But don’t doze off just yet. Though the Intel case may not titillate, in the end, it could have lasting impact on the laws governing many of the legal spats in the high-tech industry. It pits trade-secret protections against antitrust laws, and the Intel suit could bolster or limit the protections afforded to dominant firms by intellectual-property laws–trade secrets that are to Silicon Valley what oil is to Saudi Arabia. “These are cutting-edge claims,” says Robert Litan of the Brookings Institution. “It’s a more novel and potentially more interesting case than Microsoft’s.”
Intel’s troubles began when the company took actions against three of its customers–Digital Equipment Corp., Compaq and Intergraph–that build Intel’s chips into products and, in some cases, develop rival microprocessors. Each of the companies fell into patent disputes with Intel, and each was then deprived of key technical information they needed to work with Intel’s chips. Without the specs, the computer makers might as well sell slide rules.
The FTC alleges that when Intel withheld specs, it constituted an abuse of monopoly power–impeding innovation and stifling competition. “A firm with an overwhelming market share,” says the FTC’s William Baer, “can’t engage in conduct that limits the opportunity of competitors.” Intel’s moves, the FTC wrote, were an effort to “extort” rival trade secrets.
That kind of reasoning is hard for Intel to process. The company says its three rivals were all charging Intel with illegally copying designs, giving it legitimate business reasons to withhold its own trade secrets to avoid weakening its defense. By giving up the technical specs, the company argues, it would have sharpened the blades aimed at its throat. “We were using our intellectual property in a legitimate fashion to defend ourselves,” says Intel spokesman Chuck Mulloy. To counter the government’s charges, Intel is expected to argue that it isn’t a monopoly and, therefore, shouldn’t be held to the higher behavioral standards by which monopolies must abide. It helps Intel that its market share–once perched at more than 90 percent–has slipped 10 points in face of competition from cheaper chips made by Advanced Micro Devices (AMD) and National Semiconductor’s Cyrix unit. And the company will argue that its actions didn’t injure rivals or consumers. No harm, no foul.
But FTC insiders say Intel’s drop in market share was a momentary lapse. “Intel will be back in the saddle shortly,” says one agency official. The FTC can prosecute acts that have the potential to stifle innovation or harm consumers; they don’t have to wait until the damage is done. “[We don’t need] to show dead bodies,” says one FTC source. In other words, one doesn’t have to use an illegal weapon; mere possession is enough to trigger violations.
Much of this may sound like the Microsoft case, but there are significant differences. For one, the government is simply seeking to stop Intel from engaging in certain practices–not mulling a company breakup. Intel chairman Andy Grove, who will testify at the trial, has not only written a book titled “Only the Paranoid Survive,” he has made paranoia part of the company’s business plan. Back in 1987, Intel implemented a strict antitrust schooling initiative that requires salespeople to take a yearly seminar, assigns lawyers to oversee all major business transactions and generates quarterly compliance reports.
