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Cisco Granted New Trial in $63.8 Million Patent Verdict

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June 25 (Bloomberg) -- Cisco Systems Inc. won an appeals court ruling that throws out a $63.8 million patent-infringement verdict and gives it a new chance to argue it didn’t infringe a Texas company’s patent for wireless-transmission technology.

The trial judge in the case gave jurors erroneous instructions on the legal standard for infringement of Commil USA LLC’s patent, the U.S. Court of Appeals for the Federal Circuit said in an opinion posted on its website today.

The patent, issued in 2002, covers a way of maintaining network connections through a series of base stations, so a person with a laptop computer, mobile phone or device using a wireless-transmission feature such as Bluetooth doesn’t lose the signal while walking through a building. Commil claimed that the infringement occurred through the use of Cisco’s Wi-Fi access points and controllers.

A key issue in the appeal was whether Cisco knew it was actively inducing others to infringe the patent, a standard set by the U.S. Supreme Court in a ruling that came more than a month after the April 2011 verdict. The jury was instructed that it could find liability if Cisco “knew or should have known” that its action could lead others to infringe the patent.

“It is clear that the jury was permitted to find induced infringement based on mere negligence where knowledge is required,” Circuit Judge Sharon Prost wrote for the three-judge panel. “This erroneous instruction certainly could have changed the result.”

Two Trials

Cisco, the biggest maker of networking equipment, is based in San Jose, California. Kristin Carvell, a spokeswoman for Cisco, said the company had no comment on the decision.

“I expect the result to be similar to the last trial,” said Commil lawyer Mark Werbner of Sayles Werbner in Dallas. “Under the facts of the case, this is not a significant issue. Obviously Cisco thinks so. There is ample evidence that Cisco’s conduct was knowing and not just negligent.”

This was the second trial in the case, which was filed in 2007. A first trial, which Cisco also lost, was thrown out by the magistrate who presided over the case because Cisco’s lawyers made inappropriate religious comments before the jury about the inventors of the patent, who are Israeli.

The Federal Circuit, in today’s opinion, upheld the magistrate’s decision, saying he didn’t abuse his discretion to act on the continued comments by Cisco lawyers even after they were warned the comments were improper. The verdict in that case was $3.7 million.

The case is Commil USA LLC v. Cisco Systems Inc., 12-1042, U.S. Court of Appeals for the Federal Circuit (Washington). The lower court case is Commil USA LLC v. Cisco Systems Inc., 07cv341, U.S. District Court for the Eastern District of Texas (Marshall).

To contact the reporter on this story: Susan Decker in Washington at sdecker1@bloomberg.net.

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net.

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