Shares of Finjan Holdings Inc. (FNJN), the cybersecurity technology licensing company run by CEO Phil Hartstein, have more than doubled year to date as the company has upheld the validity of its patents and won important infringement litigation awards and multiple licensing settlements.

Finjan shares are currently trading around $2.82 a share and have traded between $1 and $2.90 over the past year. They closed at $1.21 on January 3, the first day of trading in 2017.

This share performance stands in sharp contrast to other publicly traded patent licensing companies such as Marathon Patent Group (MARA), the patent licensing company run by CEO Doug Croxall, which have plunged 82% year to date. Acacia Research Corp. (ACTG), the patent licensing company run by Executive Chairman Louis Graziadio III, have fallen 29% over the same period. Shares of WiLAN Inc. (WILN), the patent licensing company run by Executive Chairman Jim Skippen, similarly have declined 14.5% over the same period.

East Palo Alto, California-based Finjan posted its first ever as a publicly traded company quarter profit of $350,000 in 2016 and then its first quarterly profit of $15.9 million in first quarter of 2017, thanks to licensing agreements with Avast Software and Veracode and a settlement of its litigation with Sophos Inc.

The company also is in the process of fighting to sustain a $39.5 million infringement award won against Blue Coat Systems. It also has filed a two other infringement actions against Blue Coat in the federal court in San Francisco and in Germany.

Finjan "is one of the few patent monetization companies to have gone all the way," said Mark Gober, senior director at Sherpa Technology Group, in the technology and IP advisory firm's Silicon Valley office. "They've won IPRs, won in the courts and gotten paid."

A big reason for Finjan's success may be the strength of its patents and the fact that they are homegrown, Gober said. "The company narrative is important and Finjan is one of the few licensing companies with a legitimate right to call itself a former product company."

Hartstein said in a telephone interview that the second Blue Coat action in the U.S. may be worth an amount equivalent to the damages in the first trial, and perhaps more on a finding of willful infringement. The company has said it believes it has a good case for willfulness because of Blue Coat's delaying tactics in the first trial.

If Finjan can win an injunction against Blue Coat in the Germany, it may have more success persuading Blue Coat to settle.

Hartstein, a former IP Navigation Group vice president and former managing director of Rembrandt IP Solutions, has overseen the task of winning and sustaining infringement awards, and negotiating licensing settlements without the need for litigation.

In addition, he has led the company’s herculean defense of its patents from more than 70 inter partes review (IPR) challenges at the Patent Trial and Appeal Board. The successful defenses had the added bonus of buttressing Finjan’s infringement claims against its remaining enforcement targets who include Blue Coat, Symantec, Cisco Systems, ESET, and Palo Alto Networks.

Hartstein said Finjan also is hoping that Symantec, which last year acquired Blue Coat for $4.65 billion, may be inclined to reach a global settlement of its case and Blue Coat's case before damages in the second Blue Coat trial are awarded.

While Finjan is asking $44 million in damages against ESET, Hartstein said it might be willing to negotiate a significant discount in a settlement in the "teens," or between $10 million and $20 million.

He said the actions against Cisco, Fireye and Palo Alto Networks are too early in the process to discuss expected damages.

The company also has said it has identified more than 25 additional cybersecurity companies who may be infringing its patents.

Finjan is currently sitting on $26.4 million in cash and cash equivalents, which begs the question what the company plans to do with it.

Other patent licensing companies including WiLAN, which is changing its name to Quarterhill Inc., and Form Holdings (FH), formerly known as Vringo, have taken their hard won cash and used it to make acquisitions and in the process redefine themselves as diversified holding companies.

Skippen recently told The Patent Investor that Quarterhill will be a diversified holding company in the manner of Warren Buffett’s Berkshire Hathaway.

Such lofty aspirations aside, diversifying out of patent licensing makes sense in a patent market mired in a recession that could last 25 years or more. Indeed, changes in the attitude of the U.S. Supreme Court and the Court of Appeals for the Federal Circuit regarding injunctions, large damage awards and skepticism of non-practicing entities (NPEs) or patent trolls have taken much of the profit out of the patent licensing business.

In addition, the America Invents Act armed weary defendants with a cheaper and more efficient way to challenge patents in the IPR process before the PTAB. This has had the unintended consequence, however, of creating the trend now as "efficient infringement," where infringers refuse to even talk about a settlement no matter the quality of the patent because they have so many ways to delay and outlast NPEs.

During a recent conference call on first quarter earnings, Hartstein said "we've officially achieved our long awaited inflection point after several years of building and executing on our strategic objectives which include vigorously protecting Finjan's IP and successfully reintroducing our technology and new products into the market.

"This is evidence of our diversified platform built to position ourselves for strong sustainable growth. Looking ahead we remain confident in our vision and we look forward to multiple catalysts that we believe position us for future progress across all segments of our business."

Hartstein also said in the call that the security software and hardware segments of the cybersecurity industry "are reaching a tipping point of maturity in which we are seeing a faster pace of consolidation than ever before."

He noted that with this evolving and changing cybersecurity landscape Finjan continues to evaluate new ideas and opportunities for expanding its current programs and potentially starting new ones.

In the phone interview, Hartstein said "we brought more than $30 million of our own investment capital into the public company in 2013 and we have offset expenses with strong revenue, and we have also aligned ourselves with reputable financing partners.”

The company recently redeemed and retired the entirety of its Series A preferred stock.

Going forward, Finjan has been trying to expand beyond just its licensing business by starting a new cybersecurity product business called Finjan Mobile as well as CybeRisk, a cybersecurity advisory business. Neither have yielded much in the way of revenue yet, though that may be about to change with Finjan Mobile.

“The past few years we have marked a return to technology development and R&D, this aside from our outperformance in our venture investment through Jerusalem Venture Partners, the ongoing development efforts and recent partnership in Finjan Mobile, and our services business have put us on the right path towards sustainable growth.”

Asked what he plans to do with Finjan’s $26 million in cash, he said the company plans to increase its quarterly research and development spending to about $450,000 to $500,000 and explore the possibility of acquisitions.

He said Finjan has looked at about a half dozen targets and so far not made an offer. He said the company is focused specifically on targets in the mobile security business. He said Finjan would finance such an acquisition with cash and equity and could afford up to a $25 million acquisition.

He also said an acquisition of another patent licensing company was a "nonstarter." Expanding Finjan's patent licensing beyond cybersecurity patents might seem like a good idea given Finjan's success, but Hartstein said it "would require you to change your story."

To be sure, that story of homegrown patents and the focus on cybersecurity patents has been a big element of Finjan's success, said Sherpa's Gober.

"It's a smart move to diversify out of the patent licensing business," especially an area as hot as cybersecurity, he said. "But if they are diversifying into cybersecurity they may find that requires a different skillset than licensing."

Gober said Finjan may want to think about giving some money back to its shareholder base, who have been very patient. While Finjan shareholders have enjoyed the doubling of the stock in the last five months, a share buyback or dividend would go even further in terms of rewarding their commitment to the company, he said.

Asked about the prospects for a buyback or dividend, Hartstein said "the idea is not lost on the company" but declined to comment further.

—To reach the reporter responsible for this story, please contact Dan Lonkevich at 707 318-7899 or