Will Cisco's Settlement Satisfy the Channel?

According to published reports, Cisco has agreed to pay $5.45 million to Infra-Comm, a California VAR that successfully sued the networking vendor earlier this year for breaching its reseller contract. That means Cisco won't appeal the civil court decision it lost earlier this year.

That seems to put the specific legal matter to rest, but I bet it won't end the controversy that was ignited when Cisco breached the terms of its deal registration program by passing a large lead onto AT&T. Small VARs have been up in arms about the matter, which underscores how tactless large vendors can be when dealing with the channel. The civil case ended up being a quick and largely total victory for the VAR, whose lawyers easily convinced a jury in conservative Orange County, Calif. in late October that three clauses in the agreement are unenforceable because they are grossly unfair to the VAR (Infra-Comm in this case.)

So now Cisco lays down, Infra-Comm gets a check and everyone backs off. That's nice, but what about the Cisco reseller agreements for the rest of the channel? Will they be revised by Cisco? Will the controversial provisions involving the vendor's right of termination, damage limits and contract nonnegotiation simply not be enforced? Or is Cisco just hoping for a better outcome the next time a VAR drags the company to court over the contract?

Cisco, which prides itself on channel relations, needs to be proactive here, show some flexibility and develop a less ironclad reseller agreement that its channel can live with.


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