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Tech Law Journal |
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Editor's Notes:
IN THE UNITED STATES DISTRICT COURT
MOTION TO COMPEL INTEL CORPORATION TO Plaintiff Intergraph Corporation moves this Court to compel defendant Intel Corporation to comply with the Memorandum of Opinion and Preliminary Injunction (the "Preliminary Injunction Order" or "Order") issued by this Court on April 10, 1998. As evidenced by a number of incidents that have taken place while the Order has been in effect, Intel has not complied with this Court’s ruling. Intel has repeatedly refused to provide or has delayed providing critical information, support and products to Intergraph, while at the same time it has provided these to Intergraph’s competitors. Intergraph has tried for some time to resolve this problem without having to ask for this Court’s intervention, and files this motion now only because it is absolutely imperative that Intel provide the level of support required by the Order. Intergraph is being damaged by Intel’s non-compliance in a way that threatens the company’s ability to remain in the computer hardware business. For example, Intel’s failure to provide Intergraph with a simple certification letter stating that Intergraph uses genuine Intel components -- even after Intergraph produced evidence that Intel had provided similar letters for Intergraph’s direct competitors -- deprived Intergraph of an opportunity to bid for a (Intel confidential information redacted) million contract with an existing customer. Intel’s stone-walling on technical and curative information has effectively squeezed Intergraph out of development programs to the point where Intergraph will not have a high end Pentium III Xeon workstation product available for the next major launch date in October. Because of recurring support problems with Intel, Intergraph has been forced to eliminate whole product lines and the Intergraph organizations responsible for their production. Intergraph is presently in the process of terminating its PC and general purpose server operations, resulting in the termination of over 200 employees (representing over one-half of Intergraph Computer Systems' remaining workforce). This round of terminations is the most recent of several over the past year that have reduced Intergraph’s overall employee force significantly. Intergraph’s computer hardware operations have now been reduced to developing graphics subsystems products and supporting its highly specialized computer systems. These remaining operations will have difficulty surviving under the current support environment that exists with Intel. Intergraph asks this Court to immediately "take appropriate steps to enforce its order ...." See Order at 75, in order to protect the viability of its remaining computer hardware operations. Specifically, Intergraph asks that this Court appoint a special master who will monitor Intel’s actions and ensure that Intel complies with the Preliminary Injunction Order. I. Procedural Status of Preliminary Injunction Order Intel has appealed the Preliminary Injunction Order and that appeal has been pending in the Federal Circuit for over a year. Intel asked the appellate court to stay the operation of the Order, and that request for stay was denied. Accordingly, the Preliminary Injunction Order is the law of this case and is fully binding on Intel, notwithstanding its appeal to the Federal Circuit. See, e.g., Plaquemines Parish Comm. Council v. United States, 416 F.2d 952 (5th Cir. 1969)(during appeal of injunction, "district court retains jurisdiction to enforce its prior orders"). The Federal Rules of Civil Procedure provide: "When an appeal is taken from an interlocutory or final judgment granting, dissolving, or denying an injunction, the court in its discretion may suspend, modify, restore, or grant an injunction during the pendency of the appeal upon such terms as to bond or otherwise as it considers proper ...." Fed. R. Civ. P. 62(c). "The purpose of this rule was to give the trial court the power to preserve the status quo while the case is pending in the appellate court. Inherent with this power to issue an injunction is the power of the [district] court to punish for the disobedience of the order." Vac-Air, Inc. v. John Morh & Sons, Inc., 54 F.R.D. 580, (E.D. Wisc. 1972). Thus, this Court has authority to enforce and administer the injunction as necessary. See Chrysler Motors Corp. v. Int’l Union, Allied Ind. Workers of America, AFL-CIO, 909 F.2d 248, 250 (interlocutory appeal of injunction did not divest trial court of jurisdiction to determine whether defendant had violated injunction). II. Intel’s Obligations Under The Preliminary Injunction Order
This Court preliminarily enjoined Intel "from terminating Intergraph’s rights as a ‘strategic customer in current and future programs,’ or from otherwise taking any action adversely affecting Intel’s business relationship with Intergraph or Intergraph’s ability to design, develop, produce, manufacture, market or sell products incorporating, or based upon, Intel products or information ...." Preliminary Injunction Order at p. 75. Intel is required under the Order to provide to Intergraph with Information1 in the same way and at the same time that it is provided to Intergraph’s similarly situated competitors such as Hewlett Packard, Compaq, Dell, IBM, NetPower, and Silicon Graphics. Id. at 75-76. The Order requires Intel to maintain logs documenting when it provides advance samples, technical information, and marketing support to Intergraph and to other "similarly situated" customers of Intel. See Id. at 76. Intel is further required to "provide Intergraph ‘marketing involvement’ and include it in ‘new product introduction events’ of the type in which Intel includes Intergraph’s similarly situated Competitors." Id. at 80. III. Intel’s Non-compliance Under The Preliminary Injunction Order
Intel’s treatment of Intergraph since the issuance of the Order has not maintained the "status quo" that existed before Intel commenced the wrongful conduct that gave rise to this Court’s finding that Intergraph was entitled to injunctive relief. This Court’s Order noted that the status quo, i.e., the level of support and cooperation provided by Intel to Intergraph before the Fall of 1997, was a significant benchmark for determining Intel’s compliance. Immediately following the issuance of the Preliminary Injunction Order, Intergraph asked for a meeting with Intel and presented a detailed list of general categories and specific items of information and support that Intergraph required from Intel. (Floyd Affid. ¶ 3)2. Despite Intergraph’s specific requests and the requirements of the Order, Intel’s level of support has continued to be far below the level demonstrated by Intel before it began pressuring Intergraph to relinquish its patent rights. (Phillips Affid. ¶ 3). For example, prior to this dispute, Intel regularly flooded Intergraph with information that accompanied Chips Samples and Early Production Chips (as defined in the Preliminary Injunction Order), as well as aggressive, proactive technical support for advance and released products. (Id.). This was, and to Intergraph's knowledge remains, Intel's standard way of doing business with other "strategic customers" who are Intergraph’s similarly situated competitors. Since the dispute, and even subsequent to the Preliminary Injunction Order, Intergraph has had to persistently demand information, which often has been reluctantly provided by Intel after significant delay. Similarly, Intel marketing representative Julie Reid and senior Intel representatives such as (Intel confidential information redacted) used to visit Intergraph’s Huntsville offices regularly prior to the Fall of 1997. (Reid Depo. pp. 415-416 (copy attached as Ex. D). Since the Preliminary Injunction has been entered, those individuals have not visited Intergraph once. (Id. at 416-19). While Ms. Reid and others at Intel used to prepare (Intel confidential information redacted) for Intergraph, they have not prepared similar documents in 1998 or 1999. (Id. at 413). This is hardly the "status quo" envisioned by the Court in its Order granting Injunctive relief. Intel’s actions and inaction have squarely violated the Order’s prohibition of "any action adversely affecting Intel’s business relationship with Intergraph or Intergraph’s ability to [develop and market] products incorporating, or based upon, Intel products or information ...." See Order at 75. There is no question that Intel has not treated Intergraph the same as it did before the emergence of the dispute leading to this lawsuit. Intergraph believes that Intel’s level of support to Intergraph also falls short of the support given by Intel to Intergraph’s competitors.
Immediately after the Preliminary Injunction Order was entered, Intergraph sought to resume its development efforts using Intel products, including development efforts for a motherboard incorporating the new Intel chipset code-named "Carmel". (Floyd Affid. ¶ 4). The Carmel chipset is necessary to develop a computer workstation that integrates the Pentium III Xeon microprocessor. (Id.).
Intergraph asked Intel over the course of several months for the specific information and support that would allow Intergraph to develop a Carmel-based motherboard for its next generation workstation. (Floyd Affid. ¶ 5). In October 1998, Intergraph received the following response:
(Floyd Affid., Ex. 1) (emphasis supplied). Intergraph requested clarification of this ominous message but never received a satisfactory response from Intel regarding the Carmel program. (Floyd Affid. ¶ 5). As a result, Intergraph was left with insufficient time to develop its own Carmel-based motherboard and was forced to use a motherboard manufactured by Intel, code-named "Brigantine"3, in order to design and manufacture a Carmel-based workstation product. (Phillips Affid. ¶ 4). Ultimately, due to Intel’s delays and design support issues, Intergraph relied upon rebranding a complete Brigantine based workstation from Intel as its next generation workstation. (Id.). In contrast, Intergraph’s competitors were able to participate in the Carmel development process and were able to design and produce their own proprietary Carmel-based motherboards and/or systems.
After maneuvering Intergraph into a position of depending entirely upon Intel’s Brigantine motherboard and workstation design, Intel has now taken steps that will strand Intergraph without any Carmel-based workstation product. As noted, Intergraph had suspended its own design effort in reliance upon rebranding Brigantine-based workstation product. On July 13, Intel abruptly announced that it was going to discontinue the sale of the Brigantine-based workstation products to Intergraph.4 (Floyd Affid. ¶ 7). Weeks later, Intel's only concession was to supply Intergraph with a list of potential Carmel-based motherboard vendors. (Id.). The launch date for Carmel-based workstations is (Intel confidential information redacted). (Floyd Affid. ¶ 8). Because of Intel’s exclusion of Intergraph from the Carmel development program and abrupt cancellation of the Brigantine-based workstation, Intergraph will not have a competitive product with which to participate in the October product launch. (Id.) In contrast, Intergraph’s competitors have had a normal design period to develop their own workstations using the Carmel chipset.
As noted, Intergraph has been forced to reduce its hardware operations to specific workstations and graphics subsystems. (Floyd Affid. ¶ 9). Intel's actions pertaining to Carmel are also materially impacting Intergraph's development and sale of its graphics subsystems products. (Id.). Intel has refused to supply Carmel information to Intergraph's graphics development group ("Intense 3D"). Intergraph's Intense 3D group designs and supplies highly specialized graphics subsystems for resale by IBM, Dell, Compaq, Siemens, and Fujitsu, as well as Intergraph Computer Systems. (Id.). Intense 3D requested information on Carmel to insure that its graphics products would work properly with its customer’s Carmel-based computer systems. (Id.). Additionally, Intense 3D needs to verify its designs by testing its graphics products in its customers' Carmel-based computer systems. (Id.). Intel has refused to supply necessary Carmel information and has detrimentally delayed giving its authority to Intergraph's customers to permit them to test their Carmel-based computers with Intense 3D's products. (Id.). These delays are impacting Intense 3D's relationships with its customers, particularly with regard to Carmel-based graphics products. (Id.).
In March 1999, an Intergraph customer reported a problem with an Intergraph workstation. (Dobbins Affid. ¶ 3). The Intergraph workstation was designed around Intel’s "Marlinspike" motherboard. Intergraph traced the problem to a significant defect in the Intel Marlinspike motherboard and immediately notified Intel and asked for curative information for its customer. (Id.). During the period when Intel actively cooperated with Intergraph, Intel would have allowed Intergraph direct access to Intel’s factory engineers for the purpose of troubleshooting and fixing the defect. (Id.). In contrast, Intel’s reaction to the Marlinspike defect was to relay communications through its field sales and engineering employees, resulting in several weeks of unproductive responses and duplicative requests for further information. (Id.). Intel also required that Intergraph complete and submit a new Problem Report form requesting information that Intergraph had already provided to Intel. (Id.).
An Intel field engineer informed Intergraph in late April that Intel had re-created the failure at the Intel factory, a necessary first step toward finding a solution for the failure. (Dobbins Affid. ¶ 5). Intel later, however, demanded that Intergraph send a complete Intergraph system to California so that Intel could troubleshoot its own motherboard product! Intel’s pattern of delay and noncooperation continued until June 18, when it finally supplied an official notice to Intergraph that (Intel confidential information redacted).5 (Dobbins Affid. ¶ 6). Intel, refused, however, to offer any curative information for the defect and merely concluded that the problem (Intel confidential information redacted). (Id.).
In February 1999, Intergraph experienced a defect in a Pentium III processor product that resulted in a system failure when running Microsoft Windows NT. (Floyd Affid. ¶ 11). Later that month, Intergraph learned from a third party that MMX enabling "drivers"6 were necessary to run this system, and that those drivers had not been provided to Intergraph. (Id.). Intergraph further learned that these drivers had been provided to Intergraph’s competitors months earlier. (Id.). Intel’s excuse for its failure to provide the drivers was that its field representatives had not received the proper information from the Intel factory. (Id.). Once again, in the pre-dispute era, Intergraph would have communicated directly with Intel’s factory engineers, thus preventing these kinds of "mistakes".
In January 1999, Intergraph encountered technical problems in its development of a workstation using an Intel motherboard based upon Intel’s Pentium III Xeon processor. (Floyd Affid. ¶ 10). As a result, Intergraph asked Intel for a software fix to the BIOS. (Id.). BIOS software patches were generally available from Intel to manufacturers upon the signing of a confidentiality agreement. (Id.). When Intergraph was unable to obtain the BIOS from the local Intel representative, it requested one through Intel’s European operation. (Id.). An Intel-Europe representative informed Intergraph that, in addition to the standard requirement of a confidentiality agreement, he could not provide the BIOS to Intergraph without "specific approval from Intels (sic) US legal department." (Id., Ex. 2). The Intel-Europe representative went on to say that, "[u]nder the circumstances of our current legal ‘relationship’, the consequences of not following this procedure precisely could be devastating for me personally." (Id.). This candid admission demonstrates that Intel appears to have an announced, strictly-enforced, company-wide program for discriminating against Intergraph in a way that this Court has specifically prohibited.
In July 1998, Intergraph had an opportunity to bid on a multimillion dollar contract to sell workstations and servers to Petroleos Mexicanos, an existing Intergraph customer located in Mexico. (Floyd Affid. ¶ 12). Petroleos Mexicanos requested that Intergraph provide a written certification from Intel that Intergraph's products use genuine Intel components. (Id.). Petroleos Mexicanos informed Intergraph that other manufacturers bidding on the contract had provided a certification letter from Intel. (Id.). Intergraph requested a certification letter from Intel in July 1998. (Id.). Intel responded after some delay that Intel had ceased its practice of providing such letters. (Id.). Intergraph obtained copies of two certification letters that Intel had provided on behalf of IBM products for the same contract with Petroleos Mexicanos and forwarded those copies to Intel in October 1998. (Id., Ex. 3). Even after being provided with this information, Intel failed to deliver a certification letter and Intergraph was not able to submit an acceptable bid to Petroleos Mexicanos7 (Id.). Consequently, Intergraph lost not only the opportunity to obtain a valuable contract, but also lost an ongoing relationship with an existing customer. (Id.).
In October 1998, Intergraph requested advance samples of Intel’s Pentium III microprocessor. (Floyd Affid. ¶ 13). Intel refused to supply the samples on the ground that Intergraph was not a Validation Partner for that product. (Id.). Intergraph learned that at least two other board manufacturers who were not Validation Partners had obtained advance samples of the Pentium III microprocessor from Intel and that one had even provided a motherboard back to Intel for product testing based on the sample chips. (Id.).
In addition to the foregoing, Intel has failed to comply with the Preliminary Injunction Order in the following ways:
IV. Intergraph’s Attempts To Verify Or Obtain Intel’s Compliance With the Order Since the early stages of the injunction period, Intergraph's business and technical employees have expressed concern about Intel’s level of support. Intergraph’s counsel wrote to Intel's counsel as early as August 1998 to discuss perceived support deficiencies. Although meetings were scheduled and held where Intergraph and Intel business people discussed the problems, there has been no significant improvement. Intergraph has diligently tried to work through these issues without involving the Court. To aid in the administration of the Preliminary Injunctive Order, Intergraph counsel proposed a year ago that Intel provide Intergraph with access to the Court-ordered compliance logs on a regular basis, as well as a plan for fulfilling outstanding requests for information. This attempt to informally work out the dispute was wholly unsuccessful. Intel refused to provide prior or ongoing logs. V. Intel’s Wrongful Use of Attorney-Client Privilege Regarding Compliance When Intergraph counsel have attempted to ask questions about the support issues during depositions taken in this case, Intel counsel has objected on the ground that the subject is protected by the attorney-client privilege. For instance, Anand Chandresekher is an Intel employee who is a senior manager of Intel’s workstation products group, which in the past worked closely with Intergraph. During Mr. Chandresekher’s deposition, he was asked if anyone other than his lawyers had presented him with any specific problem in terms of complying with the injunction. Intel counsel Joel Freed objected on the ground of attorney-client privilege, stating that "(Intel confidential information redacted)." Chandresekher Depo. at 836 (copy attached as Ex. E). Even after the question was limited to exclude conversations with counsel and rephrased to ask whether any issue arose under the injunction that required Mr. Chandresekher’s attention, Mr. Freed (Intel confidential information redacted) Id. at 836-37. Julie Reid is another Intel employee who was actively involved in the post-injunction dealings between Intergraph and Intel. Ms. Reid is a Market Development Manager who has been assigned to Intergraph since 1996. During her recent deposition, Intel’s counsel (Intel confidential information redacted) The instructions received by Ms. Reid regarding compliance with the Order are certainly germane. Ms. Reid testified that (Intel confidential information redacted) The objections described above reflect a clear misuse of the attorney-client privilege. Intel has attempted to cloak under privilege every aspect of its compliance with this Court’s Preliminary Injunction Order. Although some attorney-client communications on this subject may be properly protected by the attorney-client privilege, the actions taken and issues addressed by Intel’s technical and marketing employees with respect to Intel’s support of Intergraph are clearly discoverable. Intel should be required to withdraw its overreaching assertion of the privilege and the appropriate Intel witnesses should be required to re-appear for deposition questioning on this subject. VI. Conclusion In the Preliminary Injunction Order, this Court emphasized that "it is the intent of the court that Intel treat Intergraph similarly to the way it treats its customers who are similarly situated to Intergraph, no better and no worse. Men and women of good will should have no difficulty doing as the court will direct. Should any party not be able or willing to follow the court's instructions, they should be advised now that the court can and will take appropriate steps to enforce its order . . ." Order at 74-75. It has now become necessary to seek this Court’s intervention. Faced with an immediate threat to Intergraph's remaining operations, and a pattern of prior misconduct, Intergraph has been left with no alternative but to ask this Court to prevent Intel from using feigned or partial compliance with the Order in order to further cripple Intergraph’s viability as an ongoing concern. The Preliminary Injunction Order is the law of this case and is fully binding on Intel. This Court has authority to enforce and administer its Order. WHEREFORE, PREMISES CONSIDERED, Intergraph requests that this Court (i) order the immediate appointment of a special master to determine Intel’s compliance with the Order and to fashion an ongoing supervisory procedure to ensure future compliance, (ii) order Intel to supply and certify the logs required by the Order, (iii) upon a finding that Intel failed to comply with this Court's preliminary injunction, require Intel to show cause why it should not be held in contempt of this Court's order, (iv) upon a finding that Intel failed to comply with the Order, issue such sanctions as this Court deems just and proper against Intel, (v) order the immediate resumption of the depositions of Anand Chandresekher, Julie Reid, and any other Intel employees whose testimony is necessary for the purpose of determining compliance with the Order, and requiring them to answer fully questions on this subject, and (vi) to order such other equitable relief as this Court deems just and proper.
OF COUNSEL: BAXLEY, DILLARD, DAUPHIN & McKNIGHT N. Lee Cooper David Vance Lucas William L. Jaeger Sharis Pozen, Esq.
CERTIFICATE OF SERVICE I hereby certify that a copy of the foregoing was served to the following persons on this the _____ day of August, 1999. VIA HAND DELIVERY Thad G. Long, Esq. VIA FEDERAL EXPRESS:
David J. Arp. Esq.
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