SRI International v. Cisco

On March 20, 2019, a Federal Circuit panel decided SRI International v. Cisco, addressing subject matter eligibility (yes), willfulness (no), exceptional case (yes), a running royalty (yes), and claim construction among other issues. Let’s break it down.

Subject matter eligibility. Over a dissent, the majority held the following method of cybersecurity network monitoring to be eligible because it is fundamentally “directed to a technological solution to a technological problem“:

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 one or more of 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, network connection acknowledgements, and network packets indicative of well-known network-service protocols};
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. 

The dissenting judge saw it differently:

The claims only recite the moving of information. The computer is used as a tool, and no improvement in computer technology is shown or claimed. 

Willfulness. The jury found that Cisco willfully infringed the patents. The district court judge denied JMOL of non-willfulness. And, in the only win for Cisco, the Federal Circuit reversed:

  • Evidence that Cisco employees did not read the patents-in-suit until their depositions is not evidence of willfulness; Cisco has plenty of lawyers to diligently respond to these issues.
  • Evidence that Cisco designed their products in an infringing manner is not evidence of willfulness; it’s evidence of infringement.

While the jury heard evidence that Cisco was aware of the patents in May 2012, before filing of the lawsuit, we do not see how the record supports a willfulness finding going back to 2000. As the Supreme Court recently observed, “culpability is generally measured against the knowledge of the actor at the time of the challenged conduct.” Halo, 136 S. Ct. at 1933. Similarly, Cisco’s allegedly aggressive litigation tactics cannot support a finding of willful infringement going back to 2000, especially when the litigation did not start until 2012. Finally, Cisco’s decision not to seek an advice-of-counsel defense is legally irrelevant under 35 U.S.C. § 298.

Exceptional case. The district court judge found that the case was exceptional and awarded attorneys’ fees based on Cisco maintaining “nineteen invalidity theories until the eve of trial but only presenting two at trial and pursuing defenses at trial that were contrary to the court’s ruling or Cisco’s internal documents.” The Federal Circuit affirmed.

Running royalty. The district court judge imposed a running royalty of 3.5% on infringing products not colorably different and that was ok.