7th > November > 1999 Archive

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History of The Decline & Fall of the Intel Empire

Here we need give little heed to the ancient legend that the Roamin' Empire, now known as Intel, was founded on the seven hills of Silicon Valley, or that its legendary founders Robert Noyculus and Gordon Moorulus, were nurtured in 1968 by a semiconductor wolf called Fairchild. However, the Empire, in deference to its legendary founders, dates its origin from 1968 and designated as Year Zero in all the scrolls and manuscripts which survived the subsequent conflagrations. We are, rather, concerned here, with the time when the Republic became an Empire, headed up by Andronicus Paranoidicus Inflexionus Grovus, and how it sought to become a worldwide force, sending out its crack legions, each of which fought under the banner of Intel Inside, the better to subdue and conquer the armies of Goth King Vilhelm Jeremiah Sanders III, who ruled over a large territory called Advancedmicrodevicus and his vandal ally Cyrix. In the early years of the third decade of the Roamin' Empire, the legions of Intel Inside made big inroads into the land of these barbarians. One small tribe, headed by a warrior lord called King Eckhard Pfeiffer I, stood up to the legions briefly, but eventually the troops of Andronicus swamped this small region of Germany known as Compaq, and its proud leader was taken back and paraded down the Via Mission Boulevardicus, and forced to pay tribute to the Emperor of the World. But Caesar Andronicus Paranoidicus Inflexionus did not have it all his own way. His proud town Pentium FDIV was ravaged by a flaw in a volcano, leading to the loss of half a billion Intel Inside brave bucks. Shorly after this catastrophe, and grief-stricken by the loss, Andronicus assumed the honorific title Inflexionus, and set down his thoughts in a scroll entited Only The Paranoidicus Survives. He then handed over the day-to-day running of battles to Caesar Craigus Logcabinus Barrettus, his favoured successor, who, with his generals Paulus Ottelini I and Pat Kickingus Gelsingerus IV prepared to stamp out the barbarian threat once and for all with the aid of Persian King Rambus I. The Goths, under King Vilhelm III, continued to ravage the troops of Andronicus by striking alliances with King Cyrix and to a lesser extent King Centaur, leading to a battle at the gates of ancient city Socket VII, at which Goths and Visigoths alike were forced to return to their lairs by new a Roamin' Empire general called Slot I and his son Slot II. But this defeat merely served to stiffen King Vilhelm's resolve against the Roamin' Empire. He prepared secret weapons of his own and amassed his troops at Fabricus XXX, close to modern day Dresden, in Germany. Under generals K-Sextius II and his son K-Sextius III, Vilhelm sought the aid of Scythian King Athlon VII, and prepared to invade. Soon, Vilhelm III and King Athlon "The Pentium Killer" the Seventh, would be knocking on the doors of the Roamin' Empire, aided by cohorts of his eastern ally Via Technologicus, casting motherboards and chips, each with pins and sockets, against the walls of Satan Clara... (to be continued) ®
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Caldera judge finds MS ‘grossly misprepresented’ facts

MS on Trial When denying Microsoft's motions for summary judgement in the Caldera case last week, US District Judge Dee Benson found that "Microsoft has grossly misrepresented" a cited case in a brief to the court. What follows is a little long-winded, but the detail is necessary to see just what Microsoft did. Microsoft was trying to contend that for Caldera to succeed on its claim it must first show that each of the alleged incompatibilities between DR-DOS and Windows "had no purpose other than to preclude competition from DRI", and cited in support Transamerica Computer Co., Inc. v. I.B.M. Corp. Transamerica was a producer of compatible peripherals for IBM mainframes (not personal computers as Judge Benson says). IBM redesigned its CPU to make it incompatible with any peripheral product not made by IBM. (Yes, that's how the old IBM functioned.) IBM maintained that the redesign had technological value and therefore the resulting incompatibilities could not support a Sherman Act section 2 claim. Judge Benson wrote: "Microsoft asserts in its reply brief that the court in Transamerica "held that a plaintiff must prove, in addition to intent, that the design decision was devoid of technical merit and had a significant effect on competition". Microsoft also adds that "the court [in Transamerica] expressly stated that design conduct violates 2 of the Sherman Act only if the 'design changes had no purpose and effect other than the preclusion of... competition' [citing the Transamerica case]. Applying this standard to the instant case, Microsoft argues that Caldera cannot show that even one of the alleged incompatibilities had as its only purpose the preclusion of competition or that the incompatibilities were devoid of technological merit. Therefore, defendant argues, plaintiff's claims fail as a matter of law." Judge Benson then commented: "Applying this standard, the Court may agree that plaintiff has not met its burden. However, Microsoft has grossly misrepresented the holding of Transamerica. Particularly offensive to the Court [that's as near fury as you can get in a judge's opinion] is the assertion that 'the court [in Transamerica] expressly stated that design conduct violates 2 of the Sherman Act only if the 'design changes had no purpose and effect other than the preclusion of... competition.'" This is simply not true. "It appears that Microsoft scanned the Transamerica opinion for language favourable to its position and then quoted that language entirely out of context with the intent of leading this Court to believe that the court in Transamerica held something it did not. What the Transamerica court did say is: " 'had IBM responded to [the manufacturers of peripheral equipment's] inroads on its assumed monopoly by changing the System/360 interfaces with such frequency that [peripheral equipment manufacturers] would have been unable to attach and unable to economically adapt their peripherals to the ever-changing interface designs, and if those interface changes had no purpose and effect other than the preclusion of [these manufacturers] from competition, this Court would not hesitate to find that such conduct was predatory.' "The Transamerica court was attempting to provide a hypothetical illustration of what would undeniably be predatory conduct. The court did not maintain that IBM had engaged in such conduct let alone intend to announce a standard that a plaintiff must meet in order to succeed on a technological incompatibility claim. The Transamerica court went on to add, "it is more difficult to formulate a legal standard for design conduct than it is to imagine clearly illegal situations. "Finally, the Transamerica court stated the standard by which it would evaluate the changes IBM made to the CPU design: 'A more generalised standard, one applicable to all types of otherwise legal conduct by a monopolist ... must be applied to the technological design activity here. If the design choice is unreasonably restrictive of competition, the monopolist's conduct violates the Sherman Act. This standard will allow the fact finder to consider the effects of the design on competitors; the effects of the design on consumers; the degree to which the design was the product of desirable technological creativity; and the monopolist's intent, since a contemporaneous evaluation by the actor should be helpful to the fact finder in determining the effects of a technological change.' The standard actually applied by the Transamerica court contemplates the effect the design choice has on competition. It does not impose the much heavier burden on a plaintiff of demonstrating that a design choice is entirely devoid of technological merit. "In addition, in the instant case plaintiff has not alleged a separate intentional incompatibility claim upon which a finding of liability is sought. As previously discussed, Caldera's claim of unlawful predatory conduct is based on the aggregate effect of all of Microsoft's anticompetitive behaviour. While each separate fact used to support Caldera's claim may not by itself legally support the claim, the overall effect may be prohibited anticompetitive conduct." There can be little doubt about Judge Benson's view of Microsoft's deliberate acts to make Windows incompatible with DR-DOS, but in this case it will be a matter for a jury to decide. However, the judge's view of Microsoft's lawyering could influence what matters he decides should be put to a jury. ® Complete Register Trial coverage
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Judge's ruling opens way for Caldera Win95 suit

MS on Trial Judge Benson, in dismissing Microsoft's summary judgement motions in the Caldera case, surprisingly commented that he didn't agree with the DC court of appeals decision that let Microsoft off the hook about tying IE to Windows. Rather surprisingly, his court is not bound by that decision, but if Microsoft finds its DoJ case back in the appellate court in DC, or in the supreme court - as seems highly likely - it will be extremely interesting to see how Judge Benson's view influences the outcome. In view of the importance that Microsoft has attached to that case, it's worth delving into just what the judge's view is in Salt Lake City. Judge Benson noted that "Microsoft contends that so long as the integrated design of Windows 95 offers any technological benefit, its design is immune to judicial review under the antitrust laws." Because the tying cases that are binding upon this Court involve non-technical products..., Microsoft argues that the Court should apply the reasoning used by the United States Court of Appeals for the District of Columbia Circuit in United States v Microsoft" last year. He noted that "Microsoft relies heavily on this case in support of its present motion, premising its argument on the contention that technically integrated products are immune from per se [from Sherman Act section 1] liability. As with the case at bar, the case before the D.C. Circuit arose from Microsoft's practices in marketing Windows 95. In that case, the D.C. Circuit considered whether the district court erred in entering a preliminary injunction prohibiting Microsoft from requiring computer manufacturers who license its operating system software to license its internet browser, Internet Explorer, as well. The preliminary injunction turned on the court's interpretation of a consent decree between the Department of Justice and Microsoft, which in relevant part reads: 'Microsoft shall not enter into any License Agreement in which the terms of that agreement are expressly or impliedly conditioned upon: (i) the licensing of any other Covered Product, Operating System Software product or other product (provided, however, that this provision in and of itself shall not be construed to prohibit Microsoft from developing integrated products).' " This text from the 1994 consent decree contains the guts of the so-called contempt case brought against Microsoft by the DoJ on 1998, which resulted in Judge Jackson's interim injunction to stop the forced integration of IE and Windows. This was subsequently over-ruled by the Court of Appeals. But Judge Benson argued as follows: "Although both Microsoft and the DOJ characterise section IV(E) of the decree as an 'anti-tying' provision, the court found that 'the decree does not embody either the entirety of the Sherman Act or even all 'tying' law under the Act.' Nevertheless, the court stated that 'the consent decree emerged from antitrust claims, unresolved as they were, so that we must keep pro-competitive goals in mind in the interpretive task.' It is in this perspective that the court began its analysis in attempting to interpret the consent decree consistent with the antitrust laws. While the court stated that it would keep antitrust 'goals in mind', in essence the court's task was 'to discern the bargain that the parties struck' in the consent decree." At this point, Judge Benson asserted that "the D.C. Circuit's opinion [is] non-binding on the proceedings before this Court" and went on to criticise it: "it is even less persuasive due to the context in which it arose. Nevertheless, due to Microsoft's heavy reliance on this case, the Court will review the D.C. Circuit's analysis as it may apply to the instant case. "After debating whether Windows 95 and its Internet Explorer were an 'integrated product' under the consent decree, the D.C. Circuit determined that it should ask the question 'not whether the integration is a net plus but merely whether there is a plausible claim that it brings some advantage.' Microsoft now urges the Court to adopt this standard and reject Caldera's challenge to Microsoft's integrated product design of Windows 95 so long as Microsoft has a plausible claim of technological improvement that brings some advantage. Upon announcing this standard the D.C. Circuit acknowledged that '[w]hether or not this is the appropriate test for antitrust law generally, we believe it is the only sensible reading of IV(E)(i).'" It takes some courage to disagree with an appellate court, but there is no holding back: "This Court finds that such a test is not the appropriate standard to determine whether an illegal tie has taken place under antitrust law. Simply determining whether a 'facially plausible benefit' has been ascribed to justify an integrated product that is alleged to constitute an illegal tying arrangement falls short of satisfying the antitrust laws, as well as existing antitrust authority. This Court agrees with Judge Wald's dissenting opinion in Microsoft, that the majority's standard allows Microsoft 'too safe a harbour with too easily navigable an entrance.' Just as the dissent recognised that Microsoft could require OEMs to install "integrated" software without fear of running aground on the main prohibition of section IV(E)(i) so long as Microsoft has created a design to combine functionality in a way that offers the ultimate user some 'plausible' advantage otherwise unavailable, this Court finds that if the same standard were applied in the case at bar, Microsoft could similarly avoid [Sherman Act section 1] violations and tie whatever products it wanted by simply pointing to some 'plausible advantage'. Furthermore, as Judge Wald stated: 'It is difficult to imagine how Microsoft could not conjure up some technological advantage for any currently separate software product it wished to 'integrate' into the operating system.' Were this Court to adopt in this case the standard the D.C. Circuit articulated in the narrow context of the D.C. case, the Court would be adopting a broad standard of allowing a showing of 'plausible' product improvement functionality, whatever that means, as an absolute defence to a [Sherman Act section 1] tying claim. The Court is not willing to do so and would find such a standard to be inconsistent with existing legal precedent. "This is a case dealing with technology, and the Court recognises the need to promote pro-competitive conduct in the technology world. Indeed, technological innovation is an important defence in defending antitrust allegations. ... the Court finds that the D.C. Circuit has given too much deference to the technology argument and not enough to current antitrust law. Certainly a company should be allowed to build a better mousetrap, and the courts should not deprive a company of the opportunity to do so by hindering technological innovation. Yet, antitrust law has developed for good reason, and just as courts have the potential to stifle technological advancements by second guessing product design, so too can product innovation be stifled if companies are allowed to dampen competition by unlawfully tying products together and escape antitrust liability by simply claiming a 'plausible' technological advancement." Judge Benson's opinion raises many questions. Just how it will pan out, we shall have to wait and see. ® See also: Is Win95 really just Dos 7 plus Windows 4? Complete Register Trial coverage
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Intergraph hit by further Intel court setback

A long-running case Intergraph has waged against chip giant Intel suffered a further blow Friday last when a US court of appeal said the chip giant is not violating anti-trust legislation. The ruling, reported on news.com, said that Intergraph's argument that Intel had cut off technological information and stopped supply of CPUs did not, in itself, breach US anti-trust legislation. While the appeals court, in its ruling, acknowledged that Intel had behaved harshly against Intergraph, this could not be construed as a violation of the Sherman Act. It suspended an injunction in a lower, district court, and sent a clear signal that it believed Intel did not behave in a monopolistic manner. While Intergraph can appeal this decision in a higher US court, there is some doubt about whether it will do so. The long-standing action has already drained Intergraph of funds and energy. Last month, another US court rejected an Intergraph claim that Intel had breached its patents. ®