Commonwealth Scientific and Industrial Research Organisation v. Cisco Systems, Inc.

Commonwealth Scientific and Industrial Research Organisation (CSIRO) (plaintiff) secured a patent (the ‘069 patent) disclosing techniques to make wireless technology more reliable. The Institute of Electrical and Electronics Engineers (IEEE) released the 802.11 wireless standard, which used technology claimed in the ‘069 patent. Several individuals associated with CSIRO formed Radiata, Inc., to sell wireless chips. CSIRO and Radiata entered a technology license agreement under which Radiata paid royalties to CSIRO in exchange for use of the ‘069 patent. Radiata was acquired by Cisco Systems, Inc. (Cisco) (defendant), which effectively took Radiata’s place in the agreement with CSIRO. CSIRO later decided to license the ‘069 patent to other Wi-Fi companies. CSIRO developed a rate card to give to potential licensees. The rate card calculated royalties based on sales volume and days from offer to acceptance. The lowest royalties on the rate card were higher than the royalties that Cisco was paying under the technology license agreement. CSIRO and Cisco attempted to renegotiate royalties but failed to reach an agreement. CSIRO brought a patent-infringement suit against Cisco in federal district court. After a joint stipulation that Cisco would not contest patent validity or infringement, the only issue in dispute was damages. The district court adopted its own methodology for calculating damages, focusing on the licensing negotiations held by the parties. Cisco appealed to the United States Court of Appeals for the Federal Circuit, arguing in favor of a rule that would make the smallest salable patent-practicing unit—a microchip—the beginning point for calculating damages. Cisco also argued that the court had failed to consider the extent to which the ‘069 patent was essential to the IEEE’s wireless standard.