David vs. Goliath in Battle Over Patent Rights : Litigation: Micro Technology of Anaheim is taking on computer giant Digital Equipment Corp. to contest DEC’s bid to protect what it says are some of its patented items.
Steve Hamerslag says he has never asked for trouble in 13 years of piggybacking on the success of Digital Equipment Corp., one of the nation’s largest computer companies.
But the 35-year-old president of Micro Technology Inc. in Anaheim is now locked in a legal battle with the Massachusetts-based computer giant. And his company has a lot at stake: 50% of its sales are tied to products that Digital claims are infringing on its patents.
On Wednesday, Micro Technology lost some potential supporters when six small companies that supply products that boost the storage capacity of Digital computers agreed to phase out sales of those products by the end of 1992.
Under pressure from Digital, 10 companies have agreed during the past year to stop selling certain products rather than fight Digital in court. One of those companies was Transitional Technology Inc., a small Anaheim firm.
By agreeing to allow the companies to gradually phase out the products, Digital is balancing its right to enforce its patents with the vendors’ need to develop alternative products, said Charles Christ, a Digital vice president.
Micro Technology, which had $85 million in sales last year contrasted with Digital’s $14 billion, is the biggest holdout. The company employs 400 people and is one of Orange County’s fastest-growing technology firms.
Digital filed a patent-infringement suit against Micro Technology in U.S. District Court in Denver in June, alleging that Micro Technology violated its patents. Hamerslag said his company plans to countersue soon.
“In the back of my mind, I always knew it was possible that Digital would sue us,” said Hamerslag, who seems visibly shaken by the affair. “They’ve always used litigation as a marketing tool. I hoped they would change their ways with their religion for ‘open systems.’ ”
Hamerslag contends that Digital’s suit contradicts Digital’s previous support for the concept of “open systems.” An open system is an industry term referring to the idea that various computer manufacturers should make their basic designs available to each other so that their products will work together, allowing customers to buy equipment from a variety of vendors.
Hamerslag acknowledges that Digital has the right to protect its patents. But he contends that the company is following an anti-competitive strategy that eventually will mean higher prices for Digital customers.
Digital officials think Hamerslag is trying to cloud the real issue.
“We have a fundamental belief that when people are stealing something that belongs to you, it doesn’t make sense to allow it to continue,” Christ said.
Christ said Digital is merely enforcing four patents that it received in 1984 and 1989 relating to the way a peripheral device, such as a disk drive, hooks up to a Digital computer.
The so-called SDI/STI interface is the technology of choice for roughly half of the $350-million market for third-party Digital storage products. Christ notes, however, that there are numerous alternative technologies.
“If you’re going to Boston, you can take American Airlines or Greyhound, but you really have only one choice,” Hamerslag responds. “The same is true with DEC’s alternatives.”
On a personal level, Hamerslag also says he feels hurt that a close relationship with Digital has been damaged. Digital buys equipment from Micro Technology and also maintains Micro Technology equipment at customer sites.
In the past, Digital has often tolerated third-party suppliers and recognized that they help increase the market for Digital computers. But at other times, those suppliers have been treated like parasites, said Jack Fegreuf, editor of Digital Review, a trade journal in Newton, Mass.
Candace Diel, a marketing vice president at Transitional Technology, disagrees with Hamerslag. Her 45-employee company has agreed to phase out one line of storage products that account for a quarter of its sales.
“They (Digital officials) are not trying to drive us out of business,” she said. “Micro Technology has to fight because it has almost no other products. . . . We like to be on the same side of the fence as Digital. It’s also beneficial for our customers to know their technology is legally protected.”
Digital Review’s Fegreuf says other companies have capitulated to Digital because they wanted to avoid a long, costly legal battle.
Hamerslag concedes that the technology could be obsolete by the time the case is over and that he has already started diversifying the company’s business into unrelated software markets.
But he also says that Micro Technology will fight back in part because Digital’s move is akin to “patenting a wall plug” in order to create barriers to market innovation by others.
