Allen-Myland v. International Business Machines Corp.
| Decision Date | 06 September 1990 |
| Docket Number | Civ. A. No. 85-6166. |
| Parties | ALLEN-MYLAND, INC. v. INTERNATIONAL BUSINESS MACHINES CORPORATION. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
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Robert G. Levy, and Frank, Bernstein, Conaway and Goldman, Baltimore, Md., for Allen-Myland, Inc.
Evan R. Chesler, Cravath, Swaine and Moore, New York City, for International Business Machines Corp.
Allen-Myland, Inc. ("AMI") brought this action challenging various business practices of International Business Machines Corporation ("IBM") under the Sherman Act and state common law. After the issuance in 1988 of my decision following trial of AMI's Section 1 Sherman Act claim, AMI filed additional claims and IBM filed additional counterclaims. During the spring of this year, I tried all but one of the remaining claims1 and counterclaims in this action, including: a counterclaim that AMI infringed IBM's copyright in a computer program, the 3090 microcode; two counterclaims that AMI violated the Lanham Act and engaged in unfair competition by labelling the copies of the 3090 microcode it made as produced by IBM; two counterclaims that AMI breached contracts with IBM; a claim that IBM tortiously interfered with AMI's contracts and prospective contractual relations in its business practices regarding memory cards and splits of IBM computers; a claim that IBM breached a contract to provide AMI a 3090 microcode license; and a claim that IBM breached a contract of which AMI is a third party beneficiary.
Jurisdiction over these claims is based on 28 U.S.C. §§ 1332, 1338(a) and (b) and pendent jurisdiction. The parties tried these claims before me without a jury. I bifurcated trial, and the record as to liability has been closed. This memorandum constitutes my findings of fact and conclusions of law. See Fed.R.Civ.P. Rule 52(a).
This action commenced on October 25, 1985, when AMI filed its original complaint against IBM alleging violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2, unfair competition, and tortious interference with business and prospective business relationships. IBM's original counterclaims were filed on December 30, 1986; they asserted claims of copyright infringement, breach of contract and tortious interference with a contract. The parties agreed to try the liability issues relating to AMI's Section 1 Sherman Act claim separately. I issued an opinion resolving this claim in favor of IBM on July 21, 1988. AMI v. IBM, 693 F.Supp. 262 (E.D.Pa.1988).
On August 10, 1988, AMI moved for leave to supplement its complaint with three additional counts, including one claim that IBM had violated provisions of the Consent Decree entered by the United States District Court for the Southern District of New York on January 25, 1956 in United States v. IBM, No. 72-344 (the "Consent Decree"). I placed the present action in suspense on October 6, 1988 pending resolution of AMI's anticipated declaratory judgment action before that Court seeking a declaration concerning the Consent Decree's applicability to IBM's counterclaims in the present action. Without opining on that subject, the New York District Court dismissed AMI's declaratory judgment action on June 20, 1989, 714 F.Supp. 707. See infra, at 540, n. 28. I removed the present action from the suspense docket on June 30, 1989.
IBM moved to bar use of the Consent Decree by AMI in the present action on July 14, 1989. I denied IBM's motion without prejudice to its renewal after trial of the remaining claims and counterclaims.
IBM filed amended and supplemental counterclaims on October 11, 1989, asserting claims against AMI of: breach of contract and tortious interference relating to 308X net priced upgrades;2 copyright infringement in the unauthorized copying and distribution of 3090 microcode; breach of contract for failure to pay for a split RPQ ordered and received from IBM; and violation of the Lanham Act and unfair competition in distributing 3090 microcode with unauthorized replicas of IBM labels. AMI again moved to supplement its complaint with 11 new counts. On December 4, 1989, I permitted AMI to file three of the proposed counts asserting claims of: tortious interference with contracts and prospective contractual relations; breach of contract to provide a 3090 microcode license; and breach of a contract of which AMI is a third party beneficiary.
IBM manufactures and sells, among other products, large scale high performance computer systems. At present, IBM's highest performance computer system product line is the 3090 line, introduced in 1985. Granito, Tr. at 10. Within the 3090 line, there are 42 different models available, and over 29,000 different model, memory and feature configurations possible. Granito, Tr. at 29-30; DX 4236-A. Since 1985, IBM has introduced the E, S and J families of 3090 computer systems, each offering improvements in technology, function and performance over the previously introduced families. Granito, Tr. at 10-11; DX 4232-A.
An individual 3090 computer system consists of a 3090 central processing unit, one or two 3097 power and cooling distribution units, a 3092 processor controller, two 3370 disk drives attached to the 3092, consoles for the use of the operator or service personnel, and input/output devices attached to the 3090. Granito, Tr. at 6-7; DX 4187. Some models of the 3090 system are multiprocessors, containing duplicates of every element, including processors, power supplies and power controls, so that one half of the machine can be taken away or powered down and the other half can continue operating. Granito, Tr. at 34.
The 3092 performs a variety of functions for the 3090 system, including machine startup, monitoring machine performance, error recovery, performing self-diagnostics and supporting the servicing and reconfiguration of the system. Hogan, Tr. at 114-140. In all but the smallest models of the 3090 family, the 3092 contains two duplicate processors and associated memory and related circuitry. Granito, Tr. at 7; Hogan, Tr. at 132-133. Each of the 3370s contains a complete copy of the computer software referred to by the parties as the "3090 microcode". Granito, Tr. at 7, 46. Thus, each of the processors within the 3092 has a complete copy of the 3090 microcode available on a 3370 from which to run and perform the various processor controller functions. Granito, Tr. at 7, 36-39.
The 3090 microcode contains a modified version of IBM's VM operating system and various application programs that perform the processor controller functions. Hogan, Tr. at 141-144; Granito, Tr. at 45-46; Belgard, Tr. at 1365; Belgard, Dep. Tr. at 30; Allen, Dep. Tr. at 955-956. Information about the configuration of the 3090 system also is contained in the 3090 microcode. Belgard, Tr. at 1365.
When a 3090 system operates in "single image mode", one side of the 3092 performs the processor controller functions for the system using the 3090 microcode stored on one of the 3370s. The other side of the 3092, using the 3090 microcode stored on the other 3370, serves as a backup to the...
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