This week we are previewing three arguments scheduled for next week at the Federal Circuit. We are previewing these arguments because the underlying cases attracted amicus briefs. Today we highlight Centripetal Networks, Inc. v. Cisco Systems, Inc., in which Cisco appeals a finding that it infringed four patents held by Centripetal Networks, resulting in a judgement of over $2.75 billion. An amicus brief was filed by High Tech Inventors Alliance in support of Cisco. This is our argument preview.
In its opening brief, Cisco makes five arguments.
First, it contends Centripetal disavowed all indirect infringement and “offered no evidence, and the court made no finding, that Cisco made, used, sold, or offered to sell any patented invention.” Cisco notes “the evidence shows only sales of separate devices that Centripetal said would infringe if combined together.” Therefore, Cisco continues, this “[s]ale of separate components that could infringe if combined is not direct infringement.” Moreover, Cisco argues, “the royalty base should have been limited to sales of particular accused combinations, as opposed to sales of individual products that do not infringe on their own.”
Second, Cisco argues “the district court effectively read out key limitations, finding infringement without identifying any evidence that Cisco’s products, even in combination, would practice them.”
Third, Cisco contends the “damages award rested on an excessive royalty base that did not apportion the patented inventions’ contribution.” Furthermore, Cisco says, the “royalty rate was also unjustified, as it rested on a single, inapposite settlement agreement between Centripetal and a third party.”
Fourth, Cisco argues “[t]he willfulness and enhancement findings are unwarranted.” It maintains the “court’s criticisms of Cisco’s defenses were unfair and erroneous, and certainly did not warrant a 2.5-factor enhancement of over $1 billion.”
Fifth, Cisco argues “[t]he district judge was disqualified by his wife’s financial interest in Cisco, which arose in the case’s early stages and persisted through post-trial rulings.” According to Cisco, this conflict “required recusal or divestment upon discovery of the interest, yet the court did neither.”
In its response brief, Centripetal argues the “court did not clearly err in its factual findings that Cisco makes, uses, markets (offers for sale) and sells its hardware and software network security products as integrated solutions.” Centripetal contends “Cisco cannot escape infringement liability simply by splitting its infringing system into separate invoice line items, particularly in view of its infringing manufacturing and use.” Centripetal further argues that “Cisco also fails to identify any clear error or abuse of discretion in the court’s damages award.” According to Centripetal, the court “appropriately considered and adjusted the only comparable license in the record as part of its detailed Georgia-Pacific analysis and conservatively apportioned Cisco’s revenue base.” For enhanced damages, moreover, Centripetal contends “[t]he court did not abuse its discretion when it enhanced damages against this factual backdrop and determined that Cisco’s non-infringement and invalidity arguments were not a close call, particularly in view of the infirmities of Cisco’s defenses and its misleading and contradictory trial evidence.” Finally, Centripetal argues, “Cisco strains credulity in arguing that Judge Morgan abused his discretion by declining to recuse himself.”
In it reply brief, Cisco makes similar arguments compared to those in its opening brief. Cisco argues that no acts of direct infringement were identified and that, as a result, the indirect infringement arguments fail. Cisco also contends the damages and enhanced damages should be vacated. Finally, Cisco maintains its position that the judgement should be vacated because the district judge’s was disqualified.
As mentioned, High Tech Inventors Alliance filed an amicus brief in support of Cisco. High Tech Inventors Alliance contends the enhanced damages of $1.1 billion were infirm because of a “cursory analysis that both violates Supreme Court precedent and confirms the need for additional guidance from this Court regarding the standards and procedure that district courts should follow in making an enhanced-damages award.” It argues “[t]he district court’s rote reliance on the Read factors is wholly inconsistent with the standard prescribed by the Supreme Court.” High Tech Inventors Alliance “suggest[s] that the Court adopt a two-step framework that borrows from the process that courts now use to evaluate punitive-damages awards—because enhanced damages, like punitive damages, are supracompensatory awards designed to target, and thereby punish and deter, particularly egregious conduct.”
Notably, after the conclusion of the parties’ briefing, the Federal Circuit issued an order limiting the scope of the oral argument to “the question whether the judgment should be vacated because the district court judge was required to recuse himself from the matter under 28 U.S.C. § 455.” According to the court, if it determines recusal was required and the judgment is vacated, “[t]he parties should be prepared to address at oral argument the appropriate nature and scope of further proceedings.” If the “court determines that vacatur is not required,” the order goes on to say, “oral argument on the merits will be scheduled for a later date.”
This case will be argued on Monday, April 4. We will report on developments.