On December 2, the U.S. Supreme Court declined a certiorari petition in Centripetal Networks Inc. v. Cisco Systems Inc. SCOTUS leaves the Court of Appeals for the Federal Circuit’s ruling—vacating the federal district court decision that Cisco had willfully infringed Centripetal Networks’s patents and owed damages exceeding $3 billion—in place. Patent owners may fear that this outcome places another hurdle between them and recovering patent infringement damages against established corporations.

The Underlying Case

Centripetal sued Cisco on February 13, 2018, claiming infringement of Centripetal’s patents on a cybersecurity invention. On May 6, 2020, a bench trial began. As the case neared a ruling, an assistant preparing the judge’s financial disclosures discovered that the judge’s wife held 100 shares of Cisco stock worth $4,687.99. Her broker had bought the shares in October 2019, unbeknownst to the judge or his wife. The judge was wrapping up his judgment in the Centripetal-Cisco case. He immediately alerted the parties, assured them that the stock holdings had not factored into his opinion because he had no knowledge of it before August 11, 2020, by which time he had nearly completed drafting his opinion and had practically decided every issue.

On August 21, Cisco sought the judge’s recusal. At September 9 oral argument on the motion, the judge announced that he had divested the Cisco shares into a blind trust. The judge denied the recusal motion October 2, saying, “‘The Court had devoted months of time into this matter engaging in ruling of pre-trial motions, holding a Markman hearing, conducting an almost six-week bench trial and drafting extensive findings of fact and conclusions of law in a 150-plus page opinion.’ [Thus,] . . . ‘divesture is appropriate.’”

On October 5, the court upheld four of five Centripetal patents as valid and infringed, calling Cisco’s conduct “willful and egregious.” It awarded Centripetal damages of $3.2 billion. Cisco sought retrial and filed several motions, all denied on March 17, 2021.

Cisco appealed to the Federal Circuit, which overturned the district court’s ruling over the recusal matter. The Federal Circuit deemed selling the stock the appropriate course, vacated the lower court’s ruling, and remanded the case.

Implications for Patent Owners

In its certiorari petition, Centripetal argued that the Federal Circuit’s opinion would have disadvantageous consequences for patent owners:

[T]he stakes for Centripetal and other small inventors are substantial. The decision . . . wipes out the largest patent damages award in U.S. history, without so much as a word addressing the merits . . . [and] cannot help but chill the enforcement of valid patents by small inventors. A small inventor armed with a validly issue[d] patent and strong evidence of infringement by a publicly traded incumbent faces a steep climb to vindicate its rights. Not only do companies like Cisco have an ample war chest to fight the principal patent litigation, they routinely open up a second front by challenging the validity of the patents before the PTO. Fighting that kind of two-front war is standard operating procedure for entrenched incumbents, but a devastating burden for innovative start-ups.

The amici who supported Centripetal’s petition also noted the implications. One argued:

[C]onfidence in the intellectual property system necessarily depends on confidence in the judicial system. The former cannot exist without the latter, especially in a modern innovation-based society. . . . If a smaller patent owner is required to devote enormous resources to patent-enforcement litigation, only to have a successful action thrown out on specious grounds that have no impact on the case’s merits, then the net result is a serious diminution in the value of the patent rights—not just for the specific case at issue but for patent owners writ large.

Another amicus added:

The ruling under review sends a discouraging signal to all small innovative startups: if you win at the trial court, the appellate court will use arbitrary non-merits reasons outside of your control to take away your victory. Meanwhile, in the larger context of all judicial bias rulings from the Federal Circuit, the message to small innovators is discouragement.

A third amicus warned of

the broader implications that the panel decision may have on investors and entrepreneurs. Cisco’s behavior toward Centripetal is exemplary of an increasingly popular business strategy that has become pervasive in much of the digital technology industry, sometimes referred to by these large companies as “efficient infringement.” This strategy is best described as one in which a large company with vastly greater resources simply refuses to take a license from a startup or small company whose patents it infringes, forcing it to litigate and deploying whatever funding and personnel are needed to prevail in any patent litigation – without regard to its merits, its duration or its impact on the patent owner.

Cisco did not address reversal’s or vacatur’s potential impacts on small inventors in its brief, and no amici filed briefs on Cisco’s behalf.

This case’s outcome may diminish the patent-owning public’s view of our courts and judges. It may foster the practice of “efficient infringement.” Given that enforcing patent rights primarily rests on civil litigation, patent owners and inventors may feel ill effects from Centripetal Networks v. Cisco Systems.


Note: The author leads amicus Conservatives for Property Rights and consults to Centripetal Networks, the Committee for Justice, and Eagle Forum Education & Legal Defense Fund.

Note from the Editor: The Federalist Society takes no positions on particular legal and public policy matters. Any expressions of opinion are those of the author. We welcome responses to the views presented here. To join the debate, please email us at [email protected].