The federal court in Marshall, Texas ruled last week that Cisco must pay Commil USA LLC royalties of $63.7 million. This amount is likely to rise by a further $10-15 million after interest on five years worth of royalties is calculated. The high award was made after Commil USA succeeded in proving that Cisco infringed its patent directly and indirectly, and encouraged customers to make use of it.
In 2007, Commil USA sued Cisco for patent infringement. The trial began in May 2010. The court found that Cisco infringed Commil's patent, but awarded compensation of only $3.7 million.
In June 2010, Commil requested and was granted a retrial, because of inappropriate remarks by Cisco's counsel (among other things portraying the patent owner as a greedy Jew who wanted to fill his pockets with money and take it to Israel) and the low royalties awarded. Commil demanded $50 million.
Commil USA is a US company that bought the intellectual property of Israeli company Commil in 2000, and developed products that connected fixed-line networks to wireless networks in the home and the office, making it possible to manage network loads and provide mobile network without interruption. The products were developed on the basis of a patent owned by the company's founders.
In 2005, Commil Israel closed after $15 million had been invested in it by venture capital funds DFJ Tamir Fishman Ventures Ltd. (TASE: TFVC), Gemini Israel Funds, Formula Ventures, and Royal Philips Electronics NV (NYSE: PHG; Euronext: PHIA. The company had a few million dollars left, which then CEO Yuval Dovev returned to the investors. The current court award is four times the amount that was invested, which means that there could have been a good exit.
In 2007, Adv. Jonathan David bought Commil's intellectual property for a few hundred thousand dollars, after he found that the company's patents had been infringed by a number of large telecommunications network equipment companies, including Motorola Inc. (NYSE: MOT), Aruba Networks Inc. (Nasdaq: ARUN), and Cisco. Motorola and Aruba settled with Commil USA, but Cisco refused to compromise, and David sued the company in May 2007, a process that eventually led to the $63.7 million award.
David told "Globes" today, "After a tough war that lasted five years and cost millions of dollars, justice has prevailed. All along, Cisco denied wrongdoing and behave arrogantly. Nevertheless, the court found that the lawsuit was justified."
Commil's patent covers all forms of communications, but the company chose to develop Bluetooth applications, whereas the market went with Wi-Fi technology. A year ago, David presented figures to the court in Marshall showing that Cisco's slaes of products infringing Commil's patent amounted to $1.1 billion in the first quarter of 2010.
It must now be seen whether Cisco will appeal, ask for a new trial, or contact Commil USA to try to reach a compromise.
Published by Globes [online], Israel business news - www.globes-online.com - on April 11, 2011
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