DEC's Intel patent challenge a surprise, analysts say

Is Digital's unexpected patent lawsuit against Intel a strong case - or just an attempt to instill 'some fear, loathing and back to the drawing board mentality' among the team developing Merced, Intel's forthcoming 64-bit processor? The experts differ - but they agree that the the legal challange has taken everyone by surprise.

Digital Equipment Corp. must believe it has a strong patent infringement case to make against Intel Corp., analysts say, or it would not enter a legal tangle with the chip giant.

The outcome of any patent case is not easy to predict, according to analysts. Even so, Digital's surprise lawsuit is unlikely to bring an end to Intel's dominance of the PC microprocessor market.

"For all [Digital chairman Robert] Palmer's talk about, 'We want Intel to stop using our technology,' it's very unlikely there's going to be a shutdown of the Pentium Pro assembly lines," says Terry Shannon, publisher of Shannon Knows DEC, a newsletter out of Ashland, Massachusetts.

Digital's lawsuit, filed yesterday in federal court in Massachusetts, alleges Intel's Pentium, Pentium Pro, and Pentium II chips infringed on patented technology used in Digital's 64-bit Alpha microprocessors. The suit seeks to have Intel stop using the technology in current and future products. It also seeks triple compensatory damages, a potentially huge sum of money given the US$21 billion chip giant's growth since the Pentium line was introduced.

Intel, which is readying its own 64-bit processor, code-named Merced, plans to "vigorously defend" itself against Digital's lawsuit. An official there called the lawsuit "unusual" even in an industry where patent infringement claims are fairly common. In one of the most notable cases, Intel was involved in a seven-year dispute with Advanced Micro Devices Inc., one that it settled out of court in 1995.

"Intel has sued a number of companies, [and] Intel has been named as a defendant in a number of suits," says Chuck Mulloy, an Intel spokesman. "What is unusual is two very high profile companies [being involved] without any prior warning whatsoever."

Digital has a long-term license to Intel's X-86 technology. Digital plans to continue its license, officials there said, while Intel officials say they will continue to honor it.

Digital Chairman Robert Palmer today traced the company's claim to meetings between Digital and Intel executives and engineers in 1990 and 1991, when Intel was considering licensing Digital's Alpha technology. Under a confidentiality agreement, Digital shared its Alpha technology, but Intel declined to license it in November 1991, Palmer says. Digital released the Alpha in 1992.

Digital did not have any suspicions of patent infringement in 1993, when Intel released the Pentium chip, Palmer says. But in 1995, when Intel's Pentium Pro showed such a dramatic improvement in performance compared to the Pentium and began to rival performance of some RISC chips, Digital became suspicious, Palmer said. Palmer also pointed to an August 1996 Wall Street Journal article, which he said quoted Intel officials saying that the company had, in the past, done little original research.

Digital alleges that its cache management, branch prediction, and high-speed instruction processing technologies helped Intel develop higher-performance chips than it could have developed using its own technology. But Advanced Micro Device Inc.'s K6 chip provides performance that is very close to the Pentium Pro, and DEC does not appear to have had product licensing discussions with them, says Nathan Brookwood, a microprocessor analyst with Dataquest, a GartnerGroup company in San Jose, California. Cyrix Corp.'s M1 and M2 chips also have very high performance.

"It is certainly possible to build high performance [chips] that incorporate elements of everything DEC mentioned ... and probably not violate DEC's patent," Brookwood says. "It will be interesting as the details emerge just why they believe that Intel does."

Intel will likely try to argue that Digital's patents should never have been granted because they were based on pre-existing technology, Brookwood says. Digital will have to justify in court why it did not bring its case sooner, he says.

Beyond money, Digital's lawsuit may be an attempt to instill "some fear, loathing and back to the drawing board mentality" among the Merced team at Intel, Shannon says.

"[Digital wants] to ensure their role as the dominant provider of the 64-bit architecture, and ensure that when Intel delivers the 64-bit architecture that it isn't 'Alpha Inside', " Shannon says.

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