VAR Sues Cisco Claiming Contract Breaches

It wasn't apparent at first, Hosinski said. In fact, he said that Infra-Comm worked hand-in-hand with CAS for about six months. "It was a partnership," he said. "We were listed in their documents. I had trust in them, and believed in the partnership."

The customer liked the Infra-Comm/Cisco AS design and did due diligence with other potential suppliers, and it signed with CAS, which was perfectly OK with Hosinski.

However, what happened next was the kind of story a fiction writer would have trouble imagining, Hosinski said.

The customer is very smart, and had a major concern with what the industry calls the "Katz clause," he said.

Named after Ronald A. Katz, whose company Ronald A. Katz Technology Licensing (RAKTL) has initiated claims for thousands of patent violations, a "Katz clause" is a clause in a contract under which a vendor provides indemnity to a customer in cases of intellectual property infringements, Hosinski said.

"I'd never heard of this," he said. "But the client had. They wanted protection in case they got a Katz letter. They wanted a Katz clause that Cisco would indemnify them against method patent infringements, because Katz goes after the users."

While there has never been a Katz claim against Cisco that Infra-Comm could find, Hosinski said Cisco shuttled the whole deal to AT&T, despite Infra-Comm's having registered the deal with an OIP agreement.

This was done without Infra-Comm's knowledge, Hosinski said. Cisco sent Infra-Comm's entire bill of materials (BOM), including the "Infra-Comm Service" prices clearly marked, to AT&T, in April 2006, he said. Two months later, AT&T received a purchase order from the customer for phase one of the IP telephony project, including infrastructure, 1,200 handsets, CallManager software and more, he said.

However, he said his company didn't know about the fact that the entire order was given to AT&T with the same pricing that Infra-Comm had quoted until July. "It wasn't until the hardware arrived at the customer site that I knew the deal was dead," he said. "I then found out that we didn't get the deal. AT&T got it with the same price as ours, to the penny."

Not only did AT&T get the deal with a price and BOM that looked almost exactly like Infra-Comm's, it was done before Infra-Comm's six-month OIP with Cisco on the deal expired, Hosinski said.

Cisco gave Infra-Comm the standard two-week warning that the OIP would expire, Hosinski said. However, instead of being sent to Infra-Comm on June 27, 2006, the normal time a two-week warning would have been sent, it was sent on May 28, 2006. No one could explain why that notice was sent early, he said.

Infra-Comm requested a six-month extension anyway, and was told by a Cisco representative on June 6 that the extension would be "taken care of" that week, he said.

However, on July 27 of that year, Infra-Comm logged onto the Cisco deal-registration Web site where it learned that its OIP had been deemed "expired" by Cisco. In July, products related to the order started arriving at the customer site, and Infra-Comm was surprised when its engineers received an inventory list from the customer listing AT&T as the seller of the products.

Infra-Comm continued to receive orders from the customer for other products, and in late 2006 was doing the implementation for the order in question, Hosinski said. "We did the implementation," he said. "AT&T never implemented anything. We got paid for our services. AT&T also had our services pricing."

In January 2007, Infra-Comm filed a complaint against Cisco charging that it breached its OIP agreement. However, it continued to sell Cisco products and register deals with the vendor. Other than the OIP issue, everything continued as before, with Cisco recognizing Infra-Comm with an award for customer satisfaction excellence in January and elevating it to Silver partner status in February.

In late May, Infra-Comm filed its annual renewal of Cisco's ICPA, and received an e-mail from Cisco congratulating it that the renewal was complete. The steps and response were similar to those since the first ICPA was signed in 1999, Hosinski said.

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