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Intel defends actions to FTC

The chip giant defends its right to cancel agreements with three computer vendors in its answer to the FTC's antitrust complaint.

Intel defended its right to cancel agreements with three computer vendors in its answer to the antitrust complaint filed by the Federal Trade Commission, claiming, among other grounds, that the information constituted proprietary information that the chipmaker could retrieve at any time.

The Santa Clara, California, microprocessor maker also requested that the case be dismissed.

Intel's answer, filed with the FTC today, outlined in broad strokes the chip giant's defense when the trial begins early next year. The FTC has pushed back the start date of the trial to January 12, from January 5.

As legal analysts have said earlier, the case doesn't revolve so much around a disagreement on the facts in the underlying case. Instead, it focuses on a disagreement over how those facts are interpreted under antitrust law.

One of the major points of contention is the legal definition of a monopolist. The FTC asserts that Intel holds a monopoly in microprocessors that gives it undue influence in the computer industry as a whole.

Intel has especially strong influence over PC makers, according to the agency, because it is the sole source for advance information on its microprocessors. By canceling the flow of advance information, Intel effectively used monopoly power to squelch competition. The chip giant did this, according to the FTC, when it revoked nondisclosure agreements with Intergraph, Digital Equipment and Compaq Computer.

Intel, for its part, denies that it holds a monopoly in microprocessors; therefore, antitrust law as interpreted by the FTC, does not apply to the company. Intel admitted in its answer that getting into the microprocessor business would cost a potential competitor millions of dollars and several years to get a product to market, but it also asserted that doing so is not impossible. (Intel is an investor in CNET: The Computer Network.)

Other companies, including Digital, make competing microprocessors. Intel also asserted that a "fabless" chip designer could potentially get into the microprocessor market in six months, well under the four-year cycle it would take traditional manufacturers.

In addition, Intel denies that it has an obligation to share its information with any third parties. Instead, contractual rights contained in the contracts and under the First Amendment, the company asserts, allow it to selectively distribute this information.

The chipmaker "regards certain technical information to be proprietary and provides it subject to formal nondisclosure agreements...Intel denies that it makes such information widely available to customers."

Intel further noted that the FTC's claims come late. Lawsuits relating to the incidents with Digital and Compaq have already been settled, while Intel characterized Intergraph's suit as a "baseless intellectual property claim."

One novel argument that Intel raises in its answer that has not been emphasized before is that the company's cancellation of the nondisclosure agreements falls within the purview of the First Amendment.

Under the Noerr-Pennington doctrine, Intel says, a company is free to use its First Amendment right to discuss or raise issues in a judicial or legislative forum that otherwise could be construed as being anticompetitive. In this context, Intel will assert that the patent infringement claims it filed against the three computer vendors, which the FTC claims violated antitrust law, are protected under Noerr-Pennington. One legal source, however, said that the theory seemed to be "stretching it."

The outcome of the case remains difficult to predict, and legal opinion seems to be spread across the board.

A number of antitrust academics and attorneys earlier this year told CNET NEWS.COM that the FTC faces an uphill battle. One of the agency's chief problems is the fact that Intel took its actions against customers of its products, and not, except in the case of Digital, competitors in the microprocessor market.

Experts added that the alleged retaliatory actions had their effect in the workstation or PC market, not the microprocessor sector. The FTC's complaint also is vague on which market Intel is said to be monopolizing.

On the other hand, the court in Alabama that is overseeing the pending Intergraph vs. Intel case ruled against the chip giant on most of these points. Not only did the court rule that Intel held a monopoly, but also it said it misused its monopoly power by pulling its nondisclosure agreements. Intel, the court ruled, is an essential facility, similar to a railroad, that must maintain reasonable access to its products.