Arista Networks' stock took it on the chin when Cisco slapped the company with patent infringement and copyright law suits last Friday, losing almost 20% of its value at one point as investors and others mulled the long term implications of the suits.
The short answer: this is going to take a long time and could get pretty ugly for Arista.
One of the suits accuses Arista of violating 14 Cisco patents, while the second is for extensive copying of Cisco's user manuals and multi-word CLI commands (see Cisco slaps Arista Networks with patent, copyright infringement suits).
Arista has been fairly mum on the suits, but did post a piece by board member Dan Scheinman, who formerly worked for Cisco, saying "Arista's EOS was developed from the ground up as a next generation network operating system for the cloud based upon the pioneering technologies invented by Arista" (see Arista fires back at Cisco's suits).
Scheinman ends his post posing the question, "Why now? The answer to that question speaks volumes about the real motivation going on here."
The conclusion we are apparently expected to reach is that Arista has unique technology and its growing success is a thorn in Cisco's side, hence the suits. Sales growth would support that notion. When Arista filed for its IPO last June it said sales in 2013 were $361 million, up more than 90% compared to 2012, and according to some estimates, the company will finish 2014 with sales leaping another 60% to $577 million (across that magic $500 million line that proves to be the limit for many network startups).
"Arista has good products and obviously a strong engineering staff," says Joel Snyder, a senior partner at tech consulting firm Opus One, and a longtime product reviewer for Network World. "People are starting to take note, and obviously they are making some noise that Cisco is noticing."
One large financial services company I spoke with this summer said they are installing Arista equipment to complement their largely Cisco network environment, adding anecdotal evidence that Arista is making inroads in critical accounts. Asked if this lawsuit will make them reconsider adding Arista equipment, the company said it will proceed as planned.
That's at least some good news. The bad news: Arista will have its hands full with these suits, says Charles Steenburg, an associate at Wolf Greenfield, an intellectual property law firm in Boston. While Arista might file a motion to dismiss the complaints, "in a case like this, dismissal is highly unlikely," he says.
While trials are the exception rather than the rule in patent infringement cases, especially in cases brought by patent trolls who are just after cash settlements, "cases involving competitors more often go to trial," Steenburg says.
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