Compaq, IBM Reach Broad Patent-Sharing Agreement

Times Staff Writer

Compaq Computer, the nation’s No. 3 personal computer maker, said Friday that it had reached a broad patent-sharing agreement with archrival IBM that includes a key new technology.

Analysts suggested that the agreement, under negotiation since 1987, represents an effort by Compaq to keep its options open in case it decides to use IBM’s design for a personal computer’s internal data pathway. “Compaq is hedging its bets” on what the future standard for advanced PCs will be, said Stephen Cohen, research director at Soundview Financial Group.

The deal gives Compaq rights to the data pathway, known as Micro Channel, that IBM uses in its latest PCs, while IBM will gain access to some of Compaq’s expertise in high-speed machines. Observers also said the arrangement, which gives each company non-exclusive rights to a variety of PC-related patents filed before 1993, also would eliminate a nagging dispute over payments to IBM for earlier-generation PC technology.

Compaq, which grew to prominence as a manufacturer of “clones” that imitate IBM PCs, has been the leader of a group of companies seeking to develop an alternative to the Micro Channel, known as extended industry standard architecture (EISA). On Friday, the company reiterated its commitment to EISA and said it had no plans to introduce Micro Channel products.

Because of the greater value of the IBM patents, Compaq will make annual cash payments to IBM for five years. Experts believe that the payments are for past use by Compaq of IBM technologies as well as possible future use, but the exact terms and the size of the payments were not disclosed.


Industry Hostility

IBM in 1987 proposed a licensing fee of up to 5% of revenue for products using the Micro Channel technology and was reported to be demanding 1% of sales for products that used the original IBM PC AT technology. But Stewart Alsop, publisher of the P.C. Letter, said IBM had backed off its efforts to generate significant revenue from its patents in the face of industry hostility.

John T. Rossi, an analyst with Alex. Brown & Sons, said Compaq’s payments to IBM would probably be in the $45-million range but suggested that they could be as high as $200 million.

Many other clone manufacturers, including Tandy Corp., have reached licensing agreements with IBM, and IBM said the Compaq agreement was “consistent with IBM’s patent licensing program.” IBM remained the leader in 1988 in dollar volume of PCs sold in the United States, with Compaq in third place behind Apple Computer, according to the market research firm Dataquest. Apple, however, led in number of units shipped.