Cisco’s Arista Lawsuits Sets Up Nasty Patent, Copyright Battles

Networking giant Cisco (CSCO) filed two lawsuits last Friday against rival Arista Networks (ANET), claiming in documents submitted to U.S. District Court for the Northern District of California that its patents have been infringed and its copyrights stolen.

Trouble is, it’s not that clear cut.

Cisco charged that Arista, helmed by Jayshree Ullal, the former Cisco data center switching business senior vice president, has pilfered for its own use 12 “discrete and important” features of Cisco’s switches protected by 14 U.S. patents and helped itself to copy from Cisco’s copyrighted user manuals in its own documentation, according to Mark Chandler, Cisco executive vice president, general counsel and secretary.

“The heart of our action regards Arista’s deliberate inclusion in its products of 12 discrete and important Cisco features covered by 14 different U.S. patents,” wrote Chandler in a blog post.

“All of these features are being used by Cisco currently and in products we ship to our customers,” Chandler said. “None of the implementations are incorporated in industry standards. They were patented by individuals who worked for Cisco and are now at Arista, or who at Cisco worked with executives who are now at Arista. These Cisco-created features and implementations are incorporated by Arista in their entirety into Arista’s products.”

Still, what makes Cisco’s motivation questionable is the Santa Clara, CA-based Arista’s rapid growth of late, raising some $226 million in an IPO last June driven by the promise of cloud technology’s future in the data center and specifically software-defined networking (SDN), areas where Cisco has struggled to gain footing.

Cisco filed the lawsuits only two days after the closing of the 180-day post IPO period in which Arista insiders are forbidden from selling shares. For Q3 2014, Arista recorded $155.5 million in sales for a year-over-year 53 percent increase and a 13 percent sequential bump. The company is expecting Q4 revenue as high as $168 million.

Since Cisco filed the suits Arista’s stock has taken a beating, sliding 18 percent on mid-day Monday, December 8 trading but recovering somewhat by the session’s close.

In the immediate aftermath of the complaints, Arista didn’t have much to say other than Ullal’s tepid response: “I’m disappointed at Cisco’s tactics,” she said. “It’s not the Cisco I knew.”

But in a subsequent blog post, Dan Scheinman, an Arista independent board member since 2011 who previously served as Cisco general counsel from 1997 – 2001, wrote, “Arista’s EOS was developed from the ground up as a next generation network operating system for the cloud based upon the pioneering technologies invented by Arista, far from the ugly messaging pursued by Cisco on Friday.”

Invoking the default argument used when a newer company gets sued by a legacy outfit, Scheinman then wrote, “Arista is winning the software battle in the cloud, so Cisco has chosen to do what others did to it previously and is attempting to use the legal system to cover for its lack of innovation in software.”

What’s at the heart of Arista’s retort that Cisco’s just bitter? Simply put, Arista’s beaten it to some key accounts lately, most prominently Microsoft (MSFT), which now accounts for some 10 percent of its business. Will others follow?

A Cisco spokesperson, in rebutting Scheinman’s statements, said, “Arista’s argument is a red herring. It’s what they want the world to focus on and ignores the most significant issues of patent violation.”

Seemingly trying to make the point that Cisco isn’t suing merely to blunt new technology from a more nimble competitor, Chandler wrote, “In the thirteen years I’ve been General Counsel of Cisco, I can count on one hand the number of times we’ve initiated suit against a competitor, supplier or customer. It’s therefore only after thoughtful and serious consideration that we are today filing two lawsuits to stop Arista’s repeated and pervasive copying of key inventions in Cisco products.”

Still, this fight has the makings of a family feud as much as it does a legal battle.