Cisco cites judge's family stock holdings in bid to wipe out $2.7 bln award

(Reuters) - Cisco Systems Inc told a U.S. appeals court Monday that a $2.7 billion patent award against it should be thrown out because the presiding judge's wife owned stock in the company.

A three-judge panel of the U.S. Court of Appeals for the Federal Circuit seemed receptive to Cisco's argument that U.S. District Judge Henry Morgan should have recused himself from the case, though it did not signal how it would rule.

Centripetal Networks Inc sued Cisco in Virginia federal court in 2018 for infringing its cybersecurity patents. Morgan held a bench trial on the claims in May and June 2020.

Morgan told the parties that August that he had learned his wife owned 100 shares of Cisco stock. He ruled that October that he was not required to recuse himself because he was not aware of this during the trial, and he had already drafted the ruling and decided "virtually every issue" before he learned of it.

Morgan also said his wife had created a blind trust to divest the shares.

Three days later, Morgan ordered Cisco to pay Centripetal $1.9 billion for infringing the patents willfully, plus royalties that Cisco says increase the award to over $2.7 billion.

On appeal, Cisco told the Federal Circuit that Morgan should have disqualified himself from the case, and asked the appeals court to reopen it.

Centripetal's attorney Paul Andre of Kramer Levin Naftalis & Frankel told the court during a Monday oral argument that there were no allegations that Morgan was biased, and that the judge had gone "above and beyond" to follow ethical requirements.

"But he didn't divest," Circuit Judge Timothy Dyk said. "Assuming that putting it in a blind trust is not divestiture, well, he didn't divest -- the statute told him exactly what to do and he didn't do it."

Andre responded that Morgan did "what he thought was right by the spirit of the law," and said vacating his ruling would "have much more harm on how the judiciary is perceived" than letting it stand.

Cisco's attorney Mark Fleming of Wilmer Cutler Pickering Hale & Dorr also said divestment requires actually giving up ownership of the stock, citing U.S. government statements.

U.S. Circuit Judges Richard Taranto and Tiffany Cunningham were also on the panel.

The case is Centripetal Networks Inc v. Cisco Systems Inc, U.S. Court of Appeals for the Federal Circuit, No. 21-1888.

For Cisco: Mark Fleming of Wilmer Cutler Pickering Hale & Dorr

For Centripetal: Paul Andre of Kramer Levin Naftalis & Frankel

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