NEWS & ANALYSIS

EU Commission initiates formal investigations against IBM in two cases of suspected abuse of dominant market position

by Directorate General for Competition of the European Commission

(26 July, 2010)

The European Commission has decided to initiate formal antitrust investigations against IBM Corporation in two separate cases of alleged infringements of EU antitrust rules related to the abuse of a dominant market position (Article 102 TFEU). Both cases are related to IBM's conduct on the market for mainframe computers. The first case follows complaints by emulator software vendors T3 and Turbo Hercules, and focuses on IBM's alleged tying of mainframe hardware to its mainframe operating system. The second is an investigation begun on the Commission's own initiative of IBM's alleged discriminatory behaviour towards competing suppliers of mainframe maintenance services.

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BowlerRoger Bowler Responds to IBM Patent Attack on Open Source

by Roger Bowler Creator of Hercules and Co-founder of TurboHercules

(Posted in News & Blogs section of turbohercules.com on 6 April, 2010)

As many of you know, the company I founded to promote the Hercules open source mainframe emulator, TurboHercules SAS, has filed an antitrust complaint against IBM with the European Commission in Brussels. We are not asking that IBM be subjected to punishing fines or anything like that. We simply want IBM to agree to allow legitimate paying customers of its z/OS mainframe operating system to deploy that software on the hardware platforms of their choice – including, should they so choose, on low-cost servers using Intel or AMD microprocessors and Hercules.

I want to make clear that we undertook this action reluctantly, and only after a long period of reflection during which we reached out to IBM to see if there was some way to resolve our differences amicably. I regret to report that IBM rebuffed our efforts at conciliation, and even added fuel to the fire by launching accusations against Hercules. I would like to take this opportunity to respond to some of those charges.

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The Issues of Competition in Mainframe and Associated Services in India

by Indian Council for Research on International Economic Relations and Indicus Analytics

Very little is known about the extent and nature of competition in the mainframe and associated services market in India. This is the first study to analyze competition and related issues in the Indian server market, with an extensive focus on mainframe computing.

Download the report PDF (4MB)

Steven FriedmanThe T3 Technologies story

by Steven Friedman, T3 Technologies

For over 15 years, my company was a successful IBM Business Partner. I used to have a thriving company with over 50 employees, nearly 1,000 customers in 28 countries (including 200 customers in 15 European Community states) and a profitable revenue stream earned through selling mainframe solutions to IBM customers. However, now our company is effectively out of business due to the direct actions of the company I used to be closely aligned with: IBM.

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LEGAL REFERENCE
The following legal briefs summarize antitrust and intellectual property actions involving competition in the mainframe market.

The documents referenced in the briefs are available for download here.

Monday
Jul262010

2010 TurboHercules European Commission Complaint

On July 29, 2009, TurboHercules sent a letter to IBM France. This letter was a request for IBM to consider allowing customers to license IBM mainframe operating systems such as z/OS for use on the Hercules emulator.  TurboHercules asked that IBM grant its customers these licenses under fair and reasonable terms, but left it entirely up to IBM to set prices and conditions.  TurboHercules also expressed interest in seeing a class of academic licenses that would allow a wider range of schools and universities to teach mainframe concepts and skills using Hercules.

On November 4, 2009, TurboHercules received a reply from IBM. IBM responded by saying that “we think that mimicking IBM’s proprietary, 64-bit System z architecture requires IBM intellectual property, and you will understand that IBM could not reasonably be asked to consider licensing its operating systems for use on infringing platforms.“  The letter went on to say: “We do not think that mimicking IBM’s instruction set architectures on commodity OEM hardware is in any way innovative.“

On November 18, 2009, TurboHercules responded to IBM. TurboHercules expressed surprise at IBM’s claim that the Hercules emulator infringes IBM intellectual property, given that this open source software has been widely used in the IBM mainframe community for 10 years with IBM’s full knowledge and, in many cases, active encouragement. TurboHercules asked that IBM identify the intellectual property it believes Hercules infringes. 

On March 11, 2010, IBM responded to TurboHercules' letter. (TurboHercules did not receive the response until March 25, 2010). IBM responded by stating: “I enclose with this letter a non-exhaustive list of IBM U.S. patents that protect innovative elements of IBM’s mainframe architecture and that IBM believes will be infringed by an emulator covering those elements...In these circumstances, I trust you will understand that IBM cannot agree to your request to reconsider its position.“

On March 23, 2010, TurboHercules SAS filed a formal complaint against IBM with the EC's Directorate General for Competition in Brussels. The complaint alleges that IBM is preventing customers from using the open-source emulator, Hercules, to run customers' applications on non-mainframe computers.

On July 26, 2010, in response to TurboHurcules' complaint, the EC initiated a formal investigation against IBM in two separate cases of alleged infringements of EU antitrust rules related to the abuse of a dominant market position. "The first case follows complaints by emulator software vendors T3 and Turbo Hercules, and focuses on IBM's alleged tying of mainframe hardware to its mainframe operating system The second is an investigation begun on the Commission's own initiative of IBM's alleged discriminatory behaviour towards competing suppliers of mainframe maintenance services."

TurboHercules issued a press release in response to the EC's announcement here.

Monday
Dec142009

2009 NEON Enterprise Software LLC Sues IBM

According to a press release on December 14, 2009, NEON Enterprise Software LLC filed a lawsuit in the Austin Division of the United States District Court for the Western District of Texas alleging that "IBM has violated the Lanham Act and state unfair competition laws, and that IBM is liable for business disparagement and tortious interference with prospective contracts. NEON has also sought a declaratory judgment with respect to claims made by IBM concerning the characteristics of zPrime. NEON is seeking to recover actual and enhanced damages, disgorgement of IBM profits, a declaratory judgment and reasonable and necessary attorneys' fees."

Click here to read the complaint

On January 27, 2010, IBM filed its Answer and Counterclaims.

Click here to read IBM's Answer and Counterclaims.

On February 1, 2010, NEON filed an Answer to IBM's Answer and Counterclaims.

Click here to read NEON's Answer to IBM's Answer and Counterclaims.

Click to read Exhibit A, Exhibit B, Exhibit C, Exhibit D, Exhibit E to NEON's Answer.

On February 17, 2010, NEON filed an amended complaint against IBM related to claims of anti-trust violations.

Click here to read NEON's First Amended Complaint.

On March 8, 2010, IBM filed an Amended Answer and Counterclaims.

Click here to read IBM's Amended Answer and Counterclaims.

Tuesday
Jan202009

2009 T3 European Commission Complaint

On July 1, 2008, T3 Technologies Inc. announced its intent to file a formal antitrust complaint against IBM with the European Commission over alleged anti-competitive behavior in the European computer mainframe market. T3 further announced in August 2008 that it had retained the Brussels office of the London-based law firm Berwin Leighton Paisner LLP to prepare and file the EU complaint. T3 also retained several expert witnesses to provide reports and documentation in support of its case.

T3 believes that IBM, as the dominant mainframe vendor, has shut out it and other manufacturers from sales in the market by ending support for older mainframe systems and not licensing its mainframe software.

On January 20, 2009, T3 Technologies, Inc. announced it filed a formal complaint against International Business Machines with the European Commission’s Directorate General for Competition (DG-Comp) in Brussels.

T3’s complaint alleges a history of IBM abusing its monopoly power in the mainframe industry. T3 accuses IBM of engaging in a range of anti-competitive actions, including preventing the sales of competing mainframe hardware products by tying the sale of its operating system to its mainframe hardware, and withholding patent licenses and certain intellectual property to the detriment of mainframe customers.

On July 26, 2010, the Directorate General for Competition of the European Commission announced it had launched "formal antitrust investigations against IBM Corporation in two separate cases of alleged infringements of EU antitrust rules related to the abuse of a dominant market position. Both cases are related to IBM's conduct on the market for mainframe computers." The first investigation is in response to complaints from T3 and TurboHercules SAS. The second investigation was "begun on the Commission's own initiative of IBM's alleged discriminatory behaviour towards competing suppliers of mainframe maintenance services." This second investigation is not related to T3's complaint.

T3 Technologies issued a press release which can be found here.

Thursday
Aug282008

2007 PSI European Commission Complaint

On October 19, 2007, PSI filed a complaint with the European Commission. Complaints are not publicly available, but according to the European Commission spokesperson, Jonathan Todd, PSI claimed that IBM abused EU antitrust rules "by refusing to supply interface information relating to mainframe computers and refusing to license third parties."

On July 2, 2008, IBM announced that it was acquiring PSI and as part of the acquisition, PSI agreed to drop all antitrust complaints.

Thursday
Aug282008

2006 IBM vs. Platform Solutions Inc. (PSI) and T3 Technologies Inc. (T3)

In 2006, IBM filed a complaint in US District Court against open mainframe computer marketer, Platform Solutions, Inc. (PSI), alleging breach of contract and patent infringement claims arising from PSI's development and sale of its IBM-compatible open architecture mainframe computer with IBM’s mainframe operating systems. It also asked the court for a declaratory judgment that IBM's refusal to license copyrighted operating systems, and other software to PSI does not violate any antitrust laws. Numerous claims, counterclaims and motions were filed by both parties including PSI’s claim that IBM violated federal antitrust and state unfair competition laws by unlawfully tying its mainframe computers to its mainframe operating systems. In November 2007, mainframe systems integrator T3 Technologies, Inc. filed a Motion to Intervene as Counterclaim-Plaintiff. In July 2008, PSI and IBM settled their actions when IBM acquired PSI. On September 30, 2009, the court granted IBM's motion for summary judgment and T3’s complaint was dismissed.

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Tuesday
Mar122002

2002 Compuware vs. IBM

In 2002, Compuware filed suit in the United States District Court for the Eastern District of Michigan against International Business Machines Corporation ("IBM") alleging, among other things, infringement of its copyrights and misappropriation of its trade secrets with respect to its mainframe software tools, intentional interference with contractual relations with its employees and former employees, antitrust law violations, tortious interference with its economic expectancy and various state law violations. In early 2003, Compuware asked the Court for a Preliminary Injunction on IBM’s sale of the competing products. At the end of 2003, the Court denied Compuware's Motion for Preliminary Injunction on the trade secret and false advertising claims, ruling that there were fact issues that needed to be decided by a jury. In early 2004, IBM filed patent infringement claims against Compuware in the United States District Court for the Southern District of New York. Later in 2004, IBM admitted that the source code in question had apparently been simultaneously discovered at two separate facilities located on opposite sides of Australia. A month later, the U.S. District Court for Eastern Michigan sanctioned IBM for "gross negligence" in the software piracy portion of Compuware’s case against the technology giant and granted parts of Compuware’s motion for discovery sanctions and denied other parts. The following month, Compuware filed an objection to the U.S. District Court’s order based on IBM’s refusal to pay fees associated with the U.S. District Court’s order. In 2005, Compuware announced that it had entered into a software, services and technology relationship with IBM and settled all outstanding litigation.

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Monday
Jun131994

1994 - 1998 Termination of 1956 Consent Decree

In 1994, IBM filed its Motion seeking the immediate termination of the Consent Decree. In 1997, the district court entered its Order granting the parties' Joint Motion stating that certain Decree provisions terminated immediately and the provision related to IBM's AS/400 mid-range family of products and services ceased to apply after July 2, 2000, and the provision related to the S/390 mainframe series ceased to apply after July 2, 2001. Thus, after July 2, 2001, no portion of the Decree remained in effect.

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Sunday
Jan011984

1984 IBM European Commission Undertaking

During the early 1980s, the European Commission accused IBM of abusing its position as a dominant supplier by bundling its hardware and software and by not disclosing interface information. Despite concern expressed by the U.S. Antitrust Division over continuation of the European action, in 1984 the EC was on the verge of issuing a formal complaint when IBM agreed to an "undertaking.” In the Undertaking, IBM agreed to disclose interface information, at a reasonable and non-discriminatory charge, sufficient to allow both hardware and software manufacturers to attach their systems or networks to IBM mainframes and Systems Network Architecture within 120 days of the announcement of a new System 370 product, or at the time a product became generally available. It also agreed to sell unbundled System 370 computers with the amount of memory required for testing purposes within the European Common Market. Violation of the Undertaking could have lead to reinstatement of formal case proceedings. The Undertaking was to remain in effect for five years. In 1995, IBM unilaterally withdrew from its obligations covered by the Undertaking.

Click here for the text of the EC Undertaking ...