Last week, the U.S. District Court for the Eastern District of Virginia entered what could become the largest patent infringement award to date. Huge news for anyone interested in the patent law. Although this news made the headlines across many different media sources, no one noticed the ongoing invalidity challenges that can cancel the entire award. As patent law experts, we couldn’t sit idly. Without further ado, let’s dive in.
In February 2018, Centripetal Networks, Inc., a Virginia cybersecurity company, sued Cisco Systems, Inc., the global networking giant, for patent infringement. This dispute involves a cybersecurity patent portfolio Centripetal started building in 2012 and still continues to build through continuation applications. In this case, Centripetal asserted 11 U.S. patents against Cisco. Needless to say, Cisco did not go down without a fight.
The IPR Battle
Within six month after being served with the complaint, Cisco filed 14 IPRs against 9 of Centripetal’s patents. These IPRs were largely successful. When the dust settled, Cisco outright invalidated 6 of the asserted patents and partially invalidated another patent. Nevertheless, Centripetal walked out of the IPR trial with some enforceable claims, most notably, claims of the US Patent Nos. 9,137,205 and 9,686,193.
Largest Patent Infringement Award in History
After the resolution of the IPRs, the district court resumed the infringement case based on the surviving claims. The court held that Cisco willfully infringed Centripetal’s patented technology. The judge established that Centripetal’ s damages were $756 million. Then, based on the finding that Cisco acted willfully and egregiously, the judge multiplied the damages by a factor of 2.5, yielding a total sum of $1.9 billion. But, the judged did not stop there. Next, the judge imposed a 10% royalty on the infringing products for the next 3 years and a 5% royalty for the subsequent 3 years. Tech experts estimate that the total verdict could amount to $2.65 to $3.25 billion. If this verdict stands, this will be the largest patent infringement award ever. But that’s a big IF…
When the PTAB does not institute an IPR trial, the best strategy for the party challenging patent validity is to file an Ex Parte Reexamination. This is exactly what Cisco did. In March of 2020, Cisco filed Requests for Reexamination against the claims of the ‘205 and ‘193 Patents (the ones that survived the IPRs).
After examining Cisco’s arguments, the USPTO found that the presented prior art raised a substantial new question (SNQ) of patentability. Based on this determination, the USPTO instituted Reexaminations of both patents. On July 1, 2020, the USPTO rejected the claims of the ‘205 Patent. Subsequently, on September 23, 2020, rejected the claims of the ‘193 Patent. Therefore, as of today, validity of these two patents is hanging by a thread, and, so is the largest patent infringement award in history. It is very likely, that by the time the Federal Circuit hears Cisco’s appeal, at least two of the patents on which the district court based its infringement award will be invalidated. This will have a profound effect on the outcome of the appeal.
Cisco filed 14 IPRs against 9 of Centripetal’s patents.
6 patents through IPR proceedings.
$756 million dollars in actual damages. But willful infringement was found increasing the award to $1.9 billion. The judge further added royalties which may increase the award to over $3 billion.
Not yet (as of October 12, 2020), there are various appeals underway and two patents currently found invalid in reexamination.