CBP Finds Arista Product Redesign Successfully Avoids ITC 337 Scope

A Nov. 18 CBP ruling found that a redesign of network switches imported by Arista Networks fall outside of an International Trade Commission limited exclusion order (LEO). The CBP ruling (here) marks somewhat of a win for Arista, which is in litigation with Cisco Systems over patent infringement allegations (see 1606290005). The ITC began a formal Section 337 enforcement investigation in October after Cisco filed a complaint that Arista ignored the LEO (see 1610040029).

Based on CBP's highly technical review of the Arista switches and the patents at issue, the agency ruled that "the infringing functionality has been removed and that Arista has carried its burden to establish that the articles in question are not covered by the patents at issue and therefore do not, on this basis, fall within the scope of the LEO." The CBP decision "validates our good-faith efforts to address the ITC’s findings," said Marc Taxay, general counsel for Arista Networks, in an emailed statement. "We look forward to resuming the importation of our redesigned products.” Cisco didn't immediately comment. As a result of the ruling, "CBP has issued instructions to the U.S. ports to permit entry of the Company’s redesigned products for consumption and sale in the United States," Arista said in a filing with the Securities and Exchange Commission (here).

While the CBP ruling is helpful to Arista, the patent fight remains unresolved and there are several things that could mean a reversal of that ruling. Notably, the ITC isn't bound by the CBP decision in the enforcement proceeding, Arista said in the SEC filing. In fact, if the ITC's "formal enforcement proceeding results in findings of fact or conclusions of law that conflicts with this ruling letter or is contrary to this ruling in any other way, the ruling will be modified or revoked accordingly by operation of law and CBP will carry out the agency action mandated by that determination," CBP said. If necessary, CBP can also revoke or modify its ruling within 60 days without publication and request for comments in the Customs Bulletin.

Arista is also challenging the LEO at the U.S. Court of Appeals for the Federal Circuit. "Importantly for purposes of this ruling letter, the Federal Circuit appeal involves the Commission’s Final Determination" regarding the products imported before the redesign, CBP said. The questions about the ITC final determination are "separate and distinct from the administration of exclusion orders" by CBP and its authority "to determine whether an unadjudicated article may be entered," the agency said. This follows CBP's past position that an appeal to the Federal Circuit on an ITC decision doesn't "foreclose" CBP from issuing a ruling on products that weren't part of the ITC investigation, CBP said.