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Can't Beat 'em? Sue 'em!

-- by Joseph C. Panettieri

The rallying cry of struggling high-technology companies and small start-ups everywhere: If you can't beat 'em, sue 'em.

Just ask Borland International, Cyrix, Digital Equipment Corp., Stac, Trend Micro and Wang Software. After falling on hard times, suspecting foul play or realizing that a lawsuit could reap huge financial rewards, each of these companies sued its fiercest-and most successful-rival. And in more than a few cases, that meant Microsoft or Intel.

History shows that suing Microsoft can be quite rewarding. In recent years, Stac Electronics and Wang Software (now run by Kodak under the Eastman Software banner) each charged Microsoft with unjustly using their respective software technology. Both cases, it turned out, had some merit. Microsoft ultimately paid Stac and Wang sizable sums and agreed to embed both Stac's compression and Wang's imaging technology into its operating systems.

Jumping ship

Borland's suit against Microsoft alleges that Microsoft is trying to put it out of business by stealing its employees. In fact, more than 30 of Borland's top minds have jumped ship for Microsoft, but cynics note that Borland has been sinking fast on its own. Ill-advised acquisitions, a failed foray into the applications market and heightened competition have left Borland in a pool of red ink. It now has only about 1,000 people-down from 4,000 earlier this decade-and lost $42 million in its most recent quarter.

In other cases, a quiet threat can serve the same purpose. For example, Digital insiders say the company considered suing Microsoft when it decided that portions of Windows NT's architecture closely resembled Digital's VMS operating system. After all, many of NT's designers, including chief NT architect Dave Cutler, had previously worked at Digital. Soon after, Microsoft quietly agreed to port all its NT software to Digital's Alpha processor and pay to train thousands of Digital employees on NT.

It didn't really help: Digital last year shipped 240,000 Alpha chips, according to research firm Southcoast Capital, while Intel sold 300 times that many Pentiums.

Patent suit

Now, Digital has sued Intel. The suit claims Intel's Pentium, Pentium Pro and Pentium II processors infringe on 10 Digital patents related to cache management, branch prediction and high-speed instruction processing. The suit seeks monetary damages and an injunction to stop Intel from using Digital's patented technology-in effect, telling Intel to stop shipping Pentiums altogether.

Does Digital have a case? Lawyers are probably going to be arguing that question for a while, and it may have serious ramifications. However, some insiders snipe that the suit is mostly a negotiating ploy to bring Intel to the bargaining table. Specifically, Digital hopes Intel will license its technology for use in a 64-bit chip being jointly developed by Intel and Hewlett-Packard.

Next, Intel countersued Digital-which happens to build most of its own PCs around Intel chips. Digital had assured investors that, thanks to pre-existing agreements, that line of business would not be affected. In its countersuit, Intel claimed that those deals extended only till late this year, and asked that all data relating to Intel chips be returned.

Meanwhile, Intel, which recently settled a dispute with chip maker Advanced Micro Devices over the right to the MMX brand, is now being sued by Cyrix over patent infringements. And there are other "defendants" in the dock: Trend Micro is going after both McAfee and Symantec, and Novell is suing some 70 of its engineers who formed their own company to develop clustering technology.

This may be just the tip of the iceberg. As the technology business becomes even more cutthroat, lawsuits may yet proliferate as quickly, and widely, as macro viruses.

Windows Magazine, August 1997, page 62.

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