Cisco Told to Pay $23.5M Over Hacker-Security Patents

(Bloomberg) -- Cisco the biggest maker of networking equipment, was ordered by a jury to pay more than $23.5 million to a nonprofit research center for infringing network-surveillance patents designed to identify hacking attacks on computer systems.

Jurors in federal court in Wilmington, Delaware, concluded last week that San Jose, California-based Cisco used technology owned by SRI International, the former research arm of Stanford University, without permission. The panel rejected Cisco’s arguments that it didn’t infringe or that the two at-issue patents weren’t valid.

Officials of Menlo Park, California-based SRI sought more than $50 million in damages for Cisco’s unauthorized use of the patented technology, which allows computers to automatically detect and record suspicious activity on networks.

Cisco officials were disappointed with the jury’s finding that the networking company’s products infringed SRI’s patented technology, Robyn Blum, a company spokeswoman, said in an e-mailed statement.

Appeal Grounds

“Cisco’s technology was independently developed by highly-regarded industry innovators, and we see several grounds for appeal that will be pursued,” she said.

The case focused on whether sensors created by Cisco to detect suspicious computer traffic incorporated SRI’s patented technology without its permission. Companies such as Home Depot and TransUnion, a provider of consumer-credit reports, use Cisco’s surveillance system, according to court testimony.

SRI’s lawyer told jurors in closing arguments Wednesday that Cisco’s system for tracking computer-network intrusions wrongfully incorporated SRI’s technology and the company encouraged its customers’ unauthorized use of SRI’s invention.

“Cisco instructs, guides and encourages its customers’ infringement,” Frank Scherkenbach, a lawyer for the research center, told the panel. SRI developed things such as the computer mouse and SIRI, a personal-assistance program on Apple’s IPhones.

Company Arguments

Cisco’s attorney countered that SRI failed to prove the networking company infringed on its technology and didn’t deserve a damages award. SRI contends it deserves damages in the form of reasonable royalties for Cisco’s use of its inventions without permission.

“This is not even a close case” of infringement, Steven Cherny, Cisco’s lawyer, said in closing arguments.

The case is SRI International v. Cisco Systems Inc., 1:13-cv-01534, U.S. District Court, District of Delaware (Wilmington).