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Finjan (FNJN) Settles With FireEye for a Net $12.5 Million

By Lisa Thompson


Finjan (NASDAQ:FNJN) announced today that it settled with FireEye for a net $12.5 in cash that was paid in Q4 2017. With this payment, Finjan will redeem about 31% of the Series A-1 preferred shares or $4.7 million of the $15.3 million Series A-1 Preferred Stock financing. From December 16, 2017 to March 16, 2018 Finjan is able to redeem this stock at 1.3 times the original purchase price. FireEye agreed to pay Finjan $17.5 million in license fees comprised of $12.5 million in cash which was paid on December 29, 2017, and $5.0 million which will be offset by $5 million in license fees from Finjan to FireEye under the FireEye cross license agreement.

Takeaways from the Analyst Meeting

The Finjan analyst meeting held December 14, 2017, gave investors insight into plans for 2018, the most heartening of which was the possibility of a settlement with Symantec, which would include Blue Coat. The company is currently in active negotiations with Symantec, as ordered by the judge, and the number put out was “under $500 million” certainly much higher that most expected. So far Blue Coat owes about $43 million on Blue Coat I, and is being sued for another $45 million in Blue Coat II, leaving most of the rest due to Symantec infringement. A settlement in 2018 certainly would be a huge windfall for the company versus dragging out litigation for the next few years. While at a market cap of $60 million, buying the whole company seems far more economical than paying judgments or license fees, but Finjan management insists its shareholders would not be amenable to this outcome.

Since the company reported earnings, Finjan heard the results of the Blue Coat II trial. Of the six patents, two were upheld, two were denied and two were undecided resulting in a retrial scheduled for no later than January 8, 2018 of those two patents. The retried patents are the “844” and the “494” patents, with “844” being the most important. The two patents that were upheld were the “731” and the “968” patents; awards for those two were $186,000 and $304,000. The final two patents “408” and “621” were determined to not have been infringed. 

On December 6, 2017 Finjan announced that it filed a patent infringement lawsuit in the U.S. Northern District of California against Zscaler after more than one year of good faith efforts to resolve its patent dispute. The complaint alleges that Zscaler's products and services infringe at least four Finjan patents, 6,804,780; 7,647,633; 7,975,305; and 8,677,494. Finjan is seeking, among other things, a jury trial, past damages not less than a reasonable royalty, enhanced damages for willful infringement, and reasonable attorneys' fees and costs for infringement of each of the asserted patents, as well as preliminary and permanent injunctive relief from continuing to infringe the '633 and '305 Patents. 

Updating Estimates

We are updating our Q4 2017 and 2017 year to reflex the payment from FireEye on December 29, 2017 and no action with Blue Coat. We are moving the Blue Coat I award to 2018. We are using $44 million from Blue Coat in 2018 despite the fact any resolution on those cases by negotiation with Symantec could yield upwards of $500 million. Given the new federal tax plan, pushing any revenues into 2018 would add even more profit to the company anyway. At the end of 2016, the company had a $26.1 tax loss carry forward. 


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