Centripetal Networks, Inc. v. Palo Alto Networks, Inc. DC

A member of the federal judiciary failed to recuse himself from a case after discovering that the actions of his spouse created an interest in one of the litigants in that case. A new opinion has reversed that failure to recuse, holding that vacatur of all subsequent rulings must follow “perhaps most significantly” because letting stand any rulings made after the interest become known would risk “undermining the public’s confidence in the judicial process”. Here, the interest arose from the spouse’s purchase of roughly $5K in Cisco stock, the subsequent vacatur wiping a multi-billion dollar judgment in favor of Centripetal Networks off the books.

In the fall of 2020, following a 22-day bench trial, Eastern District of Virginia Judge Henry C. Morgan Jr. entered judgment in favor of Centripetal Networks, awarding nearly $2B in enhanced past damages, together with a royalty to run on certain Cisco products in stages over the following several years. An appeal was taken, with the parties (and industry coalitions) briefing a host of issues, principally the propriety of Judge Morgan’s enhancement; however, the Federal Circuit, a couple of weeks beforehand, limited the April 4, 2022 oral argument to whether ownership of 100 shares of Cisco stock by Judge Morgan’s spouse required immediate recusal then and/or vacatur of all subsequent rulings now. Last week, the parties submitted competing supplemental briefs concerning those issues, as Centripetal asks the Eastern District of Virginia to resume more streamlined litigation against Palo Alto Networks there but seeks to expand its dispute with Keysight Technologies with an investigation before the International Trade Commission (ITC).

The Federal Circuit has hit the ground running in the early weeks of 2022, overturning two sizable damages verdicts on February 4: the California Institute of Technology’s (Caltech’s) $1.1B award against Apple and Broadcom and Quarterhill Inc. subsidiary Wi-LAN Inc.’s (WiLAN’s) $85.2M award against Apple. Now, recent activity suggests that at least the latter ruling could potentially have a ripple effect on other large damages awards currently on appeal. The ensuing weeks have seen the defendant-appellants in those cases cite the WiLAN opinion, which faulted a district court for allowing a flawed methodology that was “untethered to the facts of this case”, as relevant authority justifying similar reversals.

The day after the lapse of a limited term license agreement that ended prior litigation between the two parties, Centripetal Networks has sued Keysight Technologies (2:22-cv-00002) again. Keysight returns to active litigation as an appeal from a large judgment against Cisco proceeds before the Federal Circuit and as March 2021 litigation filed against Palo Alto Networks slogs through discovery, also in the Eastern District of Virginia. Several third-party coalitions have weighed in with respect to the Cisco appeal, primarily to provide competing takes on whether the court’s enhancement of damages as part of that large judgment is consistent with the US Supreme Court’s 2016 Halo Electronics v. Pulse Electronics decision.

Centripetal Networks has filed a third case in the Eastern District of Virginia, this one asserting a dozen network security patents against Palo Alto Networks (1:21-cv-00313), doubling the number of assets litigated in this campaign. Last October Judge Henry C. Morgan Jr. of the same district, following a 22-day bench trial conducted entirely “by Zoom”, entered judgment in Centripetal’s favor and against Cisco, to the tune of nearly $2B in enhanced past damages, together with a royalty to run on certain products in stages for the next several years. Posttrial briefing is well underway before Judge Morgan.