Intel Investors - Nitty Gritty Details/Background of the FTC Settlement
This makes for an interesting read.
Sounds like Intel has developed some "expertise" in dealing with the Washington DC Bureaucracy !
Paul
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Intel deal: Ball gets rolling on tennis court
By Bloomberg News Special to CNET News.com March 17, 1999, 5:05 p.m. PT URL: news.com
WASHINGTON--For Intel, the first hint it might be able to negotiate its way out of a legal fight with antitrust enforcers came on the tennis court.
In mid-February, only weeks before the world's biggest computer chipmaker was to defend itself in an antitrust trial against the Federal Trade Commission, Intel attorney Michael Sohn and FTC antitrust chief William Baer faced each other over the net, as they often have for more than 20 years.
After Sohn won the game--as he does about two times out of three--he suggested a few ways that the FTC's antitrust case against his client could be resolved without a long, arduous trial. The seemingly casual message between old friends in fact came directly from Intel's top management in Santa Clara, California.
That post-game exchange, as related in interviews with people involved in the negotiations, sparked two weeks of talks that resulted in a settlement Intel chief executive Craig Barrett called a "win-win" and FTC Chairman Robert Pitofsky described as a "tradeoff [that establishes] guidelines for the future."
The agreement, approved today by the FTC, settles charges Intel used its monopoly power to bully customers into surrendering their patent rights. The settlement also allowed the FTC to avoid pressing a case deemed weak by some legal experts.
An inside look at the negotiations shows how the chip giant averted a trial that threatened to be a distracting public- relations nightmare by dispatching two separate groups of lawyers on separate fronts. Sohn's firm, Washington-based Arnold & Porter, pursued a settlement, while a cadre of lawyers from Los Angeles-based Gibson, Dunn & Crutcher and Howrey & Simon of Washington prepared for trial, largely unaware of the negotiations.
"By being able to find a way out of this, we were able to avoid a lengthy protracted and expensive trial," said Intel spokesman Chuck Mulloy. "And we mean expensive not just in dollars, but in terms of management focus and attention."
Intel had expected to call 18 company executives, including Barrett and Intel Chairman Andy Grove, as witnesses in a trial that had the potential to last three months.
The settlement details revealed today show that although Intel blinked first, the company secured an agreement that in some ways validates the kinds of behavior the FTC had alleged violated antitrust laws.
Intel avoided being branded a "monopolist," which would have weakened the company's defense in private lawsuits. The company also won on another critical issue: Intel remains free to deny customers information about its chips when they file patent infringement suits seeking to cut off its lifeblood--the sale of computer chips.
The FTC got a guarantee that Intel would not withhold technical data about its chips to retaliate against companies that sue it for patent infringement and seek only damages.
The way those terms were reached illustrates how business is conducted in Washington, where decades-old relationships can pave the way to landmark agreements.
"With so much policy getting made by settlement these days, it magnifies the importance of being a Washington insider who's in contact with the regulators--whether it be in court, out of court, or on the court,'' said William Kovacic, a professor of law at George Washington University in Washington.
The opening steps With Baer receptive to Sohn's initial overtures, Intel dispatched Peter Detkin, the company's 38-year-old litigation chief, to Washington on Monday, February 22 to test settlement possibilities.
That night, Detkin met with Baer, FTC attorney Richard Dagan, and another Intel attorney, former White House Counsel Jack Quinn. Over soft drinks and chips from the mini-bar in Detkin's suite at the upscale Mayflower hotel, the four spent a little over an hour working out the basic framework for the negotiations.
Three days later, Intel sent a single-spaced, page-and-a- half proposal to the FTC describing how a settlement should be structured. Detkin, a New York native who graduated from the University of Pennsylvania with a degree in engineering before becoming an attorney, flew back to California.
FTC officials exchanged phone calls that weekend, exploring the implications of Intel's proposal. The agency responded with a counter offer Monday, prompting Detkin and others from Intel to fly to Washington with a response that could form the basis for face-to-face negotiations.
To keep Grove, Barrett, and Intel General Counsel Thomas Dunlop Jr. aware of how the talks were progressing, Detkin and his colleagues were asked to provide odds on the likelihood of an agreement after each meeting. Going into their first negotiating session on Tuesday, the handicappers said the odds were dead even.
For five hours on Tuesday, attorneys for Intel and the FTC, led by Detkin and Baer, went back and forth in a windowless conference room at Arnold & Porter, Sohn's firm. Baer, 48, had been a partner there for 12 years before taking the helm at the FTC's Bureau of Competition in 1995.
Doughnuts and fruit The meeting started jovially, with doughnuts and fruit at 9 a.m. when Baer arrived with three FTC colleagues--Will Tom, Dagan, and Mike Antalics. Antalics was ready to serve as co- counsel with FTC deputy director Richard Parker in the administrative hearing. The trial was set to start in exactly one week.
Sohn, 58, the facilitator, accompanied Detkin as did Intel in-house attorney Ron Epstein. At the round wood table, Epstein sat with a laptop computer that displayed a working draft of the settlement on its screen. When both sides would reach consensus on a point, Epstein typed the change.
At times, negotiations became heated as the lawyers disagreed on the details of five-page settlement, down to whether the word "by" or "to" should be used in one sentence, "advance" or "advanced" in another.
A game of legal poker The two sides engaged in a game of legal poker, passing notes among themselves while sitting stone-faced across the table from their adversaries. Working through a sandwich lunch, the meeting broke around 2 p.m. and Intel executives in California got the day's update on the odds: 60-40 in favor of a settlement.
Thursday, at an antitrust summit at New York's famed Waldorf- Astoria hotel, the FTC's assertion that antitrust laws trumped patent rights spawned hot debate. Baer attended some of the discussions where antitrust experts argued, at times raising their voices. He headed back to Washington without revealing an agreement was in the works.
Meetings between Intel and antitrust enforcers trailed off at the end of the week, as the negotiators ironed out the major issues.
Sunday, not-bloody Sunday Sunday found the two sides--this time with the addition of Intel's Barrett--back in the Arnold & Porter conference room to formalize the agreement. Barrett, though ready to sign, wanted to talk with Baer. Even with the settlement, the FTC is continuing its probe of Intel's business practices.
After they spoke, the consent decree was brought from FTC headquarters to the law firm and Baer and Barrett signed it.
Detkin ordered Intel's legal team to stop preparing for trial without offering an explanation. The next morning the public was told an agreement had been reached.
A celebration dinner was set for the night of March 9, which was to have been the first day of trial.
At Washington's Oval Room restaurant near the White House, more than 25 of Intel's attorneys sat around two tables drinking expensive red wine, congratulating themselves and lamenting not being able to test their talents in court.
Copyright 1999, Bloomberg L.P. All Rights Reserved. |
