Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Networking equipment start-up’s request to add antitrust counterclaims denied, (Feb 19, 2016)

By Linda O’Brien, J.D., LL.M.

In an action by networking equipment giant Cisco Systems, Inc. against its upstart rival, Santa Clara-based Arista Networks, Inc., for copyright and patent infringement, the federal district court in San Jose, California has denied Arista leave to amend its answer to add antitrust counterclaims due to undelay and prejudice (Cisco Systems, Inc. v. Arista Networks, Inc., February 18, 2016, Freeman, B.).

Founded in 1984, San Jose-based Cisco Systems is a world leader in networking products and services. Arista is a rapidly-growing networking solutions company founded in 2004 by former Cisco employees.

In December 2014, Cisco filed suit accusing Arista of infringing two patents and misappropriating Cisco’s copyrighted software code, taxonomy, structure, and documentation relating to Cisco’s operating system. A case management conference in May 2015 set a case schedule in which the last day to amend the pleadings without leave of court was September 7, 2015. Before the court was Arista’s motion for leave to amend its answer to assert counterclaims against Cisco under the Sherman Act and California’s Unfair Competition Law.

Arista argued that it had good cause to amend its answer, since it did not become aware of certain documents cited in its proposed counterclaims until November 2015. According to Arista, Cisco began producing hundreds of thousands of documents in July 2015. Although Arista prompted reviewed those documents and diligently consulted antitrust counsel, its investigation did not confirm the antitrust violations until after the September 7, 2015 deadline.

The court first determined that Arista produced sufficient evidence of its diligence in pursuing its antitrust counterclaims. Although Arista may have been aware of the underlying basis for its counterclaims, it did not discover the relevant documents cited in the counterclaims until after the deadline to amend the pleadings had passed. Once Arista found the specific documents, it promptly sought advice of antitrust counsel, investigated the counterclaims, and filed its motion.

However, allowing the amendment would cause significant prejudice to Cisco. According to the court, the trial date was previously continued after Arista requested additional time to conduct discovery; Arista’s counterclaims would drastically add to the complexity of the case; and the trial date would have to be delayed for a year and a half. Finally, since Arista indicated a willingness to file a separate action asserting its antitrust claims, the separate action would minimize any prejudice and still allow Arista to pursue those claims, the court concluded.

The case is No. 5:14-cv-05344-BLF.

Attorneys: Sean Sang-Chul Pak (Quinn Emanuel Urquhart & Sullivan, LLP) for Cisco Systems Inc. Bradley T. Tennis (Wilson Sonsini Goodrich and Rosati) and Juanita R. Brooks (Fish & Richardson PC) for Arista Networks, Inc.

Companies: Cisco Systems Inc.; Arista Networks, Inc.

Cases: Antitrust CaliforniaNews