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RETURN DATE: AUGUST 19, 2014

NETSCOUT SYSTEMS, INC.,

SUPERIOR COURT
Plaintiff,

JUDICIAL DISTRICT OF
v.

STAMFORD/NORWALK
GARTNER, INC.,

AT STAMFORD
Defendant.

AUGUST 4, 2014
COMPLAINT
Plaintiff NetScout Systems, Inc. ("NetScout"), by its attorneys Bingham McCutchen LLP,
and in support of its claims against Defendant Gartner, Inc. ("Gartner"), respectfully makes the
following allegations. Except as to allegations regarding NetScout, which allegations NetScout
knows to be true, these allegations are made upon information and belief, based on publicly
available information and the diligent investigation conducted by NetScout.
NATURE OF THE ACTION
1. This is an action for violation of the Connecticut Unfair Trade Practices Act
("CUTPA"), Conn. Gen. Stat. 42-110b, and corporate defamation, brought by NetScout, a
Massachusetts information technology company, against Gartner.
2. Gartner, an information technology ("IT") research giant, markets itself as an
"independent and objective" company offering actionable technology research from an
"unbiased source." In fact, Gartner is not independent, objective or unbiased, and its business
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model is extortionate by its very nature. Its substantial success is due to the worst kept secret in
the IT industry: Gartner has a "pay-to-play" business model that by its design rewards Gartner
clients who spend substantial sums on its various services by ranking them favorably in its
influential Magic Quadrant research reports ("Magic Quadrant reports") and punishes technology
companies that choose not to spend substantial sums on Gartner services.
3. While Gartner purports to provide objective and unbiased analysis of technology
companies in its Magic Quadrant reports, Gartner sells other services to technology companies,
including "consulting" services, informing companies that, if they pay for Gartner's "consulting"
services, the companies will enhance their relationships with Gartner analysts, an obvious means
of improving their prospects in the Magic Quadrant report. Gartner's message is plain: pay
Gartner for "consulting" services and in exchange Gartner will rank your company higher and
make favorable statements about your company in its Magic Quadrant report.
4. This "pay-to-play" business model is facilitated by Gartner's immense influence
within the IT industry. A favorable ranking in Gartner's Magic Quadrant report can "make or
break" an IT company. IT companies are pressured into spending substantial sums on Gartner's
"consulting" services to better position themselves in these "magic" reports. As one published
article questioning Gartner's business practices observed: "[flailure to get a favorable mention
in an analyst report could undermine years of product development. Acceptance, on the other
hand, boosts a company's exposure and is essential for buyers drawing up short lists."
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5. Gartner was founded in 1979 by prominent Wall Street computer analyst Gideon
Gartner. Gideon Gartner has stated that Gartner's Magic Quadrant reports are "misused and
abused" and commented on the "potential tainting" of the "objectivity of [its] research." As
Gideon Gartner, who is no longer affiliated with Gartner, stated:
The reason why people revile the Magic Quadrant is because it is misused . . . As
a guideline for a bunch of amateurs it's one thing. But when all your clients live
or die on the basis of whether Gartner Group puts you in the upper right hand
corner in the -- or wherever -- that's really bad news. And when there's
potential tainting of the objectivity of research because you have very large
contracts with your vendors, with your customers, people will always come
and complain. . . . Today, it is overused, misused and abused, terribly.
6. The very same analysts who draft Gartner's influential Magic Quadrant reports
sell "consulting" services to the IT vendors ranked in Gartner's reports. Through its
"consulting" services, Gartner sells access to its analysts. Thus, not only is Gartner issuing
purportedly "unbiased" research about its own fee-paying clients, but the very same analysts who
draft those reports have direct consulting relationships with the companies that they purport to
"independently and objectively" analyze. These conflicts of interest inevitably lead to biased
research reports, aggressive cross-selling of Gartner's research-based consulting services, and
less desirable Magic Quadrant rankings for those technology companies who refuse to spend
substantial sums on those services.
7. The U.S. Securities and Exchange Commission ("SEC") has punished similar
business practices by financial analysts on Wall Street (as opposed to technology analysts like
Gartner), finding that such business practices violate rules requiring the financial analysts to
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observe just and equitable principles of trade and principles of good business practice. There,
like here, the financial analysts were, on the one hand, publishing analyst reports evaluating
companies, while, on the other hand, offering those same companies services for a fee.
8. Indeed, the SEC instituted enforcement actions against ten Wall Street firms,
which resulted in an over $1 billion settlement and structural reforms of the entire financial
analyst industry. See infra paragraphs 115-116. Those structural reforms were intended to
remove the conflicts of interest and unfair and deceptive business practices that led to biased and
inaccurate analyst reports. See infra paragraphs 105-118.
9. The SEC and other regulators have since promulgated regulations specifically
prohibiting financial research firms from engaging in the same types of unfair and deceptive
business practices that persist at Gartner to this day. See SEC Regulation AC; FINRA Rule 2711;
NYSE Rule 472.
10. While Gartner's business practices are not regulated by the SEC, its business
practices are no less unscrupulous or unethical. The unfair and deceptive business practices
employed by Gartner have damaged NetScout and its business through, among other things,
reputational harm and lost business opportunities. Gartner has further damaged NetScout by
forcing it to expend considerable sums of money to counteract Gartner's false and defamatory
statements within the marketplace.
11. NetScout is an industry leader for advanced network, application and service
assurance solutions. In layman's terms, it manufactures, sells and supports technology products
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that allow a company to manage, monitor, diagnose and service that company's computer
network and underlying services.
12. NetScout is the leader in its market sector. With annual revenues of
approximately $400 million, it is the largest player in a market that Gartner defined as a $1
billion market. Further, NetScout is a company of the future, with a year-over-year revenue
growth rate of 15%. It owes its success in part to the fact that its products are far more scalable
than any of its competitors -- they can be used at very large companies with very fast computer
networks -- which explains why NetScout's products are deployed in 92 of the Fortune 100
companies, all five branches of the U.S. military, 19 of the top 20 commercial banks, the top ten
airlines, and the top ten financial service providers.
13. Despite Gartner's not-so-veiled overtures, NetScout has not engaged Gartner for
"consulting" services in the past five years.
14. NetScotit suffered the consequences in a recent Gartner Magic Quadrant report.
15. In a Magic Quadrant report for the Network Performance Monitoring and
Diagnostics market ("Magic Quadrant Report for NPMD"), published on March 6, 2014, Gartner
did not rank NetScout as a "Leader." Instead, it ranked NetScout as a "Challenger," which
Gartner defined as, essentially, a technology company that saddles its customers with outdated
technology. Gartner stated falsely that NetScout is "currently struggling to deal with new
technical demands and rising expectations" and has "architectures, feature sets and pricing
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structures that require modernization (often in progress) to better compete with those in the
Leaders quadrant."
16. Further, Gartner also made the following false and defamatory statements in its
report:
I NetScout offers "only a hardware-based deployment model" that "limits [its]
ability to address growing software and SaaS solution demand."
I NetScout has a "limited ability to expand beyond its network management
heritage." NetScout is "perceived as a conservative stalwart in the NPMD space,
and lacks the reach and mind share that many smaller competitors have."
17. Gartner ranked three other companies as "Leaders" who spent a significant
amount on Gartner's services and who do not deserve to be ranked ahead of NetScout, by any
measure.
18. Upon receiving a pre-publication draft of Gartner's Magic Quadrant report,
NetScout informed Gartner both orally and in writing that the Report contained numerous false
and disparaging statements of fact about NetScout. Despite having actual notice of these factual
errors, Gartner published the Magic Quadrant Report for NPMD without material alteration and
with actual malice, knowledge and/or reckless disregard of the false and defamatory statements
of fact regarding NetScout contained within the Report.
PARTIES
19. Plaintiff NetScout is a corporation organized under the laws of Delaware, with its
principal place of business in Westford, Massachusetts.
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20. Defendant Gartner is a corporation organized under the laws of Delaware, with its
principal place of business in Stamford, Connecticut.
FACTS
NetScout's Business
21. Founded in 1984, NetScout Systems, Inc. is a world-renowned innovator and
provider of integrated network performance management ("NPM") products.
22. NetScout designs, develops, manufactures, markets, licenses, sells and supports
advanced network, application, and service assurance solutions. NetScout's solutions are used
by commercial enterprises, large governmental agencies, and telecommunication service
providers worldwide to manage and monitor computer networks, optimize the delivery of
business applications and services, and assure user experience across global IP networks.
NetScout's solutions help companies' information technology staffs to quickly analyze
performance, availability and quality for network and application service delivery. This allows
them real-time visibility to identify service delivery issues early, improve service levels, reduce
operational costs, mitigate security risks, drive better business decisions and otherwise ensure
that key information technology systems are operational and functioning properly. Thus,
NetScout's products allow some of the largest companies in the world to monitor and ensure the
functionality of their information technology systems, and rely on that functionality to deliver
products and services to their customers.
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23. NetScout went public in 1999, and almost immediately exceeded the market's and
industry's expectations by earning over $100 million in annual revenues by 2001, less than ten
years after its first product introduction.
24. NetScout has a long history of innovation within the NPM market. NetScout
introduced the industry's first packet-flow based probe. Nearly every NPM market participant
now uses variations of the packet-flow based probe technology that NetScout pioneered.
NetScout has installed over 20,000 network probes to date, covering over 100,000 networks,
which is more than all of NetScout's competitors, combined. NetScout also was the first to
deliver an NPM solution for Switched LANs, one of numerous innovations from NetScout.
25. From its humble beginnings as a fledging technology startup in 1984, NetScout
has grown, both organically and through several strategic acquisitions, into a leader in the NPM
market. In 2007, NetScout acquired one of its principal direct competitors and a well-known
leader in the NPM market space, Network General. Just five years after the Network General
acquisition, International Data Corp., a leading market research, analysis, and advisory firm,
declared NetScout the largest NPM company in the world based on annual revenues. Since 2011,
NetScout's annual revenue has grown from $260 million to nearly $400 million.
26. NetScout's global reach is undeniable. NetScout offers sales, support, and
services in more than 30 countries, yielding international revenues for fiscal year 2014 of
approximately $93 million.
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27. NetScout's products are deployed in 92 of the Fortune 100 companies (including
all five of the top five), 370 of the Fortune 500 companies, and more than 165 service providers.
Additionally, all five branches of the U.S. military, 19 of the top 20 commercial banks, ten of the
top ten airlines, and ten of the top ten financial service providers utilize NetScout technology.
28. After decades of consistent vision, innovation, and leadership, NetScout employs
more than 1,000 people and earned approximately $400 million in revenue for its fiscal year
2014. For its first fiscal quarter of 2015, NetScout earned revenue of approximately $108
million, a 32% year-over-year increase, and it earned non-GAAP net income of $15 2 million, a
75% year-over-year increase. As of June 30, 2014, NetScout held $234 million in cash and cash
equivalents and short and long-term marketable securities.
29. NetScout earned more than $350 million in revenue in fiscal year 2013. Thus,
from fiscal year 2013 to fiscal year 2014, NetScout grew its annual revenue by $50 million,
while the three NetScout competitors that Gartner placed in the "Leaders" quadrant achieved less
than $50 million in revenue growth, combined.
30. NetScout is the only company in the NPM space that has such a rich history of
technological innovation, depth and breadth of customer base, dedication to research and
development, product vision, and history of sustained growth. All of the foregoing facts about
NetScout's business were known or available to Gartner when it published the Magic Quadrant
Report for NPMD.
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Gartner And Its Magic Quadrant Research Reports
31. Founded in 1979, Gartner refers to itself as "the world's leading information
technology research and advisory company." It employs approximately 6,000 associates,
including almost 1,500 research analysts and consultants. It has clients in 85 countries.
Gartner's revenue for 2013 exceeded $1.7 billion.
32. Gartner claims to offer "insight" concerning the IT industry. It states:
We deliver the technology-related insight necessary for our clients to make the
right decisions, every day. From CIOs and senior IT leaders in corporations and
government agencies, to business leaders in high-tech and telecom enterprises and
professional services firms, to technology investors, we are the valuable partner to
clients in over 14,000 distinct organizations. Through the resources of Gartner
Research, Gartner Executive Programs, Gartner Consulting and Gartner Events,
we work with every client to research, analyze and interpret the business of IT
within the context of their individual role.
33. One of the foundations of Gartner's influence within the IT industry is its Magic
Quadrant research reports. Magic Quadrant reports purport to provide Gartner's objective,
factual research analysis of particular IT market segments identified by Gartner analysts.
34. Gartner's Magic Quadrant research methodology provides a graphical competitive
positioning of four types of technology providers in fast-growing markets: Leaders, Visionaries,
Niche Players and Challengers. Leaders are obviously the most desirable position. Niche
players are the least desirable position.
35. Gartner's Magic Quadrant reports are aimed at the customers or potential
customers of the IT vendors analyzed in those reports. The Magic Quadrant reports purportedly
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are designed to aid large-scale consumers of IT products in making purchase or product
investment decisions within the identified segment of the IT industry addressed by the particular
Magic Quadrant report.
36. According to Gartner, placement in the Magic Quadrant is determined by two
primary criteria: "Ability to Execute" and "Completeness of Vision." A vendor's "Ability to
Execute" is reflected along the vertical axis of the grid. A vendor's "Completeness of Vision" is
reflected along the horizontal axis of the grid.
Challengers Leaders
Niche
Players
Visionaries
Completeness of Vision
37. Gartner maintains that it uses a "uniform set of evaluation criteria" to determine
where a vendor is placed within the Magic Quadrant. Those evaluation criteria are defined in the
Magic Quadrant Report for NPMD and weighted according to their supposed importance.
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38. Gartner purports to use the following criteria to evaluate a vendor's "Ability to
Execute":
I Product/Service
I Overall Viability (Business Unit, Financial, Strategy and Organization)
I Sales Execution/Pricing
I Market Responsiveness and Track Record
I Marketing Execution
I Customer Experience
39. Gartner purports to use the following criteria to evaluate a vendor's
"Completeness of Vision":
I Market Understanding
I Marketing Strategy
I Sales Strategy
I Offering (Product) Strategy
I Business Model
I Vertical/Industry Strategy
I Innovation
I Geographic Strategy
40. Gartner does not publicly disclose how it scores each vendor relative to each of
those criteria. The unmistakable implication Gartner conveys, however, well understood by any
reasonable reader, is that Gartner's conclusions rest on its purportedly "fact-based" analysis.
41. In addition to the Magic Quadrant itself, Gartner's Magic Quadrant reports also
contain narrative summaries of each of the companies that it places in the Magic Quadrant.
Those summaries typically consist of a one-paragraph description of the given company, its
business, and products.
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42. Directly below the narrative description are two headings entitled "Strengths" and
"Cautions." Underneath the "Strengths" heading are bullet points listing what purport to be
positive facts concerning the company. Underneath the "Cautions" heading are bullet points
listing what purport to be negative facts concerning the company.
Gartner Wields Enormous Influence In The IT Industry
43. Gartner's dominance in the IT research industry is beyond dispute, and that
dominance has, in large part, been built upon its influential Magic Quadrant research reports.
Gartner touts its influence in the IT industry in its marketing materials and financial reports filed
with the SEC, stating that it is "the world's leading information technology research and advisory
company" and that it "create[s] the broadest, highest-quality and most relevant research coverage
of the IT industry."
44. Gartner has cultivated its influence within the IT research industry by acquiring
many of its competitors. Since Gartner went public in 1993, it has made more than 32
acquisitions and investments.
45. Gartner's marketing materials state that its research reports influence "thousands"
of IT purchasing decisions: "[t]housands of companies and government agencies worldwide will
not make major IT decisions without asking, 'What does Gartner Say?"
46. Indeed, the primary consumers of NetScout's products, such as large businesses,
institutions and government entities, rely heavily, and in some cases exclusively, on Gartner's
Magic Quadrant reports when making IT purchasing decisions. For example, a Department of
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Veterans' Affairs report found that $16 million in purchases were made entirely on the basis of
Gartner's reports (which the Department's Inspector General found improperly limited
competition).
47. Companies seeking to purchase IT equipment sometimes refuse even to consider
making technology purchases from companies that are not Leaders in Gartner's Magic Quadrant
research reports. For example, in certain international technology markets, such as Asia and the
Middle East, purchasers often invite product bids only from technology vendors that Gartner has
ranked in the "Leaders" quadrant of their Magic Quadrant research reports.
48. Being ranked as a "Leader" often results in increased sales and revenue for IT
vendors. In addition, IT vendors that Gartner ranks as "Leaders" often become more attractive,
and valuable, acquisition targets for companies looking to improve both their standing within a
particular technology market and their placement within Gartner's Magic Quadrant reports.
49. IT vendors that have been ranked as "Leaders" in Gartner's Magic Quadrant often
advertise that ranking on their company websites. Gartner facilitates that advertising by charging
IT vendors a fee to allow them to include a link on their website to a licensed copy of the
relevant Magic Quadrant report.
50. Each of the IT vendors that Gartner ranked as "Leaders" in Gartner's Magic
Quadrant Report for NPMD advertises its "Leader" ranking on its website and provides a link to
a complimentary licensed version of the Magic Quadrant Report for NPMD.
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Gartner's Business Model And Practices
51. Gartner's extraordinary influence in the IT industry is well known and publicly
recognized by IT industry observers and participants. How Gartner wields that influence,
however, has raised serious questions within the IT industry, and amongst market observers,
concerning Gartner's business practices. In particular, an article in InformationWeek entitled
"Credibility Of Analysts" reported on Gartner's "troubling" business practices and influence
within the IT industry.
52. In that article, InformationWeek publicized what many IT vendors had long
known, but were reluctant to state publicly for fear of reprisal: Gartner's business model is
inherently biased and favors those IT vendors who are high-paying Gartner clients. As
InformationWeek reported regarding Gartner's business model:
[T]hey . . . rake in millions providing services to the very same companies they
monitor, heavyweights like Cisco, IBM, Microsoft, and Oracle. Which leads to a
question that continues to dog the research firms: How much influence do
technology vendors have over their work?
At issue are business practices that beg for closer scrutiny.
53. InformationWeek provided specific examples of how IT vendors feel compelled
to buy into Gartner's "pay-to-play" business model due to its outsized influence within the IT
industry. InformationWeek highlighted the experience of IT vendor and Gartner client,
Proofpoint. Proofpoint's senior VP of marketing and products acknowledged the importance of
receiving a favorable placement in Gartner's Magic Quadrant reports:
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Proofpoint, a Gartner client since 2003, expects to be included in Gartner's first-
ever Magic Quadrant for content monitoring and filtering software . . . . "This
matters more than you want it to matter," says Sandra Vaughan, Proofpoint's
senior VP of marketing and products.
Failure to get a favorable mention in an analyst report could undermine
years of product development. Acceptance, on the other hand, boosts a
company's exposure and is essential for buyers drawing up short lists. "Our
target market is big companies, so Gartner matters," Vaughan says.
54. The InformationWeek article concludes by noting that "[r]esearch firm executives
are well aware of the questions being raised about their business models, but don't expect
changes to be fast or wide-sweeping. The financial stakes are too high -- and the incentives for
change aren't compelling enough."
55. The concerns expressed in the InformationWeek article about Gartner's business
practices are widespread amongst persons who work in the IT industry. One person noted how
his experience with one of Gartner's research analysts led him to conclude that "you need to be
paying to play." As that person stated:
When with a previous employer, in one MQ interview I did it was suggested by,
the Gartner analyst that we were "not visionary enough" for that part of the
quadrant. When I asked what was visionary I was told that to get that
information we needed to be clients. So I concluded that you had to pay to
know what was visionary and then re-work that into your vision in a nice circular
process. So I do not know what the cost is but it seems to me you need to be
paying to play.
56. Another person recounted how insiders at web content management firms have
indicated to him that "you need to shell out" money to Gartner to be included in Gartner's Magic
Quadrant reports:
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I don't put much stake in their magic quadrants simply because I've got contacts
at a number of [web content management] firms who've been told in a
nutshell that they have to shell out [money to Gartner] to be included. I will
not mention names but I trust them. While [Gartner] may not come right out and
say they charge a fee, they certainly aren't going to give you something for
nothing. It's all based on how much you do or might spend Ion Gartner], as
far as I'm concerned.
57. Yet another person has recounted his own personal experience with Gartner's
"pay-to-play" business practices while employed at an IT vendor:
I have had personal experience via a company I worked for that we were only
included in an M[agic] Quadrant] when we became a Gartner customer, and
when we stopped being a customer we weren't invited to participate in the
MQ again.
So sorry, ex-Gartner folk, but it is a pay-for-play game.
58. Gartner's "pay-to-play" business model is founded upon the influence of its
research reports within the IT industry. Gartner leverages its influential research to pressure IT
vendors that are the subject of that research into purchasing additional services from Gartner.
59. Gartner describes its "independent research on IT and supply chain issues" as
"[t]he foundation for all Gartner products and services." Gartner sells its "findings from this
research" through three business segments that it markets as Research, Consulting and Events.
60. Gartner describes its "Research" segment (which produces the Magic Quadrant
reports) as delivering "independent, objective IT research and insight primarily through a
subscription-based, digital media service." Gartner's research is "the fundamental building
block for all Gartner services."
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61. Gartner actively seeks to develop, and does develop, close economic relationships
with the same companies that it rates in its research reports.
62. Gartner's business model seeks to leverage its "most valuable clients" by "cross-
selling" its services, including its "consulting" services. The term "cross-selling," as used by
Gartner, amounts to a euphemism for its practice of pressuring its research clients to pay for
additional services or risk negative treatment in its influential research reports. What Gartner
refers to as "cross-selling," is really a "carrot-and-stick" approach to getting its IT vendor clients
to purchase additional Gartner services.
63. In its 2013 Form 10-K filed with the SEC, Gartner states that its business model
seeks to leverage its "most valuable clients" by "cross-selling" its services, including its
"consulting" services. According to Gartner, its business model:
[F]acilitate[s] increased client spending on [Gartner's] research, consulting
services and events. A critical part of [Gartner's] long-term strategy is to
increase business volume with our most valuable clients, identifying
relationships with the greatest sales potential and expanding those relationships by
offering strategically relevant research and advice . . . . These initiatives have
created additional revenue streams through more effective packaging,
campaigning and cross-selling of our products and services.
64. One of the components of Gartner's "long-term strategy" is the "cross-selling" of
its "consulting" service to its research clients. As Gartner disclosed: "Gartner consulting
deepens relationships with our Research clients by extending the reach of our research
through custom consulting engagements."
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65. Gartner's unmistakable message to IT vendors is that they can improve their
placement in the Magic Quadrant by buying access to Gartner's analysts to receive their
"perspective" on how the given IT market will develop.
66. One employee at an IT vendor covered by Gartner analysts recounted his own
experience with Gartner's "cross-selling" of its services in a post entitled "How much does it
cost to be included in Gartner Magic Quadrant?" As that employee stated:
I received [the] following email from [a] Gartner sales rep: your biggest
competitor [in] SF just came onboard this quarter and took advantage of our
flexibility. Also they are in the process of filling out the BI MQ questionnaire
which they are not guaranteed to be included but are working with the analysts to
get more coverage in 2011. I want to give you a heads up because if you see
that they are included and you are not, being a client will give you a good
vehicle to plead your case.
67. Thus, whether and how much a vendor pays Gartner for its "consulting" services
is an important factor that bears on where Gartner places an IT vendor in the Magic Quadrant
and what Gartner states regarding the IT vendor in its Magic Quadrant report.
68. To improve or retain their placement in the Magic Quadrant under Gartner's
business model, IT vendors must spend substantial sums of money on Gartner's services,
including, but not limited to, services that allow access to Gartner analysts.
69. To obtain the most basic level of access to Gartner's analysts, vendors must
purchase what Gartner refers to as an "inquiry seat." An "inquiry seat," which costs $50,000,
may only be used by one designated individual at the vendor for a 12-month period. An "inquiry
seat" entitles the vendor-designated individual access to Gartner's research reports relating to a
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specific discipline, and access to Gartner analysts in the form of analyst "inquiries." If a vendor
does not have an inquiry seat, it cannot participate in calls with analysts.
70. Analyst "inquiries" -- available only to Gartner client seat holders -- are
conference calls that typically last 30 minutes or less and that are generally related "only to the
interpretation or application of Gartner research." On its website, Gartner describes analyst
"inquiries" as follows: "During inquiries, the flow of information is mostly from analyst to
vendor and can be highly interactive." "Seat" holders, however, are not entitled to "extensive
analysis or additional research by the analyst" during the inquiries.
71. Both client seat holders and non-client seat holders may participate in "vendor
briefings," during which vendors may "present their product, business plans and strategies to
Gartner analysts." "Vendor briefings" are one-way, meaning that "the flow of information is
strictly from vendor to analysts and is not an interactive analyst feedback session." Thus,
vendors do not receive a Gartner analyst's "perspective" during "vendor briefings."
72. Gartner refers to this one-way flow of information from IT vendors to Gartner
analysts as "outbound" "analyst relations" strategy. A purely "outbound" "analyst relations"
strategy can be achieved through "vendor briefings," for which IT vendors are not required to
pay. Gartner describes the "outbound" analyst relations strategy as providing the lowest amount
of "strategic value."
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Strategic Advisor
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analysts, if Inbound =2XOutbound, your mix is healthy. Gartner
73. One way that Gartner implements its "pay-to-play" business model is by
recommending that Gartner research clients adopt an "inbound" analyst relations strategy that
necessarily involves the payment of a substantial amount of money to Gartner.
74. According to Gartner, the highest amount of "strategic value," or "maximum
value," is achieved through an "inbound" "analyst relations" strategy. Gartner depicted its
recommended best practices for "analyst relations" strategy in the following slide:
75. An "inbound" strategy requires "[a] two-way consultative relationship" involving
"[f]ace-to-face strategic sessions with analysts." This "analyst relations strategy" requires IT
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vendors to spend substantial sums of money to purchase both a "seat," which entitles the holder
to analyst "inquiries," and to pay for Gartner's "consulting" services, also referred to as
Gartner's Strategic Advisory Services ("SAS"). Gartner instructs that if an IT vendor's
"inbound" interactions with analysts are twice its "outbound" interactions, "your mix is healthy."
76. Gartner actively and openly cross-sells its "consulting" services to IT vendors that
pay for its subscription-based research services. The analysts who provide those "consulting"
services are the same Gartner analysts who determine where an IT vendor is placed in the Magic
Quadrant.
77. The more a vendor spends on Gartner "consulting" services, the "healthier" its
relationship will be with the analysts who determine where that vendor will place in Gartner's
Magic Quadrant. By purchasing access to the analysts through Gartner's "consulting" services,
the IT vendor can achieve the requisite "healthy mix" of interaction with Gartner analysts that is
a substantial contributing factor to achieving favorable placement in Gartner's Magic Quadrant
reports.
78. Gartner's founder, Gideon Gartner, has commented on the "potential tainting" of
the "objectivity of [Gartner's] research." As Gideon Gartner stated:
The reason why people revile the Magic Quadrant is because it is misused . . . As
a guideline for a bunch of amateurs it's one thing. But when all your clients live
or die on the basis of whether Gartner Group puts you in the upper right hand
corner in the -- or wherever -- that's really bad news. And when there's
potential tainting of the objectivity of research because you have very large
contracts with your vendors, with your customers, people will always come
and complain. . . . Today, it is overused, misused and abused, terribly.
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79. Gartner's business model creates incentives for its analysts to: (1) place favorably
in Gartner's Magic Quadrants those IT vendors that pay substantial sums for Gartner's services;
and (2) not place favorably in its Magic Quadrants those IT vendors that do not pay substantial
sums of money for its services. The message is clear: IT vendors who pay substantial amounts
to Gartner for its services will be rewarded for their investment with favorable placement in
Gartner's influential Magic Quadrant report. The IT vendors who do not pay substantial
amounts for Gartner's services are encouraged to do so in the future to improve their placement
within the Magic Quadrant report.
80. Gartner itself is well aware of the commonly held belief in the IT industry that it
engages in "pay-to-play" business practices.
81. On October 8, 2009, a Gartner Vice President and research analyst felt the need to
"rant a little" about the commonly held belief that Gartner engages in "pay-to-play" business
practices "and can be bought." Numerous IT industry commentators responded to the Gartner
analyst's "rant" by raising further questions concerning the propriety of Gartner's business
practices.
82. One commentator recounted how, as an IT vendor, he has been told by Gartner
sales people that they "must pay between 30 and 50K$" to "enter the Magic Quadrant." As that
commentator wrote, responding to the proposition that Gartner does not engage in a pay-to-play
scheme:
Surely you're kidding.
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As a software vendor, we are told first hand by Gartner's salespeople that to
enter the Magic Quadrant for our own market, we must pay between 30 and
50K$.
How can you say you can't be bought then! This is just ludicrous.
J. (Not my real name, withholding the name of my company out of fear of
retribution).
83. Yet another commentator questioned Gartner's practice of cross-selling
"consulting" services to the subjects of its research reports:
To eliminate any concerns about vendor bias, how about Gartner eliminate
consulting contracts and payments from vendors?
I assume this is a naive question.
However, such a move would provide the strongest possible financial incentive[s]
and align with end users interest.
84. Another commentator, IT industry journalist Dennis Howlett, noted how "he gets
complaints every week of the 'pay to play' argument." As Howlett explained:
I get complaints pretty much every week of the 'pay to play' argument so
whether you believe it or not is immaterial. It goes back to what @vinnie says
about firm level issues and the corporate emphasis on aggressive selling or
as one of your major clients puts it to me: tin cupping.
85. Howlett further elaborated on the IT industry complaints about Gartner's "pay-to-
play" business practices:
I would not repeat what I am told if it was one off or obvious sour grapes but I
can say that some vendors I've spoken with see 'pay to play' (and not just
Gartner but the analyst community as a whole) as an irritant to the point where I
can immediately think of at least a handful that have voted with their wallets
and said 'no more' after many years of engagement.
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86. The foregoing is just a sampling of the serious objections that have been raised
by IT industry vendors, observers, commentators, and journalists about Gartner's "pay-to-play"
business practices.
Gartner Creates The Impression That Its
Magic Quadrant Reports Are Based On A Large Body Of
Undisclosed Facts To Further Its "Pay-to-Play" Business Practices
87. Gartner's Form 10 -K filed with the SEC states that its business model "provides
multiple entry points and synergies that facilitate increased client spending on our research,
consulting services, and events." A critical part of Gartner's long-term strategy is to "increase
business volume with its most valuable clients, identifying relationships with the greatest sales
potential."
88. One such entry point to increase client spending are Gartner's Magic Quadrant
reports.
89. The purported analysis in Gartner's Magic Quadrant reports is founded upon a
large quantity of undisclosed facts and data that Gartner compiles during its research process and
knowingly withholds from publication.
90. Gartner's withholding of facts and data from its Magic Quadrant reports allows it
to market or "cross- sell" those undisclosed facts and data as part of its purportedly "fact-based"
consulting services. In so doing, Gartner implies to its audience that the assertions made in its
Magic Quadrant reports are supported by undisclosed facts known only to Gartner and which the
audience is unable to evaluate.
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91. To accomplish Gartner's stated goal of effectively "packaging, campaigning and
cross-selling [its] products and services," Gartner makes sure that its "most valuable clients" are
aware that its Magic Quadrant reports are founded upon "fact-based" analysis.
92. Thus, Gartner creates the impression that the research and analysis in its Magic
Quadrant reports is based on an undisclosed wealth of objective fact underlying its "fact-based"
analysis.
93. To create that impression, Gartner touts the large volume of facts and data that its
analysts compile as part of their research process. Gartner, however, does not disclose those
facts and data in its Magic Quadrant reports.
94. Under the "Why Gartner" section of its website, Gartner states that its "insights
are drawn from a critical fact base not available anywhere else."
95. In a slide presentation entitled "Gartner Delivers the Technology-Related Insight
Necessary for Our Clients to Make the Right Decisions, Every Day," Gartner asserts that its
analysts provide "[al ccurate and fact based coverage created by well-timed and delivered
vendor briefings and other analyst interactions."
96. In Gartner's brochure entitled "Inside Gartner Research," it describes its
"quantitative/qualitative blend" of research that "collect facts, findings and observations." In
that same brochure, Gartner explains how "[f]ocus group and survey results" help "refine its
[research] agenda." According to Gartner, "[p]ersonal interactions at events provide additional
insight, which feeds into our quarterly review and recalibration process."
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97. In that same document, Gartner describes the breadth of the fact gathering process
that supports its research:
[A]nalysts gather information through formal and informal surveys of IT users,
technology providers and investors, business professionals, academicians and
other researchers. For example, analysts survey technology users' investment and
budget plans, and consult financial reports and government macroeconomic
studies. Ideas are brainstormed within Gartner research communities.
By analyzing lots of data from lots of sources, Gartner can begin to see valid
patterns emerging within markets. Assumptions are modified, new revelations are
sparked, and scenarios are updated.
98. In Gartner's publication "The Gartner Research Process and Methodologies,"
Gartner posits that its analyses are "valid" because they "are grounded in a solid base of facts
verified by our own experienced analysts and others in business and academia."
99. In that same document, Gartner describes that nature of the undisclosed facts and
data that purportedly support the "conclusions" in its Magic Quadrant reports:
Our conclusions are based on the hard evidence we collect -- through our analysts
and market surveys -- from the real-life experiences of our clients (who number
60,000 across 10,000 distinct organizations worldwide).
100. On the "Research and Methodologies" page of its website, Gartner references its
"access" to a "vast network of fact" that provides Gartner with the "facts, opinions and
projections to help clients make better decisions."
101. In a post on Gartner's website entitled "How not to use a Magic Quadrant,"
Gartner explained how a Magic Quadrant report reflects only a "tiny percentage" of what a
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Gartner analyst "actually knows" about a vendor. Gartner also explained that the vendor-specific
bullet points in Gartner's Magic Quadrant reports are based on "a pile of qualitative data." As
Gartner notes:
[A]n MQ [or Magic Quadrant Report] reflects only a tiny percentage of what an
analyst actually knows about the vendor. Its beauty is that it reduces a ton of
quantified specific ratings (nearly 5 dozen, in the case of my upcoming MQ) to a
point on a graph, and a pile of qualitative data to somewhere between six and
ten one-or-two-sentence bullet points about a vendor.
102. Through these statements and disclosures, as well as others, Gartner intentionally
sought to create, and did create, the impression that the statements in its Magic Quadrant reports
were supported by a bevy of undisclosed objective facts and data.
103. Gartner uses the deliberate non-disclosure of the facts and data underlying its
Magic Quadrant reports to lure its vendor-clients into purchasing "consulting" services from the
same analysts who draft the Magic Quadrant report and who purport to have direct access to the
undisclosed facts and data.
104. These "pay-to-play" business practices are not new to the research analyst
industry. Regulators have attempted to eradicate as unscrupulous, unethical and against public
policy similar "pay-to-play" business practices among research analysts in the financial services
industry.
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It Is Well Established That "Pay-To-Play" Business Practices
By Research Analysts Are Unscrupulous And Against Public Policy
105. Following the collapse of technology stocks in the 1990s and early-2000s, it came
to light that research analysts at some of Wall Street's largest investment banks had prepared
favorable research reports on companies that were also clients of the investment banks.
106. Many Wall Street investment banks employ research analysts that issue research
reports on the financial performance of corporations. Those analysts are commonly referred to
as financial analysts or research analysts.
107. Much like Gartner today, at the time, those same investment banks purported to
employ analysts and issue research reports that were independent, objective and free from bias.
108. However, in 2003, the SEC filed complaints against ten of the largest Wall Street
investment banking firms, in which it accused these firms and their analysts of engaging in
practices substantially similar to those that Gartner and its analysts currently practice.
109. The SEC alleged that six of these firms improperly "aligned" their research
analysts with their investment banking divisions in order to leverage their limited research
resources, generate new clientele, and/or offset the cost of research.
110. Similarly, Gartner improperly markets and cross-sells its "consulting" services to
IT vendors that are the subject of its analysts' research. Gartner's business model openly seeks
to: (1) "facilitate increased client spending on [its] research, consulting services and events;" (2)
"identify[] relationships with the greatest sales potential and expand[] those relationships by
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offering strategically relevant research and advice;" and (4) deepen "relationships with . . .
Research clients . . . through custom consulting engagements." Gartner further disclosed that the
foregoing initiatives "created additional revenue streams through more effective packaging,
campaigning and cross-selling of [its] products and services."
111. The SEC alleged that research analysts at all ten of the firms participated in
investment banking marketing efforts, including working with investment bankers to compile
"pitch" materials and attendance at industry "road shows."
112. Likewise, Gartner research analysts are involved in the "packaging, campaigning
and cross-selling of Gartner's products and services" to the same IT vendors that are the subject
of Gartner's research reports. Gartner analysts also attend "Gartner Symposium/ITxpo events
and Gartner Summit events" that "offer[] current, relevant and actionable technology sessions
led by Gartner analysts to clients and non-clients." Gartner clients and non-clients spend
thousands of dollars to attend and participate in these events in order to achieve a more favorable
ranking in Gartner's research reports, including its Magic Quadrant reports.
113. The SEC alleged that, at eight of the ten firms, research analyst conflicts of
interest resulted in analysts publishing research that was exaggerated, unwarranted, and/or
inaccurate.
114. Gartner's analysts suffer from the same disabling conflicts. IT vendors who
spend more on Gartner's services thus are similarly more likely to receive favorable rankings in
Gartner's research reports and, in particular, Gartner's Magic Quadrant reports.
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115. The SEC settled its enforcement actions against these ten Wall Street firms in
what the SEC titled the "Global Research Analyst Settlement." These firms, collectively, agreed
to the following terms:
a) $487.5 million in penalties;
b) $387.5 million as a disgorgement;
c) $432.5 million to provide the firms' clients with independent research;
d) $80 million to be used for investor education; and
e) An injunction against future violations of NASD and NYSE rules.
116. In addition, the Wall Street firms agreed to structural reforms in the operations of
research and investment banking divisions intended to prevent similar conflicts of interest from
occurring in the future. These reforms include:
a) Research and investment banking functions within the firm must be physically
separated;
b) Firewalls must be put in place that are reasonably designed to prevent all
improper communication between investment banking and research personnel;
c) Research analysts are not permitted to participate in efforts to solicit investment
banking business, including pitches and "road shows";
d) Investment banking personnel are prohibited from playing any role in determining
which companies are covered by research analysts;
e) Research analyst compensation may not be related, directly or indirectly, to
investment banking revenue or input from investment banking personnel; and
f) Research analyst compensation must be based, in large part, on the quality and
accuracy of the analyst's research.
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117. The SEC's settlement with these firms is but one example of its efforts to remove
the undue bias, conflicts of interest and unfair and deceptive business practices pertaining to
financial research analysts at large financial institutions.
118. The SEC, FINRA and the NYSE have since passed regulations specifically
prohibiting within financial research firms the same business practices, undue influence,
conflicts of interest, and structural biases that persist at Gartner to this day. See SEC Regulation
AC; FINRA Rule 2711; NYSE Rule 472. Those rules and regulations provide, among other
things, as follows:
a) Research analysts may not be paid any bonus, salary or other form of
compensation that is based upon a specific investment banking transaction;
b) Research analysts are prohibited from participating in efforts to solicit investment
banking business; and
c) Research analysts are prohibited from having communications with companies for
the purpose of soliciting investment banking business.
119. The same concerns relating to research analyst conflicts of interest, client bias,
lack of objectivity, and cross-selling and marketing of other services that prompted the foregoing
rules and regulations apply with equal or greater force to Gartner's business practices for, among
other things, the following reasons:
a) The same Gartner analysts that draft Gartner's research reports also provide
Gartner's consulting services;
b) Gartner encourages its research analysts to cross-sell its consulting services to its
"most valuable" clients with the "greatest sales potential," which clients are also
the subject of those same analysts' research reports; and
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c) Gartner recommends to the vendors that are the subject of its research reports that
they spend substantial amounts of money on Gartner "consulting" services to
achieve a "healthy mix" of interaction with Gartner's research analysts and
improve their "analyst relationship."
120. The biases and conflicts of interest inherent in Gartner's business model, and
borne out by its business practices, result in Gartner knowingly and/or recklessly publishing false,
inaccurate, and biased research to the detriment of NetScout and the IT industry as a whole.
NetScout's Participation In The 2014 Magic Quadrant For NPMD
121. On July 29, 2013, Gartner announced its new Magic Quadrant for the Network
Performance Monitoring and Diagnostic market. Gartner stated that the NPMD market "had
risen to enable [infrastructure and operations] organizations to be proactive and strategic with
network management planning and strategy." According to Gartner, the NPMD market is
"focused on providing greater visibility of an organization's IT infrastructure from a network
perspective."
122. What Gartner refers to as the NPMD market is substantially similar, if not
identical, to the network performance management, or NPM, market that has existed for over
twenty years.
123. The authors of the announcement materials published on July 29, 2013,
"Introducing the Network Performance Monitoring and Diagnostic Market," were Vivek Bhalla,
Jonah Kowall, and Colin Fletcher.
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124. That same day, Gartner published its "Criteria for the New Magic Quadrant for
Network Performance Monitoring and Diagnostics." Bhalla, Kowall, and Fletcher also authored
the criteria. This publication listed "Inclusion Criteria" and "Nonproduct-Related Criteria" that
vendors were required to meet to be considered for the 2014 Magic Quadrant for NPMD.
125. In an email dated September 2, 2013, Gartner formally invited NetScout to
participate in the NPMD Magic Quadrant process. Included in, or attached to, the email were:
(1) Gartner's NPMD market definition; (2) the inclusion criteria discussed above (see supra
paragraph 124); (3) the evaluation criteria discussed above (see supra paragraphs 37-39); (4) a
research and process timeline; and (5) a vendor survey.
126. The vendor survey, which NetScout was to complete focusing on the disclosed
inclusion and evaluation criteria, consisted of 21 pages and three primary sections: (1) general
vendor background information; (2) NPMD product functionality; and (3) references and recent
win list.
127. On October 1, 2013, NetScout submitted to Gartner its 52-page vendor survey
response for the 2014 Magic Quadrant for NPMD, which detailed, among numerous other things,
NetScout's market experience, vision, selling strategy, revenue and income data, specifics
regarding its products' functionality, and a list of NetScout's U.S. and International patents.
128. Over the course of October, November, and December 2013, NetScout engaged in
a series of communications with Gartner analysts concerning, among other things, NetScout's
business, products, pricing, and positioning in the marketplace.
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129. On January 9, 2014, Gartner provided NetScout with a draft of its Magic
Quadrant Report for NPMD in which it categorized NetScout as a "Challenger." The draft report
contained the Magic Quadrant graphic and the written narrative, "Strengths," and "Cautions"
pertaining to NetScout. It did not contain the definitions of the four categories of rankings:
Leaders, Challengers, Visionaries, and Niche Players.
130. After January 9 and prior to March 6, 2014, NetScout communicated with Gartner
analysts, Vivek Bhalla, and Colin Fletcher, Gartner's Chief Executive Officer, Eugene Hall, and
Gartner's ombudsperson, Nancy Erskine. During these communications, NetScout addressed, in
significant detail, each of the false statements in Gartner's draft Magic Quadrant report. In
particular, NetScout explained to Gartner how the statements regarding NetScout were false,
including the "Cautions" attributed to NetScout, the content of the narrative, the rankings, and
the weighting of the Magic Quadrant draft report. NetScout provided to Gartner a statement of
the relevant facts and evidence to counter each one of Gartner's false statements, and it
highlighted the key areas in which NetScout, and its products, excel as leaders. In addition,
NetScout expressed its concern with the fairness and accuracy of Gartner's assessment.
131. Despite these detailed communications, which provided Gartner with actual
knowledge of the falsity of its statements about NetScout, Gartner refused to remove the false
statements concerning NetScout from its report.
132. Upon learning that Gartner was unwilling to remove its false statements from its
Magic Quadrant Report for NPMD, NetScout's CEO asked Gartner to remove NetScout entirely
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from that report. Gartner's ombudsperson stated to NetScout's CEO that Gartner was not willing
to remove NetScout from the report because NetScout was such a large player in the NPM
market that Gartner's report would lack credibility if NetScout were to be removed.
133. On March 6, 2014, Gartner published the Magic Quadrant Report for NPMD,
which contained the same false statements of fact included in the prior draft it had sent to
NetScout. That report included a definition of "Challengers" that contained additional false
statements of fact concerning NetScout, and evidenced biased analysis skewed in favor of other
Gartner clients.
134. The Magic Quadrant Report for NPMD was widely disseminated to subscribers of
Gartner's research reports through its website, as well as through other means. Many of the
subscribers, entities and persons who received and read Gartner's Magic Quadrant Report for
NPMD are either current NetScout customers or potential customers of NetScout's products.
135. The published version of the Magic Quadrant Report for NPMD was purportedly
authored by research analysts Jonah Kowall, Vivek Bhalla, and Colin Fletcher.
136. The published version of the Magic Quadrant Report for NPMD contained the
same false statements of fact that were included in the draft report that Gartner sent to NetScout
on January 9, 2014, as well as additional false statements of fact about NetScout.
137. Gartner's Magic Quadrant Report for NPMD states the following about vendors
placed in the "Leaders" quadrant:
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The Leaders quadrant represents those vendors that are pushing the NPMD
market forward, including those with comprehensive portfolios and the ability to
handle multiple application and technology types. They offer a choice of
hardware or software appliances for optimum flexibility. Additionally, the use of
SaaS delivery methods within portfolios gives enterprise IT teams more choices,
while making formerly premium priced NPMD solutions attainable by midsize
organizations.
138. Gartner's Magic Quadrant Report for NPMD states the following about vendors
placed in the "Challengers" quadrant:
Challengers consist of those with high market reach and large deployments.
Once leaders in the network performance monitoring market, they are
currently struggling to deal with new technical demands and rising
expectations. These established NPMD vendors bring a substantial installed base,
but also architecture, feature sets and pricing structures that require
modernization (often in progress) to better compete with those in the Leaders
quadrant.
139. In the Magic Quadrant Report for NPMD, Gartner placed NetScout in the upper
left corner of the Magic Quadrant grid, also known as the "Challengers" quadrant.
140. The Magic Quadrant Report for NPMD listed the following three "Cautions"
concerning NetScout:
I NetScout has limited ability to expand beyond its network management heritage,
which would be the next logical step (for example, into APM or IT operations
analytics).
I Offering only a hardware-based deployment model limits NetScout's ability to
address growing software and SaaS solution demand.
I NetScout is perceived as a conservative stalwart in the NPMD space, and lacks
the reach and mind share that many smaller competitors have.
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141. Gartner placed NetScout competitors Riverbed, JDSU-Network Instruments, and
Fluke Networks in the "Leaders" quadrant.
142. Riverbed, JDSU-Network Instruments, and Fluke Networks spent a significant
amount on Gartner's "consulting" services.
143. NetScout's failure to pay a sufficient amount for Gartner's services, or otherwise
purchase enough access to Gartner's analysts to achieve the requisite "healthy mix" of
interaction, was a substantial contributing factor in NetScout not being ranked in the "Leaders"
quadrant of the Magic Quadrant Report for NPMD.
144. As one Gartner analyst had previously told NetScout's President and Chief
Executive Officer, "NetScout is not going anywhere because it does not spend enough on
marketing." NetScout's CEO reasonably understood this statement to mean that NetScout
should spend more money on Gartner's services.
145. By placing NetScout in the less desirable "Challengers" quadrant, Gartner
effectively punished NetScout for failing to purchase a sufficient amount of Gartner's services.
Gartner has attempted to use its influence to force NetScout to purchase additional Gartner
services sufficient to move NetScout to the "Leaders" quadrant, or suffer continued harm to its
business and reputation in the industry. Reduced to essentials, NetScout must now either "pay-
to-play" with Gartner, or continue to suffer lost business opportunities, and damage to its
reputation as a result of being ranked as a "Challenger" in Gartner's influential Magic Quadrant
report.
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146. Consequently, Gartner's placement of NetScout in the "Challengers" quadrant
was part of a deceptive, oppressive, unethical and unscrupulous trade practice that violates public
policy and caused NetScout substantial injury and damages.
Gartner's Magic Quadrant Report For NPMD Contains False And
Defamatory Statements About NetScout, Its Products And Its Business
147. Gartner's Magic Quadrant Report for NPMD is defamatory because it contains
numerous defamatory false statements of fact about NetScout, its products and its business.
Gartner published the Magic Quadrant Report for NPMD with actual malice, i.e., with
knowledge of the falsity of the defamatory statements of fact about NetScout or with reckless
disregard for the falsity of those statements.
148. A reasonable reader of the Magic Quadrant Report for NPMD would understand
NetScout's placement in the "Challengers" quadrant as defamatory, because it indicates that
NetScout does not meet the criteria for a "Leader" set forth in the Magic Quadrant Report of
NPMD and quoted above.
149. The Magic Quadrant Report for NPMD states that "Challengers" are "[o]nce
leaders in the network performance monitoring market." A reasonable reader would interpret
that statement as a defamatory factual assertion that NetScout was "once," but is no longer, a
leader in the NPM market. Gartner's statement is demonstrably false for the following reasons:
a) NetScout's network performance management products and technology are
unmatched in the industry;
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b) NetScout offers sales, support, and services in more than 30 countries,
yielding international revenues for fiscal year 2014 of approximately $93
million -- more countries and international revenue than any competitor in the
NPM market;
c) NetScout has had over nine years of sustained growth and profitability,
reporting record revenue and net income in fiscal year 2014, reporting nearly
$400 million in revenue, 15% growth in revenue, and 21% growth in net
income;
d) The three NetScout competitors that Gartner placed in the "Leaders" quadrant,
Riverbed, Fluke Networks, and Network Instruments, generated
approximately $100 million, $50 million and $45 million in NPM revenue in
2013, while all three experienced limited, if any, growth in revenue for 2013;
e) According to technology research firm IDC, NetScout has the largest share of
the NPM market at 13.3% (which it has held for four years), grew 16.3% in
2012 against market growth of 3.1%, generates more revenue in the NPM
market than any of its competitors, and is one of "the three market leaders" in
NPM;
f) According to research technology research firm Frost & Sullivan, NetScout
has the largest share of the NPM for Enterprises market at 30.8% and
"NetScout is expected to continue dominating the total market throughout the
forecast period;"
g)
According to technology research firm TechNavio, "NetScout is the biggest
player in the Global Network Performance Management market" and has the
largest share of the NPM market at 11-13%;
h) According to Gartner's own NPM market share analysis, NetScout had the
second largest share of the NPM market at 18.2% in 2013 -- rising from the
third largest market share in 2011 and the fifth largest in 2010 -- with 11.9%
market share growth (or nearly fifteen times faster than the growth of the
NPM market); and
i) NetScout products are deployed in 92 of the Fortune 100, ten of the top ten
financial services firms, ten of the top ten pharmaceutical companies, ten of
the top ten airlines, all five branches of the U S military, ten of the top ten
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aerospace and defense contractors, and nineteen of the top twenty commercial
banks.
The foregoing facts were available and/or known to Gartner at the time it published the Magic
Quadrant Report for NPMD.
150. Gartner also implied that it was in possession of and knew undisclosed facts
supporting its assertion that NetScout was "[o]nce [a] leader[] in the network performance
monitoring market." That implication was created by, among other things, Gartner's repeated
claims that its research reports are supported by a large volume of undisclosed facts and data
derived from surveys and interviews of "IT users, technology providers and investors, business
professionals, academicians and other researchers," many of which are NetScout's customers, as
well as Gartner's assertion that the statements in its Magic Quadrant reports rest upon "a pile of
qualitative data" and reflect but "a tiny percentage" of what a Gartner analyst "actually knows"
about the IT vendors that are the subjects of its Magic Quadrant reports.
151. The Magic Quadrant Report for NPMD further states that, as a "Challenger,"
NetScout is "currently struggling to deal with new technical demands and rising expectations."
A reasonable reader would interpret that statement as a defamatory factual assertion that
NetScout's research and development capabilities are technically deficient and that it is
otherwise unable successfully to adapt to the changing technological demands of the NPM
market and its broad customer base. That assertion is demonstrably false for all of the reasons
identified in paragraph 149(a)-(i) as well as, among other things, the following additional reasons:
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a) NetScout has a more than thirty-year history of focused innovation in
performance management technology and, in many ways, is responsible for the
creation of the NPM market itself;
b) NetScout has over 300 employees who are dedicated to research, development
and support, and invests more than 16% of its revenue in R&D initiatives;
c) NetScout operates numerous development centers across the globe and owns
over eighty U.S. patents (a majority of them related to the NPM industry), one of
the most recent of which was granted in November 2013 for NetScout's
breakthrough Adaptive Session Intelligence Technology; and
d) NetScout's network performance management products and technology are
unmatched in the industry.
The foregoing facts were available and/or known to Gartner at the time it published the Magic
Quadrant Report for NPMD.
152. Gartner also implied that it was in possession of and knew undisclosed facts that
supported its assertion that NetScout is "currently struggling to deal with new technical demands
and rising expectations." That implication was created by, among other things, Gartner's
repeated claims that its research reports are supported by a large volume of undisclosed facts and
data derived from surveys and interviews of "IT users, technology providers and investors,
business professionals, academicians and other researchers," many of which are NetScout's
customers. The implication is further fostered by Gartner's assertion that the statements in its
Magic Quadrant reports rest upon "a pile of qualitative data" and reflect but "a tiny percentage"
of what a Gartner analyst "actually knows" about the IT vendors that are the subjects of its
Magic Quadrant reports.
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153. The Magic Quadrant Report for NPMD further states that, as a "Challenger,"
NetScout has "architectures, features sets and pricing structures that require modernization (often
in progress) to better compete with those in the Leaders quadrant." A reasonable reader would
interpret the statement as a defamatory factual assertion that NetScout's products and pricing are
outdated and that its products are technologically inferior to the products of its competitors listed
in the "Leaders" quadrant. Gartner's statement impugns NetScout's products as comparatively
inferior in fundamental respects, including but not limited to the basic design of those products,
their capabilities, and their usability.
154. Gartner's assertion is demonstrably false, as NetScout's NPM product offerings
are the most modern and technologically advanced in the NPM industry by any objective
measure. Gartner's statement is also false and defamatory for all of the additional reasons
identified in paragraphs 149 (a)-(i) and 151 (a)-(d). The statement was made by Gartner with
knowledge of its falsity or with reckless disregard for the truth.
155. Gartner also implied that it was in possession of and knew undisclosed facts that
supported its assertion that NetScout's "architectures, features sets and pricing structures . . .
require modernization," i.e., that NetScout's products are outdated, lack key feature sets, are
inferior to competing products, and are not competitively priced. That implication was created
by, among other things, Gartner's repeated claims that its research reports are supported by a
large volume of undisclosed facts and data derived from surveys and interviews of "IT users,
technology providers and investors, business professionals, academicians and other researchers,"
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many of which are NetScout's customers. The implication is further fostered by Gartner's
assertion that the statements in its Magic Quadrant reports rest upon "a pile of qualitative data"
and reflect but "a tiny percentage" of what a Gartner analyst "actually knows" about the IT
vendors that are the subjects of its Magic Quadrant reports.
156. In addition, Gartner's statement is false because NetScout's product pricing does
not require modernization as compared to its competitors' pricing. NetScout's product pricing
sets the benchmark in the NPM market. Each of the NetScout competitors that Gartner placed in
the "Leaders" quadrant emulate NetScout's product pricing.
157. In the "Cautions" section of Gartner's Magic Quadrant Report for NPMD, it
states that NetScout has a "limited ability to expand beyond its network management heritage."
A reasonable reader would interpret that statement as a defamatory factual assertion that
NetScout lacks the resources, motivation, wherewithal and resolve to expand into new markets
beyond its core NPM market. Gartner's statement is a demonstrably false statement of fact. Not
only does NetScout have the "ability" to expand into markets outside of its core NPM market, it
already had expanded into other markets, including, among other things, the markets for
Application Performance Management ("APM") and Cyber Threat Monitoring.
158. As another testament to NetScout's vision and longstanding leadership in the
NPMD space, and as Gartner knew full well, in June 2013 -- eight months prior to Gartner's
publication of the Magic Quadrant Report for NPMD NetScout launched nGeniusONE with
NetScout's patented Adaptive Session Intelligence technology. nGeniusONE with ASI was the
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culmination of a multi-million dollar research and development effort, spanning over two years.
nGeniusONE is a single, unified analytics platform with myriad analytical feature sets that
provide both application and network diagnostics in a simple, unified user interface. Within just
one year of its introduction, NetScout was awarded a patent for ASI and successfully branched
out into adjacent segments, including APM and Voice Monitoring. In addition, during the same
time, this new solution further extended NetScout's already formidable position in the NPM
space. During the last 12 months, NetScout's annual revenues increased by another $50 million,
to reach $400 million.
159. NetScout's ASI technology provides a depth and breadth of analytical capability,
and scalability, far beyond any competing product offered by any NetScout competitors by any
objective measure. As Gartner states, "Adaptive Session Intelligence allows the [NetScout's]
solution to scale toward support of 40 GbE and 100 GbE environments, while optimizing storage
requirements and enhancing the visibility data." "Scaling" refers to an NPM product's ability to
operate successfully in a fast network environment (i.e., a network that is 40 GbE or faster) in
which network traffic is very high. In today's high-traffic network environments, an NPM
product's ability to scale in their environment and continue to function as the network expands is
crucial. None of NetScout's competitors' products, including those competitors placed in the
"Leaders" quadrant, offers the scalability of NetScout's products.
160. NetScout has also expanded "beyond its network management heritage" by
successfully entering the service provider market. Service providers include, among others,
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cellular, cable, and interne providers. Since 2009, NetScout's service provider business has
grown by 20% annually. Today, NetScout's products are deployed in more than 165 service
providers in over 48 countries, and in all twenty of the twenty largest service providers.
Gartner's statement of fact is also false and defamatory for all of the reasons identified in
paragraphs 149 (a)-(i) and 151 (a)-(d), and paragraphs 157-58.
161. Gartner also implied that it was in possession of and knew undisclosed facts that
supported its assertion that NetScout has a "limited ability to expand beyond its network
management heritage," i.e., that NetScout lacks the resources, motivation, wherewithal or
resolve to grow as a company and expand into new markets beyond its core NPM market. That
implication was created by, among other things, Gartner's repeated claims that its research
reports are supported by a large volume of undisclosed facts and data derived from surveys and
interviews of "IT users, technology providers and investors, business professionals,
academicians and other researchers," many of which are NetScout's customers. That implication
is further fostered by Gartner's assertion that the statements in its Magic Quadrant reports rest
upon "a pile of qualitative data" and reflect but "a tiny percentage" of what a Gartner analyst
"actually knows" about the IT vendors that are the subjects of its Magic Quadrant reports.
162. In the "Cautions" section of Gartner's Magic Quadrant Report for NPMD,
Gartner states that NetScout offers "only a hardware-based deployment model" that "limits its
ability to address growing software and SaaS solution demand." A reasonable reader would
interpret that statement as a defamatory factual assertion that NetScout does not offer a software
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or Software as a Service ("SaaS") solution for NPM, while its competitors ranked in the
"Leaders" quadrant do offer such solutions. Gartner's statement is demonstrably false. First,
NetScout does offer software-based solutions for NPM. NetScout specifically informed
Gartner's research analyst that it offers a software-based solution for NPM. Gartner's research
analyst did not refute the fact that NetScout offers a software-based solution, but rather stated
that "well, we have to have some cautions for NetScout."
163. Second, each of the NetScout competitors that Gartner placed in the "Leaders"
quadrant offers a "hardware-based deployment model," yet Gartner did not include a similar
"Caution" for any other NetScout competitor in the Magic Quadrant Report for NPMD.
Gartner's failure to include a "hardware-based deployment model" "Caution" for NetScout's
competitors creates the false and defamatory impression that NetScout's competitors' product
offerings are superior because they are not "hardware-based." In fact, each of the competitor
companies that Gartner placed in the "Leaders" quadrant uses primarily a "hardware-based
deployment model."
164. Third, none of the NetScout competitors that Gartner placed in the "Leaders"
quadrant offer a SaaS solution for NPM, yet Gartner did not include a similar "Caution" for any
other NetScout competitor in the Magic Quadrant for Report for NPMD. Gartner's failure to
include a SaaS "Caution" for NetScout's competitors creates the false and defamatory
impression that NetScout's competitors' product offerings are superior because they offer a SaaS
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solution for NPM. In fact, none of the competitor companies that Gartner placed in the
-Leaders" quadrant offer a SaaS solution.
165. Gartner also implied that it was in possession of and knew undisclosed facts
supporting its assertion that NetScout offers "only a hardware-based deployment model" that
"limits its ability to address growing software and SaaS solution demand." That implication was
created by, among other things, Gartner's repeated claims that its research reports are supported
by a large volume of undisclosed facts and data derived from surveys and interviews of "IT users,
technology providers and investors, business professionals, academicians and other researchers,"
many of which are NetScout's customers. The implication is further fostered by Gartner's
assertion that the statements in its Magic Quadrant reports rest upon "a pile of qualitative data"
and reflect but "a tiny percentage" of what a Gartner analyst "actually knows" about the IT
vendors that are the subjects of its Magic Quadrant reports.
166. In the "Cautions" section of Gartner's Magic Quadrant Report for NPMD, it
states that NetScout is "perceived as a conservative stalwart in the NPMD space, and lacks the
reach and mind share that many smaller competitors have." A reasonable reader would interpret
that statement as a defamatory factual assertion that the size and diversity of NetScout's
customer base is inferior to that of its smaller competitors, and that NetScout's brand and
products are not as well known within the NPMD market. Gartner's statement is a false and
defamatory statement of fact. As alleged in paragraphs 149 (a)-(i) and 151 (a)-(d), NetScout's
revenue, revenue growth, market share, research and development expenditures, and customer
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deployments all greatly exceed those of its "smaller competitors." For these reasons, as well as
all of the reasons identified in paragraphs 149 (a)-(i) and 151 (a)-(d), Gartner's statement is
demonstrably false.
167. Also, Gartner's statement that NetScout "lacks the reach" of "many of its smaller
competitors" directly contradicts its own statement included elsewhere in the Magic Quadrant
Report for NPMD that NetScout has "high market reach and large deployments." These
contradictory statements of fact evidence that: (1) NetScout knew that its statement that
NetScout "lacked reach" was false and defamatory when made; and (2) Gartner's "Caution"
statements, as well as its assertion that NetScout meets the definition of a "Challenger," were
pretext for placing NetScout within the "Challengers" quadrant. The actual reason that Gartner
placed NetScout in the "Challengers" quadrant was because NetScout did not spend enough
money on Gartner's services.
168. Gartner also implied that it was in possession of and knew undisclosed facts
supporting its assertion that NetScout is, "perceived as a conservative stalwart in the NPMD
space, and lacks the reach and mind share that many smaller competitors have." That
implication was created by Gartner's repeated claims that its research reports are supported by a
large volume of undisclosed facts and data derived from surveys and interviews of "IT users,
technology providers and investors, business professionals, academicians and other researchers,"
many of which are NetScout's customers, as well as Gartner's assertion that the statements in its
Magic Quadrant reports rest upon "a pile of qualitative data" and reflect but "a tiny percentage"
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of what a Gartner analyst "actually knows" about the IT vendors that are the subjects of its
Magic Quadrant reports.
169. Gartner knew that the foregoing defamatory statements of fact it published about
NetScout were false, or acted with reckless disregard of the falsity of its assertions. The
statements have caused harm to NetScout's business and reputation, and were calculated to cause
harm to NetScout within the IT industry and the NPM, NPMD and APM markets.
170. As one former senior account manager at Gartner has stated, the fact that
Gartner's Magic Quadrant has been published with "NetScout given a position that is not
representative of its true capabilities . . . will hurt NetScout and its sales figures."
171. Since Gartner published the Magic Quadrant Report for NPMD, and as a direct
result of defamatory statements in that report, potential NetScout customers have excluded
NetScout from their request for proposal processes through which potential NetScout's
customers procure NPM, APM and NPMD products. On at least one occasion, a potential
NetScout customer that had previously stated its intent to procure NPM products exclusively
from NetScout informed NetScout that it would have to consider procuring products from
NetScout's competitors after reading the defamatory statements in the Magic Quadrant Report
for NPMD.
172. The false and defamatory statements in Gartner's Magic Quadrant Report for
NPMD have damaged and interfered with NetScout's reputation with its customers, and have
forced NetScout's management and sales force to devote time and resources to counteracting
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those statements in the IT industry. As a result, NetScout risks losing current and future business,
and faces pressure from potential customers to discount its products to compete for future
business. For example, a major financial services firm, and a current NetScout customer,
currently is considering making a large technology purchase from two of the NetScout
competitors that Gartner placed in the "Leaders" quadrant in the Magic Quadrant Report for
NPMD based on the fact that Gartner ranked NetScout as a "Challenger."
173. As a direct and proximate result of Gartner's statements, NetScout has incurred
damage to its reputation, lost future business prospects, and been forced to expend additional
time, money and effort to counteract the injurious effect of Gartner's defamatory statements on
its business and reputation.
FIRST COUNT
(Violation of CUTPA, Conn. Gen. Stat. 42-110b)
1-173. NetScout incorporates here by reference all numbered paragraphs above as though
fully set forth herein.
174. At all relevant times herein, Gartner was engaged in trade or business as defined
in Conn. Gen. Stat. 42-110b, et seq., in the State of Connecticut.
175. Gartner's actions, as described herein, constitute violations of Conn. Gen. Stat.
42-110b, et seq., in that they are unfair or deceptive acts or practices in the conduct of the trade
or business for one or more of the following reasons:
a) Gartner's acts and/or practices offended public policy;
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b) Gartner's acts and/or practices were immoral, unethical, oppressive and
unscrupulous; and
c) Gartner's acts and/or practices have caused substantial injury to NetScout,
consumers, competitors, and other businessmen.
176. Gartner made a general business practice of facilitating and promoting a "pay-to-
play" scheme whereby whether and how much an IT vendor pays Gartner for its "consulting"
services is an important factor that bears on where Gartner places an IT vendor in the Magic
Quadrant and what Gartner states regarding the IT vendor in its Magic Quadrant report.
177. Gartner's unfair and deceptive conduct occurred in Connecticut and is intimately
associated with trade and commerce in Connecticut.
178. NetScout has suffered significant damages and ascertainable loss as a
consequence of Gartner's deceptive, immoral, unethical, oppressive, and unscrupulous acts or
practices.
179. Gartner committed unfair and deceptive acts with improper intent, knowledge,
and willfulness, requiring punitive damages.
180. Pursuant to Conn. Gen. Stat. 42-110g(c), copies of this Complaint have been or
will be mailed to the Attorney General of the State of Connecticut and the Commissioner of the
Consumer Protection of the State of Connecticut.
181. This action would be proper in the Judicial District of Stamford-Norwalk.
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SECOND COUNT
(Defamation and Defamation per se)
1 - 1 8 1 . NetScout incorporates here by reference all numbered paragraphs above as though
fully set forth herein.
182. Gartner published false and defamatory statements about NetScout to third parties
that were improper, unlawful, and defamatory and that libeled and disparaged NetScout and its
business reputation.
183. Gartner's false and defamatory statements about NetScout were read by persons
other than NetScout and Gartner, including, but not limited to, NetScout's customers, potential
customers, and were foreseeably made known to NetScout's customers, potential customers, and
others in the general public.
184. Gartner's false statements were made about and concerned NetScout, and were
understood by those who read Gartner's statements as concerning NetScout.
185. Gartner's statements were false as they pertained to NetScout, and their
defamatory meaning was apparent on the face of the statements.
186. Gartner's statements were defamatory per se because they were calculated to
injure NetScout and its standing in its industry by making false factual assertions that harmed
NetScout's reputation within its industry, deterred customers and potential customers from
conducting business with NetScout, and indicated that NetScout lacked skill within its industry.
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187. Gartner's statements were reasonably understood by readers as defamatory to
NetScout and/or were reasonably understood as implying the existence of undisclosed facts that
were disparaging and defamatory to NetScout.
188. Gartner's statements caused damage to NetScout in the form of damage to its
reputation, disparagement of its character, economic damage, lost business, lost business
opportunities, and special damage, all of which was the direct and proximate result of Gartner's
false and defamatory statements.
189. Gartner's false and defamatory statements concerning NetScout were made with
actual malice, ill will, improper and malevolent purpose and with knowledge of their falsity or
with reckless disregard for the truth.
This action would be proper in the Judicial District of Stamford-Norwalk.
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PRAYER FOR RELIEF
WHEREFORE, NetScout respectfully requests the following relief:
A. Monetary damages;
B. Damages pursuant to Conn. Gen. Stat. 42-110g;
C. Attorneys' fees pursuant to Conn. Gen. Stat. 42-110g(d);
D. Punitive damages;
E. Special damages;
F. After judgment, enter a permanent injunction against Gartner's unfair and
deceptive trade practices, including without limitation, any republication of false
and defamatory statements about NetScout; and
G. Such other legal and equitable relief as the Court deems just and proper.
Plaintiff NetScout hereby demands a trial by jury on all issues and causes of action so
triable.
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Dated at Hartford, Connecticut this 4th day of August, 2014.
THE PLAINTIFF,
NETSCOUT SYSTEMS, INC.,
By:
Michael D. Blanchard
BINGHAM McCUTCHEN LLP
One State Street
Hartford, Connecticut 06103
Tel: (860) 240-2700
Fax: (860) 240-2800
Juris No. 027045
Jason D. Frank (pro hac vice admission expected)
BINGHAM McCUTCHEN LLP
One Federal Street
Boston, MA 02110-1726
Tel: (617) 951-8000
Fax: (617) 951-8736
Its Attorneys
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RETURN DATE: AUGUST 19, 2014
NETSCOUT SYSTEMS, INC.,

SUPERIOR COURT
Plaintiff,

JUDICIAL DISTRICT OF
v.

STAMFORD/NORWALK
GARTNER, INC.,

AT STAMFORD
Defendant.

AUGUST 4, 2014
STATEMENT OF AMOUNT IN DEMAND
Pursuant to Conn. Gen. Stat. 52-91 and Practice Book 10-20, Plaintiff states that the
amount, legal interest or property in demand is fifteen thousand ($15,000.00) dollars or more
exclusive of interest and costs.
THE PLAINTIFF,
NETSCOUT SYSTEMS, INC.,
By:
Michael D. Blanchard
BINGHAM McCUTCHEN LLP
One State Street
Hartford, Connecticut 06103
Tel: (860) 240-2700
Fax: (860) 240-2800
Juris No. 027045
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Jason D. Frank (pro hac vice admission expected)
BINGHAM McCUTCHEN LLP
One Federal Street
Boston, MA 02110-1726
Tel: (617) 951-8000
Fax: (617) 951-8736
Its Attorneys
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