In SRI International, Inc., v. Cisco Systems, Inc., [2017-2223] (March 20, 2019), the Federal Circuit affirmed the district court’s denial of summary judgment of ineligibility, adopt its construction of “network traffic data,” and affirmed its summary judgment of no anticipation. The Federal Circuit vacated and remanded the district court’s denial of judgment as a matter of law of no willful infringement, and therefore vacate the district court’s enhancement of damages. The Federal Circuit also vacated the district court’s award of attorneys’ fees and remanded for recalculation. Finally, the Federal Circuit affirmed the district court’s award of ongoing royalties on postverdict sales of products that were actually found to infringe or are not colorably different.
The litigation involved U.S. Patent Nos. 6,484,203 and 6,711,615 directed to network intrusion detection. The Federal Circuit rejected Cisco’s assertion that the claims are just directed to analyzing data from multiple sources to detect suspicious activity. The Federal Circuit found that instead, the claims are directed to an improvement in computer network technology. The focus of the claims is on the specific asserted improvement in computer capabilities—that is, providing a network defense system that monitors network traffic in real-time to automatically detect large-scale attacks. The Federal Circuit concluded that the claims are not directed to an abstract idea under step one of the Alice analysis, and thus did not reach step two.
On claim construction, the Federal Circuit held that SRI’s statements in the prosecution history do not invoke a clear and unmistakable surrender of all preprocessing, including decryption, decoding, and parsing. Accordingly, the Federal Circuit agreed with the district court’s construction of “network traffic data” to mean “data obtained from direct examination of network packets.”
On the issue of anticipation, the Federal Circuit held that SRI’s statements in the prosecution history did not invoke a clear and unmistakable surrender of all preprocessing, including decryption, decoding, and parsing. Accordingly, the Federal Circuit agreed with the district court’s construction of “network traffic data” to mean “data obtained from direct examination of network packets.” On this record, the Federal Circuit concluded that summary judgment was appropriate. The prior art did not expressly disclose directly examining network packets as required by the claims—especially not to obtain data about network connection requests.
On the denial of JMOL on the issue of willfulness, the Federal Circuit agreed that the jury’s finding that Cisco willfully infringed the patents-in-suit prior to receiving notice thereof is not supported by substantial evidence and therefore vacated and remanded them. Among other things, SRI argued that Cisco employeees did not read the patent before their depositions, but the Federal Circuit noted that it is undisputed that these Cisco employees were engineers without legal training. Given Cisco’s size and resources, the Federal Circuit said it was unremarkable that the engineers—as opposed to Cisco’s in-house or outside counsel—did not analyze the patents-in-suit themselves. The Federal Circuit also noted that it was undisputed that Cisco did not know of SRI’s patent until SRI sent its notice letter to Cisco, and that this notice letter was sent years after Cisco independently developed the accused systems and first sold them. Under these circumstances the Federal Circuit vacated the finding of willfulness prior to the Notice letter, and remanded for the district court to determine whether the finding of willfulness after the Notice letter was supported by substantial evidence. The Federal Circuit also vacated the award of enhanced damages and remanded for further consideration along with willfulness.
The Federal Circuit vacated the district court’s award of attorneys’ fees under § 285, remanding solely for recalculation. The Federal Circuit found no error in the district court’s determination that the case was exceptional, agreeing that Cisto had “crossed the line in several regards.” However, there were several entries included by mistake, and the Federal Circuit remanded only for removal of attorney hours clearly included by mistake and consequent recalculation of reasonable attorneys’ fees.
Finally, on the issue of on-going royalty, the Federal Circuit found that the district court did not abuse its discretion in awarding a 3.5% compulsory license for all post-verdict sales. Cisco complained that the court was obligated to consider its design-arounds. The Federal Circuit agreed that Cisco was untimely, finding Cisco did not redesign its products until after trial, and Cisco did not file its motion to supplement until after completion of post-trial briefing.