Cisco ordered to cough up $2bn – yes, two billion dollars – plus royalties after ripping off biz's cybersecurity patents

Cisco has been hit with a massive $1.9bn patent-infringement bill for copying cybersecurity tech from Centripetal Networks and pushing the company out of lucrative government contracts.

The network switch maker infringed four patents, a Virginia court decided on Monday, but since the infringement was “willful and egregious,” the judge multiplied the $756m owed by 2.5 to a total fine of $1,889,521,362.50. With interest, Cisco faces a hefty $1,903,239,287.50 bill “payable in a lump sum due on the judgment date,” the court said.

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

That’s not all: the court also imposed [PDF] a royalty of ten per cent of some of Cisco’s products for the next three years, and five per cent for three years after that. That 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, the judge said.

Even though the sums are massive, they are far from ruinous, and represent about three months of profit for Cisco. The networking giant also has a massive cash pile of roughly $30bn that the total bill will barely eat into.

As for the tech itself, Centripetal Networks, based in Virginia, developed a network protection system that was in part funded by the US government. The patented parts of it deal with speed and scalability issues, and allowed for live updates and automated workflows. It outlined the technology to Cisco after the company had signed a non-disclosure agreement. But then Cisco simply stole the functionality and incorporated it into its own products in 2017. Centripetal sued [PDF] 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.”

Why don't we ask the engineers?

He also noted that Cisco prevented its engineers from answering questions about their own statements and documents in which they praised Centripetal Networks’ work for having “solved problems previously thought unsolvable.”

The judge also expressed his irritation again with Cisco over its efforts to force the court to use its own Webex video conferencing system rather than the Zoom software the court had trained its staff on: “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 unusual in that it was held entirely virtually thanks to the COVID-19 pandemic.

Having said that, the judge gave Cisco’s lawyers the thumbs up for finally getting on board and helping make the trial work, and that piece of collaboration may have saved Cisco a small fortune as the judge noted that the “enhanced damages” he decided to lay against the manufacturer had been “mitigated by the professional performance of its trial counsel.”

For its part, Cisco claimed its cybersecurity features had been developed before Centripetal had even been founded, and denied that it 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: “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 said it will appeal the decision. ®