IP Law Daily, PATENT—4th Cir.: Software developer fails to revive royalty claims against cybersecurity companies, (Jun 25, 2026)

By Saurabh Kashyap, B.A., M.A., LL.B., LL.M.

Cybersecurity products using machine-learning technology were not “derivations” of licensed containerization products under the parties’ patent-license agreement.

In a non-precedential disposition, the U.S. Court of Appeals for the Fourth Circuit has affirmed a district court ruling granting summary judgment to Sophos Inc. and Invincea, Inc. in a dispute over royalty obligations under a patent-license agreement. The court found that certain Sophos cybersecurity products were not “natural evolutions and derivations” of licensed products identified in the parties’ settlement agreement and therefore were not subject to royalty payments. Applying Virginia contract law, the court concluded that the agreement unambiguously limited royalties to products derived from the licensed containerization technology, which the disputed Sophos products did not employ (Vir2us, Inc. v. Sophos Inc., No. 25-1158 (4th Cir. Jun. 23, 2026)).

Dispute. The plaintiff-appellee, Vir2us, Inc. (Vir2us), is a California software developer that developed and patented antivirus technology using a process known as containerization, which isolates potentially malicious files in a virtual environment for testing. The defendants-appellants, Sophos Inc. and Invincea, Inc., are cybersecurity companies that develop and market antivirus and endpoint-security software.

The dispute arose from a 2016 settlement and patent license agreement entered into after Vir2us accused Invincea of infringing patents covering containerization technology. Under the agreement, Vir2us granted Invincea a worldwide license to its patents. In return, Invincea agreed to provide quarterly sales reports and pay royalties on specified "Container Products." The agreement defined those products as several named Invincea products, including Invincea X Endpoint–Spearphish Protection, together with any "natural evolutions and derivations" of those products.

In 2017, Sophos acquired Invincea and integrated portions of Invincea's source code into certain Sophos products. Those products, however, employed machine learning rather than containerization. Sophos continued paying royalties on covered Invincea products but did not pay royalties on its own products. Vir2us subsequently sued, alleging that several Sophos products qualified as royalty-bearing Container Products under the agreement.

The litigation previously reached the Fourth Circuit in 2023. The appellate court then held that products sharing source code with the listed Invincea products did not automatically qualify as Container Products. It remanded for consideration of whether the Sophos products nevertheless constituted "natural evolutions and derivations" of those products. On remand, the district court concluded that the Sophos products were not derivations of the listed container products and granted summary judgment to Sophos and Invincea. Vir2us appealed.

Meaning of “derivations.” The Fourth Circuit began by examining the dictionary definition of the term "derivation." The court concluded that a derivation ordinarily refers to something that originates from, is developed from, or is produced from an earlier source. Applying that understanding, the court held that a product could qualify as a derivation only if one of the listed container products served as its originating source.

The court found that the record did not establish the necessary relationship between the Sophos products and the listed container products. Although the products shared certain machine-learning source code files, common source code alone was insufficient to establish that the Sophos products were derived from the listed products. Versions of the Sophos products existed before Invincea's code was integrated into them, and Vir2us failed to show that the shared code originated exclusively in the listed container products or was obtained from those products themselves.

Agreement focused on containerization technology. The appellate court further concluded that the broader context of the agreement supported Sophos's interpretation. Citing TM Delmarva Power, L.L.C. v. NCP of Virginia, LLC, 557 S.E.2d 199 (Va. 2002), the court noted that contractual provisions must be interpreted as part of the agreement as a whole rather than in isolation. Here, the disputed phrase appeared within the defined term "Container Products," all of which employed containerization technology. The Sophos products, by contrast, used only machine learning and did not perform containerization.

The court also emphasized that the agreement arose from patent litigation involving Vir2us's containerization technology. In the court's view, the royalty provisions reflected the parties' intent to limit royalty-bearing products to those sufficiently connected to that technology rather than any future product containing some common source code.

No ambiguity. Vir2us alternatively argued that the agreement was ambiguous and therefore unsuitable for summary judgment. The Fourth Circuit disagreed. Citing Virginia Electric & Power Co. v. Norfolk Southern Railway, 683 S.E.2d 517 (Va. 2009), the court explained that contractual language is ambiguous only when it is reasonably susceptible to more than one meaning. The court concluded that the term "derivations" had a clear meaning in the agreement's context and that the plain language favored Sophos's interpretation.

Outcome. Thus, the Fourth Circuit affirmed summary judgment in favor of Sophos and Invincea, holding that the disputed Sophos products were not "natural evolutions and derivations" of the licensed containerization products and therefore did not trigger royalty obligations under the parties' patent-license agreement.

The Case is No. 25-1158.

Judge: Per Curiam.

Attorneys: Lauren Frisch Dayton (Mololamken, LLP) for Vir2us, Inc. Douglas John Kline (Goodwin Procter, LLP) for Sophos Inc.

Companies: Vir2us, Inc.; Sophos Inc.

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