SRI Int., Inc. v. Cisco Systems, Inc.


Docket No. 2017-2223

LOURIE (D), O’MALLEY, STOLL
March 20, 2019

Brief summary: DC finding of patent eligibility under § 101 affirmed; award of attorney fees vacated and remanded “solely for recalculation”.

Summary: Cisco appealed DC denial of its motion for summary judgment (SJ) of patent ineligibility under § 101, construction of the claim term “network traffic”, grant of SJ for no anticipation, denial of a judgment as a matter of law (JMOL) of no willful infringement, and the grant of enhanced damages, attorneys’ fees, and ongoing royalties (>$23 million and 3.5% reasonable royalty). The disputed patents are SRI’s US 6,484,203 and 6,711,615 related to “computer-automated method[s]” for detecting “suspicious network activity based on an analysis of network traffic data” (representative ‘615 claim 1). The FC panel “conclude[d] that claim 1 is not directed to an abstract idea” (Alice step 1, US 2014)), agreeing with the DC that “the claims are more complex than merely reciting the performance of a known business practice on the internet” and “solve a technological problem arising in computer networks: identifying hackers or potential intruders into the network” (“the specification bolsters our conclusion”) (like Enfish, FC 2016 and DDR Holdings, FC 2014 (more than “a ‘computer network operating in its normal, expected manner’”) and unlike Electric Power, FC 2016 (“using computers as a tool to solve a power grid problem”)). The FC panel also agreed with the DC’s construction of “network traffic”, holding “that SRI’s statements in the prosecution history do not invoke a clear and unmistakable surrender” of certain kinds of data processing (Deering Precision, FC 2003; Krippelz, FC 2012). Cisco alleged anticipation by SRI’s prior art “EMERALD” presentation, over which FN2 explains the patents “survived multiple anticipation challenges” (original prosecution, two reexaminations, and jury finding (aff’d by FC in 2010). The FC panel agreed with the DC here that the claims are not anticipated by the EMERALD prior art (e.g., “EMERALD 1997 does not expressly” (or inherently) “disclose directly examining network packets as required by the claims”), and found “no error in the sua sponte nature of the” DC’s order (e.g., “Cisco was on notice that anticipation was before the court….”) “[T]he jury’s finding that Cisco willfully infringed the patents-in-suit prior to receiving notice thereof”, and the DC’s denial of Cisco’s JMOL that it did not willfully infringe”, was vacated and remanded as “the record is insufficient to establish that Cisco’s conduct rose to the level of wanton, malicious, and bad-faith behavior required for willful infringement” (Halo, US 2016) (e.g., “Cisco’s allegedly aggressive litigation tactics cannot support a finding of willful infringement going to back to 2000, especially when the litigation did not start under 2012” and its “decision not seek advice of counsel is legally irrelevant under 35 U.S.C. § 298.”) The DC’s award of attorneys’ fees under § 285 (“a ‘court in exceptional cases may award reasonable attorney fees to the prevailing party’”, “one that stands out from others with respect to the substantive strength of a party’s litigating position…or the unreasonable manner in which the case was litigated”, proven by a preponderance of the evidence) was vacated and remanded “solely for recalculation” (e.g., Cisco created “a substantial amount of work for both SRI and the court, much of which was needlessly repetitive or irrelevant or frivolous.”) The FC panel also found the DC “did not abuse its discretion in awarding ‘a 3.5% compulsory license for all post-verdict sales’” (e.g., the DC “properly exercised its discretion in denying Cisco’s motion to supplement the record regarding alleged post-verdict design-around activity”).

This entry was posted in Damages, Patentability, Royalties, Willfullness. Bookmark the permalink.

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