Cisco Ordered To Pay $1.9B After Patent Suit Loss

On Monday in the Eastern District of Virginia, Senior United States District Judge Henry Coke Morgan, Jr. issued an opinion and order whereby Cisco Systems, Inc., a hardware networking company, owes in excess of $1.9 billion to Centripetal Networks, Inc., a cybersecurity company, after the court found that Cisco infringed several of Centripetal’s patents-in-suit.

In the opinion, Judge Morgan stated that the “four patents that were found infringed and valid were clear and not a close call,” because of the inconsistencies in Cisco’s evidence. For example, “Cisco repeatedly relied upon animations prepared ex post facto for trial, while ignoring their own technical documents.” Meanwhile, its technical documents, the majority of which were used by Centripetal “proved Centripetal’s case.”

“The infringing functionality was added to their accused products post June 20, 2017, and resulted in a dramatic increase in sales which Cisco touted,” the judge wrote. “Cisco did not advance any objectively reasonable defenses at trial” in relation to the patents it was found to have infringed.

In particular, the court found the 9,917,856 (the ‘856 Patent), the 9,500,176 (the ‘176 Patent), the 9,686,193 (the ‘193 Patent), and the 9,203,806 (the ‘806 Patent) claims “valid and literally INFRINGED” and the 9,137,205 (the ‘205 Patent) “NOT INFRINGED.” Additionally, Cisco had other patents under inter partes review with the Patent Trial and Appeal Board, which invalidated the claims. The asserted patents “deal with systems that engage in complex computer networking security functions”; computer networks are comprised of switches, routers, and firewalls. Cisco’s accused products include its switches, such as the Catalyst 9000 series, its routers, such as the 1000 series Aggregation Services Router, and its “Digital Network Architecture, along with its “new and improved Stealthwatch device,” Cognitive Threat Analysis, Identity Services Engine, Encrypted Traffic Analytics, its firewalls, and other features.

The court found that monetary damages are a more appropriate award than an injunction to compensate Centripetal noting that the injunctive relief test is not met in this suit and granting it will “likely cause massive adverse effects on the functional capabilities of Cisco’s customers and have an adverse ripple effect on national defense and the protection of the global internet” because Cisco’s “products are components of both civilian and military networks.”

Cisco’s payment consists of $755,808,545 for actual damages, but because “the infringement was willful and egregious [the amount] shall be enhanced by a factor of 2.5x to equal $1,889,521,362.50.” Prejudgment interest totals $13,717,925, which is “applied to the actual damages before enhancement plus its costs.” In sum, the total of $1,903,239,287.50 is due on the judgment date.

The court has also imposed “a running royalty of 10% on the apportioned sales of the accused products and their successors for a period of three years followed by a second three year term with a running royalty of 5% on said sales…”

Cisco is represented by Troutman Sanders LLP; Davis Polk & Wardwell LLP; and Duane Morris LLP. Centripetal is represented by Kaufman & Canoles, P.C. and Kramer Levin Naftalis & Frankel LLP.