Infra-Comm's court victory against Cisco Systems will alter the way the networking giant does business with its 30,000-plus partners -- and it may not take further court action, the solution provider's lawyer said.
"Cisco won't do that again," said Infra-Comm attorney Brian Daucher in an interview Tuesday. "They have learned their lesson about terminating a reseller that brings a case to court."
A 12-member jury decided unanimously Monday to award nearly $6.4 million in damages to Infra-Comm, which sued Cisco for breaching deal registration and channel partner agreements. If Cisco doesn't alter the contracts and another partner sues for similar breaches, the judge could penalize Cisco even more harshly.
"If I were the general counsel of Cisco, I would change them," Daucher said. "If the agreement stays the way it is, that would be a sign to the court that there is no respect."
Similar cases would likely pop up quickly, Daucher said.
"Resellers now realize when they register deals, if they are taken away, they are free to challenge them," he added. "After the first [partner] does it, there tend to be more that are willing to stand up and defend their rights."
Partners have long complained about unfair channel agreements and vendors violating deal registration, but most don't file suit for fear of retaliation. In fact, when Infra-Comm first realized Cisco had given its customer to a larger partner, the solution provider didn't want to end up in court for fear that the case would go very wrong.
"It's a tough thing to stand up to Cisco," Daucher said.
Infra-Comm started by sending a letter requesting compensation for the customer loss. When Cisco said no, Infra-Comm moved on with a lawsuit. That prompted Cisco to terminate Infra-Comm from its channel program, which fueled the solution provider's suit even further.
"We sort of got pulled into this," Daucher said.
Value-added resellers (VARs) have come out of the woodwork at tradeshows and conferences, via email and phone to say Infra-Comm's experience matched their own at various times. Now that the verdict is in, "there's been lots of talk about class-action suits," Daucher said.
But he doesn't necessarily see a class-action suit working.
"There are two kinds of resellers: those that are invested [in the vendor] and those that are not," Daucher said. "The courts are not going to extend protection to everybody, only to the invested resellers."
Still, there are other ways to challenge Cisco's control over how its products are sold, Daucher said.
"Cisco is good at requiring its resellers to specify an end user for each purchase," he said. "Where you have a company that has 75 or 80% of the market, that looks a little like price control. They better hire some good antitrust lawyers."
Daucher said VARs have not approached him to take up such a case, and he is not an antitrust attorney.
Infra-Comm is now waiting to see if Cisco will file an appeal in the required 60 to 90 days. Cisco said it is considering that option. If that happens, that sets off a process that can last up to 18 months. Daucher said he is confident that Infra-Comm will win in the end.
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