Arista Networks, Inc. v. Cisco Systems Inc.

MOTION for Summary Judgment

N.D. Cal.March 1, 2018

CISCO’S MOTION FOR SUMMARY JUDGMENT Case No. 5:16-cv-00923-BLF-SVK John M. Desmarais (admitted pro hac vice) jdesmarais@desmaraisllp.com Paul A. Bondor (admitted pro hac vice) pbondor@desmaraisllp.com Alan S. Kellman (admitted pro hac vice) akellman@desmaraisllp.com Andrew G. Heinz (admitted pro hac vice) aheinz@desmaraisllp.com Tamir Packin (SBN 317249) tpackin@desmaraisllp.com Jeffrey S. Seddon II (SBN 297502) jseddon@desmaraisllp.com Brian Leary (admitted pro hac vice) bleary@desmaraisllp.com William D. Findlay (admitted pro hac vice) wfindlay@desmaraisllp.com Carson Olsheski (admitted pro hac vice) colsheski@desmaraisllp.com DESMARAIS LLP 230 Park Avenue New York, NY 10169 Telephone: (212) 351-3400 Facsimile: (212) 351-3401 Sarah E. Piepmeier (SBN 227094) sarah.piepmeier@kirkland.com KIRKLAND & ELLIS LLP 555 California Street, 27th Floor San Francisco, CA 94104 Telephone: (415) 439-1400 Facsimile: (415) 439-1500 Attorneys for Defendant Cisco Systems, Inc. UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA, SAN JOSE DIVISION ARISTA NETWORKS, INC., Plaintiff, v. CISCO SYSTEMS, INC., Defendant. Case No. 5:16-cv-00923-BLF-SVK DEFENDANT CISCO SYSTEMS, INC.’S NOTICE OF MOTION AND MOTION FOR SUMMARY JUDGMENT Date: April 19, 2018 Time: 9:00 am Judge: Hon. Beth Labson Freeman Dept.: Courtroom 3 REDACTED VERSION OF DOCUMENT SOUGHT TO BE SEALED Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 1 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT ii Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION PLEASE TAKE NOTICE that on April 19, 2018, at 9:00 a.m., or at another time directed by the Court, before the Honorable Beth Labson Freeman in the United States District Court for the Northern District of California, Defendant Cisco Systems, Inc. (“Cisco”) will and hereby does respectfully move the Court for entry of summary judgment on all counts of the Amended Complaint filed by Arista Networks, Inc. (“Arista”). This Motion is based on this Notice of Motion and Motion, the Memorandum of Points and Authorities below, the Declaration of Jeffrey S. Seddon II filed herewith, and such other papers, evidence, and argument submitted to the Court in connection with the hearing on this motion. STATEMENT OF THE RELIEF SOUGHT Cisco seeks an Order from the Court entering summary judgment for Cisco on all counts and dismissing Arista’s Amended Complaint in its entirety. Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 2 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT iii Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENTS INTRODUCTION ...........................................................................................................................1 STATEMENT OF FACTS ..............................................................................................................2 I. Background Preceding Litigation. .......................................................................................2 II. Cisco Sues Arista For Patent Infringement And Copyright Infringement. ..........................2 III. Arista Files An Antitrust Claim In Response To Cisco’s Litigation. ..................................3 IV. Material Facts During The Relevant Conduct Period. .........................................................4 A. Arista Adjudged An Infringer By The ITC. .............................................................4 B. Cisco’s Statements About The CLI Litigation.........................................................4 C. No Direct Evidence Shows That The CLI Litigation Or Communications About That Litigation Caused Arista To Lose Sales. ..............................................5 D. Marketplace Competition Grew Throughout The CLI Lawsuit. .............................5 E. No Switch Suppliers Altered Their CLI Due To The CLI Lawsuit. ........................6 LEGAL STANDARDS ...................................................................................................................6 I. Summary Judgment. ............................................................................................................6 II. Requirements For Proving Monopolization Or Attempted Monopolization. ......................6 ARGUMENT ...................................................................................................................................7 I. As A Matter of Law, Arista Cannot Show Exclusionary Conduct. .....................................8 A. Cisco’s CLI Litigation Is First Amendment–Protected Government Petitioning. ...............................................................................................................8 B. Cisco’s Communications About The CLI Litigation Are Also Noerr- Protected And Not Exclusionary In Any Event. ......................................................8 1. Cisco’s Communications About The CLI Litigation Are Protected Under The Noerr–Pennington Doctrine. .....................................................9 2. Cisco’s Communications Are Not Exclusionary. ......................................10 C. No Legal Theory Supports Arista’s Allegations Of Anticompetitive Conduct. .................................................................................................................13 1. Arista’s “Hold-Up” Theory Has No Legal Basis. ......................................13 2. Arista’s “Policy Change” Theory Has No Legal Basis. ............................15 II. Arista Cannot Show that Cisco Has Monopoly Power Or A Dangerous Probability Of Obtaining Monopoly Power. ........................................................................................18 III. Arista Cannot Establish Injury-In-Fact Or Damages Caused By CLI-Related Conduct. .............................................................................................................................20 IV. Arista Cannot Show Harm To Competition.......................................................................23 A. Arista Speculates That Competition Was Harmed. ...............................................23 B. Competition Flourished Throughout The Conduct Period. ...................................24 V. Because Arista Cannot Prevail On The Sherman Act Claims, Arista’s California Unfair Competition Law Claim Also Fails. .......................................................................25 CONCLUSION ..............................................................................................................................25 Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 3 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT iv Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Cases Aircapital Cablevision, Inc. v. Starlink Commc’ns Grp., Inc., 634 F. Supp. 316 (D. Kan. 1986) .............................................................................................. 9 Am. Ad Mgmt., Inc. v. Gen. Tel. Co. of Cal., 190 F.3d 1051 (9th Cir. 1999) ............................................................................................ 7, 20 Am. Prof’l Testing Serv., Inc. v. Harcourt Brace Jovanovich Legal & Prof’l Pub’ns, Inc., 108 F.3d 1147 (9th Cir. 1997) ......................................................................................... passim Barq’s Inc. v. Barq’s Beverages, Inc., 677 F. Supp. 449 (E.D. La. 1987) ........................................................................................... 10 Boulware v. State of Nev., Dep’t of Human Res., 960 F.2d 793 (9th Cir. 1992) .................................................................................................... 8 Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297 (3d Cir. 2007).............................................................................................. 14, 18 Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977) .................................................................................................................. 7 Cal. Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508 (1972) .................................................................................................................. 8 Celotex Corp. v. Catrett, 477 U.S. 317 (1986) .................................................................................................................. 6 Chavez v. Whirlpool Corp., 113 Cal. Rptr. 2d 175 (2001) .................................................................................................. 25 City of Columbia v. Omni Outdoor Advert., Inc., 499 U.S. 365 (1991) ................................................................................................................ 17 City of San Jose v. Office of the Comm’r of Baseball, 776 F.3d 686 (9th Cir. 2015) .................................................................................................. 25 City of Vernon v. Southern California Edison Co., 955 F.2d 1361 (9th Cir. 1992) ................................................................................................ 23 Coastal States Mktg., Inc. v. Hunt, 694 F.2d 1358 (5th Cir. 1983) .................................................................................................. 9 Concord Boat Corp. v. Brunswick Corp., 207 F.3d 1039 (8th Cir. 2000) ................................................................................................ 23 Corales v. Bennett, 567 F.3d 554 (9th Cir. 2009) .................................................................................................... 8 Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 4 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT v Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Datagate, Inc. v. Hewlett–Packard Co., 941 F.2d 864 (9th Cir. 1991) .................................................................................................. 20 David L. Aldridge Co. v. Microsoft Corp., 995 F. Supp. 728 (S.D. Tex. 1998) ......................................................................................... 11 E. R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961) ......................................................................................................... passim Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451 (1992) .......................................................................................................... 15, 16 Farley Transp. Co. v. Santa Fe Trail Transp. Co., 786 F.2d 1342 (9th Cir. 1985) ................................................................................................ 21 Freeman v. Lasky, Haas & Cohler, 410 F.3d 1180 (9th Cir. 2005) .............................................................................................. 8, 9 Funai Elec. Co. v. LSI Corp., No. 16-cv-01210-BLF, 2017 WL 1133513 (N.D. Cal. Mar. 27, 2017) ............................ 17, 18 Glen Holly Entm’t, Inc. v. Tektronix, Inc., 352 F.3d 367 (9th Cir. 2003) .............................................................................................. 7, 20 Globetrotter Software, Inc. v. Elan Comput. Grp., Inc., 362 F.3d 1367 (Fed. Cir. 2004)............................................................................................... 10 Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986 (9th Cir. 1979) .................................................................................................. 22 Hynix Semiconductor Inc. v. Rambus Inc., 527 F. Supp. 2d 1084 (N.D. Cal. 2007) ............................................................................ 14, 17 In re Apple iPod iTunes Antitrust Litig., 796 F. Supp. 2d 1137 (N.D. Cal. 2011) ...................................................................... 12, 13, 25 Int’l Norcent Tech. v. Koninklijke Philips Elecs. N.V., No. 07-cv-00043, 2007 WL 4976364 (C.D. Cal. Oct. 29, 2007) ........................................... 14 JTS Choice Enters., Inc. v. E.I. DuPont De Nemours & Co., No. 11-cv-3143, 2014 WL 793525 (D. Colo. Feb. 26, 2014) ................................................. 24 K.M.B. Warehouse Distribs., Inc. v. Walker Mfg. Co., 61 F.3d 123 (2d Cir. 1995)...................................................................................................... 25 Kemin Foods, L.C. v. Pigmentos Vegetales del Centro S.A. de C.V., 384 F. Supp. 2d 1334 (S.D. Iowa 2005), aff’d, 464 F.3d 1339 (Fed. Cir. 2006) ................ 9, 10 Los Angeles Land Co. v. Brunswick Corp., 6 F.3d 1422 (9th Cir. 1993) .................................................................................................... 19 Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 5 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT vi Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Magnetar Techs. Corp. v. Intamin, Ltd., 801 F.3d 1150 (9th Cir. 2015) .......................................................................................... 21, 23 Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986) ............................................................................................................ 6, 24 Matsushita Elecs. Corp. v. Loral Corp., 974 F. Supp. 345 (S.D.N.Y. 1997)............................................................................................ 9 McGlinchy v. Shell Chem. Co., 845 F.2d 802 (9th Cir. 1988) .................................................................................................. 21 Mercatus Grp., LLC v. Lake Forest Hosp., 641 F.3d 834 (7th Cir. 2011) ...................................................................................... 11, 12, 13 MetroNet Servs. Corp. v. Qwest Corp., 383 F.3d 1124 (9th Cir. 2004) .................................................................................................. 6 Metzler v. Bear Auto. Serv. Equip. Co., 19 F. Supp. 2d 1345 (S.D. Fla. 1998) ..................................................................................... 17 Nineteen Eighty-Nine, LLC v. Icahn Enterps. L.P., 99 A.D.3d 546 (N.Y. App. Div. 2012) ................................................................................... 10 Novell, Inc. v. Microsoft Corp., 731 F.3d 1064 (10th Cir. 2013) (Gorsuch, J.) ..................................................................... 7, 16 Oracle Am., Inc. v. Google Inc., 750 F.3d 1339 (Fed. Cir. 2014)............................................................................................... 15 Paladin Assocs., Inc. v. Mont. Power Co., 328 F.3d 1145 (9th Cir. 2003) ............................................................................................ 7, 23 Patrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962 (2014) ............................................................................................................ 16 Prof’l Real Estate Inv’rs, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49 (1993) ........................................................................................................ 8, 10, 17 PSI Repair Servs., Inc. v. Honeywell, Inc., 104 F.3d 811 (6th Cir. 1997) .................................................................................................. 16 Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421 (9th Cir. 1995) .................................................................................. 7, 19, 20, 23 Sosa v. DIRECTV, Inc., 437 F.3d 923 (9th Cir. 2006) .............................................................................................. 9, 10 Subsolutions, Inc. v. Doctor’s Assocs., Inc., 436 F. Supp. 2d 348 (D. Conn. 2006) ..................................................................................... 16 Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 6 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT vii Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Tate v. Pac Gas & Elec. Co., 230 F. Supp. 2d 1072 (N.D. Cal. 2002) ............................................................................ 12, 13 Theme Promotions, Inc. v. News Am. Mktg. FSI, 546 F.3d 991 (9th Cir. 2008) ............................................................................................ 20, 22 United Mine Workers v. Pennington, 381 U.S. 657 (1965) ......................................................................................................... passim United States v. Colgate & Co., 250 U.S. 300 (1919) .................................................................................................................. 7 United States v. E.I Du Pont de Nemours & Co., 351 U.S. 377 (1956) ................................................................................................................ 18 United States v. Grinnell Corp., 384 U.S. 563 (1966) .................................................................................................................. 7 United States v. Syufy Enters., 903 F.2d 659 (9th Cir. 1990) ........................................................................................ 1, 20, 23 Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004) .................................................................................................................. 7 Version2 Tech., Inc. v. Neilmed Pharm., Inc., No. 16-cv-04720, 2016 WL 6611015 (N.D. Cal. Nov. 9, 2016) ............................................ 17 Vizio, Inc. v. Funai Elec. Co., No. 09-cv-0174, 2010 WL 7762624 (C.D. Cal. Feb. 3, 2010) ............................................... 22 Walker Process Equip., Inc. v. Food Mach. & Chem. Co., 382 U.S. 172 (1965) ................................................................................................................ 17 Warner Bros. v. Am. Broad. Cos., 720 F.2d 231 (2d Cir. 1983).................................................................................................... 15 White v. Lee, 227 F.3d 1214 (9th Cir. 2000) ................................................................................................ 17 Statutes 15 U.S.C. § 2 (2004) ............................................................................................................................. 6 Rules Fed. R. Civ. P. 56 .................................................................................................................................. 6 Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 7 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 1 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 INTRODUCTION In December 2014, Cisco exercised its First Amendment right to ask this Court to resolve a dispute regarding Arista’s admitted copying of Cisco’s user interfaces and related documentation. Arista never modified its CLI as a result of this CLI litigation, nor did any Arista customer have to change how it configured and managed Arista switches. Despite this outcome, Arista now alleges that Cisco should be liable for hundreds of millions of dollars in antitrust damages because Cisco sought judicial resolution of a copyright dispute and made public statements about that dispute. Arista attempts to justify this odd result by arguing that by filing its lawsuit Cisco “closed” industry access to a purported “de facto” standard CLI in violation of Sherman Act § 2. But the only anticompetitive conduct Arista alleges is the CLI lawsuit and communications related to the lawsuit. Those activities are immune from antitrust liability under the Noerr–Pennington doctrine, and no legal precedent supports abrogating that immunity based on the circumstances here. Arista likewise cannot prove numerous other elements of its antitrust claims. Arista cannot prove that Cisco has monopoly power—the power to raise prices or restrict output—because the undisputed facts reflect a highly competitive market where prices are falling, output is rising, and numerous competitors continue to gain market share even as Cisco’s share falls. Nor has Arista met its burden to prove injury-in-fact. Arista has no direct evidence that it lost any sale because of the CLI litigation or discussions about the litigation. Instead, Arista relies on its expert’s econometric analysis that—even the expert concedes—cannot distinguish the effects of contemporaneous events that Arista concedes were not anticompetitive, but that undisputedly impacted Arista’s sales. For example, the ITC excluded Arista products from the market after finding Arista to be a willful infringer, prices across the market declined, and Cisco released its Nexus 9000 series products. Finally, Arista’s claims also fail because Arista cannot prove harm to competition, as opposed to harm to Arista itself. “It can’t be said often enough that the antitrust laws protect competition, not competitors.” See United States v. Syufy Enters., 903 F.2d 659, 668 (9th Cir. 1990). Arista’s expert speculates that harm may have occurred based on general economic theory—but never analyzed actual harm to competition. Such speculative evidence is insufficient to survive Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 8 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 2 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 summary judgment, particularly in light of undisputed evidence of a highly competitive market. STATEMENT OF FACTS I. Background Preceding Litigation. Founded in 1984, Cisco pioneered the networking technologies that enabled the growth of the Internet. Cisco’s operating system software allows engineers to configure and manage Cisco routers and switches through the use of a command-line interface (“CLI”). (Case No. 5:14-cv- 05344-BLF, Dkt. (hereinafter, “CLI Dkt.”) 64 ¶¶ 20–30.) Cisco’s CLI is not a formal standard, and no formal standard CLI for Ethernet switches exists. (E.g., Seddon Decl., Ex. (hereinafter, “Ex.”) A1, FSM Tr. at 129:6–132:18; Ex. A2, Black Tr. at 160:3–11.) Cisco’s CLI includes numerous copyrighted compilations. (See CLI Dkt. 740 at 6–16.) In 2003, Cisco sued Huawei, a switching competitor, alleging that Huawei infringed Cisco’s rights in its CLI. (Ex. A3 ¶¶ 13–18; Ex. A4 ¶ 12 (declaration of Arista board member).) In July 2004, Cisco and Huawei settled that litigation with an agreement requiring modification of Huawei’s infringing CLI. (Ex. A5 § 2.01.) Arista was founded in that same year, and Arista released its first switch in 2008. (Dkt. 162 ¶ 18.) By 2014, Arista had 7.8% of the high-speed datacenter switching market. (Ex. A6; Ex. A7 at 5.) In 2013 and 2014, Arista executives publicly stated that Arista’s CLI so closely mirrored Cisco’s CLI that anyone trained on Cisco switches could operate Arista switches “right away.” (Ex. A8.) Arista’s CEO stated that competing with Cisco “in a conventional way . . . would take . . . 15 years and 15,000 engineers, and that’s not a recipe for success.” (Ex. A9.) Cisco never licensed its CLI copyrights (or other intellectual property) to Arista. (Ex. A10, Carlton Rpt. ¶ 82 & n.167; Ex. A1, FSM Tr. at 165:3–9.) Nor did Arista ever ask Cisco for a license or other permission to copy Cisco’s CLI, (Ex. A10, Carlton Rpt. ¶ 82 & n.168; Ex. A1, FSM Tr. at 164:7–165:9), even though Arista’s CTO, in a publicly available podcast, stated, “Our customers come very well trained, big stacks of people who understand the particular CLI. And we copied it slavishly.” (Ex. A11, Duda Tr. at 346:13–348:8.) II. Cisco Sues Arista For Patent Infringement And Copyright Infringement. Cisco filed two lawsuits against Arista on December 5, 2014. In the CLI case before this Court, Cisco pursued copyright and patent infringement claims related to its CLI, as well as verbatim Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 9 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 3 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 copying of Cisco’s user manuals and other copyrighted materials. (CLI Dkt. 64.) Arista voluntarily discontinued distribution of the user manuals and other materials. (Ex. A12 Ullal Tr. at 204:3–20.) The jury returned a verdict on December 14, 2016, finding that Arista infringed Cisco’s copyrights in its CLI-related user interfaces but that Arista could use them under the scènes à faire doctrine, a finding that is currently on appeal before the Federal Circuit. (CLI Dkt. 749 at 1.) The jury rejected Arista’s defenses of copyright misuse, abandonment, and fair use. (Id. at 1–2.) In the second lawsuit, Cisco asserted infringement of twelve patents covering different switch-related technologies. (Case No. 4:14-cv-05343-JSW, Dkt. 1.) On December 19, 2014, Cisco filed a complaint in the U.S. International Trade Commission (“ITC”), asserting infringement of those same twelve patents, which the ITC instituted as Inv. Nos. 337-TA-944 (“’944 action”) and 337-TA-945 (“’945 action”) (“the ITC actions”). (See Exs. A13–A14.) The district court patent case is stayed pending resolution of the ITC actions. (Case No. 4:14-cv-05343-JSW, Dkt. 34.) III. Arista Files An Antitrust Claim In Response To Cisco’s Litigation. Arista first sought leave to add antitrust counterclaims late in the CLI case. (CLI Dkt. 163.) Denied leave, Arista filed this separate action on February 24, 2016. (Dkt. 1.) Arista alleges that Cisco’s lawsuit and related communications amount to an antitrust violation because Cisco had elsewhere allegedly “made representations” about its CLI constituting “industry standard commands.” (Dkt. 162 ¶ 69.) Arista alleges that, through these representations, Cisco, “for over a decade[,] encouraged customers and competitors to utilize and innovate on top of industry-standard commands,” (id. ¶ 114), then “reversed [this] long-standing policy in 2014” with the CLI lawsuit. (Id. ¶ 83.) Arista also alleges that Cisco “[e]ngage[ed] in associated intimidation tactics pursuant to its policy change.” (Id. ¶ 114.) Arista claims that Cisco’s conduct violates the prohibitions under Section 2 of the Sherman Act against monopolization (Count I) and attempted monopolization (Count II) as well as Section 17200 of the California Unfair Competition Law (“UCL”) (Count III) by harming the U.S. and global markets for Ethernet switches and “high-speed” Ethernet switches. (Id. ¶¶ 50, 112–33.) Arista alleges that Cisco’s conduct caused harm during the two-year period from the filing of the CLI case on December 5, 2014, to the verdict on December 14, 2016. (Ex. A6, FSM Rpt. ¶ 208.) Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 10 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 4 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Arista agrees that Cisco’s conduct toward Arista prior to filing the CLI case was pro-competitive. (Ex. A6, FSM Rpt. ¶ 61; Ex. A1, FSM Tr. at 48:6–20.) Arista offers no evidence of harm, nor does Arista allege anticompetitive conduct, after the verdict in the CLI case. (Id.) IV. Material Facts During The Relevant Conduct Period. A. Arista Adjudged An Infringer By The ITC. During the pendency of the CLI case, the ITC actions progressed through trial and resulted in numerous, public judgments against Arista. On February 2, 2016, the Honorable David P. Shaw issued an Initial Determination in the ’944 action and found that Arista Ethernet switches infringe three valid Cisco patents covering its SysDB and Private VLAN technologies. (Ex. A15 at 292; Ex. A16.) On June 23, 2016, the ITC affirmed Judge Shaw’s findings, concluding that Arista willfully infringed the patents as part of a “corporate culture of copying,” (Ex. A17 at 3, 19–20; Ex. A18), and entered an order excluding Arista switches (and components thereof) from importation into the United States and a cease-and-desist order, prohibiting Arista from, inter alia, selling those switches in the United States. (Ex. A19 at 1; Ex. A20 at 2; Ex. A18.) Those orders took effect on August 22, 2016. (Dkt. 162 ¶ 103.) Similarly, the Honorable MaryJoan McNamara issued an Initial Determination in the ’945 action on December 9, 2016, and found that Arista switches infringe two additional Cisco patents.1 (Ex. A26 at 302; Ex. A27.) B. Cisco’s Statements About The CLI Litigation. To provide consistent communication regarding the Cisco–Arista dispute, Cisco commented on the litigations through its General Counsel, Mark Chandler. Mr. Chandler posted to a Cisco.com blog regarding events in the CLI litigation and occasionally spoke to customers about the litigation, particularly when requested by the customer. (See, e.g., Ex. A28 .) Most of Mr. Chandler’s blog posts solely related to the ITC actions, not the CLI case; none related solely to the CLI case. (Compare Exs. A29–A35 (seven blog posts discuss the CLI case and the ITC/patent actions), with Exs. A36–A49 (fourteen 1 Judgments against Arista continued after the CLI verdict and the challenged conduct period—for example, the ITC affirmed Judge McNamara’s findings of infringement and issued exclusion and cease-and-desist orders in the ’945 action, and the Federal Circuit affirmed findings of infringement in the ’944 action. (Exs. A21–A25.) Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 11 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 5 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 blog posts discuss only the ITC/patent actions).) Internally, Cisco instructed its worldwide field organization that they should “not comment on ongoing litigation” and, instead, direct customer inquiries to the public filings and to Mr. Chandler’s blog. (Ex. A50.) In October 2016, Cisco modified these instructions in one way: it provided a pre-written letter and technical summary related to the ITC actions that salespeople could forward to customers as appropriate. (Ex. A51.) Neither document mentions the CLI case. (Id.) C. No Direct Evidence Shows That The CLI Litigation Or Communications About That Litigation Caused Arista To Lose Sales. Between the filing of the litigation in December 2014 and the jury verdict in December 2016, Arista nearly doubled its revenue, growing from $584 million in revenue in 2014 to $1.13 billion in revenue in 2016. (Ex. A52 at 45.) Its market share also continued to increase, growing from 7.8% in 2014 to 11.7% in 2016, according to its own calculations. (Ex. A7 at 5.) Although Arista has identified customers where its sales staff (see, e.g., Ex. A53, Sadana Tr. at 34:14–37:13), Arista has not identified even a single specific sale that it contends was lost due to the CLI litigation or communications about that litigation. (See Ex. A54.) Nor has Arista provided any evidence or testimony from customers that they chose not to buy Arista switches because of the CLI litigation or communications about the CLI litigation. (Id.) In contrast, Arista has admitted that the impact of the ITC actions on Arista’s sales “cannot be overstated.” (Ex. A55 at 16; see also Ex. A56 (Arista CEO stating that the ITC actions continue to “really impact” Arista revenue).) D. Marketplace Competition Grew Throughout The CLI Lawsuit. Both before and during the CLI case, the markets for Ethernet switches displayed increasing competition. Prices declined. (Ex. A6, FSM Rpt. Figs. 12–15; Ex. A10, Carlton Rpt. ¶ 44.) Output increased. (See Ex. A10, Carlton Rpt. ¶¶ 97–98.) Numerous competitors, such as Arista, Huawei, and Juniper, gained market share. (Id. ¶ 43; Ex. A6, FSM Rpt. Figs. 4–5.) So did sales of “white box” switches (id.), commodity hardware on which customers deploy open-source or self-developed software. (Ex. A6, FSM Rpt. ¶ 43.) Cisco’s market share declined significantly both before and during the alleged conduct period, dropping below 50% in the “high-speed” worldwide market. (Ex. Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 12 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 6 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 A10, Carlton Rpt. ¶ 43; Ex. A6, FSM Rpt. Fig. 9.) E. No Switch Suppliers Altered Their CLI Due To The CLI Lawsuit. Arista never altered its CLI in response to the CLI case. (See, e.g., Ex. A53, Sadana Tr. at 236:16–22 ; Ex. A2, Black Tr. at 216:18–23; Ex. A1, FSM Tr. at 163:14–19.) Nor did any other competitor or any customer alter their CLI, or anything related to the CLI, as a result of the CLI case. (E.g., Ex. A2, Black Tr. at 221:12–222:9.) LEGAL STANDARDS I. Summary Judgment. Summary judgment should be entered where “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “[T]he plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The opposing party “must do more than simply show that there is some metaphysical doubt as to the material facts. . . . Where the record taken as a whole could not lead a rational trier of fact to find for the non- moving party, there is no ‘genuine issue for trial.’” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citations omitted). II. Requirements For Proving Monopolization Or Attempted Monopolization. Section 2 of the Sherman Act prohibits “monopoliz[ing], or attempt[ing] to monopolize.” 15 U.S.C. § 2 (2004). To prevail on its claim for monopolization, Arista must prove that Cisco “(1) possessed monopoly power in the relevant market, (2) willfully acquired or maintained that power through exclusionary conduct and (3) caused antitrust injury.” MetroNet Servs. Corp. v. Qwest Corp., 383 F.3d 1124, 1130 (9th Cir. 2004) (citing Am. Prof’l Testing Serv., Inc. v. Harcourt Brace Jovanovich Legal & Prof’l Pub’ns, Inc., 108 F.3d 1147, 1151 (9th Cir. 1997)). To prevail on its claim for attempted monopolization, Arista must prove—in addition to the same exclusionary Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 13 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 7 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 conduct and causal antitrust injury as in a monopolization claim—that Cisco had a “specific intent to control prices or destroy competition” and “a dangerous probability of achieving ‘monopoly power.’” Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421, 1432–33 (9th Cir. 1995). The exclusionary conduct element requires proving “the willful acquisition or maintenance of [monopoly] power” through exclusionary conduct “as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.” Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004) (quoting United States v. Grinnell Corp., 384 U.S. 563, 570–71 (1966)). “[A]s a general matter, the Sherman Act ‘does not restrict the long recognized right of [a] trader . . . engaged in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal.’” Id. at 408 (quoting United States v. Colgate & Co., 250 U.S. 300, 307 (1919)). Forcing firms to deal “would also risk reducing the incentive . . . to innovate, invest, and expand . . .; the smaller company might be deterred, too, knowing it could just demand the right to piggyback on its larger rival.” Novell, Inc. v. Microsoft Corp., 731 F.3d 1064, 1073 (10th Cir. 2013) (Gorsuch, J.). To establish causal antitrust injury, Arista bears the burden of proving “(1) unlawful conduct, (2) causing an injury to the plaintiff, (3) that flows from that which makes the conduct unlawful, and (4) that is of the type the antitrust laws were intended to prevent.” Glen Holly Entm’t, Inc. v. Tektronix, Inc., 352 F.3d 367, 372 (9th Cir. 2003) (quoting Am. Ad Mgmt., Inc. v. Gen. Tel. Co. of Cal., 190 F.3d 1051, 1055 (9th Cir. 1999)). “If the injury flows from aspects of the defendant’s conduct that are beneficial or neutral to competition, there is no antitrust injury, even if the defendant’s conduct is illegal per se.” Rebel Oil Co., 51 F.3d at 1433. Because the antitrust laws were designed to protect “competition[,] not competitors,” Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 488 (1977), Arista must show injury to competition, not merely itself. Paladin Assocs., Inc. v. Mont. Power Co., 328 F.3d 1145, 1158 (9th Cir. 2003) (“Where . . . conduct harms the plaintiff without adversely affecting competition generally, there is no antitrust injury.”). ARGUMENT The only wrongful acts Arista alleges are that Cisco sued Arista for copyright infringement and talked about its lawsuit. Cisco sued no other competitors, Arista never altered its products as a Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 14 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 8 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 result of the CLI case, and Arista prevailed. This is not a cognizable antitrust violation, and Arista cannot meet its burden on numerous elements of its claims. I. As A Matter of Law, Arista Cannot Show Exclusionary Conduct. Whether framed as a “policy change” as in the Amended Complaint or standards-based hold- up as in Arista’s expert’s report, Arista’s allegations of anticompetitive harm wholly rest on Cisco’s CLI lawsuit against Arista and communications about that lawsuit. Arista’s antitrust theory collapses without these activities. But no legal precedent supports Arista’s attempt to void the First Amendment protection afforded to these activities. Arista’s claims, therefore, fail as a matter of law. A. Cisco’s CLI Litigation Is First Amendment–Protected Government Petitioning. Under the Noerr–Pennington doctrine, the CLI litigation is First Amendment–protected government petitioning immunized from antitrust liability.2 Freeman v. Lasky, Haas & Cohler, 410 F.3d 1180, 1183 (9th Cir. 2005) (citing Cal. Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 510 (1972)). Arista has never alleged—and cannot show—that the CLI case constituted sham litigation.3 See, e.g., Prof’l Real Estate Inv’rs, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60–63 (1993). “[S]ummary judgment . . . is proper where the defendant’s allegedly anticompetitive conduct is protected by the Noerr–Pennington doctrine and . . . do[es] not fall within the ‘sham’ exception to Noerr–Pennington as a matter of law.” Boulware v. State of Nev., Dep’t of Human Res., 960 F.2d 793, 796 (9th Cir. 1992). Therefore, the Court should, at a minimum, grant summary judgment that Cisco’s CLI lawsuit was objectively reasonable under Noerr. B. Cisco’s Communications About The CLI Litigation Are Also Noerr-Protected And Not Exclusionary In Any Event. Arista asserts that Cisco engaged in a campaign of public and private communications about the CLI litigation that aimed to discourage customers from purchasing Arista switches. (See, e.g., 2 Cisco’s patent suits against Arista are also Noerr-protected. Arista has never alleged otherwise. 3 Although Arista ultimately prevailed, the jury also found that “Arista infringed . . . Cisco’s user interfaces” and rejected most Arista defenses. (CLI Dkt. 749 at 1–2.) The Court found that Cisco asserted valid copyrights in multiple compilations from its CLI, (see CLI Dkt. 740 at 6–16), and denied Arista’s motion for summary judgment, (CLI Dkt. 482), indicating that “a reasonable trier of fact [could] find” for Cisco. Corales v. Bennett, 567 F.3d 554, 562 (9th Cir. 2009). Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 15 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 9 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Dkt. 162 ¶¶ 84, 114, 121.) Through these communications, Arista alleges, Cisco has (Ex. A6, FSM Rpt. ¶ 140.) But such communications are protected under the Noerr–Pennington doctrine as conduct incidental to Cisco’s CLI case and, in any event, cause no more than de minimis harm to competition as a matter of law. 1. Cisco’s Communications About The CLI Litigation Are Protected Under The Noerr–Pennington Doctrine. Cisco’s communications about the CLI litigation are, like the CLI case itself, protected conduct under the Noerr–Pennington doctrine.4 “[C]onduct incidental to a petition is protected by Noerr–Pennington if the petition itself is protected.” Freeman, 410 F.3d at 1184 (citation omitted). “[C]ommunications between private parties are sufficiently within the protection of the Petition Clause to trigger the Noerr–Pennington doctrine, so long as they are sufficiently related to petitioning activity.” Sosa v. DIRECTV, Inc., 437 F.3d 923, 935 (9th Cir. 2006); see also Matsushita Elecs. Corp. v. Loral Corp., 974 F. Supp. 345, 359 (S.D.N.Y. 1997) (acts incidental to litigation are those “that are ‘reasonably and normally attendant upon protected litigation,’ such as sending letters threatening court action [and] are entitled to immunity to the same extent as the related litigation” (citation omitted)). Cisco’s communications about the CLI litigation are necessarily related to the Noerr-protected litigation—the communications would not have occurred but for the litigation. Numerous courts have held that conduct incidental to Noerr-protected litigation includes the same sort of public and private communications that Cisco made about the CLI litigation. Publicity about protected litigation—such as Mr. Chandler’s blog posts summarizing Cisco’s positions on the ongoing litigation—is Noerr protected. See Coastal States Mktg., Inc. v. Hunt, 694 F.2d 1358, 1367 (5th Cir. 1983) (“[T]he publicity and threats of litigation were protected by petitioning immunity.”); Kemin Foods, L.C. v. Pigmentos Vegetales del Centro S.A. de C.V., 384 F. Supp. 2d 1334, 1349, 1353 (S.D. Iowa 2005) (press releases regarding competitor’s alleged patent infringement protected under Noerr), aff’d, 464 F.3d 1339 (Fed. Cir. 2006); Aircapital Cablevision, Inc. v. Starlink Commc’ns Grp., Inc., 634 F. Supp. 316, 326 (D. Kan. 1986) (public statements in newspapers 4 The same is true of Cisco’s communications related to the ITC actions. Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 16 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 10 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 discussing litigation and intimating that competitors’ customers may also be liable protected under Noerr); Nineteen Eighty-Nine, LLC v. Icahn Enters. L.P., 99 A.D.3d 546, 547 (N.Y. App. Div. 2012) (filing of an SEC Schedule 13D amendment, which plaintiff alleged was “only a glorified press release meant to frighten away investors,” was protected under Noerr). Similarly, communications like Cisco’s to customers or suppliers (who could be, for example, potential infringers) about actual or potential non-sham litigation are protected under Noerr. Sosa v. DIRECTV, Inc., 437 F.3d at 936 (communications to potentially infringing customers protected by Noerr); Globetrotter Software, Inc. v. Elan Comput. Grp., Inc., 362 F.3d 1367, 1374–77 (Fed. Cir. 2004) (communications to third parties urging them to investigate whether competitor’s products infringed protected by Noerr); Kemin Foods, L.C., 384 F. Supp. 2d at 1349, 1353 (contacting companies regarding competitor’s alleged infringement protected by Noerr); Barq’s Inc. v. Barq’s Beverages, Inc., 677 F. Supp. 449, 453 (E.D. La. 1987) (letters to competitor’s suppliers regarding litigation “are also protected under the Noerr–Pennington petitioning immunity”). 2. Cisco’s Communications Are Not Exclusionary. Not only are Cisco’s CLI-related communications protected under Noerr–Pennington, they are also not anticompetitive as a matter of law.5 In the Ninth Circuit, “disparagement of a rival” presumptively has—at best—a de minimis effect on competition. Harcourt Brace, 108 F.3d at 1151–52. Although such communication may “impair the opportunities” of Arista, the “harmful effects . . . are ordinarily not significant enough to warrant recognition under § 2 of the Sherman Act.” Id. at 1151. Arista can overcome this presumption of de minimis harm only with “cumulative proof” that Cisco’s “representations were [1] clearly false, [2] clearly material, [3] clearly likely to induce reasonable reliance, [4] made to buyers without knowledge of the subject matter, [5] continued for prolonged periods, and [6] not readily susceptible of neutralization or other offset by rivals.” Id. at 1152. Arista must first satisfy “all six elements.” Id. (emphasis added). Arista would need to “show[] significant and more-than-temporary harmful effects on competition (and not merely 5 Even if Noerr–Pennington did not immunize some small subset of Cisco’s litigation-related communications, Arista must still show that such communications constituted exclusionary conduct. See Prof’l Real Estate Inv’rs, Inc., 508 U.S. at 61 (“Even a plaintiff who defeats the defendant’s claim to Noerr immunity . . . must still prove a substantive antitrust violation.”). Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 17 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 11 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 upon [Arista]) before these practices can rise to the level of exclusionary conduct.” Id. at 1151. Arista cannot satisfy any of the six factors the Ninth Circuit identified in Harcourt Brace. First, Arista’s only evidence of falsity is self-serving, speculative testimony from Arista employees and its expert that Cisco’s statements and that they disagreed with some of Mr. Chandler’s personal views. (See, e.g., Ex. A57, Foss Tr. at 40 (claiming Mr. Chandler’s blogs were sometimes ).) Second, Arista cannot show that Cisco’s CLI-related communications were clearly material: as discussed in greater detail in Section III, infra, Arista never sought discovery from customers to determine whether any decided not to purchase an Arista switch due to Cisco’s CLI-related communications. Thus, Arista has no evidence demonstrating that the communications were material. Third and fourth, Arista cannot show that Cisco’s few communications were likely to induce reasonable reliance or were made to buyers without knowledge of the subject matter. There can be no genuine dispute that customers who purchase data center switches—e.g., AT&T, Microsoft, and Facebook—are sophisticated. (See, e.g., Ex. A53, Sadana Tr. at 251:9–11 ); Ex. A1, FSM Tr. at 104:24–25 ).) The Ninth Circuit and other Courts of Appeal have generally cautioned that buyers “recognize disparagement as non-objective and highly biased.” Harcourt Brace, 108 F.3d at 1152; see also Mercatus Grp., LLC v. Lake Forest Hosp., 641 F.3d 834, 852 (7th Cir. 2011) (collecting holdings of four Courts of Appeals that “anticompetitive effects of false speech are presumptively minimal” in part because “[m]any customers will ‘recognize disparagement as non-objective and highly biased.’”). This observation obviously applies with even greater force to the sophisticated buyers here. Fifth, Cisco’s CLI-related communications did not continue for prolonged periods: they were sporadic, directed only at those expressing an interest, and limited to the duration of the CLI case. See, e.g., David L. Aldridge Co. v. Microsoft Corp., 995 F. Supp. 728, 750 (S.D. Tex. 1998) (allegedly disparaging warning messages in Windows95 not prolonged when “the user must seek them out”). Finally, Arista was quite capable of neutralizing Cisco’s CLI-related communications and cannot argue otherwise. Mr. Chandler commented on the CLI litigation in a public blog that readily Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 18 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 12 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 afforded Arista an opportunity to respond, and it is undisputed that Arista did so. (E.g., Ex. A58 (Arista CEO discussing response to CLI suit with analysts); Exs. A59–A61 (Arista blog posts); Ex. A62 (Arista press release).) It is also undisputed that customers contacted Arista (as well as Cisco) to hear the parties’ positions on the litigations (although not necessarily the CLI case). (See, e.g., Ex. A57, Foss Tr. at 39:5–10 (testifying fielded ). And, as discussed above, “[t]he type of customers at issue was sufficiently sophisticated so as not to be fooled easily by . . . misinformation.” Tate v. Pac. Gas & Elec. Co., 230 F. Supp. 2d 1072, 1080 (N.D. Cal. 2002). There is no reasonable dispute that Arista was “capable of defending their product and winning over customers based on the merits.” Id. Accordingly, Cisco’s communications about the litigation are not exclusionary as a matter of law, and Arista has not come forward with sufficient facts to overcome the presumption of—at most—de minimis that harm the Ninth Circuit established in Harcourt Brace. Even if Arista could overcome the de minimis presumption, Arista cannot clear the next, even higher hurdle: “showing significant and more-than-temporary harmful effects on competition,” not just Arista itself. Harcourt Brace, 108 F.3d at 1151. First, Cisco’s CLI-related communications were limited in number and occurred only during the two-year period of the lawsuit. “[C]ourts must exercise ‘caution . . . against attaching much weight to isolated examples of disparagement.’” Mercatus Grp., LLC, 641 F.3d at 852 (quoting 3 Areeda & Turner, Antitrust Law ¶ 737b at 280–81 (1978)); see also In re Apple iPod iTunes Antitrust Litig., 796 F. Supp. 2d 1137, 1146 (N.D. Cal. 2011) (granting summary judgment in part due to infrequency of disparaging statements). Indeed, Cisco never authorized its employees to discuss the CLI case. On December 19, 2014, Cisco instructed its worldwide field organization that they should “not comment on ongoing litigation” and to direct any customer inquiries to the public blog posts by Mr. Chandler, who “will be Cisco’s only authorized public spokesperson” on the Cisco–Arista litigations. (Ex. A50; see also Ex. A63, Palumbo Tr. at 122:25–123:6 (email went to entire Cisco sales force).) The evidence shows that Cisco’s sales force adhered to that directive. And as far as Mr. Chandler, only seven of his blog posts over the span of the CLI litigation related to that lawsuit. (Compare Exs. A29–A35 (seven blog posts discuss the CLI case as well as the ITC/patent actions), with Exs. A36–A49 (fourteen blog Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 19 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 13 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 posts discuss only the ITC actions).) Second, as explained in more detail in Section IV, infra, there is insufficient evidence of any harm to competition as a result of Cisco’s communications about the CLI (or any other conduct)—let alone “significant and more-than-temporary harmful effects on competition.” Harcourt Brace, 108 F.3d at 1151; see also In re Apple, 796 F. Supp. 2d at 1144, 1146 (Apple statement that it was “investigating the [legal] implications” of competitor RealNetworks’ actions and cautioning customers that RealNetworks’ software may cease working not anticompetitive). The kinds of communications Arista complains of are simply “competing information” within “the marketplace of ideas. . . . It is all too easy for losers in the rough-and-tumble of commerce to accuse competitors of spreading false information.” Tate, 230 F. Supp. 2d at 1080. But “whenever one competitor’s statements about another are false or misleading or incomplete or just plain mistaken, the remedy is not antitrust litigation but more speech—the marketplace of ideas.” Mercatus Grp. LLC, 641 F.3d at 852 (citations omitted). C. No Legal Theory Supports Arista’s Allegations Of Anticompetitive Conduct. Summary judgment is warranted solely on the basis that Cisco has engaged in First Amendment–protected government petitioning—not exclusionary conduct. The analysis should end there. To the extent that Arista argues that Noerr–Pennington should not apply to Cisco’s conduct or that Arista’s theory of exclusionary conduct does not depend Cisco’s Noerr-protected activities, Arista is wrong. Factually, Arista’s theory of exclusionary conduct wholly hinges on the Noerr- protected CLI litigation and communications about it: Arista’s own expert concedes that Cisco’s conduct prior to the CLI case was not anticompetitive, and Arista alleges no anticompetitive conduct separate from the CLI suit and related communications. (Ex. A6, FSM Rpt. ¶ 61.) There is no precedent that supports abrogating the First Amendment protections afforded to Cisco’s conduct. 1. Arista’s “Hold-Up” Theory Has No Legal Basis. Arista’s expert frames its theory of exclusionary conduct in terms of intellectual property hold-up. (E.g., id. ¶ 160 (case ).) But the case law on hold-up does not apply to the undisputed facts before this Court. Hold-up may occur when technology or work protected by intellectual property is Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 20 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 14 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 incorporated into an established standard, thereby placing the rights-holder “in a position to ‘hold up’ industry participants from implementing the standard” without paying “supracompetitive royalties.” Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 310 (3d Cir. 2007) (Barry, J.). (See also Ex. A6, FSM Rpt. ¶¶ 162–63.) But cases that result in antitrust liability under a theory of hold- up do not support Arista’s case because they exclusively deal with standards developed in multi- participant, rules-based standard-setting organizations (“SSOs”) with formal licensing requirements. E.g., Broadcom Corp., 501 F.3d at 303–04 (antitrust defendant’s patented invention alleged to be part of Universal Mobile Telecommunications System standard set by the European Telecommunications Standards Institute and U.S. counterparts); Hynix Semiconductor Inc. v. Rambus Inc., 527 F. Supp. 2d 1084, 1088–89 (N.D. Cal. 2007) (Rambus sought patents covering technology incorporated in SDRAM standards set by the Joint Electronic Devices Engineering Council); see also Int’l Norcent Tech. v. Koninklijke Philips Elecs. N.V., No. 07-cv-00043, 2007 WL 4976364, at *7 n.51 (C.D. Cal. Oct. 29, 2007) (summarizing antitrust liability related to standard- setting as limited to circumstances where “an established industry-wide standard-setting process was abused or manipulated”). Arista does not dispute that no SSO has ever created a standard for Ethernet switching CLI, let alone that Cisco’s CLI is such a formal standard. (E.g., Ex. A1, FSM Tr. at 129:6–132:18; Ex. A2, Black Tr. at 160:3–11.) This critical fact distinguishes this case from any case in which courts have held rights-holders liable for hold-up. Moreover, it is undisputed that Cisco’s CLI differs significantly from that of other competitors in the marketplace, such as Juniper, Huawei, and 3Com. (See Ex. A64, Black CLI Tr. at 210:14–24.) Competitors that do not use Cisco’s copyrighted material cannot be “held up.” No court has held an antitrust defendant liable under a theory of hold- up based on a so-called “de facto” or informal standard, particularly one that significant competitors do not even use. This Court should not be the first. Arista’s hold-up via a de facto standard theory merely seeks to punish Cisco for enforcing its copyrights in a work that gained popularity and that Arista chose to copy. But “to the extent [an infringer] suggests that it was entitled to copy the [works] because they had become the effective industry standard, we are unpersuaded. [The accused infringer] cites no authority for its suggestion that Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 21 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 15 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 copyrighted works lose protection when they become popular, and we have found none.” Oracle Am., Inc. v. Google Inc., 750 F.3d 1339, 1372 (Fed. Cir. 2014) (applying Ninth Circuit law); see also Warner Bros. v. Am. Broad. Cos., 720 F.2d 231, 242 (2d Cir. 1983) (“No matter how well known a copyrighted [work] becomes, its author is entitled to guard against its appropriation.”). Arista’s “de facto” standard approach argues that Cisco’s CLI borrowed from pre-existing material or was widely employed by other switch vendors, but these are not arguments based in antitrust jurisprudence; they are arguments that go toward defenses to copyright. Arista has already had a chance to litigate those defenses in a proper copyright context. The “hold-up” cases simply do not support imposing treble damages on Cisco for exercising its First Amendment right to petition the government for redress of its reasonably held belief that Arista infringed its CLI copyrights—particularly when no actual standard ever existed. 2. Arista’s “Policy Change” Theory Has No Legal Basis. Arista’s reliance on Eastman Kodak Co. v. Image Technical Services, Inc., is also mistaken. 504 U.S. 451 (1992). The undisputed facts before this Court are critically distinct from the conduct in Kodak, and there is no legal basis to extend Kodak to a “policy change” consisting of Noerr- protected activity. Kodak considered the anticompetitive nature of a sudden refusal to deal (the policy change) following a years-long prior course of dealing. See id. at 457–58. In the early 1980s, independent service organizations (“ISOs”) began competing with Kodak in the services market for repair of Kodak office equipment. Id. The ISOs purchased replacement parts from OEMs as well as from Kodak itself—until 1985, when Kodak ceased selling replacement parts to ISOs and entered agreements prohibiting OEMs from doing so either. Id. Because this change in policy came after years of prior dealing, there was no other source of Kodak parts and competition in the repair market suffered. Id. Critically, this harm flowed from Kodak’s prior course of dealing. That Kodak repeatedly sold its replacement parts to ISOs over many years made it reasonable for the ISOs to rely on a continuation of Kodak’s established course of dealing. i. Kodak has no relevance to the undisputed facts before this Court. First, there are no facts here establishing a prior course of dealing. Cisco never licensed its CLI to Arista or other switching competitors. (CLI Dkt. 162; Ex. A1, FSM Tr. at 165:3–9.) Arista relies upon a handful of Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 22 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 16 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Cisco marketing materials that described its CLI as an “industry standard,” (see, e.g., Ex. A6, FSM Rpt. ¶ 170 & nn.299–301), but that is not the kind of communication that creates an enforceable course of dealing. See Novell, Inc., 731 F.3d at 1074 (“[U]nadulterated unilateral conduct . . . won’t trigger antitrust scrutiny.”). Such unilateral advertising communications do not create the kind of mutual understanding created by Kodak’s multi-year practice of selling parts to ISOs and is not the kind of communication that invites reasonable reliance, particularly from a party that knew no actual industry standard existed. Nor was Cisco’s CLI lawsuit against Arista an unforeseeable policy reversal. In 2003, as Arista well knows, Cisco sued Huawei for infringing Cisco’s CLI. (See Ex. A3 ¶¶ 13–18; Ex. A4 ¶ 12.) “[A]n antitrust plaintiff cannot succeed on a Kodak-type theory when the defendant . . . has been otherwise forthcoming about its . . . policies.” PSI Repair Servs., Inc. v. Honeywell, Inc., 104 F.3d 811, 820 (6th Cir. 1997); see also Subsolutions, Inc. v. Doctor’s Assocs., Inc., 436 F. Supp. 2d 348, 356–57 (D. Conn. 2006) (no Kodak-style claim when the plaintiff could reasonably have anticipated the defendant’s conduct). Ruling otherwise would also contradict the Supreme Court’s rejection of laches as a defense to copyright, see Patrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct. 1962, 1972–74 (2014), and revive that now-rejected defense as an antitrust weapon. Finally, in contrast to Kodak, Arista cannot show that Cisco’s alleged policy change foreclosed Arista’s or any other competitor’s ability to compete. Kodak severed the ISOs’ access to replacement parts. No similar facts exist here. Arista continues to compete, and neither Arista nor any other competitor or customer altered its CLI in response to Cisco’s alleged policy change. (See, e.g., Ex. A2, Black Tr. at 221:12–222:16; Ex. A1, FSM Tr. at 163:14–19, 319:18–23.) Cisco did not sue other switch manufacturers over their CLIs. (See CLI Dkt. 162; Ex. A1, FSM Tr. at 313:11–14.) And it is undisputed that other competitors, such as Juniper and Huawei, offer CLIs with with Cisco’s copyrighted CLI. (See Ex. A64, Black CLI Tr. at 210:14–24.) ii. There is no legal basis to extend Kodak liability to Noerr-protected conduct. None of the alleged anticompetitive acts in Kodak were Noerr-protected activities. No court has extended Kodak to reach—as Arista asks this Court to do—a purported policy change that consists solely of an intellectual property rights holder initiating litigation to enforce their rights following a period of not Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 23 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 17 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 doing so. Nor has a court extended Kodak to reach any other circumstances where the allegedly anticompetitive acts were constitutionally protected speech. Indeed, as one court observed, “[c]ases interpreting Kodak have imposed a sharp limitation on its sweep.” Metzler v. Bear Auto. Serv. Equip. Co., 19 F. Supp. 2d 1345, 1356 (S.D. Fla. 1998). Extending Kodak liability to Noerr-protected activities would also run afoul of Supreme Court precedent by “undermin[ing], if not vitiat[ing] Noerr.” Prof’l Real Estate Inv’rs, Inc., 508 U.S. at 60. The only exception the Court has recognized to Noerr protection is sham litigation.6 Id. at 61–63. And the Court circumscribed this exception to prevent it from becoming “no more than a label courts could apply to activity they deem unworthy of antitrust immunity.” Id. at 55. If petitioning conduct is found to be objectively reasonable, that finding “irrefutably demonstrates . . . entitl[ement] to Noerr immunity.” Id. at 63 (emphasis added). “Policing the legitimate boundaries of . . . a genuine attempt to influence governmental action[] is not the role of the Sherman Act.” City of Columbia v. Omni Outdoor Advert., Inc., 499 U.S. 365, 382 (1991). While some district courts have found otherwise-Noerr-protected petitioning anticompetitive as part of a larger “scheme,” as this Court has recognized, such a “scheme” exception to Noerr has not been endorsed by the Ninth Circuit. See Funai Elec. Co. v. LSI Corp., No. 16-cv-01210-BLF, 2017 WL 1133513, at *5–6 (N.D. Cal. Mar. 27, 2017). The Ninth Circuit has cautioned against “lightly conclud[ing]” that Noerr–Pennington does not apply to litigation, “as doing so would leave that action without the ordinary protections afforded by the First Amendment, a result we would reach only with great reluctance.” White v. Lee, 227 F.3d 1214, 1232 (9th Cir. 2000). Thus, courts that have found otherwise-Noerr-protected petitioning anticompetitive as part of a larger “scheme” have only done so after “first find[ing] that the other aspects of the scheme independently produce anticompetitive harms.” Funai Elec. Co., 2017 WL 1133513, at *6 (quoting Hynix Semiconductor Inc., 527 F. Supp. 2d at 1097); see also Version2 Tech., Inc. v. Neilmed Pharm., Inc., No. 16-cv- 04720, 2016 WL 6611015, at *5 (N.D. Cal. Nov. 9, 2016) (similar). Only after this step—which is not even alleged here—can the court “ask whether the accused . . . litigation was causally connected 6 Not at issue here, the Court also excluded fraud on the Patent Office from Noerr protection. See Walker Process Equip., Inc. v. Food Mach. & Chem. Co., 382 U.S. 172, 177 (1965). Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 24 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 18 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 to these anticompetitive harms.” Funai Elec. Co., 2017 WL 1133513, at *6. Arista cannot cross this threshold step. The antitrust defendants in these other cases engaged in conduct that—even if the Noerr-protected activity had not occurred—independently caused anticompetitive harm. Cisco has not. The only conduct alleged by Arista to have altered market structure is Noerr-protected conduct. In Funai Electric Co., the defendant allegedly committed fraud on multiple SSOs to induce adoption of its patented technology into formal standards but refused to honor its FRAND commitments. Id. Under the holding of Broadcom Corp. v. Qualcomm Inc.,7 this conduct was itself actionable, anticompetitive conduct separate from any Noerr-protected petitioning. Funai Elec. Co., 2017 WL 1133513, at *6. There is no similar conduct here: Arista concedes that Cisco’s CLI is not a formal standard, and Cisco never made (and never broke) false commitments to license its CLI on FRAND or any other terms. Without the CLI litigation, Arista’s claims of anticompetitive conduct and harm would not exist. Even Arista concedes that all of Cisco’s conduct preceding the litigation was procompetitive. (Ex. A6, FSM Rpt. ¶ 61; Ex. A1, FSM Tr. at 48:6–20.) There are no “other aspects of the [alleged] scheme [that] independently produce[d] anticompetitive harms.” Funai Elec. Co., 2017 WL 1133513, at *6. Stripped of speculative economic theory, Arista accuses Cisco of engaging in anticompetitive conduct by enforcing its intellectual property rights. Such a theory has no legal or factual basis, contradicts controlling precedent, and should be rejected. II. Arista Cannot Show that Cisco Has Monopoly Power Or A Dangerous Probability Of Obtaining Monopoly Power. Arista’s antitrust claims also fail because Arista cannot show that Cisco possessed or had a dangerous probability of achieving monopoly power—“the power to control market prices or exclude competition.” United States v. E.I Du Pont de Nemours & Co., 351 U.S. 377, 391 (1956). The Court should grant summary judgment against Arista’s claims on this independent ground. Id. 7 Specifically, the Third Circuit held that “(1) in a consensus-oriented private standard-setting environment, (2) a patent holder’s intentionally false promise to license essential proprietary technology on FRAND terms, (3) coupled with an SDO’s reliance on that promise when including the technology in a standard, and (4) the patent holder’s subsequent breach of that promise, is actionable anticompetitive conduct.” Broadcom Corp., 501 F.3d at 314. Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 25 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 19 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 To prove monopoly power directly, a plaintiff must establish supra-competitive pricing and restricted output. Rebel Oil Co., 51 F.3d at 1434. Arista cannot show supra-competitive pricing because there is no genuine dispute that pricing in the market is highly competitive. Arista’s CEO, Jayshree Ullal, has described the switching environment as “dynamic and highly competitive and highly pressured on price.” (A65 at 21.) According to its SEC filings, Arista has consistently “experienced declines in sales prices” because “[c]ompetition continues to increase . . . thereby leading to increased pricing pressures.” (E.g., Ex. A66 at 24; see also Ex. A67 at 41; Ex. A52 at 43.) That competition has resulted in an undisputed decline in prices across all relevant markets. (See, e.g., Ex. A6, FSM Rpt. Figs. 12–15 (showing prices declining across all markets); Ex. A10, Carlton Rpt. ¶ 44 (“[P]rices have declined substantially in recent years across switches of all speeds.”); see also id., ¶¶ 94–95, Figs. 5–6.) Nor is there a genuine dispute that Cisco competes on price (See Ex. A10, Carlton Rpt. ¶ 45, Fig. 3; see also Ex. A68.) Accordingly, there is no genuine factual dispute that Ethernet switch prices are not supra-competitive. See Los Angeles Land Co. v. Brunswick Corp., 6 F.3d 1422, 1426 (9th Cir. 1993) (finding no “inference of monopoly pricing” or “power to control prices” where “[defendant’s] prices were lower than some and higher than others”). Nor can Arista show restricted output, because there is no genuine factual dispute that output has significantly increased in recent years, before, during, and after the alleged period of anticompetitive conduct. Indeed, market-wide output has increased in every one of Arista’s putative markets, whether measured by revenue or ports shipped. (See Ex. A10, Carlton Rpt. ¶¶ 97–98; id., Figs. 7–8.) For example, over the past six years, Arista has grown both its revenue and manufacturing output (See Ex. A69, Metivier Tr. at 239:16–21.) Over the same timeframe, Arista’s market share—using the putative high-speed worldwide Ethernet switching market as an example—increased by eight percentage points. (Ex. A10, Carlton Rpt. ¶ 43; see also Ex. A6, FSM Rpt., Figs. 4–5 (showing similar increases in other putative markets).) Nor was Arista the only competitor to increase output and gain market share: Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 26 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 20 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Huawei’s share increased by seven percentage points, Juniper’s share increased by three percentage points, and the share of demand satisfied by white box switches increased by three percentage points over the same timeframe. (Id.) Accordingly, the “undisputed evidence indicating that competitors have expanded output in the recent past” demonstrates that Cisco lacks the ability to restrict output, and thus lacks monopoly power. Rebel Oil Co., 51 F.3d at 1441. For similar reasons, Arista cannot show monopoly power through circumstantial evidence. There is no genuine dispute that Cisco’s market share has declined in recent years: (Ex. A10, Carlton Rpt. ¶ 43; Ex. A6, FSM Rpt., Fig. 19; see also Ex. A7 at 5.) Cisco’s declining share is inconsistent with monopoly power. See Syufy Enters., 903 F.2d at 665–66 (“In evaluating monopoly power, it is not market share that counts, but the ability to maintain market share.” (emphasis in original)). Furthermore, notwithstanding Arista’s alleged “barriers to entry and expansion,” (Ex. A6, FSM Rpt. ¶¶ 104–06), there is no genuine dispute of fact that both new entrants (such as Arista and white box switches deployed by leading technology companies) and existing competitors (such as Huawei and Juniper) have expanded output and market share both before and during the relevant time period. (See Ex. A10, Carlton Rpt. ¶ 43; see also Ex. A6, FSM Rpt. Figs. 4–5.) Accordingly, Arista cannot “show that there are significant barriers to entry and show that existing competitors lack the capacity to increase their output in the short run” and thus cannot show that Cisco possessed monopoly power or a dangerous probability of achieving it. Rebel Oil Co., 51 F.3d at 1434. III. Arista Cannot Establish Injury-In-Fact Or Damages Caused By CLI-Related Conduct. This Court should grant Cisco summary judgment for the additional reason that Arista cannot show that Cisco’s CLI-related conduct “caus[ed] an injury” to Arista “that flows from that which makes the conduct unlawful.” Glen Holly Entm’t, Inc., 352 F.3d at 372 (quoting Am. Ad Mgmt., Inc., 190 F.3d at 1055). “In order to find that an antitrust injury exists, we must examine both the nature of the injury and whether the injury is causally related to the antitrust violation.” Theme Promotions, Inc. v. News Am. Mktg. FSI, 546 F.3d 991, 1003 (9th Cir. 2008) (citing Datagate, Inc. v. Hewlett–Packard Co., 941 F.2d 864, 867 (9th Cir. 1991)). Arista—despite almost tripling its high- Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 27 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 21 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 speed switch revenues during the conduct period, (Ex. A10, Carlton Rpt. ¶ 100)—alleges injury based on a theory that its sales growth was slowed by Cisco’s conduct. But Arista’s only evidence for that claim is an expert’s econometric model that fails entirely to account for any other cause that may have impeded Arista’s growth, such as the contemporaneous ITC actions. “To survive a motion for summary judgment, [Arista] must ‘provide evidence such that the jury is not left to speculation or guesswork in determining the amount of damages to award.’” Magnetar Techs. Corp. v. Intamin, Ltd., 801 F.3d 1150, 1159 (9th Cir. 2015) (quoting McGlinchy v. Shell Chem. Co., 845 F.2d 802, 808 (9th Cir. 1988)). First, there is insufficient admissible evidence beyond the econometric model on which a jury could find that Arista suffered causal antitrust injury or damages. Arista has never introduced direct evidence of lost sales at specific accounts due to Cisco’s CLI-related conduct. (See Ex. A54.) Arista did not seek third-party discovery from customers to obtain direct evidence of sales lost due to Cisco’s CLI-related conduct. See Farley Transp. Co. v. Santa Fe Trail Transp. Co., 786 F.2d 1342, 1352 (9th Cir. 1985) (“The critical flaw in [plaintiff’s] theory of damages was the failure to present direct evidence concerning the behavior and motivations of the . . . customers . . . as opposed to evidence on the conduct of [defendants].” (emphasis in original)). And Arista’s Chief Customer Officer and 30(b)(6) witness, Anshul Sadana testified that he (Ex. A53, Sadana Tr. at 24:12–27:15; see also Ex. A70, Brennan Tr. at 178–91 (Arista’s CFO repeatedly testifying that she is “not in a position to assess” whether Cisco’s conduct impacted Arista’s sales).) Lacking direct evidence of injury, Arista relies upon an econometric model created by economic expert, Dr. Fiona M. Scott Morton. (Generally Ex. A6, FSM Rpt. § IX.) Dr. Scott Morton’s damages estimate uses i.e., prior to the CLI lawsuit, and based on that model, forecasts Arista’s revenues during the CLI lawsuit. (Id. ¶¶ 195–96.) Arista includes the entire difference between the forecasted revenue and actual revenue during the CLI lawsuit in its claim of injury. (Id.) Arista’s model, however, fails to distinguish the impact of other salient events occurring Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 28 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 22 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 throughout the CLI suit and, therefore, fails to establish antitrust injury or show damages. See Theme Promotions, Inc., 546 F.3d at 1003 (“If the injury flows from aspects of defendant’s conduct that are beneficial or neutral to competition, there is no antitrust injury.”). Most prominently, throughout the CLI suit, the parallel ITC actions resulted in numerous, public adverse judgments against Arista: In February 2016, the ’944 ITC action reached a public initial determination that found Arista infringed three Cisco patents; in June 2016, the ITC affirmed that determination and issued exclusion and cease-and-desist orders; and in early December 2016, the ’945 ITC action also reached a public initial determination that found Arista infringed two additional Cisco patents. (Exs. A15–A20, A26–A27.) There can be no genuine dispute that the ITC actions were material to Arista customers: Arista itself told the Federal Circuit that “[t]he gravity of harm [from the ITC orders] to Arista’s customers—and thus to Arista—cannot be overstated.” (Ex. A55 at 16; see also, e.g., Exs. A71 ¶ 8, A72 ¶ 5 (Arista customers declaring that ITC actions have impacted product choice).) Another customer decided (Ex. A73 at 2.) And as Arista’s own expert admits, Cisco’s enforcement of its patents in the ITC actions “does not constitute harm to competition.” Vizio, Inc. v. Funai Elec. Co., No. 09-cv-0174, 2010 WL 7762624, at *5 (C.D. Cal. Feb. 3, 2010) (citing Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986, 996 (9th Cir. 1979)). (See also Ex. A1, FSM Tr. at 344:12–17 .) Arista’s economic expert concedes that the damages model conduct. (Ex. A1, FSM Tr. at 345:8–10.) Nor can the model distinguish between the effects of different accused conduct—e.g., the CLI litigation versus related communications—one or more of which may be found by this Court or the jury to not be exclusionary. (Id. at 364:15–18 .) Arista’s model also does not account for the effects of Cisco’s introduction of new and more competitive products, more aggressive pricing by Cisco, or increasing competition from white box installations and other competitors. (See Ex. A10, Carlton Rpt. ¶¶ 114–15.) Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 29 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 23 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Numerous courts have rejected antitrust damages theories that failed to link the accused conduct to the plaintiff’s injury. For example, in City of Vernon v. Southern California Edison Co., the plaintiff offered a damages theory where “there [wa]s no indication of what part of [the alleged loss] was due to proper [actions] and what part to improper ones, or for that matter, due to other factors entirely.” 955 F.2d 1361, 1373 (9th Cir. 1992). The Ninth Circuit agreed with the district court that “the serious flaws in the only damage study which could be proffered to the jury placed [the plaintiff] in the position of having no proper proof of damages at all.” Id. (affirming summary judgment); see also, e.g., Magnetar Techs. Corp., 801 F.3d at 1159–60 (affirming summary judgment where “expert calculation did little more than examine the difference between . . . projected revenue . . . [and] actual revenue” and failed to “segregate the losses . . . caused by acts which were not antitrust violations from those that were”); Concord Boat Corp. v. Brunswick Corp., 207 F.3d 1039, 1056–57 (8th Cir. 2000) (similar). Because Arista cannot show that it has suffered injury or prove damages caused by Cisco’s CLI-specific conduct, this Court should grant Cisco summary judgment. IV. Arista Cannot Show Harm To Competition. Even if Arista could show that it suffered harm as a result of Cisco’s CLI-related conduct— which, as discussed above, it cannot—that would not demonstrate antitrust injury because it does not show harm to competition: “Where the defendant’s conduct harms the plaintiff without adversely affecting competition generally, there is no antitrust injury.” Paladin Assocs., Inc., 328 F.3d at 1158; see also Syufy Enters., 903 F.2d at 668 (“[T]he antitrust laws protect competition, not competitors.”). Arista provides no more than speculation that Cisco’s conduct harmed competition in the alleged market; in fact, the evidence reflects a highly competitive market. Thus, Arista’s claims cannot survive summary judgment. See Paladin Assocs., Inc., 328 F.3d at 1158. A. Arista Speculates That Competition Was Harmed. Arista lacks evidence that Cisco’s CLI litigation or communications about it harmed competition—or even harmed other Ethernet switch suppliers. Arista did not provide evidence that Cisco’s conduct raised the price of switches above competitive levels or diminished switch quality. Cf. Rebel Oil Co., 51 F.3d at 1433 (“[A]n act is deemed anticompetitive under the Sherman Act only Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 30 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 24 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 when it harms both allocative efficiency and raises the prices of goods above competitive levels or diminishes their quality.”). Nor could Arista: as noted in Section II, supra, prices have declined across the relevant markets throughout the conduct period. And neither Arista nor other competitors altered their switching CLI in response to the CLI litigation, foreclosing any argument that a diminishment of quality occurred as a result of Cisco’s CLI-related conduct. (See Ex. A53, Sadana Tr. at 236:6–22, 237:19–238:13.) Similarly, Arista does not offer evidence showing any other competitor lost revenue, market share, or individual sales opportunities, or suffered increased costs as a result of the litigation. See JTS Choice Enters., Inc. v. E.I. DuPont De Nemours & Co., No. 11- cv-3143, 2014 WL 793525, at *5–6 (D. Colo. Feb. 26, 2014) (granting defendant summary judgment because evidence of plaintiff’s lost sales insufficient to show antitrust injury when plaintiff failed to show anticompetitive effects of defendant’s conduct on a “robust market”). Instead Arista offers an expert’s uninformed speculation. For example, Dr. Scott Morton posits that ” but she admitted that this is that she did not measure. (Ex. A10, FSM Tr. at 323:8– 325:19; see also id. at 326:18–328:5.) Theoretical harm is not sufficient to create a factual issue, particularly when contradicted by other undisputed facts: not only did Arista gain market share throughout the period of the CLI litigation, so did competitors like Huawei and Juniper that have with Cisco’s CLI. (Ex. A64, Black CLI Tr. at 210:14–24; Ex. A6, FSM Rpt. Figs. 4–5.) Arista “must do more than simply show that there is some metaphysical doubt as to the material facts. . . . [Arista] must come forward with specific facts showing that there is a genuine issue for trial.” Matsushita Elec. Indus. Co., 475 U.S. at 586–87 (emphasis in original). B. Competition Flourished Throughout The Conduct Period. In contrast to the speculative harms that Arista offers, there is no genuine dispute that the relevant markets have been and continue to be highly competitive. Arista has repeatedly admitted as much. For instance, Arista consistently stated that the data center switching market is “intensely competitive, and we expect competition to increase in the future from established competitors and new market entrants.” (Ex. A66 at 9; see also Ex. A67 at 27; Ex. A52 at 26.) Arista also stated, repeatedly, that “[t]he markets in which we compete are . . . characterized by rapidly changing Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 31 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 25 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 technology . . . [and] frequent introductions of new products and services.” (Ex. A67 at 21; see also Ex. A52 at 19.) As to pricing, during the conduct period Arista consistently stated that “[w]e have experienced declines in sales prices for our products . . . and expect competition to further increase in the future, thereby leading to increased pricing pressure.” (Ex. A66 at 24; see also Ex. A67 at 41; Ex. A52 at 43.) In a declaration submitted to the Federal Circuit, Arista’s Chief Customer Officer Mr. Sadana declared “[t]he network and switching market is highly competitive.” (Ex. A74 ¶ 19.) And, as discussed in Section II, supra, other competitors, including Juniper, Huawei, and white box, saw their market share increase as output increased and prices declined. Thus, Arista’s own characterization of market conditions belies its assertions of harm to competition and demonstrates that summary judgment should be granted in Cisco’s favor. See, e.g., K.M.B. Warehouse Distribs., Inc. v. Walker Mfg. Co., 61 F.3d 123, 128 (2d Cir. 1995) (affirming summary judgment where “an examination of the . . . market belies even KMB’s assertion that . . . competition has been harmed. There are over twenty Walker distributors of various size in the Tri-state area . . . [and] during . . . this case, prices for . . . products have apparently fallen and distributors’ discounts have increased.”). V. Because Arista Cannot Prevail On The Sherman Act Claims, Arista’s California Unfair Competition Law Claim Also Fails. Arista’s claim under California’s Unfair Competition Law fails for the same reasons that Arista’s Sherman Act claims fail. “If the same conduct is alleged to be both an antitrust violation and an ‘unfair’ business act . . . for the same reason—because it unreasonably restrains competition and harms consumers—the determination that the conduct is not an unreasonable restraint of trade necessarily implies that conduct is not ‘unfair’ toward consumers.” Chavez v. Whirlpool Corp., 113 Cal. Rptr. 2d 175, 184 (2001). “An independent claim under California’s UCL is therefore barred so long as [the same accused] activities are lawful under the antitrust laws.” City of San Jose v. Office of the Comm’r of Baseball, 776 F.3d 686, 692 (9th Cir. 2015). Arista’s UCL claim rests on the same theory of exclusionary conduct. (See generally Dkt. 1.) Thus, the Court should also grant summary judgment dismissing Arista’s UCL claim. See, e.g., In re Apple, 796 F. Supp. 2d at 1147. CONCLUSION Accordingly, the Court should grant summary judgment for Cisco on all of Arista’s claims. Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 32 of 33 CISCO’S MOTION FOR SUMMARY JUDGMENT 26 Case No. 5:16-cv-00923-BLF-SVK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Dated: March 1, 2018 By: /s/ John M. Desmarais John M. Desmarais (admitted pro hac vice) jdesmarais@desmaraisllp.com Paul A. Bondor (admitted pro hac vice) pbondor@desmaraisllp.com Alan S. Kellman (admitted pro hac vice) akellman@desmaraisllp.com Andrew G. Heinz (admitted pro hac vice) aheinz@desmaraisllp.com Tamir Packin (SBN 317249) tpackin@desmaraisllp.com Jeffrey S. Seddon II (SBN 297502) jseddon@desmaraisllp.com Brian Leary (admitted pro hac vice) bleary@desmaraisllp.com William D. Findlay (admitted pro hac vice) wfindlay@desmaraisllp.com Carson Olsheski (admitted pro hac vice) colsheski@desmaraisllp.com DESMARAIS LLP 230 Park Avenue New York, NY 10169 Telephone: (212) 351-3400 Facsimile: (212) 351-3401 Sarah E. Piepmeier (SBN 227094) sarah.piepmeier@kirkland.com KIRKLAND & ELLIS LLP 555 California Street, 27th Floor San Francisco, CA 94104 Telephone: (415) 439-1400 Facsimile: (415) 439-1500 Attorneys for Plaintiff Cisco Systems, Inc. Case 5:16-cv-00923-BLF Document 221 Filed 03/01/18 Page 33 of 33