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Federal Circuit Vacates $63 Million Verdict Against Cisco
2013-06-25 04:05:00 PM
Cisco Systems Inc. has gotten a reprieve on a $63 million verdict in a trial that came about because one of its lawyers made allegedly anti-Semitic remarks in an earlier trial. On Tuesday a panel of the U.S. Court of Appeals for the Federal Circuit vacated the latest verdict in the case, a patent infringement suit brought against Cisco by Commil USA LLC, a small patent-holding company. Finding that the judge had given erroneous instructions to the jury in the second trial, the panel ordered a new, third trial on Commil's claims.
William Lee of Wilmer Cutler Pickering Hale and Dorr represented Cisco before the Federal Circuit. It's the latest win for Lee, whom Recorder sibling publication The Litigation Daily named as Litigator of the Week earlier this month for helping Pfizer Inc. secure a $2.15 billion settlement from Teva Pharmaceutical Industries Ltd. Mark Werbner of Dallas-based Sayles Werbner, which has been lead counsel to Commil throughout the case, said his client plans to seek an en banc review of the ruling.
Commil claims in its suit, which it brought in the Eastern District of Texas, that its patent on how wireless devices communicate with base stations has been infringed by Cisco. The case first went to trial before U.S. Magistrate Judge Charles "Chad" Everingham IV in Marshall, Texas, in May 2010. The jury found Cisco liable for direct infringement and awarded Commil $3.7 million in damages.
Cisco's counsel in that trial, Otis Carroll of Tyler, Texas-based Ireland, Carroll & Kelley, made a misstep that cost his client. Commil's owner, Jonathan David, is a resident of Israel. After David stated during a cross-examination that that he had eaten at a local barbecue restaurant, Carroll replied, "I bet not pork." Carroll later apologized in court, but Everingham announced that he would entertain a motion for a new trial. A month later, Commil followed up on that suggestion with this motion, in which it maintained that Carroll's remark was "a sarcastic means of informing the jury" that David and one of Commil's inventors were Jewish. Affiliates Texas Lawyer and Corporate Counsel reported on the controversy here and here.
Cisco turned to Simpson Thacher & Bartlett for its defense in the second trial, which was held in April 2011 before Everingham. But the company suffered an even bigger loss. Jurors found Cisco liable for induced infringement, and awarded Commil $63 million in damages. An additional $10 million in interest was later tacked on to that figure.
In its Tuesday ruling, the Federal Circuit panel agreed that Everingham was right to order a new trial. Judge Sharon Prost wrote in her lead opinion, "Cisco attempted to instill in the jury, through irrelevant references to ethnicity and religion, an 'us versus them' mentality." In a footnote, she added that Commil's lawyers also used religious references during the trial, such as noting that their client's case began in Israel, "the Holy Land for many religions."
However, the circuit panel disagreed with the instructions that Everingham gave to the jury during the second trial. Prost wrote that Everingham told jurors they could find Cisco liable if they believed that the company "knew or should have known that its actions would induce actual infringement." According to Prost, "the jury was permitted to find induced infringement based on mere negligence where knowledge is required."
Prost also found that Everingham was wrong to block Cisco from presenting evidence that it didn't believe it had committed infringement because it believed in good faith that Commil's patent was invalid. While Judge Kathleen O'Malley agreed with Prost on this point, Judge Pauline Newman dissented, writing, "Whatever Cisco's 'belief' as to invalidity of the patent, this belief is irrelevant to the fact and law of infringement."
Commil counsel Werbner said he found encouragement in Newman's opinion. He said Prost's finding on good faith "is really an issue of first impression" that should be addressed by the full Federal Circuit bench. (If the case does go to trial again, it won't be before Everingham; he left the bench in 2011 to join Akin Gump Strauss Hauer & Feld.)
Cisco counsel Lee referred a request for comment to a company spokesperson, who said the decision speaks for itself.
Brian Zabcik is a senior editor with The Litigation Daily, a Recorder affiliate.