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Finjan (FNJN) Buys IBM Cybersecurity Patents to Monetize

08/29/2017
By Lisa Thompson

NASDAQ:FNJN

Finjan announced that its new wholly owned subsidiary, Finjan Blue (NASDAQ:FNJN), entered into a patent assignment and support agreement with IBM on August 24, 2017. Finjan Blue acquired select IBM patents in the security sector in exchange for $8.5 million cash, with $2.0 million already paid on that date, and $6.5 million to be paid over the next four years. This deal includes 25 patents and 16 pending patents or applications in the cybersecurity field. The company will soon be filing which specific patents they are. The agreement is for five years and Finjan will reap all the financial benefits of any licensing fees or litigation proceeds from them, while IBM promises to support those efforts with information on those patents as needed. IBM retained the right to use those patents for its own products and services and Finjan may use them for their businesses. While there is some overlap with patents Finjan already owns, it does open up new segments of the security market. None of these patents have been defended in court nor been challenged in the USPTO.

The company has a pipeline of 30 deals and we expect it to continue to license additional cybersecurity companies throughout the course of the year with significant activity because of the end of the Blue Coat appeal process. We expect Finjan Blue patent licensing conversations to come up where relevant in these on going discussions. 

VPN Product Offering

Finjan is expected to formally launch its VPN offering on September 6, 2017, although it is already available for purchase. According to CNET, there are about 200 VPN offerings on the marketplace and each has its pros and cons. Users are advised to decide what sites they plan to use a VPN with and if they want to use one to remain just anonymous or secure or both. The Finjan offering is novel in that it will combine a secure browser and a VPN service in one offering. Finjan’s browser scans sites to protect users from malware and viruses and does not collect user data, while Avira’s VPN keeps users anonymous. Finjan’s browser does not require users to log onto the VPN first; it automatically connects via the VPN, removing steps. While the browser is open, all other apps a mobile user uses automatically are routed through the VPN. Finjan’s free plan limits users to 1GB a month. Pricing for the paid version is $4.99/month or $39.99/year to use on IOS devices only, or $7.99/month or $59.99/year to use on multiple platforms. 

Blue Coat Systems Appeal to Be Heard September 8, 2017

Oral arguments will be heard at the appeals court in DC on September 8, 2017. The outcome of this appeal will no doubt greatly move the stock. Finjan expects that the most likely outcome is a Rule 36 Affirmed Decision, which would be decided within two to four weeks. The big win for Finjan against Blue Coat happened on August 5, 2015 and the jury awarded the company $40 million. Since then, the district court granted Finjan pre and post judgment interest on the jury's award and Blue Coat has already put up a bond with the court for the $39.5 million and an incremental accounting for pretrial interest. With interest and royalties, the company estimates this could total $46 million by the time it is collected, of which, 20% will go to the litigating law firm. The results of this appeal process should change the dynamics of negotiating with future licensees as well as Blue Coat and Symantec in particular.

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