by Dennis Crouch
SRI International, Inc. v. Cisco Systems, Inc. (Fed. Cir 2019) (modified opinion on rehearing)
When the Federal Circuit released its eligibility decision in March 2019, I panned the opinion as a “results-oriented decision [that] unfortunately shades-facts and provides no clarity in its legal analysis of eligibility.” On petition, the panel has modified its original opinion. Unfortunately, the court did not modify its eligibility analysis, but rather modified a portion of the remand on attorney fees.
The jury awarded SRI a 3.5% reasonable royalty for a total of $23,660,000 in compensatory damages. The jury also found by clear and convincing evidence that Cisco’s infringement was willful. The judge then doubled the compensatory award as a punitive damages for willful infringement and also awarded $8 million attorney fees as well as an ongoing compulsory license for any future infringement. (I believe the patents have now expired).
Willful Infringement: The patent act does not expressly identify willfulness as relevant to an infringement lawsuit. However, courts have ruled that willfulness is an underlying requirement for enhanced damages under 35 U.S.C. 284. “Enhanced damages under § 284 are predicated on a finding of willful infringement.”
On appeal here, the Federal Circuit ruled that enhanced damages willfulness should be further apportioned by time. I.e., enhanced damages cannot be awarded for infringement that occurred prior to the infringer’s willful infringement. Here, the patentee proved infringement going back to 2000, but did not show that Cisco knew of the patent before May 2012 – thus no willfulness. On remand, the district court will need to reconsider the willfulness award to match the court’s temporal apportionment approach.
The court’s approach here is interesting — the jury found the infringement to be willful. Rather than rejecting the jury verdict, the appellate panel “interpreted” the verdict as finding willfulness as of May 2012 (and finding no willfulness prior to 2012). Then, the appellate court found error by the district court in enhancing damages for the entire term of infringement.
Attorney Fees: Ordinarily, each party must pay its own trial costs, including attorney fees. However, in patent cases the district court has discretion to award fees to the prevailing party in “exceptional cases.” Here, the district court found that Cisco’s litigation tactics were unduly aggressive:
Cisco pursued litigation about as aggressively as the court has seen in its judicial experience. While defending a client aggressively is understandable, if not laudable, in the case at bar, Cisco crossed the line in several regards.
One example – was that Cisco maintained 19 invalidity theories until the eve of trial — then only presented two of them at trial along with defenses that were contrary to both the evidence and prior court rulings. The district court also noted that the willfulness finding by the jury contributed to the decision to award attorney fees. Because the now-modified willful infringement judgment served as one basis for the enhanced damages, the appellate panel also vacated the enhanced damages for reconsideration on remand.
In its original opinion, the appellate panel had explained that there was sufficient evidence of bad behavior to justify a fee award even without willfulness — and thus had affirmed an award. In the modified opinion, the court instead vacated the finding of exceptional case — likely because that decision is supposed to be within the discretion of the district court.
In its petition for rehearing, Cisco had also asked for reconsideration of the eligibility decision. That portion of the petition was denied. EFF had filed a petition in support of rehearing, arguing that “the claims here fall squarely within a category of abstract ideas that is now well-established: claims that involve collecting, analyzing, and displaying information without more.”
1. A computer-automated method of hierarchical event monitoring and analysis within an enterprise network comprising:
deploying a plurality of network monitors in the enterprise network;
detecting, by the network monitors, suspicious network activity based on analysis of network traffic data selected from the following categories:
- network packet data transfer commands,
- network packet data transfer errors,
- network packet data volume,
- network connection requests,
- network connection denials,
- error codes included in a network packet;
generating, by the monitors, reports of said suspicious activity; and
automatically receiving and integrating the reports of suspicious activity, by one or more hierarchical monitors.