On July 26, 2016, the International Trade Commission (“the Commission”) issued the public version of its opinion in Certain Network Devices (Inv. No. 337-TA-944).

By way of background, this investigation is based on a December 19, 2014 complaint filed by Cisco Systems, Inc. (“Cisco”) alleging that the respondent, Arista Networks, Inc. (“Arista”), unlawfully imports into the U.S., sells for importation, sells within the U.S. after importation, and/or uses within the U.S. after importation certain networking equipment and components and software thereof that infringe one or more claims of U.S. Patent Nos. 7,162,537 (the ’537 patent), 8,356,296 (later terminated from the investigation by Cisco), 7,290,164 (the ’164 patent), 7,340,597 (the ’597 patent), 6,741,592 (the ’592 patent), and 7,200,145 (the ’145 patent) (collectively, the “asserted patents”). See our December 29, 2014 and February 5, 2015 posts for more details on the complaint and notice of investigation, respectively.

On February 2, 2016, ALJ Shaw issued a notice of the final initial determination (“ID”) finding a violation of Section 337 as to certain claims of the ’537 patent, ’592 patent, and ’145 patent. No Section 337 violation was found with respect to the asserted claims in the ’597 patent and ’164 patent. See our February 4, 2016 post for more details on this ID. Accordingly, ALJ Shaw recommended that “the Commission should (1) issue a limited exclusion order covering accused products found to infringe the asserted patents, (2) issue a cease and desist order against Arista, and (3) require a zero percent importation bond (i.e., no bond) during the Presidential review period.”

The Commission reviewed the ID’s findings of: (1) infringement of the ’537, ’597, ’592, and ’145 patents; (2) the patentability of the claimed subject matter of the ’597, ’592, and ’145 patents under 35 U.S.C. § 101; (3 & 4) certain claim construction determinations; (5) equitable estoppel; (6) laches; (7) the technical prong of domestic industry for the ’537, ’597, ’592, and ’145 patents; (8) the economic prong of domestic industry; and (9) importation. The Commission also reviewed whether the ALJ’s findings on the ’164 patent had any bearing on the aforementioned issues under review. The Commission affirmed the ID’s findings of a Section 337 violation for the ’537, ’592, and ’145 patents and no violation for the ’597 and ’164 patents.

The Commission’s Analysis of the ’537 Patent

The accused ’537 patent products were Arista’s switches which run Arista’s scalable network operating system (EOS), whose center is a centralized database that was the focus of the claim construction dispute for this patent. Specifically, the parties disputed what was stored in the database – Arista argued that the database stored user supplied configuration commands while Cisco argued that the router configuration data were stored. Based on the intrinsic record – the specification and prosecution history, the Commission agreed with Cisco that “the claims require storing of router configuration data, not user-supplied commands.” The Commission further held that the basis of the violation for the ’537 patents was indirect infringement based on the direct infringement by certain accused Arista products. Evidence for this finding came from an Arista internal presentation, Arista’s expert witness testimony, and figures in the patent.

The ID had also found that Arista changed its importation practices shortly after Cisco filed the complaint in this investigation. This action, the Commission found, “evinces knowledge and an intent to infringe under the relevant standards for contributory and induced infringement.” In doing so, the Commission rejected Arista’s argument that the Commission should apply the Federal Rule of Evidence 407 for the inadmissibility of evidence of subsequent measures. The Commission also held that Arista had waived its good faith belief argument by presenting only a single sentence concerning a good faith belief in non-infringement in its pre-hearing brief. Additionally, the Commission found, based on the totality of the evidence in the record, that Arista had willfully blinded itself to the ’537 patent amongst others.

The ID had also found Arista liable for contributory infringement, which the Commission affirmed, rejecting Arista’s argument that while there are no non-infringing uses of its switches, the components had to be directed to an “inventive contribution” of the patent to be a material part of the invention for purposes of Section 271(c).

The ID additionally had found Arista liable for actively inducing third parties to infringe the ’537 patent on the basis of presentations, documents, and manuals that showed Arista “encourages, aids, facilitates, and otherwise causes others to use EOS.” The Commission also concluded that Arista was liable for induced infringement but on the basis of Arista’s sale and promotion of its accused products.

Arista raised a defense of laches which is a novel issue at the ITC after the Federal Circuit’s en banc decision in SCA Hygiene Products v. First Quality Baby Prod., 807 F.3d 1311 (Fed. Cir. 2015), which held that laches may be considered in injunctive relief cases. The ID found that Cisco did not become aware of Arista’s infringement until May 2014 and thus a delay in filing until December was not unreasonable. The Commission declined to address whether laches is available as a defense at the ITC, but regardless, Arista had shown insufficient evidence to prove laches. Based on the evidence at hand, the Commission adopted the ID’s findings on this issue and found that there was no unreasonable delay in this case.

Although no party petitioned for review of the ID’s findings concerning domestic industry, the Commission reviewed it nevertheless because it had reviewed the claim construction. On review, it affirmed the ID’s findings.

The Commission’s Analysis of the ’592 and ’145 Patents

The ID found that the ’592 and ’145 patents cover Arista’s VLAN products, and the Commission affirmed the ALJ’s infringement determination based on both parties’ expert witnesses’ testimonies as well as product descriptions in Arista’s EOS User Manual. The Commission found that direct infringement of these patents had “occurred by the fully assembled and operational products as used by Arista’s customers and such infringement supports a finding of indirect infringement by Arista.” Applying the test for determining whether there are substantial non-infringing uses set forth in Ricoh Co. Ltd v. Quanta Computer Inc., 550 F.3d 1325 (Fed. Cir. 2008), the Commission held that bundling non-infringing components and turning off infringing features do not create substantial non-infringing uses. Thus, the Commission affirmed the ID’s findings that Arista had induced infringement of the asserted claims. Furthermore, it found that the domestic industry products asserted by these patents practice the asserted claims and thus satisfy the technical prong of domestic industry.

Additionally, the Commission rejected Arista’s argument that the ’592 and ’145 patents cover unpatentable abstract ideas. Applying Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S.Ct. 2347 (2014), the Commission found that these patents are directed to a specific device, namely “a switch or a router comprising a VLAN—a definite structure.” “In addition, the claims are not directed to an algorithm, or merely computerize an approach that was implemented manually in the prior art, but to a device that solves a problem that existed in the networking field in the prior art.” Furthermore, the Commission held that these patents contain “an inventive concept” that amounted to “significantly more than a patent upon the abstract idea itself.” The Commission then concluded that “the claims require a special purpose device with defined structures that transform the networking device into a special purpose machine.”

Finally, the Commission rejected Arista’s equitable defenses of equitable estoppel and laches. For equitable estoppel, the Commission found that Arista had failed to sustain its burden to show that “(1) Cisco, through misleading conduct, led Arista to reasonably believe that Cisco did not intend to enforce its patents against Arista; and (2) Arista relied on that conduct.” Turning then to laches, the Commission found that Cisco’s delay of less than two years did not result in a presumption of laches.

The Commission’s Analysis of the ’597 Patent and the ’164 Patent

Finding that the intrinsic record does not support the construction proposed by Arista, the ID had adopted Cisco’s construction for the claims at issue in the ’597 patent. The Commission, on review, modified the ID’s construction, which it found rendered a claim term ambiguous. Regardless, the Commission also found that the accused products did not infringe the asserted claims of the ’597 patent. Despite the new claim construction, the Commission affirmed the ID’s findings on the technical prong of domestic industry, finding that the domestic industry products asserted for the ’597 patent practice its claims. Finally, the Commission declined to review the ID’s findings that assignor estoppel applies to Arista. Thus, Arista was precluded from challenging the validity of the ’597 patent such as on § 101 grounds.

Cisco did not petition for review of the ID’s findings on the ’164 patent and thus the Commission affirmed these findings.

The Commission’s Analysis of the Economic Prong of Domestic Industry

The Commission reviewed the ID’s findings on the economic prong of domestic industry sua sponte. Reviewing the elements required by Section 337(a)(2) and (3), the Commission affirmed the ID’s finding that Cisco had established this prong by showing substantial investment in the exploitation of the patents under Section 337(a)(3)(C).

Remedy, Bonding and Public Interest

The Commission adopted the ALJ’s recommended remedies of a limited exclusion order, a cease and desist order, and no bond during the Presidential review period.