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Cisco Testimony On Consumer Protection at Senate Committee

November 7, 2013 at 10:03 am PST

Today, before the United States Senate Consumer Protection Subcommittee, Cisco SVP and General Counsel Mark Chandler had the opportunity to talk about a new and troubling kind of scam dressed up with language such “patent infringement” and “innovation.” As he shared with the Subcommittee, the perpetrators of this scam are sending out thousands of threat letters to small businesses and consumers, and file lawsuits in the hope of a big payday, not based on the merits of the case, but on the fears of victims who just want to make a problem go away.

These victims — mom and pop stores, hospitals, pharmacies, car dealers, — aren’t manufacturers of products, they’re simply users, like you and me.

Chandler’s full testimony can be read on the U.S. Senate Commerce Committee website here.

His oral testimony as offered to the committee is in full below:

Madam Chairman, Ranking Member Heller, members of the Subcommittee,

My name’s Mark Chandler, and I’m Senior Vice President and General Counsel of Cisco.

Today I will describe our experience with a new kind of scam based on a formula that’s as old as the hills, but dressed up with the language of “patent infringement” and “innovation”.

The perpetrators send out thousands of threat letters to small businesses and consumers, and file lawsuits in the hope of a big payday, not based on the merits of the case, but on the fears of victims who just want to make a problem go away.

These victims — mom and pop stores, hospitals, pharmacies, car dealers, — aren’t manufacturers of products, they’re simply users, like you and me.

I’m involved as General Counsel of Cisco because I want to defend my customers. But we need your help in bringing a little sunshine to this dark corner of the patent system.

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Why Apple-Samsung Proves that the Patent System Can Work

Like many in the tech industry, I closely followed the recent Apple-Samsung litigation and believe that the case will have meaningful implications for years to come.  What I find most interesting is not the jury’s decision – which could have gone either way for purposes of this commentary – but the underlying premise of this case, which is exactly the type of issue our patent system was designed to handle. I can even picture Thomas Jefferson, our nation’s first Commissioner of Patents, sitting in his study at Monticello, reading about the case on his iPhone and texting a note to Judge Koh congratulating her for her conduct of the case.

This case involved two companies with competing products, and each believed they had intellectual property that should exclude the other from participating within their marketplace. More importantly however, at least some of the patents being litigated were essential to the products’ design. In other words, they were inherently the reason that consumers would want to buy those specific products. This important concept – that true innovation must be tied to consumer preference – played out in a court of law, in front of a jury, and in a way that will have great significance for how the marketplace treats companies that innovate.  Unfortunately, this is a far cry from a majority of patent litigation we see in our system today.

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Innovation Engine: Cisco Ranked #1 for R&D Quality by Patent Board

When I demonstrated Cisco’s newest network management technologies in my keynote address at Cisco Live last week, there were gasps and applause from the audience as they saw the difference between our  next generation technology and the technology our competitors are touting as ‘good enough’.

The technologies I demonstrated (Cisco Prime, UCS Manager and the Cisco Virtual Switching System) are the great results of the more than $5 billion that Cisco invests in R&D on an annual basis. Cisco spends more on R&D than all of our networking industry peers combined and, for the record, we invest five times more (on a percentage of revenue basis) than the next largest networking vendor.

However, what’s more important than the size of our R&D budget is its impact and I’m proud to say that the Patent Board today recognized Cisco as the #1 innovator among 141 companies in its annual Telecom and Communications industry scorecard. Cisco ranked #1 for both the number of patents granted, as well as for the overall strength of the company’s patent portfolio, which is a combined measure of quality and quantity.

That’s a tremendous accomplishment, and I am very proud of our fantastically talented engineers. Credit is particularly due to Cisco Senior Vice President of Research and Advanced Development, Joel Bion, for his tremendous leadership of our R&D efforts. As I often say, great engineers make innovation look easy.

To our customers the message is also clear: whether it’s the 500 patents earned by the recently refreshed Catalyst 6500 (the world’s most popular switching platform) or those awarded in the creation of our ground-breaking Cisco Cius enterprise collaboration tablet, world-beating innovation is something you can always expect from Cisco.

You can find a comprehensive analysis of the Patent Board’s latest Telecom and Communications industry scorecard in the Wall Street Journal (password required).

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Cisco ranked #1 Innovator by The Patent Board

Cisco continues to hold the top spot as “#1 Innovator in the Telecom & Communications industry” in The Patent Board scorecard released this week.

According to a release issued by The Patent Board, “Cisco holds a comfortable lead over the industry, and had a patent count increase of 10%, well above the 8.3% industry average increase.”

On their website, The Patent Board says the scorecard “ranks corporate innovation using a series of metrics to determine patent quality, technological strength and breadth of impact.”

Cisco’s Managing Director of Intellectual Property Dan Lang says:

“We’re very proud of Cisco’s reputation as an innovator.  Cisco continues to invest heavily in research and development, and the new statistics from The Patent Board indicate the breadth and quality of our innovation.”

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