Cisco Patent Infringement

CISCO Fined $1 bn for Patent Infringement

Ashish Chaturvedi
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What is the case:

This is an intellectual property domain case (Centripetal Networks Inc. v Cisco Systems, Inc.) brought by Centripetal Networks Inc. against Cisco Systems Inc. for patent infringement of its network cybersecurity-related patent grants. The case was brought in the jurisdiction of US district courts, the Eastern District of Virginia. The district court held that Cisco infringed on 4 patents owned by Centripetal Networks, primarily involving cybersecurity features. It is an important decision in the realm of esteemed and large software companies facing the music for trampling over innovator’s rights and claiming them as their own.

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Case Details:

  1. Cisco was provided demonstrations of the product and confidential information regarding Centripetal’s proprietary algorithms.
  2. Within a year of these meetings, Cisco released the ‘network of the future’ which involved embedding its older products with new software functionality that was detailed to them by the Centripetal team by disclosing the patent in several rounds of technical discussions.
  3. The court ruled that Cisco’s release of the ‘new’ product which mirrored the functionality of the Centripetal patents within a year of those meetings is beyond mere coincidence and is compelling enough to enhance the damages for copying.
  4. The functionality added to Cisco’s product resulted in a dramatic increase in sales revenue, which Cisco prominently advertised in both technical and marketing documents
  5. Cisco had a Nondisclosure agreement with Centripetal about the patent features, however, it embedded the copied software functionality from the patents in its post-June 2017 switches, routers, and firewalls. The court found this as an egregious case of willful misconduct.
  6. Court also held that Cisco had direct knowledge of the asserted patents by Centripetal Inc. and the complete functionality of the claims
  7. The court increased the award by almost 2.5 times as enhanced damages for willful misconduct or bad faith by Cisco. The actual damages were around $755 million but were enhanced by a multiplier of 2.5 (to about $1.9 billion) to account for punitive damages.
  8. The court observed that Cisco did not provide any reasonable non-infringement or patent invalidity defense in its arguments.
  9. Once Cisco was notified about the patent infringement, the Court observed that the defendant should have investigated the issue and/or validity. Cisco failed to perform any such investigation and the district court based its decision of awarding punitive damages concerning Cisco’s willfulness in this failure.
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What is Next:

Cisco said it will appeal the decision to the U.S. Court of Appeals for the Federal Circuit.

References:

  1. https://www.wraltechwire.com/2020/10/15/cisco-ordered-to-pay-1-9b-to-virginia-firm-in-patent-infringement-lawsuit/#:~:text=NORFOLK%2C%20VIRGINIA%20%E2%80%94%20Cisco%20Systems%20has,security%20based%20in%20Norfolk%2C%20Virginia.
  2. https://www.reuters.com/article/us-cisco-systems-centripetal-networks/cisco-is-ordered-to-pay-1-9-billion-in-u-s-patent-lawsuit-plans-appeal-idUSKBN26Q2VX
  3. https://www.bloomberg.com/news/articles/2020-10-05/cisco-must-pay-1-9-billion-in-patent-trial-on-network-feature