Last year, the Federal Circuit made waves with its June 2022 Centripetal Networks v. Cisco decision, which overturned a $2.7B judgment because the district judge discovered his wife’s ownership of stock in the defendant but failed to recuse himself. In recent weeks, some plaintiffs have tried to leverage that opinion in their own litigation—but now, two of those attempts have fallen flat. In the Northern District of California, Judge Yvonne Gonzalez Rogers rejected a motion for recusal from CellSpin Soft Inc., which she hit with a noninfringement ruling this past June, as a meritless “attack on the integrity of the judiciary” that showed a “measure of desperation”. The order came soon after the Patent Trial and Appeal Board (PTAB) denied another such recusal motion, this one from Centripetal Networks, as similarly “lacking in substance” and “baseless”—holding that an administrative patent judge (APJ) owned a small enough interest in joined copetitioner Cisco that he was not required to recuse himself under the applicable regulations.

As noted in RPX’s prior coverage, the reversal in Centripetal Networks came after Eastern District of Virginia Judge Henry C. Morgan Jr., now deceased, discovered that his wife had purchased around $5K of stock in defendant Cisco. Judge Morgan placed the stock in a blind trust to cure any apparent conflict, arguing that this was a divestiture under a safe harbor provision of the applicable recusal statute (28 USC Section 455), and thus declined to recuse himself. However, the Federal Circuit disagreed and reversed that failure to recuse, holding that placing the stock in a blind trust did not count as a divestment under that statute. The appellate court determined that it was necessary to vacate all of the decisions that Judge Morgan made after he discovered the conflict, concluding that leaving them in place would work an injustice on the parties (as he had made substantive rulings after the interest was discovered), would “suggest that sitting on a case in which the judge’s family has a financial interest is not a serious issue” such that the risk of injustice in other cases would rise, and, “perhaps most significantly”, would undermine public confidence in the impartiality of the federal judiciary.

Judge Gonzalez Rogers Beats Back CellSpin’s Attempt to Leverage Centripetal Networks

The recusal motion in the CellSpin campaign that cited Centripetal Networks followed multiple setbacks for the plaintiff, though the first was only temporary. In 2018, Judge Gonzalez Rogers invalidated the four patents-in-campaign under Alice, later faulting the inventor-controlled plaintiff for not having “filed a ‘test case’ before asserting its patents here”. However, the following year, the Federal Circuit overturned the lower court’s invalidity ruling, holding that Judge Gonzalez had failed to properly consider the second step of the Alice test, and also reversed her resulting order granting attorney fees.

In June 2022, though, Judge Gonzalez Rogers again dinged CellSpin’s litigation strategy in a decision granting summary judgment of noninfringement for a group of defendants that it sued in 2017: Fitbit (acquired by Google in 2021), Fossil, Garmin, Nike, Nikon, and Under Armour. The court ruled that the plaintiff failed to “marshal the evidence necessary to defeat the defendants’ summary judgment motions”, suggesting that the failure is “perhaps a consequence of Cellspin’s decision to litigate this case with numerous defendants and accused products”. CellSpin’s appeal of that decision, filed in July, remains active, with the appellant having recently refiled its opening brief after an extension and a series of routine compliance issues (2022-2025).

On January 20, with that appeal still in its infancy, CellSpin additionally opted to challenge the lower court’s ruling through its recusal motion. The plaintiff argued that Judge Gonzalez Rogers must recuse herself because she invested in index funds that include holdings in Fitbit’s parent Google, which it contends is not a divestiture as required under Section 455(f), “akin to putting Cisco stock in a blind trust” as addressed in Centripetal. The plaintiff also alleged that the judge should recuse herself because her husband allegedly benefits from Google through his work with McKinsey (which uses Google Cloud) and Ajax Strategies (through which he purportedly works with Google-backed startups).

Judge Gonzalez Rogers denied that motion on February 15, slamming it as a “a futile attempt to evade the Federal Circuit’s review of” her “comprehensive” order granting summary judgment. As noted above, the court characterized CellSpin’s recusal motion as an “attack on the integrity of the judiciary, through the undersigned”, arguing that the request was “based upon nothing but speculation and attenuation” and is “extreme and meritless”. While asserting that she is “under no obligation to address the meritless assertions in detail”, she nonetheless did so “at exacting length to increase transparency and reassure the public that members of the judiciary take seriously their obligation to be impartial and objective. Unfortunately, the judiciary cannot predict when lawyers and parties will grasp to bypass the normal avenues of appellate review hoping for the proverbial second bite at the apple” (internal citations omitted).

Among the flaws detailed by the court were “myriad procedural deficiencies” that “plagued” CellSpin’s motion, including certain issues related to jurisdiction. In particular, Judge Gonzalez Rogers noted that because the plaintiff has already appealed to the Federal Circuit, she has no jurisdiction to vacate the order—observing that CellSpin should have filed a motion for an indicative ruling under Federal Rule of Civil Procedure 62.1. Also problematic was CellSpin’s failure to cite the specific basis for vacating the order, as dictated by Rule 60, instead merely making “vague gestures” toward that rule. In both instances, Judge Gonzalez Rogers “generously construe[d]” the errors in the plaintiff’s favor, in the interest of “judicial economy for the Court and parties”.

That said, Judge Gonzalez Rogers underscored that she would have still denied the motion even if she had jurisdiction. Among her reasons was that CellSpin’s motion for recusal had been untimely, which “on its own is a sufficient basis to deny plaintiff’s motion”. While Judge Gonzalez Rogers acknowledged that Section 455 has no statutory deadline, she held that courts have found that motions invoking the statute should be filed with “‘reasonable promptness’” and may be denied due to delays for “‘strategic purposes’” or when a party “wait[s] to raise the issue until after an unfavorable order was on appeal” (citations omitted). This was the case here, the judge found. CellSpin’s motion was not reasonably prompt because it had been filed long after the disclosures it cited: Fitbit disclosed its acquisition by Google in 2021, while the alleged financial interests held by the judge and her husband had been respectively disclosed in 2012 and 2011. “Despite these public disclosures, plaintiff sat on the motion and strategically litigated this case through summary judgment”, the court observed—expressing “little doubt” that this was “gamesmanship”. Still other procedural problems, as identified by the court, were CellSpin’s failure to file recusal motions in the other cases in which it sought reversals on the same basis and its failure to provide sufficient supporting evidence for its claims.

Judge Gonzalez also declined to recuse herself based on arguments related to her husband’s alleged ties to Google through his employment at McKinsey and Ajax. Not only had his position at McKinsey ended by the time she issued her summary judgment order, Judge Gonzalez Rogers explained, CellSpin had misconstrued one of her financial disclosures that mentioned McKinsey. While the plaintiff characterized this disclosure as acknowledging that any primary clients of McKinsey appearing before her would be grounds for recusal, the actual quote limited such grounds for potential recusal to the appearance of clients of her husband specifically. Also unavailing were arguments relating to Ajax: Judge Gonzalez Rogers asserted that her husband had no equity interest in any of Ajax’s portfolio companies, and that any affiliations are either “attenuated” or “nonexistent”.

Finally, Judge Gonzalez Rogers found that her own disclosed investments in certain funds were also not grounds for recusal. She held that her interest in two Vanguard index funds, which include holdings in Google, Nike, Under Armour, Garmin, and Fossil, fall within Section 455’s safe harbor for mutual or common investment funds, as similarly provided by the applicable ethical rules. The Vanguard funds “are prototypical examples falling into the safe harbors for mutual or common investment funds”, argued the judge, because they are sold as mutual funds, are managed by “separate portfolio managers”, and are both “diversified and extremely large”. This is “far removed” from the circumstances in Centripetal Networks, the court found, as that case involved a direct financial interest in the defendant that did not fall within any safe harbor. Judge Gonzalez Rogers also contended that her interest in an additional “Special Situations Fund”, despite its management by McKinsey, fell within the same safe harbor because—similar to the Vanguard funds—its investors do not directly own stocks, are denied access to details on the fund’s particular assets, and “have no influence on the assets that are pursued”.

For these reasons, Judge Gonzalez Rogers concluded that “one can only surmise that plaintiff and its lawyers brought the motion for tactical advantage”—citing a desire not to “reward such conduct” in denying CellSpin’s motion for recusal.

On February 17, CellSpin filed a notice of appeal for this decision.

PTAB Denies Centripetal’s Motion for Recusal

As noted above, the PTAB has also denied a recusal request on a similar basis—specifically, a motion for motion for recusal filed by Centripetal Networks in an IPR from Palo Alto Networks (IPR2022-00182), targeting one of the patents at issue in Centripetal’s district court litigation (9,917,856). Cisco was subsequently granted joinder to that IPR for a petition of its own (IPR2022-01151). Centripetal’s motion argued that one of the APJs on the assigned PTAB panel, Brian J. McNamara, must recuse himself because he “has owned Cisco stock”, and because he “has been paid a significant amount of money (apparently a share of the profits) from one of Cisco’s lobbyist law firms”—referring to retirement payments that McNamara has received from his former firm, Foley & Lardner—“while he was deciding IPR petitions against patents that Centripetal has asserted against Cisco in litigation”. These alleged conflicts, the company asserted, meant that “[t]he entire panel is now tainted with APJ McNamara’s conflict”, on which basis it insisted that “the panel therefore should be recused, and the decision to institute should be vacated”.

Shortly after, and before the motion was decided, McNamara withdrew from the case. Although he contended that Centripetal’s motion for recusal was “without merit”, he stated that he was nevertheless withdrawing “[i]n order to reduce the number of issues and simplify the briefing”. He noted that his ownership of Cisco stock was a longstanding matter of public record and falls below the $15K threshold at which recusal is required by the Office of Government Ethics. McNamara also rejected Centripetal’s claims that he is biased due to his retirement payments from Foley & Lardner, countering that the payments “are not contingent on any specific matter and [that] the firm does not provide retirees its current list of clients, which, like any large law firm, changes from day to day”. On January 18, another APJ on the panel, Steven M. Amundson, also withdrew, citing Centripetal’s argument that McNamara’s alleged conflicts “cast a shadow over the entire panel of judges in this IPR”. Amundson also argued that the patent owner’s motion was without merit on that issue but withdrew to “reduce the number of issues” and give another APJ sufficient time to “become familiar with the record”.

The PTAB’s February 3 order denying Centripetal’s motion rejected each of its arguments. With respect to McNamara’s Cisco stock, the Board observed that the applicable ethical regulation that applies to executive branch employees (5 CFR Section 2635.402(d)(1)) provides “de minimis exceptions” where a financial interest does not require recusal if it is “too remote or too inconsequential to affect the integrity” of the employee. Relevantly, one of those exceptions covers securities issued by publicly traded entities “affected by” a matter before the employee where the securities have an aggregate value that does not exceed $15K. A related exception, covering securities in one or more entities that are not parties but are still “affected by” the matter, raises that threshold to $25K for securities in one entity and $50K for all entities. Since Cisco was not a party to the decision at the time that Palo Alto’s petition was instituted, the Board found that the $25K threshold applied, which meant that McNamara’s Cisco stock—as valued “between $1,001 and $15,000”—“was plainly not disqualifying under the rules”.

The PTAB additionally found that McNamara’s Foley & Lardner retirement payments do not constitute a “prohibited financial interest”. Here, the Board agreed with McNamara that no evidence showed he knew that Cisco was a client, and that nothing showed that the amount of those payments was dependent on the firm’s “receipts from Cisco”. The PTAB highlighted one of Centripetal’s supporting arguments on this point as particularly problematic: While the patent owner had argued that Cisco was listed by Foley as its “most lucrative contract”, the Board found that this was either “a misunderstanding (or misrepresentation)” of the cited document, which was actually “a survey of fees received for executive branch lobbying in Florida” (emphasis in original). This evidence, the Board determined, hardly showed that Cisco is the firm’s most lucrative overall client across its practice groups, nor did it establish that this lobbying work would be in any way affected by the outcome of the IPR.

The fact that those “arguments are so lacking in substance is especially concerning given their aim” of seeking disqualification, the PTAB emphasized—warning that “further baseless arguments directed at the Board, its members, or its process may be met with sanctions”.

Nor, for that matter, did the PTAB agree that any violations of due process had occurred here. This included arguments related to the executive branch ethical rules described above. Although Centripetal cited cases finding due process violations based on certain financial interests held by public officials, the Board found that the caselaw cited in support requires such interests to be “substantial”. While acknowledging that this is an admittedly subjective threshold, the PTAB nonetheless found that the “remote” and “inconsequential” interests that fall within the applicable “de minimis exceptions” were not “substantial interests”. This is particularly the case, it determined, because “the underlying dollar limits were last contemplated “in 2002, and the passage of twenty years has only made them more remote and inconsequential” (emphasis in original).

The PTAB was also not convinced by Centripetal’s arguments that because the post-judgment institution rate for IPRs against its patents (i.e., those with institution decisions issued after the $2.7B judgment) was higher for panels including McNamara, this “raises at least an appearance of actual bias” (emphasis in decision). Since the relevant test looks for either the appearance of bias or actual bias, the Board assumed that this argument really meant to focus on the latter, since that is the only one that can trigger due process concerns. On that point, the PTAB held that bias is not established merely because decisions went against the party in question. That is particularly the case here, the Board found, since all but one of the patents cited for the “higher institution rate argument” have only been asserted against petitioner Palo Alto Networks, not Cisco—meaning that Centripetal is really arguing that it is the target of the alleged bias. Moreover, the PTAB emphasized that for IPRs against patents actually asserted against Cisco, and instituted during the relevant period, panels including McNamara denied institution for two of the three patents at issue.

The Board also rejected Centripetal’s argument that it would be inconsistent with Centripetal Networks v. Cisco for Judge Morgan to be required to recuse himself, but not APJ McNamara. This was not so, the PTAB found: the statute governing Article III judges, Section 455, bars ownership of any stock and does not apply to the PTAB. In contrast, as noted above, “the regulations that do apply to the Board allow ownership of up to $15,000 of stock in a party and up to $25,000 of stock in a non-party that may be affected by a matter handled by an APJ” (emphasis in original). To claim otherwise amounts to a misplaced policy argument that the more stringent standard of Section 455 should apply to PTAB APJs—since this was not the policy at the time of institution or at present.

Finally, similar to the CellSpin ruling, the PTAB determined that Centripetal was wrong to have waited so long to raise the conflicts issue, three months after it “admittedly became aware” of the underlying facts. That “extended delay . . . strongly suggests” that the patent owner was waiting to see if it would prevail on its motion for reconsideration at the PTAB, and in its Supreme Court appeal of the Federal Circuit’s ruling (which failed in December). “But no matter which it was, it was highly inappropriate, because a matter as serious as a conflict requiring recusal of multiple APJs should have been raised immediately, not held for strategic reasons.” That delay, the PTAB concluded, would have barred the relief now being sought by Centripetal even if there had been a conflict.

The Board also issued a separate decision that heavily criticized the conduct of Paul Andre, the managing partner of Kramer Levin Naftalis & Frankel’s Silicon Valley office, who had sought pro hac vice admission as Centripetal’s backup PTAB counsel. That motion for admission had initially been unopposed, but counsel for petitioner Palo Alto Networks reversed course after Andre repeatedly directed “unilateral emails to the Board that are replete with improper argumentation”. On February 7, the PTAB declined to admit Andre, noting that he had filed the recusal motion despite not yet having been admitted to practice before the Board. The PTAB further observed that while Andre had represented himself as a member in good standing, he also disclosed that he had been sanctioned by Western District of Texas Judge Alan D. Albright. In that cited order, Judge Albright chided Andre for accusing a defendant of invoking antisemitic stereotypes against the Jewish executives of the Israeli plaintiff he was representing, finding that these allegations were “particularly disturbing” and “nothing but baseless attacks on the integrity of this Court and the reputation of Defendants’ counsel”. Judge Albright also noted that this was not the first time his conduct had been criticized by a court, observing that Andre had also been chastised, though not sanctioned, for misconduct underpinning a damages theory fiasco in the Finjan v. Juniper Networks litigation.

The PTAB drew parallels between that misconduct and the behavior at issue in this proceeding, denying his admission on that basis:

The arguments Mr. Andre has already presented in this case (before being admitted) thus appear to bear more than a passing resemblance to the “baseless attacks on the integrity of [the] Court” that resulted in the sanctions imposed by Judge Albright. This information and conduct are quite troubling, and, we conclude, sufficient reason to deny Mr. Andre’s motion to participate in this IPR.

For more on the impact of the Centripetal Networks decision, including the recently denied motions for recusal discussed above, see “Conflict Ruling That Toppled $2.7B Judgment Ripples Through Other Litigation” (January 2023).