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Packard Bell sues CTX

The firm and its subsidiary Vantus Technologies file a lawsuit against CTX International for alleged patent infringement.

Packard Bell NEC today sued CTX International, a major third-tier vendor of notebook and desktop PCs as well as monitors, for alleged patent infringement.

The lawsuit, filed in the U.S. District Court for the Central District of California, seeks to prevent CTX from making, selling, or importing its desktop and portable computers, in addition to "substantial monetary damages," Packard Bell said.

CTX could not be reached for comment.

CTX International is a subsidiary of Chuntex Electronics, a publicly traded company in Taiwan. Chuntex says it is one of the top ten monitor manufacturers in the world. The company, although not widely known, offers inexpensive PCs that are popular items at retailers such as Circuit City and CompUSA--areas where it competes directly against Packard Bell.

Packard Bell claims computers manufactured by CTX infringe on five separate patented technologies invented either at Packard Bell or Vantus Technologies, a holding company for patents granted to Zenith Data Systems, which is a Packard Bell subsidiary now.

"CTX was (sued) because they recently adopted an aggressive consumer market strategy and are selling systems below the prevailing rates in the marketplace," said Mal Ransom, senior vice president of marketing for Packard Bell NEC, Consumer Division. CTX is able to do this, he says, because they aren't paying the same development costs in regards to licensing technology, and therefore Packard Bell decided to enforce patents it holds.

Some of the patent rights being asserted wouldn't appear to be at the cutting edge of technology--one patent involves putting a notebook into a power saving mode when the lid is closed--but increasingly companies are using their patent portfolios in a variety of ways. Other patents cover an interface for connecting different peripheral devices to the computer through a serial or parallel port--the technology allows a device to be recognized by the computer.

In July, CTX had a 7 percent share of the retail PC space and Packard Bell had between 8 to 10 percent market share, according to Aaron Goldberg, executive vice president of ZD Market Intelligence.

"Packard Bell has been in a slow downturn, and CTX is in a slow upturn," Goldberg said. CTX is competing directly against Packard Bell, and they are taking some of its business, he noted, so the lawsuit is a way to "create competitive angst" without engaging in an expensive price war.

Most computer companies have already established solid patent cross licensing agreements with each other, but for those that don't, Goldberg thinks more companies will use their patent portfolios as weapons in the war for the desktop.

Because of the nature of the patents, other companies that infringe on Packard Bell's market could find themselves the subject of similar lawsuits.

"These patents are broad. They involve very core technologies we have invested heavily in. We felt it was appropriate we protect our intellectual property," said Ransom. "We've clearly made ourselves aware of other people in the industry who may be infringing on our patents, but we have no intent at this point in time of focusing on anyone other than CTX."

Packard Bell itself was the subject of a well-publicized lawsuit in 1995 when Compaq alleged that Packard Bell was selling computers with previously sold parts, and Packard Bell counter-sued with a similar claim. The lawsuit was eventually settled out of court and the terms were not disclosed.

Since that time, Packard Bell has had a tough time recovering from the beating its image took. Packard Bell has since slipped from being the top vendor to the fifth largest vendor of PCs to consumers in recent years, while Compaq eventually rose to take the number one spot in retail.

The patents being asserted by Packard Bell NEC cover key features in today's desktop and portable computers such as: "automatically reconfiguring a memory system of a computer; a computer interface for connecting a number of different peripheral devices to the computer; and a computer power management system that allows a computer to power down into a suspend mode and then resume operation the same place."

Other areas include: "a portable computer system, enabling the computer to switch into a suspend mode upon lid closing and returning the computer to the operation mode and resuming applications upon lid opening; and a variable battery charging system that maximizes the efficiency of a portable computer's battery pack."