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McAfee, Symantec win in court

In a preliminary court hearing between antivirus software titans Symantec and McAfee Associates, both sides are claiming victory.

In a preliminary court hearing between antivirus software titans Symantec (SYMC) and McAfee Associates (MCAF), both sides are claiming victory.

McAfee said today that archrival Symantec is narrowing the injunction it is seeking in its high-profile legal battle, asking a federal judge to block shipments only on McAfee products that include Symantec computer code.

Symantec, meanwhile, said it was given permission to amend its complaint to include more McAfee products that allegedly contain Symantec code. It also said the judge denied a McAfee motion that would have dismissed many of the charges leveled against it.

Cupertino, California-based Symantec filed suit in April, alleging that McAfee lifted key portions of Symantec's CrashGuard software and incorporated it into McAfee's PC Medic. Symantec amended its complaint in July to further allege that McAfee, located in Santa Clara, California, had inserted Symantec code into McAfee's VirusScan product.

McAfee has argued in court papers that Symantec's code in the two products--said to total about 130 lines out of more than 100,000--was obtained over the Internet and therefore was in the public domain. Its inclusion was inadvertent and has since been removed, McAfee attorneys argue.

McAfee also has fired back with a $1 billion defamation suit based on public statements Symantec has made about the case.

And as if the dispute wasn't complicated enough, two separate suits filed against McAfee and Symantec promise to turn the battle over antivirus software into a high-technology battle royal. Software companies Hilgraeve of Michigan and Trend Micro of Japan both claim that McAfee and Symantec are infringing two separate software patents.

When it first filed its motion, Symantec sought a preliminary injunction forbidding McAfee from shipping all versions of its flagship product, called VirusScan, and a new program called PC Medic, according to court documents provided by McAfee. That request was amended two weeks ago to remove the mention of VirusScan, a move McAfee immediately hailed as a victory.

Symantec also changed its accusations regarding PC Medic, saying McAfee had misappropriated its trade secrets regarding the product. Previously, Symantec alleged that PC Medic infringed its copyrights.

"[Symantec is] effectively changing their request so that it does not have any impact on my currently shipping products," said Peter Watkins, McAfee's general manager and vice president of security. He explained that his company removed Symantec's code from its two products two months ago.

Symantec, however, said the change was merely cosmetic. "There has been no change in the scope of the relief Symantec is seeking," said Art Courville, Symantec's legal director. He said that Symantec had requested all along that McAfee be enjoined from selling any product containing Symantec source code.

Courville said Symantec is still investigating whether current versions of VirusScan contain infringing code. The company said it will seek a recall of any such code it discovers.

But McAfee's Watkins downplayed the significance of that investigation, saying that Symantec's code resided only in versions of VirusScan and PC Medic that were made and sold over a 10-month period ranging from November 1996 to last August. He explained that McAfee features that automatically update customer software already have removed the code from the majority of McAfee products.

Whyte is expected to rule within the next month, and possibly much sooner, on Symantec's order for a preliminary injunction.

According to Symantec, Whyte granted its motion to add other McAfee products to its complaint. The company declined to say what products it would challenge.

Symantec also said Whyte denied McAfee's motion for partial summary judgment, which would have gotten McAfee off the hook for a number of the claims Symantec had leveled against it.

The stakes in the battle to dominate the market for antivirus software are high. As the Internet becomes the preferred medium to transmit software and other digital products, it is becoming increasingly easy for vandals to pass along destructive viruses to unsuspecting customers.

In 1996, McAfee's revenue more than doubled from the year before, to $181 million. Symantec generated $472 million in fiscal 1997, up from $445 the year before.

Both companies will report earnings later this month. A survey by First Call predicts Symantec earnings at 33 cents a share, up from 2 cents during the same period last year. McAfee is expected to post earnings of 44 cents, compared to earnings of 24 cents a share last year, according to First Call.

According to Jill Cofer, an analyst at PC Data, VirusScan has sold some 517,000 units since it was introduced in August 1995, generating more than $24 million in revenues. She said it was too early to know what sales of PC Medic have generated, since it was launched only last March.