Error and “Harmless Error” In Huge Infringement Award

Dennis Crouch writes about an odd IP case, Centripetal Networks, Inc. v. Cisco Sys., Inc., that resulted in what he calls a “wild” decision by the Federal Circuit. Centripetal sued Cisco, alleging infringement of cybersecurity related patents. District court Judge Henry C. Morgan held a bench trial and found five patents valid and infringed. He awarded damages and a running royalty that takes the total above $3 billion, the largest patent-damage award in U.S. history. Two months after the trial ended, while Judge Morgan was writing-up his decision, he became aware that his wife owned 100 shares of Cisco stock valued at $4,687.99. He knew he should get her to sell the shares immediately, but he also knew that his decision would make the stock drop and it would appear that she sold on the basis of insider knowledge. Instead, the stock was placed in a blind trust, with instructions for the trustee to use his own judgment on when to sell the stock. The trust still held it when the Judge issued his final judgment. Centripetal announced that it had no problem with the judge’s ownership, but Cisco complained, because it had lost its pretrial motions and suspected that the case was going to be decided in Centripetal’s favor. Their complaint was clearly a ploy to escape judgment and seek a new, potentially more favorable judge, but on appeal the Federal Circuit did not consider the merits of the case. It vacated the entire trial, ruling that the Judge should have recused himself despite the fact that there was no indication that he was biased nor was there any legitimate question about his impartiality. The question was, did he make an error or a “harmless error.” The Federal Circuit rejected the argument of “harmless error.” The patentee has now petitioned the Supreme Court on the question of whether the statute demands judicial recusal.