SRI Int'l, Inc. v. Cisco Sys., Inc.

• Decision Date: 28 September 2021
• Docket Number: 2020-1685, 2020-1704
• Citation: 14 F.4th 1323
• Parties: SRI INTERNATIONAL, INC., Plaintiff-Appellant v. CISCO SYSTEMS, INC., Defendant-Cross-Appellant
• Court: U.S. Court of Appeals — Federal Circuit

14 F.4th 1323

SRI INTERNATIONAL, INC., Plaintiff-Appellant

v.CISCO SYSTEMS, INC., Defendant-Cross-Appellant

2020-1685, 2020-1704

United States Court of Appeals, Federal Circuit.

Decided: September 28, 2021

Frank Scherkenbach, Fish & Richardson, PC, Boston, MA, argued for plaintiff-appellant. Also represented by Robert Courtney, Minneapolis, MN; Howard G. Pollack, Redwood City, CA; John Winston Thornburgh, San Diego, CA.

Andrew J. Danford, Wilmer Cutler Pickering Hale and Dorr LLP, Boston, MA, argued for defendant-cross-appellant. Also represented by Annaleigh E. Curtis, Lauren B. Fletcher, William F. Lee, Louis W. Tompros.

Before Lourie, O'Malley, and Stoll, Circuit Judges.

Stoll, Circuit Judge.

SRI International, Inc. appeals the United States District Court for the District of Delaware's denial of its motion to reinstate the jury's willfulness verdict and to reinstate the district court's award of enhanced damages. Cisco Systems, Inc. cross-appeals the district court's award of attorney fees and expenses. Because substantial evidence supports the jury's finding of willful infringement, we reverse the district court's denial of SRI's motion to reinstate the willfulness verdict. Having restored the jury's willfulness finding, we also restore the district court's award of enhanced damages. Finally, we affirm the district court's award of attorney fees.

BACKGROUND

This is the second appeal in this case. SRI filed suit in the District of Delaware alleging that Cisco infringed certain claims of U.S. Patent Nos. 6,711,615 and 6,484,203 (the "asserted patents"). The ’615 patent is titled "Network Surveillance" and is a continuation of the ’203 patent, which is titled "Hierarchical Event Monitoring and Analysis." A jury trial was held on validity, infringement, willful infringement, and damages. See SRI Int'l, Inc. v. Cisco Sys., Inc. (SRI I ), 254 F. Supp. 3d 680 (D. Del. 2017). The jury found that the accused Cisco products infringed certain claims of the asserted patents and awarded a 3.5% reasonable royalty for a total of $23,660,000 in compensatory damages. The jury also found that Cisco's infringement was willful.

After trial, Cisco moved for judgment as a matter of law (JMOL) of no willful infringement and SRI moved for attorney fees and enhanced damages. Regarding the jury's willfulness finding, the district court determined that substantial evidence—including that certain Cisco employees did not read the asserted patents until their depositions, that Cisco designed the products in an infringing manner, and that Cisco instructed its customers to use those products in an infringing manner—supported the jury's willfulness finding. Id. at 716–17.

The district court also awarded SRI attorney fees and costs. Id. at 723. The district court noted that "Cisco pursued litigation about as aggressively as the court has seen in its judicial experience" and that this litigation strategy "created a substantial amount of work for both SRI and the court, much of which work was needlessly repetitive or irrelevant or frivolous." Id. at 722–23 (footnotes omitted). In awarding fees, the district court also took into account "the fact that the jury found that Cisco's infringement was willful." Id. at 723.

With respect to enhancement of damages based on the jury's willfulness finding, the district court doubled the damages award. Id. at 723–24. The district court explained that enhancement was appropriate "given Cisco's litigation conduct, its status as the world's largest networking company, its apparent disdain for SRI and its business model, and the fact that Cisco lost on all issues during summary judgment and trial, despite its formidable efforts to the contrary." Id. at 723.

Cisco appealed the district court's denial of JMOL of no willful infringement and its grant of enhanced damages and attorney fees. We vacated and remanded on each of those issues. See SRI Int'l, Inc. v. Cisco Sys., Inc. (SRI II ), 930 F.3d 1295, 1312 (Fed. Cir. 2019). First, we held that the jury's verdict of willful infringement before May 8, 2012 was not supported by substantial evidence because it was undisputed that Cisco did not know of SRI's patents until after that date. Id. at 1309–10. We stated that for the time period prior to May 8, 2012, "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." Id. at 1309. We also criticized the evidence the district court identified as supporting the jury's willfulness verdict. For example, we explained that "it was unremarkable" that two Cisco employees identified in the appellate record merely as engineers did not review the patents until their depositions. Id. We vacated the district court's denial of JMOL of no willful infringement and remanded the case to the district court to decide in the first instance whether the jury's finding of willful infringement after May 8, 2012 (the date Cisco received notice) was supported by substantial evidence. Id. We likewise vacated the district court's enhanced damages award because it was predicated on the finding of willful infringement. In addition, we vacated the award of attorney fees because it was partly based on the finding of willful infringement.

On remand, the district court reasonably read our opinion to require a more stringent standard for willful infringement than our other cases suggest—conduct rising to "the level of wanton, malicious, and bad-faith behavior." SRI Int'l, Inc. v. Cisco Sys., Inc. (SRI III ), Civil Action No. 13-1534-RGA, 2020 WL 1285915, at *1 (D. Del. Mar. 18, 2020). Based on this standard, the district court in SRI III held that substantial evidence did not support the jury verdict of willful infringement after May 8, 2012.

The district court in SRI III also reviewed the jury instructions on willful infringement, which neither party ever challenged on appeal. The instructions directed the jury to consider whether Cisco "acted despite a high likelihood that [its] actions infringed a valid and enforceable patent." Id. at *2. The jury was further instructed that, if it answered this question affirmatively, it should also determine whether Cisco "actually knew or should have known that its actions constituted an unjustifiably high risk of infringement of a valid and enforceable patent." Id. To determine whether Cisco had this state of mind, the jury was instructed to consider the following factors:

One, whether or not defendant acted in accordance with the standards of commerce for its industry.

Two, whether or not defendant intentionally copied a product of plaintiff's that is covered by the patents-in-suit.

Three, whether or not there is a reasonable basis to believe that defendant did not infringe or had a reasonable defense to infringement.

Four, whether or not defendant made a good-faith effort to avoid infringing the patents-in-suit, for example, whether defendant attempted to design around the patents-in-suit.

And, five, whether or not defendant tried to cover up its infringement.

Id. at *2–3.

Regarding attorney fees, the district court noted that even though it removed the willfulness finding it had partially relied on in awarding fees, there was nevertheless sufficient reason to maintain the fees award. Id. at *4. It again found the case "exceptional" and accordingly granted the renewed motion for attorney fees and expenses. Id. at *5.

SRI appeals the district court's JMOL of no willful infringement and the denial of its motion to reinstate the jury's willfulness verdict and to reinstate the district court's award of enhanced damages. Cisco cross-appeals the district court's award of attorney fees. We have jurisdiction under 28 U.S.C. § 1295(a)(1).

DISCUSSION

We review a grant of JMOL of no willfulness under the same standard as the district court, for substantial evidence. Johns Hopkins Univ. v. CellPro, Inc. , 152 F.3d 1342, 1354, 1363 (Fed. Cir. 1998) ; MobileMedia Ideas LLC v. Apple Inc. , 780 F.3d 1159, 1164 (Fed. Cir. 2015) (citing Pitts v. Delaware , 646 F.3d 151, 155 (3d Cir. 2011) ). We review a district court's decision regarding the amount of enhanced damages for an abuse of discretion. Halo Elecs., Inc. v. Pulse Elecs., Inc. , 579 U.S. 93, 136 S. Ct. 1923, 1934, 195 L.Ed.2d 278 (2016). Likewise, we review an award of attorney fees pursuant to 35 U.S.C. § 285 for an abuse of discretion.

Highmark Inc. v. Allcare Health Mgmt. Sys., Inc. , 572 U.S. 559, 564, 134 S.Ct. 1744, 188 L.Ed.2d 829 (2014).

I

A

In SRI II , we held that there was no willful infringement as a matter of law before Cisco had notice on May 8, 2012. We did not decide whether substantial evidence supported the jury verdict of willful infringement after May 8, 2012. Rather, we remanded for the district court to determine this issue in the first instance. We now hold that that substantial evidence supports the jury's finding of willful infringement after May 8, 2012. We do not disturb SRI II's holding that there was no willful infringement before May 8, 2012.

First, we presume, as we must, that consistent with the jury instructions, the jury found that Cisco had no reasonable basis to believe that it did not infringe or that it had a reasonable defense to infringement.¹ See SSL Servs., LLC v. Citrix Sys., Inc. , 769 F.3d 1073, 1082 (Fed. Cir. 2014) (generally, "[w]e presume that the jury resolved the underlying factual disputes in favor of the verdict and review those factual findings for substantial evidence" (citing Kinetic Concepts, Inc. v. Smith & Nephew, Inc. , 688 F.3d 1342, 1356–57 (Fed. Cir. 2012) )).

SRI presented evidence that Cisco's invalidity defenses were unreasonable. Cisco's only assertion of invalidity over the prior art was based on anticipation by a reference that was twice considered and twice rejected by the Patent Office. See SRI I , 254 F. Supp. 3d at 722 n.52. SRI's expert testified that this reference was lacking a key limitation of the...