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FTC has Intel "talking points"

The agency releases a white paper about the antitrust case, as a judge denies an Intel motion for the FTC to say which markets the company monopolizes.

When the Federal Trade Commission sued Intel on June 8, it distributed the complaint and a press release describing the case to all who were interested.

But for an elite few, the FTC distributed something more: a silver-tongued white paper providing "talking points" for academics and other legal pundits who talk to the press.

The document, which provides a list of questions and answers about the FTC's antitrust case against Intel, still is not available on the agency's Web site, though a copy is posted on the copy on the Law Journal Extra site.

Meanwhile, Intel suffered a minor setback Friday when an administrative law judge rejected Intel's motion to compel the FTC to define the issues in its case.

Intel was seeking an order that would compel the FTC to state which markets it believed Intel has been inflicting unwarranted monopoly power. Intel has been given ten days to file an appeal. A hearing to discuss the calendar in the case will take place July 10.

Sending out position papers is not unusual for government agencies, especially when they take on a multibillion-dollar company with lots of public relations muscle. But two FTC watchers said they were surprised the document was released so selectively, adding that it described the case far more optimistically than the corresponding press release did, and certainly more than is warranted.

An FTC spokeswoman said the agency distributed the white paper to academics and lawyers contacted by the press to explain the case. She added that the issuance of such a position paper is "not unheard of" but could not recall other examples.

"We don't believe circulating a white paper of this nature is appropriate," countered Chuck Mulloy, a spokesman with Intel. "Intel will continue to deal with these issues in the court, not in the press."

The paper provides a number of legal citations for cases that the FTC will rely on in its case and explains the commission's opinion of Intel's business practices in detail.

In general, the agency will not argue that Intel's competitors lost business, or that Intel necessarily gained business when it terminated intellectual property agreements with three computer vendors. Instead, the agency will argue that the company used illegal means to protect itself from potential competition. According to the memo, the chipmaker's motives can mostly be read from the fact that Intel had no legitimate business reasons for its actions.

In addition, the paper more fully explains the FTC's reasons for filing the suit. In anticipation of critics who have charged that the suit involves an expansive reading of monopoly law, the paper nonchalantly states that the suit "is black-letter law." It later suggests that Intel's refusal to license its patents to workstation manufacturer Intergraph could be considered an unlawful refusal to deal under antitrust law.

"The commission is trying to depict the case as being right in the middle of the mainstream of doctrine and fairly straightforward," said William Kovacic, a professor specializing in antitrust law at George Mason University. "I think the case is riskier than that in that more things can go wrong than the FTC's talking points would suggest."

Rich Gray, an antitrust attorney who has followed the case against Intel and has represented Intel in other matters, agreed. "In a document that's already simplistic, the FTC's rejection of Intel's arguments in the intellectual property arena plumb the depths of undue simplicity," he said. "There are good, strong arguments that even a monopolist has a right not to license its patents to parties it does not want to."

The FTC took action against Intel alleging that in dealings with at least three customers, the chip giant withdrew valuable technical information when the companies asserted intellectual property claims. Claiming Intel holds a monopoly in the market for personal computer microchips, the FTC said the actions violate antitrust laws.

For its part, Intel does not deny it cut off information from Compaq Computer, Digital Equipment, and Intergraph, but it says it was within its rights to do so.

Some legal observers strongly agree with Intel and add that there are serious flaws in the FTC's case. Chief among them: A failure to define the market in which Intel allegedly holds a monopoly, the application of laws that govern how monopolists must deal with competitors, and Intel's dealings with the three companies, who also are customers.