Fujitsu to Pay IBM Fee to Keep Making Compatibles

Associated Press

Two arbitrators announced an order Tuesday ending a fierce dispute over software copyrights between two of the world's most powerful computer firms, International Business Machines Corp. and Fujitsu Ltd.

Under the order, Fujitsu will pay IBM an amount that is not yet decided in return for the licenses and information that will make it possible to stay in the business of making mainframe computers compatible with those of IBM.

The arbitrators' order is a landmark in the mainframe computer business, which generates revenue of $20 billion to $25 billion a year worldwide and is 70% controlled by IBM.

Both firms issued statements saying they were pleased that the matter had been basically resolved, but neither claimed victory.

IBM is the world's biggest computer maker. Fujitsu is the world's fourth largest and the biggest in Japan.

The dispute between the two giants dated to 1982 and amounted to "legal warfare," said Robert Mnookin, one of the two arbitrators, who is a professor at Stanford Law School.

"The stakes for both companies could hardly be higher--not simply because of the vast sums of money at issue but because of the principles involved," Mnookin said.

It is difficult to assess who came out ahead under the order because the arbitrators have not yet decided how much Fujitsu will pay IBM or how freely Fujitsu will be able to use pieces of IBM software.

Both companies will benefit from not having to employ armies of highly paid lawyers to continue arguing the case.

"The bad news for Fujitsu is that this agreement is going to cost them a lot of money. The good news is that they're going to stay in the very rich IBM-compatible business," said Frank Gens, an analyst for International Data Corp. in Boston.

"There clearly were wins on both sides," said Steven Cohen, an analyst for Gartner Securities Corp. in Stamford, Conn. "It's the end of the second round, and I'd think both sides would like to avoid a third round."

IBM's stock dropped $4.50 a share Tuesday to $157.50 in consolidated New York Stock Exchange trading, but analysts said it was probably the result of an overall market decline rather than any pessimism about the order.

The dispute involved the scope of Fujitsu's licenses of copyrights on the operating systems for IBM's mainframe computers.

Operating systems are the programs that control the internal operations of the computers. A compatible operating system, involving as many as 20 million lines of densely packed code, is what makes it possible for Fujitsu's computers to run the same programs as IBM's computers.

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