Appeals Court Hears Oral Argument in Intergraph v. Intel

(December 12, 1998)  The U.S. Court of Appeals for the Federal Circuit heard oral argument on Wednesday, December 9, in the antitrust action brought by workstation maker Intergraph against chipmaker Intel.  Intel has appealed the April 10, 1998, preliminary injunction issued by Judge Nelson.

Intergraph sued Intel in federal court in Alabama in November of 1997, alleging a long list of legal claims. Judge Edwin Nelson granted Intergraph a preliminary injunction on April 10 which orders Intel to provide Intergraph with advanced product information, advanced microprocessor "chip samples," "early production chips," and "production chips."

Intel manufactures microprocessors which Intergraph uses in workstations built for such things as computer aided design. When Intergraph and Intel disputed microprocessor patent rights, Intel withheld certain products and information from Intergraph. Intergraph then filed this lawsuit, alleging unfair competition, antitrust law violation, patent infringement, and other claims.

Intel filed its brief in this appeal on June 8, 1998.  It argued that "For responding as it did to Intergraph’s assertion of its intellectual property against Intel’s core microprocessor business, Intel has been branded a monopolist and a likely antitrust violator, denied its copyright and patent rights, forced to divulge its trade secrets, penalized for using its business judgment as to how best to protect its confidential information and intellectual property, compelled to do business with a litigation opponent, and threatened with contempt if it does not follow an order too vague to satisfy the specificity requirements of Fed. R. Civ. P. 65(d). Neither antitrust law, contract law, tort law, nor the law of injunctions supports this result."

Intel further argued that the precedent in the Eleventh Circuit, of which Alabama is a part, does not suppport Judge Nelson's injunction. "Contrary to the district court’s notion of fairness, the Eleventh Circuit and several other courts have made it clear that a defendant’s refusal to deal with a litigation opponent is entirely permissible. Courts also have held that parties have no duty to predisclose proprietary information and may elect to maintain a competitive advantage by retaining their confidential information. In addition, it is well established that a patent owner has no obligation to license or sell its patented products to anyone. Here, Intel has been compelled by injunction to do all of the above, and more, under circumstances which Intergraph can exploit to obtain extrajudicial discovery, to create a commercial advantage over its rivals, or to try to develop additional infringement claims."

Intergraph issued a statement after the hearing, which included the following:

"Intel’s attempts to try to shift the public debate away from the evidence by portraying the matter as a dispute over access to intellectual property is unfounded. Intellectual property rights do not provide absolute immunity to antitrust acts or liability. Intel had not asserted intellectual property claims against Intergraph until after Intergraph filed its lawsuit last November. Theirs was a retaliatory act. Intergraph was forced to file the lawsuit not primarily to assert its intellectual property rights, but to protect its business from Intel’s illegal, coercive and anticompetitive behavior. These acts caused irreparable damage to Intergraph’s business and market position. We contend that these anticompetitive acts were intended to coerce patent licenses from Intergraph, violating federal and state law in the process."

Intergraph also stated that:

"The preliminary injunction is well founded. With extensive, clear reasoning, the trial court’s 80-page order plainly stated the facts and the law as applied to this case. It shows an in-depth understanding of not just the legal issues, but the technical issues as well."

"Intel’s appeal and argument failed to adequately discredit those findings. Intel failed to mount any substantive challenge to three of the four factors supporting the injunction: (1) the clear irreparable harm to Intergraph, (2) the clear balance of harms and equities in favor of the injunction, and (3) the public interest served by the injunction in upholding the antitrust and intellectual property laws."

The Appeals Court gave no indication as to when it would rule. Trial of the case is set for February, 2000.

Intergraph Press Release.
Re: Oral Argument in Intel v. Intergraph.
Date: December 9, 1998.
Source: Intergraph.

At Federal Court Hearing, Intergraph Says Intel Appeal Is A Weak Challenge to a Strong Injunction

Evidence Provides Numerous Grounds for Injunction

WASHINGTON, DC, December 9, 1998 -- Intergraph Corporation <NASDAQ: INGR> issued the following statement today after a hearing before the U.S. Court of Appeals for the Federal Circuit in its lawsuit against Intel Corporation. Intergraph and Intel delivered oral arguments today on Intel’s appeal of a preliminary injunction awarded to Intergraph April 10, 1998. The injunction is intended to protect Intergraph from irreparable harm by assuring access to Intel products and information, pending the trial’s outcome. Intergraph is suing Intel for various state law claims, patent infringement, and antitrust violations of the Sherman Act.

The preliminary injunction is well founded. With extensive, clear reasoning, the trial court’s 80-page order plainly stated the facts and the law as applied to this case. It shows an in-depth understanding of not just the legal issues, but the technical issues as well.

Intel’s appeal and argument failed to adequately discredit those findings. Intel failed to mount any substantive challenge to three of the four factors supporting the injunction: (1) the clear irreparable harm to Intergraph, (2) the clear balance of harms and equities in favor of the injunction, and (3) the public interest served by the injunction in upholding the antitrust and intellectual property laws.

As to the fourth factor – the likelihood of success on the merits of the case – Intel’s appeal substantively challenged only two of the numerous bases for antitrust liability cited by the district court as grounds for the injunction: monopoly leveraging and attempt to monopolize. Intel failed to challenge numerous other findings in the injunction, including (1) illegal maintenance of monopoly, (2) denial of access to essential facilities, (3) unlawful refusals to deal, (4) misuse of monopoly power, (5) coercive reciprocity, (6) unconscionability, (7) fraud, and (8) specific performance.

By law, in order to obtain the preliminary injunction Intergraph needed to establish likelihood of success on any one of its claims. As it is, the district court found Intergraph has both strong antitrust and state law claims on which it will likely prevail at trial.

Intergraph has established more than adequate grounds for this injunction.

There is no merit to Intel’s suggestion that the district court judge abused his discretion in entering this order.

Intel’s attempts to try to shift the public debate away from the evidence by portraying the matter as a dispute over access to intellectual property is unfounded. Intellectual property rights do not provide absolute immunity to antitrust acts or liability. Intel had not asserted intellectual property claims against Intergraph until after Intergraph filed its lawsuit last November. Theirs was a retaliatory act. Intergraph was forced to file the lawsuit not primarily to assert its intellectual property rights, but to protect its business from Intel’s illegal, coercive and anticompetitive behavior. These acts caused irreparable damage to Intergraph’s business and market position. We contend that these anticompetitive acts were intended to coerce patent licenses from Intergraph, violating federal and state law in the process.

We fully expect to win the case, either through trial or settlement.

Case Background

In a lawsuit filed November 17, 1997, in the U.S. District Court, Northern District of Alabama, Intergraph alleged that Intel is using its dominant market position in an attempt to coerce the workstation manufacturer into giving up certain key patent rights. These coercive tactics, including withholding vital information and technical support, delayed shipment of various Intergraph Computer Systems’ products and have otherwise hindered Intergraph’s business. (Intergraph Computer Systems is a wholly-owned subsidiary of Intergraph Corporation.)

Compelled by the merits of the evidence, on December 3, 1997, Intergraph amended its original complaint of November 17 to include a federal antitrust claim against Intel.

Specifically, in its complaint Intergraph says Intel is guilty of wrongful conduct, including interference with business and contractual relations, interference with technical assistance from third-party vendors, breach of contract, misappropriation of trade secrets, negligence, and infringement of computer technology patents owned by Intergraph.

The text of the court’s April 10, 1998, "Memorandum of Opinion and Preliminary Injunction" – plus other extensive background information – is available at <www.intergraph.com/intel>.

Editors Note

Complete information related to this lawsuit – including court filings, a chronology, and numerous news articles – is available for public viewing on the Intergraph Website at <www.intergraph.com/intel>.

Intergraph Background Information

A computer industry pioneer, Intergraph Corporation provides comprehensive engineering, mapping/GIS, and IT solutions for the process and building, utilities and transportation industries, and local and national governments. For desktop or enterprise solutions, Intergraph offers software, computers, support, consulting, and training services. Industry analysts consistently rank Intergraph as a top solutions provider in the markets the company has served for three decades.

Intergraph common stock trades on The NASDAQ Stock Market under the symbol: INGR. Visit our web site at www.intergraph.com for more information about Intergraph Corporation.