OT and the dark side of NDA use...Intergraph Accuses Intel of "Oppression"
by Linley Gwennap
In a bizarre turnaround, workstation maker Intergraph has gone from being one of Intel's sweethearts to being tossed away like a cheap tart. Intergraph has filed a lawsuit against Intel alleging patent infringement and anticompetitive behavior. The suit was apparently expected: Intel responded within hours by filing a countersuit that attempts to overturn Intergraph's patents. A second countersuit filed a week later accuses Intergraph of breach of contract.
The former Clipper vendor was the first major RISC workstation vendor to convert its products to Intel processors, and Intergraph's systems were prominently featured at the Pentium Pro introduction (see MPR 11/13/95, p. 1). As recently as May, Intergraph was on stage during Intel's launch of Pentium II.
According to the workstation maker, however, by then its relationship with Intel had already started to sour. The crux of the suits is a set of Clipper patents-U.S. 4,899,275, 4,933,835, and 5,091,846-relating to cache management, patents that Intergraph asserts are infringed by Intel's Pentium and Pentium II processors.
The suit goes well beyond patent infringement, however, accusing Intel of "a systematic campaign of coercion and oppression...to pressure Intergraph into giving up" its patent rights. After Intergraph refused to license its patents to Intel without compensation, Intel directed its employees to "cease and desist providing any support to Intergraph," according to the complaint.
Intergraph also claims that Intel unilaterally terminated its nondisclosure agreement (NDA), failed to inform the system maker of a chip-set bug, and prevented a third party from supplying Intergraph with Intel-compatible test equipment. Perhaps going over the edge, the suit even alleges that Intel has "introduced competitors into Intergraph's customer accounts" and threatened to withdraw marketing funds from companies that buy Intergraph products. (The full complaint is available at www.intergraph.com/intel.stm.)
Intel claims that Intergraph's patents are not valid and therefore its products don't infringe. Intel acknowledges that it terminated Intergraph's NDA but says it can legally do so at any time. The lack of an NDA prevented Intergraph from receiving bug reports as promptly as other Intel customers. Intel denies the other claims of improper activities. Intel's countersuit accuses Intergraph of refusing to return confidential material upon termination of the NDA, as legally required by the agreement.
Sources indicate that Intergraph, which has had only one profitable quarter in the past five years, was wielding its patents in an attempt to gain royalties from other makers of x86 workstations. Instead of settling this matter in a court of law, these system makers asked Intel to be the judge and jury in this case. Intel told Intergraph to stop asserting its patents and, when the company refused, sentenced it to the outer circle of Intel's customer list.
Intergraph's allegations of anticompetitive behavior will certainly feed an ongoing investigation by the U.S. Federal Trade Commission (FTC) into Intel's business practices. The key issue the FTC must decide in this case is whether Intel must maintain NDA relationships with all of its largest customers, due to its dominant position in the market, or whether Intel has the same right as smaller companies to decide with whom it partners. Preventing Intel from arbitrarily terminating NDAs, a tactic it also used against Digital, would remove a powerful weapon Intel can use to keep its customers (i.e., most of the computer industry) in line.
Rulings in both the Intergraph suits and the FTC investigation could take months or years. In the meantime, Intel must move nimbly in both the courts and government offices to emerge unscathed from this latest spat.
