Intel Antitrust Case To Be Low Key

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January 08, 1999 (4:50 PM EST)

By Mary Mosquera,

The government expects its antitrust trial against chip maker Intel to be quick and narrow in focus when it gets under way in February, unlike another antitrust trial taking place down the street in the nation's capital, antitrust attorneys said Friday.

The case will not carve new law, according to an FTC senior attorney, who did not wish to be identified. Intel has said the case is chiefly an intellectual-property rights case; the government contends Intel is using its chip monopoly illegally to maintain its monopoly. "We are establishing rules only for a monopolist," the FTC attorney said. "This trial will be positive for intellectual property. It will make those rights real," he said. It will also encourage choice.

In June, the FTC slapped antitrust charges against Santa Clara, Calif.- based Intel, saying it had used its monopoly in the microprocessor market to deny three of its customers and potential competitors access to technical information needed to develop products based on Intel's chips.

William Baer, director of the FTC's Bureau of Competition, charged at the time that Intel retaliated against the three computer companies -- Compaq, Digital Equipment (acquired by Compaq in 1998), and work station maker Intergraph -- when they filed patent-infringement suits against the leading chip maker.

"Intel cannot use its monopoly power to extract intellectual-property licenses from companies and, therefore, extract compulsory licenses. The government just wants to see some competition."
-- FTC Official

Intel said it does not have a monopoly in the chip industry and must compete aggressively with other companies, such as Advanced Micro Devices. The FTC official agreed there was competition in the low-end, or consumer chips. "But the big money is in the segment of the chip market that has no competition," he said, referring to high-end microprocessors used in large corporate systems.

"Intel cannot use its monopoly power to extract intellectual-property licenses from companies and, therefore, extract compulsory licenses. The government just wants to see some competition," the FTC official said.

A key question is: when does cross-licensing of intellectual property go too far and become anticompetitive compulsory licensing. A government win could establish case law that a dominant company must continue to deal with a customer once a contractual relationship has been established, without the option of terminating or changing the terms of the relationship, essentially compulsory licensing, according to William Kovacic, law professor at George Washington University.

A monopolist can transact a licensing agreement based on normal economic terms and business procedures, the FTC attorney said. A monopolist can deny its intellectual property to partners if they have not paid for it or have misused it, but not to pressure them.

A pretrial hearing is set for Feb. 19, with the trial scheduled to begin Feb. 23, if there are no more delays, and is anticipated to last about eight weeks at the FTC before Chief Administrative Law Judge James Timony. However, if Intel is going to contest issues like market definition and market power, the case could drag on, said Howard Morse, a partner at Drinker, Biddle & Reath in Washington, D.C., and former assistant director of the FTC's Bureau of Competition.

The FTC's antitrust suit could get preempted by the federal appeals court, which is reviewing a district court's injunction against Intel to force the chip maker to continue to provide technical information to Intergraph. "The FTC may not be bound by that decision but the appeals court decision could be influential," Morse said. A ruling for Intergraph strengthens the FTC case; a decision favoring Intel could either kill the FTC case or set up a difference in decisions, making a Supreme Court review bid more likely. Morse expects an appellate court decision by June but probably sooner.

A high-profile antitrust trial continues three blocks away with the other member of the Wintel duopoly, as the Justice Department and Microsoft box it out to win the hearts and minds of the court and the public through a twice daily media blitz by both sides. The FTC attorney said not to expect the same atmosphere in the Intel case.

The Intel case will not be as riveting to the general public as the Microsoft case. "Intel is more low key and its executives are not as flamboyant as Bill Gates," Morse said.

Richard Parker is the FTC's lead attorney. Robert Cooper of the Los Angeles law firm Gibson, Dunn and Crutcher will represent Intel before Timony, who has been an FTC judge since 1976.