Santa Clara, CA-based networking equipment developer Arista Networks (NYSE:ANET) was recently successful in its attempts to overturn the validity of a patent held by San Jose, CA-based tech multinational Cisco Systems (NASDAQ:CSCO). The recent ruling of the Patent Trial and Appeal Board (PTAB) clears the way for Arista to overturn a ruling of the U.S. International Trade Commission (ITC), which has prevented Arista from importing and selling networking equipment in the U.S. due to patent infringement violations.
The recently invalidated Cisco patent was one of two patents asserted by that firm which led the ITC to institute a Section 337 patent infringement investigation into Arista’s business activities, specifically the sale of network switches having functionalities which were specific to network performance, security and/or management. On December 9th, 2016, an administrative law judge (ALJ) at the ITC issued an initial determination finding that Arista’s importation and sale of such networking devices infringed upon the following patents:
- U.S. Patent No. 6377577, titled Access Control List Processing in Hardware. It claimed a method of maintaining a set of access control patterns in at least one associative memory in a way that minimizes the processing of such control patterns, resulting in improved data packet routing speeds.
- U.S. Patent No. 7224668, titled Control Plane Security and Traffic Flow Management. It disclosed an internetworking device with a control plane port entity providing access to a plurality of control plane processes in a way that provides adequate control plane protection against a denial-of-service (DoS) cyber attack.
On May 5th, the ITC issued a final determination of Section 337 violations by Arista along with a limited exclusion order and cease-and-desist order both entered against that firm. Those orders were entered to prevent the sale of Arista products including those having components for access control list filtering. The final determination indicates that the ITC has set bonding of 5 percent of the entered value of the covered products during the period of review.
The post-grant validity challenges available through PTAB, however, will undoubtedly help Arista in its attempt to turn the tide of the ITC investigation in their favor. About a week before PTAB declared that the ‘668 patent was invalid, PTAB also invalidated important claims of the ‘577 patent. As a result, Cisco is left without any valid claims remaining which it had originally asserted in its Section 337 patent infringement complaint. “Arista welcomes the successful invalidation of all relevant claims of both the ‘577 and ‘668 patents in the [PTAB],” said Marc Taxay, senior VP and general counsel for Arista, in a prepared statement following PTAB’s decisions. “We will now seek complete suspension of the [ITC’s] remedial orders for the entire 945 investigation.”
The ITC action between Cisco and Arista is simply one branch of the ongoing legal battle between the two parties over patented networking technologies. Last December saw a volley of seemingly conflicting decisions coming out of the ITC as well as the U.S. District Court for the Northern District of California (N.D. Cal.). At the same time that the ITC ALJ had reached an initial determination in favor of Cisco in the Section 337 investigation, a federal jury in N.D. Cal. rejected a $355 million award that Arista would have had to pay Cisco in a copyright infringement case; in that case, Cisco alleged that Arista copied commands verbatim from Cisco’s command-line interface as well as material from Cisco’s user manuals.
The PTAB invalidations have been creating a friendlier business climate for Arista. An analyst note from Wells Fargo following the invalidation of the first Cisco patent led to a 2 percent bump in the price of Arista shares during that day of trading. In early June, investment banking firm Oppenheimer reiterated a “buy” rating on Arista stock. Arista’s most recent earnings report, which came out in early May, indicated that sales in the first quarter of 2017 increased by 39 percent compared to the same period last year; Arista also posted a 7 cents beat on analysts’ forecasts on earnings per share.