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Zscaler To Pay $15 Million To Settle Symantec Patent Lawsuits

New Symantec Enterprise Security patent owner Broadcom has agreed to provide Zscaler with a patent license, release and covenant not to sue in exchange for a $15 million payment.

Zscaler has agreed to pay $15 million to settle all patent infringement lawsuits filed by Symantec just three months after Broadcom bought the Symantec Enterprise Security business.

The San Jose, Calif.-based web and network security vendor said semiconductor giant Broadcom has agreed to provide Zscaler with a patent license, release and covenant not to sue in exchange for the $15 million payment. The settlement amount is equal to just under 5 percent of Zscaler’s $303 million of annual sales in its most recent fiscal year.

“We are pleased that we were able to reach an amicable agreement with Broadcom to resolve the lawsuits,” Zscaler Chairman and CEO Jay Chaudhry said in a statement. “While we were confident of our position in the case, we believe this outcome is in the best long-term interest of our stockholders and customers.”

[Related: Accenture To Buy Symantec Cyber Security Services Unit From Broadcom]

Zscaler’s stock is up $0.68 (1.14 percent) to $60.30 in pre-market trading Tuesday, while Broadcom’s stock remains unchanged at $301.18 in trading before the market opened. Broadcom acquired the patents underlying the Symantec lawsuits as part of its $10.7 billion purchase of the Symantec Enterprise Security business in November. San Jose-based Broadcom declined to comment.

Symantec and Zscaler came into direct conflict following the former’s $4.7 billion purchase of legacy web security player Blue Coat Systems in June 2016. A December 2016 lawsuit by Mountain View, Calif.-based Symantec against Zscaler accused the latter of violating seven of Symantec’s patents in areas such as web security, data loss prevention, threat prevention, access control and antivirus.

“We have an obligation to our customers and our shareholders to defend our intellectual property when we believe it has been infringed, and the lawsuit filed against Zscaler is intended to stop them from copying our pioneering technologies in network security,” Symantec Executive Vice President, General Counsel and Secretary Scott Taylor said in a statement at the time.

Four months later, Symantec filed a second lawsuit against Zscaler alleging an additional seven patent infringements in areas including web security, security scanning, data loss prevention, intrusion prevention and intrusion signature analysis.

“We are taking this additional action because we believe that Zscaler is continuing to infringe the intellectual property of Symantec and Blue Coat,” Taylor said in an April 2017 statement. “Symantec has a responsibility to its shareholders and customers to protect the company’s investments in innovative technologies.”

Zscaler Chief Legal Officer Robert Schlossman said at the time that the company defends itself vigorously against lawsuits of this nature.

The company was founded in 2008 as a cloud-based alternative to Blue Coat Systems, and raised $148 million in three rounds of outside funding before joining the Nasdaq stock exchange as part of a March 2018 initial public offering that valued Zscaler at $1.9 billion. Today, Zscaler employs 1,726 people and has a market capitalization of $7.63 billion, according to LinkedIn and Google Finance.

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