Posted at 10:19 p.m. PST Thursday, February 25, 1999
Intel, FTC outline strategies
BY TOM QUINLAN
Mercury News Staff Writer
With the filing of a new round of documents, it is now much clearer
what evidence will be part of the upcoming Intel Corp. antitrust
hearing -- and what will be left for a broader ongoing probe.
Intel and the Federal Trade Commission filed legal papers Thursday
outlining their planned strategies. Those filings remain under seal, but
interviews and supporting documents indicate that the FTC will seek
to introduce evidence of alleged anticompetitive behavior inside and
outside the microprocessor market to bolster its case.
However, under an agreement the FTC and Intel reached last year,
the hearing that begins March 9 must remain focused on the relatively
narrow issues cited in the government's June complaint: that Intel
leveraged its microprocessor monopoly to force Compaq Computer
Corp. and Digital Equipment Corp. to surrender their intellectual
property rights; and attempted to do the same to Intergraph
Computer Corp.
That means it will likely lack both the drama and the import of the
ongoing Microsoft antitrust trial.
Nevertheless, the FTC is proceeding with its wider investigation,
which prompted the agency to serve Intel with a second subpoena
and civil investigative demand on October 26 of last year. That action,
like the agreement limiting the scope of the upcoming hearing, is only
now coming to light.
Sources say -- and legal documents indicate -- that the ongoing
investigation is focusing on a range of Intel's activities, including its
move into markets for computer components such as chip sets and
graphics chips, its control of a wide array of PC technical standards,
and its use of marketing programs such as the Intel Inside campaign.
Administrative Law Judge James Timony has ruled that the FTC can
seek to introduce additional actions by Intel in attempt to demonstrate
a pattern of behavior. But he has also made it clear that the case will
largely concern some technical fine points of antitrust law as it relates
to the high tech industry.
''Fundamentally, this case will come down to the intersection of
intellectual property rights and antitrust law,'' noted Peter Detkin,
Intel's assistant general counsel and the lawyer who will spearhead the
company's defense. ''At a high level, there isn't a dispute about the
facts in the case. The FTC will say we withheld our intellectual
property in these specific cases, and we did. Our argument is that we
had a right too.''
The government is seeking a remedy that is similarly narrow: It wants
to limit Intel's ability to withhold or withdraw technical information or
products from companies in the event of a legal dispute. Intel engaged
in such disputes with Intergraph, Digital and Compaq.
''In that respect its a pretty narrow case that won't have that much
impact,'' noted one industry source. ''(Intel) won't have to change
how it designs or markets its products.''
Intel retains the right to object to testimony that goes beyond that
narrow issue. The FTC said last week it may call executives at
Advanced Micro Devices Inc., Micron Technology Inc. and Data
General Corp., who would likely testify that Intel also used its
intellectual property to limit the ability of other companies to innovate
and compete.
Legal papers surrounding the case offer some details of that subject
matter. They indicate that Harvard professor Frederic Scherer, a
potential expert witness for the FTC, has prepared testimony
regarding the relationship between microprocessors and other PC
components such as chip sets, graphics chips and bus specifications,
all of which Intel has dominated or has sought to influence. Sources
say the FTC may also introduce evidence regarding Intel's relationship
with direct competitors, chiefly AMD.
The FTC's final witness list includes three executives who competed
head-to-head with Intel at Sunnvale-based AMD -- vice president
and co-chief marketing executive Robert Herb, executive vice
president and CTO Atiq Raza, and former executive vice president
Vinod Dham.
According to sources familiar with the case, those three executives
could be called on to testify on how Intel controlled access to its
technology-- particularly its advanced products such as the Pentium
Pro or the Pentium II Xeon processor -- through strict non-disclosure
agreements with manufacturers of components such as chip sets and
memory. With limited access to these technological standards, AMD
could testify that its ability to compete was hampered.
Such evidence could blunt two of Intel's most persuasive arguments
against the initial complaint: That antitrust law was never intended to
regulate the relationship between a company and its customers and
that Intel was only responding to companies that had sued it or were
threatening to sue it.
Other potential FTC witnesses who could provide testimony about
broader competitive issues include ex-Intel executive Gordon
Campbell, who left Intel to co-found specialty memory manufacturer
Seeq Technology and later Chips and Technologies -- a chip set
pioneer that later switched to graphics chips -- before becoming CEO
of microprocessor start-up Exponential
Intel is expected to fight back with witnesses and evidence that
competition in the microprocessor market is in fact increasing -- as
new chip companies like Rise Technologies and Integrated Device
Technologies join enter the market and established companies like
AMD gain greater market share. It will also argue that it followed the
letter of existing antitrust law when it responded to lawsuits from
customers.
''They're trying to change the law on us,'' Detkin said. ''This has the
potential to effect how the entire industry has to deal with intellectual
property issues.''
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