Finjan Holdings Inc
Overview
Finjan Holdings Inc (FNJN) operate a cybersecurity business, focused on licensing and enforcement, developing mobile security applications, and investing in emerging cybersecurity technologies and intellectual property.1
Operations
Finjan Holdings, Inc. is a pioneer in cybersecurity focused in three business lines; intellectual property licensing and enforcement, mobile security application development, and investing in cybersecurity technologies and intellectual property. Licensing and enforcement of the Company's cybersecurity patent portfolio is operated by its wholly-owned subsidiaries Finjan, Inc. (“Finjan”) and Finjan Blue, Inc. ("Finjan Blue"). The Company’s mobile security business is operated through its wholly-owned subsidiary Finjan Mobile, Inc. ("Finjan Mobile").
Through Finjan, the company own a portfolio of patents, focused on 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, the company believe that its patented technologies continue to be widely used by third parties in a number of market segments. The company intend to maximize the economic benefits of its technologies through further licensing and to broaden its technologies and patent holdings through acquisitions and strategic partnerships.
As a core element of its continued patent licensing and enforcement business, Finjan monitors a number of markets and assesses and observes the adoption of its patented technologies in these markets. The company's management team, in conjunction with the internal team, external 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, the company continue to believe its patented technologies are highly relevant in specific cybersecurity technology areas including, but not limited to, endpoint/cloud software, web gateway/internet infrastructure, and networking equipment markets. From that basis, the Company pursues unlicensed entities through licensing, assertion of claims or both to preserve the value of its 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 income derived from intellectual property licenses granted to third parties for the use of patented technologies that are owned by Finjan.
Finjan Blue was founded to support its development and licensing efforts of the IBM Security Patents obtained by Finjan Blue through the August 2017 Patent Assignment and Support Agreement and the May 2018 Patent Assignment Agreement with IBM. The Agreements, the terms of which are confidential, includes pathways for Finjan and IBM to consider development efforts in the future and provides for the sharing of pertinent institutional knowledge and resources by IBM to Finjan Blue.
Finjan Mobile was founded to ensure that consumer 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 mobile device has become so convenient that consumers often ignore online security and download apps and blindly agree to terms of service, purchase products, pay bills, connect to free Wi-Fi, and do not think twice about personal data and photos stored on their devices. The company started research and development of security products for mobile devices which benefit from technologies developed and patented by Finjan but also include the invention of new mobile technologies that will help expand its existing patent portfolio. Products currently available include its Finjan Mobile Secure Browser and a Virtual Private Network (VPN), recently re-branded as InvinciBull, which can be used within the Finjan Browser or separately to encrypt data and keep consumers' data secure.
As of September 30, 2019, the company had 9 employees. The company intend to hire or engage additional full-time professionals, employees, and/or consultants in alignment with its growth strategy. Although the market is highly competitive for attracting and retaining highly qualified professionals in its industry, the company continue its endeavor to find such candidates for its Company. The company's management team and additional personnel that the company may hire in the future will be primarily responsible for executing and implementing its licensing and enforcement strategy, including analyzing licensing and enforcement opportunities, making tactical decisions related to its strategy, identifying new applications for its existing cybersecurity technologies and pursuing opportunities to invest in new technologies through strategic partnerships and acquisitions.
Liquidity and Capital Resources
The company's cash requirements are, and will continue to be, dependent upon a variety of factors. The company expect to continue devoting significant capital resources to the litigations in process and any other litigation the company pursue. The company also expect to require significant capital resources to maintain its issued patents, prosecute its patent applications, acquire new technologies as part of its growth strategy, and attract and retain qualified personnel on a full-time basis.
- On November 21, 2013, the company made a $5 million commitment to invest in an innovation fund through JVP to invest in early-stage cyber technology companies, of which $1.1 million of the commitment remains unfunded as of September 30, 2019. The fund can make a call on its remaining commitment at any time. The company expect to make payments to honor this commitment if and when capital calls are made by the fund. Finjan Holdings has sufficient cash on hand to fund such obligations.
- On April 21, 2017, the company entered into a $3.9 million agreement with Avira, Inc., to provide services to support its VPN Platform effective July 1, 2017, payable over 3 years in quarterly payments of $0.3 million. As of September 30, 2019, the Company has a $1.0 million contractual obligation due over the next 3 quarters.
- The company entered into a $8.5 million Patent Assignment and Support Agreement with IBM effective August 24, 2017. As of September 30, 2019, the Company has a $4.0 million obligation due over the next 2 years, with final payment due August 24, 2021.
- On July 19, 2018, the company entered into a lease for its corporate headquarters office in East Palo Alto, California. Under the terms of the lease, the company owe minimum lease obligations of $3.7 million over 57 months. As of September 30, 2019, Finjan Holdings has an outstanding obligation of $2.4 million.
The amount and timing of cash flows from its licensing and enforcement activities are subject to uncertainties stemming primarily from uncertainties regarding the rates of adoption of its patented technologies, the success of its licensing efforts and the outcome of enforcement actions. As a result, its income and cash flows may vary significantly from period to period.
Industry Trends and Outlook
Cybersecurity is not just another technology but a critical business issue that intersects government, corporations and individual citizens. Finjan Holdings has seen a number of devastating cybersecurity breaches targeting high profile government offices and corporations. The full extent of the cost and damage associated with these attacks are often hard to quantify. 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.
Given its experience of over 20 years in the cybersecurity market Finjan Holdings has had the benefit of actively participating in the progression on how technology has moved to meet the new threats and demands. The company believe this puts it in a unique position to make observations and determine the best course of action in order to make investments in new developing technologies. There is still a limited appreciation for how much personal data is being pushed out over the internet for anyone to capture and unlike desktops and laptop computers, mobile devices do not have the same kind of access to security. The company believe this represents a unique opportunity for Finjan to develop products for consumer mobile devices that were once only available to its enterprise customers. As such, Finjan Holdings is using and building upon its current patented technology and migrating it into the mobile platform so consumers can have greater control of their security and personal information.
The company believe that there are some proponents of patent law reform, largely made up of an individual or coalitions of technology corporations that continue to seek statutory limitations on how companies can enforce their patents. In an effort to ensure fair and balanced protections for all good faith patent owners, its executives have dedicated time and resources to actively educate its 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 economy as a whole.
Further, since the enactment of the Leahy-Smith America Invents Act ("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 inter partes review (IPR). 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.” 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.
Future Growth Strategy
The company's mission, for the foreseeable future, is to build a diversified company benefiting from historical investments in technology and patents while expanding into new product and service offerings. The company believe its patented technologies continue to hold significant value and the company intend to vigorously protect its investment, the value of its existing licensees’ investments, and the value that technology and intellectual property represents for its shareholders. Finjan Holdings is pursuing and will continue to pursue its growth through the following strategies:
Expand its IP Assets through Acquisitions and Strategic Partnerships - The company intend to acquire and develop new patents, technologies or other business assets or companies and invest in intellectual property through strategic partnerships, acquisitions of technology-focused companies, IP portfolios or other assets and other initiatives. The company aim 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 the company can monetize (i.e., licensing or litigation) and other expertise. The company may also broaden its technology and patent holdings by working with inventors and universities, acquiring technology companies, investing in research laboratories, start-ups, and by creating strategic partnerships with companies, large and small, seeking to effectively and efficiently monetize their technology and patent assets. The company's 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.
Through Finjan Blue, the company entered into a Patent Assignment and Support Agreement with International Business Machines Corporation, a New York corporation (“IBM”), effective August 24, 2017. Pursuant to the Patent Assignment Agreement, Finjan Blue acquired 41 select issued and pending IBM patents in the security sector in exchange for $8.5 million cash, payable as follows: 
$2.0 million upon execution of the Patent Assignment Agreement and (ii) $6.5 million over the subsequent four years, final payment due August 24, 2021. IBM will support Finjan Blue in its development and licensing of the IBM Security Patents and provide assistance for such efforts as needed for the term of the Agreement and Finjan Blue will reimburse IBM for reasonable time and out of pocket costs for such assistance, however IBM will not receive further proceeds from such efforts. IBM has reservation of rights with respect to the IBM Security Patents for its current licensees and open source initiatives. Finjan Blue and IBM also agreed to explore further development and licensing opportunities.
The relationship with IBM was further expanded on May 15, 2018 with a second Patent Assignment and Support Agreement (the “May 2018 Patent Assignment Agreement”). Pursuant to the May 2018 Patent Assignment Agreement, Finjan Blue acquired 56 select issued and pending IBM patents in the security sector. The terms of the May 2018 Patent Assignment Agreement are confidential.
On June 29, 2018, the Company including its wholly-owned subsidiaries, entered into a Confidential Patent License Agreement (the “June License Agreement”) with Trend Micro Incorporated (K.K.), a Japanese corporation (“Trend Micro Japan”) and Trend Micro, Inc., a California corporation (“Trend Micro U.S. and collectively with Trend Micro Japan, the “Trend Micro Parties”). The June License Agreement provides that the Trend Micro Parties will obtain a license to, among others, the Finjan patents and pay the Finjan parties $13.4 million in cash which Finjan received June 29, 2018. Further, upon acquisition by the Trend Micro Parties of certain entities, the Trend Micro Parties will pay additional license fees to Finjan, unless otherwise mutually agreed to by the Company and the Trend Micro Parties. Further, the June License Agreement has additional provisions relating to certain unlicensed products of any company that acquires a Trend Micro Party, in which case additional license fees may apply. The parties also entered into related agreements with respect to their respective patents, including the transfer of 18 select issued security-related patent assets from the Trend Micro Parties to the Finjan Parties. The remaining terms of the June License Agreement are confidential.
- Develop and Expand Existing Patent Portfolio - Finjan Holdings has obtained and continue its efforts to obtain new patents relating to security technologies through research and development and/or acquisition in the cybersecurity space.
- Continue to Demonstrate Best Practices in Pursuing Licensing Relationships and Enforcing its Patent Rights - In March 2014, the company adopted Best Practices to demonstrate its commitment to ethical, transparent and consistent business practices for intellectual property licensing. The company called upon and continue to promote industry-wide adoption of a set of best practices through leadership organizations such as the Licensing Executive Society (LES) that support technological advancements, investments in innovation, and continued job creation while protected by a robust patent system. In February of 2017, the American National Standards Institute or ANSI had approved LES' application to receive accreditation to become a Standards Development Organization or SDO. With this new endorsement and governance from ANSI, Finjan is moving to build industry consensus for IP and patent related matters in a number of disciplines. The company intend to continue pursuing a proactive campaign that adheres to its best practices guidelines while rigorously protecting its intellectual property rights. Finjan Holdings has entered into preliminary discussions with numerous potential licensees in accordance with these 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 its preference to resolve its patent-related disputes through amicable business solutions, protecting the value of its patented technology is paramount.
- Invest in Internal Research & Development through Finjan Mobile - The company 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. Since the company do not yet have sufficient internal personnel to engage in large-scale research and development, the company currently operate this business with limited internal staff focused on strategy and market development while software development is completed under contract with external developers. Products currently available include its Finjan Mobile Secure Browser and a Virtual Private Network (VPN), recently re-branded as InvincBull, which can be used within the Finjan Browser or separately to encrypt data and keep consumers' information secure.
Finjan Mobile launched InvinciBull VPN in September of 2018. The new and improved VPN is available for use on Apple and Android mobile platforms and Mac and Windows desktop applications. The InvinciBull VPN sits in the VitalSecurity family of products and builds upon the incorporation of Finjan, Inc.'s, core security patented technology.
Recent Developments
On May 22, 2019, the Company announced that Jevan Anderson will be joining the company on June 3, 2019 as Chief Financial Officer, replacing Michael Noonan who departed to explore new pursuits. Mr. Anderson will report to Phil Hartstein, Finjan’s CEO, and lead Finjan’s finance and operations. Mr. Anderson, 50, has 25 years of experience in investment banking, corporate development and strategy consulting. Most recently Jevan was Senior Vice President, Corporate Advisory for Jones Lang LaSalle Incorporated ("JLL"). Prior to JLL, Jevan spent 10 years as a Managing Director and Co-Head of Technology Mergers & Acquisitions for Wells Fargo and RBC Capital Markets. Prior to his 17 year investment banking career, Jevan held roles in management consulting, strategic planning, corporate development and investor relations. Mr. Anderson holds an MBA from NYU Stern School of Business and a B.S. in Electrical Engineering from Lehigh University.
On October 3, 2019, the Company received $5.9 million from the Mimecast agreement.
On January 23, 2020 its subsidiaries Finjan, Inc., Finjan Blue and Finjan Mobile (collectively “Finjan”) each entered into a patent license and settlement agreement with BitDefender ("the Agreements”). The Agreements resolved the parties' disputes, grants BitDefender a fully paid up license to each of Finjan's patent portfolios, mutual covenants not to sue and mutual releases, among other terms which are confidential.
