Intel Investors - Another Intel vs. the FTC article from IBD.
Paul
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Intel Takes The Offense In Defense Against FTC
Date: 3/8/99 Author: James DeTar
Can U.S. companies be forced to license their technology to anybody?
That question might be answered soon in a trial that pits the Federal Trade Commission against Intel Corp.
Regulators accuse the company of forcing its customers to license their competing chip technologies to Intel. The government says Intel coerced customers by withholding advance information on new Intel chips.
''In effect, Intel established its own privately administered compulsory licensing regime by which it can acquire at reduced cost any technology that it perceives to be a competitive threat,'' the government said.
Intel counters that the government is trying to force Intel to reveal its chip technology to others, even when it doesn't want to.
The two are set to face off in a trial that starts Tuesday in Washington, D.C., before James Timony, an administrative law judge.
The FTC - in a suit filed against Santa Clara, Calif.-based Intel on June 8 - charges the world's largest chipmaker with acting as a monopoly. The suit states that Intel used its monopoly position to try to squeeze trade secrets from three customers.
Those customers are Compaq Computer Corp., Digital Equipment Corp. and Intergraph Corp. Compaq has since bought DEC.
Intel attorney Peter Detkin says the government in effect is trying to force the company to license its intellectual property, or data on new chips, to customers.
''This country has been very careful in how it treats other countries in terms of intellectual property,'' Detkin said. ''Now the government is saying, 'We think compulsory intellectual property licensing is good.' ''
The attorney says it's unfair to compel Intel to share advance information on its microprocessors - the brains of desktop computers -with its customers. Intel says that amounts to forced licensing of its chip technology.
Detkin says a decision against Intel could cause waves in the chip industry. ''This case has profound implications in regard to the government's ability to dictate how one company uses its intellectual property,'' Detkin said.
The case could change the way things are done, agrees Linley Gwennap, publisher of chip industry newsletter Microprocessor Report.
''I think there are a lot of companies in Intel's position, whether it's Microsoft or Cisco or Adobe,'' Gwennap said. ''They (FTC) need to set out rules where these companies can interact with customers.''
Intel clearly has a different interpretation than its customers, he says.
The case might be important in terms of how companies deal with customers. But it doesn't have the import of the Justice Department's antitrust case against Microsoft Corp., where regulators are considering things as extreme as breaking up the company.
''The FTC isn't seeking drastic remedies in the Intel case,'' Gwennap said. If the company loses, ''my expectation is there would be some kind of fine, and they would be told to not do what they had been doing,'' he said.
The government says Intel is a monopoly and wants to hold that position. It says the chipmaker retaliated against Compaq, Digital and Intergraph after becoming entangled in separate legal disputes with each of them.
Intel used the legal quarrels, the FTC says, as an excuse to try to grab their rival chip technologies.
Part of the dispute goes back to Intel's 1995 release of its Pentium Pro microprocessor.
Digital determined that Intel used its technology in the Pentium Pro. On May 12, 1997, Digital sued Intel, claiming it had infringed on 10 Digital patents.
Intel responded by denying Digital access to technical information DEC needed to develop computer systems using Intel chips. This hurt Digital's ability to compete, the FTC says.
Digital and Intel later settled out of court. Digital ended up licensing the technology to Intel as part of a larger agreement. Without that pact, Intel's actions would have hurt Digital even more, the FTC says.
The Intergraph dispute goes back further. In 1987, Intergraph bought a division of Fairchild Industries that developed a chip called the ''Clipper.'' Until 1993, Intergraph used the Clipper chip in its systems.
Beginning in 1992, Intergraph started using Intel Pentium chips. By 1994, Intel chips were used in three-fourths of all Intergraph systems.
In 1996, the FTC says, Intel demanded a free license to Intergraph's Clipper as a condition for Intergraph to continue to receive advance information on Intel chips. Intel mulled using some of the Clipper technology in its chips. When Intergraph refused, Intel cut off the flow of information.
Intergraph sued Intel. That case is slated to come to trial in February. In the meantime, the government has issued an injunction that forces Intel to sell its chips to Intergraph.
Intergraph Chief Executive James Meadlock, a witness FTC intends to call, says his firm's relationship with Intel remains tense.
''In my mind, there's no question Intel is a monopoly, at least at the high end of the microprocessor space,'' Meadlock said.
As for Compaq, in 1994 it sued Packard Bell Inc. , asserting it used Compaq's technology in its systems. Intel sided with Packard Bell, cutting off technical information that Compaq needed, the government says.
This hurt Compaq's ability to sell its PCs and workstations. The two settled their differences, and in January 1996 they announced a 10-year licensing agreement.
Intel spokesman Chuck Mulloy says the FTC suit won't affect Intel's ability to deliver chips to customers. He expects the trial will end in about 10 weeks, though the FTC says only that it hopes to finish by year-end. |
