Compaq Computer filed suit yesterday against the low-cost PC manufacturer Emachines and its South Korean parent companies.
The suit, filed in the Federal District Court for the Southern District in Houston, alleges Emachines and Trigem Computer, Trigen's American affiliate, and Korea Data Systems infringed on 13 Compaq patents.
"Compaq's law suit seems to be aimed at stopping Emachines, which has been growing rapidly in the United States, and the fund-raising process (by Emachines)," Trigem executives said in a written statement.
Privately, a senior Trigem executive told Reuters: "It makes no sense for them to claim that we infringed their patents."
The complaint contends Emachines sold models Etower 333cs, 333id, and 366I using technologies to which Compaq owns rights without its permission. The technologies range from password functions to display enhancements to resetting devices.
"We've invested a lot in these patents," said Compaq spokesperson Alan Hodel. "And we just can't allow our investments to be exploited."
"Our comment is, no comment at this time," said Steve Dukker, chief executive of Emachines about the complaint.
The suit could be similar to the one Compaq filed against Packard Bell. In 1994, Compaq sued the PC maker, alleging 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; 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 slipped from being the top PC maker to the fifth-largest vendor of PCs to consumers in recent years, while Compaq eventually rose to take the No. 1 spot in retail.
Some questioned the legitimacy of the complaint, given Emachines's fast rise in the sub-$1,000 PC market carved out by Compaq. Emachines stormed the market last autumn with the introduction of a $599 PC. Compaq and Emachines held the No. 2 and 3 positions in the consumer PC market for June, according to PC Data.
"If you go back to the 1994 Packard Bell suit, you could discuss whether there is real merit beyond the suit or whether the success of Emachines is giving Compaq real problems," said a source close to both companies. "Compaq can create fear and uncertainty around the Emachines brand with this suit."
Analysts said that depending on what manufacturers Emachines gets its main circuit boards ("motherboards") from, it may already be covered for some or even all of the patents. If Intel supplies the motherboards, Compaq might not have a case at all.
Some of the patents could also be covered by BIOS manufacturers, again, depending on whose Emachines1 suppliers are.
"A lot of those patents are just design 'workarounds' that Compaq came up with for bugs that were in some of the original PC," said Independent patent consultant Rich Belgard. "Arguably, some of the patents are good, but it looks like Compaq is trying to squeeze a good competitor."
Compaq requested a jury trial in the complaint.