Intel Loses NEC Trial but Claims Anti-Piracy Victory

Striking a blow to the fortunes of high-technology pirates and copycats, a federal judge in San Jose ruled Tuesday in a case pitting Intel Corp. against its Japanese rival NEC that a key element in computer chips is subject to federal copyright laws.

U.S. District Judge William Gray handed a partial victory to NEC, ruling that the scrappy Japanese firm did not infringe on an Intel copyright for the microchips that act as the brains in first-generation IBM personal computers.

But Intel claimed a broader victory in Gray’s ruling that microchip codes are subject to copyright law--a decision the American firm said would protect the investments that it and other innovative chip manufacturers have made in developing new technology.

Experts in intellectual property law agreed, saying the decision would discourage the kind of imitation that has resulted in cutting-edge U.S. firms losing the profits on their inventions to lower-priced foreign copycats.

“It draws a line against . . . lower-cost producers simply waiting for Intel to produce a top-of-the-line microprocessor which they then take to Hong Kong or Taiwan and duplicate at cheap labor and put in the market to compete with Intel,” said Vincent Cox, a Century City attorney who specializes in intellectual property law.

“It gives Intel a substantial incentive to go out there and invest heavily in obtaining a leadership role in the microprocessor field and then to reap the rewards,” Cox added.

In the San Jose case, Intel had complained 4 1/2 years ago that NEC, once its partner in a broad cross-licensing agreement, had violated its copyright on the microcode of its 8086/88 computer chip. Microcodes are the tiny instructions that are embedded in and help run a microprocessor.

Microcode Called Software

On the narrow issue, Gray said Intel had failed to protect its copyright. Although Intel had properly marked its devices with copyright notices, Gray said many of the devices, made by some Intel licensees, were distributed without the notices. As a result, Intel forfeited its copyright, the judge ruled.

But more importantly, say analysts, Gray sided with Intel and ruled that a microcode qualifies as a computer program and can be protected under copyright laws.

NEC had contended that the Intel microcode did not meet the definition of a computer program. The microcode, NEC said, is virtually part of the computer, and thus not subject to copyright protection.

Michael Murphy, editor of the California Technology Stock Letter, said Intel’s immediate loss of copyright protection on its 8086/88 chip was a minor blow, because the company no longer sells many of those chips.

“It’s a clear loss, but it does not hurt much,” said Murphy.

But he agreed that the long-term implications of Gray’s ruling favored Intel and its innovative peers. “Intel has won a big victory in the long term,” he said. “It certainly does make it difficult to copy a chip because it’s very difficult for one chip to work like another if you don’t copy the microcode.”

Times staff writer Jesus Sanchez contributed to this story.