Cisco Systems Inc. (CSCO) today announced that it is suing Arista Networks Inc. (ANET), the data-center switching company that was founded by Cisco alumni and recently went public.
Cisco is accusing Arista of infringing on an array of Cisco patents and copyrights associated with its networking equipment. Cisco says it is also suing Arista for intellectual property violations, including copying copyrighted material from user manuals and command lines in management interfaces.
The patent lawsuit, filed in United States District Court, Norther California, was posted here, though Arista says it has not yet received the complaint. The copyright lawsuit, also filed in the Northern California District, was posted here.
This is no ordinary lawsuit, it is a blood feud with a long history of relationships between executives at both companies. Many Arista executives are former Cisco employees.
Jayshree Ullal, an Arista CEO and a Cofounder, was a senior vice president at Cisco responsible for high-level technology direction at the networking giant. Another Arista co-founder, Andy Bechtolsheim, is an engineer and entrepreneur best known for designing the first Sun Microsystems Inc. workstations. He is also a former Cisco employee, where he served for number of years as president of a Cisco business unit after selling Cisco a company he founded, Granite Systems, in the early 1990s.
Now, the only certainty here is that the legal system will run its course and lawyers will make a lot of money out of this. But the real question is, is it the right move for Cisco? Will Cisco be rewarded? It’s a big leap with huge negative public relations and marketing implications for both companies. Setting the final judgement aside, Cisco must think it has a good case as it hasn’t typically launched big patent suits in the past.
Cisco’s General Counsel, Mark Chandler, wrote that Cisco has not been an overly litigious company, though dozens of companies have been founded by former Cisco personnel. “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,” wrote Chander.
Cisco cited very specific patents in its lawsuit, including the following:
Cisco might think it has more to gain than to lose. Arista has had lots of momentum in the data-center switching market — it announced year-over-year revenue gains of 53% in its last quarterly earnings — and Cisco is battling it tooth-and-nail for the fast-growing data-center market segment for networking gear. Even if Cisco does not win the case, it’s going to be a distraction and a marketing headache for Arista.
There’s also the issue of the stock price. Arista shares dropped 7% today, trading down to $68, well off its recent high of $94. Arista went public in June of this year and shares shot up to $58 in its first day of trading.
So, for the first 24 hours at least, Cisco’s strategy appears to have made a signficant impact.
Arista offered limited comment, saying it needed time to reveiw the lawsuit.
“I am disappointed at Cisco’s tactics,” Arista’s Ullal said in a public statement. “It’s not the Cisco I knew.”
This is not the only lawsuit involving former co-workers that Arista is involved with. David Cheriton, one of Arista’s largest shareholders and a founder of the company, sued Arista after leaving in 2013. That left him in the unusual position of making more than $900M off the IPO of a company he was suing.
Stay tuned. This will be interesting.