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Arista co-founder may have switch maker by its jewels

Jim Duffy | April 23, 2014
The future of Arista Networks, the hot data center switching company that just filed to go public, could rest in the outcome of a lawsuit filed against it by one of its founders.

Arista says Optumsoft is a failing company trying to capitalize on the financial success of another just as it is about to raise additional capital through a public offering.

"This case involves an all too common scenario: a successful company about to go public (Arista) sued by a failing company seeking a Hail Mary to rescue it (Optumsoft)," the countersuit states. "The failing company fabricates a claim to own the successful company's intellectual property, in the hope of disrupting the IPO and securing some payoff in the process.

"(U)nder Optumsoft's theory, there are effectively no limits to what Optumsoft can claim to own," the countersuit states. "No company would ever license a development tool to write software if use of the tool would transfer to the toolmaker ownership of the company's software. But that is the absurd deal Optumsoft now claims Arista struck.

"Arista brings this Cross-Complaint to defeat Optumsoft's fabricated claims and to obtain from the Court a declaration of what Optumsoft has itself acknowledged again and again that Arista owns the EOS software that it created."

But should Arista lose this case, the results could be catastrophic for the high flying data center switching company which doubled earnings every year between 2010 and 2013, and almost doubled revenue between 2012 and 2013. If it were determined that Optumsoft owned components of EOS, Arista would be required to transfer ownership of those components and any related intellectual property to Optumsoft, the company stated in its S-1.

Optumsoft could then make them available to Arista competitors, stripping Arista of its differentiation in a hotly competitive market where to date it's been very successful.

Alternatively, a big payout to Optumsoft to resolve the dispute could impact Arista's consecutive profitability profile and revenue stream, observers note, making the company's IPO a potentially unappealing investment.

 

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