Wave Issue 9734 1/22/98 Article 9-01

***Legal

Intergraph Sues Intel for Anticompetitive Behavior; Coercive tactics used
by Intel in attempt to obtain rights to Intergraph's patents
(November 17)

Intergraph Corp. filed a lawsuit in U.S. District Court, the Northern
District of Alabama, charging Intel Corporation with anticompetitive
behavior. Specifically, Intergraph claims that Intel has engaged in a
series of wrongful acts to coerce Intergraph into relinquishing certain
patent rights to Intel.

In its complaint, the company says Intel is guilty of wrongful conduct,
including interference with business and contractual relations,
interference with technical assistance from third-party vendors, breach
of contract, misappropriation of trade secrets, negligence and
infringement of computer technology patents owned by Intergraph.
Intergraph says that Intel ended a harmonious multi-year business
relationship with Intergraph when Intel sought to acquire rights to
Intergraph patents at no cost. These patents, which define the
architecture of a microprocessor's cache memory management, are at the
heart of the entire Pentium family of processors and systems, including
the Pentium Pro and Pentium II processors. "When Intergraph refused to
give up its patent rights," the complaint states, "Intel undertook a
systematic campaign of coercion and oppression against Intergraph" and
"has used, and is using, its dominant market power in the computer
industry to pressure Intergraph to give up its valuable property rights,
or to crush Intergraph in retaliation for refusing to do so."

In the lawsuit, Intergraph is asserting claims for monetary damages and
injunctive relief to prevent Intel from continuing its anticompetitive
behavior. An injunction would require Intel to stop its wrongful acts and
thus allow Intergraph Computer Systems to continue developing leading
edge Pentium II-based graphics workstations, PCs, and servers without
interruption. "Intel is using its dominant market position in
microprocessors to undermine us on multiple fronts," stated Intergraph
CEO Jim Meadlock. "It's necessary for us to take legal action against
Intel in order to defend our rapidly growing workstation business and our
intellectual property. We've discussed these issues with Intel for well
over a year, and we now need to take action that is in the best interest
of our shareholders, customers, business partners and employees."

In describing the circumstances leading to the suit, Intergraph says the
patents in question relate to the Company's Clipper microprocessor, the
industry's first attempt to bring mainframe-class computing power to
compact, low-cost integrated circuit technology. The Clipper was used in
Intergraph's RISC/UNIX workstations before the company migrated its
product lines to the Intel/Windows NT platform.

Intergraph continues to support its legacy hardware that uses the Clipper
processor. In 1993, Intergraph Computer Systems became the pioneer of
affordable high-performance workstations based on the open-architecture
Intel/Windows NT platform. As cited in the court filing, Intergraph
believed that, based on assurances from Intel, the Intel Pentium family
of microprocessors combined with Microsoft's 32-bit Windows NT operating
system would be capable of providing workstation-class performance,
handling the processing requirements of high-end creative and technical
applications such as animation, visual simulation, and computer-aided
design, manufacturing, and electronics (CAD/CAM/CAE).

Also in 1993, Wade Patterson, president of Intergraph Computer Systems,
proposed to Intel that the two companies work together to introduce the
Intel/Windows platform as an alternative to the RISC/UNIX systems, which
then dominated the workstation market.

The companies enjoyed a mutually beneficial relationship, with Intergraph
developing award-winning workstations and Intel expanding its
microprocessor sales beyond PCs and into new workstation markets such as
Hollywood's entertainment industry. Intergraph was the first to use dual-
processor technology for Pentium-based workstations. This capability
boosted systems performance and caused wider and faster acceptance of the
Pentium processor as a computer technology for workstations. Intergraph
introduced the industry's first single and dual Pentium-based 3D graphics
workstation in January 1994, the first Pentium Pro-based workstation, and
the first quad-processor workstation in November 1995. In November 1995,
Intel used Intergraph's TDZ 3D Graphics Workstations to introduce its new
Pentium Pro processors worldwide.

Intergraph contends that Intel has sought to obtain rights under
Intergraph's Clipper-related patents through coercive tactics. According
to Intergraph's complaint, Intel began demanding broad license grants of
Intergraph technology, including the Clipper patents, before Intergraph
could participate in new Intel product development programs. Intergraph
refused. Intel rapidly escalated its anticompetitive behavior. Intergraph
contends that in May 1997, Intel retaliated by drastically curtailing its
technical and marketing support to Intergraph. The complaint alleges that
Intel directed its employees "to cease and desist providing any support
to Intergraph." The complaint further states, "Intel also notified
Intergraph that it was unilaterally terminating NDAs (non-disclosure
agreements) with Intergraph."

Intergraph cited that also in May 1997, Intel did not inform Intergraph
of a bug in its released PIIX4 chipset. In October 1997, Intergraph
discovered a second bug in the PIIX4 chipset and asked Intel for
technical information and support to correct the problem. Intel would not
respond to Intergraph's requests. When Intergraph ordered a testing
device from a third-party vendor to debug the problem, Intel would not
permit the supplier to release the equipment to Intergraph. Both these
actions caused Intergraph a significant amount of rework and resulted in
major product delays for workstations announced by Intergraph Computer
Systems in August.

The complaint also contends that in recent months, Intel has introduced
competitors into Intergraph's customer accounts and has even suggested to
customers that Intel would fund projects if they use a competitor's
workstation but might not fund those projects if customers purchased
Intergraph's workstations. "Intel's anticompetitive behavior has taken a
significant toll on Intergraph's time, energy, resources, and dollars,"
said Meadlock. "This is a situation we could no longer tolerate and we
needed to take action in order to keep our business on track. We are
confident that this action will protect our property and rights in court,
and ensure our ability to continue the direction initiated in 1993 to
provide open systems to the market place.

www.intergraph.com

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