Intel, FTC prepare to square off

As the Microsoft trial winds down, PC chip giant Intel Corp. -- the other half of the "Wintel duopoly" -- will find itself in front of a Federal Trade Commission judge on Tuesday, defending itself against anti-trust charges.
Written by ZDNet Staff, Contributor

The complaint -- filed by the FTC in June 1998 -- claims that Intel withheld critical information regarding its processors from three customers -- Intergraph Corp., Digital Equipment Corp. (now, part of Compaq), and Compaq Computer Corp. -- to protect its monopoly in the microprocessor market.

In each case, according to the claims, Intel withheld information about its future products from its customers, when those companies threatened to sue Intel for patent infringement. Intel calls the actions fair -- if harsh -- business, while the FTC has coloured the moves as those of a monopolist protecting its turf.

In the abstract, the two sides don't dispute the facts.

In November 1997, after Intel withheld documents from computer maker Intergraph, the Huntsville, Alabama company sued Intel for patent infringement and anti-competitive practices. Intel claims the actions pre-empted Intergraph's decision to sue it for patent infringement. In a separate suit, Intergraph won an Alabama court order forcing Intel to provide it with documents regarding the Californian company's new microprocessors.

The case closely resembled that of Digital Equipment Corp. The company -- now a subsidiary of Compaq -- settled with Intel in December in 1997, selling off its semiconductor operations to Intel after a seven-month legal battle.

Compaq also ran afoul Intel's muscle when it tried to sue Intel customer and PC maker Packard Bell NEC Inc. for patent infringement in November 1994. When Packard Bell asked Intel for protection, the PC chip giant intervened by withholding technical information from Compaq necessary for the company to design systems around Intel processors. Compaq settled the suit.

The key issue: Whether Intel's withholding of information constitutes an abuse of power. Wielding its ability to keep back information from its customers is fair only if Intel is not a monopoly, said Warren Grimes, professor at the Southwestern University School of Law and a former FTC attorney.

To prove its case, the FTC will have to show that Intel is a monopoly and abused its monopoly power. For the FTC, a major step along that path will be to show that Intel's proprietary information is necessary for PC makers to do business, or in legal parlance, an "essential facility". While both Intel and the FTC have steered clear of using the term, in its pretrial brief, the FTC stated that Intel "controlled basic product information and microprocessor product samples indispensable to ... Intergraph, Digital, and Compaq." Such a statement smacks of an "essential facility" strategy, said Grimes. "When (the FTC) uses the word 'indispensable,' it seems to point towards the conclusion that they will be pursuing 'essential facility,'" he said.

While Grimes would not predict whether the government would pursue charges outside the brief, he did confirm that previous precedents had been set. "One of the things the FTC can show is that (Intel) used their monopoly power in another market," said Grimes.

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