Rivals Prep For Antitrust Case Against Intel

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February 26, 1999 (1:07 PM EST)

Rivals Prep For Antitrust Case Against Intel

The combatants in the government's antitrust case against Intel are revving up their public-relations machines as they prepare for the start of a landmark Federal Trade Commission hearing next month.

Of those with the most at stake in the outcome of the Intel case is workstation vendor Intergraph and its down-home chairman Jim Meadlock. Meadlock, a government witness in the antitrust case, is also battling Intel in a federal court back in Alabama over Intel's alleged infringement of its cache-management patent.

"This a real war" is the way Meadlock summed up his two-track legal offensive against the chip giant.

Like Intel, Meadlock was in Washington this week to get out his side of the legal battle that could change the landscape of the semiconductor industry. Intergraph is seeking damages and royalty payments from Intel in its lawsuit in Huntsville, Ala. The case is scheduled to go to trial next February if an Intel motion to dismiss the case is rejected.

Meadlock said in an interview his case against Intel has been miscast by Intergraph's competitor and by the media. Intergraph has issued a point paper saying it sued Intel in November 1997 only after it alleged Intel took steps to coerce royalty-free patent licenses from Intergraph.

"Their desire was to force us to sign away our rights to royalties," Meadlock alleged. "We refused to sign over free access to our technology."

Intel appealed a preliminary injunction issued in the Alabama court that prohibits Intel from "taking any action adversely affecting ... Intergraph."

Along with infringing the cache-management patent, Intergraph alleges Intel engaged in anticompetitive practices. Intel subsequently countersued.

"If you have a problem with Intel," Meadlock said, "you have a legal problem."

Meadlock said FTC lawyers approached Intergraph after reading court records in the Alabama case posted on the company's website. Meadlock eventually agreed to be a government witness in the FTC's antitrust case against Intel.

He is acutely aware of the fact that an FTC ruling that Intel exercises monopoly control over the general-purpose microprocessor market could give his lawsuit a major boost. The scheduling of the FTC hearing has created "a very interesting 'where-do-you-go-from-here' situation," the Intergraph chairman acknowledged.

Intel has launched its own PR campaign here, arguing it does not exercise monopoly control over the microprocessor market. There's a lot of competition in the X86 microprocessor market, said Peter Detkin, Intel's assistant general counsel. "It's not theoretical, it's actual," he said.

Intel points to private analysts who estimate its share of the microprocessor market has declined by about 10 percent in 1998 as rivals Advanced Micro Devices and National Semiconductor's Cyrix CPU unit have made gains. Besides, Detkin said, monopoly power is not measured by market share, but by the ability to set prices, control output, and exclude competition.

"In the market for general-purpose microprocessors, we don't set prices," Detkin said.

Intel also faces a patent-infringement suit filed by Digital Equipment. Illustrating how personal the antitrust case has become, Detkin said Santa Clara, Calif.-based Intel received no notice of the lawsuit and heard about it in the press. Digital "called us thieves in the press," Detkin said.

Former Digital chairman Robert Palmer is among the approximately 50 individuals expected to appear during the FTC hearing.

In its suit filed last June, the FTC alleged Intel illegally used its market power to deny Digital, Intergraph, and Compaq continuing access to technical information needed to develop systems based on Intel microprocessors. The commission also alleged Intel took other steps to punish them for refusing to license key patents on Intel's terms.

The prehearing rhetoric is heating up on all sides as the FTC case nears. Referring to his own suit against Intel, Meadlock called Intel "a monopolist overextending to get something for free." He also accused Intel of orchestrating a "whitewash" in the Alabama case designed to misrepresent Intergraph's intent. Company officials said it was only after a year of Intel's alleged coercive behavior that Intergraph decided to sue.

Meadlock said he is confident all this will come out in the FTC hearing, and that commission lawyers have crafted a narrow antitrust case they can win. "You can't let a monopolist run free," he said.

Some observers, including Intel, agreed FTC lawyers probably won't expand the antitrust case to address issues like proprietary chip interfaces that have drawn complaints from Intel's rivals. "I don't expect the case to go beyond [the FTC's] basic allegation" that Intel monopolizes the market for general-purpose microprocessors, Detkin said.