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Digital suit trouble for Intel?

Intel may be in for a costlier battle with Digital over alleged patent infringements than previously thought.

Intel (INTC) may be in for a tougher battle with Digital (DEC) over alleged patent infringements than it first appeared, according to legal experts and a preliminary report from a major marketing research firm.

Earlier this month, Digital Equipment filed a lawsuit in the U.S. District Court in Worcester, Massachusetts, charging Intel with "willful infringement" of ten patents on Digital's microprocessors.

Of the ten claims that Digital filed, there is a significant chance that at least one and possibly more of the claims will be upheld, according to some independent legal experts.

And even just one could throw a wrench into the works for Intel as it prepares to ramp up production for a whole new series of chips later this year.

If a judge grants Digital an injunction against shipment of the chips cited in the claim, though unlikely, it could throw off Intel's carefully planned roll-out and upgrade schedule. If the claims that Intel infringed the patents are proven, a more likely scenario, Intel could suffer a large monetary penalty, according to experts.

Intel could not be reached for comment. Intel is an investor in CNET: The Computer Network.

Jonathan Retsky, an intellectual property lawyer with Brinks, Hofer, Gilson & Lione, also a former microprocessor designer, believes that Digital's claims may be valid for several of the patents.

And if the case actually makes it to court, Retsky added, Intel will be working at a disadvantage. Juries commonly side with the patent holder, meaning that "it is almost impossible for Intel to come out completely unscathed," Retsky says.

A preliminary report from a marketing research firm obtained by CNET's NEWS.COM says that Intel may well have infringed on Digital's patents.

Because the report is unfinished and still subject to change, the author requested anonymity. But the existing version of the report says that Digital's history adds credibility to its patent claims. The company's semiconductor group has been involved in high-speed, single-chip computer design since the heyday of its VAX line in the mid-1970s.

Digital's engineers were dealing with high-speed processor issues several years ahead of everybody else and its trailblazing netted several patents related to the implementation of fast processors. The company's current Alpha architecture is a continuation and evolution of this original design strategy.

The report also examines the Digital claim that Intel intentionally misappropriated its technology after exploring the possibility of licensing the Alpha architecture during a series of discussions in 1991.

Many observers think that Digital will have a hard time proving the allegation that Intel stole technology deliberately. A more likely possibility is that Digital could receive "reasonable royalties," says Annette L. Hurst, a lawyer specializing in intellectual property and antitrust litigation and counseling at Howard, Rice, Nemerovski, Canady, Falk, & Rabkin in San Francisco.

Both Hurst and the report say that there are several ways in which Intel might have ended up inadvertently infringing on Digital's patents. For example, an Intel engineer could have been involved in evaluating the Alpha technology and later worked on either the Pentium Pro or Pentium II design, thereby using a similar concept in subsequent work.

Intel and Digital engineers could also have come up with similar solutions independently of each other. If this is the case, the first inventor of the device is protected by patent law, even if the latecomer developed the technology independently.

The preliminary report outlines several options for Intel if it ends up faced with a lawsuit.

First, it could countersue. Intel could find patents that Digital infringes upon--a likely possibility according to the report and industry analysts--and then use these to negotiate a cross-licensing arrangement. This would avoid the headache of a court trial and cost less than a monetary settlement, the report notes.

Intel could also just try to settle right now, but the tone of rhetoric from both parties so far makes this seem an unlikely possibility, the report says.

Long-term, many different scenarios could arise the report explains. For example, if Digital were to be acquired by some other company, Intel could make a bid to buy its patent portfolio and put the issue to rest permanently.

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