Intergraph Corp. v. Intel Corp., CV-97-N-3023-NE.
Citation | 3 F.Supp.2d 1255 |
Decision Date | 10 April 1998 |
Docket Number | No. CV-97-N-3023-NE.,CV-97-N-3023-NE. |
Parties | INTERGRAPH CORPORATION, Plaintiff, v. INTEL CORPORATION, Defendant. |
Court | U.S. District Court — Northern District of Alabama |
N. Lee Cooper, James L. Priester, Luther Dorr, Jr., Maynard Cooper & Gale, William J. Baxley, Joel E. Dillard, Baxley Dillard Dauphin & McKnight, Birmingham, AL, David V. Lucas, Intergraph Corp., Huntsville, AL, William L. Jaeger, William J. Bohler, K.T. Cherian, George Marcus Schwab, Stephen James Akerley, Townsend Townsend & Crew LLP, San Francisco, CA, Byron W. Cooper, Townsend and Townsend and Crew LLP, Palo Alto, CA, for Plaintiffs.
Thad G. Long, Bradley Arant Rose & White, Birmingham, AL, Gary C. Huckaby, Kimberly Bessiere Martin, Bradley Arant Rose & White, Huntsville, AL, Joel M. Freed, Marc Gary Schildkraut, Howrey & Simon, Washington, DC, for Defendants.
The court has for consideration the motion and the renewed motion of plaintiff Intergraph Corporation for a preliminary injunction. The motions essentially seek to prevent defendant Intel Corporation from refusing to engage in future business with the plaintiff in the same or similar manner that it has done from approximately 1993 until the present dispute arose between the parties in 1997. The amended complaint is in twenty-three counts and includes, inter alia, claims under state law theories of fraud, fraudulent suppression, negligent failure to warn, negligence, wantonness and willfulness, breach of contract, intentional interference with business relationships, breach of express warranty, breach of implied warranty of fitness for a particular purpose, and violation of the Alabama Trade Secrets Act. The complaint contains three claims for patent infringement and a single count charging anti-trust violations under 15 U.S.C. §§ 1 and 2. Jurisdiction in this court is founded upon 28 U.S.C. § 1331 (federal question), 28 U.S.C. § 1332 (diversity of citizenship), 28 U.S.C. § 1338(a) and (b) ( ), and 28 U.S.C. § 1367(a) (supplemental jurisdiction).
On Monday, December 8, 1997, the court held a hearing (the "Hearing") on Intergraph's verified motion to enjoin Intel from cutting off or delaying its supply of computer chips and product information (the "Verified Motion"), which was filed in open court on November 21, 1997 (Document # 16).1
At the Hearing, Intergraph presented the live testimony of Wade Patterson, currently the President of Intergraph's Computer Hardware Division (Tr. 51), who testified that he holds a B.S. degree in Electrical Engineering (Tr. 207) and that he has previously worked as Intergraph's Vice-President of Engineering and its Executive Manager for Systems Development (Tr. 101-02).2 Intergraph also submitted and served in open court during the Hearing Mr. Patterson's supplemental affidavit on which Intel was allowed to cross-examine him. (Intergraph Ex. I; Tr. 236-41). In support of its motion for a preliminary injunction, Intergraph also filed the affidavits of Allen Blaxton, Bryan Floyd, Mike Ellard, James Meadlock, Terry Phillips, and Wade Patterson. (Document # 29).
Prior to the Hearing, on December 3, 1997, Intel filed and served on Intergraph the affidavits of Keith Johnson and Ron Epstein (Documents 26 and 27). At the Hearing, Intel presented no live testimony from its own employees, but it called as its own witness, James Meadlock, Chairman and CEO of Intergraph, who was voluntarily present in the courtroom. (Tr. 241). Intel also submitted the affidavit of Anand Chandrasekher during the Hearing. (Tr. 122; Intel Ex. 2).
Then on December 10, 1997, with permission of the court, Intel supplemented its hearing presentation with the affidavit of Edwin Bauernfreund under seal. Intergraph responded with the affidavits of Sanford C. Morris, Jr., Kirk Totten, and Allen Blaxton and the Second Supplemental Affidavit of Wade Patterson on December 12, 1997. Also, the parties have each submitted proposed findings of fact and conclusions of law for the court's consideration, and those submissions have been helpful.
Generally, under Fed.R.Civ.P. 65, in order to prevail on its motion for a preliminary injunction, Intergraph must prove: (1) it has a substantial likelihood of ultimate success on the merits of one or more of its substantive claims; (2) there is a substantial threat that it will suffer irreparable injury in the absence of preliminary relief; (3) the likely injury to itself is greater than that likely to be suffered by the defendant; and (4) entry of the preliminary injunction would not disserve the public interest. Lucero v. Operation Rescue of Birmingham, 954 F.2d 624, 627 (11th Cir. 1992), reh'g denied, 961 F.2d 224 (1992). Where, as here, the plaintiff advances antitrust claims, preliminary relief is specifically authorized by 15 U.S.C. § 26.3
Upon due consideration, the plaintiff's motion for a preliminary injunction will be granted.
Based upon the affidavits filed by the parties, the testimony at the Hearing and the exhibits received at the Hearing, the court makes the following findings of fact.4
Defendant Intel Corporation is the world's largest designer, manufacturer, and supplier of high-performance microprocessors,5 frequently described as the "brains" of a computer because they control the central processing of data in personal computers.6 (Intergraph Ex. F). Intel also designs manufactures, and supplies: (1) "chipsets" which, in conjunction with the CPUs, perform essential logic functions surrounding the CPU in computers based on Intel architecture processors;7 (Id.); (2) motherboards which combine Intel microprocessors and "chipsets" to form the basic subsystem of a PC or server;8 (Id.); and (3) graphics subsystems to provide graphic functions for computers and workstations. (Patterson Supp. Aff. ¶¶ 7-9).
Most of the entire world's personal computers today are powered by Intel designed and manufactured microprocessors of the "x86" variety, originally created by Intel.9 See Competitive Impact Statement and Complaint in United States v. Microsoft, 59 Federal Reporter 42845, August 14, 1994. In 1996, Intel received eighty-eight percent of the total revenue derived from microprocessors sold for use in desktop computers, laptops,10 servers, and workstations, or $14.6 billion out of a total of $16.6 billion. Within the "x86" market, Intel had a market share of eighty-five percent. (Patterson Supp. Aff. ¶ 7). See December 22, 1997, Business Week article.
In its fiscal year 1996, Intel had total revenues of $20.8 billion and net income before taxes of $7.9 billion — a profit percentage of approximately thirty-eight percent. It has consistently made very high profits. (1996 Intel Annual Report)11
Intel, over a period of almost twenty years, has continued to develop the "x86" line of microprocessors, creating ever faster and more powerful units. Its current generation of the "x86" microprocessors, the Pentium series, is an extraordinarily complex product, which is difficult and expensive to design and manufacture. According to Intel, the Pentium Pro processor has 5.5 million transistors and can execute 300 million instructions per second. More than 200 major steps are required to produce the Pentium Pro. (1996 Intel Annual Report).12
Intel's dominance in the market for personal computer CPUs is reflected in its name recognition among the computer buying public, the great majority of whom insist upon having a genuine Intel CPU in their computers.13 The "Intel Inside" brand promotion has helped to create a remarkable demand for the Intel product. More than 1,300 licensees worldwide participate in the "Intel Inside" program with each computer bearing a distinctive Intel logo. In 1996, the journal Financial World designated the Intel brand as the tenth most valuable brand in the world. (1996 Intel Annual Report).
The Intel microprocessors are compatible with a number of computer operating systems, but they are used primarily with operating systems created and supplied by Microsoft Corporation.14 In other litigation, the United States Department of Justice has contended for a number of years that Microsoft itself has a monopoly on operating systems for personal computers. See United States v. Microsoft, supra. Intergraph uses Microsoft's Windows NT, a thirty-two bit operating system powerful enough to run both business and technical applications for all Intergraph workstations and other products. (Tr. 75-76).
Until the development of its latest generation of Pentium II microprocessors, Intel used an "open architecture," which was available generally to all participants in the industry. For example, other manufacturers such as Cyrix, AMD, and IBM designed, developed and marketed microprocessors that were more or less compatible with the earlier Intel CPUs. Beginning with the Pentium II, however, Intel changed to a closed or proprietary architecture, which included the use of a new "bus," the P6. This means that the Pentium II and planned Intel microprocessors, the Deschutes and the Merced, are not and will not be compatible with other CPUs. (Tr. 64-65). Moreover, the latest Intel CPUs are technologically superior, at least in terms of their ability to interact with and handle the advanced graphics functions required by high-end workstations,15 to all other so-called Intel compatible microprocessors. (Tr. 70-71).16
Computers manufactured by Original Equipment Manufacturers ("OEMs") to use Intel microprocessors must be specifically designed and manufactured to meet the precise physical and technical requirements of the Intel architecture. For example, Intel chips, before the Pentium II, were mounted on flat sockets, the P7 Bus, that physically...
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