Protecting Innovation: Final Ruling Confirms Unlawful Infringement

Today the International Trade Commission issued a Final Determination that Arista’s products infringe three Cisco patents. Two of the patents cover Cisco’s private VLAN network security technology which Arista included in its switches. The third covers Cisco’s proprietary core SysDB technology misappropriated by Arista, which Arista’s CEO has ironically referred to as Arista’s “secret sauce.” The case, known as “the ‘944 investigation,” is the first of two ITC investigations into Arista’s unlawful and unauthorized copying and use of Cisco’s proprietary, non-standardized switching technology. The Commission’s ruling affirms Administrative Law Judge Shaw’s 294-page Initial Determination, issued in early February. The Commission’s own full decision will be issued shortly. Arista insisted that large portions of Judge Shaw’s opinion be kept secret. Cisco is prepared to allow all but six lines of that opinion, which incorporate customer information, to be made public. We call on Arista to be honest with its shareholders and customers about the scope and intentionality of its misappropriation by allowing Judge Shaw’s opinion, and the ITC’s pending decision, to be made public.

This marks the end of Arista’s ability to mislead its shareholders and customers about the infringing nature of their products. The ITC remedies include an exclusion order, which would ban all Arista switches and their components from importation into the U.S., and a cease and desist blocking them from building infringing products in the US that are comprised of any imported components.

Arista has as much as acknowledged the infringement of the Private VLAN patents, announcing that they will discontinue the private VLAN feature “for now,” belying their claim that they had developed workarounds. The remedies also include a cease and desist order prohibiting the marketing, sale, and distribution of infringing Arista switches in the U.S. These orders are scheduled to go into effect at the end of the Presidential Review Period on August 23, 2016. Arista made much of the fact that it had challenged the validity of Cisco’s patents. Arista did not challenge the validity of the Private VLAN patents, however, and the Patent and Trademark Office declined to institute review proceedings on six claims in the SysDB patent which the ITC found infringed.

We previously outlined Arista’s options after Judge Shaw issued his Initial Determination. Now that the Commission’s final ruling found Arista’s behavior unlawful, there are fewer options available. All of those options are ethically questionable and carry significantly more risk for customers, partners and vendors. Further, they will only serve as a brief, temporary delay, given that Arista’s copying has not been limited to just the patents in the ‘944 case. An additional ITC action is due for Initial Determination in late August and a District Court copyright infringement case set for trial in November.

Arista’s options are:

Attempt to evade the ITC orders by hiring a contract manufacturer to build in the U.S.:The ITC’s exclusion order extends to components used to make infringing Arista switches and the cease and desist order prohibits the promotion, sale and distribution of infringing switches. Encouraging contract manufacturers to circumvent these federal rulings by assembling infringing Arista switches using imported components will expose these manufacturers to claims of willful patent infringement in federal court. Such actions not only would violate the ITC orders, but the federal court has the authority to enjoin local manufacturing of infringing products.

Arista has acknowledged that this delay tactic will not remedy Arista’s infringing conduct: Arista’s CFO recently said that “Putting it in the U.S., in terms of litigation, does give us a little bit more flexibility on timing,” acknowledging “the strategy is still very much [that] we need to have design-around, so we need to get the design-arounds approved.”

The right thing for Arista to do is to stop using Cisco’s patented technology, not to find ways to ship products to U.S. customers that they know infringe Cisco patents. Just last August, the Federal Circuit Court of Appeals ruled in the Suprema case that programming or configuring an imported product to perform in an infringing manner is a violation of an ITC order, and subject to injunction and significant penalties.

Appeal to the Federal Circuit for a stay of the exclusion order: Stays of ITC exclusion orders during an appeal process are extremely rare. In the unlikely event a stay could be obtained, this delay tactic would continue to cause uncertainty for customers who were sold infringing products. It also increases the risk for those customers who are planning their future networking needs.

Attempt to evade transparent review of the claimed design around: Arista has had ample opportunity to present its promised redesign to the ITC, but has declined to do so. Arista later refused Cisco’s attempts to discuss the promised redesigned product. Now, faced with a final determination of infringement, Arista apparently intends to ask Customs and Border Protection to review its redesign in secret and without Cisco’s participation. We believe that any such review should be transparent and should continue to be conducted in a fair and open process in the ITC, where Arista has the burden of proof.

We welcome fair competition from Arista. Fair competition requires technical redesigns that the ITC determines no longer infringe. That, however, has not happened.

Arista’s copying has not been limited to the patents in the ‘944 case. In August, we expect an initial ruling regarding a different group of patents in the second ITC investigation (the ‘945 Investigation). In that case, the ITC Staff Attorney has recommended findings of infringement of two additional Cisco patents. And in November, Arista faces trial on charges of patent and copyright infringement involving its use of Cisco’s proprietary interface and related materials.

We thank the Commission, Judge Shaw and the ITC staff for their diligence in this lengthy investigation. Cisco’s goal has always been to protect our innovation, and stop Arista from using our patented technology. If Arista wants to continue competing in this market, the ITC has ruled that they will need to do so without the use of stolen Cisco IP.