Market Overview

Cisco Request to Dismiss VirnetX Lawsuit Denied By Texas Court


A Texas court denied Cisco's (NASDAQ: CSCO) motion to dismiss a patent lawsuit filed by VirnetX Holdings (NYSE: VHC) today. In addition, the court granted a request from VirnetX to join SAIC, Inc. (NYSE: SAI) as a plaintiff in the case. Benzinga spoke with a Wall Street analyst who provided some color on the decision.

The analyst said that Cisco's motion to dismiss was denied on the basis that the Court found VirnetX's retains substantial rights to 3 networking patents, which were originally transferred to it from SAIC (original inventor). The patents are related to secure communications over Internet Protocol, such as VPN technology. In 2005, 2006, and 2008 SAIC transferred their legal rights to these patents to VirnetX via a Patent License Assignment Agreement (PLAA). In arguing its case, VirnetX used similar Microsoft (NASDAQ: MSFT) litigation as a precedent.

The analyst told Benzinga that "Microsoft sets a strong precedence in this patent infringing case. It is highly likely that Cisco will choose to settle before this goes to trial, at which point it could lose and may have to settle post-trial, but at a much higher price. It's hard to say whether Cisco will try to argue it is using their own IP versus VirnetX's (chances there may be slightly better than in the case of Microsoft since these are largely core networking patents). At any rate, most of these patent infringement cases do ultimately settle and I don't think this will hurt Cisco in any material way."

Posted-In: News Legal


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