PTAB Judge Who Owns Cisco Stock Withdraws from IPR Following Centripetal Claims of Bias

This article was updated on Friday at 4:39pm to add a statement from Centripetal.

Following a Motion for Recusal and Vacatur filed on December 30 by Centripetal Networks, Inc., a Patent Trial and Appeal Board (PTAB) judge has now withdrawn from an inter partes review (IPR) proceeding in a stated effort to “reduce the number of issues and simplify the briefing.”

Centripetal filed the December 30 Motion in an IPR brought against it in November 2021 by Palo Alto Networks, which Cisco Systems, Inc. successfully petitioned to join. The Motion argued that Administrative Patent Judge (APJ) Brian McNamara created at least the appearance of actual bias in failing to provide “notice, divestiture, or any apparent attempt to recuse” himself from proceedings involving Cisco despite owning Cisco stock and being “paid a significant amount of money (apparently a share of the profits) from one of Cisco’s lobbyist law firms,” according to the Motion.

In the Withdrawal filed yesterday, McNamara claimed that Centripetal’s allegations were “without merit” and that the Motion was filed “without having sought the requisite authorization.” McNamara said that the financial disclosure information cited by Centripetal has been public for 10 years and reviewed and approved each year by the Office of Government Ethics (OGE). “OGE requires recusal from any matter where the financial disclosure indicates an interest exceeding $15,000,” McNamara said in his Withdrawal brief. “That is not the case here.”

He added that his retirement payments from Foley & Lardner, which Centripetal said has done lobbying work for Cisco, “are not contingent on any specific matter and the firm does not provide retirees its current list of clients, which, like any large law firm, changes from day to day.”

It ‘Cannot Be Correct’

Centripetal’s Motion for Vacatur and Recusal argued that McNamara’s “direct financial conflicts violate Centripetal’s rights and undermine the integrity of the Board, and the public’s confidence in the adjudicatory process.” The Motion added that the U.S. Court of Appeals for the Federal Circuit recently vacated Centripetal’s $2.75 billion+ award against Cisco because Judge Henry C. Morgan, Jr. of the United States District Court for the Eastern District of Virginia was disqualified from hearing the case after becoming aware of his wife’s ownership of $4,687.99 in Cisco stock. Centripetal explained in its Motion:

“It simply cannot be correct that an Article III judge’s wife’s holding of Cisco stock can nullify his validity determination while an administrative judge can knowingly hold the same Cisco stock and decide a collateral attack on that very judgment.”

The amount of Cisco stock held by McNamara between 2015 and 2020 was between $1,001 and $15,000, according to Centripetal. During that time he “knowingly decided numerous IPRs involving Centripetal and Cisco while owning Cisco stock.” This includes having sat on “every single panel deciding the 14 petitions Cisco filed in 2018, and personally authoring several institution and final written decisions, the Motion noted.

The amounts earned from Foley & Lardner ranged between $30,000 and $60,000, and Foley “still featured APJ McNamara on its website until June of 2022.” Furthermore, Foley “recently listed Cisco as ‘its most lucrative contract.’”

Stats Show Appearance of Bias

The Centripetal Motion also cited institution rates for McNamara that suggest bias. According to the Motion, McNamara sat on the panels in each of the 14 IPR cases that Cisco filed in 2018 against Centripetal’s patents; the Board instituted trial in nine of those IPRs, “resulting in an institution rate of 64.2%.”

While that institution rate is approximately consistent with the Board’s overall institution rate in the same timeframe, Centripetal argued that, of the 18 IPR Petitions filed following “Centripetal’s historic judgment against Cisco,” McNamara was empaneled on eight, of which seven were instituted, “resulting in an 87.5% institution rate.” But of the 10 cases decided without McNamara, only two were instituted, for an institution rate of 20%.

“The discrepancy between the post-judgment institution rates for panels with and without APJ McNamara—those decided after the extent of Cisco’s liability was established— raises at least an appearance of actual bias,” said the Centripetal Motion.

According to McNamara’s Withdrawal, a substitute APJ will be appointed to replace him in the IPR relating to Patent No. 9,917,856.

In a statement sent to IPWatchdog on Friday, a Centripetal spokesperson said the following of McNamara’s decision to witdraw:

“Centripetal feels very strongly about the merits of our recent filing. We are aware that Administrative Judge Brian J. McNamara has withdrawn from the panel effective immediately and will not participate further in the proceeding. This is an important first step and we look forward to the successful resolution of our filing. The PTO should apply the same standard established by the Federal Circuit regarding financial interests. The entire panel should be recused and the decision to institute this IPR petition should be vacated.”

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