The decision represents a remarkable turnaround in the case, which was closely watched primarily because of its implications for separate and more serious antitrust allegations. Those charges, which await a decision on Intel's appeal of an adverse preliminary injunction in the case, were not directly affected by today's ruling.
Only this past June, Alabama federal judge Edwin Nelson had rejected a key defense raised by the chip giant, holding that Intel did not have rights to the disputed technology at the core of the case. That ruling had undercut an important argument by Intel, which took the position that a 1976 cross-license it signed with National Semiconductor gave it the right to use patented technology covering Intergraph's microchips.
The case took a sharp turn in the other direction today, when Nelson agreed to grant reconsideration. The case was dismissed with prejudice, virtually wiping out any chance for an appeal.
"The court is satisfied...that it initially gave too little weight to Intel's argument that when National Semiconductor Corporation acquired all the stock of Fairfield Semiconductor Corporation it also acquired control of the patents that are now claimed to be owned by Intergraph," he wrote in Intergraph vs. Intel.
"This allows us to focus our resources to defend against the antitrust portion of the civil case," said Chuck Mulloy, an Intel spokesman. "We believe our behavior was well within our rights, and we plan to mount a vigorous defense when the case goes to trial on June 12, 2000."
Intergraph released a statement saying they would appeal the order. "We believe Judge Nelson's original opinion of June 4, 1999, to be correct, which held that Intel did not have a license to use our patents," Intergraph wrote in the statement. "Intergraph's lawsuit against Intel has three components: tort, patent, and antitrust claims. This decision does not affect the antitrust and tort claims of the lawsuit." Under a tort claim, a litigant has a broad right to sue for damages over an injury.
Dan Wall, an attorney at McCutchen Doyle Brown & Enersen in San Francisco, said the ruling was not a "complete shock." He noted the judge had indicated in another decision recently that he might have changed his mind. "But it is a remarkable turnaround from a position that was just about as black as you can imagine," he said.
Wall added that the decision may have negative fallout for the antitrust claims.
"This order doesn't affect the antitrust claims directly," he said. "However, the gist of the antitrust claim is that Intel wrongly denied Intergraph access to certain technology in retaliation for the assertion of the patent suit.
"That claim [assumes] that Intergraph should have the right to assert valid patent claims without fear of retaliation. So now that it has been determined that Intergaph's patent claims are not valid, the idea that Intel got mad about them doesn't seem so bad. It just takes all the wind out of the sails."
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.
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.
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.