Cisco Systems Inc-v-Arista Networks, Inc

Filing 58

ORDER GRANTING 39 DEFENDANT'S PARTIAL MOTION TO DISMISS, WITH LEAVE TO AMEND. Signed by Judge Beth Labson Freeman on 7/9/2015. (blflc1, COURT STAFF) (Filed on 7/9/2015)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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CISCO SYSTEMS INC,

Case No. 14-cv-05344-BLF

Plaintiff,
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v.
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ARISTA NETWORKS, INC.,
Defendant.

ORDER GRANTING DEFENDANT'S
PARTIAL MOTION TO DISMISS,
WITH LEAVE TO AMEND
[Re: ECF 39]

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United States District Court
Northern District of California

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In this copyright and patent infringement suit, Defendant moves to dismiss two portions of

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Plaintiff’s First Amended Complaint (“FAC”): (1) allegations of pre-suit indirect patent

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infringement, and (2) allegations of post-Complaint willful patent infringement. The parties

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appeared for oral argument on the motion on July 2, 2015. For the reasons stated on the record

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and further articulated below, the Court GRANTS Defendant’s partial motion to dismiss, with

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leave to amend.

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As to allegations of pre-suit indirect patent infringement, Plaintiff concedes in its

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opposition that it is not seeking damages for pre-suit indirect infringement, only post-Complaint

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indirect infringement. See Opp. at 10 (“Cisco’s indirect infringement allegations are presently

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limited to infringement occurring after Arista received notice of Cisco’s patents by virtue of the

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original complaint in this case.”). As such, the Court GRANTS Defendant’s motion on this

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ground. The Court gives Plaintiff leave to amend to clarify that the damages it seeks for indirect

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infringement are based only on conduct occurring after the initial Complaint in this action was

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filed. See, e.g., In re Bill of Lading Transmission Processing Sys. Patent Litig., 681 F.3d 1323,

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1345 (Fed. Cir. 2012).

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Plaintiff’s FAC also alleges post-suit willful patent infringement. The original Complaint
in this action was filed on December 5, 2014, and was served on Defendant on December 9, 2014.

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Plaintiff’s original Complaint alleged that Arista’s Extensible Operating System (“EOS”)

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infringed upon two Cisco patents, the ’526 Patent and the ’886 Patent. See Compl., ECF 1 at ¶¶

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66-75. In the FAC, Plaintiff adds an allegation that on December 10, 2014, “Arista released a new

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version of EOS, dubbed “EOS+.” EOS/EOS+ retains the infringing features and functionality of

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EOS,” which Plaintiff contends give rise to a claim for willful infringement. See FAC, ECF 37 ¶

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58.

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Plaintiff argues in its briefing that the factual pleadings in the FAC, including its

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incorporation by reference of statements made by Arista in a press release touting EOS+ in

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footnote 12 of paragraph 58, make out a claim for willful infringement because they show
plausibly that Arista brought a new product to market despite having been put on notice of its

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United States District Court
Northern District of California

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infringing conduct by virtue of the filing and service of the original Complaint. See Opp. at 10

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(“Arista willingly chose to launch publicly what it described as a major new product offering after

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receiving notice of Cisco’s patent infringement claims from the filing of Cisco’s original

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complaint.”). Defendant argues in response that Plaintiff has not pled the existence of a new

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product, but instead infringement based on a new version of an existing product, and that the

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Federal Circuit’s ruling in In re Seagate Technology, LLC, 497 F.3d 1360 (Fed. Cir. 2007) and

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cases in this district interpreting Seagate preclude a willful infringement claim based upon such

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continuing conduct. See, e.g., LML Holdings, Inc. v. Pac. Coast Distrib. Inc., 2012 WL 1965878,

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at *5 (N.D. Cal. May 30, 2012) (“Circumstances where an infringer’s post-filing conduct was

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found to be willful involved some material change that could create an objectively high likelihood

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of infringing a valid patent . . . . Otherwise, the accused infringer must have pre-filing knowledge

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of the patents at issue before the patentee can accrue enhanced damages based on post-filing

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willful conduct.”) (emphasis added).

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The fact pattern in this action – the filing of a Complaint alleging infringement, and

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thereafter the filing of an FAC alleging willfulness due to Defendant’s release of a new infringing

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product – is something more than what was at issue in Seagate and its progeny. Relying on this,

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Plaintiff at oral argument encouraged the Court to adopt a three-prong “bright line” test to

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determine when a party could seek damages for willful infringement when there is conduct that
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goes beyond continuing to sell existing accused products while defending the suit. Plaintiff

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suggests the following elements: (1) that defendant engaged in conduct “in the world,” and not

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just merely defensive litigation conduct, (2) that the defendant brought a “new product” to market,

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and (3) that the plaintiff could have filed a separate complaint asserting damages based on this

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new conduct. See, e.g., Hearing Tr. at 11-15.1

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The Court defers consideration of Plaintiff’s proffered test because it is not necessary to

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adjudicate this motion. The Court finds that Plaintiff has failed to allege sufficient facts to meet

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its own “bright line” test and the complaint lacks sufficient factual allegations to distinguish this

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case from the holdings in Seagate, 497 F.3d 1360, LML Holdings, 2012 WL 1965878, and
Vasudevan Software v. TIBCO Software, Inc., 2012 WL 1831543 (N.D. Cal. May 18, 2012).

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United States District Court
Northern District of California

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Moreover, the Court shares Defendant’s expressed concern that such an exception would swallow

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the rule set forth in Seagate. Especially in regard to software products where updates and

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revisions are commonplace and frequent in a rapidly evolving market, one could expect that

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during the course of litigation most software products would have to be revised or die. An

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exception allowing excessive damages for post-complaint conduct might have the same effect

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sought to be avoided under Seagate. Upon amended pleadings, the Court would be willing to

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revisit this issue. At this stage, however, allegations summarizing Arista’s puffery in sales and

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marketing materials is not enough. Plaintiff must therefore plead that a defendant’s conduct did

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more than continue selling the alleged infringing product.
The Court therefore GRANTS Defendant’s partial motion to dismiss. Any second

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amended complaint must be filed no later than July 23, 2015.
IT IS SO ORDERED.

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Dated: July 9, 2015

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______________________________________
BETH LABSON FREEMAN
United States District Judge

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The Court observes that consideration of the new “bright line” test applied to software products
is made difficult by the seeming blurry line that separates a “new” product from a new “version”
of an old product, or just an update to address “bugs” in the current version of the accused product.
It is not, after all, a situation where Arista launched an entirely new item, such as a toaster that
contains the same allegedly infringing features as the accused product identified in the complaint.
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