Subject: James Love: Federal Judge says Intel CPU platform must be disclosed (fwd)
Richard K. Moore (rkmoore@iol.ie)
Date: Wed, 15 Apr 1998 04:35:47 +0100
Date: Wed, 15 Apr 1998 04:35:47 +0100 Message-Id: <v0211012cb159dcd027b1@[194.125.43.240]> To: roundtable@cni.org From: rkmoore@iol.ie (Richard K. Moore) Subject: James Love: Federal Judge says Intel CPU platform must be disclosed (fwd)
What about Windows? Same argument applies, it seems to me...
"_Microsoft wields absolute power over who will and who will not
be allowed to participate in that part of the high-end _software
and _service industry that is based upon the _Windows OS"
rkm
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> In a decision with broad relevance to Microsoft and the biotechnology
> sector, Edwin L. Nelson a US Federal District Court judge from
> Birmingham, Alabama, issued a decision on April 10, 1998, declared
> Intel's CPU an "essential facility," and ordered significant
> non-discriminatory licensing of Intel's proprietary information to
> Intergraph, a firm which sells graphics chips and technical software,
> and workstations.
>
> Jamie Love
> <love@cptech.org>
>
>
> The decision is on the Web at:
>
> http://www.intergraph.com/intel/order.htm
>
> Here are a few high points from the 80 page decison:
>
> On Intel's market power:
>
> -----
>
> Intel has purposely changed its CPU architecture by using proprietary
> sockets and otherwise, converting from the previously "open
> architecture" to a new "closed architecture."17 (Tr. 85). This "closed
> architecture," for practical purposes, allows Intel, by exercising its
> intellectual property rights in its "closed architecture," to wield
> absolute power over who will and who will not be allowed to participate
> in that part of the high-end computer industry that is based upon the
> "x86" microprocessor. Inasmuch as it requires two or more years and
> millions of dollars to design and develop a mother board and graphics
> subsystem to accept and take advantage of a CPU such as the Pentium II
> or any possible alternative, (Tr. 69)18 OEMs, such as Intergraph, who
> rely entirely on Intel for their supply of microprocessors and chip sets
> have become technologically and financially locked in to the Intel CPU,
> its associated chip sets, and the P6 Bus, and they have no feasible
> alternative to it...
>
> ..OEMs, such as Intergraph, are capable of competing in the marketplace
> only if they also have access to: (1) Intel's advance confidential
> technical information, which is necessary to develop new products and to
> service existing products; (2) advance samples of Intel's development
> chips, which are needed by Intergraph to develop its own next-generation
> products using those chips (hereinafter referred to as "Chips Samples");
> and (3) early releases of Intel chips, related products, and related
> technical information, which is necessary for Intergraph to test and
> produce its products (hereinafter referred to as "Early Release Chips").
>
> -----
>
> 4. Intel's Use of NDAs to Coerce Intergraph.
>
> Intel provides its products, as well as technical and design
> information, to Intergraph under NDAs, which are terminable at will by
> Intel. These NDAs are documents drafted by Intel and presented to
> Intergraph and other customers on a take-it-or-leave-it basis. Intel
> simply dictates the terms under which it provides its products and
> design information to customers such as Intergraph. (Patterson Tr.
> 128-130).
>
> The evidence suggests strongly that Intel has used the threatened or
> actual termination of NDAs as a contractual weapon, coercing customers
> such as Intergraph to accede to Intel's demands and restraining
> competition. The court takes judicial notice of the fact that, when
> Intergraph and Digital Equipment separately asserted their patent rights
> against Intel, Intel immediately used the termination provisions of
> their respective NDAs to deny both Intergraph and Digital further
> technical information, samples, and products and demanded the return of
> all Intel confidential information provided to them. . . .
>
> In view of Intel's previous policy of providing much of the same type of
> information now subject to NDAs in a much less restricted manner and in
> view of the fact that Intel has offered no reasonable explanation of any
> present need for the use of the NDAs, it seems reasonable to conclude
> that Intel's present use of one sided and terminable-at-will NDAs and
> its retaliatory cancellation of the NDAs are unreasonable and
> anticompetitive contractual restraints using Intel's monopoly in CPUs
> and related design and technical information. Furthermore, the chilling
> effect which Intel's arbitrary enforcement of the NDAs in this manner
> must have on other members of the industry, who are dependent upon Intel
> for microprocessors, is obvious.
>
> -------
>
>
> The court also finds that Intel has attempted to leverage its monopoly
> power in the "x86" CPU market to prevent Intergraph from competing in
> the graphics subsystem and workstation markets and to control and
> dominate competition in these markets through discriminatory and favored
> agreements and understandings with some of Intergraph's competitors.
> This reduces competition in the markets in which Intergraph competes,
> depriving customers of alternative and improved technology in these
> markets, stifling innovation, reducing competition in price and quality,
> and impairing competition generally.
>
>
> -----------
>
>
> B. Intel's Unlawful Refusal to Deal and Denial of Access to
> Essential Facilities.
>
> A refusal to deal "may be unlawful because a monopolist's control of an
> essential facility (sometimes called a 'bottleneck') can extend monopoly
> power from one stage of production to another, and from one market into
> another." MCI Communications Co. v. AT&T, 708 F.2d 1081, 1132 (7th Cir.
> 1983), cert. denied, 464 U.S. 891, 104 S. Ct. 234, 78 L. Ed. 2d 226
> (1983). Courts have held that the antitrust laws protect customers and
> purchasers in cases when a monopolist refuses to deal in order to
> control a downstream market or to frustrate litigation. Image Technical
> Services, 125 F.3d at 1211 (supplier's refusal to deal with its
> "customers" in order to control a downstream market); Bergen Drug Co. v.
> Parke, Davis & Co., 307 F.2d 725, 726 (3d Cir. 1962) (preliminary
> injunction granted where defendant drug company refused to sell its
> products to "purchasers" on the same terms as they are sold to other
> purchasers).
>
> The antitrust laws impose on firms controlling an essential facility the
> obligation to make the facility available on non-discriminatory terms.
> MCI Communications Co., 708 F.2d at 1132; Otter Tail Power Co. v. United
> States, 410 U.S. 366, 93 S. Ct. 1022, 35 L. Ed. 2d 359 (1973), reh'g
> denied, 411 U.S. 910, 93 S. Ct. 1523, 36 L. Ed. 2d 201 (1973); Aspen
> Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 105 S. Ct.
> 2847, 86 L. Ed. 2d 467 (1985) (access to essential facility must be
> granted by ski lift owner controlling seventy-five percent of the ski
> lifts); Tic-X-Press, Inc. v. Omni Promotions Co. of Ga., 815 F.2d 1407,
> 1420 (11th Cir. 1987) (Omni arena was unique facility with substantial
> economic advantages; lack of viable alternative arenas gave the owner
> substantial market power).
>
> Intel's advanced CPUs and Intel's technical information are "essential"
> if they are vital to competitive viability and competitors cannot
> effectively compete in the relevant market without access to them. City
> of Anaheim v. Southern Calif. Edison Co., 955 F.2d 1373, 1380 n.5 (9th
> Cir. 1992) (a facility is "essential" if it is otherwise unavailable and
> cannot be "reasonably or practically duplicated"). Intel's Advanced
> Chips Samples, Early Release Chips and Technical Information need not be
> indispensable, but their denial must "impose a severe handicap on
> potential market entrants." TCA Bldg. Co. v. Northwestern Resources Co.,
> 873 F. Supp. 29, 39 (S.D. Tex. 1995).
>
> Reasonable and timely access to critical business information that is
> necessary to compete is an essential facility. Bellsouth Adver. & Publ'g
> Corp. v. Donnelley Info. Publ'g, Inc., 719 F. Supp. 1551, 1566 (S.D.
> Fla. 1988), aff'd, 933 F.2d 952 (11th Cir. 1991). Furthermore, a
> monopolist's unilateral refusal to deal violates S. 2 of the Sherman Act
> where such conduct unreasonably handicaps competitors or harms
> competition. Image Technical Services, 125 F.3d at 1209.
>
> Accordingly, the court concludes that Intel's refusal to supply advanced
> CPUs and essential technical information to Intergraph likely violates
> S. 2 of the Sherman Act, because they are not available from alternative
> sources and cannot be feasibly duplicated, and because competitors
> cannot effectively compete in the relevant markets without access to
> them. Moreover, the court concludes that Intel has no legitimate
> business reason to refuse to deal with Intergraph. Intergraph has been a
> loyal and beneficial customer of Intel. The dispute over Intergraph's
> patent claims could be resolved separately without Intel denying
> Intergraph the essential CPUs and technical information it needs.
>
>
> -------------
>
>
> VII. Preliminary Injunction.
>
> Accordingly, pending further order of the court, it is hereby Ordered,
> Adjudged, and Decreed:
>
> Intel Corporation, its officers, agents, servants, employees, and
> attorneys, and anyone acting in concert with any of them, shall be and
> they hereby are PRELIMINARY ENJOINED from terminating Intergraph's
> rights as a "strategic customer in current and future programs," or from
> otherwise taking any action adversely affecting Intel's business
> relationship with Intergraph or Intergraph's ability to design, develop,
> produce, manufacture market or sell products incorporating, or based
> upon, Intel products or information, including but not limited to the
> following:
>
> a. Intel shall supply Intergraph with all Intel product information,
> including but not limited to technical, design, development, defect,
> specification, support, supply, future product, product release or
> sample data, whether existing in product data books, "yellow backs,"
> Confidential Information Transmittal Records, email or other mediums
> (hereinafter "Information"), in such form and content as supplied to and
> at the same time Intel supplies such Information to Intergraph's
> similarly situated competitors, such as Hewlett Packard, Compaq, Dell,
> IBM, NetPower and Silicon Graphics (hereinafter "the Competitors"),
> whether it is on an advance basis for the development of motherboards,
> graphics subsystems or workstations utilizing Intel's existing, or
> future generation products (hereinafter "Product Development"), on
> current products as needed for support of such products. Intel shall be
> required to maintain a log of the disclosure of Information to
> Intergraph and its similarly situated Competitors, and upon request of
> the court, certify to this court its compliance with the procedures and
> timely delivery of such Information.
>
> b. Intel shall supply to Intergraph all Information of the type or
> content made available by Intel to Intergraph through third parties
> (hereinafter "Third Party Information"), at the same time it permits, or
> provides, the disclosure of such Third Party Information to Intergraph's
> similarly situated Competitors, whether it is on an advance basis for
> Product Development or on a current basis for the support of products in
> distribution. Intel shall be required to maintain a log of the
> disclosure of Third Party Information to Intergraph and its
> Competitors,and upon request of the court, certify to this court its
> compliance with the procedures and timely delivery of such Information.
>
> c. Intel shall supply Intergraph with an allocation, and set aside a
> supply of microprocessors, semiconductors, chips, and buses (hereinafter
> "Chips") on an advance basis for product development ("Chips Samples"),
> in such quantities as forecasted by Intergraph in the same manner and
> the same terms as is done by Intergraph's similarly situated
> Competitors, or in proportional quantities as supplied to Intergraph's
> similarly situated Competitors, and at the same time Intel supplies such
> Chips Samples to Intergraph's similarly situated Competitors, at the
> prevailing rate charged to Intergraph's similarly situated Competitors.
> Intel shall be required to maintain a log of the release,or delivery, of
> Chips Samples to Intergraph and its Competitors, and upon request of the
> court, certify to this court its compliance with the procedures and
> delivery of such Chips Samples.
>
> d. Within eleven (11) days of the date on which Intergraph posts the
> bond, as required by subsection (h) of this order, Intel shall supply
> Intergraph with 25 sets of Deschutes Chips Samples, together with all
> technical data needed to permit Intergraph to develop, design, and
> manufacture its products. Such technical data shall be of the same type,
> nature, and extent of technical data provided to Intergraph's similarly
> situated Competitors.
>
> e. Intel shall supply Intergraph with an allocation, and set aside a
> supply, of Chips which have been manufactured by or on behalf of Intel
> for distribution (hereinafter "Production Chips"), as well as all future
> chips proposed by, or available from Intel, including but not limited to
> 333mhz Pentium II, BX, Deschutes and Merced Chips, in accordance with a
> forecast supplied by Intergraph. Intergraph shall provide Intel with a
> forecast for Production Chips at least one (1) quarter in advance of the
> quarter in which Intergraph desires to receive delivery of such
> Production Chips.
>
> (i) Intel shall supply its authorized distributors with
> sufficient quantities of Production Chips to fulfill Intergraph's
> allocation of Production Chips, when such allocation has been presented
> by Intergraph to Intel's authorized distributor for fulfillment.
> Intergraph shall, as it has agreed to do, purchase Production Chips
> available through Intel's authorized distributors by placing an order
> for such an authorized distributor to fulfill Intergraph's Production
> Chips allocation. Intergraph shall negotiate the terms and conditions
> for the supply of its Production Chips allocation with any Intel
> authorized distributor of its choosing, and Intel shall not take any
> action, or fail to take any action, that will interfere with or effect
> Intergraph's terms, conditions, negotiations or relationship with the
> Intel authorized distributor selected by Intergraph, including but not
> limited to actions pertaining to prices, discounts, volumes, shipping or
> delivery pertaining to such Production Chips. Intel shall be required,
> upon request of the court, to certify to this court its compliance with
> the procedures with the applicable authorized distributor and delivery
> of such Production Chips.
>
> (ii) Intel shall supply Intergraph with Production Chips not yet
> available from Intel's authorized distributors ("Early Production
> Chips") in such quantities as forecasted by Intergraph, or in
> proportional quantities as supplied to Intergraph's similarly situated
> Competitors, at the same time Intel supplies such Early Production Chips
> to Intergraph's similarly situated Competitors, at the prevailing rate
> charged to Intergraph's similarly situated Competitors. Intel shall be
> required to maintain a log of the simultaneous release, or delivery, of
> Early Production Chips to Intergraph and its similarly situated
> Competitors, and upon request of the court certify to this court its
> compliance with the procedures and delivery of such Early Production
> Chips. Notwithstanding the foregoing, Intel shall supply Intergraph
> those Early Production Chips ordered by Intergraph for the 1st Quarter
> of 1998 at the prices previously agreed to by the parties.
>
> [snip]
>
>
>
> --
> James Love
> Consumer Project on Technology
> P.O. Box 19367, Washington, DC 20036
> love@cptech.org | http://www.cptech.org/
> 202.387.8030, fax 202.234.5176
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