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Investor Contact

Charles Yager
Director, Product and
Investor Advocacy
cyager@arista.com 

Chuck Elliott
Director, Business and
Investor Development
chuck@arista.com

Arista Legal Update

Update on 944 and 945 ITC Investigation
April 8, 2017

In light of our commitment to provide full transparency to our readers, we would like to update you on recent developments in the U.S. International Trade Commission (“ITC”) 944 and 945 Investigations, including a 177 letter issued by Customs and Border Protection (“CBP”) on the evening of April 7, 2017 and the ITC enforcement hearing on April 5, 2017.

Quick Recap

Cisco’s efforts at CBP and ITC are merely parts of a multi-prong legal attack—started in December 2014— that spans two separate District Court cases and two ITC Investigations. Taken together, Cisco has alleged these actions that Arista’s products infringed 14 patents—many asserted against widely implemented networking features—and copyrights asserted against a limited number of elements in Arista’s Command Line Interface (“CLI”). Contrary to Cisco’s distorted messaging, Arista has obtained significant victories in these proceedings, receiving favorable decisions on 9 of the 14 asserted patents and, on December 14, 2016, receiving a favorable jury verdict against Cisco’s copyright claims.

Cisco’s motives for this legal assault were made public last December during the copyright trial. The testimony of current and former Cisco executives, including Executive Chairman John Chambers, revealed that Cisco believed Arista was outperforming Cisco in “price, product, roadmap and vision” and, in the words of one customer, Cisco was “on target to become irrelevant” in the majority of data centers. The testimony also indicated that these Cisco failures came despite its six-year campaign to “beat Arista,” including efforts to build Arista killer products, to disrupt us in customer accounts and to stop our 2014 IPO.

Despite Cisco’s overheated rhetoric and promises to shut Arista down, we are still standing tall thanks to the wide-ranging support we have received from the larger community that sees this assault for what it is.

ITC 944 Investigation Update

On August 22, 2016, the Presidential review period for the ITC’s Final Determination in the 944 case ended. Of six patents at issue, the ITC found infringement of three: the ’145 and ’592 patents, which Cisco asserted against PVLANs, and the ’537 patent. Consequently, the ITC issued a limited exclusion order and a cease and desist order that prohibited Arista from importing into the United States (or selling after importation) products that infringed these patents. These orders did not prohibit Arista from either importing or selling non-infringing products.

Contrary to Cisco’s public statements, the ’537 patent does not broadly cover our implementation of a centralized database or the multi-process state-sharing architecture in our Extensible Operating System (EOS). Instead, the ’537 patent is directed to a specific request-based process to register “managing subsystems” to “externally manage” router configuration data of a centralized database—a process that Cisco does not even claim to use in its own Ethernet switch operating systems (IOS or NX-OS).

In our effort to fully comply with the ITC’s remedial orders, Arista undertook a significant redesign of EOS, which included the complete removal of the PVLAN feature as well as the EOS agent-to-SysDB write mount requests Cisco accused of infringing the ’537 patent. These product modifications removed central elements of the technologies found the have infringed the patent claims. To complete this redesign, Arista committed substantial financial and engineering resources over many months.

CBP process

In tandem with these activities, Arista sought a ruling from U.S. Customs and Border Protection (“CBP”) that Arista’s redesigned products no longer infringe the ’145, ’592, and ’537 patents, which would allow Arista to import these products into the United States. The CBP process is widely used, and the ITC’s Final Determination specifically reaffirmed that it was proper for Arista to use it to obtain import clearance for its redesigned products.

After many months of discussions and extensive review by CBP, we were pleased to receive CBP’s approval of our redesigned products on November 18, 2016. As a result, CBP reopened the borders and allowed us to resume importing our products into the United States. As we explained at that time, however, pursuant to applicable regulations, CBP could modify or revoke its ruling if CBP found it to be in error, not in accordance with its current views, or in conflict with any future ITC findings. Given Cisco’s transparent motives, the stakes involved, and its recent loss of the CLI copyright case in the District Court in December, it is not surprising that Cisco aggressively campaigned to revoke CBP’s decision. Indeed, Cisco filed its formal request for revocation (without Arista’s knowledge) the day Arista obtained a favorable jury verdict in the copyright case.

In response to Cisco’s request, CBP decided to conduct an inter partes proceeding to reconsider our redesign, in which both Arista and Cisco were given the opportunity to fully present their arguments. On January 13, 2017, CBP also revoked its November 18, 2016 ruling until it could put a new ruling in place based on the outcome of the inter partes process.

On April 7, 2017, following extensive briefing by both parties and a hearing during which both parties presented their arguments, CBP once again ruled that Arista’s redesigned products do not infringe the ’592, ’145, or ’537 patents, and that Arista may resume importing its redesigned products into the United States. Arista appreciates the hard work and dedication of CBP in conducting this fair process and in reaffirming the initial ruling, which validates the company’s good faith efforts to comply with the ITC’s remedial orders.

Enforcement Action

In addition to CBP’s review of whether Arista’s redesigned products infringe the ‘537 patent, Cisco also brought an ITC enforcement action against Arista on August 26, 2016 (three days after the end of the Presidential review period in the original investigation) asserting that Arista is violating the cease and desist order in the 944 Investigation. This investigation only involves the ‘537 patent; Cisco no longer alleges that Arista infringes the ’145 or ’592 patents.

A hearing in this matter was held on April 5, 2017 involving both parties as well as the ITC staff attorney representing the Office of Unfair Importation Investigations (“OUII”). OUII serves as a neutral third party representing the interests of the public in ITC investigations. OUII takes the position that Arista’s redesigned products do not infringe the ’537 patent, that Arista has not violated the ITC’s cease and desist order and that Arista acted in good faith in doing so.

The ALJ’s initial determination is expected on June 20, 2017, and the ITC’s final determination is expected on September 20, 2017. It is noteworthy that the ITC will independently evaluate the redesigned products and is not bound by CBP’s ruling. CBP is required to follow the ITC’s final determination.

ITC 945 Investigation

On December 9, 2016, the ALJ issued her initial determination in the 945 Investigation finding that Arista’s products infringed two of the six patents asserted in that case—the ’668 and ’577 patents. The ITC Commission is currently reviewing the initial determination and is expected to issue its final determination on May 1, 2017. If the ITC finds a violation, that finding will be subject to a 60-day Presidential review period.

Arista has filed petitions with the Patent and Trial Appeal Board (“PTAB”) for inter partes review of the validity of the ’668 and ’577 patents. The PTAB has instituted both petitions, and the parties participated in a hearing before the PTAB in March 2017. The PTAB is expected to issue its final written decisions in June 2017.

The true motive of Cisco’s litigation campaign is made apparent by its assertion of the ’853 and ’577 patents. Cisco asserts these patents against the use of ternary content addressable memories (TCAMs) to implement access control lists (ACLs). This nearly-20-year-old technology is implemented the same way in virtually every network switch on the market and is built into the third-party merchant silicon used by Arista, Cisco, and several others. Despite claiming that it is engaged in a virtuous effort to protect its intellectual property, Cisco has never asserted these patents against any other network switch vendor, nor sought to stop the supply of this allegedly infringing technology by third-party silicon suppliers. And given that it applied for this patent in 1998, and the patent expires in June 2018, Cisco has had ample years to do so.

Arista’s Commitment to Our Customers

While Cisco is a dominant and powerful company with deep pockets and enormous political clout and lobbying capabilities, it has also attempted to portray itself as an innocent, injured party, while misstating the facts and generating FUD with misleading spin and blog posts.

For the first time in decades the industry has recognized in Arista a true alternative to Cisco; a better and compelling replacement for the technology that has dominated Ethernet switching based on momentum instead of innovation. Arista’s contributions to the Cloud and SDN are welcome and refreshing improvements in this stagnant marketplace.

Since the beginning of Cisco’s legal attack in 2014, we have explained that we are committed to the continued lawful supply of products to our customers, and to servicing them without disruption. We remain firm in that commitment.

We cannot thank you enough for your unwavering support.

Sincerely,

The Arista Leadership Team