An Eastern District of Virginia trial in a Centripetal Networks case against Palo Alto Networks (2:21-cv-00137) has ended with an infringement verdict for the plaintiff. On January 31, a jury found that certain Palo Alto Networks cybersecurity products infringed four Centripetal patents, down from the 13 previously at issue—the case having been trimmed significantly by the Patent Trial and Appeal Board (PTAB) last year. Additionally, the jury awarded Centripetal $151.1M in lump-sum damages but determined that Palo Alto Networks’s infringement had not been willful, also finding that three of the patents were not “well-understood, routine, and conventional” (based on which those patents may survive a pending Alice challenge). The verdict followed a series of significant setbacks last year in another Centripetal suit: After the Federal Circuit overturned a $2.7B judgment in its case against Cisco in June due to a conflict held by the now-deceased district judge, another district judge overturned the underlying judgment of infringement in December.

Centripetal filed its complaint against Palo Alto Networks in March 2021, accusing the company of infringing 12 network security patents (10,091,246; 10,503,899; 10,530,903; 10,542,028; 10,567,343; 10,567,413; 10,567,437; 10,659,573; 10,735,380; 10,749,906; 10,757,126; 10,785,266) through the provision of its Next-Generation Firewall, Panorama, Cortex, AutoFocus, MineMeld, and DNS Security Service threat identification and mitigation products. The following month, Palo Alto Networks filed a Rule 12(b)(6) motion to dismiss, asserting that the ‘126, ‘028, and ‘246 patents are unpatentably directed to the abstract idea of “filtering and sorting data (here, computer network packets) based on rules”. The motion further contended that the complaint suffered from various pleading deficiencies, including with respect to willfulness due to insufficient allegations of pre-suit knowledge of the asserted patents, willfulness due to the failure to plausibly allege egregious conduct, contributory infringement, and direct and indirect infringement. In July, after Centripetal amended its complaint to asserted a newly issued thirteenth patent (10,931,797), Palo Alto Networks renewed its motion, asserting that the second complaint suffered from the same pleading deficiencies and realleging ineligibility under Alice.

Throughout July and August of that year, Palo Alto Networks also filed a series of validity challenges at the PTAB, ultimately targeting all 13 asserted with at least one inter partes review (IPR) each (except for the ‘797 patent, against which it filed a single post-grant review (PGR)). In March 2022, District Judge Roderick C. Young issued a single order that granted Palo Alto Networks’s motion to stay pending the outcome of the PTAB proceedings (at which point five of the IPRs had been instituted) and denied its motion to dismiss without prejudice to refile after the PTAB stay.

In that same decision, Judge Young also denied an unusual motion in which Centripetal sought to disqualify Palo Alto Networks’s law firm, Ropes & Gray, based on its role in a potential financing deal between Centripetal and Silver Point Finance (SPF)—described by the defendants, per the court, as providing funds to pay for insurance on a large judgment on appeal, apparently the one in the Cisco case. Ropes & Gray had been retained by SPF (not Centripetal) to represent it, and during the relevant period of time, attorneys from the firm participated in a teleconference that allegedly touched on details of Centripetal’s litigation (though the firm asserts that its attorneys only asked questions to confirm their understanding about prior litigation), and allegedly had access to confidential information, under an NDA, through a “data room” set up by the plaintiff (to which the firm responded that they never actually used their access apart from testing its functionality).

District Judge Roderick C. Young rejected Centripetal’s argument in support of disqualification that it had an implied attorney-client relationship with Ropes & Gray, based on which the plaintiff had argued that numerous ethical violations had occurred. Rather, the court countered that the NDA made it clear that Centripetal had had its own counsel, based on which it could not have had a “reasonable belief that Ropes & Gray was acting as its attorney”. Judge Young also found that Centriptetal had “misconstrue[d] the nature of the NDA in an attempt to make that matter substantially related” (since ethical rules bar an attorney who represents a client in one matter from then representing another client in a matter “substantially related” to the first one) “and to stretch the bounds of ‘common interest’” by arguing that the “common interest” was the patents at issue. The court determined instead that the NDA did not reflect patent litigation, but rather a financing deal. In addition, the court found that Centripetal had misconstrued the purpose of the transaction as whole by characterizing it as focused on “patent protection”, whereas its true purpose was “to provide liquidity and security to Plaintiff in the face of uncertainty, as its judgment from the prior litigation was under appeal”. As a result, the court held in part that Centripetal was not the firm’s “former client” for purposes of the relevant rules of professional conduct. The PTAB also rejected a motion to disqualify the firm from Palo Alto Networks’s IPRs, apparently on that same basis (though the full decision is under seal).

In May 2023, following a series of final written decisions in which the PTAB invalidated six of the challenged patents (the ‘028, ‘126, ‘413, ‘246, ‘906, and ‘899 patents; appeals of those decisions remain active), the court granted Centripetal’s motion to lift the stay. However, that same August, after the PTAB instituted trial in additional Palo Alto Networks IPRs challenging the ‘343 and ‘266 patents, both in their entirety, the plaintiff’s claims asserting those patents went back on ice after the court granted the parties’ joint motion to stay. This left just the ‘437, ‘380, ‘573, ‘903, and ‘797 patents in active litigation.

As the case moved closer to a scheduled January 22, 2024 trial, the parties then filed a series of motions on the merits. Palo Alto Networks, in part, brought a motion for judgment on the pleadings under Alice, this time targeting the ’903, ’380, ’573, and ’797 patents (with two of those in its prior motion, the ’126 and ’028 patents, having since been invalidated by the PTAB, and the ’246 patent newly stayed pending IPR); and a motion for summary judgment of no infringement for the remaining patents-in-suit that also sought a judgment of no invalidity of claim 8 from the ’437 patent for lack of an adequate written description, challenged pre- and post-suit willfulness, and sought a judgment that Centripetal may not recover damages for sales and use occurring outside the US. Centripetal, for its part, filed a wide-ranging motion for summary judgment of no invalidity under Sections 102, 103, and 112 (including, for the former two grounds, arguments related to IPR estoppel).

On January 2, 2024, District Judge Elizabeth W. Hanes (who had been assigned the case in August 2022) denied Palo Alto Networks’s summary judgment motion, finding disputes of material fact as to its claims of no infringement and invalidity, but reserved judgment on the ‘380 patent. At a hearing two days later, the court then denied the defendant’s Alice motion, converting the motion to a summary judgment motion as it pertained to the ‘980, ‘573, and ‘797 patents prior to denial. In a subsequent ruling, the court explained in a footnote that it denied that summary judgment motion because it “found genuine issues of material fact existed”. While Judge Hanes did not elaborate, this was apparently a reference to the second step of the Alice analysis, which contemplates whether the challenged claims contain an inventive concept sufficient to save the claims. That determination has a factual component, and under the Federal Circuit’s 2018 Berkheimer v. HP decision, courts must deny Alice summary judgment motions when material factual disputes underpinning that second step remain unresolved. On January 13, the court then circled back and granted summary judgment of no direct infringement of the ‘380 patent for Palo Alto Networks. Six days later, Judge Hanes denied the remaining claim from Centripetal’s summary judgment motion (seeking no invalidity of claim 8 of the ‘437 patent for lack of an adequate written description), the other claims having either been denied or mooted at the January 4 hearing.

Trial then began as scheduled on January 22; the parties subsequently filed motions for judgment as a matter of law on certain issues, including dueling claims as to the patent eligibility of the claims from the ‘980, ‘573, and ‘797 patents still at issue. On January 31, the trial’s eighth day, the jury returned a verdict finding that Palo Alto Networks had directly and literally infringed claim 8 of the ‘437 patent, claim 10 of the ‘903 patent, claims 1 and 9 of the ‘573 patent, and claims 1, 12, and 17 of the ‘797 patent; also finding induced infringement for claim 1 of the ‘573 patent and claim 1 of the ‘797 patent; as well as infringement under the doctrine of equivalents for claim 8 of the ‘437 patent. The jury awarded $37.875M in damages for each patent as a lump sum for the life of the patents. In addition, the jury found that this amount included sales outside the US, finding that for each patent, $33.709M in damages derived from US sales and $4.166M from sales to non-US customers. The jury further determined that Palo Alto Networks’s infringement had not been willful. However, the jury also found that the defendant had not shown that a person having ordinary skill in the art as of the relevant 2015 date would have found the tried claims from the ‘903, ‘573, and ‘797 patent were “well-understood, routine, and conventional”—a finding that suggests the patents may survive the second step of the Alice analysis, and would thus be found not ineligible on that basis.

As noted above, this outcome stands in contrast to that of Centripetal’s case against Cisco following multiple rulings adverse to the plaintiff last year. In June, the Federal Circuit overturned a $2.7B judgment, ruling that Eastern District of Virginia District Judge Henry C. Morgan, Jr. should have recused himself due to conflicts involving his wife’s ownership of stock in the defendant. That case also ended up before Judge Hanes due to Judge Morgan’s death. On December 11, she additionally reversed Judge Morgan’s judgment of infringement, holding that Centripetal had failed to establish that Cisco’s accused networking and cybersecurity products meet a set of key claim limitations.

Centripetal has since filed a motion, on January 8, seeking additional and amended findings and an amended judgment, or a new trial in the alternative. The plaintiff argues that the unusual circumstances of this case—“a highly technical patent lawsuit in which years of proceedings and thousands of pages of evidence and briefing were compiled and submitted before a different judge—made for a perfect storm”, under which Judge Hanes allegedly made errors of both fact and law with respect to her noninfringement ruling. In particular, Centripetal argues that it would have sought to supplement the record as allowed under Federal Rule of Civil Procedure 63 (governing the replacement of a judge) if it had known that Judge Hanes would engage in further claim construction, a development it describes as unprecedented: “[N]ever before had a Rule 63 judge engaged in further claim construction that altered the settled understanding of the constructions reached by the initial presiding judge”. Briefing on that motion is currently underway, with Cisco’s brief in response now due on February 21 following an extension.

For more on the rulings leading up to Judge Hanes’s noninfringement ruling, see “Court Vacates Cisco Infringement Ruling After $2.7B Judgment Fell Due to Prior Judge’s Conflicts” (December 2023).