Arista to pay $400 million to Cisco to resolve court fight

August 6, 2018 11:58 AM EDT

A Cisco Systems sign is seen outside a Cisco health clinic at Cisco Systems in San Jose, California, U.S., March 22, 2018. REUTERS/Elijah Nouvelage

By Jan Wolfe

(Reuters) - Arista Networks Inc (NYSE: ANET) will pay $400 million to Cisco Systems Inc (NASDAQ: CSCO) to resolve a U.S. court fight between the two network equipment makers, Arista said in a regulatory filing on Monday, the day a jury trial in the dispute was scheduled to begin.

The settlement resolved U.S. lawsuits filed by Cisco alleging Arista copied its intellectual property.

The deal also called for Arista to drop a lawsuit alleging Cisco engaged in anticompetitive conduct to preserve its dominant share of the ethernet switch market. The jury trial in that case was to have started on Monday in San Jose, California.

The companies said in a joint statement that the settlement "demonstrates their commitment to the principles of IP protection."

Founded in 2004 by former Cisco engineers, Arista has emerged as a rival to Cisco in the multibillion-dollar market for ethernet switches used in data centers.

Cisco sued Arista in 2014, alleging it brazenly copied software that runs switching products and other technology protected by patents and copyrights. Arista has denied the allegations and accused Cisco of a smear campaign intended to stifle competition.

The U.S. International Trade Commission ruled in 2016 that Arista infringed three patents and recommended a limited ban on Arista’s products that infringe the patents.

Arista said that in an effort to comply with the ITC’s ruling it redesigned its technology to remove elements found to infringe Cisco's patents.

Arista scored a major victory of its own in 2016, when a U.S. jury said it owed no damages over Cisco’s claims of copyright infringement.

The settlement came shortly before a trial in a 2016 antitrust lawsuit filed by Arista. It alleged Cisco permitted rivals to use its interface technology and then later, after they were locked into using it, claimed copyright protection on it.

Cisco denied the allegations in court filings, saying it never encouraged Arista to adopt its technology and that it acted reasonably in suing for copyright infringement.

The companies said in the joint statement that "with limited exceptions, no new litigation will be brought over patents or copyrights related to existing products, for five years."

The settlement does not resolve Cisco's appeal of the 2016 verdict that Arista was not liable for damages under U.S. copyright law. A federal appeals court heard arguments relating to those claims in June and likely will issue a ruling later this year.

(Reporting by Jan Wolfe; Editing by Bill Berkrot and Bill Trott)

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