ARISTA NETWORKS, INC. (NYSE:ANET) Files An 8-K Other EventsItem 8.01 Other Events
On July 20, 2017, Arista Networks, Inc. (“Arista”) announced that the International Trade Commission (“ITC”) has denied Arista’s motions to suspend the limited exclusion order and cease and desist order (the “ITC Orders”) issued in connection with Investigation No. 337-TA-945 (the “945 Investigation”).
Cisco Systems, Inc. (“Cisco”) initially filed a complaint in the 945 Investigation accusing Arista of infringing six patents (U.S. Patents 7,023,853; 7,061,875; 7,460,492; 8,051,211; 6,377,577; and 7,224,668). The Commission issued a Final Determination in the investigation on May 5, 2017, finding that Arista’s Ethernet switching products did not violate section 337 of the Tariff Act (“Section 337”) with respect to four of the six patents under investigation (the ’853, ’875, ’492 and ’211 patents) but did infringe certain claims of two patents (the ‘577 and ‘668 patents). Accordingly, the ITC issued a limited exclusion order and cease and desist order concerning Arista’s Ethernet switching products. During the 60-day Presidential review period, the ITC Orders permitted Arista to continue importing and selling products covered by the orders so long as Arista paid a 5% bond.
Following the completion of the Presidential review period, on July 3, 2017, the ITC Orders went into effect, barring Arista from importing and selling infringing covered products in the United States.
In separate proceedings in the Patent Trial and Appeal Board (“PTAB”), on May 25, 2017 and June 1, 2017, the PTAB issued final written decisions invalidating all claims of the ’577 and ’668 patents that Arista was found to infringe by the ITC. Accordingly, on May 30, 2017 and June 2, 2017, Arista filed emergency motions with the ITC seeking suspension of the ITC Orders pending completion of any appeals of the PTAB decisions. On June 12, 2017, Cisco filed a brief in response objecting to any suspension of the ITC Orders, while the staff attorney from the Office of Unfair Importation Investigations (“OUII”), a neutral third party representing the interests of the public in ITC investigations, also filed a brief in support of Arista’s requested suspension.
On July 20, 2017, the ITC denied Arista’s motion to suspend the ITC Orders pending completion of any appeals of the PTAB decisions. Arista respectfully disagrees with the ITC’s decision and intends to immediately file an appeal with the Court of Appeals for the U.S. Federal Circuit requesting a review of the ITC’s decision and a motion to stay, seeking suspension of the ITC’s orders.
Arista has been working on modifying its products to address the ITC Orders. Arista intends to release these modified products as soon as practicable and work with customers on their qualification and deployment. Arista will also seek appropriate regulatory approvals for these modified products.
Risk Factors:
In an effort to redesign its products, Arista may not be able to do so in a manner that does not continue to infringe the patents or that is acceptable to its customers. Arista may not be able to complete, and its customers may not be able to qualify, such redesigned products in a timely fashion, if at all, leading to an inability to ship products to customers. Arista’s redesign efforts could be extremely costly and time consuming as well as disruptive to its other development activities and distracting to management. Arista would also need to obtain ITC or Customs and Border Protection (“CBP”) approval to resume importation of such redesigned products into the United States. Arista may not be successful in its efforts to obtain such approvals in a timely matter, or at all. In addition, the service and support exception included in the ITC Orders may not extend to products that were purchased after May 4, 2017, and customers may be required to upgrade to new products to obtain service and support. Any failure by Arista to effectively redesign its products, obtain timely clearance from the ITC or CBP to import such redesigned products, or to address the ITC findings in a manner that complies with the ITC orders, may cause a disruption to its product shipments materially and adversely affecting its business, prospects, reputation, results of operations, and financial condition. In addition, if Arista’s importation and sale of such redesigned products is found to be a violation during an enforcement action, Arista could be subject to civil penalties up to the greater of $100,000 per day of violation or twice the value of the products sold or imported.
About ARISTA NETWORKS, INC. (NYSE:ANET)
Arista Networks, Inc. is a supplier of cloud networking solutions that address the needs of Internet companies, cloud service providers and next-generation data centers for enterprises. The Company’s cloud networking solutions consist of its Extensible Operating System (EOS), which is a set of network applications and its 10/25/40/50/100 Gigabit Ethernet switches. EOS is purpose-built to be programmable and modular. The programmability of EOS allows it to create a set of software applications that address the requirements of cloud networking, including workflow automation, network visibility and analytics, and allows it to integrate with a range of third-party applications for virtualization, management, automation, orchestration and network services. It offers a product line of data center 10/25/40/50/100 Gigabit Ethernet switches comprising its 7050X Series, 7060X Series, 7150 Series, 7260 Series, 7280 leaf switches, 7300X Series Spline switches and its 7500E Series spine switches.
