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Symantec loses a round in court

A federal judge issues a preliminary injunction forbidding McAfee from shipping any software that contains lines of code cribbed from archrival Symantec.

    SANTA CLARA--A federal judge today issued a preliminary injunction forbidding McAfee (MCAF) from shipping any software that contains lines of code cribbed from archrival Symantec (SYMC).

    But the ruling likely will have little effect on McAfee?s operations. U.S. District Judge Ronald Whyte of San Jose found that, although McAfee used Symantec?s code in its earlier products, it no longer appears to be producing software with any of its competitor?s code.

    In August, McAfee rewrote its PC Medic program, using a so-called "clean room" process that was designed to remove all Symantec code from the software. According to the ruling, Symantec's own experts concede that the resulting version, referred to as PC Medic 1.0.1a, is "substantially and fundamentally different from" the infringing code.

    Whyte also noted that the injunction didn't appear to affect current products sold by McAfee.

    "It seems likely that, by now, most of the infringing versions of McAfee's products have been sold or will be upgraded via the Internet...to the current version," he wrote.

    But attorneys for Symantec said they remain suspicious of McAfee's clean room efforts.

    "There's strong evidence that the alleged clean room was anything but clean, and that the code that emerged from the clean room was derived directly from the code that was misappropriated," said Allen Ruby, a lawyer for Symantec. He added that Symantec is still analyzing other McAfee products to see if they contain Symantec code.

    In the ruling, Whyte also rejected Symantec?s efforts to require McAfee to recall copies of its flagship VirusScan product line, and its new product, PC Medic.

    However, the judge rejected McAfee's effort to have key allegations in the suit dismissed.

    He also required McAfee to instruct distributors who are still selling older versions of its products to advise all purchasers to upgrade the product in order to remove Symantec code.

    The injunction is a far cry from what Symantec originally sought. Just three months ago, the company had attempted to block McAfee from shipping the entire line of VirusScan, as well as PC Medic.

    But several weeks ago, Symantec narrowed its request to the court, aiming to block only shipments of McAfee software that still contain Symantec code.

    After the ruling, both sides declared victory.

    "We feel somewhat vindicated by this ruling in what we have said is a meritless suit," said Peter Watkins, vice president of McAfee?s antivirus and data security unit. "If Symantec wants to continue to pursue litigation, then so be it. We plan to get back to selling software."

    Meanwhile, Art Courville, Symantec's legal director, had this to say: "McAfee, a couple months ago, was saying none of its products contained any Symantec code. The judge has clearly said that McAfee copied."

    Courville noted that the case is in an early stage. Whyte's ruling could extend to any additional McAfee products that Symantec can prove contain its source code.

    Symantec's suit alleges that McAfee lifted key portions of its CrashGuard software and incorporated it into McAfee's PC Medic. Symantec amended its complaint in July to allege further that McAfee also inserted Symantec code into McAfee's VirusScan product.

    McAfee, meanwhile, has argued in court papers that Symantec's code in the two products--about 130 lines out of more than 100,000--was obtained over the Internet, and therefore was in the public domain. McAfee also said the code was inadvertently included in its products.

    McAfee said it had removed 30 lines of disputed code from its new PC Medic software in May and 100 lines of code from VirusScan in July, days after Symantec filed suit over VirusScan.

    McAfee also has fired back with a $1 billion defamation suit over Symantec's public statements regarding the case, although Symantec issued a public apology for its comments in August.

    The stakes in the battle to dominate the antivirus software market are high. As the Internet becomes the preferred medium by which to transmit software and other digital products, it is becoming increasingly easy for vandals to pass along destructive viruses to unsuspecting customers.

    In 1996, McAfee's revenue more than doubled from the year before, to $181 million. Symantec, meanwhile, generated $472 million in revenues during fiscal 1997, up from $445 million the year before.

    McAfee said it will announce its next quarterly results October 20. The company expects revenues of $88.3 million and earnings of 45 cents per share for the quarter, compared with revenues of $40.8 million and earnings of 24 cents per share for the same period last year. First Call?s consensus of analysts expect earnings of 44 cents per share.

    Symantec will report earnings later this month as well.