A federal judge hearing Intergraph's patent infringement
lawsuit against Intel has rejected a key defense raised by the chip giant,
holding that it did not have rights to the disputed technology at the core of the case.
The ruling undercuts an important argument by Intel, which said in a motion filed last June that a 1976 cross-license it signed with National Semiconductor gave it the
right to use patented technology covering Intergraph's microchips.
Intergraph obtained the patents when it bought a portion of Fairchild Semiconductor from National in 1987. Intel had argued that the earlier cross-license gave it the rights to all technologies in National's control, including subsidiaries such as Fairchild.
But in a decision Intel said it would appeal, U.S. District Judge Edwin Nelson disagreed, saying the cross-license did not apply to subsidiaries.
National "had no legal authority to grant a license, as the patents at
issue belonged not to [National] but to a legally distinct
corporation--Fairchild," Nelson wrote in the ruling, which was released
late last Friday. "Intel thus never received a license from any entity with
the power to grant one." The judge went on to say that under the language
of the cross-license, subsidiaries' patents could not be applied to the
deal "unless and until they consent."
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. Trial is
scheduled for early next year.
Intel immediately said it would challenge the decision in the court of
appeals.
"We're disappointed and respectfully disagree with the judge," said Intel
spokesman Chuck Mulloy. "We believe this ruling has a very broad and
unprecedented implication. Given our concerns, we plan to pursue an appeal."
Mulloy said of particular concern was Nelson's determination that the
cross-license did not cover technology owned by subsidiaries. "It
potentially changes the law that applies to thousands of other agreements,"
Mulloy said. "We're very concerned about the implications."
Intergraph chief executive Jim Meadlock applauded the ruling.
"Intel repeatedly has made a big issue about the
'fact' they have a license to the Clipper patents," Meadlock said in a
statement. "The court affirms they don't have such a license."
Judge has ruled against Intel before
This is not the first time that Nelson has ruled against Intel in the
dispute. 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.
Friday's decision in the case means that, unless it is overturned on
appeal, Intel will be barred from raising the defense if the case goes to
trial. Even still, Intel is asserting a number of other defenses in the
case. Among them is Intel's assertion that the patents are invalid, and
that they do not cover technology used in Pentium chips. Intel also argues
that Intergraph lacks standing to sue Intel on antitrust grounds because
the two companies are not competitors.
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.