporting periods beginning after December 15, 2016.
Subsequently, FASB issued ASUs in 2016 containing implementation guidance related to ASU 2014-09, including: ASU 2016-08,
Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus
Net), which is intended to improve the operability and understandability of the implementation guidance on principal versus agent
considerations; ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and
Licensing, which is intended to clarify two aspects of Topic 606: identifying performance obligations and the licensing
implementation guidance; and ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements
and Practical Expedients, which contains certain practical expedients in response to identified implementation issues. The Company
expects to adopt this guidance in the first quarter of fiscal 2018 and apply the modified retrospective approach. The Company is
evaluating the impact of adopting this new accounting standard on its consolidated financial statements.
In February, 2016, FASB issued ASU No. 2016-02 “Leases” that requires a lessee to recognize the assets and liabilities that arise
from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease
liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12
months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease
assets and lease liabilities. The new guidance is effective for fiscal years beginning after December 15, 2018, including interim
periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effect of the standard on
its consolidated financial statements and related disclosures.
In March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting” (“ASU 2016-09”). The standard is intended to simplify several areas of accounting for share-
based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures.
ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, which for
the Company will commence with the year beginning January 1, 2018, with early adoption permitted commencing January 1,
2017. The Company is currently evaluating the standard to determine the impact of its adoption on the consolidated financial
statements.
In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts
and Cash Payments.” ASU No. 2016-15 clarifies and provides specific guidance on eight cash flow classification issues that are
not currently addressed by current GAAP and thereby reduce the current diversity in practice. ASU No. 2016-15 is effective for
public business entities for annual periods, including interim periods within those annual periods, beginning after December 15,
2017, with early application permitted. This guidance is applicable to the Company's fiscal year beginning January 1, 2018. The
Company is currently evaluating the standard to determine the impact of its adoption on the consolidated financial statements.
Other recent accounting standards that have been issued or proposed by FASB or other standards-setting bodies that do not require
adoption until a future date are not expected to have a material impact on our consolidated financial statements upon adoption.
NOTE 4 – ACCRUED EXPENSE
The components of accrued expenses are as below:
Legal - licensing & litigation
Legal - other
Compensation
Other
F-12
For the Years Ended
December 31,
2016
2015
(In thousands)
$
1,195 $
—
560
77
1,832 $
$
100
146
204
—
450
NOTE 5 – PROPERTY AND EQUIPMENT
The components of property and equipment were as follows:
Office equipment leasehold improvements and furniture
Less accumulated depreciation
Property and equipment
For the Years Ended
December 31,
2016
2015
(In thousands)
$
$
319 $
(116)
203 $
325
(68)
257
Depreciation expense for the years ended December 31, 2016 and 2015 was approximately $63,000 and $50,000, respectively.
NOTE 6 – INVESTMENTS
On November 21, 2013, the Company made a $5 million commitment to invest in Jerusalem Venture Partners (“JVP Fund”). As
of December 31, 2016, $2.7 million remains outstanding on this commitment. If and when the Company funds the entire amount
of the investment, the investment will be less than a 10% limited partnership interest in which the Company will not be able to
exercise control over the fund. Accordingly, the Company has accounted for this investment under the cost method of accounting.
On June 8, 2015, the Company received a cash distribution of $826,000 as a portion of a gross entitlement of approximately
$1,271,000 from its investment in the JVP Fund. This distribution represents a portion of the gross proceeds allocated to the
Company’s investment, with the remaining amount to be retained by the JVP Fund to fund future investment activities. The retained
proceeds did not reduce the Company's future capital commitment to the venture capital fund.
There were no identified events or changes in circumstances that are believed to have had a significant adverse effect on the fair
value of the investments as of December 31, 2016 and 2015.
The following is a summary of the Company’s investments (in thousands):
Balance - January 1, 2015
Investment made during 2015
Proceeds retained and reinvested in fund
Balance - December 31, 2015
Investment made during 2016
Balance - December 31, 2016
NOTE 7 – COMMITMENTS AND CONTINGENCIES
LEASES
Venture Capital
Fund
$
$
1,000
750
445
2,195
550
2,745
On September 9, 2013, the Company entered into a lease for its former corporate headquarters in New York, NY for a period of
five years beginning October 1, 2013. Under the terms of the lease, the Company owed an initial annual rent of approximately
$139,000, payable in monthly installments of approximately $12,000, unless earlier terminated in accordance with the lease. As
of December 31, 2016 the total future minimum lease payments to be paid under the agreement, which expires in September 2018,
was $266,000. The agreement also required an initial security deposit of $69,000 which is included in other long term assets. The
annual rental rate, beginning after the first year, is subject to an increase, on a cumulative basis, at a rate of 2.5% per annum
compounded annually.
F-13
In May 2015, the Company entered into a sublease agreement for its former corporate headquarters in New York, NY. As of
December 31, 2016 the total future minimum lease payments to be received under the sublease agreement, which expires in
September 2018, was $292,000.
On March 20, 2014, the Company received the consent of the master landlord for a sublease agreement dated March 10, 2014,
pursuant to which the Company subleased office space in Menlo Park, CA through November 30, 2017. From the commencement
date, the Company owed an initial annual rent of approximately $165,000, payable in equal monthly installments, unless earlier
terminated by either party in accordance with the lease. The annual rental rate is subject to an approximately 3.0% increase at each
anniversary of the commencement date during the term. As of December 31, 2016 the total future minimum lease payments to be
paid under the agreement, which expires in November 2017, was $157,000.
In August 2015, the Company entered into a sublease agreement for its office space in Menlo Park, CA. As of December 31, 2016,
the total future minimum lease payments to be received under the sub-lease agreement, which expires in November 2017, was
$178,000.
On January 7, 2015, the Company entered into a sublease agreement to sublease office space in East Palo Alto, CA through
September, 2018 to serve as its new Company headquarters. The annual rent is approximately $425,000, payable in equal monthly
installments, unless earlier terminated by either party in accordance with the lease. The annual rent is subject to an approximate
3.0% increase at each anniversary of the commencement date during the term of the sublease agreement. The agreement also
required an initial security deposit of $231,000 which is included in other long-term assets. As of December 31, 2016, the total
future minimum lease payments to be paid under the agreement, which expires in September 2018 was $790,000.
On December 1, 2016, the Company entered into a monthly lease agreement in Tel Aviv, Israel, where it is conducting operations
in support of CybeRisk. The annual rent is approximately $12,000, payable in equal monthly installments, unless earlier terminated
by either party in accordance with the lease.
The Company accounted for its “Cease-Use Liability” in accordance with ASC 420 “Exit or Disposal Cost Obligations”.
The following table sets forth the Company’s aggregate future minimum payments under its operating lease commitments as of
December 31, 2016 (in thousands):
Years ending December 31,
2017
2018
Total
$
$
753
458
1,211
For the years ended December 31, 2016 and 2015, the rent expense was approximately $782,000 and $667,000, respectively.
Rental income for the years ended December 31, 2016 and 2015 was $349,000 and $132,000, respectively.
Sublease income is recorded as a reduction in rental expense. Future minimum lease payments to be received under the sublease
agreements as of December 31, 2016 are as follows (in thousands):
Years ending December 31,
2017
2018
New York Menlo Park
Total
$
$
165 $
127
292 $
178 $
—
178 $
343
127
470
F-14
NOTE 8 - LITIGATION, CLAIMS AND ASSESSMENTS
A. United States District Court Actions
Finjan, Inc. v. FireEye, Inc., Case No. 13-cv-03133SBA, (N.D. Cal)
Finjan filed a patent infringement lawsuit against FireEye, Inc. (“FireEye”) in the United States District Court for the Northern
District of California on July 8, 2013, asserting that FireEye, Inc. is directly and indirectly infringing certain claims of Finjan’s
U.S. Patent Nos. 6,804,780, 7,058,822, 7,647,633, 7,975,305, 8,079,086, and 8,225,408, through the manufacture, use, importation,
sale, and/or offer for sale of its products and services, including but not limited to FireEye’s Threat Protection Platform, including
the FireEye Malware Protection System, the FireEye Dynamic Threat Intelligence, and the FireEye Central Management System.
Finjan amended its Complaint on August 16, 2013, to add U.S. Patent No. 6,154,844 to the list of asserted patents. The principal
parties in this proceeding are Finjan, Inc. and FireEye, Inc. Finjan seeks entry of judgment that FireEye, Inc. has infringed, is
infringing, and has induced infringement of the above-listed patents, a preliminary and permanent injunction from infringing, or
inducing the infringement of the above-listed patents, an accounting of all infringing sales and revenues, damages of no less than
a reasonable royalty and consistent with proof, enhanced damages, and enhanced damages for willful infringement, costs, interest,
and reasonable attorneys’ fees under 35 U.S.C. §285. FireEye, Inc. answered Finjan's Amended Complaint on September 3, 2013,
by denying Finjan's allegations of infringement and counterclaiming that the asserted patents are invalid under 35 U.S.C. §§ 101,
102, 103 and/or 112. Both parties have demanded a jury trial. On June 2, 2014, the Honorable Saundra Brown Armstrong entered
an Order Granting Motion to Stay Pending Reexamination of U.S. Patent Nos. 7,058,822 (“the ‘822 Patent”) and 7,647,633 (“the
‘633 Patent”). Accordingly, the action was placed off calendar until the U.S. Patent and Trademark Office ("USPTO") completed
its administrative reexamination proceedings. On February 16, 2016, the USPTO issued an Ex Parte Reexamination Certificate
confirming the validity of claims 1-8 and 16-27 of the ‘822 Patent. On May 31, 2016, pursuant to the Court’s Order Granting
Motion to Stay Pending Reexamination, the parties filed a joint status report regarding the status of reexamination proceedings
of the ‘822 and ‘633 Patents. On September 16, 2016, the USPTO issued an Ex Parte Reexamination Certificate confirming the
validity of claims 1-7 and 28-33 of the ‘633 Patent. On October 4, 2016, the Court directed the parties that if FireEye intends to
file a Renewed Motion to Stay, it must do so by November 4, 2016. On November 3, 2016, FireEye filed its Renewed Motion for
Stay. Finjan's response to the motion was filed November 17, 2016, and FireEye filed a reply on November 23, 2016. The Court
vacated the hearing on the Motion to stay scheduled for December 14, 2016 and stated that the Motion will be decided on the
pleadings. There can be no assurance that Finjan will be successful in settling or litigating these claims.
Finjan, Inc. v. Blue Coat Systems, Inc., Case No. 13-cv-03999-BLF (N.D. Cal.)
Finjan filed a patent infringement lawsuit against Blue Coat Systems, Inc., (“Blue Coat”) in the United States District Court for
the Northern District of California on August 28, 2013, asserting that Blue Coat is directly and indirectly infringing certain claims
of Finjan’s U.S. Patent Nos. 6,154,844, 6,804,780, 6,965,968, 7,058,822, 7,418,731, and 7,647,333. The principal parties in this
proceeding are Finjan and Blue Coat. This action is before the Honorable Judge Beth Labson Freeman. The Court held a claim
construction hearing, or Markman Hearing, for this matter on August 22, 2014. The Court entered its Markman Order entitled
“Order Construing Claims in U.S. Patent Nos. 6,154,844, 7,058,822, 7,418,731, and 7,647,633," on October 20, 2014, which is
available on PACER (www.pacer.gov), as Docket No. 118. Trial for this action took place from July 20, 2015 through August 4,
2015. On August 4, 2015, the jury returned a unanimous verdict that each of the Finjan asserted patents are valid and enforceable.
Further, the jury returned a unanimous verdict that Finjan’s U.S. Patent Nos. 6,154,844, 6,804,780, 6,965,968, and 7,418,731
were literally infringed by Blue Coat, and that U.S. Patent No. 7,647,633 was infringed by Blue Coat under the Doctrine of
Equivalents. Upon the findings of infringement, the jury also awarded Finjan approximately $39.5 million in damages as reasonable
royalties for Blue Coat's infringement. On September 9, 2015, the Court held a bench trial on non-jury legal issues, and issued
findings of fact and conclusions of law on November 20, 2015. On November 20, 2015, the Court entered Judgment in favor of
Finjan. On January 29, 2016, the Court taxed costs against Blue Coat. A hearing for the parties’ post-trial motions was held on
April 28, 2016. On July 18, 2016, the Court issued an order upholding the jury’s verdict of infringement, validity, and damages,
and denying Blue Coat’s motion to amend the Court’s findings of fact and conclusions of law, denying Blue Coat’s motion for
judgment as a matter of law, granting Blue Coat’s motion to amend the judgment to show infringement under the doctrine of
equivalents is moot for U.S. Patent Nos. 6,154,844, 6,804,780, and 6,965,968, denying Blue Coat’s motion for a new trial, denying
Finjan’s motion for enhanced damages, granting Finjan’s motion for pre-and post-judgment interest, and denying Finjan’s motion
for attorneys’ fees. Blue Coat filed a Notice of Appeal to the United States Court of Appeals for the Federal Circuit on August
17, 2016, and an Amended Notice of Appeal on August 22, 2016. On September 2, 2016, the parties submitted a joint stipulation
for approval of a supersedeas bond and a stay of enforcement of the judgment pending the resolution of Blue Coat’s appeal. On
September 7, 2016, the Court approved Blue Coat’s bond in the amount of $40,086,172.78. Blue Coat filed its Opening Appellant
Brief on December 20, 2016, and appealed the patent eligibility of U.S. Patent No. 6,154,844, infringement of U.S. Patent Nos.
6,154,844, 6,965,968, and 7,418,731, and the jury’s damages award. Finjan filed its Response Brief on January 30, 2017. Blue
F-15
Coat filed its Reply Appeal Brief on February 13, 2017. Finjan has not received any revenue from Blue Coat with respect to this
lawsuit. There can be no assurance that Finjan will be successful in collecting the full amount of the jury award.
Finjan, Inc. v. Sophos Inc., Case No. 14-cv-01197-WHO (N.D. Cal.)
Finjan filed a patent infringement lawsuit against Sophos Inc. (“Sophos”) in the United States District Court for the Northern
District of California on March 14, 2014, asserting that Sophos is directly and indirectly infringing certain claims of Finjan’s U.S.
Patent Nos. 6,154,844, 6,804,780, 7,613,918, 7,613,926, 7,757,289, and 8,141,154. Finjan amended the Complaint on April 8,
2014 to add U.S. Patent Nos. 8,677,494 and 8,566,580 to the list of asserted patents. Finjan asserts infringement against Sophos
through the manufacture, use, importation, sale, and/or offer for sale of its products and services, including but not limited to End
User Protection Suites, Endpoint Antivirus, Endpoint Antivirus - Cloud, Sophos Cloud, Unified Threat Management, Next-Gen
Firewall, Secure Web Gateway, Secure Email Gateway, Web Application Firewall, Network Storage Antivirus, Virtualization
Security, SharePoint Security, Secure VPN, Secure Wi-Fi and Server Security. The principal parties in this proceeding are Finjan
and Sophos. This action is before the Honorable William H. Orrick. Finjan seeks entry of judgment that Sophos has infringed
and is infringing the above-listed patents, a judgment that Sophos has induced infringement of U.S. Patent Nos. 6,804,780,
7,613,918, 7,613,926, 7,757,289, 6,154,844, and 8,667,494, a judgment that Sophos has contributorily infringed U.S. Patent
No. 8,566,580, a preliminary and permanent injunction from infringing, inducing, or contributorily infringing the same patents,
an accounting of all infringing sales and revenues, damages of no less than a reasonable royalty and consistent with proof, enhanced
damages, costs, interest, and reasonable attorneys’ fees under 35 U.S.C. §285. A claim construction or Markman Hearing occurred
on February 13, 2015. The Court entered its Markman Order entitled “Claim Construction Order” on March 2, 2015, which is
available on PACER (www.pacer.gov), as Docket No. 73. On April 9, 2015, Finjan filed a Second Amended Complaint that
included a certificate of correction for the ‘154 Patent. On November 17, 2015, Finjan filed a Third Amended Complaint to add
claims of Sophos’s willful infringement. Sophos filed an Answer to Finjan’s Third Amended Complaint on December 4, 2015.
On May 24, 2016, the Court issued an order on the parties’ motions to strike, motions for summary judgment, and discovery
matters. In its Order, the Court granted Sophos’ motion for summary judgment of non-infringement for U.S. Patent Nos. 7,757,289
and 7,613,918, denied the remainder of Sophos’ motion for summary judgment, denied Finjan’s motion for summary judgment
of infringement for U.S. Patent Nos. 7,613,926 and 8,677,494, granted Finjan’s motion for summary judgment that certain prior
art references were not publicly accessible, granted Finjan’s motion to strike in part to exclude certain prior art, granted Sophos’s
motion to strike in part to exclude portions of Finjan’s expert reports on infringement, and deferred ruling on Finjan’s motion for
summary judgment of validity for U.S. Patent Nos. 8,141,154, 8,677,494, 6,804,780, 8,154,844 and 7,613,926 after reviewing
supplemental filings to be submitted with the parties’ pre-trial filings. The Court also precluded Sophos from relying on documents
that were produced after the close of fact discovery. A mandatory settlement conference was held on July 25, 2016 with no
settlement. On August 26, 2016, the parties stipulated to withdrawing allegations in the case, including Finjan’s claim of
infringement of U.S. Patent No. 8,566,580.
Trial for this action took place from September 6, 2016 through September 21, 2016. On September 21, 2016, the jury returned
a unanimous verdict that each of the Finjan asserted patents are valid and enforceable. Further, the jury returned a unanimous
verdict that Sophos literally infringed U.S. Patent Nos. 6,154,844; 8,677,494; 6,804,780; 7,613,926 and 8,141,154 and awarded
Finjan $15 million in damages. The jury found that Sophos did not willfully infringe Finjan’s patents. On October 31, 2016, the
Court entered Judgment in favor of Finjan. Sophos filed post-trial motions on December 20, 2016, asking the Court to overturn
jury’s determination and to find that there was no infringement, that U.S. Patent Nos. 6,154,844 and 8,677,494 are not patent
eligible, the damages were improper, and that collateral estoppel should apply, or, in the alternative, grant a new trial. The Court
held a hearing on the post-trials motions on January 18, 2017, and on March 14, 2017, the Court issued an order denying Sophos’
request to overturn the jury’s determination and to find that there was no infringement, held that U.S. Patent Nos. 6,154,844 and
8,677,494 are patent eligible, that damages were proper, that collateral estoppel was not applicable, and denied the request for a
new trial. The Court also granted Finjan’s request for pre- and post-judgment interest. Finjan has not received any revenue from
Sophos with respect to this lawsuit. There can be no assurance that Finjan will be successful in collecting the full amount of the
jury award.
Finjan, Inc. v. Blue Coat Systems LLC, Case No. 5:15-cv-03295-BLF (N.D. Cal.)
Finjan filed a second patent infringement lawsuit against Blue Coat Systems LLC (“Blue Coat”) in the United States District Court
for the Northern District of California on July 15, 2015, asserting that Blue Coat is directly infringing certain claims of Finjan’s
U.S. Patent Nos. 6,154,844, 6,965,968, 7,418,731, 8,079,086, 8,225,408, 8,677,494, and 8,566,580 (collectively, the “asserted
patents”), through the manufacture, use, importation, sale, and/or offer for sale of its products and services, including but not
limited to the Web Security Service, WebPulse Cloud Service, ProxySG Appliances and Software, Blue Coat Systems SV2800
and SV3800, Malware Analysis Appliances and Software, Security Analytics Platform, Content Analysis System, and Mail Threat
Defense, S400-10 and S400-20. Finjan seeks entry of judgment that Blue Coat has infringed and is infringing the above-listed
patents, a preliminary and permanent injunction from the infringement of the same patents, an accounting of all infringing sales
F-16
and revenues, damages of no less than a reasonable royalty consistent with proof, and enhanced damages for willful infringement,
costs, interest, and reasonable attorneys’ fees under 35 U.S.C. §285. Blue Coat filed its Answer to the Complaint with Jury Demand
and Counterclaim with Jury Demand against Finjan on September 8, 2015. On September 29, 2015, Finjan filed its Answer to
Blue Coat’s Counterclaim. This second Blue Coat action is also assigned to the Honorable Beth Labson Freeman. On December
15, 2015, Blue Coat filed a Motion to Stay the case pending final resolution of Case 5:13-cv-03999-BLF, and Motions for Joinder
of several Petitions for Inter Partes review (“IPR”) on five of seven asserted patents, and Ex Parte Reexamination requests for
two asserted patents, filed previously by other defendants. A case management conference was held on December 17, 2015. On
March 1, 2016 Finjan filed an amended Complaint to add existing Finjan U.S. Patent No. 9,141,786 and two newly issued Finjan
U.S. Patent Nos. 9,189,621 (issued November 17, 2015) and 9,219,755 (issued December 22, 2015). On March 18, 2016, Blue
Coat filed its Answer to the Amended Complaint and Counterclaims with Jury Demand. On April 8, 2016, Finjan filed its Answer
to Blue Coat’s Counterclaims. On April 28, 2016, the Court held a hearing on Blue Coat’s motion to stay. On June 10, 2016,
Finjan notified the Court on the status of the IPR and Ex Parte Reexamination proceedings for the asserted patents. On June 27,
2016, Finjan filed an Amended Answer to Blue Coat’s counterclaims, adding an affirmative defense of collateral estoppel. On
June 27, 2016, Blue Coat filed an Amended Answer to Finjan’s Amended Complaint. On July 11, 2016, Finjan filed a motion to
strike certain affirmative defenses in Blue Coat’s Amended Answer, and a reply to Blue Coat’s counterclaims. On July 26, 2016
the Court denied Blue Coat's motion to stay the second case pending proceedings before the USPTO and the United States Patent
Trial and Appeal Board’s (“PTAB”). On July 28, 2016 Finjan filed a motion for preliminary injunction against Blue Coat. The
preliminary injunction would prohibit Blue Coat from making, using, offering to sell or selling within the U.S. or import into the
U.S. the Dynamic Real-Time Rating component of Blue Coat’s WebPulse product. On August 12, 2016, the parties filed a joint
claim construction statement setting forth the parties’ undisputed and disputed claim terms. On August 19, 2016, the Court issued
an Order setting a schedule for discovery relating to Finjan’s preliminary injunction motion. On August 23, 2016, Blue Coat filed
a motion to strike Finjan’s infringement contentions on the grounds of collateral estoppel and res judicata, which Finjan opposed
on September 27, 2016. On September 16, 2016, Blue Coat filed a motion for judgment on the pleadings under 35 U.S.C. § 101,
claiming that the asserted claims of the ‘494 patent are ineligible for lack of patentable subject matter. The Court held a claim
tutorial hearing on February 3, 2017, but cancelled the Markman hearing when Finjan and Blue Coat agreed to the meaning of all
terms. The hearing on Finjan's Motion to Strike Blue Coat's Sixth, Ninth and Tenth Affirmative Defenses, Finjan's Motion for
Preliminary Injunction and Blue Coat's Motion for Judgment on the Pleadings was heard on November 10, 2016. On November
14, 2016, the Court granted-in-part Finjan’s Motion to Strike Blue Coat’s Affirmative Defenses. On November 22, 2016, the
Court denied Finjan’s Motion for a Preliminary Injunction. On December 13, 2016, the Court denied Blue Coat’s Motion for
Judgment on the Pleadings. On January 31, 2017, the Court granted-in-part and denied-in-part Finjan’s motion to compel discovery
from Blue Coat. On February 7, 2017, Finjan supplemented its infringement contentions. On February 2, 2017, the Court granted-
in-part and denied-in-part Blue Coat’s Motion to Strike Finjan’s Infringement Contentions. Summary judgment motions are due
to be filed with the Court by May 17, 2017, and a summary judgment hearing is scheduled for June 22, 2017. A pretrial conference
is scheduled for October 5, 2017, and trial is scheduled for October 30, 2017. There can be no assurance that Finjan will be
successful in settling or litigating these claims.
Finjan, Inc. v. Symantec Corporation., Case No. 14-cv-02998-HSG (N.D. Cal.)
Finjan filed a patent infringement lawsuit against Symantec Corporation (“Symantec”) in the United States District Court for the
Northern District of California on June 30, 2014, asserting that Symantec is directly and indirectly infringing certain claims of
Finjan’s U.S. Patent Nos. 7,756,996, 7,757,289, 7,930,299, 8,015,182, and 8,141,154, through the manufacture, use, importation,
sale, and/or offer for sale of certain products and services. Finjan amended the Complaint on September 11, 2014 to add U.S.
Patent Nos. 6,154,844, 7,613,926 and 8,677,494. The accused products and services include Symantec Endpoint Protection,
Symantec Endpoint Protection Small Business Edition, Network Access Control, Norton Internet Security, Norton Anti-Virus,
Norton 360, Safe-Web Lite, Norton Safe Web, Messaging Gateway, Messaging Gateway for Service Providers, Messaging Gateway
Small Business Edition Managed Security Services-Advance Threat Protection, Advanced Threat Protection Solution, Symantec
Protection Engine for Cloud Services, Symantec Protection Engine for Network Attached Storage, Symantec Mail Security for
Domino, Symantec Mail Security for Microsoft Exchange, Symantec Scan Engine for Windows, Web Security.cloud, Email
Security.cloud, AntiVirus/Filtering for Domino, AntiVirus for Linux, Mail Security for SMTP, Scan Engine for Linux/Solaris,
AntiVirus for Caching/Messaging/NAS for Linux/Solaris, Protection Engine for Linux/Solaris, AntiVirus for Caching/Messaging/
NAS for Windows, Web Gateway and Norton Security. The principal parties in this proceeding are Finjan and Symantec. Finjan
seeks entry of judgment that Symantec has infringed and is infringing the asserted patents, has contributorily infringed and is
contributorily infringing U.S. Patent No. 8,015,182, and has induced infringement, and/or is inducing infringement of U.S. Patent
Nos. 6,154,844, 7,613,926, 7,756,996, 7,757,289, 7,930,299, and 8,677,494, a preliminary and permanent injunction from
infringing, contributorily infringing, or inducing the infringement of the same patents, an accounting of all infringing sales and
revenues, damages of no less than a reasonable royalty and consistent with proof, enhanced damages, and enhanced damages for
willful infringement, costs, interest, and reasonable attorneys’ fees under 35 U.S.C. §285. Symantec answered the Amended
Complaint on September 25, 2014, by denying Finjan’s allegations of infringement and counterclaiming that the asserted patents
are invalid under 35 U.S.C. §§ 101, 102, 103 and/or 112. Symantec filed an Amended Answer on October 31, 2014, removing
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its Fourteenth Affirmative Defense of unenforceability. Both parties have demanded a jury trial. This matter is assigned to the
Honorable Haywood S. Gilliam, Jr., United States District Judge. A Markman Hearing was heard on June 29, 2015.
On July 3, 2015, Symantec filed petitions for IPR before the PTAB for all asserted claims of U.S. Patent Nos. 8,015,182, 8,141,154,
7,757,289, 7,930,299, and 7,756,996. On September 10, 2015, Symantec filed a total of 11 IPR petitions for all asserted claims
of asserted patents. On August 20, 2015, Symantec filed a motion to stay the case pending completion of these eight IPR petitions.
The motion was heard on October 1, 2015 and on October 9, 2015, the Court stayed the case pending the PTAB’s decision on
whether to institute IPR of the claims that are the subject of Symantec’s petitions. On January 14, 2016, the PTAB denied institution
of six IPRs of five asserted patents. On January 21, 2016, the parties filed a joint status report giving the Court an update regarding
the status of the IPR petitions. On February 26, 2016 the PTAB denied institution of an additional two IPRs filed on separate
patents, denying a total of eight petitions as of February 26, 2016. On March 11, 2016 the PTAB denied two more IPR's on patents
against Symantec, denying a total of 10 petitions to date. On March 18, 2016, the PTAB granted institution on the 11th Petition
by Symantec, relating to U.S. Patent No. 8,677,494 (IPR2015-01892). On March 29, 2016, the parties jointly requested the Court
lift the stay, and on March 30, 2016, the Court lifted the stay. On April 15, 2016, the parties jointly submitted a proposed schedule
to the Court for the remainder of the case. On August 1, 2016 the Court issued a Scheduling Order indicating a timeline to trial
but without specifically identifying a trial date. On August 31, 2016, the parties filed a joint stipulation requesting that the Court
set a date for a settlement conference. There was a settlement conference that took place on March 3, 2017, and the parties provided
an update on settlement discussions on March 17, 2017.
On August 25, 2016, Symantec filed an administrative motion requesting leave to submit supplemental authority regarding various
claim construction issues and requesting the Court take judicial notice of statements made during and in connection with the IPR
proceedings. Finjan opposed the motion on August 28, 2016. On August 24, 2016, Finjan filed a request that the Court take
judicial notice of the PTAB’s construction of certain claim terms in connection with its denial to institute inter partes review with
respect to U.S. Patent Nos. 7,613,926 and 8,677,494. On August 25, 2016, Finjan filed a request that the Court take judicial notice
of the PTAB’s construction of certain claims in connection with its granting-in-part of inter partes review of U.S. Patent No.
8,677,494 and denial of inter partes review of U.S. Patent No. 7,613,926. Following a hearing on November 3, 2016, the Court
granted the Motion and ordered the parties to file a joint statement by no later than November 11, 2016, proposing an expedited
schedule for disclosures, briefs, and a Markman hearing if "deemed necessary by the Court". Finjan filed an opening supplemental
claim construction brief on November 29, 2016, Symantec filed a responsive supplemental claim construction brief on December
13, 2016, and Finjan filed a reply brief on December 20, 2016. A supplemental Markman Hearing was held on January 20, 2017.
The Court issued a Claim Construction Order on February 10, 2017. The Court issued an Order denying Symantec’s Motion to
Strike Finjan’s Infringement Contention and Sanctions on February 15, 2017. A case management conference was held on February
21, 2017 to discuss the schedule of the case. On March 14, 2017, the Court issued an order scheduling summary judgment motions
to be filed by September 22, 2017, the pretrial conference to be held on February 27, 2018, and a 10-day trial to commence on
April 9, 2018. There can be no assurance that Finjan will be successful in settling or litigating these claims.
Finjan, Inc. v. Palo Alto Networks, Inc., Case No. 3:14-cv-04908 PJH (N.D. Cal.)
Finjan filed a patent infringement lawsuit against Palo Alto Networks, Inc. (“Palo Alto Networks”) in the United States District
Court for the Northern District of California on November 4, 2014, asserting that Palo Alto Networks is directly and indirectly
infringing certain claims of Finjan’s U.S. Patent Nos. 6,804,780, 6,965,968, 7,058,822, 7,418,731, 7,613,918, 7,613,926, 7,647,633,
8,141,154, 8,225,408, and 8,677,494, through the manufacture, use, importation, sale, and/or offer for sale of its products and
services, including but not limited to Next-Generation Security Platform, Next-Generation Firewall, Virtualized Firewall, WildFire
Subscription, WildFire Platform, URL Filtering Subscription, Threat Prevention Subscription, and Advanced EndPoint Protection.
Palo Alto Networks failed to timely respond to the Complaint and Finjan submitted an application for Entry of Default. On Palo
Alto Networks’ request, Finjan stipulated to an extension of time for Palo Alto Networks to respond. The principal parties in this
proceeding are Finjan and Palo Alto Networks. Finjan seeks entry of judgment that Palo Alto Networks has infringed and is
infringing the above-listed patents, and has induced infringement and is inducing infringement of U.S. Patent Nos. 6,804,780,
6,965,968, 7,058,822, 7,418,731, 7613,918, 7,613,926, 7,647,633, 8,141,154, 8,225,408, and 8,677,494, a preliminary and
permanent injunction from infringing, or inducing the infringement the same patents, an accounting of all infringing sales and
revenues, damages of no less than a reasonable royalty consistent with proof, and enhanced damages for willful infringement,
costs, interest, and reasonable attorneys’ fees under 35 U.S.C. §285. Palo Alto Networks filed its Answer and Counterclaims on
December 31, 2015, by denying Finjan's allegations of infringement and counterclaiming that the asserted patents are invalid
under 35 U.S.C. §§ 101, 102, 103 and/or 112. Both parties have demanded a jury trial. On October 8, 2015, the Honorable Edward
M. Chen recused himself from the case and requested the case be reassigned to another judge. Also on October 8, 2015, the case
was reassigned to the Honorable Phyllis J. Hamilton in the Oakland division of the District Court for the Northern District of
California. On September 25, 2015, Palo Alto Networks filed a petition for IPR before the PTAB of U.S. Patent No. 8,141,154.
On September 30, 2015, Palo Alto Networks filed petitions for IPR of U.S. Patent Nos. 7,058,822, 7,418,731, 7,647,633 and
8,225,408. On November 4, 2015, Palo Alto Networks filed an IPR petition of U.S. Patent Nos. 7,613,926. On November 5, 2015,
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Palo Alto Networks filed IPR petitions of U.S. Patent Nos. 6,965,968 and 8,141,154. On November 6, 2015, Palo Alto Networks
filed IPR petitions of U.S. Patent Nos. 6,804,780, 7,613,918, 8,225,408 and 8,667,494. On December 10, 2015, the matter was
stayed pending a decision by the PTAB on whether to institute IPR of Finjan's claims of its ten patents asserted against Palo Alto
Networks. On March 21, 2016, the PTAB instituted trial on claims 1-8, 10 and 11 of U.S. Patent No.8,141,154, and on April 20,
2016, the PTAB instituted trial on the same claims from a separate petition. On March 29, 2016, the PTAB instituted trial on U.S.
Patent No. 8,225,408, claims 14 and 19 of U.S. Patent No. 7,647,633, and denied institution of inter partes review for U.S. Patent
Nos. 7,058,822 and 7,418,731. On May 9, 2016, the PTAB denied institution of trial on U.S. Patent Nos. 7,613,926, 6,965,968,
6,804,780, and 7,613,918. On May 13, 2016, the PTAB instituted trial on U.S. Patent No. 8,677,494. On May 26, 2016, the Court
ordered the stay to remain in effect until the PTAB’s final determination of the instituted IPRs. There can be no assurance that
Finjan will be successful in settling or litigating these claims.
Finjan, Inc. v ESET, LLC et al., Case No. 3:16-cv-03731-JD (N.D. Cal.)
Finjan filed a patent infringement lawsuit against ESET, LLC ("ESET, LLC") and ESET SPOL S.R.O. (“ESET SPOL”) (collectively
"ESET") in the United States District Court for the Northern District of California on July 1, 2016, asserting that ESET infringes
Finjan’s U.S. Patent Nos. 6,154,844, 6,804,780, 7,975,305, 8,079,086, 9,189,621, and 9,219,755, through the manufacture, use,
importation, sale, and/or offer for sale of its products and services, including but not limited to, ESET ThreatSense, ESET Advanced
Heuristic, ESET DNA Signature, Host-based Intrusion Prevention System (HIPS), and ESET LiveGrid technologies including
ESET’S Home Protection, Small Office, and Business product lines and ESET Services. Finjan seeks entry of a judgment that
ESET has infringed and is infringing the asserted patents, a preliminary and permanent injunction from the infringement of the
same patents, an accounting of all infringing sales and revenues, damages of no less than a reasonable royalty consistent with
proof, and enhanced damages for willful infringement, costs, interest, and reasonable attorneys’ fees under 35 U.S.C. § 285. On
July 14, 2016, this case was assigned to the Honorable James Donato in the San Francisco division. On July 27, 2016, ESET, LLC
filed a motion to dismiss or stay this action on the grounds that ESET, LLC first filed a declaratory judgment action in the Southern
District of California (ESET, LLC v. Finjan, Inc., Case No. 16-cv-01704 (S.D. Cal.)). A hearing was held on this motion on August
31, 2016, during which the Court stayed this matter pending the Southern District’s resolution of Finjan’s motion to dismiss ESET,
LLC’s declaratory judgment action. On September 16, 2016, the Southern District dismissed ESET LLC’s declaratory judgment
action without prejudice. On September 27, 2016, Finjan filed a notice of supplemental authority informing the Court that ESET’s
declaratory judgment action in the Southern District of California was dismissed without prejudice and requesting that the Court
lift the stay. A Case Management Conference was held on October 6, 2016, wherein the Court granted Finjan's request to lift the
stay, referred the matter to a settlement conference, and ordered service of the Complaint on ESET's counsel on behalf of ESET
SPOL under Federal Rules of Civil Procedure 4(f). On January 27, 2017, the Court ordered that this Case be transferred to the
Southern District of California under 28 U.S.C. § 1404(a). This case was transferred to the Southern District of California on
January 30, 2017 and was assigned to the Honorable Cathy Ann Bencivengo on February 8, 2017, Case No. 3-17-cv-00183 (S.D.
Cal.). There can be no assurance that Finjan will be successful in settling or litigating these claims.
Finjan, Inc. v. ESET, LLC et al., Case No. 3:17-cv-00183 (S.D. Cal.)
Finjan filed a patent infringement lawsuit against ESET, LLC (“ESET, LLC”) and ESET SPOL S.R.O. (“ESET SPOL”)
(collectively, “ESET”) in the United States District Court for the Northern District of California on July 1, 2016 (Case No. 3:16-
cv-03731-JD (N.D. Cal.)), which was transferred to the Southern District of California on January 31, 2017. This action is currently
before the Honorable Cathy Ann Bencivengo. A Case Management Conference was held on March 20, 2017. On October 20,
2016, defendant ESET, LLC filed a motion to dismiss Finjan’s Complaint for failure to state a claim for patent infringement. On
November 2, 2016, defendant ESET SPOL filed a motion to dismiss Finjan’s Complaint for lack of personal jurisdiction and for
failure to state a claim for patent infringement. A hearing regarding ESET’s motions to dismiss was held on March 20, 2017.
There can be no assurance that Finjan will be successful in settling or litigating these claims.
ESET, LLC v. Finjan, Inc., Case No. 16-cv-01704 (S.D. Cal.)
ESET, LLC (“ESET”) filed a Complaint for Declaratory Judgment against Finjan, Inc. (“Finjan”) in the United States District
Court for the Southern District of California on July 1, 2016, asserting that there is an actual controversy between the parties to
declare that ESET does not infringe any claim of U.S. Patent No. 7,975,305 (“the ‘305 Patent”). ESET sought an entry of judgment
that it has not infringed any claim of the ’305 Patent, an injunction against Finjan from asserting any of the claims in the ‘305
Patent against ESET or any of its customers or suppliers, and a finding that the case is exceptional and an award of fees and costs
under 35 U.S.C. § 285. On July 11, 2016, ESET filed an Amended Complaint for Declaratory Judgment, seeking entry of judgment
that it does not infringe any claim of the U.S. Patent Nos. 6,154,844, 6,804,780, 7,975,305, 8,079,086, 9,189,621, and 9,219,755.
ESET seeks an injunction against Finjan from asserting infringement of these patents against ESET or any of its customers or
suppliers, and a finding that the case is exceptional and an award of fees and costs under 35 U.S.C. § 285. On July 26, 2016,
Finjan filed a motion to dismiss the action pursuant to the first-to-file rule, asserting that Finjan was first to file an action in the
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Northern District of California with respect to five of the six patents at issue between the parties (Finjan, Inc. v ESET, LLC et al.,
Case 3:16-cv-03731-JD (N.D. Cal.). In the alternative, Finjan sought to have the case transferred to the Northern District of
California on the basis that it is the most appropriate venue. On September 26, 2016, the Court granted Finjan’s motion and
dismissed this action without prejudice. ESET has appealed the dismissal to the Court of Appeals for the Federal Circuit. The
Federal Circuit dismissed this Appeal to the Federal Circuit on February 2, 2017 after the Court in Finjan, Inc. v. ESET, LLC et
al., Case 3:16-cv-03731-JD, transferred that case to the Southern District of California.
Finjan, Inc. v. Cisco Systems, Inc., Case No. 17-cv-00072-SK (N.D. Cal.)
Finjan filed a patent infringement lawsuit against Cisco Systems, Inc. (“Cisco”) in the United States District Court for the Northern
District of California on January 6, 2017, asserting that Cisco infringes Finjan’s U.S. Patent Nos. 6,154,844; 6,804,780; 7,647,633;
8,141,154; and 8,677,494 through the manufacture, use, importation, sale, and/or offer for sale of its products and services, including
but not limited to, Cisco’s Advanced Malware Protection, Cisco Collective Security Intelligence, Cisco Outbreak Filters, Talos
Security Intelligence and Research Group, and AMP Threat Grid technologies, including Cisco AMP for Endpoints, Cisco AMP
for Networks (also referred to by Cisco as “NGIPS”), Cisco AMP for ASA with FirePOWER Services, Cisco AMP Private Cloud
Virtual Appliance, Cisco AMP for CWS, ESA, or WSA, Cisco AMP for Meraki MX, Cisco AMP Threat Grid. Finjan seeks entry
of a judgment that Cisco has infringed and is infringing the asserted patents, a preliminary and permanent injunction from the
infringement of the same patents, an accounting of all infringing sales and revenues, damages of no less than a reasonable royalty
consistent with proof, and enhanced damages for willful infringement, costs, interest, and reasonable attorneys’ fees under 35
U.S.C. § 285. Finjan filed a Proof of Service for January 12, 2017 on January 18, 2017. On March 6, 2017, Cisco answered
Finjan’s Complaint by denying Finjan’s allegations of infringement, and alleging a counterclaim of breach of contract. A case
management conference has been scheduled for June 8, 2017. There can be no assurance that Finjan will be successful in settling
or litigating these claims.
Finjan, Inc. v. ESET SPOL S.R.O. et al., Docket No. 4c O 33/16 (Düsseldorf District Court)
Finjan filed a patent infringement lawsuit against ESET SPOL. S.R.O. (ESET SPOL"), a Slovak Republic Corporation, and ESET
Deutschland GmbH (collectively “ESET”) in the Düsseldorf District Court of Germany on July 1, 2016, asserting that ESET
infringes Finjan’s European Patent No. 0 965 094 B1 (“the ‘094 Patent”), through the offering and/or delivering to customers in
the Federal Republic of Germany software covered by the ‘094 Patent, including but not limited to ESET’s ThreatSense, ESET
Advanced Heuristic, ESET DNA Signature, ESET LiveGrid technologies, including ESET’s Home Users, Small Office, and
Business product lines and ESET services. Finjan seeks a judgment sentencing ESET to a fine for each violation of patent
infringement or, alternatively imprisonment of ESET directors, cease and desist orders for offering or delivering infringing software,
providing Finjan with profit information for offering or delivering infringing software, damages, which Finjan has suffered or
shall suffer as a result of ESET offering or delivering infringing software since November 1, 2008. On November 24, 2016, ESET
filed a nullity action. There can be no assurance that Finjan will be successful in settling or litigating these claims.
Finjan, Inc. v. Blue Coat Systems, Inc., and Blue Coat Systems GmbH., Docket No. 4c O 33/16 (Dusseldorf District Court)
Finjan filed a third patent infringement lawsuit against Blue Coat Systems, Inc., which is its first patent infringement suit against
Blue Coat’s subsidiary Blue Coat Systems GmbH, located in Munich Germany in the Dusseldorf District Court of Germany on
October 14, 2016. Finjan asserts that Blue Coat infringes Finjan’s European Patent No. 0 965 094 B1 (“the ‘094 Patent”), through
the offering and/or delivering to customers in the Federal Republic of Germany software covered by the ‘094 Patent, including
but not limited to Blue Coat’s ProxySG Secure Web Gateway, Blue Coat’s Content Analysis System, Blue Coat’s Malware Analysis
Appliance, Webpulse, Security Analytics, Web Security Service, and Advanced Secure Gateway. Finjan seeks a judgment
sentencing Blue Coat to a fine for each violation of patent infringement or, alternatively imprisonment of Blue Coat’s directors,
cease and desist orders for offering or delivering infringing software, providing Finjan with profit information for offering or
delivering infringing software, damages, which Finjan has suffered or shall suffer as a result of Blue Coat offering or delivering
infringing software since November 1, 2008. There can be no assurance that Finjan will be successful in settling or litigating
these claims.
B. Proceedings before the United States Patent & Trademark Office (USPTO)
Ex Parte Reexamination Proceedings: As defined by the USPTO, an Ex Parte Reexamination is a “proceeding in which any person
may request reexamination of a U.S. Patent based on one or more prior patents or printed publications. A requester who is not the
patent owner has limited participation rights in the proceedings.”
U.S. Patent No. 8,079,086 (Assignee, Finjan, Inc.):
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A first third-party request for Ex Parte Reexamination of U.S. Patent No. 8,079,086 was filed on October 7, 2013, on behalf of
FireEye, Inc. and assigned Reexamination Control Number 90/013,015. The USPTO denied FireEye’s request on November 19,
2013, and the reexamination proceedings terminated on January 14, 2014.
A second third-party request by FireEye, Inc., for Ex Parte Reexamination of U.S. Patent No. 8,079,086 was filed on February 7,
2014, and assigned Reexamination Control Number 90/013,147. The USPTO denied FireEye’s second request on March 27, 2014,
and the reexamination proceedings terminated on April 29, 2014.
A third third-party request for Ex Parte Reexamination of Claims 17 and 24 of U.S. Patent No. 8,079,086 was filed on December
9, 2015 by Proofpoint, Inc. and assigned Reexamination Control Number 90/013,654. The reexamination request was partially
granted on February 2, 2016. Requester’s petitioned the Director to reconsider the partial denial and the petition was granted on
March 21, 2016. A response to non-final Office Action was filed on August 10, 2016. On November 23, 2016, the Patent Office
issued a Reexamination Certificate confirming the patentability of all claims.
U.S. Patent No. 7,975,305 (Assignee, Finjan, Inc.):
A third-party request for Ex Parte Reexamination of Claims 1, 2, 5 and 13 of U.S. Patent No. 7,975,305 was filed on December
11, 2015 by Proofpoint, Inc. and assigned Reexamination Control Number 90/013,660. The request for reexamination was granted
on January 19, 2016 and a non-final Office Action was mailed on April 12, 2016. A response to the non-final Office Action was
filed on June 13, 2016. A Final Action was mailed on August 24, 2016 with a response due October 24, 2016. A response to the
Final Action was filed on October 24, 2016 and a second interview with the Patent Office was conducted. The Patent Office issued
an Advisory Action maintaining the rejections. A Notice of Appeal was filed on November 11, 2016 and an Appeal Brief was
filed on January 23, 2017. Finjan is currently waiting on a response from the Patent Office. There can be no assurance that Finjan
will be successful in rebutting the patentability challenge before the USPTO.
U.S. Patent No. 7,647,633 (Assignee, Finjan, Inc.):
A third-party request for Ex Parte Reexamination of Claims 1-7 and 28-33 of U.S. Patent No. 7,647,633 was filed on October 7,
2013, on behalf of FireEye, Inc. and assigned Reexamination Control Number 90/013,016. The request for reexamination was
granted and a non-final Office Action was mailed November 19, 2013. The non-final Office Action included rejections of Claims
1-7 and 28-33 under various prior art (including previously considered and disclosed prior art) under 35 U.S.C. §§ 102 and/or
103. An in-person Examiner interview was conducted at the USPTO on February 4, 2014, and a timely response to non-final
Office Action was filed on February 19, 2014. The response to non-final Office Action included arguments and a supporting
declaration by Finjan showing commercial success, industry praise, and copying by others of products covered by pending claims;
a declaration by a technology expert rebutting improper technical interpretations of the prior art and the invention; and additional
new claims for consideration. Additionally, a renewed petition to accept an unintentionally delayed priority claim was also
submitted and the petition was granted on January 23, 2015. An updated filing receipt reflecting the priority claim was issued. A
final Office Action was issued May 22, 2015, and a Notice of Appeal was filed by Finjan on May 22, 2015. Finjan’s appeal brief
was filed August 24, 2015, appealing the rejections of Claims 1-7, 28-33 and 42-52. An Examiner’s Answer was received on
December 18, 2015. Finjan filed its Reply Brief requesting reversal of the rejections and a Request for Oral Hearing February 18,
2016. An Oral Hearing was conducted on June 22, 2016 and a decision reversing the Examiner’s rejections of claim 1-7, 28-33,
42, 44, 48 and 49 was mailed on June 29, 2016. An amendment cancelling rejected claims 43, 45-47 and 50-52 was filed on July
5, 2016 to move the application to Notice of Intent to Issue Reexamination Certificate (NIRC). A Reexamination Certificate
confirming the patentability of original claims 1-7 and 28-33 and new claims 42, 44, 48 and 49 was issued on September 16, 2016.
A second third-party request for Ex Parte Reexamination of Claims 8 and 12 of U.S. Patent No. 7,647,633 was filed on December
9, 2015 by Proofpoint, Inc. and assigned Reexamination Control Number 90/013,652. The reexamination request was granted on
February 3, 2016. On May 10, 2016, the USPTO terminated the reexamination and mailed a Notice of Intent to Issue a Reexamination
Certificate and on May 26, 2016, a Reexamination Certificate was issued confirming the patentability of all claims.
U.S. Patent No. 7,058,822 (Assignee, Finjan, Inc.):
A third-party request for Ex Parte Reexamination of Claims 1-8 and 16-27 of U.S. Patent No. 7,058,822 was filed on October 7,
2013, on behalf of FireEye, Inc. and assigned Reexamination Control Number 90/013,017. The request for reexamination was
granted and a non-final Office Action was mailed December 6, 2013. The non-final Office Action included rejections of Claims
1-8 and 16-27 under various prior art (including previously considered and disclosed prior art) under 35 U.S.C. §§ 102 and/or
103. An in-person Examiner interview was conducted at the USPTO on February 4, 2014, and a timely response to non-final
Office Action was filed on March 6, 2014. A final Office Action was mailed on September 8, 2014 and a response thereto was
filed on October 8, 2014, which included proposed claims amendments and arguments rebutting the various prior rejections. On
October 23, 2014, an Advisory Action was issued by the Patent Office maintaining the rejections from the final Office Action and
indicating that Finjan’s proposed claims amendments would not be entered. On December 8, 2014, Finjan: (1) filed a petition to
the Director of the Central Reexamination Unit (CRU) under 37 CFR 1.181 challenging the Examiner’s failure to enter the
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amendments and requesting entry; and (2) a notice of appeal to the Patent Trial and Appeal Board. Finjan filed an appeal brief on
February 8, 2015. The Examiner filed a brief on March 30, 2015. Finjan filed a Reply Brief and a Request for Oral Hearing on
June 1, 2015, and the Appeal was docketed at the PTAB and assigned Appeal No. 2015-006304. An oral hearing before the PTAB
took place on November 3, 2015. On December 30, 2015, the PTAB issue a decision reversing the Examiner’s rejection of Claims
1-8 and 16-27 and new claims 37 and 40 added during prosecution of the reexamination. On February 16, 2016, an Ex Parte
Reexamination Certificate (Certificate No. US 7,058,822 C1) was issued to Finjan by the USPTO. Finjan was granted U.S. Patent
Nos. 9,141,786 and 9,219,755 containing additional claims on September 22, 2015 and December 2, 2015, respectively.
U.S. Patent No. 6,154,844 (Assignee, Finjan, Inc.):
A third-party request for ex parte reexamination of claims 32 and 42 of U.S. Patent No. 6,154,844 was filed on December 9, 2015
by Proofpoint, Inc. and assigned Reexamination Control Number 90/013,653. The request for reexamination was granted on
January 13, 2016. On March 30, 2016, the Patent Office terminated the reexamination and mailed a Notice of Intent to Issue a
Reexamination Certificate. On May 13, 2016, a Reexamination Certificate was issued confirming the patentability of all claims.
U.S. Patent No. 7,930,299 (Assignee, Finjan, Inc.):
A third-party request for ex parte reexamination of claims 13, 14-18, 20 of U.S. Patent No. 7,930,299 was filed on September 16,
2016 and assigned Reexamination Control Number 90/013,811. The request for reexamination was granted on November 14,
2016. On January 17, 2017, Finjan filed a petition to consider pre-institution argument requesting, inter alia, that the Director
rescind and/or terminate the reexamination pursuant to 35 U.S.C. § 325(d). Finjan is currently waiting on a decision on the Petition.
There can be no assurance that Finjan will be successful in rebutting the patentability challenge before the USPTO.
U.S. Patent No. 8,015,182 (Assignee, Finjan, Inc.):
A third-party request for ex parte reexamination of claims 8-11, 13 of U.S. Patent No. 8,015,182 was filed on September 16, 2016
and assigned Reexamination Control Number 90/013,812. The request for reexamination was granted on October 17, 2016. On
December 19, 2016, Finjan filed a petition to consider pre-institution argument requesting, inter alia, that the Director rescind
and/or terminate the reexamination pursuant to 35 U.S.C. § 325(d). Finjan is currently waiting on a decision on the Petition. There
can be no assurance that Finjan will be successful in rebutting the patentability challenge before the USPTO.
U.S. Patent No. 7,756,996 (Assignee, Finjan, Inc.):
A third-party request for ex parte reexamination of claims 1-7 of U.S. Patent No. 7,756,996 was filed on September 16, 2016 and
assigned Reexamination Control Number 90/013,813. The request for reexamination was granted on November 14, 2016. On
January 17, 2017, Finjan filed a petition to consider pre-institution argument requesting, inter alia, that the Director rescind and/
or terminate the reexamination pursuant to 35 U.S.C. § 325(d). Finjan is currently waiting on a decision on the Petition. There
can be no assurance that Finjan will be successful in rebutting the patentability challenge before the USPTO.
Inter Partes Reexamination Proceedings:
As defined by the USPTO, an Inter Partes Reexamination is a “proceeding in which any person who is not the patent owner and
is not otherwise estopped may request examination of a U.S. Patent issued from an original application filed on or after November 29,
1999, based on one or more prior patents or printed publications. Both patent owner and third party requester have participation
rights throughout the proceeding, including appeal rights.” Effective September 16, 2012, the American Invents Act (“AIA”)
replaced Inter Partes Reexaminations with proceedings referred to as post-grant review and Inter Partes Review (“IPR”). Post-
grant proceedings are generally available immediately after patent issuance. For patents filed under the pre-AIA first to invent
rules (i.e., applications filed prior to March 16, 2013, IPRs can be initiated immediately following issuance of patent. For patents
examined under the AIA first-to-file rules (i.e., applications filed on or after March 16, 2013), IPRs can be initiated after the nine-
month window of eligibility for post-grant review.
U.S. Patent No. 6,480,962 (Assignee, Finjan, Inc.):
A third-party request for Inter Partes Reexamination of all Claims 1-55 of U.S. Patent No. 6,480,962 was filed on November 29,
2011, on behalf of Symantec Corporation, and assigned Reexamination Control Number 95/001,836. The request for reexamination
was granted and a non-final Office Action was mailed January 25, 2012. The non-final Office Action included rejections of claims
1-55 under numerous prior art references and combinations of such references (including previously considered and disclosed
prior art) under 35 U.S.C. §§ 102 and/or 103. Finjan filed a response to non-final Office Action and the USPTO mailed an Action
Closing Prosecution (ACP) on October 2, 2013. Finjan responded to the ACP on December 2, 2013, which included proposed
claim amendments for consideration. Symantec responded on January 2, 2014. On June 27, 2014, the USPTO stated that the
proposed claim amendments would not be entered and issued a Right of Appeal Notice. On July 1, 2014, Finjan filed a Notice
of Appeal of the rejection of Claims 1-55 followed by an Appeal Brief on September 2, 2014. The Requester Symantec filed a
respondent brief on October 2, 2014. The Examiner filed a brief on March 25, 2015. Finjan filed a Rebuttal Brief on April 27,
2015 and a Request for Oral Hearing on May 26, 2015. The Rebuttal Brief maintained Finjan’s request to review the rejections
of Claims 2-4, 7-11, 13-14, 16-20, 22-32, 34-36, 39-44, 46-51, 53 and 54. Claims 1, 5, 6, 12, 15, 21, 33, 37, 38, 45, 52 and 55
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were withdrawn from appeal in view the final invalidity decision issued on September 15, 2014 by the Federal Circuit. The Appeal
was forwarded to the PTAB in accordance with the Notice mailed June 2, 2015. Finjan also sought examination of additional
claims through multiple Track I expedited continuation applications. Finjan was granted U.S. Patent Nos. 9,189,621 and 9,291,755
containing those additional claims on November 17, 2015 and December 22, 2015, respectively. Oral argument was heard on
February 17, 2016. On February 29, 2016, the PTAB issued a decision affirming the rejections of the Examiner. On March 29,
2016, Finjan filed a request for rehearing regarding the rejection of claims 22-32 and 46 and the Requester filed comments on
April 28, 2016. The PTAB denied Finjan’s Request for Rehearing on August 5, 2016. Finjan did not appeal the PTAB decision to
the Federal Circuit. A Reexamination Certificate cancelling the rejected claims 2-4, 7-11, 13-14, 16-20, 22-32, 34-36, 39-44,
46-51, 53 and 54 was issued on January 12, 2017.
Inter Partes Review Proceedings:
As defined by the USPTO, Inter Partes Review (“IPR”) is a trial proceeding conducted at the Patent and Trial and Appeal Board
(PTAB or Board) to review the patentability of one or more claims in a patent only on a ground that could be raised under §§ 102
or 103, and only on the basis of prior art consisting of patents or printed publications. For first-inventor-to-file patents IPR process
begins with a third party (a person who is not the owner of the patent) filing a petition after the later of either: (1) nine months
after the grant of the patent or issuance of a reissue patent; or (2) if a post grant review is instituted, the termination of the post
grant review. These deadlines do not apply to first-to-invent patents. The patent owner may file a preliminary response to the
petition. An IPR may be instituted upon a showing that there is a reasonable likelihood that the petitioner would prevail with
respect to at least one claim challenged. If the proceeding is instituted and not dismissed, a final determination by the Board will
be issued within one year (extendable for good cause by six months). The procedure for conducting IPR took effect on September
16, 2012, and applies to any patent issued before, on, or after September 16, 2012.
U.S. Patent No. 7,613,926 (the “’926 Patent”)
On March 19, 2015, Sophos, Inc. filed a petition for IPR of U.S. Patent No. 7,613,926 (IPR2015-00907). Finjan filed a Patent
Owner’s Preliminary Response (“POPR”) to the petition on June 26, 2015. The PTAB denied Sophos’ petition to institute the
IPR proceeding on the ‘926 Patent on September 24, 2015. On October 26, 2015, Sophos filed a Request for Rehearing, and on
December 4, 2015, the PTAB denied Sophos’ Request for Rehearing.
U.S. Patent No. 8,677,494 (the “’494 Patent”)
On April 8, 2015, Sophos, Inc. filed a petition for IPR of U.S. Patent No. 8,677,494 (IPR2015-01022). Finjan filed a POPR to
the petition on July 14, 2015. The PTAB denied Sophos’ petition to institute the IPR proceeding on the ‘494 Patent on September
24, 2015. On October 26, 2015, Sophos filed a Request for Rehearing, and on January 28, 2016, the PTAB denied Sophos’ Request
for Rehearing.
U.S. Patent No. 7,756,996 (the “’996 Patent”)
On July 3, 2015, Symantec Corporation filed two (2) separate petitions for IPR of U.S. Patent No. 7,756,996 (IPR2015-
01545/01546). Finjan filed POPRs to the petitions October 19 and 20, 2015. The PTAB denied both of Symantec’s petitions to
institute IPR proceedings on the ‘996 Patent on January 14, 2016. On February 16, 2016, Symantec filed a Request for
Rehearing, and on February 25, 2016, the PTAB denied Symantec’s Request for Rehearing.
U.S. Patent No. 7,757,289 (the “’289 Patent”)
On July 3, 2015, Symantec Corporation filed a petition for IPR of U.S. Patent No. 7,757,289 (IPR2015-01552). Finjan filed a
POPR to the petition on October 19, 2015. The PTAB denied Symantec’s petition to institute IPR proceedings on the ‘289 Patent
on January 14, 2016.
U.S. Patent No. 7,930,299 (the “’299 Patent”)
On July 3, 2015, Symantec Corporation filed a petition for IPR of U.S. Patent No. 7,930,299 (IPR2015-01549). Finjan filed a
POPR to the petition October 20, 2015. The PTAB denied Symantec’s petition to institute IPR proceedings on the ‘299 Patent on
January 14, 2016.
U.S. Patent No. 8,015,182 (the “’182 Patent”)
On July 3, 2015, Symantec Corporation filed a petition for IPR of U.S. Patent No. 8,015,182 (IPR2015-01548). Finjan filed a
POPR to the petition on October 20, 2015. The PTAB denied Symantec’s petition to institute IPR proceedings on the ‘182 Patent
on January 14, 2016.
U.S. Patent No. 8,141,154 (the “’154 Patent”)
On July 3, 2015, April 19, 2016, and May 26, 2016, Symantec Corporation filed three (3) separate petitions for IPR of U.S. Patent
No. 8,141,154 (IPR2015-01547; IPR2016-00919; IPR2016-01071), and moved to join the petition for IPR filed by Palo Alto
Networks with respect to the ‘154 Patent (IPR2016-00151). Finjan filed a POPR to the petition in IPR2015-01547 on October
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19, 2015. The PTAB denied Symantec’s petition to institute IPR proceedings in IPR2015-01547 on January 14, 2016. On February
16, 2016, Symantec filed a Request for Rehearing with respect to IPR2015-01547, and on February 25, 2016, the PTAB denied
Symantec’s Request for Rehearing. With respect to IPR2016-00919 and IPR2016-01071 on the ‘154 Patent, the PTAB’s granted
Symantec’s motions for joinder on September 8, 2016. On March 15, 2017, the PTAB issued a final written decision maintaining
the validity of the instituted claims in both IPR2016-00919 and IPR2016-01071.
U.S. Patent No. 8,677,494 (the “’494 Patent”)
On September 10, 2015, Symantec filed a petition for inter partes review of the ’494 Patent (IPR2015-01892). Finjan filed a
POPR to the petition on December 28, 2015. On March 18, 2016, the PTAB granted Symantec’s petition to institute the IPR
proceeding on claims 1, 2, 5, 6, 10, 11, 14, and 15 of the ’494 Patent. On April 1, 2016, Finjan filed a request for rehearing. The
PTAB denied the request for rehearing on May 23, 2016. On March 15, 2017, the PTAB issued a final written decision maintaining
the validity of claims 5, 10, 11, 14, and 15 and invalidating claims 1, 2, and 6 of the ’494 Patent.
On September 11, 2015, Symantec Corp. filed a petition for inter partes review of the ’494 Patent (IPR2015-01897). Finjan filed
a POPR to the petition on December 28, 2015. The PTAB denied Symantec’s petition to institute the IPR proceeding on the ’494
Patent on February 26, 2016.
U.S. Patent No. 6,154,844 (the “’844 Patent”)
On September 11, 2015, Symantec Corporation filed a petition for IPR of U.S. Patent No. 6,154,844 (“the ‘844 Patent”)
(IPR2015-01894). Finjan filed a POPR to the petition on December 17, 2015. The PTAB denied institution of the IPR proceeding
on the ‘844 Patent on March 11, 2016.
U.S. Patent No. 7,613,926 (the “’926 Patent”)
On September 11, 2015, Symantec, Corp. (“Symantec”) filed two petitions for IPR of the ’926 Patent (IPR2015-01893,
IPR2015-01895). Finjan filed its POPRs to the Petition on December 17, 2015. The PTAB denied Symantec’s petition to institute
the IPR proceeding for IPR2015-01895 on February 26, 2016. The PTAB denied Symantec’s petition to institute the IPR proceeding
for IPR2015-01893 on March 11, 2016.
U.S. Patent No. 8,141,154 (the “’154 Patent”)
On September 25, 2015 and November 5, 2015, Palo Alto Networks Inc. filed two (2) separate petitions for IPR of U.S. Patent
No. 8,141,154 and a Motion for Joinder to Symantec’s Petition for IPR of the ‘154 Patent (IPR2015-01547). (IPR2015-01979;
IPR2016-00151). Finjan filed a POPR to the first petition in IPR2015-01979 on December 29, 2015. With respect to IPR2015-
01979, the PTAB granted institution of IPR proceedings on the ‘154 Patent on March 21, 2016. On April 5, 2016, Finjan filed a
partial request for rehearing, and on April 19, 2016, the PTAB denied Finjan’s partial request for rehearing. On July 12, 2016,
Finjan submitted a Patent Owner Response to the Petition. With respect to IPR2016-00151 on the ‘154 Patent, Finjan filed a
POPR on February 17, 2016, and on April 20, 2016, the PTAB instituted trial on claims 1-8, 10, and 11, denied institution on
the remaining claims and denied Palo Alto Network’s Motion for Joinder. On May 4, 2016, Finjan filed a partial request for
rehearing, and on June 2, 2016, the PTAB denied Finjan’s Request for Rehearing. On June 16, 2016, the parties filed a joint notice
to amend the Scheduling Order. On August 31, 2016, Finjan filed its Patent Owner Response to Palo Alto Network’s Petition in
IPR 2016-00151. The parties had an oral hearing for IPR2016-00151 on January 24, 2017 and on March 15, 2017, the PTAB
issued a final written decision maintaining the validity of all instituted claims. The parties had an oral hearing for IPR2015-01979
on December 15, 2016 and on March 15, 2017, the PTAB issued a final written decision maintaining the validity of all instituted
claims.
U.S. Patent No. 7,647,633 (the “’633 Patent”)
On September 30, 2015, Palo Alto Networks, Inc. filed a petition for IPR of U.S. Patent No. 7,647,633 (IPR2015-01974). Finjan
filed a POPR to the petition on January 7, 2016. On March 29, 2016, the PTAB granted institution of IPR proceedings with respect
to claims 14 and 19 of the ‘633 Patent, and denied institution with respect to all other challenged claims. On April 12, 2016, Palo
Alto Networks filed a request for rehearing. On May 18, 2016, the PTAB denied Palo Alto Networks’ Request for Rehearing. On
June 1, 2016, the parties filed a joint notice to amend the Scheduling Order. On August 9, 2016, Finjan filed its Patent Owner
Response to Palo Alto Network’s Petition in IPR 2015-01974. The parties had an oral hearing on January 5, 2017, and on March
16, 2017, the PTAB issued a final written decision maintaining the validity of all instituted claims.
U.S. Patent No. 7,058,822 (the “’822 Patent”)
On September 30, 2015, Palo Alto Networks Inc. filed a petition for IPR of United States Patent No. 7,058,822 (IPR2015-01999).
Finjan filed a POPR to the petition on January 6, 2016. The PTAB denied institution of IPR proceedings on the ‘822 Patent on
March 29, 2016. On April 28, 2016, Palo Alto Networks filed a Request for Rehearing, and on May 18, 2016, the PTAB granted
Palo Alto Networks’ Request for Rehearing but did not alter its Decision denying institution.
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U.S. Patent No. 7,418,731 (the “’731 Patent”)
On September 30, 2015, Palo Alto Networks Inc. filed a petition for IPR of United States Patent No. 7,418,731 (IPR2015-02000).
Finjan filed a POPR to the petition on January 8, 2016. The PTAB denied institution of IPR proceedings on the ‘731 Patent on
March 23, 2016. On April 22, 2016, Palo Alto Networks filed a Request for Rehearing. On May 20, 2016, the PTAB denied Palo
Alto Networks’ Request for Rehearing.
U.S. Patent No. 8,225,408 (the “’408 Patent”)
On September 30, 2015 and November 6, 2015, Palo Alto Networks Inc. filed two (2) separate petitions for IPRs of United States
Patent No. 8,225,408 (IPR2015-02001; IPR2016-00157). Finjan filed POPRs to the petitions on January 6, 2016, and February
17, 2016, respectively. On March 29, 2016, the PTAB granted institution of the IPR proceedings in IPR2015-02001 and
IPR2016-00157 and consolidated the two IPR proceedings. On April 12, 2016, Finjan filed requests for rehearing. On May 16,
2016, the PTAB denied Finjan’s Requests for Rehearing. On June 27, 2016, the parties filed a joint notice to amend the Scheduling
Order. On August 9, 2016, Finjan filed its Patent Owner Response to Palo Alto Network’s Petition in IPR 2015-02001 and IPR
2016-00157. The parties had an oral hearing on January 5, 2017, and on March 17, 2017, the PTAB issued a final written decision
maintaining the validity of all instituted claims.
U.S. Patent No. 7,613,926 (the “’926 Patent”)
On November 4, 2015, Palo Alto Networks, Inc. filed a petition for IPR of the ’926 Patent (IPR2016-00145). Finjan filed its
POPR on February 17, 2016. The PTAB denied Palo Alto Networks’ petition to institute the IPR proceeding on the ’926 Patent
on May 9, 2016.
U.S. Patent No. 6,965,968 (the “’968 Patent”)
On November 5, 2015, Palo Alto Networks Inc. filed two (2) separate petitions for IPR of United States Patent No. 6,965,968
(IPR 2016-00149, IPR2016-00150). Finjan filed POPRs to the petitions on February 17, 2016. On May 16, 2016, the PTAB
denied institution of IPR proceedings on both petitions.
U.S. Patent No. 6,804,780 (the “’780 Patent”)
On November 6, 2015, Palo Alto Networks Inc. filed a petition for IPR of United States Patent No. 6,804,780 (IPR 2016-00165).
Finjan filed a POPR to the petition on February 17, 2016. On April 21, 2016, the PTAB denied institution of IPR.
U.S. Patent No. 7,613,918 (the “’918 Patent”)
On November 6, 2015, Palo Alto Networks Inc. filed a petition for IPR of United States Patent No. 7,613,918 (IPR 2016-00164).
Finjan filed a POPR to the petition on February 17, 2016. On May 5, 2016, the PTAB denied institution of IPR.
U.S. Patent No. 8,677,494 (the “’494 Patent”)
On November 6, 2015, Palo Alto Networks Inc. filed a petition for IPR of United States Patent No. 8,677,494 (IPR 2016-00159).
Finjan filed a POPR to the petition on February 17, 2016. On May 13, 2016, the PTAB granted institution of IPR. On May 27,
2016, Finjan filed a Request for Rehearing, and on June 23, 2016 the PTAB denied Finjan’s Request for Rehearing. On June 27,
2016, the parties filed a joint notice to amend the Scheduling Order. On August 12, 2016, Finjan filed its Patent Owner Response
to Palo Alto Network’s Petition in IPR 2016-00159. The parties had an oral hearing on February 16, 2017 and are waiting on a
final decision from the PTAB.
U.S. Patent No. 6,965,968 (the “’968 Patent”)
On January 19, 2016, Blue Coat Systems, Inc. filed two petitions for IPR of the ‘968 Patent (IPR2016-00478; IPR2016-00479)
and a Motion for Joinder to Palo Alto Networks’ Petition for IPR of the ‘968 Patent (IPR2015-00149; IPR2015-00150). On April
22, 2016, Finjan filed a POPR to the petitions. On June 20, 2016, the PTAB denied institution of IPR proceedings on both petitions.
U.S. Patent No. 7,647,633 (the “’633 Patent”)
On January 20, 2016, Blue Coat Systems, Inc. filed a Petition for IPR of U.S. Patent No. 7,647,633 (“the ‘633 Patent”)
(IPR2016-00480) and a Motion for Joinder to Palo Alto Networks’ Petition for IPR of the ‘633 Patent (IPR2015-01974). On April
22, 2016, Finjan filed a POPR to the petition. On June 24, 2016, the PTAB instituted IPR, and granted Blue Coat’s Motion for
Joinder. On March 16, 2017, the PTAB issued a final written decision maintaining the validity of all instituted claims.
U.S. Patent No. 7,418,731 (the “’731 Patent”)
On January 21, 2016, Blue Coat Systems, Inc. filed a Petition for IPR of U.S. Patent No. 7,418,731 (“the ‘731 Patent”)
(IPR2016-00493) and a Motion for Joinder to Palo Alto Networks’ Petition for IPR of the ‘731 Patent (IPR2015-02000). On April
29, 2016, Finjan filed a POPR to the petition. On June 8, 2016, the PTAB denied institution of IPR.
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U.S. Patent No. 6,804,780 (the “’780 Patent”)
On January 21, 2016, Blue Coat Systems, Inc. filed a petition for IPR of U.S. Patent No. 6,804,780 (IPR2016-00492) and a Motion
for Joinder to Palo Alto Networks’ Petition for IPR of the ‘780 Patent (IPR2016-00165). On April 29, 2016, Finjan filed a POPR
to the petition. On June 8, 2016, the PTAB denied institution of IPR.
U.S. Patent No. 6,154,844 (the “’844 Patent”)
On January 25, 2016, Blue Coat Systems, Inc. filed a Petition for IPR of U.S. Patent No. 6,154,844 (IPR2016-00498) and a Motion
for Joinder to Symantec Corp.’s Petition for IPR of the ‘844 Patent (IPR2015-01894). On April 29, 2016, Finjan filed a POPR to
the petition. On June 20, 2016, the PTAB dismissed the Petition and motion for joinder pursuant to Blue Coat’s motion to dismiss.
U.S. Patent No. 8,225,408 (the “’408 Patent”)
On April 27, 2016, Blue Coat Systems, Inc. filed two (2) separate petitions for IPRs of United States Patent No. 8,225,408
(IPR2016-00955; IPR2016-00956), and Motion for Joinder to Palo Alto Networks, Inc.’s Petitions for IPR of the ‘408 Patent
(IPR2015-02001 and IPR2016-00157). On August 30, 2016, the PTAB granted Blue Coat Systems, Inc.’s Motions for Joinder.
On March 17, 2017, the PTAB issued a final written decision maintaining the validity of all instituted claims in IPR2015-02001
and IPR2016-00157.
U.S. Patent No. 8,677,494 (the “494 Patent”)
On April 14, 2016 and on June 10, 2016, Blue Coat Systems, Inc. filed two Petitions for IPR of United States Patent No. 8,677,494
(IPR2016-00890; IPR2016-01174) and a Motion for Joinder to Symantec Corp.’s Petition for IPR of the ‘494 Patent (IPR2015-
01892) and Palo Alto Networks, Inc.’s Petition for IPR of the ‘494 Patent (IPR2016-00159). The PTAB granted Blue Coat’s
motion for joinder. On March 15, 2017, the PTAB issued a final written decision maintaining the validity of claims 5, 10, 11, 14,
and 15 and invalidating claims 1, 2, and 6 of the ’494 Patent in IPR2015-01892.
U.S. Patent No. 8,141,154 (the “’154 Patent”)
On April 21, 2016, Proofpoint, Inc. and Armorize Technologies, Inc. filed a Petition for IPR of U.S. Patent No. 8,141,154
(IPR2016-00937) and a Motion for Joinder to Palo Alto Networks, Inc.’s Petition for IPR of the ‘154 Patent (IPR2015-01979).
On June 24, 2016, the PTAB terminated the IPR proceedings pursuant to a joint motion.
U.S. Patent No. 7,647,633 (the “’633 Patent”)
On April 29, 2016, Proofpoint, Inc. and Armorize Technologies, Inc. filed a Petition for IPR of U.S. Patent No. 7,647,633 (“the
‘633 Patent”) (IPR2016-00966) and a Motion for Joinder to Palo Alto Networks’ Petition for IPR of the ‘633 Patent (IPR2015-
01974). On June 24, 2016, the PTAB terminated the IPR proceedings pursuant to a joint motion.
U.S. Patent No. 8,225,408 (the “’408 Patent”)
On April 29, 2016, Proofpoint, Inc. and Armorize Technologies, Inc. filed two separate Petitions for IPR of U.S. Patent No.
8,225,408 (the “’408 Patent”) (IPR2016-00967; IPR2016-00970) and a Motion for Joinder to Palo Alto Networks’ Petition for
IPR of the ‘408 Patent (IPR2015-02001; IPR2016-00157). On June 24, 2016, the PTAB terminated the IPR proceedings pursuant
to a joint motion.
U.S. Patent No. 8,079,086 (the “’086 Patent”)
On July 15, 2016, Blue Coat Systems, Inc. filed a Petition for IPR of U.S. Patent No. 8,079,086 (the “’086 Patent”) (IPR2016-01444).
Finjan filed its POPR on November 18, 2016. The PTAB denied institution of IPR on February 16, 2017.
U.S. Patent No. 8,225,408 (the “’408 Patent”)
On July 15, 2016, Blue Coat Systems, Inc. filed a Petition for IPR of U.S. Patent No. 8,225,408 (the “’408 Patent”) (IPR2016-01441).
On November 18, 2016, Finjan filed a POPR. On December 13, 2016, the PTAB authorized Blue Coat to file a Reply to the POPR
and Finjan a sur-reply to respond to the arguments in Petitioner’s Reply. On January 23, 2017, the PTAB denied institution of
IPR.
U.S. Patent No. 8,677,494 (the “’494 Patent”)
On July 15, 2016, Blue Coat Systems, Inc. filed a Petition for IPR of U.S. Patent No. 8,677,494 (the “’494 Patent”) (IPR2016-01443).
On January 23, 2017, the PTAB denied Blue Coat’s petition to institute the IPR proceeding on the ’494 Patent.
U.S. Patent No. 8,225,408 (“’408 Patent”)
On October 28, 2016, FireEye, Inc. filed a Petition for IPR of the ‘408 Patent (IPR2017-00157) and a Motion for Joinder to Blue
Coat Systems, Inc.’s Petition for IPR of the ‘408 Patent (IPR2016-01441). Finjan filed its POPR on February 3, 2017 and the
PTAB denied institution of IPR of Blue Coat’s Petition for IPR on January 23, 2017.
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U.S. Patent No. 8,079,086 (the “’086 Patent”)
On October 28, 2016, FireEye, Inc. filed a petition for IPR of the ’086 Patent (IPR2017-00155) and a Motion for Joinder to Blue
Coat’s Petition for IPR of the ’086 Patent (IPR2016-01444). Finjan filed its POPR on February 3, 2017 and the PTAB denied
institution of IPR of Blue Coat’s Petition for IPR on February 16, 2017.
U.S. Patent No. 9,189,621 (the “’621 Patent”)
On March 1, 2017, Blue Coat Systems LLC filed a petition for IPR of the ’621 Patent (IPR2017-00995). The PTAB has not yet
issued a notice of filing date.
U.S. Patent No. 9,141,786 (the “’786 Patent”)
On March 1, 2017, Blue Coat Systems LLC filed a petition for IPR of the ’786 Patent (IPR2017-00996). Finjan will file its
POPR on June 14, 2017.
U.S. Patent No. 9,219,755 (the “’755 Patent”)
On March 1, 2017, Blue Coat Systems LLC filed a petition for IPR of the ’755 Patent (IPR2017-00997). Finjan will file its
POPR on June 15, 2017.
Except for the foregoing disclosures, Finjan is not presently aware of any other material pending legal proceedings, to which
Finjan or any of its subsidiaries are a party or of which any of its property is the subject.
Litigation, including patent litigation, is inherently subject to uncertainties. As such, there can be no assurance that Finjan will be
successful in litigating and/or settling any of these claims.
NOTE 9 – LICENSE, SETTLEMENT AND RELEASE AGREEMENT
On December 28, 2016, Finjan entered into a Confidential Patent License Agreement (the “December 2016 License”) with F5
Networks, Inc. (“F5”). The December 2016 License provides for F5 to pay a license fee of $4.0 million in cash, which Finjan
received on December 30, 2016. Finjan recognized all of the $4.0 million license as revenue as of December 31, 2016, as such
amount was determined to be fixed and determinable, in accordance with the Company’s revenue recognition policy as described
in Note 3. In exchange for the foregoing and other valuable consideration, Finjan agreed to, subject to certain restrictions, limits
and other conditions, grant F5 a nonexclusive, irrevocable (except in the case of non-payment by F5), worldwide paid-up license
under Finjan’s patents as specified in the December 2016 License.
On September 21, 2016, following a two-week trial, a Jury in the Northern District of California returned a verdict that all five
Finjan Patents were found literally infringed by Sophos, Inc. ("Sophos"). The jury verdict, deciding that Finjan was entitled to
$15 million in damages for Sophos’ infringement. Finjan has not received any revenue from the lawsuit with Sophos.
On June 30, 2016, Finjan entered into a Confidential Patent License Agreement (the “June 30, 2016 License”) with a European
cloud-based network security firm (the “2016 European Licensee”). The June 30, 2016 License provides for the 2016 European
Licensee to pay Finjan $565,000 in cash, which was paid on or about the time of execution of the June 30, 2016 License. Finjan
recognized all of the $565,000 license as revenue as of December 31, 2016, as such amount was determined to be fixed and
determinable, in accordance with the Company’s revenue recognition policy as described in Note 3. In exchange for the foregoing
and other valuable consideration, Finjan agreed to, subject to certain restrictions, limits and other conditions, grant the 2016
European Licensee a nonexclusive, term license in the United States under Finjan’s U.S. patents as specified in the June 30, 2016
License.
On June 3, 2016, Finjan entered into a Confidential Patent License, Settlement and Release Agreement (“June 3, 2016 License”)
with Proofpoint, Inc. (“Proofpoint”). As part of the June 3, 2016 License, Case No. 3:15-cv-5808-HSG, entitled Finjan, Inc. v.
Proofpoint, Inc. and Armorize Technologies, Inc., pending before the Honorable Haywood S. Gilliam, Jr. in the U.S. District Court
for the Northern District of California, was dismissed with prejudice on June 7, 2016. The June 3, 2016 License provides for
Proofpoint to pay Finjan the sum of $10.9 million in cash, in which $4.3 million was received on June 6, 2016, $3.3 million was
received in December 28, 2016, and $3.3 million is payable on or before January 3, 2018. The Company recognized $7.6 million
of the $10.9 million license as revenues as of December 31, 2016, as such amount was determined to be fixed and determinable,
in accordance with the Company’s revenue recognition policy as described in Note 3. The remaining balance of $3.3 million under
the terms of the June 3, 2016 License will be recognized as revenue when the payment is due. In exchange for the foregoing and
other valuable consideration, Finjan agreed to, subject to certain restrictions, limits and other conditions, grant Proofpoint a
worldwide, non-royalty bearing, fully paid-up (as of the final payment), nonexclusive, perpetual, irrevocable (except in the case
of non-payment by Proofpoint or other material breach) license under Finjan’s patents as specified in the June 3, 2016 License.
Certain portions of the June 3, 2016 License are subject to Confidential Treatment pursuant to a Confidential Treatment request
F-27
filed with the Securities and Exchange Commission (“SEC”) on August 8, 2016 and Confidential Treatment Order granted by the
SEC on September 26, 2016.
On December 30, 2015, Finjan entered into a Confidential Patent License, Settlement and Release Agreement (“December 30,
2015 License”), effective December 29, 2015, with a United States-based third party (“Licensee”). The December 30, 2015 License
provides for Licensee to pay Finjan the sum of $3.65 million in cash, in which $1.0 million was received on December 30, 2015,
$1.65 million was received on June 27, 2016, and $1.0 million was received on September 1, 2016. The Company recognized
$1.0 million of the $3.65 million license as revenues as of December 31, 2015. The remaining balance of $2.65 million under the
terms of the December 30, 2015 License was recognized as revenues as of December 31, 2016. In exchange for the foregoing
and other valuable consideration, Finjan agreed to, subject to certain restrictions, limits and other conditions, grant Licensee a
non-exclusive, irrevocable (except in the case of non-payment by Licensee or other material breach), worldwide license under
Finjan Patents during the Term as specified in the December 30, 2015 License.
On April 7, 2015, Finjan entered into a Confidential Asset Purchase and Patent License Agreement (the “April 7, 2015 License”),
effective as of April 7, 2015, with F-Secure Corporation, a company incorporated in Finland (“F-Secure”). The April 7, 2015
License provides for F-Secure to pay Finjan the sum of $1.0 million in cash, of which $700,000 was received on April 22, 2015
and $300,000 received on March 31, 2016. The Company recognized $700,000 of the $1.0 million license as revenues as of
September 30, 2015, as such amount was determined to be fixed and determinable, in accordance with the Company’s revenue
recognition policy as described in Note 3. The remaining balance of $300,000 under the terms of the April 7, 2015 License,
recognized as revenues as of March 31, 2016. Finjan agreed to, subject to certain restrictions, limits and other conditions, grant
F-Secure a worldwide, fully-paid, non-exclusive field of use license to Finjan patents owned as of the effective date or acquired
by Finjan or its affiliates within two years from the effective date, as well as to the F-Secure Patents.
On September 24, 2014, Finjan entered into a Confidential Patent License, Settlement and Release Agreement (the “September
24, 2014 License”) with Websense, Inc. (“Websense”) against whom Finjan had filed a patent infringement lawsuit. Pursuant to
this September 24, 2014 License, Websense and Finjan also agreed to dismiss the infringement litigation, and each party gave the
other a general release for all claims that it might have against the other, known or unknown, based on the actions of either party
on or before the date of the settlement. Under the September 24, 2014 License, Websense will pay Finjan a license fee of $8.0
million payable in four installments. The first installment of $3.0 million was paid upon execution of the agreement and filing of
the dismissal with prejudice, the second installment of $2.0 million was received on January 16, 2015, the third installment of $2.0
million was received on January 14, 2016. The fourth and final installment of $1.0 million was received on January 13, 2017. The
Company recognized approximately $5.0 million of the $8.0 million license as revenues during 2014. The remaining balance of
$3.0 million under the terms of the September 24, 2014 License will be recognized as revenues when the payments are due. Each
party also agreed to bear its own legal fees and costs. The Company recognized $0.8 million of legal fees related to this settlement
as cost of revenues. At December 31, 2014, the second installment of $2.0 million was recognized as revenue and accounts
receivable, and was received on January 16, 2015. The January 2016 payment was recognized as revenue in 2016. At December 31,
2016, the fourth and final installment of $1.0 million was recognized as revenue and accounts receivable, and was received on
January 13, 2017.
NOTE 10 – Series A Preferred Stock
On May 6, 2016, Finjan entered into a Series A Preferred Stock Purchase Agreement with Halcyon LDRII, pursuant to which the
Company agreed to issue to Halcyon LDRII in a private placement an aggregate of 102,000 shares of the Company’s Series A
Preferred Stock Shares at a purchase price of $100.00 per share, for aggregate proceeds of $10.2 million. The closing of the Private
Placement occurred on May 20, 2016. The Company incurred issuance costs of $0.7 million which are recorded as an offset to
the redeemable preferred stock.
The Series A Preferred Stock was accounted under Section 480-10-S99 - Distinguishing Liabilities from Equity (FASB Accounting
Standards Codification 480) as amended by ASU 2009-04 - Accounting for Redeemable Equity Instruments (“ASU 2009-04”).
Under ASU 2009-04, a redeemable equity security is to be classified as temporary equity if it is conditionally redeemable a) at a
fixed or determinable price on a fixed or determinable date, b) at the option of the holder, or c) upon the occurrence of an event
that is not solely within the control of the issuer. The Company’s financing is redeemable at the option of the holder. Therefore,
the Company classified the Series A Preferred Stock as temporary equity in the consolidated balance sheet.
F-28
The Series A Preferred Stock have redemption features that have a determinable price and determinable date based on the following
liquidation preferences:
The lesser of:
•
2.8x the original purchase price (OPP); or the following:
•
•
•
•
1.5x the OPP if redeemed within 90 days of closing; or
1.65x the OPP if redeemed between 90 and 360 days of closing; or
1.75x the OPP if redeemed between 360 days and 720 days of closing; or
Thereafter, 1.75x the OPP plus 0.1x the OPP for every 90 day period the preferred remains outstanding.
The redemption feature is at the option of the holder and is defined in the Certificate of Designation as a percentage of certain
revenues, which varies by type of revenue as well as date received. These revenues include monetary awards, damages, fees,
recoveries, judgments in a suit, as well as monies received from gross licensing, royalty or similar revenue recovered from JVP
related to Finjan’s investment in JVP. Such monetary awards are not solely within the control of Finjan.
The increase in the redemption value is a deemed dividend that increases the carrying value of the Series A Preferred Stock to
equal the redemption value at the end of each reporting period with an offsetting decrease to additional paid-in-capital.
On July 1, 2016, the Company redeemed $2.6 million or 17,286 shares of the Series A Preferred stock; $1.7 million reduced the
original recorded value of the Series A Preferred stock and $0.9 million reduced the accreted value.
On October 3, 2016, the Company redeemed $0.2 million or 1,212 shares of the Series A Preferred stock; $0.1 million reduced
the original recorded value of the Series A Preferred stock and $0.1 million reduced the accreted value.
At December 31, 2016, the Series A Preferred stock was $13.5 million, net of redemptions and the Liquidation value was $13.8
million.
Subsequent to year end, the Company redeemed $3.3 million or 20,303 shares of the Series A Preferred stock; $2 million reduced
the original recorded value of the Series A Preferred stock and $1.3 million reduced the accreted value.
NOTE 11 – STOCKHOLDERS’ EQUITY
AUTHORIZED CAPITALIZATION
The Company’s capital structure is comprised of preferred stock and common stock. The Company’s authorized capitalization
consists of (i) 80,000,000 shares of common stock, par value $0.0001 per share, and (ii) 10,000,000 shares of Preferred Stock,
$0.0001 par value per share.
The Company’s certificate of incorporation authorizes the Board of Directors to establish one or more classes or series of preferred
stock. Unless required by law or by any stock exchange on which our common stock is listed in the future, the authorized shares
of preferred stock will be available for issuance at the discretion of our Board of Directors without further action by our stockholders.
The Board of Directors is able to determine, with respect to any class or series of preferred stock, the terms and rights of that series.
COMMON STOCK
Holders of the Company’s common stock are entitled to one vote on each matter submitted to a vote at a meeting of stockholders.
The Company’s common stock does not have cumulative voting rights, which means that the holders of a majority of voting shares
voting for the election of directors can elect all of the members of the Board of Directors. The Company’s common stock has no
preemptive rights and no redemption or conversion privileges. The holders of the outstanding shares of the Company’s common
stock are entitled to receive dividends out of assets legally available at such times and in such amounts as the Board of Directors
may, from time to time, determine, and upon liquidation and dissolution are entitled to receive all assets available for distribution
to the stockholders. A majority vote of shares represented at a meeting at which a quorum is present is sufficient for all actions
that require the vote of stockholders.
F-29
NOTE 12 – STOCK-BASED COMPENSATION
Upon shareholder approval of the 2014 Plan, the 2013 Global Share Option Plan and Israeli Sub-Plan were terminated, other than
respect to the 1,489,532 shares of common stock underlying options outstanding under such plan.
The Company shareholders approved the 2014 Plan at the annual meeting of stockholders held July 10, 2014, pursuant to which
2,196,836 shares of common stock are authorized for issuance.
During 2015, the Company issued a total of 240,000 RSU's and options to purchase an aggregate of 182,500 share of our common
stock.
During 2016 the Company granted an aggregate of 295,001 options to purchase shares of our common stock to certain employees
in connection with their employment with the Company.
As of December 31, 2016, the remaining number of shares available for issuance under the 2014 Plan is 1,201,488.
Total stock-based compensation for stock options and restricted stock awards, of $0.9 million and $0.8 million was recorded in
selling, general and administrative expenses in the accompanying consolidated statements of operations for the year ended
December 31, 2016 and 2015, respectively. The stock-based compensation expense is for options and restricted stock awards
granted to certain employees, consultants, and members of the Board of Directors.
STOCK OPTIONS
The following is a summary of stock option activity during the years ended December 31, 2016 and 2015:
Number of
Options
Outstanding
Weighted
Average
Exercise Price
Average
Remaining
Contractual
Life (in years)
Aggregate
Intrinsic
Value
(thousands)
Outstanding – December 31, 2014
1,430,559 $
Options granted
Options exercised
Options forfeited
Outstanding – December 31, 2015
Options granted
Options exercised
Options forfeited
182,500
32,227
70,000
1,510,832
295,001
67,000
131,486
Outstanding – December 31, 2016
1,607,347 $
Exercisable – December 31, 2016
Exercisable – December 31, 2015
1,229,704 $
1,198,204 $
1.84
1.47
2.09
2.61
1.63
1.12
0.76
0.97
0.83
0.77
1.63
7.07 $
6.48 $
6.73 $
—
—
—
F-30
The Company estimates the fair values of stock options using the Black-Scholes option-pricing model on the date of grant. For
the years ended December 31, 2016 and 2015, the assumptions used in the Black-Scholes option pricing model, which was used
to estimate the grant date fair value per option, were as follows:
2016
Employee
Grants
2015
Employee
Grants
Non-Employee
Grants
Weighted-average Black-Scholes option pricing model
assumptions:
Volatility
Expected term (in years)
Risk-free rate
Expected dividend yield
148.68%
7
1.26%
0.0%
90.99%
6
1.49%
0.0%
Weighted average grant date fair value per share
$
1.15
$
1.47
$
61.10%
6
0.71%
0.0%
1.44
The risk-free interest rate is the United States Treasury rate for the day of the grant having a term equal to the life of the equity
instrument. The volatility is a measure of the amount by which the Company’s share price has fluctuated or is expected to fluctuate.
Since the Company’s common stock was not publicly traded, or was not publicly traded for an extended duration at the time of
the grant, an average of the historic volatilities of comparative companies was used. The dividend yield is zero percent as the
Company has not made any dividend payment and has no plans to pay dividends in the foreseeable future. Due to the lack of
historical information, the Company determines the expected term of its stock option awards by using the simplified method,
which assumes each vesting tranche of the award has a term equal to average of the contractual term and the vesting period.
As of December 31, 2016, total compensation cost not yet recognized related to unvested stock options was approximately $0.7
million, which is expected to be recognized over a weighted-average period of 2.5 years.
RESTRICTED STOCK UNITS
The following is a summary of non-vested RSUs award activity for the year ended December 31, 2016 and 2015:
Non-vested
Shares granted
Shares vested
Shares forfeited
Non-vested
2016
2015
Number of
Shares
Weighted Average
Grant Date
Fair Value
Number of
Shares
Weighted Average
Grant Date
Fair Value
408,710 $
200,000
395,117
28,333
185,260 $
2.66
1.20
1.99
1.74
2.67
374,504 $
240,000
160,286
45,508
408,710 $
5.08
2.29
1.58
4.10
2.66
The Company estimates the fair value of the granted shares using the market price of the Company’s stock price at the grant date.
For the years ended December 31, 2016 and 2015, the Company recognized $0.7 million and $0.5 million , respectively of stock-
based compensation expense related to the RSUs.
F-31
NOTE 13 – RELATED PARTY TRANSACTIONS
In the course of business, the Company obtains legal services from a firm in which an executive of Finjan and member of the
Company’s board is a member. The Company incurred approximately $227,000 and $228,000 in legal fees to the firm during the
years ended December 31, 2016 and 2015, respectively. As of December 31, 2016 and 2015 the Company had balances due to this
firm amounting to approximately $88,000 and $13,000, respectively.
The Company obtained social media and investor related services from a firm in which the Company’s Chief Financial Officer
holds a 50% interest. The Company incurred approximately $22,000 and $80,000 in fees to the firm during the years ended
December 31, 2016 and 2015, respectively. As of December 31, 2016 and 2015, the Company has balances due to this firm
amounting to $0 and $4,000, respectively. The Company canceled this service agreement effective June 30, 2016.
NOTE 14 – INCOME TAX
The domestic and foreign components of loss before income taxes from operations for the years ended December 31, 2016 and
2015 are as follows:
Domestic
Foreign
For the Years Ended
December 31,
2016
2015
(in thousands)
1,094 $
(744)
(12,001)
(601)
350 $
(12,602)
$
$
The provisions for income tax for the years ended December 31, 2016 and 2015, consist of the following and are included as
general and administrative expense, in the accompanying consolidated statements of operations:
Federal:
Current
Deferred
State:
Current
Deferred
Foreign:
Current
Deferred
Change in valuation allowance
Income tax provision
F-32
For the Years Ended
December 31,
2016
2015
(in thousands)
$
— $
416
—
(3,868)
3
(380)
—
(174)
5
488
—
(159)
(135)
(3,534)
$
138
3 $
3,539
5
The expected tax expense (benefit) based on the statutory rate is reconciled with actual tax expense (benefit) as follows:
U.S. Federal statutory rate
State rate, net of federal benefit
Permanent differences:
Change in tax rate
Deferred tax adjustment
Stock based compensation
Foreign tax rate difference
Other
Change in valuation allowance
Income tax provision
For the Years Ended
December 31,
2016
2015
34.0 %
7.8 %
(113.0)%
(19.1)%
28.9 %
19.3 %
3.0 %
40.0 %
0.9 %
34 %
1.3 %
— %
— %
(1.1)%
(0.4)%
— %
(33.9)%
(0.1)%
The approximate tax effects of temporary differences, which give rise to significant deferred tax assets and liabilities, are as follows:
Deferred tax assets
Net operating losses
Stock-based compensation
Intangible assets
Other
Total deferred tax assets
Valuation allowance
Deferred tax asset, net of valuation allowance
Deferred tax liability
Net deferred tax liability
As of December 31,
2015
2016
(in thousands)
$
10,032 $
949
3,748
77
14,806
(14,497)
309
(309)
9,666
890
3,752
50
14,358
(14,358)
—
$
— $
—
As of December 31, 2016 and 2015, the Company had NOL carryforwards of approximately $26.1 million and $25.5 million,
respectively. The federal and state net operating loss carryforwards will begin to expire in 2026.
The valuation allowance associated with discontinued operations which are not reflected in the above table are approximately
$418,000 for both years ended December 31, 2016 and 2015.
Utilization of the Company’s NOLs may be subject to substantial annual limitation due to the ownership change limitations provided
by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of the NOLs
before utilization.
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or
all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those temporary difference become deductible.
Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and taxing strategies in
making this assessment. Based on this assessment, management has established a full valuation allowance against all of the deferred
tax assets in excess of the deferred tax liabilities for each period, since it is more likely than not that the deferred tax assets will
not be realized. The change in valuation allowance for the years ended December 31, 2016 and 2015, is $0.1 million and $3.5
million, respectively.
F-33
NOTE 15 – SUBSEQUENT EVENTS
On March 2, 2017, Finjan, Inc., entered into a Confidential Patent License Agreement (the “March 2017 License Agreement”)
with Veracode, Inc., a Delaware corporation (“Veracode”). Pursuant to the March 2017 License Agreement, Veracode will obtain
a license to the Finjan patent portfolio and pay a license fee of $2.0 million in cash, which Finjan received on March 2, 2017.
Such license does not grant Veracode any right to transfer, sublicense or grant any rights under the March 2017 License Agreement
to a third party except as specifically provided under the March 2017 License Agreement. Such license also has certain provisions
relating to certain unlicensed products of any company that acquires Veracode, or is acquired by Veracode or its affiliates, in which
case additional license fees may apply. The specific terms of the March 2017 License Agreement are confidential.
On March 24, 2017, Finjan Holdings, Inc., announced that Finjan, Inc., its wholly-owned subsidiary and Avast Software s.r.o., a
company organized under the laws of the Czech Republic ("Avast"), have reached an agreement (the "March 2017 Agreement")
that upon Avast's satisfaction of certain terms, Finjan will dismiss its breach of contract and patent infringement claims, filed in
the U.S. District Court for the Northern District of California (Case No. 3:17-cv-00283-BLF), against Avast and its newly acquired
subsidiary, AVG Technologies, with prejudice. Under the terms of the March 2017 Agreement, Avast is to pay Finjan $7.745
million in cash on or before March 24, 2017. Payment was received on March 24, 2017 and was recorded as revenue in the first
quarter of 2017, in accordance with the Company's revenue recognition policy, as described in Note 3 of the Company's Financial
Statements. As called for in the March 2017 Agreement, specific terms of the Agreement are confidential.
The Company will redeem $3.9 million or 23,469 shares of the Series A Preferred stock in April 2017; $2.4 million reducing the
original recorded value of the Series A Preferred stock and $1.5 million reducing the accreted value.
F-34
FINJAN HOLDINGS, INC. SUBSIDIARIES
Exhibit 21.1
The following are the subsidiaries of Finjan Holdings, Inc.:
Finjan, Inc., a Delaware corporation
CybeRisk Security Solutions, Ltd, an Israeli company
Finjan Mobile, Inc., a Delaware corporation
CybeRisk Security Solutions, Inc., a Delaware corporation
Exhibit 23.1
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT
We consent to the incorporation by reference in the Registration Statement of Finjan Holdings, Inc.
on Form S-3 (333-197378), Form S-3 (333-189984), Form S-8 (333-195922) and Form S-8
(333-197369) of our report dated March 27, 2017, with respect to our audits of the consolidated
financial statements of Finjan Holdings, Inc. as of December 31, 2016 and 2015 and for the years
then ended, which report is included in this Annual Report on Form 10-K of Finjan Holdings, Inc.
for the year ended December 31, 2016.
/s/ Marcum LLP
Marcum LLP
New York, NY
March 27, 2017
I, Philip Hartstein, certify that:
CERTIFICATION
1.
I have reviewed this Annual Report on Form 10-K of Finjan Holdings, Inc.;
Exhibit 31.1
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board
of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: March 27, 2017
By:
/s/ Philip Hartstein
Philip Hartstein
President and Chief Executive Officer
I, Michael Noonan, certify that:
CERTIFICATION
Exhibit 31.2
1.
I have reviewed this Annual Report on Form 10-K of Finjan Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control
over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
be designed under our supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board
of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial reporting.
Date: March 27, 2017
By:
/s/ Michael Noonan
Michael Noonan
Chief Financial Officer and Treasurer
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
Pursuant to 18 U.S.C. Section 1350, the undersigned, Philip Hartstein, hereby certifies that, to the best of his
knowledge, the Annual Report on Form 10-K of Finjan Holdings, Inc. for the fiscal year ended December 31, 2016
(i) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934,
and (ii) that the information contained in such Annual Report on Form 10-K fairly presents, in all material respects,
the financial condition and results of operations of Finjan Holdings, Inc.
Date: March 27, 2017
By:
/s/ Philip Hartstein
Philip Hartstein
President and Chief Executive Officer
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
Pursuant to 18 U.S.C. Section 1350, the undersigned, Michael Noonan, each hereby certifies that, to the best of his
knowledge, the Annual Report on Form 10-K of Finjan Holdings, Inc. for the fiscal year ended December 31, 2016
(i) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934,
and (ii) that the information contained in such Annual Report on Form 10-K fairly presents, in all material respects,
the financial condition and results of operations of Finjan Holdings, Inc.
Date: March 27, 2017
By:
/s/ Michael Noonan
Michael Noonan
Chief Financial Officer and Treasurer
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2016
Finjan has generated over $250M from its IP to-date.
2015
Finjan launched its FinjanMobile™ and CybeRisk™ subsidiaries
2014
Finjan was listed on the NASDAQ Capital Market under the trading symbol
“FNJN” where we continue to trade today.
2013
Finjan became a publicly traded company capitalized with $30M and began a
more focused program to license the Company’s landmark intellectual property.
2009
The online security industry began moving towards real-time, behavior-based,
proactive threat detection. In the same year, the Company completed its first
license with Microsoft.
2005
Finjan divested hardware and technology assets, including sales and executive
teams and the Company’s Malicious Code Research Center (MCRC) into M86
Security.
2002
Finjan raised funding from top tier US and international venture funds, private
equity groups, and corporate investors.
1997
Finjan began a migration from a pure software company into a diversified
hardware and software platform technology provider.
1996
Finjan was formed in Israel to cultivate proprietary technology that focused
on proactively detecting threats to online security by identifying patterns and
behavior of online viruses and other malicious code.
Executive Officers
Board of Directors
Stock Listing
Phil Hartstein
President and Chief Executive Officer
Julie Mar-Spinola
Chief Intellectual Property Officer and
VP, Legal Ops
Michael Noonan
Chief Financial Officer and Treasurer
Eric Benhamou ¹
Chairman and CEO of Benhamou
Global Ventures, LLC
Daniel Chinn
Partner at Tulchinsky Stern Marciano
Cohen Levitski & Co.
Glenn Daniel ¹,²
Former Managing Director
Houlihan Lokey
Harry Kellogg 2,3
Vice Chairman, Emeritus
Silicon Valley Bank
Gary Moore
Former Co-President and COO
Cisco Systems
Alex Rogers ²,³
Managing Director of HarbourVest
(Asia) Limited and HarbourVest
Partners LLC
Michael Southworth ¹
CEO
Contact Solutions LLC
The NASDAQ Capital Market
Ticker Symbol: FNJN
Offices
Finjan Holdings, Inc.
2000 University Avenue
Suite 600
East Palo Alto, CA 94303
Phone: (650) 282 3228
Email: investors@finjan.com
www.finjan.com
Independent Registered
Public Accounting Firm
Marcum LLP
750 Third Avenue, 11th Floor
New York NY, 10017
Phone: 212-485-5500
Transfer Agent and
Registrar
Computershare Investors Services
250 Royall Street
Canton, MA 02021
Phone: 877-373-6474
Annual Meeting
June 21, 2017, 9:00 a.m. PST
Finjan Holdings, Inc.
2000 University Avenue
Suite 600
East Palo Alto, CA 94303
Phone: (650) 282 3228
¹ Audit Committee
² Compensation Committee
³ Nominating and Corporate Governance Committee
CORPORATE GOVERNANCE INFORMATION: We are committed to maintaining the highest standards of business conduct and corporate
governance, which we believe are essential to running our business efficiently, serving our stockholders well and maintaining our integrity
in the marketplace. Accordingly, our Board has adopted and maintains a Code of Business Conduct and Ethics, a Code of Ethics for Principal
and Senior Financial Officers, and Charters for each of the Audit Committee, the Compensation Committee, and the Nominating and
Corporate Governance Committee. Please visit our website at www.finjan.com to view or obtain a copy of the current version of any of these
documents.
ADDITIONAL INFORMATION: We file annual, quarterly and periodic reports, proxy statements and other information with the Securities
and Exchange Commission. You may request a copy of any of these documents, at no cost to you, by writing or telephoning us at: Finjan
Holdings, Inc., 2000 University Avenue, Suite 600, East Palo Alto, CA 94303 Attention: Investor Relations, telephone (650) 282-3228. We will
not send exhibits to these reports unless the exhibits are specifically requested and you pay a modest fee for duplication and delivery.
In 1995, Shlomo Touboul, Finjan’s founder and lead inventor on a number of our patents, became intrigued with the Java programming language. While the commercial success of Java, at the time was unknown, it has become one of the most widely used software technologies to deliver content and information over networks and the internet. Shlomo immediately recognized that this program would require a new type of security to protect it from hackers.In fact the name “Finjan” is derived from the word used in the Middle East to describe a vessel or small cup that contains or “protects” the coffee - or java. Shlomo believed the name was appropriate because the idea for the company and the associated technology came from his realization that with the introduction of the Java programming language, the existing security software would not be able to contain or protect against the possible threats to a computer using Java. 2000 University Avenue
Suite 600
East Palo Alto, CA 94303
(650) 282 3228
www.finjan.com
A N N U A L R E P O R T 2 0 1 6
2 0 Y E A R S AT T H E C E N T E R O F C Y B E R S E C U R I T Y