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Case 1:04-cv-00876-GMS

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE TELCORDIA TECHNOLOGIES, INC., Plaintiff/Counterclaim Defendant, v. CISCO SYSTEMS, INC., Defendant/Counterclaim Plaintiff. ) ) ) ) ) ) ) ) )

C.A. No. 04-876 (GMS)

DEFENDANT'S CITATION OF SUBSEQUENT AUTHORITY IN SUPPORT OF ITS MOTION FOR A NEW TRIAL Pursuant to D.Del. LR 7.1.2 (b), defendant Cisco Systems, Inc. ("Cisco") wishes to bring to the Court's attention the Federal Circuit's recent, unanimous en banc Opinion in In re Seagate Tech., LLC, 2007 U.S. App. LEXIS 19768, Miscellaneous Docket No. 830 (Fed. Cir. Aug. 20, 2007) (Ex. A). Seagate reflects a sea change in willfulness law and, notably, validates the key arguments Cisco made in support of its motion for a new trial on the issue of willful infringement. In Seagate, the Federal Circuit "abandon[ed]" the previous standard for establishing willful infringement that was centered around an accused infringer's "affirmative duty of due care" to avoid infringement.1 See Seagate, 2007 U.S. App. LEXIS 19768, at *22 (citations omitted). As the Federal Circuit noted, the previous willfulness standard was "more akin to negligence," but the "standard civil usage of `willful' includes reckless behavior." Id. (citations omitted). The Federal Circuit thus held that willful infringement would henceforth

1

Significantly, the willfulness instruction in this case specifically stated that Cisco was under an "affirmative duty to use due care," see D.I. 343 at 18, and thus expressly included the now-abrogated "due care" standard.

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"require[] at least a showing of objective recklessness." Id. (emphasis added). The Federal Circuit elaborated on the new "objective recklessness" standard as follows: "[T]he civil law generally calls a person reckless who acts . . . in the face of an unjustifiably high risk of harm that is either known or so obvious that it should be known." Accordingly, to establish willful infringement, a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent. The state of mind of the accused infringer is not relevant to this objective inquiry. If this threshold objective standard is satisfied, the patentee must also demonstrate that this objectivelydefined risk (determined by the record developed in the infringement proceeding) was either known or so obvious that it should have been known to the accused infringer. Id. at *22-*23 (emphasis supplied, citations omitted).2 Most relevant for present purposes, Seagate substantiates the key point that Cisco made in its new trial motion: when the jury was instructed to consider four factors directed to egregiousness, Cisco's size, and Telcordia's allegations of litigation misconduct in deciding willfulness, it was erroneously led to consider issues that are irrelevant to that analysis. See D.I. 374. Holding that the heart of the willfulness inquiry is whether there was an "objectively high likelihood that [the accused infringer's] actions constituted infringement of a valid patent," Seagate confirms that it is inappropriate for the jury to use the Read analysis (intended for the Court to use when deciding whether to enhance damages) when deciding willfulness analysis.3 Indeed, Read factors directed to egregiousness, such as the "duration of

2

The trial record confirms that Cisco was anything but "objectively reckless" in its prelitigation and litigation conduct. See, e.g., D.I. 391 [Cisco's Answering Brief Opposing Telcordia's Motion to Enhance Damages]. As in Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp., 383 F.3d 1337 (Fed. Cir. 2004), Seagate cited Read--without any discussion or analysis--in recounting its previous willfulness jurisprudence. See Seagate, 2007 U.S. App. LEXIS 19768, at 2

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defendant's misconduct" (Read factor 6), shed no light on whether there was an objectively high likelihood of infringement of a valid patent. The same thing can of course be said for the corporate size of the accused infringer (Read factor 4). Furthermore, given that the Seagate willfulness standard is "objective," it is now especially clear that such individualized traits have little significance when it comes to willfulness. Precisely the same arguments apply to the consideration of defendant's "behavior as a party to the litigation" (Read factor 3) when deciding willfulness. The Federal Circuit even held in Seagate that under "ordinary circumstances, willfulness will depend on an infringer's prelitigation conduct," id. at *29 (emphasis added), leaving no doubt that alleged litigation misconduct should generally be excluded from the willfulness calculus. Thus, the Federal Circuit's opinion in Seagate is fundamentally aligned with the arguments Cisco presented in its motion for a new trial. Because the erroneous willfulness instruction based on the Read factors was compounded by an express instruction on the nowabrogated "affirmative duty of care" and Telcordia's exploitative trial presentation, it simply cannot be said that it is "highly probable" that the erroneous jury instruction "did not affect the outcome of the case." See Hill v. Reederei F. Laeisz G.M.B.H., 435 F.3d 404, 411 (3d Cir. 2006). For the reasons set forth in Cisco's briefs, which are resonated in Seagate, a new trial on willful infringement is warranted.

*15-*16. In so doing the Federal Circuit was perhaps suggesting, as it did in Knorr, that some Read factors will in the future remain relevant to the willfulness inquiry. For example, whether the accused "infringer deliberately copied the ideas or design of another" (Read factor 1) will surely remain part of the willfulness inquiry. The ultimate message of Seagate, however, is that the willfulness standard has fundamentally changed. Indeed, the Federal Circuit explicitly left to "future cases" the development of the new "objective recklessness" standard. See id. at *23. And, the Federal Circuit even instructed courts to consider a factor that is entirely absent from Read when deciding willfulness: "the standards of commerce." See id. at *23 n.5.

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MORRIS, NICHOLS, ARSHT & TUNNELL LLP /s/ Jack B. Blumenfeld (#1014) Jack B. Blumenfeld (#1014) Leslie A. Polizoti (#4299) 1201 North Market Street Wilmington, DE 19899-1347 (302) 658-9200 [email protected] Attorneys for Defendant Cisco Systems, Inc.

OF COUNSEL: Matthew D. Powers Edward R. Reines Jessica L. Davis Sonal N. Mehta Thomas B. King Derek C. Walter WEIL, GOTSHAL & MANGES LLP 201 Redwood Shores Parkway Redwood Shores, CA 94065 (650) 802-3000 August 31, 2007
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CERTIFICATE OF SERVICE I certify that on August 31, 2007 I electronically filed the foregoing with the Clerk of the Court using CM/ECF, which will send notification of such filing to Steven J. Balick and John G. Day. I further certify that I caused copies of the foregoing document to be served on August 31, 2007 upon the following in the manner indicated: BY HAND John G. Day ASHBY & GEDDES 500 Delaware Avenue, 8th Floor Wilmington, DE 19801 BY FEDERAL EXPRESS (on September 1, 2007) Don O. Burley FINNEGAN, HENDERSON, FARABOW, GARRETT & DUNNER 901 New York Avenue Washington, DC 20001

BY ELECTRONIC MAIL John Day ([email protected]) Steven J. Balick ([email protected]) John Williamson ([email protected]) York Faulkner ([email protected]) Don Burley ([email protected])

/s/ Jack B. Blumenfeld (#1014) MORRIS, NICHOLS, ARSHT & TUNNELL LLP 1201 North Market Street Wilmington, DE 19801 (302) 658-9200 [email protected]