Arista (ANET) vs. Cisco (CSCO): Who Wins Patent Infringement Case?

In a case filed in the California Northern District Court on December 5, 2014, Cisco Systems, Inc. (NASDAQ: CSCO) claimed Arista Networks, Inc. (NYSE: ANET) had infringed upon existing patents and copyrights. By April 2015, the case spanned 12 patents and numerous copyrights and included two District Court actions and two International Trade Commission (ITC) actions.

Dismissal of Some Claims

In July 2015, Federal Judge Beth Labson Freeman dismissed Cisco’s indirect infringement claims since the company was not seeking any damages. She stated that the bright line test for software—in this case, the software being Arista’s EOS+ operating system—has a blurry line when it comes to what is a new product and what is simply a new version of an old product. Arista had no comment on the dismissal, as patent infringement litigation was still proceeding.

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Arista’s Stocks Plummet

By September of this year, Arista’s stocks began to fall, plummeting 13 percent over the two days following the ITC’s conclusion that Arista was in fact infringing upon three of Cisco’s patents. However, by October 6, Arista’s stock was on the rise again. The turnaround came after the Patent Trial and Appeal board found that Arista was not infringing on two of the three claimed cases.

What Comes Next

The next trial is currently expected to take place in November. The ITC plans to release its findings in January 2016 and April 2016, and to make a final decision no later than August 2016.

During this process, an ITC Administration Law Judge will have to make a ruling, after which the full ITC commission will make their final recommendation. Although the staff’s recommendations aren’t binding in a court of law, the judges often use them to assist in making final decisions.

Despite the ITC’s plans to be done with the proceeding in less than a year, securities analyst Ryan Hutchinson isn’t so sure. He believes the case could take much longer and that late 2016 is the absolute earliest a final decision will be made. Until then, all the companies’ investors can do is watch and wait.

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