Cisco Wins Appeal of $1.9 Billion Patent- Infringement Judgment

People pass by Cisco stand on the Web Summit, Europe’s largest technology conference, in Lisbon, Portugal, November 3, 2021. REUTERS/Pedro NunesPHOTO: PEDRO NUNES/REUTERS

A U.S. appeals court voted to throw out a $1.9 billion patent-infringement judgment against Cisco Systems Inc., CSCO saying the judge in the original case should have disqualified himself after learning his wife owned stock in the company.

"It is seriously inimical to the credibility of the judiciary for a judge to preside over a case in which he has a known financial interest in one of the parties and for courts to allow those rulings to stand," Judge Timothy Dyk wrote in the 3-0 ruling Thursday for the U.S. Court of Appeals for the Federal Circuit.

The ruling is part of the continuing fallout from federal judges allegedly violating financial-conflict laws that have spread to appeals courts across the nation.

After a bench trial but before issuing an opinion, Judge Henry Morgan in Norfolk, Va., disclosed that he had learned that his wife held $4,700 of Cisco stock during the trial.

Centripetal Networks Inc. a Virginia-based cybersecurity company, had filed a patent­infringement case against Cisco. Originally, Centripetal raised no objection to the judge remaining on the case, but Cisco requested that Judge Morgan step aside.

At a hearing, the judge said he would direct his lawyer to place the shares in blind trust instead of asking his wife to sell them off. He said he worried that dumping the stock ahead of his opinion on the merits of the case could look bad if he ruled against Cisco.

“I was concerned that, to the extent that the Court's ruling might have an adverse effect on the stock price—I don't know if it will or not—that that would be defeating the very purpose of the [ethics] Rules," Judge Morgan explained in a September 2020 hearing, according to a transcript.

The judge, an appointee of President George H.W. Bush, denied Cisco's recusal motion in October 2020 and soon found that the company infringed CentripetaFs patents.

Cisco appealed to the U.S. Court of Appeals for the Federal Circuit in Washington, D.C・ The company has argued in 辻s briefs that federal law required Judge Morgan to recuse himself or his wife to sell off her Cisco shares, in order for him to continue to hear the case. Lawyers for Centripetal said in their briefs that Judge Morgan made an ethical decision in moving the Cisco shares into a blind trust.

Judge Morgan has since died, according to a court employee at the clerk's office at the U.S. District Court for the Eastern District of Virginia, Norfolk Division. His obituary said he was "a well-respected jurist and was devoted to the districfs famous 'Rocket Docket.' "

Cisco declined to comment on the ruling.

Jonathan Rogers, chief operating officer of Centripetal, said the company will continue its fight. "This is yet another example of the difficulties that innovative companies have to endure to protect their property rights against large predatory infringers,' he said.

Nothing bars judges from owning stocks, but federal law since 1974 has prohibited judges from hearing cases that involve a party in which they, their spouses or their minor children have a "legal or equitable interest, however small." That law and the Judicial Conference of the U.S., which is the federal courts, policy-making body, require judges to avoid even the appearance of a conflict.

A 2021 Wall Street Journal investigation found that judges have improperly failed to disqualify themselves from 685 court cases around the nation since 2010, and more than 130 federal judges have violated U.S. law and judicial ethics by overseeing court cases involving companies in which they or their family owned stock.

Source: wsj.com

Editor: IPR Daily-Rene