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Cisco to Pay $1.9 Billion and Royalties Following Patent Lawsuit

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Cisco, a company well known for its network switches, has been ordered by a Virginia court to pay approximately $1.9 billion to Centripetal Networks, the result of a patent infringement lawsuit filed by the later. Centripetal Networks had developed a network protection system, with the work partly funded by the US government, and patented parts of it that dealt with speed and scalability issues, as well as enabling live updates and automated workflows. The lawsuit claimed that through meetings with Cisco, the larger company gained enough information to incorporate it into its own products within a year. Centripetal Networks had outlined the technologies to Cisco as it had signed a non-disclosure agreement and appeared interested in purchasing the technology. Instead the technology was embedded into Cisco products within a year of these meetings.

The fine Cisco has been ordered to pay is $1,903,239,287.50, which is two and a half times $756 million, plus interest. The reason for the multiplication is because the judge felt the infringement was "willful and egregious." It likely did not help Cisco's arguments that it prevented its own engineers from answering questions concerning their own statements and documents, which included praise for Centripetal Networks for having "solved problems previously thought unsolvable." Cisco also tried to claim its cybersecurity features had been developed prior to even the founding of Centripetal Networks, but the judge felt its evidence the patents were invalid often contradicted the non-infringement evidence, in addition to failing to recognize the new functionality that resulted from copying Centripetal Network's work.

If this case needed another interesting point to it, it is that the case was held completely virtually, due to the current pandemic, and this led to some contention. Cisco had wanted its Webex video conferencing system to be used for the proceedings, but it was Zoom the court staff had been trained on. Ultimately Cisco relented on this point and that might have actually helped its side some, as the judge reduced the "enhanced damages" thanks to the "the professional performance of its trial counsel."

While the nearly $2 billion fine, with royalties of 10% for the next three years and 5% for the three years after that, is a large sum for most, The Register points out it represents about three months of profit for Cisco, and that company has about $30 billion in cash as well. Of course it might not end up paying this amount, or any amount depending on the result of the appeal the company has said it will file.

Source: The Register



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