The Federal Trade Commission today announced that it has
approved the surprise settlement struck last week with Intel.
The consent order, which
was made public today, is being cast as a win for both sides. While it
prevents Intel in many cases from
witholding advanced product information and samples from customers over
intellectual property disputes, it is significantly narrower than the
relief the FTC originally requested.
In an action filed last June, the agency alleged that Intel, the world's
largest chipmaker, was a monopolist that illegally withheld crucial
products from customers unless they signed away valuable intellectual
property rights.
Under the settlement, Intel still is permitted to withhold product information
and samples from customers who seek a court order prohibiting the sale, use,
and manufacture of Intel chips. Two of the three customers Intel is accusesd of harming--Compaq Computer and Digital Equipment--sought such injunctions
before Intel cut them off. Intergraph requested an injunction
just a few months after losing access to Intel products.
The commission voted 3-0 to accept the proposed consent agreement for a
60-day public comment period, with one commissioner not participating
because of medical reasons.
"This gives a framework how to handle these disputes with our customers,"
said Peter Detkin, associate general counsel at Intel. "We now know what
the framework is. They know what the framework is. We think that's very
valuable."
The FTC believes that companies moved to seek injunctions earlier against Intel because they didn't have the options available under today's settlement, said Michael Antalics, the agency's assistant director at the bureau of competition.
"If companies have the option to get reasonable compensation and at the same time can continue getting chips and advanced product information, they would prefer that," said Antalics.
"The heart of the commission's complaint against Intel was the principle
that a monopolist cannot withhold products or information about products in
order to retaliate against customers who find themselves in an intellectual
property dispute," FTC chairman Robert Pitofsky said in a statement.
Pitofsky added that the commission recognized that there is an "essential
balance" that needs to be struck between protecting the incentives of
smaller rivals to innovate and unduly constricting a
dominant firm's conduct of its business.
The settlement, which is effective for 10 years, prevents Intel from
"impeding, altering, suspending, withdrawing [or] withholding"
advanced technical information or samples to customers who assert or
threaten to assert patents or other types of intellectual property rights,
against the chip giant.
"I believe that Intel is a company that will obey the terms of this order and obey the law if they know what the rules are. I expect them to interpret this order in good faith," said Pitofsky. "But of course, as with any order, we are going to keep an eye on whether people are trying to get around the provisions of it in any way."
The FTC has a compliance group which focuses on handling alleged order violations.
Intergraph, a Huntsville, Alabama maker of workstations that is pursuing a
private antitrust and patent infringement suit against Intel, hailed the
settlement as a victory for the government.
"Clearly, the FTC's concerns and actions were well-founded for Intel to
have chosen to settle out of court," the company said in a statement. It
added that the decree reinforced a preliminary injunction Intergraph won
last April ordering Intel to resume supplies of technical information and
chips to the workstation maker.
The preliminary injunction, which is now on
appeal, held that Intel products were "essential" to Intergraph's business.
Intel began withholding the products shortly before Intergraph filed suit.
"Should the preliminary injunction in Intergraph's lawsuit happen to be
lifted on appeal, Intergraph is still protected by this consent decree,"
Intergraph added.
Intel and the FTC filed a joint motion last Monday, a day before trial was
to start, delaying the courtroom battle pending final approval. With a
majority of the agency's commissioners signed off on the settlement, it is
now open for public comment. Final approval could happen by early summer.
In its complaint, the FTC accused
Intel of depriving its smaller customers of one of their chief
assets--intellectual property rights that could be used as leverage when
negotiating with Intel. Intel was able to take such action by threatening
to withhold technical information customers needed to build their products
unless they entered into royalty-free cross-licenses, the FTC alleged.
While the consent decree forbids Intel from severing ties with customers
who assert patent rights against Intel products, it requires them to agree
in writing not to seek an injunction against the use or sale of Intel
chips. All three of the alleged Intel victims sought such injunctions,
meaning Intel would be free to take the same actions even after entering
into the decree.
Under the settlement, Intel does not admit it is a monopolist or that it
engaged in any wrongdoing.
The proposal identifies other specific circumstances where Intel
is not obligated to supply product or advance technical
information, including the following:
• When a customer has breached an agreement regarding the
disclosure or use of the information.
• When the information or product is not being provided to other
customers.
• When the information would be used to design competing
microprocessors.