Intel Countersues Digital, Alleges Breach of Contract
In an anticipated counterattack, Intel Corp. has sued Digital Equipment Corp. for breach of contract and raised the possibility of withholding future technologies and products from the Massachusetts-based computer maker.
The suit came two weeks after Digital stunned the computer industry by filing a suit that accused Santa Clara, Calif.-based Intel of making its top-selling Pentium line of microprocessors with technology stolen from Digital.
“Digital fired the first shot, and Intel is retaliating,” said Dan Niles, an analyst at Robertson Stephens & Co. in San Francisco. “You can’t expect Intel to be slapped by Digital and do nothing.”
In its suit filed Tuesday in U.S. District Court in San Jose, Intel is primarily seeking the return of product specifications shared with Digital in recent years. Such materials are commonly distributed to computer makers to allow them to prepare for upcoming changes in microprocessor design.
Intel spokesman Howard High said Digital has refused recent requests to return the specifications, violating terms of nondisclosure agreements between the two companies.
“When you’ve got a company questioning your integrity, you don’t want to continue to give them confidential engineering materials,” High said.
But High signaled a much greater threat to Digital by suggesting that the company could be cut off from future Intel products after a contract between the companies expires in September.
“We’ll look and see what makes sense between the two companies at that time,” High said.
Digital makes its own line of microprocessors, the electronic brains that power computers. But about a quarter of its $14.6 billion in revenue last fiscal year was generated by sales of machines using Intel chips.
Digital executives called the suit by Intel “a diversion from the real issue of unlawful patent infringement” and scoffed at Intel’s threat to withhold products.
“This countersuit is nothing more than a thinly veiled attempt to cause concern among Digital customers,” Thomas C. Siekman, Digital’s general counsel, said in a statement. “We expect to have timely access to Intel technology.”
But the potential disruption of the relationship between the two companies has led many analysts to question Digital’s wisdom in picking a legal battle with such a powerful supplier.
“This is definitely going to hurt Digital more than it’s going to hurt Intel,” Niles said.
Shares of Intel closed down $2.19 to $187.13 on Nasdaq. Digital stock dropped $1.25 to close at $36 on the New York Stock Exchange.
