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Intel loses key ruling in Intergraph case

A federal judge rules that an old cross-licensing agreement did not give Intel rights to some of Intergraph's patents.

A federal judge hearing Intergraph's patent infringement lawsuit against Intel has rejected a key defense raised by the chip giant, holding that it did not have rights to the disputed technology at the core of the case.

The ruling undercuts an important argument by Intel, which said in a motion filed last June that a 1976 cross-license it signed with National Semiconductor gave it the right to use patented technology covering Intergraph's microchips.

Intergraph obtained the patents when it bought a portion of Fairchild Semiconductor from National in 1987. Intel had argued that the earlier cross-license gave it the rights to all technologies in National's control, including subsidiaries such as Fairchild.

But in a decision Intel said it would appeal, U.S. District Judge Edwin Nelson disagreed, saying the cross-license did not apply to subsidiaries.

National "had no legal authority to grant a license, as the patents at issue belonged not to [National] but to a legally distinct corporation--Fairchild," Nelson wrote in the ruling, which was released late last Friday. "Intel thus never received a license from any entity with the power to grant one." The judge went on to say that under the language of the cross-license, subsidiaries' patents could not be applied to the deal "unless and until they consent."

Intergraph filed suit against Intel in 1997, alleging the world's largest chipmaker infringed patents covering the so-called "clipper chip," which is no longer in production. The Huntsville, Alabama, maker of workstations also claimed that Intel's attempts to withhold advanced product information from Intergraph after the dispute arose violated antitrust laws. Trial is scheduled for early next year.

Intel immediately said it would challenge the decision in the court of appeals.

"We're disappointed and respectfully disagree with the judge," said Intel spokesman Chuck Mulloy. "We believe this ruling has a very broad and unprecedented implication. Given our concerns, we plan to pursue an appeal."

Mulloy said of particular concern was Nelson's determination that the cross-license did not cover technology owned by subsidiaries. "It potentially changes the law that applies to thousands of other agreements," Mulloy said. "We're very concerned about the implications."

Intergraph chief executive Jim Meadlock applauded the ruling.

"Intel repeatedly has made a big issue about the 'fact' they have a license to the Clipper patents," Meadlock said in a statement. "The court affirms they don't have such a license."

Judge has ruled against Intel before
This is not the first time that Nelson has ruled against Intel in the dispute. In April 1998 Nelson ruled that Intel's product information and samples were "essential" to Intergraph's business and that withholding them from Intergraph violated antitrust laws. Nelson also held that Intergraph was likely to show at trial that its patents are being infringed by Intel's Pentium line of microprocessors. Intel's appeal of that decision is pending.

Friday's decision in the case means that, unless it is overturned on appeal, Intel will be barred from raising the defense if the case goes to trial. Even still, Intel is asserting a number of other defenses in the case. Among them is Intel's assertion that the patents are invalid, and that they do not cover technology used in Pentium chips. Intel also argues that Intergraph lacks standing to sue Intel on antitrust grounds because the two companies are not competitors.

Intergraph's dispute with Intel formed the cornerstone of an antitrust complaint the Federal Trade Commission filed against Intel a year ago. Intel and the FTC settled the complaint last March, on the eve of a trial. Under the settlement, Intel agreed not to withhold advanced product information when companies sue for patent infringement, so long as the companies do not seek an injunction against Intel chips.