Compuware Corporation v. International Business Machines Corporation
Antitrust Liability for Plaintiff
Compuware alleged that IBM illegally used its monopoly power over mainframe hardware and certain types of mainframe software to harm competition in other mainframe software markets. Compuware had long sold software “tools” for developing, testing and managing mainframe applications or environments. In about 2000, IBM entered these markets with its own products. According to Compuware, IBM withheld and manipulated technical information to exclude competition from Compuware and other independent software firms, and IBM engaged in illegal tying of the tools at issue to other, monopolized software products. (Compuware also alleged that IBM misappropriated Compuware’s intellectual property, but applEcon did not participate in this part of the lawsuit.)
applEcon provided expert economic analysis and testimony concerning the antitrust liability issues. We defined and measured power for several predicate markets. We analyzed the impact of IBM’s conduct on competition in the markets at issue. We also undertook statistical analyses to support the computation of damages by another expert.
Numerous factors presented difficulties for the economic analysis, and for conveying the results to a jury. A large number of markets were involved, there were complementarities between several of the products in different functional markets, and the products were technically complex and unfamiliar to non-specialists. To analyze the various markets, applEcon’s research team developed a thorough understanding of the technical and business details of both mainframe and non-mainframe high-end computers along with their associated computing and application development environments. This allowed us to understand how these products did or did not compete. It also provided the underpinnings for assessing the impact of IBM’s actions on competition in the at-issue markets. We combined our understanding of the underlying markets with statistical analysis to successfully complete our assignment.
In particular, the nature of the tying allegations required us to understand at the customer level how purchase decisions are made for complex products. We developed a statistical analysis of several hundred contract bids to determine whether the alleged tying conduct or other unchallenged factors caused the impact on competition.
After six weeks in trial, a settlement valued at $400 million was reached, ending all outstanding litigation. The agreement created a software, services, and technology relationship between Compuware and IBM.
To learn more about this settlement, view some public press articles:
“Compuware Press Release”, 22 March 2005
“Compuware and IBM settle, ending federal trial”, Detroit Free Press, 22 March 2005
“Jurors: Compuware presented a solid case”, Detroit Free Press, 23 March 2005
Full Case Name: Compuware Corporation v. International Business Machines Corporation, 02-70906 (U.S. Fed. Dist. Ct. Eastern Dist. of Michigan)
Year: 2005
Case Number: 02-70906