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Cisco Hit with $1.9Bn Fine for Patent-Infringement from Centripetal Networks

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On Monday, a U.S. judge ordered the biggest maker of computer-networking gear, Cisco Systems, Inc., to pay $1.9 billion to a Virginia company for patent-infringement on their cybersecurity patents.

Centripetal Networks Inc, of Hendron, Virginia accused Cisco of infringing five of their cybersecurity patents and the U.S. District Judge Henry Morgan of Norfolk, Virginia found Cisco guilty of infringing four of the five patents. He found no infringement on the fifth patent.

The four patents are: US 9,203,806 , 9,560,176 , 9,686,193 , and 9,917,856.

The judge deemed the infringement as “willful and egregious” so he multiplied the $756 million owed by 2.5x for a total fine of $1,889,521,362.50.

Slap on some interest and Cisco is looking at a hefty bill of nearly $2 billion or $1,903,239,287.50 – to be exact.

The non-jury court also imposed a royalty of ten percent of some of Cisco’s products for the next three years and five percent for next three years after that.

According to U.S. District Judge Henry Morgan, “the royalty must be at least $168m and no more than $300m for the first three years, and between $84m and $150m for the next three.”

Although these fines are massive, they are not going to ruin Cisco and in fact, the fines represent nearly three months of profit for Cisco.

Furthermore, the computer-networking gear giant has nearly $30 billion in cash reserves.

So how did Cisco gain access and steal the patents?

Centripetal Networks received funding from the US government towards the developments of a network protection system.

The patented parts of the system deal with speed and scalability issues and allow for live updates and automated workflows.

Centripetal Networks had planned to work together on portions of the project and the company had Cisco sign a non-disclosure agreement.

Cisco simply turned around and stole the functionality and incorporated it into their own products in 2017, ignoring the non-disclosure agreement they had signed.

When Centripetal caught on, they sued the following year.

“The fact that Cisco released products with Centripetal’s functionality within a year of these meetings goes beyond mere coincidence,” said District Judge Henry Morgan in his judgment.

He noted that Cisco had “continually gathered information from Centripetal as if it intended to buy the technology from Centripetal,” but then “appropriated the information gained in these meetings to learn about Centripetal’s patented functionality and embedded it into its own products.”

The judge also mentioned that Cisco told its engineers not to answer question about their own statements and documents in which they praised Centripetal Networks’ work for having “solved problems previously thought unsolvable.”

Cisco further irritated the judge by forcing the court to use their own Webex video conferencing rather than the Zoom software that the court was already prepared and trained to use – “While Cisco objected to trying the case on a video/audio platform, and specifically the platform upon which the court’s staff was trained…” the case was entirely virtual due to COVID-19.

Cisco denied the allegations and said they had already developed its cybersecurity features before Centripetal was even founded.

They also denied that they had undermined the company’s efforts to win government contracts, claiming that nobody wanted Centripetal because its approach was “too complicated.”

The judge wasn’t buying it though and said “Cisco’s invalidity evidence often contradicted its non-infringement evidence and failed to recognize the new functionality which it copied from Centripetal during and after the Nondisclosure Agreement.”

Cisco has already filed an appeal and plans to fight the decision.

About the author

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Denise Elizabeth

Denise is one of our Senior Editors who has over 5 yrs hands-on Experience in the IT Software Procurement industry as well as extensive experience in forensic accounting.

Denise has a Master Degree in Organization Development and a Bachelors in Science in Accounting & Business Administration. He career path has taken her through several Tech companies and she's come to work for ITDM full-time as our Senior Editor.

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