Don’t Call Me a Troll: Enhanced Damages Awarded Based On “Disdain” For Business Model

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Fortunately for SRI, Cisco’s attempt to win a war of attrition not only failed, but backfired spectacularly

by: Patrick Anderson | June 7, 2017

One of the downsides to winning a patent infringement trial is the fact that, generally speaking, the patent owner is entitled to a “reasonable royalty.” In other words, much of the time, the worst case scenario for the infringer is that they pay what they theoretically would have agreed to pay in the first place. While this notion purports to put the patent owner in, roughly, as good a position as they would have been in had the infringement not occurred, the zero-sum nature of this policy also somewhat removes risk from the infringer’s part of the equation.

Thankfully, the patent laws also provide for the possibility of “enhanced” damages up to three times the amount assessed. This punitive nature can have a deterrent effect in cases such as willful infringement. Apart from willfulness, however, the types of conduct that will result in enhanced damages are a bit of a dark market. It is against this backdrop that we examine Cisco’s infringement of patents owned by SRI International.

Cisco was found to infringe on multiple claims of two SRI-owned patents. The patent owner is described as “an independent, not-for-profit research institute.” In other words, SRI very likely does not commercialize its inventions, preferring instead to license their patents and technology to third parties. In other words, a “non-practicing entity”, or NPE.

Judge Sue Robinson of the District of Delaware, in her post-trial opinion, walks through a litany of inappropriately aggressive conduct on the part of Cisco. As part of their overall strategy for avoiding, delaying, and ultimately undercutting the benefit of SRI’s patent, Cisco maintained nineteen different invalidity theories right up until the eve of trial, only to ultimately move forward on two of them. In addition, Cisco’s only non-infringement defenses directly contradicted the court’s earlier rulings—in other words, they had no justifiable non-infringement defense.

Cisco designated 53 transcripts covering 48,000 lines of testimony—forcing SRI to review, provide objections, and provide counter-designations—only to ultimately rely on a mere 22 lines from a single transcript at trial.

As a result, Judge Robinson was not content to stop at merely awarding SRI with attorney’s fees. In determining whether, and by how much, the damages should be enhanced, Judge Robinson decided that a 2x enhancement was appropriate based on, among other things, Cisco’s “apparent disdain for SRI and its business model.” It’s unclear whether this “apparent disdain” stems from the conduct mentioned above, or from specific statements made by Cisco throughout the course of the litigation.  What is clear, however, is that Cisco used its size and money to aggressively avoid paying for its indefensible use of SRI’s property for as long as it could, and to undermine the benefit of any ultimate payment to SRI by making it more expensive.

Fortunately for SRI, Cisco’s attempt to win a war of attrition not only failed, but backfired spectacularly. All patent owners should be so fortunate as to be in front of a judge who recognizes Cisco’s delay tactics for what they are and penalizes them appropriately for it.  Between this decision, and the Texas court’s award of attorneys fees against a pro se patent owner, this is a bad week to be on the losing side of a patent case!

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