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Arista Banned From Importing Products – Cisco

Mitch Wagner
8/23/2016

The US Trade Representative has upheld a ban on importing Arista products, effective Tuesday, according to a report on Cisco's blog. The ban is a result of ongoing intellectual property litigation brought by Cisco against Arista.

The trade representative upheld an International Trade Commission ban on importing all Arista Networks Inc. products, writes Mark Chandler, Cisco Systems Inc. (Nasdaq: CSCO) senior vice president and general counsel, in a post on the Cisco blog Monday.

"This is a great victory for the principle that the intentional use of others' intellectual property should not be allowed," Chandler says.

The order "blocks the marketing, sale or distribution of all inventory of imported infringing products. It also means that Arista is unable to honor the service and warranty contracts for any infringing products sold after the ITC's ruling date (June 23, 2016). Arista's customers must now bear that risk," Chandler says.

Cisco's blog post paints a bleak picture for Arista, which imports its products from overseas. Its primary contract manufacturers are Jabil Circuit and Foxconn, though it also works with Flextronics International on logistics and final configuration in North America, according to Arista's most recent 10-K filing with the SEC. Without the ability to import products, Arista is left with the inventory of its US warehouses -- after that, it will have nothing to sell unless it can overturn or work around the import ban. However, Arista said in its most recent earnings call that it is bringing US manufacturing online. 

Arista responded Tuesday in an email statement from its general counsel: "We believe that we are in full compliance with the [International Trade Commission's] remedial orders. As we've previously announced, all of our products now feature our new version of EOS, which contains design-arounds that we believe address the ITC's findings. Our primary focus remains the continued supply of non-infringing products to our customers."

Arista said in June -- and reiterated on its most recent earnings call, earlier this month -- that it's ready with "design-arounds" to address the ITC's findings, following the commission's final determination that Arista violated three Cisco patents in Arista's Ethernet switches. (See Arista Ready With 'Design-Arounds' Following Import Ban Recommendation and Cloud Drives Arista to Billion-Dollar Run Rate.)


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Arista said it had a new version of the EOS software that it believes is non-infringing. But Cisco said Monday that Arista had not yet received regulatory approvals for that software.

Tuesday morning, Arista announced new telemetry capabilities for realtime network monitoring in EOS. (See Arista Launches Real-Time Telemetry for Cloud Networks.)

Cisco filed its initial complaint against Arista in December, 2014.

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Joe Stanganelli
Joe Stanganelli
8/25/2016 | 9:27:24 PM
Re: Usual or Unusual?
You're welcome, Alison!

Incidentally, my notes indicate (although this data may be slightly dated) that the USITC gets reversed just more than 1/3 of the time when its decision appealed (meaning, of course, conversely, that just shy of 2/3 of the time, its decision is upheld on appeal).  Note that this statistic is for ALL USITC decisions -- not just cases where a ban was imposed.

Also worth noting: The Harvard Journal of Law and Technology found, a few years ago, that ITC decisions that favored respondents were "significantly more likely to survive" on appeal than did ITC decisions that favored complainants.

I have a wealth of other information and insight on this subject if you're ever interested, Alison.  ;)
Alison_ Diana
Alison_ Diana
8/25/2016 | 11:30:16 AM
Re: Usual or Unusual?
See, I knew the Hive Mind would have the answer! Thanks, Joe!
Joe Stanganelli
Joe Stanganelli
8/24/2016 | 5:14:21 PM
Re: Usual or Unusual?
@Alison: Actually, there was a ban ordered by the ITC as a result of Apple v. Samsung -- only to be overturned by the Obama Administration.

To my knowledge, such an overturning of such an import ban had only happened once before -- during the Reagan Administration.

As for how common it is, I used to know/have some of those figures... I'll see what I can dig up in my files.
Alison_ Diana
Alison_ Diana
8/24/2016 | 3:00:12 PM
Usual or Unusual?
Is this the usual way the government responds? I don't know and that's why I ask. I'm thinking primarily of Apple v. Samsung, which of course did not have the same ban. Anyone know how common an out-and-out ban on importation is?
Kelsey Ziser
Kelsey Ziser
8/24/2016 | 10:52:01 AM
Re: Updated
@Mitch I wonder if they'll be able to switch over to US manufacturing in time and at the right price point...does sound like a bleak picture.
Mitch Wagner
Mitch Wagner
8/23/2016 | 4:30:30 PM
Updated
Updated about an hour after publication to include a comment from Arista. 
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