November 5, 1999 11:40 AM PST

Court lifts injunction in Intel-Integraph case

Intergraph suffered a major defeat today in its legal battle with Intel as an appeals court ruled that the evidence does not support the argument that Intel is a monopolist.

The U.S. Court of Appeals for the Federal Circuit today overturned an injunction in Intergraph vs. Intel that effectively held that Intel violated sections of the Sherman Antitrust Act. Specifically, the underlying injunction held that Intel held a monopoly in microprocessors and, as such, could not arbitrarily cut off supplies of chips and technical information to Intergraph.

The appeals court, in a 43-page opinion, dismissed the argument in great detail. Intel has a huge market share and did in fact cut off the flow of technology to Intergraph at crucial times, the appeals court found. But, while Intel may be a tough competitor, the company's conduct did not constitute violations of antitrust law, the court found.

"In the proceedings whose record is before us, Intergraph has not shown a substantial likelihood of success in establishing that Intel violated the antitrust laws," the court concluded in vacating the injunction.

"The Sherman Act does not convert all harsh commercial actions into antitrust violations," the ruling stated. "Unilateral conduct that may adversely affect another's business situation, but is not intended to monopolize that business, does not violate the Sherman Act."

The company has already said it will appeal the lower court decision last month, which threw out some parts of the case. An appeal to today's ruling may have to be directed to the Supreme Court.

An Intergraph spokesman said that the company will evaluate its options as a result of the ruling and likely announce a course of action next week.

The spokesman added that the lifting of the injunction will have little practical impact on Intergraph because Intel has agreed to supply companies with product pursuant to a settlement of claims brought by the FTC in certain circumstances. However, the spokesman acknowleged that Intergraph's claim for treble damages, which tend to be far higher than actual damage awards, rested on the antitrust claim.

Intel spokesman Chuck Mulloy stated that the decision validates its argument that the case involves a dispute over patents only and not antitrust law.

Integraph filed its suit in 1997 claiming that Intel infringed its patents and unlawfully withheld technology from Intel. Intel's acts, Intergraph asserted, constituted violations of the Sherman Act, breached contracts between the companies and were negligent, among other claims.

The decision only applies to the injunction. Nonetheless, the court gave a detailed analysis of Intergraph's arguments in the underlying case and dismissed nearly all of them. The court, for instance, held that Intel's technology does not constitute an "essential facility" that must remain open to all downstream customers. The court also found that the evidence does not support a finding that Intel illegally wields a monopoly in microprocessors. The decision will likely send a signal to the district court.

In October, the trial judge overseeing the main action threw out Intergraph's claims of patent infringement. After that decision, Intergraph's claims largely rested on the antitrust theories

With the patent claims on appeal and the questions surrounding the validity of the antitrust claims, Intergraph's suit now seems mostly to rely on breach of contract and negligence claims.

 

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