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US Report: FTC takes action against Intel, alleges abuse

The other shoe dropped here today, as the Federal Trade Commission (FTC) voted to file an administrative complaint against Intel for federal antitrust violations.

The FTC's action means both halves of the so-called Wintel duopoly now face government discipline for alleged anti-competitive behaviour. Microsoft at least as powerful in the area of PC software as Intel is in PC hardware, is in court with the Department of Justice (DOJ).

The FTC, which has been investigating Intel's business practices since September of 1997, said in a release handed out before its press conference here that Intel abused its monopoly in the market for PC microprocessors.

The FTC said Intel had denied access to its technologies and threatened to cut-off the chip supply to three major customers, Digital, Intergraph and Compaq. Behind these actions, the FTC said, were Intel's desire to retaliate against these companies for filing patent claims against it or against other companies that use Intel chips.

If Intel can use its monopoly position in the market for microprocessors to prevent other firms from enforcing their own patents, other firms will have little incentive to invent new features to challenge Intel's dominance," said William Baer, director of the FTC's Bureau of Competition, in a statement.

During the press conference, Baer said the FTC action was limited to these three companies, and did not necessarily indicate widespread use of these methods. However, he said, "it doesn't take a lot of this type of behaviour to send a signal on how people are supposed to behave."

PC makers subpoenaed in the FTC case have said they were asked to provide the agency with information on Intel's NDA (nondisclosure agreement) policies. An Intel spokesman declined to comment until the company receives "official" word of the lawsuit from the FTC. He said Intel would issue a statement within a few hours after the FTC's judgement.

Intel has maintained it has a right to protect its intellectual property and that it does not consider it prudent to continue doing business with companies that are suing it. The FTC disagrees, declaring Intel's processors as absolutely necessary to PC makers that are developing their own products.

"If Intel can use its monopoly position in the market for microprocessors to prevent other firms from enforcing their own patents, other firms will have little incentive to invent new features to challenge Intel's dominance,'' said Baer, in a statement released this afternoon. "The case the commission is bringing today seeks to prevent Intel from repeating this conduct in the future," Baer added.

While Intergraph and Digital's legal battles with Intel have been widely reported, the involvement of Compaq comes as a surprise. In November of 1994, the FTC said, Compaq sued Packard Bell for patent infringement surrounding motherboard technology. Intel intervened on Packard Bell's behalf because "Intel had an obligation to indemnify Packard Bell," according to the FTC.

After Compaq asserted its patent rights with Packard Bell, Intel cut off technical information to it, the FTC said. "Intel restored Compaq's access to technical information only after Compaq agreed to cross-license its patents with Intel," according to the FTC. A Compaq spokesman in Houston could not be reached for comment.

Intergraph executives said it was cut off from chip supplies after it demanded patent royalty payments from Intel for its Clipper chip.

Intel threatened to cut off Digital after the latter claimed Intel knowingly stole Alpha patents that led to the wild success of Intel's Pentium processor line.

Intergraph CEO Jim Meadlock said the FTC antitrust case will undoubtedly boost the antitrust portion of his own company's case against the company.

"Our case stands on its own and we will prevail regardless of the FTC,'' said Meadlock. "But there is no question this reinforces our case. This is nothing but a positive.''

Intergraph and Intel attorneys will meet on June 18 to set a date for a formal trial.

Although the FTC has used the antitrust portion of the Intergraph case as something of a basis for its case, Meadlock is reluctant to stand out as a poster-boy for the industry.

"I'm concerned with how fairly Intel deals with Intergraph," he said. "The rest of the industry is not my problem.''

Intel spokesman Chuck Mulloy, the only Intel official responding to inquiries regarding the FTC case, could not be reached by press time.