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 If You Can't Innovate, Then Litigate By Art Wittmann Over the past few weeks, Intel and Digital have been jousting with each other over whether Intel infringed on Digital's patents with its Pentium, Pentium Pro and Pentium II chips. Although we've seen this pattern again and again, I'm surprised Digital has stooped to this. These lawsuits rarely amount to anything other than some posturing for the stock market. Particularly in this case, I believe that Digital has taken a real gamble. If you haven't yet heard about the lawsuits, let me sum them up by saying that Digital claims Intel infringed on its patents regarding such issues as cache management technology and branch prediction. These concepts are fundamental to every modern microprocessor. Further, the patents in dispute were issued to Digital years ago. At a minimum, one has to wonder why Digital waited this long to file suit and why it named only Intel. Robert Palmer, Digital's CEO and pres ident, has addressed that question, saying that he got really worked up after reading a Wall Street Journal article in which Intel executives talked about the company's practice of copying the best technologies for its microprocessors.
Same Old, Same Old This certainly sounds a lot like Apple's lawsuit against Microsoft ove r the look and feel of Windows. After years of costly legal battles, Apple wound up with little more than a big legal bill and strained relations with Microsoft. There are plenty of other instances where big lawsuits have been filed with little or no effect--other than to possibly make a company on the rise share some technology with a company on the way down. Digital's move, however, seems suicidal considering that a good part of its business depends on Intel chips. Intel, on the other hand, really doesn't need Digital and can comfortably treat it like dirt when it comes time to decide which of its customers get preferential treatment. Dumb and Dumber Overall, this fracas is unfortunate and unproductive. Both companies will end up spending a fortune suing and countersuing. It's good money that both could put into R&D. The industry is in a constant state of cross-licensing. If Intel somehow failed to participate in that process with Digital, then maybe Intel owes Digital some money. That m oney, however, should be confined to the low millions. The lawsuits will undoubtedly be for billions, and that just isn't right. Although technology is important, it's doing the right thin g with the technology that has separated Intel from Digital. Hopefully, these two will settle quickly and we won't have to see the brouhaha that went on between Microsoft and Apple all over again. Invariably, the smaller company--the one on the way down--suffers more from this type of lawsuit. The market has no sympathy for the underdog, and lawsuits like these only serve to feed a few hungry lawyers who like to stir up trouble. Andy? This Is Robert.... Unfortunately, I doubt we'll see a quick end to this case. Why do I say that? Digital's Palmer was asked after his announcement of the suit if he'd talked to Intel's Andy Grove. Palmer in effect said that he had sent Grove e-mail and a fax, but it was too early in the morning to call him and wake him up over this. So Digital went ahead and filed the suit with out a dialogue with Intel, or at least without dialogue between Palmer and Grove. Excuse me? The U.S. courts hear multibillion dollar suits only one day of the year? If it's too early in the morning, simply wait until the afternoon to make the call. Then and only then, if you must, file the suit the next day. How hard is that? My guess is that this suit is about anything but being reasonable, so be prepared for a long useless battle unless cooler heads prevail. Art Wittmann can be reached at awittman@nwc.com. |
Intel has made somewhere in the range of $20 billion on the Pentium--that's enough to buy Digital three or four times over. In its initial gambit, Digital seeks an injunction and triple damages from Intel. These numbers alone make this a fairly big deal, but what can Digital gain from this? My guess is not much--and apparently the stock market agrees: Intel stock recovered nicely after an initial dip following the lawsuit's announcement.
by Bill Frezza Corporate View by Brian Walsh In The Middle by Nick Gall On The Wire by Bill Alderson and J. Scott Haugdahl Updated June 27, 1997 |
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